As filed with the Securities and Exchange Commission on January 22, 1997
Registration No. 333-15011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 to
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
GENISYS RESERVATION SYSTEMS, INC.
(Name of small business issuer in charter)
New Jersey 7872 22-2719541
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification I.D. Number)
incorporation Code Number)
or organization)
(Address and telephone number, of registrant's
principal executive offices)
2401 Morris Avenue, 3rd Floor
Union, New Jersey 07083
(908) 810-8767
(Address of principal place of business or
intended principal place of business)
(Name, address and telephone number, of agent for service)
JOHN H. WASKO
c/o Genisys Reservation Systems, Inc.
2401 Morris Avenue, 3rd Floor
Union, New Jersey 07083
(908) 810-8767
Please send a copy of all communications to:
DAVID W. SASS, ESQ. William J. Davis
McLaughlin & Stern, LLP Scheichet & Davis, P.C.
260 Madison Avenue 505 Park Avenue, 20th Floor
New York, New York 10016 New York, New York 10022
(212) 448-1100 (212) 688-3200
Fax(212) 448-0066 Fax(212) 371-7634
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []_____
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
[]---
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 delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. []
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CALCULATION OF REGISTRATION FEE
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Security Being Offering Price Aggregate Offering
Registration
Being Registered Registered Per Unit/Share (1) Price Fee
- --------------------------------------------------------------------------------------------------
Shares of Common Stock 1,035,000 $5.00 $5,175,000 $1,568.18
$.0001 par value(2)(3) Shares
Class A Common Stock 1,725,000 $0.20 $ 345,000 $ 104.55
Warrants(2)(3) Warrants
Shares of Common Stock 1,725,000 $5.75 $9,918,750 $3,005.68
underlying the Class A Shares
Warrants(2)(3)(4)
Class B Common Stock 1,035,000 $0.10 $ 103,500 $ 31.36
Warrants(2)(3) Warrants
Shares of Common Stock 1,035,000 $6.75 $6,986,250 $2,117.05
underlying the Class B Shares
Warrants(2)(3)(4)
Class A Common Stock
Warrants(5) 287,500 $ .01 $ 2,875 $ .87
Shares of Common Stock 287,500 $5.75 $1,653,125 $ 500.95
underlying Class A
Warrants issued in a
private placement(5)
Underwriter's Warrant 90,000 $ .0001 $ 9 $ .01
to purchase Common Shares
Stock(2)
Class A Warrants(2) 150,000 $ .0001 $ 15 $ .01
Warrants
Class B Warrants(2) 90,000 $ .0001 $ 9 $ .01
Warrants
Underwriter's Shares 90,000 $6.00 $ 540,000 $ 163.64
of Common Stock(2) Shares
Shares of Common Stock 150,000 $6.90 $ 1,035,000 $ 313.64
Underlying Under- Shares
writer's Warrant to
Purchase Class A
Warrants(2)(3)
Shares of Common Stock 90,000 $8.10 $ 729,000 $ 220.91
Underlying Under- Shares
writer's Warrant to
Purchase Class B
Warrants(2)(3)
TOTAL $8,026.86
---------
Paid on Account 7,614.66
---------
Balance Due $ 412.20
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Securities being registered for sale by the Company.
(3) Includes an additional 135,000 of Common Stock, 225,000 Class A
Warrants and shares underlying the Class A Warrants and 135,000 Class B
Warrants and shares underlying the Class B Warrants as part of the
Underwriter's overallotment option.
(4) Pursuant to Rule 416 there are also being registered such additional
shares as may be issued as a result of the anti-dilution provisions of
the Common Stock Purchase Warrants and the Representative's Warrant.
(5) Securities being registered for resale only.
The registrant hereby 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 the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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EXPLANATORY NOTE
This registration statement covers the primary offering of Common Stock
and Class A and Class B Redeemable Warrants by Genisys Reservation Systems, Inc.
("Company") and the offering of securities by certain selling stockholders
("Selling Stockholders"). The Company is registering under the primary
prospectus ("Primary Prospectus") 900,000 Shares of Common Stock, 1,500,000
Class A Redeemable Warrant, and 900,000 Class B Redeemable Warrants for sale by
the Underwriter. The Selling Stockholders are registering, under an alternate
prospectus (the "Alternate Prospectus") 287,500 Class A Warrants and 287,500
shares of Common Stock underlying outstanding Class A Warrants. The Alternate
Prospectus pages, which follow the Primary Prospectus, contain certain sections
which are to be combined with all of the sections contained in the Primary
Prospectus, with the exceptions of the front and back cover pages and the
section entitled "The Offering." Furthermore, all references contained in the
Alternate Prospectus to the "Offering" shall refer to the Company's offering
under the Primary Prospectus.
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GENISYS RESERVATION SYSTEMS, INC.
Cross Reference Sheet
Item Caption Location
1. Forepart of Registration Statement Outside Front Cover
Page and Outside Front Cover Page of Page
Prospectus
2. Inside Front and Outside Back Cover Inside Front and
Outside Pages of Prospectus Outside
Back Cover Pages
3. Summary Information and Risk Factors Prospectus Summary;
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Underwriting; Risk
Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Legal Proceedings Not Applicable
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of
Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Underwriting-
Indemnification for Securities Act Indemnification
15. Organization Within Last Five Years Not Applicable
16. Description of Business Business; Risk
Factors; Financial
Statements; Selected
Financial Data;
Prospectus Summary;
Use of Proceeds
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17. Management's Discussion and Analysis Management's
Discussion and or Plan of Operation Analysis of Financial
Condition and Results
of Operation
18. Description of Property Business-Properties
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Related Market Information;
Stockholder Matters Prospectus Summary
21. Executive Compensation Management-Executive
Compensation
22. Financial Statements Financial Statements
23. Changes In and Disagreements With Not Applicable
Accountants on Accounting and
Financial Disclosure
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Subject to Completion dated January 22, 1997
PROSPECTUS
GENISYS RESERVATION SYSTEMS, INC.
900,000 Shares of Common Stock
1,500,000 Class A Redeemable Warrants
900,000 Class B Redeemable Warrants
Genisys Reservation Systems, Inc., a New Jersey corporation (the
"Company"), hereby offers through R.D. White & Co., Inc. (the "Underwriter")
900,000 shares ("Shares") of Common Stock, par value $.0001 per share, ("Common
Stock") and 2,400,000 redeemable warrants ("Redeemable Warrants"), 1,500,000 of
which will be "Class A Redeemable Warrants" and 900,000 of which will be "Class
B Redeemable Warrants," at an anticipated public offering price of $5.00 per
share of Common Stock, $.20 per Class A Redeemable Warrant, and $.10 per Class B
Redeemable Warrant (the Common Stock and Redeemable Warrants collectively
referred to as the "Securities"). The Common Stock, Class A Warrants and Class B
Warrants will be offered separetly. See "Underwriting."
Each Redeemable Warrant shall be exercisable for a period of 48 months,
commencing six (6) months from the date on which the registration statement (the
"Registration Statement") of which this prospectus (the "Prospectus") forms a
part is declared effective (the "Effective Date") by the Securities and Exchange
Commission (the "Commission"). Each Class A Redeemable Warrant shall entitle the
holder to acquire one share of Common Stock at a price equal to $5.75 per share.
Commencing 12 months after the Effective Date, the Company will have the right
at any time to redeem all, but not less than all, of the Class A Redeemable
Warrants at a price equal to twenty cents ($.20) per Redeemable Warrant,
provided that the closing bid price of the Common Stock equals or exceeds $6.25
per share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. Each Class B Redeemable Warrant shall entitle the
holder to acquire one share of the Common Stock at a price equal to $6.75 per
share. Commencing 12 months after the Effective Date, the Company will have the
right at any time to redeem all, but not less than all, of the Class B
Redeemable Warrants at a price equal to ten cents ($.10) per Redeemable Warrant,
provided that the closing bid price of the Common Stock equals or exceeds $7.25
per share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. See "Descriptions of Securities."
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The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter's prior consent for a
period of eighteen (18) months following the date of this Prospectus. This
provision may limit the Company's ability to raise additional equity capital.
AN INVESTMENT IN THE SECURITIES DESCRIBED HEREIN INVOLVES A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK
FACTORS" AND "DILUTION."
SUCH SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Public Underwriting Discounts Proceeds to
and Commissions (1) Company(2)
Per Share offered by $5.00 $.50 $4.50
Company............
Per Class A Redeemable $.20 $.02 $.18
Warrant offered by
Company..........
Per Class B Redeemable $.10 $.01 $.09
Warrant offered by
Company..........
Total(3)..... $4,890,000 $489,000 $4,401,000
</TABLE>
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R.D. White & Co., Inc.
-----------------
The Date of this Prospectus is _________, 1997
- ---------------
(1) Does not include additional underwriting compensation to be
paid by the Company to the Underwriter in the form of a non-
accountable expense allowance of $146,700 ("Non-Accountable
Expense Allowance") equal to 3% of the aggregate public
offering price of the Securities or $168,705 assuming exercise
in full of the Over-Allotment Option, as (defined below)),
$50,000 of which has been advanced to the Underwriter.
(2) Exclusive of exercise of the Over-Allotment Option (as defined
below) and before deducting expenses payable by the Company
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estimated at $381,700 (including the Underwriter's Non-Accountable
Expense Allowance of $146,700 payable by the Company). After deducting
such expenses and applicable underwriting discounts, the net proceeds
to the Company, exclusive of the exercise of the Over-Allotment Option
(as defined below), will be approximately $4,019,300.
(3) The Company has granted an option to the Underwriter to
purchase all or part of an additional 15% of the shares of
Common Stock and Redeemable Warrants from the Company to cover
over-allotments for a period of forty five (45) days from the
effective date of the Registration Statement upon the same
terms and conditions (the "Over-Allotment Option"). If the
Over-Allotment Option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, and Proceeds
to the Company will be $5,623,500, $562,350 and $5,061,150,
respectively (exclusive of other expenses payable by the
Company of $235,000 and the Non-Accountable Expense Allowance
of $168,705). Assuming exercise of the Over-Allotment Option
and after deducting expenses and applicable underwriting
discounts, the net proceeds to the Company will be
approximately $4,657,445. See "Underwriting."
The Company's public offering as described herein, there has been no
active public market for the Common Stock or the Redeemable Warrants, and no
assurance may be given that a public market will develop following the
completion of the offering or that, if any such market does develop, it will be
sustained. The Company has applied to have the Securities listed for quotation
on The NASDAQ SmallCap MarketSM ("NASDAQ") under the symbols: "GENS," "GENSW,"
and GENSZ," respectively. There can be no assurance given that the Company will
be able to satisfy on a continuing basis the requirements for quotation of such
securities on NASDAQ. See "Risk Factors - No Assurances of Public Market or
Continued NASDAQ Listing," "Risk Factors-Penny Stock Regulations" and "Market
for the Company's Securities and Other Related Stockholder Matters."
The Securities being offered for sale by the Company are being offered
on a firm commitment basis, subject to prior sale, when, as and if delivered to
and accepted by the Underwriter pursuant to the terms of the underwriting
agreement relating to the offering. See "Underwriting." It is expected that
delivery of certificates representing the securities being offered by the
Company will be made against payment therefor at the offices of the Underwriter
on or about ______, 1997. See "Available Information."
The Registration Statement of which this Prospectus forms a part but
with a different Prospectus cover page also relates to the offer and sale of
287,500 Class A Warrants and 287,500 shares of Common Stock issuable upon
exercise of 287,500 outstanding Class A Redeemable Warrants which were
previously issued by the Company to the holders thereof and are to be offered
and sold by such
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stockholders (the "Selling Stockholders"). The Class A Redeemable Warrants are
exercisable at $5.75 per share. Such securities are subject to an 18 month
lock-up by the Underwriter. The shares are being offered by the Selling
Stockholders and are being registered for resale purposes only pursuant to an
Alternate Prospectus. Sales of the securities to be offered by the Selling
Stockholders (or even the potential of such sales) would likely have an adverse
effect on the market prices of the securities being offered by the Company. The
Company will not receive the proceeds of any sale of such securities by the
Selling Stockholders but may receive proceeds from the exercise of the Warrants
covered by such shares, if such warrants are exercised, as to which there can be
no assurance. The Selling Stockholders will receive the proceeds from the sale,
if any, of the securities to be offered by Selling Stockholders. Except as
otherwise set forth herein, the costs incurred in connection with the
registration of such securities are to be borne by the Company. See "Selling
Stockholders".
For a period of time, the Company was not in compliance with the filing
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and may
be subject to legal liability as a result thereof. See "Risk
Factors-Non-Compliance with Exchange Act Reporting Requirements".
As of June 25, 1996 there were 763 shareholders of record of the
Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ALTHOUGH IT HAS NO LEGAL OBLIGATION TO DO SO, THE UNDERWRITER MAY FROM
TIME TO TIME ACT AS A MARKET-MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE
COMPANY'S SECURITIES. THE UNDERWRITER WILL NOT ACT AS A MARKET-MAKER UNTIL SUCH
TIME AS ITS PARTICIPATION IN THIS OFFERING IS COMPLETE. THE UNDERWRITER, IF IT
PARTICIPATES IN THE MARKET, MAY BE A DOMINATING INFLUENCE IN ANY MARKET THAT
MIGHT DEVELOP FOR ANY OF THE COMPANY'S SECURITIES. SUCH ACTIVITIES, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME OR FROM TIME TO TIME. THEREFORE,
THERE IS NO ASSURANCE THAT THE UNDERWRITER WILL OR WILL NOT BE A DOMINATING
INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED HEREUNDER MAY BE
AFFECTED BY THE DEGREE, IF ANY, OF THE UNDERWRITER'S PARTICIPATION IN THE
MARKET. SEE "RISK FACTORS" AND "UNDERWRITING."
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith presently files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copies at the Commission's public reference
room located in Room 1024 at 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's Regional Offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials may also
be obtained at prescribed rates from the Public Reference Section of the
Commission located in Room 1024 at 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company has filed a Registration Statement relating to the
securities offered hereby with the Commission pursuant to the provisions of the
Securities Act of 1933, as amended (the "Securities Act"). Although this
Prospectus forms a part of the Registration Statement, it does not contain all
of the information set forth in the Registration Statement, the exhibits or the
schedules thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement, the
exhibits and the schedules thereto. All material elements of documents
referenced in the Registration Statement are set forth in the prospectus
disclosure herein. Reference is also made to the copy of such document which has
been filed as an exhibit to the Registration Statement.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and financial
data (including any financial statements and the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all share and per
share amounts set forth hereinafter have been adjusted to reflect the reverse
split on a one for two basis effectuated in July, 1996. Each prospective
investor is urged to read this Prospectus in its entirety.
The Company
The principal business activity of Genisys Reservation Systems, Inc.
(the "Company") is developing a computerized limousine reservation and payment
system for the business traveler. The management of the Company anticipates that
the proprietary software that is being developed will enable limousine
reservations to be completely computerized -i.e., be entirely automatic and
operate without human intervention. Genisys Reservation Systems, Inc. is a
development stage company and has no commericially available products at the
present time.
At the present time, there are four major airline reservations systems
in operation in the United States -- "Sabre", "Worldspan", "Apollo" and "System
One" (the "Reservation System"). Each of these systems allows a travel agency or
corporate travel department to make an airline reservation and receive
instantaneously a confirmation and a printed airline ticket on any airline. It
is also possible to make a hotel reservation with one of the major hotel chains
through any of the reservation systems and receive an instantaneous confirmation
of room availability. Additionally, a travel agent or corporate travel manager
may make an automobile reservation with any one of the major car rental
companies (Hertz, Avis and the like) through these airline reservations systems,
and receive an immediate confirmation of the car rental reservation.
When it comes to limousine reservations, however, there is at present
no method for making a reservation through one of the four major airline
reservation systems and receiving an immediate guaranteed confirmation. The
usual method of making a limousine reservation in a destination city is to call
a limousine company, if the travel agent knows of one. This use of the
telephone, with its attendant inconveniences such as "telephone tag" and missed
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communications, can require up to a few hours to secure a confirmed limousine
reservation. It is also an expensive process for the travel agent or corporate
travel manager, due primarily to the personnel required to secure a binding
limousine reservation. There are also frequent billing errors and clerical
mistakes in scheduling.
The Company seeks to solve the problems involved in making limousine
reservations for the business traveler by:
1. developing a limousine reservation system that utilizes
the airline computer reservation systems already in use;
2. developing a way to identify and qualify the best
limousine service providers in the cities that are the business
travelers most frequent destinations;
3. developing a way to disseminate reservation information to
corporate clients and to limousine service providers with no
errors, with immediate confirmation and without the need to utilize
the telephone;
4. developing an automated electronic payment system to
process all fees charged by the Company to its clients;
5. performing the above-described tasks with a high degree of
quality control; and
6. providing corporate clients with precise management and
financial information, to enable them to ascertain where their
money is being spent.
The Company was organized on April 25, 1986 under the name of
JEC02 Lasers, Inc. and changed its name to Robotic Lasers, Inc. on
December 22, 1987. It changed its name to Genisys Reservation
Systems, Inc. on July 16, 1996. The Company's executive offices
are at 2401 Morris Avenue, Union, New Jersey 07083, and its
telephone number is 908-810-8767.
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The Offering
Securities Offered
900,000 shares of Common Stock, par value $.0001, per share ("Common Stock") and
2,400,000 redeemable warrants ("Redeemable Warrants"), 1,500,000 of which will
be "Class A Redeemable Warrants" and 900,000 of which will be "Class B
Redeemable Warrants."
Offering Price
$5.00 per Share of Common Stock $0.20 per Class A Redeemable Warrant $0.10 per
Class B Redeemable Warrant
The Redeemable Warrants
Each Redeemable Warrant shall be exercisable for a period of 48 months,
commencing six (6) months from the date on which the registration statement (the
"Registration Statement") of which this prospectus (the "Prospectus") forms a
part is declared effective (the "Effective Date") by the Securities and Exchange
Commission (the "Commission"). Each Class A Redeemable Warrant shall entitle the
holder to acquire one share of Common Stock at a price equal to $5.75 per share.
Commencing 12 months after the Effective Date, the Company will have the right
at any time to redeem all, but not less than all, of the Class A Redeemable
Warrants at a price equal to ten cents ($.10) per Redeemable Warrant, provided
that the closing bid price of the Common Stock equals or exceeds $6.25 per share
for any twenty (20) trading days within a period of thirty (30) consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. Each Class B Redeemable Warrant shall entitle the holder to acquire
one share of the Common Stock at a price equal to $6.75 per share. Commencing 12
months after the Effective Date, the
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Company will have the right
at any time to redeem all,
but not less than all, of
the Class B Redeemable
Warrants at a price equal
to ten cents ($.10) per
Redeemable Warrant,
provided that the closing
bid price of the Common
Stock equals or exceeds
$7.25 per share for any
twenty (20) trading days
within a period of thirty
(30) consecutive trading
days ending on the fifth
trading day prior to the
date of the notice of
redemption.
Securities Outstanding Prior to the
Company's Offering
Common Stock 3,280,594 Shares
Class A Warrants 287,500
Securities Outstanding After the
Company's Offering:
Common Stock (1)(3) 4,195,594 Shares
Class A Warrants(2) 1,787,500 Warrants
Class B Warrants(2) 900,000 Warrants
Proposed NASDAQ SmallCap MarketSM
Symbols(4)
Common Stock GENS
Class A Warrants GENSW
Class B Warrants GENSZ
- ---------------
(1) Does not include: (a) 2,400,000 shares of Common Stock
issuable upon exercise of the Class A and Class B Warrants;
(b) 135,000 shares of Common Stock issuable upon exercise of
the Over-Allotment Option and 360,000 shares of Common Stock
issuable upon the exercise of the Redeemable Warrants
contained therein; or (c) 287,500 shares issuable upon
exercise of outstanding warrants issued in a private placement
in May, 1996. See "Description of Securities," and
"Underwriting."
(2) Does not include the issuance of 360,000 Redeemable Warrants
issuable upon exercise of the Over-Allotment Option, but does
include 287,500 Class A warrants issued in a private placement
in May 1996, which Warrants are identical to the Class A
Redeemable Warrants offered hereby. See "Underwriting" and
"Description of Securities."
(3) Includes 15,000 shares of Common Stock issuable upon the
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conversion of two promissory notes at the completion of this Offering
in the principal amounts of $20,000 and $10,000, respectively (the
"Convertible Notes").
(4) The Shares of Common Stock and the Class A Redeemable Warrants
and Class B Redeemable Warrants are expected to be listed for
quotation on NASDAQ under the symbols: "GENS", "GENSW" and
"GENSZ", respectively. There can be no assurance given that
the Company will be able to satisfy on a continuing basis the
requirements for quotation of such securities on NASDAQ. See
"Risk Factors" and "Market for the Company's Securities and
Other Related Stockholder Matters."
Risk Factors
An investment in any of the securities being offered hereby is highly
speculative and involves substantial risks including a qualified independent
auditors report - financial losses, limited operations, early development stage
of the Company, technological changes, market acceptance, dependence on existing
computer reservation systems, working capital - use of proceeds: broad
discretion in application of proceeds, dependence upon a key individual,
possible need for additional financing, dependence on certain suppliers,
economic downturn, technological change and new product development, product
protection and infringement, and competition. See "Risk Factors."
Use of Proceeds
The Company will receive the net proceeds of its offer and sale of the
Common Stock and Warrants of approximately $4,019,300 and intends to use the net
proceeds for the following: (i) approximately $850,000 for systems and
procedures development and additional equipment; (ii) approximately $563,500 for
repayment of outstanding indebtedness; and (iii) approximately $2,605,800 for
general working capital purposes. See "Risk Factors" and "Use of Proceeds".
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Summary Financial Information
The following summary of selected financial information concerning the
Company, other than the "As Adjusted" information reflecting the Company's
receipt and use of the net proceeds of its public offering (see "Use of
Proceeds"), have been derived from the financial statements (including the
related notes thereto) of the Company included elsewhere in this Prospectus (the
"Financial Statements").
The unaudited financial information of the Company as of September 30,
1996 and for the six months then ended have been prepared on the same basis as
the audited financial statements of the Company and, in the opinion of
management, include all adjustments necessary to present fairly the financial
position and the results of operations of the Company.
SUMMARY STATEMENT OF OPERATIONS DATA:
Period from
Four Months Ended Year Ended March 7, 1994
December 31, 1995 August 31, 1995 to August 31, 1994
----------------- --------------- -----------------
Costs and Expenses $ 293,210 $ 269,080 $ 31,510
Net Loss $(293,210) $ (269,080) $(31,510)
Net Loss Per Share $ (.11) $ (.16) $ (.02)
Nine Months Ended September 30
1996 1995
(Unaudited) (Unaudited)
Costs and Expenses $ 734,549 $ 252,793
Net Loss $(734,549) $(252,793)
Net Loss per Share $ (.26) $ (.15)
SUMMARY BALANCE SHEET DATA:
September 30, 1996 September 30, 1996
December 31, As
1995 Proforma Adjusted(1)(2)
Working Capital $(814,504) $(1,171,895) $2,333,905
(Deficit)
Total Assets $ 352,685 $ 733,991 4,239,791
Long-term Debt $ 89,746 $ 660,101 66,601
Total Liabilities $ 927,566 $ 1,924,668 1,331,168
Stockholders' Equity $(574,881) $(1,190,677) 2,908,623
(Deficiency)
(1) Includes the net proceeds (after underwriting commission,
nonaccountable expense allowance and estimated expenses) of the
offering contemplated herein and the repayment of outstanding
indebtedness of $563,500. See "Use of Proceeds".
(2) Includes the November, 1996 sale of 25,000 shares of Common Stock to an
unaffiliated party for $50,000 and the conversion of $30,000 of
convertible notes payable into 15,000 shares of Common Stock of the
Company, which occurs upon consummation of the offering contemplated
hereby.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. SUCH SECURITIES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THEREFORE, EACH PROSPECTIVE INVESTOR
SHOULD, PRIOR TO PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS,
AS WELL AS ALL OF THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS
AND THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS, THE NOTES THERETO AND
THE DOCUMENTS REFERENCED HEREIN.
When used in this Prospectus, the words "may", "will", "expect", "anticipate",
"continue", "estimate", "project", "intend" and similar expressions are intended
to identify forward-looking statements within the meaning of Section 27A of the
Securites Act of 1933 and Section 21E of the Securities Exchange Act of 1934
regarding events, conditions and financial trends that may affect the Company's
future plans of operations, business strategy, operating results and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Such
factors are described under the headings "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "The Company," "Business" and
in the risk factors set forth below.
Qualified Independent Auditor's Report - Financial Losses and Going
Concern.
The financial statements have been prepared assuming that the Company
will continue as a going concern and the auditor's report indicates that the
going concern basis may not be appropriate, due to its current financial
condition and recent results of operations. There can be no assurance that the
Company's business strategy will prove successful, or that the Company will
operate profitably. Since the Company has incurred operating losses from
inception and has capital and working capital deficiencies, there is substantial
doubt as to the Company's ability to continue as a going concern. See
"Business", "Financial Statements" and "Management's Discussion and Analysis".
Limited Operations - No Revenues to Date
To date, the operations of the Company have been limited to market
research and development of a software and hardware system for computerizing the
limousine reservation and payment process. The Company has not yet generated any
revenues and will require further technical development within a period of the
next twelve months, as well as an additional investment of the proceeds from
this Offering before a determination of the system's commercial feasibility can
be made. No assurance can be given that the Company's reservation and payment
system will achieve commercial
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feasibility. See "Business".
Development Stage of the Company
The Company is not sufficiently established to fully evaluate
or forecast its prospects. The Company is thus subject to all the
risks associated with the creation of a new business and there is
no assurance that it will be able to continue to function as a
viable entity. See "Business"
Rapid Technological Changes - Cost and Competition
The computer hardware and software industry is relatively new and has
undergone, and is expected to continue to undergo, significant and rapid
technological changes. Not only will market penetration and customer acceptance
of the Company's system depend upon the Company's ability to develop and
maintain a technically competent marketing force, but upon the Company's ability
to adapt to rapid technological changes in its industry. The Company also
expects that new competitors may introduce systems or services that are directly
or indirectly competitive with those of the Company. Such competitors may
succeed in developing systems and services that have greater functionality or
are less costly than the Company's systems and services and may be more
successful in marketing such systems and services. The Company intends to
continue to enhance and develop its reservation software products, however,
there can be no assurance that such enhancements or developments will be
accepted by existing or new markets. The Company is still developing its
products and none are currently available. See "Business."
No Assurance of Market Acceptance
The Company believes that its computerized limousine reservation and
payment system will gain acceptance among corporate travel departments, however,
there can be no assurance that a sufficient number of corporate travel
departments will be willing to utilize the Company's system to enable the
Company to achieve profitable operations. See "Business".
Dependence on Existing Computer Reservation Systems
The Company is dependant on access to existing computer reservation
systems. If such systems were to experience technical difficulties or be unable
to operate for a period of time, the Company's business would be adversely
affected. In addition, the Company has agreements with three of the four major
airline reservation systems. There can be no assurance that such agreements
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will be renewed or renewed on favorable terms after their
expiration. Moreover, if such agreements were to terminate and the
Company were to lose access to such systems, its business would be
materially and adversly affected. See "Business".
Broad Discretion by Management in Application of Proceeds; Funding
of Day to Day Operations
A portion (approximately $2,605,800 or 64.9%) of the net proceeds
derived from the sale of the Securities offered hereby will be added to the
Company's general working capital. Management will have complete discretion as
to the application of such funds, including payment of executive salaries and
fees relating to the day to day operations. No assurance can be given as to the
amounts that will be raised by this offering and if such amounts will be
sufficient to meet the Company's needs. See "Use of Proceeds."
The management of the Company also has broad discretion as to the
application and allocation of up to $16,353,125 of gross proceeds that may be
received upon exercise of the Redeemable Warrants. As a result of the foregoing,
the success of the Company will be substantially dependent upon the discretion
and judgment of the management of the Company with respect to the application
and allocation of the net proceeds hereof. Pending use of such proceeds, the net
proceeds of this offering will be invested by the Company in temporary,
short-term interest-bearing obligations. See "Use of Proceeds," "Business" and
"Management."
Dependence Upon Key Individual
The Company has only a few employees and the Company's success is
dependent upon the activities of Joseph Cutrona, its President. The loss of Mr.
Cutrona's services through death, disability or resignation will have a material
and adverse effect on the business of the Company. The Company intends to obtain
key man insurance on the life of Mr. Cutrona in the amount of $1,000,000. See
"Management".
Possible Need for Additional Financing
The Company intends to fund its operations and other capital needs for
the next twelve (12) months from the date of this offering substantially from
revenues generated by the Company's planned operations and the proceeds of this
offering, but there can be no assurance that such funds will be sufficient for
these purposes. There can be no assurance that such financing will be available,
or that it will be available on acceptable terms. See "Use of Proceeds."
Dependence on Certain Suppliers
The Company is dependent on certain of its suppliers who are
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involved with the development of the Company's system. Should the Company lose
any such suppliers, it would cause a delay in the Company's bringing its system
to market. The Company is dependent on two key suppliers who provide software
development services to the Company. Travel Automation Management provides the
"script" software programs which enable the Company's program to interact with
each of the airline computer reservation systems. Prosoft, Inc. has written all
the proprietary custom software for the Company's reservation system and is
presently completing the Company's payment system. Travel Automation
Management's services are provided on a purchase order/contract basis with
progress payment terms. Prosoft's services are provided under various formal
written consulting agreements. No assurance can be given that the Company will
be able to adequately replace these two suppliers in the event of a termination
of services by the suppliers to the Company. See "Business".
Adverse Effect of Economic Downturn
The Company's system, when operable, will be dependant on the travel
habits of its customers. In the event there is an economic downturn or change in
travel patterns, the Company's business could be adversely affected. See
"Business".
Continuing Voting Control by Current Officers and Directors
As of the date hereof, the management of the Company owns 2,253,227
shares of Common Stock. Consequently, immediately upon completion of the
Company's public offering of the Securities, the officers and directors of the
Company will own or control the voting of 53.70% of the Company's issued and
outstanding Common Stock, assuming no exercise of the Over-Allotment Option and
no exercise of the Redeemable Warrants. There are no cumulative voting rights
and directors must be elected by a plurality of the outstanding voting
securities entitled to vote. Therefore management of the Company will be in a
position to control the actions of the Company. See "Principal Stockholders" and
"Certain Transactions."
Limitations on Product Protection and Possibility of Infringement
The Company does not have any patents on any of its technology and
relies largely on copyright, its license agreements with customers and its own
security systems, confidentiality procedures and employee nondisclosure
agreements to maintain the trade secrecy of its proprietary information. There
can be no assurance that the legal protections and precautions taken by the
Company, or available remedies, will be adequate to prevent misappropriation of
the Company's proprietary information. In addition, these protections do not
prevent independent third-party development of functionally equivalent or
superior systems, products or
22
<PAGE>
methodologies. Moreover, there can be no assurance that third
parties will not assert infringement claims against the Company.
See "Business".
Likely Competition
Although, to the best of the knowledge of the management of the
Company, there are as yet no competitors, it must be assumed that if the
Company's efforts are successful, other companies will begin to offer competing
systems. These future competitors may well be companies which have substantially
greater research, development, marketing and financial resources than the
Company. Moreover, customers seeking limousine service will be able to reserve
such service through existing telephone based systems or alternative methods
which may indirectly compete with the Company.
See "Business".
Non-Compliance with Exchange Act Reporting Requirements
The Company was not in compliance with the filing requirements of the
Exchange Act in that it had filed unaudited financial statements rather than the
audited financial statements required by the Exchange Act due to its inability
at the time to pay for audited financial statements. The Company may be subject
to legal liability as a result thereof. The Company intends to use portions of
the proceeds from this offering allocated to working capital to fund such
compliance. See "Use of Proceeds".
Need for Highly Qualified Personnel
The success of the Company's business will depend upon its ability to
attract and retain personnel with a wide range of technical capabilities.
Competition for such personnel is intense, and is expected to increase in the
future. No assurance can be given that the Company will be able to attract and
retain such personnel. See "Business".
Arbitrary Determination of Offering Price of Securities
The public offering price of the Securities and the exercise price of
the Redeemable Warrants were determined by negotiation between the Company and
the Underwriter and do not necessarily bear any relationship to the Company's
assets, book value, net worth or any other established criteria of value. Among
the factors considered in determining such prices were the Company's historical
performance and growth, management's assessment of the Company's business
potential and earning prospects, the prospects for growth in the industry in
which the Company operates, market prices and prevailing market conditions
generally. Neither the offering price of the Securities nor the exercise price
of the Redeemable Warrants
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<PAGE>
should be regarded as indicative of the actual value of any of the securities
being offered by the Company. The trading price of the securities and/or
exercise price of the Redeemable Warrants could also be subject to significant
fluctuations in response to variations in quarterly results of operations,
announcements of new contracts or services by the Company or its competitors,
government regulatory action, general trends in the industry and other actions,
including extreme price and volume fluctuations which have been experienced by
the securities markets from time to time in recent years. See "Underwriting".
Immediate and Substantial Dilution
This Offering involves an immediate and substantial dilution of $4.39
(87.8%) per share between the net tangible book value per share of Common Stock
upon consummation of this Offering and the public offering price. To the extent
that any future financing involves the sale of the Company's equity securities,
the interests of the Company's then existing stockholders, including investors
in this Offering, could be substantially diluted. See "Dilution" and "Future
Sales of Stock by Stockholders."
Absence of Dividends on Common Stock
The Company has not paid any dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, working capital
and earnings, if any, will be retained for use in the Company's business
operations and in the expansion of its business. The Company has no present
intention to pay cash dividends on its Common Stock. See "Dividend Policy" and
"Description of Securities".
Possible Adverse Effect of Future Sales of Stock by Stockholders
Of the Company's 3,280,594 outstanding shares of Common Stock prior to
the Offering contemplated hereby, 3,000,109 shares are "restricted securities"
as that term is defined under the Securities Act and in the future may only be
sold in compliance with Rule 144 promulgated under the Securities Act or
pursuant to an effective registration statement. Rule 144 provides, in essence,
that a person (including a group of persons whose shares are aggregated) who has
satisfied a two-year holding period for such restricted securities may sell
within any three-month period, under certain circumstances, an amount of
restricted securities which does not exceed the greater of 1% of that class of
the Company's outstanding securities or the average weekly trading volume of
that class of securities during the four calendar weeks prior to such sale. In
addition, pursuant to Rule 144, persons who are not affiliated with the Company
and who have held their restricted securities for at least three years are not
subject to the quantity limitations or the manner of sale restriction of the
rules. As of the date hereof, no shares of Common Stock are available for resale
24
<PAGE>
pursuant to Rule 144. Pursuant to an agreement with the Underwriter, the
officers, directors and holders of 5% or more of the Company's equity
securities, other then Steven Pollan and other than 200,000 shares of common
stock held by Loeb are restricted from selling their respective securities for a
period of 18 months from the Effective Date, absent waiver of such restriction
by the Underwriter. See "Certain Transactions" and "Underwriting."
In the event that shares of Common Stock which are not currently
salable become salable by means of registration, eligibility for sale under Rule
144 or otherwise and the holders of such shares of Common Stock elect to sell
such shares of Common Stock in the public market, there is likely to be a
negative effect on the market price of the Company's securities and on the
ability of the Company to obtain additional equity financing. In addition, to
the extent that such shares of Common Stock enter the market, the value of the
Common Stock in the over-the-counter market may be reduced. No predictions can
be made as to the effect, if any, that sales or availability for sale of the
Securities will have on the market price of any such securities, which may
prevail from time to time. Nevertheless, the foregoing could adversely affect
such prevailing market prices. See "Principal Stockholders," "Certain
Transactions" and "Description of Securities."
Possible Adverse Effects of Authorization of Preferred Stock; Anti-
Takeover Effects.
The Company's Certificate of Incorporation authorizes the issuance of a
maximum of 25,000,000 shares of preferred stock, $.0001 par value ("Preferred
Stock"), on terms which may be fixed by the Company's Board of Directors without
further stockholder action. None of such Preferred Stock has been designated or
issued. The terms of any series of Preferred Stock, which may include priority
claims to assets and dividends, and special voting rights, could adversely
affect the rights of holders of the Common Stock. The issuance of Preferred
Stock could make the possible takeover of the Company or the removal of
management of the Company more difficult, discourage hostile bids for control of
the Company in which stockholders may receive premiums for their shares of
Common Stock, or otherwise dilute the rights of holders of Common Stock and the
market price of the Common Stock. See "Description of Securities - Preferred
Stock".
Capital-Raising Restrictions
The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter's prior consent for a
period of eighteen (18) months following the date of this Prospectus. This
provision may limit the Company's ability to raise additional equity capital.
The purpose of such provision is to protect against unnecessary dilution to the
public
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<PAGE>
shareholders.
Financial Risk to Investors in Public Offering
Upon completion of the Company's public offering, the Company's current
stockholders will have paid $618,600 for 3,295,594 shares of Common Stock, or
78.5% of the Company's then outstanding shares of Common Stock, and purchasers
of the Securities in the Company's public offering will have paid $4,500,000 for
900,000 shares of Common Stock, or 21.5% (exclusive of related warrants) of the
Company's then outstanding shares of Common Stock, assuming no exercise of the
Over-Allotment Option and no exercise of the Redeemable Warrants being offered
by the Company pursuant thereto. Therefore, investors purchasing Securities in
the Company's public offering will bear a substantially greater financial risk
than the Company's current stockholders. See "Dilution."
No Assurance of Public Market or Continued NASDAQ Listing
Prior to the Company's public offering, there has been no public market
for any of the Company's securities, and there can be no assurance given that a
regular trading market for the Securities will develop after the completion of
the Company's public offering. If a trading market does in fact develop for any
of the foregoing securities, there can be no assurance given that it will be
sustained. The Company became a public company in 1988 in a transaction in which
JEC Lasers, Inc. distributed all of the Company's common stock then owned by it
to its stockholders. The Company has had no active business until its
acquisition of Corporate Travel Link. In connection with the Company's public
offering, the Company applied for and is expected to be granted inclusion of the
Common Stock and the Redeemable Warrants for quotation on NASDAQ under the
symbols: GENS, GENSW, and GENSZ, respectively. While such securities are
currently listed for quotation on NASDAQ, there can be no assurance given that
the Company will be able to satisfy the requirements for continued quotation on
NASDAQ or that such quotation will otherwise continue. If, for any reason, any
of such securities become ineligible for continued listing and quotation or a
public trading market does not develop, purchasers of such securities may have
difficulty selling their securities should they desire to do so.
Under the current rules of the National Association of Securities
Dealers, Inc. ("NASD"), in order to qualify for initial listing on NASDAQ, a
company must have, among other things, at least $4,000,000 in total assets,
$2,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $3.00 per share. For continued listing, a
company must have, among other things, $2,000,000 in total assets, $1,000,000 in
total capital and surplus, $1,000,000 in market value of public
26
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float and a minimum bid price of $1.00 per share. Although the Company is able
initially to satisfy the requirements for quotation on NASDAQ, it may be unable
to satisfy the requirements for continued quotation thereon, and trading, if
any, in the securities being offered hereby would be conducted in the
over-the-counter market in what are commonly referred to as the "pink sheets" of
the National Quotation Bureau, Inc. or on the NASD OTC Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of or to
obtain accurate quotations as to the price of such securities. See
"Underwriting".
On November 6, 1996, Nasdaq approved changes to its listing
requirements which, after a 30-day comment period and consideration of changes
to proposals, will be submitted to the Securities and Exchange Commission (the
"Commission") for final approval. If the current proposal is approved without
modification a company's qualification for continued listing on Nasdaq would
require that the company, among other things, have at least $2,000,000 in "net
tangible assets" ("net tangible assets," equals total assets less total
liabilities and good will) or at least $35,000,000 in total market value or at
least $500,000 in net income in two out of its last three fiscal years, as well
as at least 500,000 shares in the pubic float, at least $1,000,000 in market
value of the public float, a bid price of not less than $1.00 per share, a
minimum of two independent directors and other corporate governance criteria
which are the same as those for Nasdaq National Market.
Risk of "Penny Stock" Regulations
The Commission has adopted regulations which define a "penny stock" to
be any equity security that has a market price (as defined) of less than $5.00
per share, subject to certain exceptions. The Company believes that, as of the
date of this Prospectus, the Common Stock and/or the Redeemable Warrants may be
deemed to be "penny stocks" as defined by the Exchange Act and the rules and
regulations promulgated thereunder. For any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities, information on the limited market in penny stocks and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. In addition, the
broker-dealer must obtain a written acknowledgment from the customer that such
disclosure information was provided and must retain such acknowledgment from the
customer for at least three years.
Further, monthly statements must be sent to the customer disclosing
current price information for the penny stock held in the account. While many
NASDAQ-listed securities would otherwise be
27
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covered by the definition of penny stock, transactions in a NASDAQ-listed
security would be exempt from all but the sole market-maker provision for: (i)
issuers who have $2,000,000 in tangible assets ($5,000,000 if the issuer has not
been in continuous operation for three years); (ii) transactions in which the
customer is an institutional accredited investor; and (iii) transactions that
are not recommended by the broker-dealer. In addition, transactions in a
NASDAQ-listed security directly with a NASDAQ market-maker for such securities
would be subject only to the sole market-maker disclosure, and the disclosure
with respect to commissions to be paid to the broker-dealer and the registered
representative.
The above-described rules may materially adversely affect the liquidity
for the market of the Company's securities. Such rules may also affect the
ability of broker-dealers to sell the Company's securities and may impede the
ability of holders (including, specifically, purchasers in this offering) of the
Common Stock, the Class A Warrants, the Common Stock underlying the Class A
Warrants, the Class B Warrants and the Common Stock underlying the Class B
Warrants to sell such securities in the secondary market.
Underwriter's Influence on the Market
Although it has no legal obligation to do so, the Underwriter may from
time to time act as a market-maker and otherwise effect transactions in the
Company's securities. To the extent the Underwriter acts as a market-maker in
the Common Stock or Redeemable Warrants it may be a dominating influence in that
market. The price and liquidity of such securities may be affected by the
degree, if any, of the Underwriter's participation in the market inasmuch as a
significant amount of such securities may be sold to customers of the
Underwriter. Such customers subsequently may engage in transactions for the sale
or purchase of such securities through or with the Underwriter. In the event
that market-making activities are commenced, the Underwriter may discontinue
such activities at any time or from time to time. See "Underwriting."
Risk of Blue Sky Restrictions on Exercise of the Redeemable
Warrants
The Company has qualified the sale of the securities being offered
hereby in a limited number of states. Although certain exemptions in the Blue
Sky laws of certain states, other than those states in which such securities are
initially qualified, may permit such securities, including the Redeemable
Warrants, to be transferred to purchasers in such states, the Company will be
prevented from issuing Common Stock upon exercise of the Redeemable Warrants in
such states unless an exemption from registration or qualification is available
or unless the issuance of Common Stock upon the exercise of the Redeemable
Warrants is qualified and a current registration statement is in effect. The
Company may decide
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not to seek or may not be able to obtain qualification of the issuance of such
Common Stock in all of the states in which the ultimate purchasers of the
Redeemable Warrants reside. In such case, the Redeemable Warrants of such
purchasers will expire and have no value if such warrants cannot be exercised.
Accordingly, the market for the Redeemable Warrants may be limited. See
"Underwriting".
Current Prospectus Requirement to Exercise Warrants
During the exercise period of the Redeemable Warrants, the Company must
maintain and make available a current prospectus. This Prospectus will no longer
be current after _________, 1997 (or earlier upon the occurrence of a material
event or change which would render the information herein inaccurate or
otherwise misleading). There can be no assurance given that the Company will not
be prevented by financial or other considerations from maintaining a current
prospectus. In the event that a current prospectus is not available, the
Redeemable Warrants may not be exercisable and the Company will be precluded
from redeeming the Redeemable Warrants. See "Underwriting".
Adverse Effects of Possible Redemption of the Redeemable Warrants
Each Class A Redeemable Warrant shall entitle the holder to acquire one
share of the Common Stock at a price equal to $5.75 per share. Commencing 12
months after the Effective Date, the Company will have the right at any time to
redeem all, but not less than all, of the Class A Redeemable Warrants at a price
equal to ten cents ($.10) per Redeemable Warrant, provided that the closing bid
price of the Common Stock equals or exceeds $6.25 per share for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption. Each Class
B Redeemable Warrant shall entitle the holder to acquire one share of the Common
Stock at a price equal to $6.75 per share. Commencing 12 months after the
Effective Date, the Company will have the right at any time to redeem all, but
not less than all, of the Class B Redeemable Warrants at a price equal to ten
cents ($.10) per Redeemable Warrant, provided that the closing bid price of the
Common Stock equals or exceeds $7.25 per share for any twenty (20) trading days
within a period of thirty (30) consecutive trading days ending on the fifth
trading day prior to the date of the notice of redemption. See "Descriptions of
Securities." Although holders of the Redeemable Warrants will have the right to
exercise their Redeemable Warrants through the date of redemption, they may be
unable to do so because they lack sufficient funds at the time of redemption, or
they may simply not wish to invest any more money in shares of the Common Stock
at that time. Should a holder of the
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Redeemable Warrants fail to exercise such Redeemable Warrants or to sell such
Redeemable Warrants on or prior to the redemption date, such Redeemable Warrants
will have no value beyond their redemption value. The Company may not redeem the
Redeemable Warrants unless the Company has available a current prospectus with
respect to the Redeemable Warrants. See "Risk Factors-Current Prospectus
Requirement" above and "Description of Securities-Redeemable Warrants."
Possible Restrictions on Market-making Activities During Warrant
Solicitation
To the extent that the Underwriter solicits the exercise of the
Redeemable Warrants from the holders thereof, it may be prohibited pursuant to
the requirements of Rule 10b-6 under the Exchange Act from engaging in
market-making activities during such solicitation and for a period of up to nine
days preceding such solicitation. As a result, the Underwriter may be unable to
continue to provide a market for the Company's securities during certain periods
while the Redeemable Warrants are exercisable. The Underwriter is not obligated
to act as a market-maker. See "Underwriting."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities being
offered by the Company, after deducting expenses and other costs of the
offering, are estimated to be approximately $4,019,300 (or $4,657,445 if the
Over-Allotment Option is exercised in full). The Company intends to use the net
proceeds of its offering substantially as follows:
Proposed Use of Proceeds Approximate Amount Percentage
System Procedures Development
and additional equipment(1) $850,000 21.1%
Repayment of Debt (2) 563,500 14.0%
Working Capital (3) 2,605,800 64.9%
--------- -----
Total $4,019,300 100%
---------
- ----------------------------
(1) To be utilized for (a) completion of software development and acquisition of
computer hardware needed to complete development of the Genisys payment system
($560,000) and (b) completion of software development and acquisition of
computer hardware necessary to complete integration of the Genisys reservation
system with the Apollo Computer Reservation System ("CRS") ($290,000).
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(2) The total of $563,500 bears interest at 10% per annum and is payable to 16
unaffiliated parties and matures upon the earlier to occur of May 29, 1997 or
thirty days after the closing date of the first underwritten public offering of
the Company's securities. See "Certain Transactions."
(3) General working capital contemplates, among other things, the use for
general corporate purposes, including funding day to day operations of the
Company such as executive salaries, compliance with reporting requirements and
the Company's future development.
The amounts set forth above are estimates developed by management of
the Company based upon the Company's current plans and prevailing economic and
industry conditions. Although the Company does not currently contemplate
material changes in the proposed use of proceeds set forth above, to the extent
that management of the Company finds that adjustment thereto is required, the
amounts shown may be adjusted among the uses indicated above. The Company's
proposed use of proceeds is subject to changes in general, economic and
competitive conditions, timing and management discretion, each of which may
change the amount of proceeds expended for the purposes intended. The proposed
application of proceeds is also subject to changes in market conditions and the
Company's financial condition in general. Changes in general, economic,
competitive and market conditions and the Company's financial condition would
include, without limitation, the occurrence of an economic slowdown or recession
and changes in the competitive environment in which the Company operates. While
management of the Company is not currently aware of the existence or pending
threat of any of the foregoing events, there can be no assurance given that one
or more of such events will not occur. See "Risk Factors" generally, including
specifically, "Risk Factors-Working Capital-Use of Proceeds" and "Risk
Factors-Competition." Any additional proceeds received upon exercise of the
Over-Allotment Option or Redeemable Warrants will be added to working capital
and used as management, in its sole discretion, deems appropriate.
While there can be no assurance given, the Company believes that the
net proceeds from its public offering and revenues generated by the Company's
planned operations will be adequate to satisfy the Company's working capital
needs for the next 12 months. The Company does not currently anticipate that it
will need the proceeds from the potential exercise of Redeemable Warrants to
fund its working capital needs or to maintain its operations over the next 12
months. However, the Company may require additional financing in the future in
order to expand its business. The Company is not able at this time to predict
the amount or potential source of such additional funds and has no current
commitments to obtain such funds, other than relating to the potential exercise
of outstanding Warrants. There can be no assurance that additional financing on
acceptable terms will be available to the Company when needed, if at all. See
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Pending
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<PAGE>
use of the net proceeds from the Company's public offering, the Company may make
temporary investments in short-term, high grade, interest-bearing instruments.
32
<PAGE>
- ----------------------------------------------------------------
CAPITALIZATION
- -----------------------------------------------------------------
The following table sets forth as of September 30, 1996 the Company's
capitalization on a proforma basis and as adjusted to give effect to this
Offering and its net proceeds, assuming the over-allotment is not exercised. The
information below should be read in conjunction with the Financial Statements
contained in this Prospectus, which should be read in their entirety.
<TABLE>
<CAPTION>
<S> <C> <C>
Proforma As Adjusted(1)(2)(3)
Short-term debt:
Current portion of obligations
under Capital Leases $ 59,952 59,952
Notes payable-Stockholder 733,827 733,827
------- --------
Total Short-term debt 793,779 793,779
------- --------
Long-term debt:
10% Promissory notes payable 563,500 -
Convertible notes payable(3) 30,000 -
Long-term portion of obligations
under capital leases 66,601 66,601
------- --------
Total long-term debt 660,101 66,601
------- --------
Stockholders' equity (deficency):
Preferred stock, $.0001 par value;
25,000,000 shares authorized;
None outstanding - -
Common stock, $.0001 par value;
75,000,000 shares authorized;
3,255,594 shares issued and
outstanding (proforma) 326 -
4,195,594 shares outstanding,
as adjusted - 420
Paid in capital 137,346 4,236,552
Deficit accumulated during the
development stage (1,328,349) (1,328,349)
------------ -----------
Total stockholder's equity
(Deficiency) (1,190,677) 2,908,623
------------ ----------
Total Capitalization
Debt and stockholders' equity
$ 263,203 $3,769,003
------------- --------------
</TABLE>
- -------------
(1) Gives effect to the anticipated net proceeds of $4,019,300 public
offering and the repayment of debt of $563,500 with the proceeds.
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<PAGE>
(2) Does not include: (a) 287,500 shares of Common Stock issuable
upon exercise of the Class A Warrants issued in a private
placement; (b) 135,000 shares of Common Stock issuable upon
exercise of the Over-Allotment Option; (c) 360,000 shares of
Common Stock issuable upon exercise of the Redeemable Warrants
made part of the Over-Allotment Option; or (d) 90,000 shares
of Common Stock issuable upon exercise of the Underwriter's
Purchase Option. In the event all outstanding options
(excluding 360,000 options covering the over-allotment option
but including 90,000 shares covered by the Underwriters
Purchase Option) were exercised there would be 4,708,094
shares of Common Stock outstanding. See "Description of
Securities," "Certain Transactions," "Management" and
"Underwriting."
(3) Includes the conversion of $30,000 of convertible notes
payable into 15,000 shares of common stock upon consummation
of the public offering. Also includes the sale of 25,000
shares of common stock to an unaffiliated party for $50,000 in
November, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources".
DILUTION
As of September 30, 1996, the Company had an aggregate of 2,834,866 shares of
Common Stock outstanding and a net tangible book value of $(1,557,871) or $(.55)
per share of Common Stock (3,255,594 shares, net tangible book value of
$(1,551,168) or $(.48) per share on a proforma basis. See September 30, 1996
financial statements). "Net Tangible Book Value Per Share" represents the total
amount of the Company's tangible assets, less the total amount of its
liabilities, divided by the total number of shares of Common Stock outstanding.
After giving effect to the sale of 900,000 shares of Common Stock by
the Company at the offering price of $5.00 per share of Common Stock, and the
proceeds from the sale of the Class A and Class B Warrants and the deduction of
offering expenses in the amount of $235,000 and underwriting discounts and
commissions estimated at $635,700 (which amounts include payment of the
Underwriter's Non-Accountable Expense Allowance but without taking into account
exercise of the Over-Allotment Option), the proforma net tangible book value of
the Company would be $.61 per share of Common Stock. This amount represents an
immediate dilution (the difference between the attributed price per share of
Common Stock to purchasers in the Company's offering and the proforma net
tangible book value per share of Common Stock as of September 30, 1996 of
approximately $4.39 per share of Common Stock to new
34
<PAGE>
investors and an immediate increase (the difference between the proforma net
tangible book value per share of Common Stock as of September 30, 1996 and the
proforma net tangible book value per share of Common Stock as of September 30,
1996 after giving effect to the issuance of 900,000 shares of Common Stock and
related warrants) of $1.06 per share of Common Stock to the Company's
stockholders. Such increase to the Company's current stockholders is solely
attributable to the cash price paid by purchasers of the Securities offered for
sale by the Company.
The following table illustrates the per share dilution as of September 30, 1996:
Public offering price per share(1)................. $5.00
Net proforma tangible book value per share
before giving effect to the Company's
offering(3)..................................... $(.45)
Increase per share attributable to the net proceeds
of the sale of 900,000 shares of Common Stock
and related warrants offered by the Company..... 1.06
Proforma net tangible book value per share as of
September 30, 1996 reflecting the Company's
Offering(2)........................................ .61
Dilution per share to purchasers in the Company's
offering........................................... $4.39
- ------------------------
(1) Attributes $5.00 of the public offering price to the shares of
Common Stock and none to the Redeemable Warrants. Represents
the public offering price before deduction of estimated
expenses of the Company's offering, underwriting discounts and
commissions. If the Underwriter's over-allotment option is
exercised in full, the proforma as adjusted net tangible book
value per share of Common Stock after this Offering would be
approximately $.74 representing an immediate increase of $1.19
per share to current stockholders and an immediate dilution of
$4.26 per share to new investors.
(2) Assumes no exercise of: (a) the Underwriter's Purchase Option
(or exercise of the Redeemable Warrants included therein); (b)
the Over-Allotment Option (or exercise of the Redeemable
Warrants included therein). See "Capitalization,"
"Underwriting," "Certain Transactions" and "Description of
Securities."
(3) Includes the effect of the conversion of $250,000 of loans into term
debt and the related issuance of 420,738 shares of common stock, the
sale of 25,000 shares of common stock for $50,000 in November, 1996 and
the conversion of $30,000 of convertible notes payable into 15,000
shares of common stock.
35
<PAGE>
The following table sets forth, as of November 30, 1996, a comparison
of the number of shares of Common Stock acquired by current stockholders from
the Company, the total consideration paid for such shares of Common Stock and
the average price per share paid by current stockholders of Common Stock and to
be paid by the prospective purchasers of the shares of Common Stock offered for
sale by the Company (based upon the anticipated public offering price of $5.00
per share of Common Stock, before deducting underwriting discounts and
commissions and estimated offering expenses).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Common Stock Acquired Total Consideration Average Price
Number Percent Amount Percent Per Share
Current Stockholders..... 3,295,594 78.5% $ 618,600 12% $ .19
New Investors(1)(2)...... 900,000 21.5% $4,500,000 88% $5.00(3)
----------- ----- ----------- ----
Total(2)(3)(4)....... 4,195,594 100% $5,118,600 100%
</TABLE>
(1) Does not include 90,000 shares of Common Stock which may be
issued upon the exercise of an option granted to the
Underwriters to cover over-allotments. See "Underwriting".
(2) Assumes no exercise of: (a) the Underwriter's Purchase Option
(or exercise of the Redeemable Warrants included therein); or
(b) the Over-Allotment Option (or exercise of the Redeemable
Warrants included therein). See "Capitalization," "Management
Discussion and Analysis of Financial Conditions and Results of
Operations", "Underwriting," and "Description of Securities."
(3) Aggregate offering price before deduction of offering
expenses, underwriting discounts and commissions.
(4) Includes the 15,000 shares of Common Stock issuable upon the conversion
of the Convertible Notes and the 25,000 shares of Common Stock sold in
November 1996 for $50,000.
DIVIDEND POLICY
The Company has not, to date, paid and does not anticipate
paying any dividends on its Common Stock in the foreseeable future.
The Company currently intends to retain all working capital and
earnings, if any, for use in the Company's business operations and
in the expansion of its business. See "Description of Securities-
Common Stock."
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The principal business activity of the Company is developing a
computerized limousine reservation and payment system for the business traveler.
The Company anticipates that the proprietary software that is being developed
will enable limousine reservations to be completely computerized -- i.e., be
entirely automated and operate without human intervention except for initial
input of travel information.
The Company, a New Jersey corporation, was organized on April 25, 1986,
under the name of JECO2 Lasers, Inc. and changed its name to Robotic Lasers,
Inc. on December 22, 1987. On August 11, 1995, Robotic Lasers acquired Corporate
Travel Link, Inc. (a development-stage enterprise) which was incorporated in New
Jersey on March 7, 1994. For accounting purposes, the share exchange transaction
and combination of Corporate Travel Link with the Company has been treated as a
reverse acquisition. The previous historical financial statements of Corporate
Travel Link (since its information in March 1994) are now reported as the
historical consolidated financial statements of the Company and its subsidiary.
Since August 11, 1995, the Company's business and operations have consisted
solely of the business and operations of Corporate Travel Link, which continues
to operate as a wholly-owned subsidiary of the Company. The Company changed its
name from Robotic Lasers, Inc. to Genisys Reservation Systems, Inc. on July 16,
1996.
The Company changed its fiscal year end from the last day of August to
December 31, effective December 31, 1995.
Development of the Company's Systems
The development of the software program and the database for the Genisys
reservation system has been completed. All the hardware elements of the Genisys
computer system have been purchased and integrated and the completed system is
up and operating. The Worldspan "script" computer software interface, which
allows the Genisys reservation system to operate over the Worldspan CRS, has
been completed. The completed Genisys reservation hardware and software system
and data base operating through the Worldspan CRS has been beta tested with a
major entertainment company and its travel agency in Atlanta and with a
limousine service provider in Los Angeles. Actual reservations were booked,
confirmed and limousine services were provided. At that time, Worldspan could
have been brought on-line but the management of the Company decided
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<PAGE>
to wait until the payment system and the Sabre system could be brought on-line
at the same time.
The Sabre "script" computer software interface has also been completed and is
now undergoing preliminary or "alpha" testing, which the Company expects to be
completed shortly. The Company expects to begin beta testing the Sabre system in
February 1997.
The hardware and software development of the Genisys Payment System has been
completed and is currently undergoing alpha testing in conjunction with the
Sabre system. The payment system will be beta tested along with and integrated
into the Sabre system. Upon completion of the testing of the Sabre
reservation/payment system, the Worldspan system will be given a second beta
test with the payment system integrated within its system, as well. Upon
completion of the Worldspan reservation/payment system beta test, both the Sabre
and Worldspan systems will be brought on-line. Management expects this to occur
in early 1997.
The "script" software program for Apollo is currently being developed and should
be ready for alpha testing in early 1997. Since by that time the Genisys
reservation and payment system will be operating through the Sabre and Worldspan
CRS's, management expects to assume that beta testing of the Apollo system can
be completed by mid 1997 and the Apollo system brought on-line in late 1997.
Components of Revenue and Expenses
Revenue. The Company is a development-stage company and has generated
no revenues and has no commercial operations to date. The Company did not
generate any revenues from operations during the fiscal year ending December 31,
1996. The Company does expect to bring its computerized limousine reservation
and payment system on-line through two of the four main airline Computer
Reservation Systems in existence (Sabre and Worldspan) in early 1997, at which
time the Company expects to generate revenue. The Company anticipates completing
development of and bringing a third airline Computer Reservation System, Apollo,
on-line in late 1997, which it expects to increase revenues.
The Company anticipates that its computerized limousine reservation and
payment system will generate revenue from the following sources: (i) a booking
fee charged for use of the Genisys reservation system and billed through the
Genisys payment system, (ii) a processing fee generated by charges processed
through the Genisys payment system, (iii) an annual software licensing fee
charged to limousine service providers who utilize the Genisys reservation and
payment systems.
Expenses. Cost of service will include all costs directly
attributable to the Company's provision of services to its
38
<PAGE>
corporate clients and the limousine service providers. The most significant
component of cost of service is the booking fee charged by the airline Computer
Reservation System ("CRS") for reservations made by the Genisys systems
utilizing the CRS. Booking fees are a set amount charged by each CRS for
transactions posted through the system. Cost of service also includes the access
and file fees charged by a commercial bank acting as the Company's Automated
Clearing House in distributing payments made to limousine service providers
through the Genisys payment system.
General and administration expenses include salaries, commissions and
benefits, travel costs, professional fees, rent, telephone and other operating
costs of the Company. The Company has not capitalized any internal expenditures
with respect to the costs of developing and implementing the Genisys reservation
and payment systems.
Results of Operations
The Company is in the development stage and has not yet generated any
revenues and has no commercial operations to date. The Company has been
unprofitable since inception and expects to incur additional operating losses
over the next several fiscal quarters. The Company does not expect to generate
any revenues from operations until 1997. As reflected in the accompanying
financial statements, the Company has incurred losses totaling $1,328,349 since
inception and at September 30, 1996, had a working capital deficit (proforma) of
$1,171,895.
Selling, general and administrative expenses were $561,808 for the nine
months ended September 30, 1996 as compared to $233,695 during the nine months
ended September 30, 1995. The primary reason for the difference between the two
periods is the commencement of operations during the earlier period when the
Company had only four part time employees for approximately half the period,
while during the latter period the Company was operational with 5 full-time
employees. Payroll and payroll-related costs increased approximately $155,000
during 1996. Other approximate cost increases during the 1996 period consist of
consulting fees ($46,000), professional fees ($66,000), travel costs ($19,000),
marketing costs ($15,000) and other administrative costs ($27,000).
Comparison of the results of operations during the 4 months ended
December 31, 1995, to the same period in 1994 is not deemed meaningful, as the
Company only incurred nominal operating costs during the 1994 period.
Liquidity and Capital Resources.
The Company's funds have principally been provided from Loeb
39
<PAGE>
Holding Corporation, as escrow agent (Loeb), LTI Ventures Leasing Corporation
and a private offering, as described below.
In February, 1995, Loeb agreed to loan the Company up to a maximum of
$500,000 as evidenced by Convertible Notes. In addition, pursuant to five
interim loan agreements, Loeb loaned the Company an additional $250,000 from
December 1995 thru March 1996. In November and December 1996, Loeb Holding
Corporation loaned the Company $210,000 evidenced by a series of eighteen month
term Promissory Notes bearing interest at the annual rate of 10%. Total loan
proceeds from Loeb and Loeb Holding Corporation to date are $960,000.
On September 30, 1995, the Company entered into a sale and lease-back
arrangement with LTI Ventures Leasing Corp. (LTI) whereby the Company sold the
bulk of its computer hardware and commercially purchased software to LTI. In
consideration for the sale, the Company received a total of $169,599 and agreed
to lease back the hardware and software for varying terms at a monthly rental
totaling $7,039.
During the quarter ended March 31, 1996, the Company sold 5,000 shares
of the Company's restricted Common Stock to a former officer and director of the
Company for $10,000. During the same period, the Company also sold 25,000 shares
of the Company's restricted Common Stock to an unaffiliated party for $50,000.
Pursuant to a private offering, the Company issued 11.5 units to
sixteen unaffiliated third parties in May and June 1996. The Underwriter acted
as placement agent for the private placement. Each $50,000 unit consists of a
$49,000 promissory note and a Class A redeemable Common Stock purchase Warrant
valued at $1,000 per unit. Each warrant entitles the holder to purchase 25,000
shares of the Company's common stock at $5.75 per share. Total proceeds received
from this offering was $575,000 and warrants to purchase 287,500 shares of the
Company's common stock were issued by the Company.
In April and June 1996, the Company borrowed a total of $30,000 from
two unaffiliated third parties. The maturity date is the earlier of January 1,
1998, or the consummation of a public offering of the Company's common stock.
These notes bear interest at a rate of 7% per annum, payable on the last day of
each calendar quarter of each year, commencing March 31, 1997, to the maturity
date. If the maturity date of these notes shall occur prior to January 1, 1998,
in lieu of the $30,000 payment of the principal amount due, the principal amount
due shall be converted into 15,000 fully paid and non-assessable shares of
common stock of the Company.
In November, 1996, the Company sold 25,000 shares of the Company's
restricted common stock to an unaffiliated party for
40
<PAGE>
$50,000.
At September 30, 1996, the Company had cash of $76,550 and a working
capital deficit (proforma) of $1,171,895. The Company intends to fund its
operations and other capital needs for the next twelve (12) months from the date
of this offering substantially from revenues generated by the Company's planned
operations and the proceeds of this offering, but there can be no assurance that
such funds will be sufficient for these purposes. There can be no assurance that
such financing will be available, or that it will be available on acceptable
terms. See "Use of Proceeds."
During the quarter ended September 30, 1996, Joseph Cutrona, President
of the Company made a capital contribution to the Company in the amount of
$41,700. In October, November and December 1996, Mr. Cutrona made additional
capital contributions totaling $35,000.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that certain long-lived assets be reviewed for possible impairment
and written down to fair value, if appropriate. The Company adopted this new
pronouncement in 1996 and the impact of adoption is not expected to have a
material effect on the Company's financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," requires companies to measure employee stock
compensation plans based on the "fair value" method of accounting. However, the
statement allows the alternative of continued use of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," with proforma
disclosure of net income and earnings per share determined as if the "fair
value"-based method had been applied in measuring compensation cost. The Company
has not yet determined if it will adopt this new pronouncement in 1996 or
provide only proforma disclosure. The effects of this new pronouncement, if
adopted, have not been determined.
41
<PAGE>
- ------------------------------------------------------------
BUSINESS
- ------------------------------------------------------------
History
The Company was incorporated in New Jersey in April 1986 as a
wholly-owned subsidiary of JEC Lasers, Inc. ("JEC") to continue the research and
development of an ultra-compact, multi-kilowatt CO2 laser begun under an
agreement with Loughborough Consultants Ltd ("LCL"), which is affiliated with
Loughborough University of Technology, Loughborough, Leicestershire, England.
Due to the uncertain financial condition of JEC and, in order to
preserve the CO2 laser technology which management felt may have had some value,
on May 30, 1986, the Board of Directors of JEC voted to spin-off Robotic Lasers
into an independent, publicly-owned corporation by issuing a stock dividend of
one share of the Company's Common Stock for every four shares of JEC common
stock outstanding to all shareholders of record as of July 8, 1986. On September
23, 1988, the shares were registered for resale under the Securities Act of
1933, as amended. On June 25, 1986, the Company and JEC signed a Purchase
Agreement whereby the Company acquired all of the assets, rights and properties
relating to JEC's CO2 laser research and development agreement with LCL, subject
to certain liabilities.
On March 3, 1995, the Company sold all of the assets, rights and
properties relating to the C02 laser research and development agreement with
LCL, subject to certain liabilities, to JEC for $345,593 which generated a
profit of approximately $246,000.
On August 9, 1995, the shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation to effect a
fifty-five-for-one reverse stock split pursuant to which each fifty-five shares
of the Company's Common Stock outstanding as of its close of business on July
12, 1995 was replaced by one share of Common Stock. The reverse stock split
reduced the number of outstanding shares of Common Stock of the Company as of
July 12, 1995 from 30,853,352 to 560,974 (before July 16, 1996 one for two
reverse split) shares of Common Stock.
On August 11, 1995, Robotic Lasers acquired Corporate Travel Link, Inc.
(a development-stage enterprise) which was incorporated on March 7, 1994, by
issuing 5,048,758 shares of restricted New Common Stock of the Company
(2,524,379 shares after the July 16, 1996 one for two reverse split. See Note 3
to December 31, 1995 financial statements) in exchange for 300 shares of the
Common Stock of Corporate Travel Link ("Travel Link"), which represented
42
<PAGE>
all of the authorized, issued and outstanding shares of common
stock of Travel Link.
Since August 11, 1995, the Company's business and operations have
consisted solely of the business and operations of Travel Link which continues
to operate as a wholly-owned subsidiary of the Company.
General
The principal business activity of the Company is developing a
computerized limousine reservation and payment system for the business traveler.
The management of the Company anticipates that the proprietary software that is
being developed will enable limousine reservations to be completely computerized
- -i.e., be entirely automatic and operate without human intervention.
At the present time, there are four major airline reservations systems
in operation in the United States -- "Sabre", "Worldspan", "Apollo" and "System
One"(the "Reservation System"). Each of these systems allows a travel agency or
corporate travel department to make an airline reservation and receive
instantaneously a confirmation and a printed airline ticket on any airline. It
is also possible to make a hotel reservation with one of the major hotel chains
through any of the reservation systems and receive an instantaneous confirmation
of room availability. Additionally, a travel agent or corporate travel manager
may make an automobile reservation with any one of the major car rental
companies (Hertz, Avis and the like) through these airline reservations systems,
and receive an immediate confirmation of the car rental reservation.
When it comes to limousine reservations, however, there is at present
no method for making a reservation through one of the four major airline
reservation systems and receiving an immediate guaranteed confirmation. The
usual method of making a limousine reservation in a destination city is to call
a limousine company, if the travel agent knows of one. This use of the
telephone, with its attendant inconveniences such as "telephone tag" and missed
communications, can require up to a few hours to secure a confirmed limousine
reservation. It is also an expensive process for the travel agent or corporate
travel manager, due primarily to the personnel required to secure a binding
limousine reservation. There are also frequent billing errors and clerical
mistakes in scheduling.
In today's cost-conscious business world, corporations must explore
every possible way to cut costs and save time. Under systems presently in place,
there is no quick, direct, and efficent way to reserve limousine service. Today
reservations are still being booked, changed, canceled and reconfirmed by
telephone, which is time-consuming, error-prone and expensive.
43
<PAGE>
Computerized Limousine Reservation and Payment System
The Company proposes to work with travel agents and corporate travel
departments by providing a computerized system for securing limousine
reservations.
A typical reservation with the Company's proposed system may be
demonstrated as follows:
Assume that a corporate executive wishes to travel from Newark, New
Jersey to Phoenix, Arizona. The executive will contact his travel manager/agent
with his travel plans. The travel manager/agent will then determine which
airline flies between Newark and Phoenix on the date and at the time when the
executive wishes to travel.
The travel manager/agent will then go to his airline reservation
computer to enter the information necessary to book the reservation. The
information originated by the travel manager/agent will be transmitted to one or
more of the Reservation System's mainframe computers and, in turn, will be
relayed to the mainframe computer of the selected airline. The airline's
computer will ascertain seat availability and it will transmit a reservation
back to the Reservation System's mainframe computer. The Reservation System will
then retransmit the information to the travel manager/agent and a ticket will be
issued.
Further, if the corporate executive decides that he wishes to stay at a
particular hotel while in Phoenix, this reservation, too, may be made through
the Reservation System. The travel manager/agent inputs the data already in the
computer pertaining to the airline reservation, and he adds the data necessary
to secure a hotel reservation. The information is transmitted to the Reservation
System's mainframe computer, and it is then relayed to the hotel's mainframe.
The latter computer searches to ascertain room availability and relays a
confirmed reservation to the Reservation System. The Reservation System
transmits the information to the travel manager/agent and a confirmed
reservation slip is printed.
Finally, the corporate executive advises his travel manager/agent to
obtain four limousine reservations: (a) from his home to Newark Airport; (b)
from Phoenix Airport to his hotel; (c) from the hotel to the Phoenix Airport at
the end of his trip; and (d) from Newark Airport to his home. The travel
manager/agent, however, cannot presently effect these reservations through the
Reservation System or any of the other reservation systems and receive an
immediate, error-free confirmed limousine reservation.
Instead, the travel manager/agent must use the telephone.
While a corporate travel manager/agent based in Newark will
44
<PAGE>
undoubtedly know of a limousine company in the Newark area to call, he may not
know of any in the Phoenix area. Reliable reservations cannot be made quickly or
efficiently.
The Company's system proposes to remedy this dilemma. The Company
proposes to create its own computerized system which will be linked with one or
more of the airline reservation systems. Any limousine reservations made through
the Reservation System will be relayed instantaneously to the Company's computer
and then to a service provider of the clients choice -- all without human
intervention -- and an immediate limousine reservation will be confirmed. In the
event that the client has no relationship with a service provider or has no
preference, they will be able to access a national network service provider
through the Company's system. The Company is in the process of arranging access
to such national network services.
The Company's Computer System Defined
The Company's computer system would be made up of two main systems, the
Genisys Reservation System, and the Genisys Payment System. The Genisys
Reservation System would be a fully automated computer system that allows travel
agents to make limousine bookings directly through their airline computer
reservation system ("CRS"), much like hotel or car bookings. The Genisys Payment
System is an automated electronic payment and reporting system which will
process and reconcile all purchases made through the Genisys Reservation System.
The Genysis Payment System is not yet operational. All hardware required for
development and commercial operation of the Company's reservation and payment
system are purchased, off-the-shelf components and are not manufactured by the
Company.
An Overview of the Genisys Reservation System
There are three main "components" that play a role in the delivery of a
limousine reservation; the CRS, the Genisys database, and the Genisys computer
terminals which must be purchased by the limousine service provider. The
Company's computer software will integrate these three components into a fully
functional, automated reservation delivery system.
CRS's Interface Development
There are four main airline CRS in existence today in the U.S., SABRE,
WORLDSPAN, APOLLO, and SYSTEM ONE. These CRS's are the primary technology tool
utilized by travel managers/agents to make airline, hotel and car rental
reservations. The Company has contracts with SABRE, WORLDSPAN and APOLLO which
enabled the Company to develop an interface that will allow travel
managers/agents to make limousine reservations through the Genisys
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System.
The Company has completed and tested the Genisys reservation system's
WORLDSPAN interface, and will soon complete the SABRE interface. The Company
anticipates bringing WORLDSPAN and SABRE on-line in early 1997. APOLLO will be
the third CRS brought on-line, and the Company anticipates completing
development and bringing APOLLO on-line in late 1997.
As stated in the prospectus, the Company has contracts in place with
SABRE, APOLLO, and WORLDSPAN. Each contract requires the Company to pay a fee
for each "booking" processed by the CRS. A "booking" is broadly defined as a
reservation that has not been canceled prior to its effective date - in essence,
a reservation where service is performed. The "booking" fee charged to the
Company varies by CRS and is activity driven (no booking, no charge).
Additionally, there are minimum charges in each of the CRS agreements: SABRE -
$2,000 / mo..; APOLLO - $1,000 / mo.; WORLDSPAN - $350 / mo. These minimum
payments will only apply if actual booking fees do not exceed monthly minimum.
Development of the Company's Systems
The development of the software program and the database for the
Genisys reservation system has been completed. All the hardware elements of the
Genisys computer system have been purchased and integrated and the completed
system is up and operating. The Worldspan "script" computer software interface
which allows the Genisys reservation system to operate over the Worldspan CRS
has been completed. The completed Genisys reservation hardware and software
system and data base operating through the Worldspan CRS, has been beta tested
with a major entertainment company and its travel agency in Atlanta and with a
limousine service provider in Los Angeles. Actual reservations were booked,
confirmed and limousine services were provided. At that time, Worldspan could
have been brought on-line but the management of the Company decided to wait
until the payment system and the Sabre system could be brought on-line at the
same time.
The Sabre "script" computer software interface has also been completed
and is now undergoing preliminary or "alpha" testing, which the Company expects
to be completed shortly. The Company expects to begin beta testing the Sabre
system in February 1997.
The hardware and software development of the Genisys Payment System has
been completed and is currently undergoing alpha testing in conjunction with the
Sabre system. The payment system will be beta tested along with and integrated
into the Sabre system. Upon completion of the testing of the Sabre
reservation/payment system, the Worldspan system will be given a second beta
test with the payment system integrated within its system as well. Upon
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completion of the Worldspan reservation/payment system beta test, both the Sabre
and Worldspan systems will be brought on-line. Management reasonably expect this
to occur in early 1997.
The Apollo "script" computer software interface program is currently
being developed and should be ready for alpha testing in early 1997. Since by
that time the Genisys reservation and payment system will be operating through
the Sabre and Worldspan CRS's,management expects that beta testing of the Apollo
system can be completed by mid 1997 and the Apollo system brought on-line in
late 1997.
Genisys Database and Genisys Terminal Development
The Genisys Reservation System database was designed using relational
database technology which supports MPP (Massively Parallel Processing), a
technology that allows for much greater transaction processing throughput
through the use of additional low cost processors. The system, as currently
implemented, keeps a second server synchronized with the first to continue
operations in case of a server failure. The Company has developed custom
software applications to interact with the airline CRS's (Apollo, Sabre and
Worldspan), the remote Genisys Terminals which will be located at all limousine
service provider locations, and the Genisys Payment System.
The Genisys Terminal is a WindowsTM 3.1, 3.11 and Windows 95TM
compliant application, which has been built using technology purchased from a
leader in remote client/server communications. This technology is already in use
on more than 750,000 remote clients. Delivery of reservations and payment
information as well as the retrieval of completed trip information and their
associated costs are handled by clustered communications servers capable of
supporting over 5,000 Genisys Terminals in their current configuration. The
Genisys Terminals provide an easy to-use desktop with security for use by the
limousine service provider. Communications sessions with the limousine service
provider will always be initiated by the remote communications servers and
therefore will be transparent to the Service Provider. Communication sessions
will be supported via dedicated dial-up phone lines through the public switched
network to ensure availability. The limousine service provider will be
responsible for the cost of purchasing the Genisys Terminal, which the Company
estimates to be approximately $2,000. The Company's database and terminal
software will be provided in accordance with licensing agreements entered into
with the limousine service providers.
An Overview of Genisys Payment System
Currently under development, the Genisys Payment System will provide an
important addition to the Company's product package by performing two key
functions:
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1. The Genisys Payment System will process all booking fees charged by
the Company for use of the Genisys Reservation System. This automated collection
of booking fees will eliminate billing and reduce accounts receivable for the
Company.
2. The Genisys Payment System will process payments for all ground
transportation purchases made through the Genisys Reservation System. This
functionality will allow the Company to become the "master merchant" for all
limousine purchases made through its Reservation System. By becoming the "master
merchant", the Company expects to create additional interest revenue and
processing fee revenue on the total dollar volume processed through the Genisys
Reservation and Payment Systems.
Revenue Sources
The Company anticipates generating revenue from the following sources:
1. Booking Fee
The Company will charge a booking fee for the use of the
Genisys Reservation System. Booking fees will be processed daily through the
Genisys Payment System and will either be charged to the Company's corporate
customer via a centrally billed credit card account or deducted from the amount
wired to the limousine service providers bank account in settlement of the
services provided.
2. Processing Fee
The Company will charge service providers a processing fee for
limousine service transactions processed through the Genisys Payment System.
This processing fee will take the place of the merchant fee currently charged to
service providers by the credit card companies with whom they do business. By
processing payments for all ground transportation services paid through the
system, the Company becomes the "master merchant". The Company has secured
discounted merchant fees rates from the credit card companies and will set its
processing fee at a rate that is comparable to what limousine service providers
are currently paying in merchant fees. The difference between the Company's cost
and the processing fee rate it charges is referred to as processing fee revenue.
Competition
Although, to the best of the knowledge of the management of
the Company, there are as yet no competitors, it must be assumed
that if the Company's efforts are successful, other companies will
begin to offer competing systems. These future competitors may be
companies which have substantially greater research, development,
marketing and financial resources than the Company. Moreover
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customers seeking limousine service will be able to reserve such service through
existing methods such as direct contact with service providers which may compete
with the Company.
Employees
The Company presently employs 5 full-time employees; 2 executive
officers, 2 marketing officers, and 1 office administrator. None of these
employees is covered by a collective bargaining agreement. The Company utilizes
several software and marketing consultants on a part-time basis and one full
time ground transportation industry consultant. The Company believes its
personnel relations to be satisfactory.
Properties
The Company presently leases office space at 2401 Morris Avenue, Union,
New Jersey. The five-year lease provides for a monthly rental of $2,125.00
through November 2000 and contains approximately 1,500 square feet of office
space. This property has been leased from unaffiliated third parties and
adaquately satisifies the present needs of the Company. The Company anticipates
that it will need approximately 3,500 square feet in additional space in early
1997.
A portion of the additional space (approximately 1500 square feet) will
be used to house the computer hardware system which runs the Company's
reservation and payment system software programs. The balance of the space will
be used for additional corporate and sales offices. The Company requires no
manufacturing facilities since it has no present plans to manufacture any
hardware items. All hardware related to the Company's software product is
purchased commercially.
Government Regulation and licensing
There are no special regulations which impact upon the Company other
than the usual statutes and regulations which govern businesses in general.
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- -------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------
Directors and Officers
The following table sets forth certain information with respect to each of the
Company's directors and executive officers.
NAME AGE POSITION
Joseph Cutrona 59 President and Director
John Wasko 58 Secretary, Treasurer
and Director
Mark A. Kenny 44 Director
Warren D. Bagatelle 58 Chairman and Director
The Company's Executive Committee is empowered to exercise
the full authority of the Board of Directors in circumstances when
convening the full Board is not practicable. Mr. Warren D.
Bagatelle, Mr. John H. Wasko, and Mr. Joseph Cutrona currently
serve as members. All officers of the Company other than Mr.
Bagatelle devote full time to the Company's business.
Upon the consummation of this offering, the Board of Directors of the
Company will establish a Compensation Committee and Audit Committee. The
Company's Compensation Committee, to be comprised of two directors who are not
employees of the Company, will be responsible for establishing executive
salaries, bonuses and other compensation and administering any stock option and
other employee benefit plans of the Company. The Company's Audit Committee, to
be comprised of two directors who are not employees of the Company, will
recommend the annual appointment of the Company's auditors, with whom the Audit
Committee will review the scope of audit and non-audit assignments and related
fees, accounting principles used by the Company in financial reporting, internal
auditing procedures and the adequacy of the Company's internal auditing
procedures and the adequacy of the Company's internal control procedures.
Joseph Cutrona has served the Company as President since August
1995, and has served as President of Travel Link since inception, March 11,
1994. From 1992 to 1995, Mr. Cutrona was engaged as a marketing consultant of
Country Club Transportation Services, Newark, New Jersey, a company providing
limousine services. From 1990 to 1992, he served as Marketing Director of Gem
Limousine, Edison, New Jersey, a provider of limousine
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services. From 1978 to 1990, Mr. Cutrona provided limousine
consulting services to large corporations in the tri-state area.
Mr. Cutrona graduated from Fairleigh Dickinson University and The
University of Maryland and Sophia University, Osaka Japan.
John H. Wasko has served the Company as Secretary since
September 1995, and as Secretary and Treasurer since April 1996. Mr. Wasko has
also served the Company as President and Chairman of the Board since its
inception to August, 1995, and as Treasurer from April 1986 to September 1987
and from May 1988 to August 1995. Mr. Wasko has also served as Chairman of the
Board, President and Director of JEC Lasers, Inc. ("JEC") since it was organized
in September 1977. He was awarded a bachelor of science degree in physics in
1963 and a master of science degree in physics (summa cum laude) in 1965 from
Fairleigh Dickinson University.
Mark A. Kenny, currently a consultant to the Company, served as
the Company's Executive Vice President from August 1995 to October 1996 and
Director since August 1995 and has served as Executive Vice President of Travel
Link since inception, March 11, 1994 to October 1996. From 1974 to November,
1996 he was a partner of Country Club Transportation Services, a provider of
limousine services, which he co-founded in 1974. Mr. Kenny is one of the
original members of the New Jersey Business Travel Association and attended
Seton Hall Preparatory School and Seton Hall University. He is also a member of
the Association of Corporate Travel Executives and a charter member of the New
Jersey Limousine Association.
Warren D. Bagatelle has been a director of the Company since
August, 1995 and Chairman of the Board of Directors of the Company since
December, 1996. He has been, since 1988, a Managing Director at Loeb Partners
Corporation, a New York City investment banking firm and member of the New York
and American Stock Exchanges. Mr. Bagatelle is also a director of Energy
Research Corporation, a company engaged in the development and commercialization
of electrical storage and power generation equipment, principally fuel cells and
rechargeable storage batteries, Rotary Power International, Inc., a developer
and manufacturer of rotary engines, and Sports Media, Inc., a sports publishing
and marketing company. From 1981 to 1987, he was head of Corporate Finance and
Chairman of Josephthal, Lyon & Ross Incorporated (formerly Rosenkrantz, Lyon &
Ross, Inc.) an investment banking firm. Mr. Bagatelle has a B.A. in economics
from Union College and an M.B.A from Rutgers University.
Executive Compensation
The following tabulation shows the total compensation paid by the Company
for services in all capacities during the years ended December 31, 1996 and 1995
and August 31, 1995 to the Officers of
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the Company and total compensation for all Officers as a group for
such period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long-Term Compensation
Awards Payouts
Name and Other Annual Restricted All other
Principal Annual Compensation Compensation Stock Options LTIP Compen-
Position(1) Year Salary($) Bonus ($) Awards($) SARs Payouts(#) sation($)
Joseph Cutona 1996 $73,500.00 $0 $5,000 0 0 0
1995 $45,000.00 $0 $3,840 0 0 0
President 1995 $28,000.00 $0 $3,840 0 0 0
Mark A. Kenny 1996 $42,000.00 $0 $16,250 0 0 0
1995 $44,795.00 $0 $3,840 0 0 0
1995 $28,000.00 $0 $3,840 0 0 0
John H. Wasko 1996 $10,000.00 $0 $48,000 0 0 0
1995 $0 $0 $2,500 0 0 0
Secretary
Treasurer 1995 $0 $0 $2,500 0 0 0
</TABLE>
- -------
(1) See below "-Employment/Consulting Agreements," for a description of the
Company's employment agreements with Mr. Cutrona and Mr. Wasko.
Employment/Consulting Agreements.
The Company entered into an Employment Agreement with Joseph Cutrona
on September 5, 1995 which agreement was revised on October 17, 1996 for an
indefinite period of time, providing an annual salary of $75,000 for the period
from October 17, 1996 through December 31, 1996, and $100,000 thereafter until
modified by the Company. Mr. Cutrona is entitled to incentive bonuses in cash
and stock. Any incentive bonus paid to Mr. Cutrona shall be within the sole
discretion of the board of directors of the Company.
The Company entered into an Employment Agreement on October 17, 1996
with John Wasko for an indefinite period of time, providing an annual salary of
$50,000 for the period from October 17, 1996 through December 31, 1996, and
$80,000 thereafter until modified by the Company. Mr. Wasko is entitled to
incentive bonuses in cash and stock in each year that the Company has net
profits in amounts to be determined by the Company. Any incentive bonus paid to
Mr. Wasko shall be within the sole discretion of the board of directors of the
Company.
The Company entered into a Consulting Agreement on October
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18, 1996 with Mark A. Kenny for an indefinite period of time, providing a
monthly fee of $6,500.00 during the period from October 18, 1996 through and
including February 28, 1997, and a monthly fee of $8,400.00 thereafter, in each
case payable in arrears on the last day of each month during the term of the
Consulting Agreement. Mr. Kenny is entitled to incentive bonuses in cash and
stock. Any incentive bonuses paid to Mr. Kenny shall be within the sole
discretion of the board of directors of the Company.
All officers and directors other than Mr. Warren D. Bagatelle are
full time employees of the Company.
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CERTAIN TRANSACTIONS
In August 1994 Joseph Cutrona and Mark Kenny each received a total of
666,433 shares of the Company's common stock for services to be provided to the
Company.
During February 1995, the Company issued 45,765 shares of its Common
Stock in repayment of certain liabilities totaling $251,702. Those liabilities
include notes payable to Saddle Brook Investors of $149,633, note payable plus
accrued interest to a director of $34,273 and certain accounts payable of
$67,796.
In February 1995, Loeb Holding Corporation, as escrow agent ("Loeb"),
for Warren D. Bagatelle, HSB Capital, trusts for the benefit of families of two
principals of Loeb Holding Corporation and three unaffiliated individuals,
agreed to loan the Company $500,000 evidenced by a series of Convertible
Promissory Notes. In September 1995, Loeb converted the Convertible Promissory
Notes into 841,455 common shares of the Company and two Term Promissory Notes,
one in the principal amount of $475,000 and the other in the principal amount of
$25,000.
The principal amount of the $475,000 note is to be repaid in twelve
equal quarterly payments commencing two (2) years from the date of said note.
Prepayments may be made at any time without penalty. Interest is accrued at a
rate of 9% per annum and interest payments are to made quarterly at the end of
each calendar quarter, or at such earlier date that the Note becomes due and
payable as a result of acceleration, prepayment or as otherwise provided
therein. Interest began to run from the date that the monies were advanced to
the Company.
The Promissory Note for $25,000 and the Note for $12,500 have been
modified. Each Note provides for accrued interest at the rate of 9% per annum
payable quarterly and unless previously converted the principal amount of each
note is to be repaid in twelve equal quarterly installments, commencing April 1,
1998, or on such earlier date as the Notes provide. The Notes are convertible at
the sole option of the holder into an aggregate of 400,000 common shares of the
Company.
During March 1995, John H. Wasko, then President of the Company, upon
exercise of his own option, acquired 70,520 shares of the Common Stock of the
Company at an exercise price of $0.02145 per share.
On March 3, 1995, the Company and JEC signed a purchase agreement
whereby JEC acquired all of the assets, rights and properties relating to the
Company's CO2 laser research and development agreement with LCL, subject to
certain liabilities, in full consideration for the forgiveness of the
indebtedness of the Company to JEC in the amount of $345,593 owed as of February
28,
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1995.
On August 11, 1995, Robotic Lasers acquired Travel Link by issuing
1,682,924 shares of restricted new Common Stock of the Company in exchange for
the shares of the common stock of Travel Link owned by Joseph Cutrona, Mark A.
Kenny, Steven E. Pollan, which represented all the issued and outstanding shares
of common stock of Travel Link.
In August 1995 the Company granted Mr. Wasko a 5 year option to
purchase 25,000 shares of the Company's common stock at a price of $0.60 per
share and in November, 1996 the Company granted Mr. Wasko a five year option to
purchase 35,000 shares of the Company's Common Stock at a price of $2.00 per
share.
On September 5, 1995 the Company entered into three year consulting
and investment banking agreement with Loeb Partners Corporation. Under the terms
of the agreement the Company pays Loeb Partners Corporation $3,000 per month.
Loeb Partners Corporation will also receive a fee for arranging private
financing and acquisitions. Mr. Warren Bagatelle, a Director of the Company, is
a Managing Director of Loeb Partners Corporation.
During December 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes. In November 1996, Loeb
converted the Convertible Promissory Notes into (i) two Term Promissory Notes,
one in the principal amount of $237,500 and the other in the principal amount of
$12,500 and (ii) 420,728 shares of Common Stock of the Company, of which 420,000
shares of common stock are owned by four unaffiliated parties. Loeb Holding
Corporation has not received any shares of the Company's Common Stock in this
transaction.
The principal amount of the $237,500 note is to be repaid in twelve
equal quarterly payments commencing two (2) years from the date of said note.
Prepayments may be made at any time without penalty. Interest is accrued at a
rate of 9% per annum and interest payments are to be made quarterly at the end
of each calendar quarter, or at such earlier date that the Note becomes due and
payable as a result of acceleration, prepayment or as otherwise provided
therein. Interest began to run from the date that the monies were advanced to
the Company.
In August 1996, the Company gave notice to Mr. Pollan that it was
cancelling the 333,216 shares of its Common Stock which had been issued to him
for services to be provided to the Company. The reason for such cancellation
related to various claims made by the Company against Mr. Pollan that he failed
to provide services to the Company. Mr. Pollan has informed the Company that he
intends to legally contest any attempt by the Company to cancel his shares.
During the quarter ended September 30, 1996, in order to raise
additional working capital for the Company, Joseph Cutrona, President of the
Company, sold a total of 26,100 shares of restricted Common Stock of the Company
owned by him, to sixteen unaffiliated third parties at prices ranging from $2.00
to $2.50 per share for total proceeds of $53,700. During the quarter ended
September 30, 1996, Mr. Cutrona remitted $41,700 of these proceeds
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<PAGE>
to the Company in the form of a capital contribution. Subsequent to September
30, 1996, Mr. Cutrona remitted $12,000 to the Company, which represents the
balance of the proceeds from the sale of his stock in the form of an additional
capital contribution. In October, November and December 1996, Mr. Cutrona sold
an additional 11,500 shares of restricted Common Stock of the Company owned by
him to 3 unaffiliated third parties at a price of $2.00 per share for total
proceeds of $23,000, which Mr. Cutrona remitted to the Company in the form of an
additional capital contribution. Mr. Mark Kenny has agreed to use 18,800 of his
own shares of restricted Common Stock of the Company to reimburse Mr. Cutrona
for one-half of the number of shares recently sold by Mr. Cutrona.
On October 10, 1996, the Company, Joseph Cutrona, President of the
Company, Mark A. Kenny and Prosoft, Inc. signed an agreement whereby Mr. Cutrona
and Mr. Kenny each agreed to transfer 14,533 shares of restricted Common Stock
owned by them to Prosoft, Inc., or its designees, upon completion of the design
and satisfactory development of the Company's computerized vendor payment
system. Prosoft agreed to accept the 29,066 shares valued at $3.75 per share in
satisfaction of $108,997.50 which would be owed to Prosoft, Inc. by the Company
upon completion of the vendor payment system.
In October and November 1996, Joseph Cutrona, in recognition of
extensive valuable services rendered to the Company by two employees of the
Company, made a gift of 10,000 shares of restricted common stock of the Company
owned by him to the first employee and a gift of 5,000 shares of restricted
common stock of the Company owned by him to the second employee.
During November and December 1996, the Company and Loeb Holding
Corporation signed four 18 month Promissory Notes whereby Loeb Holding
Corporation loaned the Company the sums of $75,000, $30,000, $10,000 and $95,000
(totaling $210,00). The Promissory Notes which bear interest at 10%, mature on
May 11, 1998, May 25, 1998, June 2, 1998 and June 9, 1998.
The Company believes that each of these transactions was entered into
on terms at least as favorable to the Company as could have been obtained from
unaffilated third parties.
The transactions described above involve actual or potential
conflicts of interest between the Company and its officers or directors. In
order to reduce the potential for conflicts of interest between the Company and
its officers an directors, prior to entering into any transaction in which a
potential material conflict of interest might exist, the Company's policy has
been and will continue to be that the Company does not enter into transactions
with officers, directors or other affiliates unless the terms of the transaction
are at least as favorable to the Company as those which would have been
obtainable from an unaffiliated source. As of the date of this Prospectus, the
Company has no plans to enter into any additional transactions which involve
actual or potential conflicts of interest between the Company and its officers
or directors and will not enter into any such transactions in the future without
first obtaining an independent opinion with regard to the fairness to the
Company of
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<PAGE>
the terms and conditions of any such transaction.
- ----------------------------------------------------------------
PRINCIPAL STOCKHOLDERS
The following tabulation shows the security ownership as of November 30, 1996 of
(i) each person known to the Company to be the beneficial owner of more than 5%
of the Company's outstanding Common Stock,(not including 333,216 shares issued
to Steven Pollan which the Company has given notice of cancellation of as a
result of certain disputes between Mr. Pollan and the Company) (ii) each
Director and Officer of the Company, and (iii) all Directors and Officers as a
group.
NUMBER OF PERCENT PERCENT
NAME & ADDRESS SHARES OWNED OF CLASS AFTER OFFERING
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway
New York, NY 10006 1,242,183 37.86% 29.61%
Warren D. Bagatelle(2)
Loeb Partners Corp.
61 Broadway
New York, NY 100061 1,271,155 38.75% 30.30%
Joseph Cutrona(5)
Genysis Reservation Systems
2401 Morris Avenue
Union, NJ 07083 618,100 18.84% 14.7%
Mark A Kenny(5)
10 Lisa Drive
Chatham, NJ 07928 633,100 19.30% 15.50%
John H. Wasko(3)(4)
Genysis Reservation Systems
2401 Morris Avenue
Union, NJ 07083 156,205 4.76% 3.72%
All Officers and Directors
as a group (4 person) 2,678,560 81.65% 63.84%
(1) Includes 842,183 Common Shares purchased by Loeb Holding
Corporation as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital of which Warren Bagatelle is a partner, and trusts
for the benefit of families of
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<PAGE>
two principals of Loeb Holding Corporation and three unaffiliated
persons and 400,000 common shares issuable upon conversion of two
convertible Promissory Notes aggregating $37,500. Loeb disclaims
any beneficial interest in these shares.
(2) Includes 842,183 Common Shares purchased by Loeb Holding
Corporation as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital of which Warren Bagatelle is a partner, and trusts
for the benefit of families of two principals of Loeb Holding Corporation and
three unaffiliated individuals, and 6,739 Common Shares owned directly by Warren
D. Bagatelle and 2,233 Common Shares owned directly by HSB Capital and 20,000
Common Shares pledged by Joseph Cutrona to Warren Bagatelle as security and
400,000 common shares issuable upon conversion of two convertible Promissory
Notes aggregating $37,500.
(3) Includes 29,383 Common Shares owned of record by Joan E.
Wasko, John Wasko's wife, of which Mr. Wasko disclaims beneficial
ownership, but of which he may be deemed beneficial owner.
(4) Includes a 5-year option to purchase 25,000 shares of the
Company's Common Stock at a price of $0.60 per share granted to Mr. Wasko by the
Company on August 11, 1995, a 5-year option to purchase 35,000 shares of the
Company's Common Stock at a price of $2.00 per share granted to Mr. Wasko by the
Company on November 1, 1996 and 5,333 common shares issuable upon conversion of
two convertible Promissory Notes aggregating $37,500.
(5) Includes 14,533 Common Shares to be transferred to
ProSoft, Inc. upon successful completion of the Company's vendor
payment system.
Messrs. Cutrona and Kenny may be deemed to be "parents"
and "promoters" of the Company, as those terms are defined in the
rules and regulations of the Securities Act of 1933, as amended.
In August 1994 Messrs. Cutrona and Kenny each received their Common
Stock in the Company for services to be provided to the Company.
For accounting purposes these shares were recorded at $7,840 for
each individual. In August 1994 Mr. Pollan received his common
stock in the Company for services to be provided. See "Certain
Transactions".
SELLING STOCKHOLDERS
In addition to the Securities, the Registration Statement, of which
this Prospectus forms a part, also covers the registration of an aggregate of
287,500 Class A Redeemable Warrants and 287,500 shares of Common Stock issuable
upon the exercise of the Class A Redeemable Warrants, which were issued by the
Company in a private placement. The Company will not receive any proceeds from
the sale of these Class A Redeemable Warrants or shares but, may receive
proceeds if the warrants are subsequently exercised, as to which there can be no
assurance. The costs of qualifying these 287,500 Class A Redeemable Warrants and
287,500 shares of Common Stock under federal and state securities laws, together
with legal and accounting fees, printing and other costs in connection with this
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offering, will be paid by the Company.
Pursuant to an agreement with the Underwriter, the Class A Redeemable
Warrants and the 287,500 shares of Common Stock registered in the Registration
Statement, of which this Prospectus forms a part, may not be sold for eighteen
(18) months from the date of this Prospectus, subject, however, to earlier
release at the sole discretion of the Underwriter. Such shares are being
registered for resale purposes only and will be offered pursuant to an alternate
prospectus. See "Underwriting."
The terms and conditions of the Common Stock Purchase Warrants issued
by the Company in the private placement are identical to the terms and
conditions of the Class A Redeemable Warrants being offered pursuant to this
Prospectus. All of the securities issued in the private placement are being
registered in the Registration Statement, of which this Prospectus forms a part.
Pursuant to an agreement with the Underwriter, such Warrants and shares of
Common Stock may not be sold until eighteen months from the date of this
Prospectus, subject, however, to earlier release at the sole discretion of the
Underwriter. The certificates representing the 287,500 Class A Redeemable
Warrants and 287,500 shares of Common Stock issuable on exercise of the Class A
Redeemable Warrants will have legends affixed setting forth such restrictions.
The Underwriter may release these securities from this eighteen month
restriction at any time after all securities subject to this offering have been
sold. See "Underwriting." The resale of securities by the Selling Stockholders
are subject to prospectus delivery and other requirements of the Securities Act.
Sales of these securities, or even the potential for such sales at any time,
would likely have an adverse effect on the market prices of the Common Stock and
the Class A and Class B Redeemable Warrants. The Company will not receive any
proceeds from the sale of the securities by the Selling Stockholders. If all of
the Class A Redeemable Warrants issued in the private placement are exercised,
of which there is no assurance, the Company will receive the gross proceeds
therefrom aggregating up to an additional $1,653,125.
59
<PAGE>
Set forth below is a list of the Selling Stockholders and the number
of Warrants and shares of Common Stock issuable upon their exercise which are
being registered pursuant to the Registration Statement, of which this
Prospectus forms a part:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
No. of Shares No. of Shares No. Of Percentage
Owned Before issuable upon Warrants owned after
Name (1) Offering exercise of Offering(3)
- -------- -------- ----------- -----------
Class A Reedamble
-----------------
Warrants (2)
Steven C. Wright 0 12,500 12,500 0
Keith C. Kammer 0 12,500 12,500 0
Paul W. Leblanc 0 12,500 12,500 0
Mildred J. Greiss 0 12,500 12,500 0
Terry Nash 0 12,500 12,500 0
Joel B. Pipe 0 25,000 25,000 0
Theodore E. Hanson 0 25,000 25,000 0
Dennis Lafer 0 25,000 25,000 0
Vincent A. Ferranti 0 25,000 25,000 0
Jason J. Leinwand 0 12,500 12,500 0
James R. Welch 0 12,500 12,500 0
Daniel Churchill 0 25,000 25,000 0
Glen Cadrez, Jr. 0 12,500 12,500 0
John Albanese Numismatics 0 12,500 12,500 0
Giuseppe Pappalardo 0 25,000 25,000 0
Joseph Perri 0 25,000 25,000 0
- --------------------------
</TABLE>
(1) The persons named in the above table have sole voting and investment power
with respect to all of the Common Stock shown as beneficially owned by them,
except as otherwise indicated.
(2) Pursuant to an agreement with the Underwriter, the Class A Redeemable
Warrants and underlying shares may not be sold for eighteen (18) months from the
date of this prospectus, subject, however, to earlier release at the sole
discretion of the Underwriter.
(3) Assumes all Class A Redeemable Warrants and underlying
shares held by the Selling Stockholders are sold.
After making the investment in the private placement, the investors
did not own, nor did any of them have any right to acquire, any other securities
of the Company. None of the investors were affiliated with the Company at the
time of making their investment, at the time of this offering, or at any other
time.
Plan of Distribution
Subject to the eighteen (18) month restriction on the offer and sale
of the 287,500 Class A Redeemable Warrants and the 287,500 shares of Common
Stock issuable on their exercise the securities
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<PAGE>
offered hereby may be sold from time to time directly by the Selling
Stockholders. Alternatively, the Selling Stockholders may, from time to time,
offer such securities through underwriters, dealers and/or agents. The
distribution of securities by the Selling Stockholders may be effected in one or
more transactions, privately-negotiated transactions or through sales to one or
more broker-dealers for resale of such securities as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Stockholders
in connection with such sales. The Selling Stockholders, and intermediaries
through whom such securities are sold, may be deemed "underwriters" within the
meaning of the Securities Act with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation.
At the time a particular offer of securities is made by or on behalf
of the Selling Stockholders to the extent required, a prospectus will be
distributed which will set forth the number of securities being offered and the
terms of the offering, including the name or names of any underwriter, dealer or
agent, the purchase price paid by the underwriter for securities purchased from
the Selling Stockholders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers and the proposed selling price to the public.
Under the Exchange Act and the regulations promulgated thereunder,
any person engaged in the distribution of the securities of the Company offered
by this Prospectus may not simultaneously engage in market-making activities
with respect to such securities of the Company during the applicable "cooling
off" period (which is nine days) prior to the commencement of such distribution.
In addition, and without limiting the foregoing, the Selling Stockholders will
be subject to applicable provisions of the Exchange Act, and the rules and
regulations promulgated thereunder, including without limitation, Rules 10b-6
and 10b-7 in connection with transactions in such securities, which provisions
may limit the timing of purchases and sales of such securities by the Selling
Stockholders.
Sales of securities by the Selling Stockholders or even the potential
of such sales, would likely have an adverse effect on the market prices of the
securities offered hereby. Following the closing of this offering, the freely
tradeable securities of the Company ("public float"), including this offering,
will be 1,159,101 shares of Common Stock, 1,500,000 Class A Redeemable Warrants
and 900,000 Class B Redeemable Warrants. This does not including an aggregate of
287,500 Class A Redeemable Warrants and the 287,500 shares of Common Stock
issuable upon exercise of the Class A Redeemable Warrants owned by the Selling
Stockholders,
61
<PAGE>
which are not transferable for eighteen (18) months commencing on the date of
this Prospectus or at such earlier date as may be permitted by the Underwriter,
which may release such securities at any time after all securities subject to
this offering have been sold and assuming no exercise of the Underwriter's
Purchase Option. See "Descriptions of Securities" and "Underwriting".
DESCRIPTION OF SECURITIES
Common Stock
The Company is currently authorized to issue 75,000,000 shares of
Common Stock, having a par value of $.0001 per share of which 3,280,594
(including 333,216 shares issued to Mr.Pollan) are outstanding prior to the
offering contemplated hereby. Each share of Common Stock entitles the holder
thereof to one vote on each matter submitted to the stockholders of the Company
for a vote thereon. The holders of Common Stock: (i) have equal ratable rights
to dividends from funds legally available therefor when, as and if declared by
the Board of Directors; (ii) are entitled to share ratably in all of the assets
of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) as noted above, are entitled to one
non-cumulative vote per share on all matters submitted to stockholders for a
vote at any meeting of stockholders. The Company has not paid any dividends on
its Common Stock to date. The Company anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing operations of
its business. The payment of dividends will depend upon, among other things,
capital requirements and operating and financial conditions of the Company.
Redeemable Common Stock Purchase Warrants
The Company is offering 2,400,000 redeemable warrants, 1,500,000 of
which will be "Class A Redeemable Warrants" and 900,000 of which will be "Class
B Redeemable Warrants," at an anticipated public offering price of $.20 per
Class A Redeemable Warrant and $.10 per Class B Redeemable Warrant. Each
Redeemable Warrant shall be exercisable for a period of 48 months, commencing
six (6) months from the date on which the registration statement (the
"Registration Statement") of which this prospectus (the "Prospectus") forms a
part is declared effective (the "Effective Date") by the Securities and Exchange
Commission (the "Commission").
62
<PAGE>
Class A Redeemable Warrants
Each Class A Redeemable Warrant shall entitle the holder to acquire
one share of Common Stock at a price equal to $5.75 per share. Commencing twelve
months after the Effective Date, the Company will have the right at any time to
redeem all, but not less than all, of the Class A Redeemable Warrants at a price
equal to twenty cents ($.20) per Redeemable Warrant, provided that the closing
bid price of the Common Stock equals or exceeds $6.25 per share for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the date of the notice of redemption.
Class B Redeemable Warrants
Each Class B Redeemable Warrant shall entitle the holder to acquire
one share of the Common Stock at a price equal to $6.75 per share. Commencing
twelve months after the Effective Date, the Company will have the right at any
time to redeem all, but not less than all, of the Class B Redeemable Warrants at
a price equal to ten cents ($.10) per Redeemable Warrant, provided that the
closing bid price of the Common Stock equals or exceeds $7.25 per share for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption.
Preferred Stock
The Certificate of Incorporation of the Company authorizes the
issuance of up to 25,000,000 shares of Preferred Stock, $.0001 par value per
share. None of such Preferred Stock has been designated or issued. The Board of
Directors is authorized to issue shares of Preferred Stock from time to time in
one or more Class And, subject to the limitations contained in the Certificate
of Incorporation and any limitations prescribed by law, to establish and
designate any such limitations prescribed by law, to establish and designate any
such Class And to fix the number of shares and the relative conversion rights,
voting rights and terms of redemption (including sinking fund provisions) and
liquidation preferences. If shares of Preferred Stock with voting rights are
issued, such issuance could affect the voting rights of the holders of the
Common Stock by increasing the number of outstanding shares having voting
rights, and by the creation of class or series voting rights. If the Board of
Directors authorizes the issuance of shares of Preferred Stock with conversion
rights, the number of shares of Common Stock outstanding could potentially be
increased by up to the authorized amount. Issuance of shares of Preferred Stock
could, under certain circumstances, have the effect of delaying or preventing a
change in control of the Company and may adversely affect the rights of holders
of Common Stock. Also, the Preferred Stock could have preferences over the
Common Stock (and
63
<PAGE>
other series of preferred stock) with respect to dividends and
liquidation rights.
Private Placement
The terms and conditions of the Common Stock Purchase Warrants issued
by the Company in the private placement are identical to the terms and
conditions of the Class A Redeemable Warrants. All of the securities issued in
the private placement are being registered in the Registration Statement, of
which this Prospectus forms a part. Pursuant to an agreement with the
Underwriter, such warrants and shares of Common Stock may not be sold until
eighteen months from the date of this Prospectus, subject, however, to earlier
release at the sole discretion of the Underwriter. The certificates representing
the 287,500 Class A Warrants and the 287,500 shares of Common Stock issuable on
exercise of the Class A Redeemable Warrants will have legends affixed setting
forth such restrictions. The Underwriter may release these securities from this
eighteen month restriction at any time after all securities subject to this
offering have been sold. See "Underwriting."
Transfer and Warrant Agent
Continental Stock Transfer & Trust Company is the Registrar
and Transfer Agent for the Common Stock and the Registrar and
Warrant Agent for the Redeemable Warrants.
UNDERWRITING
General
Subject to the terms and conditions set forth in the Underwriting
Agreement by and between the Company and the Underwriter (the "Underwriting
Agreement"), the Underwriter has agreed to purchase on a "firm commitment"
basis, an aggregate of 900,000 shares of Common Stock and 2,400,000 Redeemable
Warrants (exclusive of the 135,000 shares of Common Stock and 360,000 Warrants
subject to the Over-Allotment Option).
The Underwriter has advised the Company that it proposes to offer the
Common Stock and Redeemable Warrants to the public at the public offering price
set forth on the cover page of this Prospectus. The Securities are offered by
the Underwriter subject to: (i) approval of certain legal matters by counsel to
the Underwriter; and (ii) certain other conditions typical of such agreements
specified in the Underwriting Agreement.
The Company has agreed to sell the Securities to the
64
<PAGE>
Underwriter at a discount of 10% of the public offering price thereof. The
Company has also agreed to pay the Underwriter the Non-Accountable Expense
Allowance (as previously defined) equal to 3% of the aggregate offering price of
the Securities ($50,000 of which was advanced to the Underwriter). Pursuant to
the provisions of the Underwriting Agreement, in the event that the Company's
public offering is terminated for any reason, the Underwriter shall be
reimbursed for all accountable expense incurred by it. Any amounts previously
paid shall be credited against any amounts due.
The Underwriter has informed the Company that it does not intend to
confirm sales to any accounts over which it exercises discretionary authority.
Prior to the Company's public offering, there has been no public
trading market for the Securities. The offering price of the Common Stock and
the exercise price of the Redeemable Warrants were determined by negotiation
between the Company and the Underwriter. The factors considered by the Company
and the Underwriter in determining the public offering price of the Common Stock
and the exercise price of the Redeemable Warrants, in addition to prevailing
market conditions, were management's assessment of the Company's business
potential and earning prospects, the prospects for growth in the industry in
which the Company operates. The public offering price may not bear any
relationship to the Company's assets, book value, net worth or other criteria of
value applicable to the Company.
The Underwriter has required that all officers and directors and
holders of 5% or more of the issued and outstanding shares of Common Stock and
securities exercisable, convertible or exchangeable for shares of Common Stock,
other then Mr. Pollan and 200,000 of the shares held by Loeb, agree to a lock-up
of their securities for a period of not less than eighteen (18) months in order
for the Underwriter to engage in the Offering as well as in order to maintain a
more orderly trading market. Such shares will have a legend placed on the
certificates to express the lock-up.
The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter`s prior consent for a
period of eighteen (18) months following the Effective Date of the Registration
Statement. The Underwriter has no present intention to waive the restrictions
prior to the eighteen month period. This provision may limit the Company's
ability to raise additional equity capital. The purpose of such provision is to
protect against unnecessary dilution to the public shareholders.
The Over-Allotment Option
The Company has granted to the Underwriter the Over-Allotment
65
<PAGE>
Option which is exercisable for a period of 45 days following the Effective Date
of the Registration Statement of which this Prospectus forms a part to purchase
up to an additional 135,000 shares of Common Stock and 360,000 Redeemable
Warrants (equal to an aggregate of up to 15% of the number of shares of Common
Stock and Redeemable Warrants offered by the Company to the public) for the
purpose of covering over-allotments. The Over-Allotment Option is exercisable
upon the same terms and conditions as are applicable to the sale of the
Securities.
The Underwriter's Purchase Option
As part of the consideration to the Underwriter for its services in
connection with the public offering described herein, the Company has agreed to
issue and sell to the Underwriter, at the closing, for nominal consideration,
five (5) year warrants to purchase such number of shares of Common Stock and
Redeemable Warrants as shall equal 10% of the number of shares of Common Stock
and Redeemable Warrants (excluding the over-allotment option) being underwritten
for the account of the Company at a price of $.0001 per warrant (the
"Warrants"). The Warrants shall be exercisable at any time during a period of
four(4) years commencing at the beginning of the second year after their
issuance and sale at a price equaling 120% of the public offering price of the
shares of Common Stock and Redeemable Warrants.
During the period in which the Underwriter's Purchase Option is
exercisable, the holders thereof are given the opportunity to profit from a rise
in the market price of the Securities which may result in a dilution of the
interest of the stockholders. The Company may find it more difficult to raise
additional equity capital if it should be needed for the business of the Company
while the Underwriter's Purchase Option is outstanding. At any time when the
holders thereof might be expected to exercise such Warrants, the Company would
probably be able to obtain additional equity capital on terms more favorable
than those provided by the Underwriter's Purchase Option. Any profit realized on
the sale of securities issuable upon the exercise of the Underwriter's Purchase
Option may be deemed additional underwriter compensation.
Registration Rights
In connection with the underwriting of the Company's public offering,
the Company has granted to the Underwriter certain "piggy back" and "demand"
registration rights. Pursuant to the terms of the Underwriting Agreement, the
Company agrees that, for a period of seven (7) years from the date of the
closing of the public offering of the shares of Common Stock and Redeemable
Warrants (the "Closing"), if the Company intends to file a Registration
Statement or Statements for the public sale of securities for cash (other than a
Form S-8, Form S-4 or comparable Registration Statement), it
66
<PAGE>
will notify all of the holders of the Warrants and/or underlying securities and
if so requested it will include therein material to permit a public offering of
the securities underlying said Warrants at the expense of the Company (excluding
fees and expenses of the holder's counsel and any underwriting or selling
commissions). In addition, for a period of five (5) years from such date, upon
the written demand of holder(s) representing a majority of the Warrants, the
Company agrees, on one occasion, to promptly register the underlying Securities
at the expense of the Company (excluding fees and expenses of the holder's
counsel and any underwriting or selling commissions).
Finder's Fees
No finder has been associated with the Company's public offering as
described herein; nor does the Company have any obligation to pay a finder's fee
to anyone in connection with any pending transaction involving the Company.
Warrant Solicitation Fee
Pursuant to the Underwriting Agreement, the Company has agreed to
grant to the Underwriter a right of first refusal for a period of three (3)
years after the Effective Date of the Registration Statement for any publicly
offered sale of securities to be made by the Company or any of its present or
future subsidiaries. The Underwriting Agreement also provides that the
Underwriter shall act as the Company's exclusive agent with respect to the
solicitation of the Redeemable Warrants, and receive from the Company a
commission equal to 4% of the exercise price of the Redeemable Warrants (the
"Warrant Solicitation Fee") commencing twelve (12) months after the effective
date of the Registration Statement, payable upon exercise, if; (i) the market
price of the Common Stock on the date that any such Redeemable Warrant is
exercised is greater than the exercise price of the Redeemable Warrant; (ii) the
exercise of such Redeemable Warrant was solicited by a member of the National
Association of Securities Dealers, Inc.; (iii) the Redeemable Warrant is not
held in a discretionary account; (iv) disclosure of this compensation
arrangement is made both at the time of the public offering and at the time of
the exercise of such Redeemable Warrant; and (v) solicitation of the exercise is
not in violation of Rule 10b-6 of the Exchange Act. No commission will be paid
to the Underwriter on Redeemable Warrants voluntarily exercised within one year
of the Effective Date or on Redeemable Warrants voluntarily exercised at any
time without solicitation by the Underwriter.
In addition, unless granted an exemption by the Commission from Rule
10b-6 under the Exchange Act, the Underwriter will be prohibited from engaging
in any market making activities or solicited brokerage activities with respect
to the Company's
67
<PAGE>
securities for the period from nine business days prior to any solicitation of
the exercise of any Redeemable Warrant or nine business days prior to the
exercise of any Redeemable Warrant based on a prior solicitation until the later
of the termination of such solicitation activity or the termination (by waiver
or otherwise) of any right the Underwriter may have to receive such a fee for
the exercise of the Redeemable Warrants following such solicitation. As a
result, the Underwriter may be unable to continue to provide a market for the
Company's securities during certain periods while the Redeemable Warrants are
exercisable.
Other Terms of the Underwriting
The Company has agreed not to issue, sell, offer to sell, grant any
option relating to the sale of or otherwise dispose of (directly or indirectly)
any of the Company's equity securities (including securities convertible into,
exercisable for or exchangeable into equity securities) without the
Underwriter's prior written consent, except for issuances pursuant to: (i) the
exercise of the Underwriter's Purchase Option; (ii) the Company's public
offering of securities as described herein; (iii) a declaration of dividends,
recapitalization, reorganization or similar transaction; or (iv) a currently
existing stock incentive or option plan, for 18 months from the Effective Date.
In addition, each officer, director and stockholder who owns 5% or more of the
Company's equity securities, other then Mr. Pollan and other than 200,000 of the
shares held by Loeb has agreed not to sell, transfer, convey, pledge,
hypothecate or otherwise dispose of any of the respective securities of the
Company owned by them for a period of 18 months from the Effective Date without
the Underwriter's prior approval.
In connection with and as consideration for the Underwriter's
participation in the Company's public offering, the Company has given the
Underwriter the right, upon completion of such public offering, to designate a
person to attend all meetings of the Company's Board of Directors for a period
of five (5) years. Such person need not be a director but shall be entitled to
attend all such meetings and to receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors. As of
the date hereof, the Underwriter has not identified a designee nor has it
expressed to the Company the desire to exercise its right to select such a
designee.
The Company has agreed to retain the Underwriter as its financial
consultant for a period of 24 months commencing upon consummation of the
proposed public offering at a monthly retainer of $2,000, all of which is
payable in advance upon such consummation.
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<PAGE>
Indemnification
The Company has agreed to indemnify the Underwriter and others
against certain liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to officers, directors or persons controlling the Company, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy and is therefore unenforceable. The
Underwriter has agreed to indemnify the Company, its directors, and each person
who controls it within the meaning of Section 15 of the Securities Act with
respect to any statement in or omission from the Registration Statement, the
Prospectus or any amendment or supplement thereto if such statement or omission
was made in reliance upon information furnished in writing to the Company by the
Underwriter specifically for or in connection with the preparation of the
Registration Statement, the Prospectus, or any such amendment or supplement
thereto.
The foregoing summaries of certain terms and conditions of the
Underwriting Agreement and the Underwriter's Purchase Option state all the
material elements of such documents. Copies of the foregoing documents have been
filed with the Commission as exhibits to the Registration Statement of which
this Prospectus forms a part and are also on file at the offices of the
Underwriter and the Company. Reference is hereby made to each such exhibit for a
detailed description of the provisions thereof which have been summarized above.
See "Available Information."
LEGAL MATTERS
Certain legal matters in connection with the issuance of the
securities being offered by the Company will be passed upon for the Company by
McLaughlin & Stern, LLP, New York, New York. A member of the firm of McLaughlin
& Stern, LLP owns 5,000 shares of the Company's Common Stock. Legal matters for
the Underwriter will be passed upon by Scheichet & Davis, P.C., New York, New
York.
EXPERTS
The Financial Statements of the Company included in this Prospectus
to the extent and for the periods indicated in their report have been reported
on by Wiss & Company, LLP, independent certified public accountants, as stated
in their report appearing herein in reliance upon such report given on the
authority of that firm as experts in accounting and auditing.
69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheet at December 31, 1995 F-3
Consolidated Statements of Operations for the Four Months
Ended December 31, 1995, the Year Ended August 31, 1995,
and the Periods From March 7, 1994 (commencement of
development stage activities) to August 31,
1994 and to December 31, 1995 F-4
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency) for the Four Months Ended
December 31, 1995, the Year Ended August 31,
1995, and the Period From March 7, 1994
(commencement of development stage activities) to
August 31, 1994 F-5
Consolidated Statements of Cash Flows for the Four Months
Ended December 31, 1995, the Year Ended August 31, 1995,
and the Periods From March 7, 1994 (commencement of development
stage activities) to August 31,
1994 and to December 31 ,1995 F-6
Notes to Consolidated Financial Statements F-7 to F-15
Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets - September 30, 1996
(proforma), September 30, 1996 and December 31, 1995 F-16
Consolidated Statements of Operations - Nine and
Three Months Ended September
30, 1996 and Period From March 7, 1994
(commencement of
development stage activities)
Through September 30, 1996 F-17
Consolidated Statement of Stockholders' Equity
(Deficiency) -Nine Months Ended September 30, 1996 F-18
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1996 and
1995 and Period From March 7, 1994 (commencement of
development stage activities)
Through September 30, 1996 F-19
Notes to Consolidated Financial Statements F-20 to F-23
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Genisys Reservation Systems, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Genisys
Reservation Systems, Inc. and Subsidiary (formerly Robotic Lasers, Inc. and a
Development Stage Company) as of December 31, 1995 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
four months ended December 31, 1995, the year ended August 31, 1995, and for the
periods from March 7, 1994 (commencement of development stage activities) to
August 31, 1994 and December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Genisys Reservation Systems, Inc.
and Subsidiary (formerly Robotic Lasers, Inc. and a Development Stage Company)
at December 31, 1995 and the results of their operations and their cash flows
for the four months ended December 31, 1995, the year ended August 31, 1995 and
for the periods from March 7, 1994 (commencement of development stage
activities) to August 31, 1994 and December 31, 1995, in conformity with
generally accepted accounting principles.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company is a development
stage company and has suffered recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
WISS & COMPANY, LLP
Woodbridge, New Jersey
July 8, 1996
F-2
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 22,613
Prepaid expenses 703
---------------
Total Current Assets $ 23,316
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $17,393
145,384
OTHER ASSETS:
Computer software costs 156,997
Deposits and other 26,988
183,985
$ 352,685
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable - stockholder, less unamortized
debt discount of $12,426 $637,574
Accounts payable and accrued expenses 98,012
Current portion of obligations under capital leases
45,012
Loans and advances - related parties 19,126
Accrued interest payable - stockholder 28,096
Payroll taxes payable 10,000
Total Current Liabilities $ 837,820
LONG-TERM PORTION OF OBLIGATIONS UNDER CAPITAL
LEASES 89,746
927,566
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.0001 par value: 25,000,000
shares authorized; none outstanding
-
Common stock, $.0001 par value: 75,000,000 shares
authorized; 2,804,866 shares issued and
outstanding 280
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
Additional paid-in capital 18,639
Deficit accumulated
during development stage (593,800)
Total Stockholders' Equity (Deficiency) (574,881)
$ 352,685
See accompanying notes to consolidated financial statements.
F-3(continued)
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Period from March 7, 1994
Four Months Year (Commencement of
Ended Ended Development Stage
Activities) to
December 31, August 31, August 31, December 31,
1995 1995 1994 1995
----------------
REVENUES AND EXPENSES DURING THE DEVELOPMENT STAGE:
Revenues $ - $ - $ - $ -
----------------
Expenses:
General and administrative 250,454 256,621 31,416 538,491
Depreciation and amortization 18,453 240 94 18,787
Interest expense 24,303 12,219 - 36,522
-------------
293,210 269,080 31,510 593,800
------------
NET LOSS INCURRED DURING THE
DEVELOPMENT STAGE $ (293,210) $(269,080) $(31,510) $ (593,800)
===========
NET LOSS PER COMMON SHARE $ (.11) $(.16) $(.02) $(.32)
====
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
2,594,503 1,694,611 1,682,924 1,859,495
===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Total Shares Par Value Capital Stage
PERIOD ENDED AUGUST 31, 1994:
Issuance of common stock at
March 7, 1994 (inception) for services rendered, valued
at approximately $.006 per share $ 10,000 1,682,924 $ - $ 10,000 $ -
---------
Net loss (31,510) - - - (31,510)
-----------
BALANCE, AUGUST 31, 1994 (21,510) 1,682,924 - 10,000 (31,510)
YEAR ENDED AUGUST 31, 1995:
Contribution of services rendered 9,600 - - 9,600 -
Net assets received (liabilities assumed)
in reverse acquisition of Robotic Lasers, Inc. (14,087) 280,487 28 (14,115) -
Change in par value - - 168 (168) -
Net loss (269,080) - - - (269,080)
----------
BALANCE, AUGUST 31, 1995 (295,077) 1,963,411 196 5,317 (300,590)
PERIOD ENDED DECEMBER 31, 1995:
Conversion of related party debt into common stock 13,406 841,455 84 13,322 -
Net loss (293,210) - - - (293,210)
BALANCE, DECEMBER 31, 1995 $(574,881) 2,804,866 $280 $18,639 $(593,800)
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period From
Four Months Year March 7, 1994
Ended Ended (Commencement of Develoment Stage
Activities), to
December 31, August 31, August 31, December 31,
1995 1995 1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(293,210) $(269,080) $(31,510) $(593,800)
---------- ----------
Adjustment to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 18,453 240 94 18,787
------
Contribution of services rendered
to capital - 9,600 10,000 19,600
Changes in operating assets and liabilities:
Prepaid expenses 3,031 (3,734) - (703)
Other assets 218,053 (243,255) (2,200) (27,402)
Accounts payable and accrued expenses 10,770 73,155 - 83,925
Payrol1 taxes payable 1,027 8,973 - 10,000
Accrued interest payable 15,852 12,244 - 28,096
-----------
Net cash flows from operating
activities (26,024) (411,857) (23,616) (461,497)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Acquisition of equipment and software (319,774) - - (319,774)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (repayments to) stockholders (6,820) (4,001) 10,821 -
Loans and advances from related parties 14,326 (8,000) 12,800 19,126
Proceeds from issuance of notes payable 215,000 435,000 - 650,000
Payments under computer equipment leases (9,724) - - (9,724)
Proceeds from sale and lease-back 144,482 - - 144,482
---------
Net cash flows from financing
activities 357,264 422,999 23,621 803,884
---------
NET CHANGE IN CASH 11,466 11,142 5 22,613
CASH, BEGINNING OF PERIOD 11,147 5 - -
----------
CASH, END OF PERIOD $ 22,613 $ 11,147 $ 5 $ 22,613
=========
F-6
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 8,426 $ - $ - $ 8,426
==========
Net liabilities assumed in reverse acquisition $ - $ 14,087 $ - $ 14,087
Conversion of related party debt into common stock $ 13,406 $ - $ - $ 13,406
See accompanying notes to consolidated
financial statements.
</TABLE>
F-6(continued)
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - History of the Company, Nature of the Business and Summary of
Significant Accounting Policies:
History of the Company and Nature of the Business - Genisys
Reservation Systems, Inc. (the "Company") was incorporated in
April 1986 as Robotic Lasers, Inc. In March 1995, the Company
sold all of its assets, rights and properties relating to a
certain laser research and development agreement (subject to
certain liabilities). On August 11, 1995, the Company acquired
Corporate Travel Link, Inc. ("Travel Link") a development stage
company, by issuing 1,682,924 shares of its restricted common
stock in exchange for all of the authorized, issued and
outstanding shares of common stock of Travel Link. For
accounting purposes, the share exchange transaction and
combination of Travel Link with the Company has been treated as
a reverse acquisition by, and a recapitalization of, Travel
Link. The net assets of the Company of $(14,000) consisted
primarily of accounts payable of $14,000. The previous
historical financial statements of the Company are no longer
reported and the financial statements of Travel Link (since its
formation in March 1994) are now reported as the historical
consolidated financial statements of the Company and its
subsidiary.
The Company is a development stage company and is engaged in
developing a computerized limousine reservation and payment
system for the business traveler. The Company anticipates that
the proprietary software being developed will enable a system of
limousine reservations to be completely computerized and operate
without human intervention.
The Company has generated no revenues and has no commercial
operations to date. The Company has been unprofitable since
inception and expects to incur additional operating losses over
the next several quarters. The Company does not expect to
generate any revenues from operations during the fiscal year
ending December 31, 1996.
Estimates and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Principles of Consolidation - As indicated above, the consolidated financial
statements include the accounts of the Company's wholly-owned subsidiary, Travel
Link and, since August 11, 1995, those of the Company. Retroactive effect has
been given to the exchange of shares for Travel Link to March 7, 1994. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
F-7
<PAGE>
Financial Instruments - Financial instruments include cash and equivalents,
other assets, accounts payable, accrued expenses and long-term debt. The amounts
reported for financial instruments are considered to be
reasonable approximations of their fair values, based on market information
available to management.
Cash and Equivalents - The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
Concentration of Credit Risk - The Company maintains its cash balances in
several financial institutions. The accounts at each institution are insured by
the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1995,
there were no uninsured balances.
Property and Equipment - Property and equipment is stated at cost and
depreciated using the straight-line method over an estimated useful life of 5
years.
Computer Software Costs Relating to Reservation and Payment Systems - The
Company capitalizes the external direct costs of materials and services and
interest consumed in the development of the Genisys Reservation and
Payment Systems (no internal direct costs are anticipated). Such
costs will be amortized on a straight-line basis over three
years, subject to periodic evaluation for impairment.
Debt Issue Costs - Costs related to the issuance of debt are capitalized.
Such costs and any related debt discount are amortized over the term of the
related debt.
Income Taxes - Deferred tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the
periods in which the temporary differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized.
Fiscal Year - In December 1995, the Board of Directors voted to change the
Company's fiscal year to a calendar year, effective December 31, 1995.
Net Income (Loss) Per Common Share - Net income (loss) per common share is based
upon the weighted average number of outstanding common shares.
The shares issuable upon the exercise of outstanding warrants
and options or upon conversion of outstanding debt have been excluded since the
effect would be
F-8
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
antidilutive, due to net losses for all periods presented. Fully
diluted earnings per share will be reported in future years when
certain contingencies (see Note 5) are reasonably possible of
occurrence and the effect results in a material dilution of
earnings per share.
New Accounting Pronouncements - Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that certain
long-lived assets be reviewed for possible impairment and
written down to fair value, if appropriate. The Company will
adopt this new pronouncement in 1996 and the impact of adoption
is not expected to have a material effect on the Company's
financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for stock
Based Compensation," requires companies to measure employee stock compensation
plans based on the fair value method of accounting. However, the
statement allows the alternative of continued use of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," with proforma disclosure of net income and earnings
per share determined as if the fair value based method had been
applied in measuring compensation cost. The Company has not yet
determined if it will adopt this new pronouncement in 1996 or
provide only proforma disclosure. The effects of this new
pronouncement, if adopted, have not been determined.
Note 2 - Operating and Liquidity Difficulties and Management's Plans to
Overcome:
The accompanying financial statements of the Company have been
presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has
reported net losses since inception and expects to incur
additional operating losses over the next several quarters. The
Company has also experienced liquidity difficulties since
inception, and in order to continue the development of the
Company's reservation and payment system, needs significant
additional financing. The Company has financed its operations
since inception with the proceeds from the issuance of long-term
debt.
Since inception, the operations of the Company have been
limited to market research and developing a software and
hardware system for computerizing the limousine reservation and
payment system. These efforts are at a preliminary stage and
will require further technical development within a period of
the next twelve months and additional financing before a
determination of the system's commercial feasibility can be
made. No assurance can be given that the Company's reservation
and payment system will achieve commercial feasibility.
F-9
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's working capital and its capital requirements
will depend upon numerous factors, including, without
limitation, the progress of the Company's system development,
competition, industry technological advances and the ability of
the Company to market its limousine reservation system. The
Company will require additional significant financing to
complete the system development, cover anticipated losses and
sustain operations in 1996 and beyond and, in addition, to
satisfy the repayment of long-term debt. There can be no
assurance that the financing needed for attaining commercial
viability of the Company's reservation and payment system will
be obtained. If the Company is unable to raise sufficient
capital, it will delay and could prevent the completion of the
development of the reservation system.
The Company intends to fund its operations and other capital
needs for the next twelve months substantially from the net
proceeds of additional borrowings and a contemplated public
offering, but there can be no assurance that the net proceeds of
such contemplated offering, if successful, will be sufficient
for these purposes. There is also no assurance that such
financing will be available, or that it will be available on
acceptable terms.
Reference should be made to "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included elsewhere herein for additional information.
Note 3 - Notes Payable - Stockholder:
In February 1995, the Company signed an agreement with a
related party pursuant to which the Company borrowed $500,000 as
evidenced by a series of Convertible Promissory Notes. In
September 1995, the Convertible Promissory Notes were converted
into 841,455 shares of the Company's common stock and two
Promissory Notes with principal amounts of $475,000 and $25,000,
respectively. Simultaneously, 841,455 shares outstanding were
contributed back to the Company by its original shareholders.
For accounting purposes, such transaction has been treated as a
reverse stock split. The common stock issued upon conversion has
been recorded based upon its estimated fair value and that of
the notes.
The $475,000 note is to be repaid in twelve equal quarterly
installments commencing two years from the date of such note.
This note bears interest at nine percent (9%) per annum payable
quarterly. The $25,000 promissory note accrues interest at nine
percent (9%) per annum (payable quarterly) and is convertible at
the sole option of the note holder into a maximum of an
additional 30% of shares of common stock of the Company based on
the Company achieving certain results of operations as compared
to the projected
F-10
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
results of operations provided to the stockholder. If the
Company achieves pre-tax profit of at least 80% of the projected
results of operations, there is no conversion option. Unless
previously converted, this $25,000 note will be repaid by the
Company in twelve equal quarterly installments commencing on
April 1, 1998.
In December 1995, the Company and this stockholder signed an
additional loan agreement whereby the stockholder agreed to loan
the Company up to an additional $250,000. In December 1995, the
stockholder loaned the Company $150,000 and, during the first
quarter of 1996, the stockholder loaned the Company an
additional $100,000. These additional loans are due 60 days from
the date of such loans and accrue interest at nine percent (9%)
per annum. The stockholder has the option of converting these
additional loans, totaling $250,000 into two 9% term notes
($237,500 and $12,500) and 420,728 shares of common stock of the
Company. Such common stock would be recorded based upon its
estimated fair value and that of the notes. The $237,500 note
would be repaid in 12 equal quarterly installments commencing
two (2) years from the date of such note. The $12,500 note would
be convertible at the sole option of the holder into a maximum
of an additional 15% of the Company's shares of common stock
based on the Company's achievement of certain operating results
as compared to projected results, as more fully described above
for the $25,000 note. Unless previously converted, this $12,500
note will be repaid by the Company in twelve equal quarterly
installments commencing on April 1, 1998.
Total borrowings from the stockholder are $650,000 at December
31, 1995 and $750,000 through June 1996. Accrued interest was
$28,096 at December 31, 1995 and $60,253 at June 30, 1996. The
Company has not paid any interest under these loan agreements
through June 30, 1996. Therefore, the Company is technically in
default on such notes. Accordingly, the notes have been
classified as current liabilities in the accompanying
consolidated financial statements.
Note 4 - Commitments:
Leases - In September 1995, the Company entered into a sale
and lease-back arrangement whereby the Company sold the bulk of
its computer hardware and commercially purchased software to a
lessor for approximately $170,000 and
F-11
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreed to lease back such equipment for initial terms ranging from 24 to 30
months. The obligations under these leases at December 31, 1995 consist of
the following:
Imputed
Interest
Description Rate
Capital lease payable in monthly
installments of $3,945
through March 1998 and $2,367
through March 1999,
collateralized by the computer
equipment 25.4% $146,754
Capital lease payable in monthly
installments of $2,105
through September 1997 and $421
through September 1998,
collateralized by the computer equipment
20.4% 55,572
----------
202,326
Less: Amount representing interest 67,568
Present value of minimum lease payments 134,758
Less: Current maturities 45,012
$ 89,746
The obligations under these leases mature as follows:
Year Ending December 31,
1996 $ 45,012
1997 51,565
1998 31,370
1999 6,811
-----------
$134,758
The Company leases its administrative facilities under a five-year lease
expiring in November 2000. The lease provides for annual rent of $25,500.
Rent expense totalled $7,000, $14,000 and $7,000 for the four
months ended December 31, 1995, the year ended August 31, 1995
and the period from March 7, 1994 (date of commencement of
development stage activities) to August 31, 1994, respectively.
F-12
<PAGE>
Employment Agreement - The Company entered into an employment
agreement with its President in September 1995. The agreement
provides for annual compensation of $75,000 effective October
1996 and $100,000, effective January 1997.
Note 5 - Income Taxes:
Deferred income taxes reflect the net effects of temporary
differences between the amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The principal temporary difference arises from the net
operating loss carryforwards and results in a deferred tax asset
of approximately $236,000 at December 31, 1995.
A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax asset will not be
realized. The Company has determined, based on its recurring net
losses, lack of a commercially viable product or system and it
being a development stage company, that a full valuation
allowance is appropriate at December 31, 1995.
A reconciliation of the provision (benefit) for income taxes
computed at the federal statutory rate of 34% and the effective
tax rate of income (loss) before income taxes is as follows:
Period Ended Year Ended
December 31, August 31,
1995 1995
Computed tax benefit on net loss
at federal statutory rate $ (99,000) $ (91,000)
State income tax benefit, net of
federal income tax effect (17,000) (16,000)
Tax effect of net operating
losses not currently usable 116,000 107,000
Provision (benefit) for income taxes $ - $ -
At December 31, 1995, the Company had net operating loss
carryforwards of approximately $600,000 expiring through 2010.
Current tax law limits the use of net operating loss
carryforwards after there has been a substantial change in
ownership (as defined) during a three year period. Because of
the possible future changes in common stock ownership, the use
of the Company's net operating loss carryforwards may be subject
to an annual limitation. To the extent amounts available under
the annual limitation are not used, they may be carried forward
for the remainder of 15 years from the year the losses were
originally incurred.
F-13
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Stockholders' Equity:
Preferred Stock - The Company's Certificate of Incorporation
authorizes the issuance of up to 25,000,000 shares of Preferred
Stock. None of such Preferred Stock has been designated or
issued to date. The Board of Directors is authorized to issue
shares of Preferred Stock from time to time in one or more
series and to establish and designate any such series and to fix
the number of shares and the relative conversion rights, voting
rights, terms of redemption and liquidation.
Warrants and Options - In August 1995, the Company granted an
option to purchase 25,000 shares of its common stock to an
officer, exercisable at $.60 per share through August 2000.
In connection with the lease described in Note 4, the Company
granted to the lessor a warrant to purchase a maximum of 12,721
shares of common stock
at an exercise price of $2 per share.
Note 7 - Subsequent Events:
Recent Sales of Common Stock - During the quarter ended March
31, 1996, the Company sold 5,000 shares of its restricted common
stock to a former officer and director of the Company for
$10,000. In addition, the Company sold, to an unaffiliated
private investor, 25,000 shares of its restricted common stock
for $50,000.
Reverse Stock Split - In July 1996, the Company's stockholders
approved and effectuated a one for two reverse stock split.
Stock splits have been retroactively reflected in the
accompanying consolidated financial statements.
Private Offering - Pursuant to a private offering, the Company
issued 11.5 units to various unrelated parties in May and June
1996. Each $50,000 unit consists of a $49,000 three-year
promissory note (bearing interest at 10% per annum) and a Class
A redeemable common stock purchase warrant valued at $1,000 per
unit. Each warrant entitles the holder to purchase 25,000 shares
of the Company's common stock at $5.75 per share. Gross proceeds
of this private offering totalled $575,000.
The principal and interest on the promissory notes are to be
repaid at the earlier of three years from issuance of such notes
or 30 days after the closing date of the Company's first
underwritten public offering. Each Class A common stock purchase
warrant entitles the holder to purchase a share of the Company's
common stock at an exercise price of $5.75 per share. The rights
represented by this warrant are exercisable commencing 90 days
after the effective date of a
F-14
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
public offering registration statement until four years
thereafter. The terms and conditions of these warrants are
subject to adjustment to conform with the warrants to be
registered upon the effectiveness of the contemplated
registration statement to be filed with the Securities and
Exchange Commission. Warrants to purchase 287,500 shares of the
Company's common stock are currently outstanding pursuant to
this private offering.
Convertible Notes Payable - In April and June 1996, the
Company borrowed a total of $30,000 from two unaffiliated
parties. These notes bear interest at 7% per annum, payable on
the last day of each calendar quarter, commencing March 31,
1997. The maturity dates are the earlier of January 1, 1998 or
upon the consummation of a public offering of the Company's
common stock. If the maturity dates of these notes occur prior
to January 1, 1998, the notes will be converted into 15,000
shares of the Company's common stock.
Note 8 - Event Subsequent to Date of Auditors' Report (Unaudited):
In August 1996, the Company gave notice to a former officer
that it was cancelling the 333,216 shares of its common stock
which had been issued to the former officer in connection with
services to be provided at the inception of Travel Link. Such
cancellation relates to various claims made by the Company
against the former officer and failure to provide services to
the Company. The former officer has informed the Company that he
will contest any attempt by the Company to cancel his shares.
Pending return of the shares, they are considered outstanding
for all periods presented herein.
F-15
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(formerly Robotic Lasers, Inc.)
A Development Stage Enterprise
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 1996 December
Proforma Historical 31, 1995
(Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 76,550 $ 76,550 $ 22,613
Prepaid Expenses 16,122 16,122 703
--------- ---------- --------------
Total Current Assets 92,672 92,672 23,316
PROPERTY & EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF
$58,424, $58,424 & $17,393 252,041 252,041 145,384
-------- -------- ---------
OTHER ASSETS
Computer software costs, less accumulated
amortization of $31,598, $31,598 & $0 310,402 310,402 156,997
Dept issue costs, less accumulated
amortization of $6,261, $6,261 & $0 50,089 50,089 --
Deposits and Other 28,787 28,787 26,988
--------- ----------- ------------
389,278 389,278 183,985
-------- ---------- -----------
$ 733,991 $ 733,991 $ 352,685
========= --------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES:
Notes Payable - Stockholder, less
unamortized debt discount of $16,173,
$9,470 & $12,426 $733,827 $ 740,530 $ 637,574
Accounts Payable and accrued expenses 269,320 269,320 98,012
Current portion of obligation under computer
equipment lease 59,952 59,952 45,012
Accrued interest payable - stockholder 95,461 95,461 28,096
Accrued consulting fees - officer 49,500 49,500 ---
Loans and advances from related parties 56,507 56,507 19,126
Payroll taxes payable --- --- 10,000
--------------- --------------- -----------
Total current liabilities 1,264,567 1,271,270 837,820
Long-term portion of obligation under
computer equipment lease 66,601 66,601 89,746
10% Promissory Notes payable 563,500 563,500 ---
Convertible notes payable 30,000 30,000 ---
----------- ----------- ----------
1,924,668 1,931,371 927,566
--------- --------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred Stock, $.0001 Par Value: 25,000,000
Shares Authorized; None Outstanding
Common Stock, $.0001 Par Value; 75,000,000
Shares Authorized;3,255,594 (proforma),
2,834,866 and 2,804,866 Shares
Issued and Outstanding 326 283 280
Additional paid in Capital 137,346 130,686 18,639
Deficit Accumulated During the Developmental Stage (1,328,349) (1,328,349) ( 593,800)
----------- ----------- ---------
(1,190,677) (1,197,380) ( 574,881)
----------- ---------- ---------
$ 733,991 $ 733,991 $ 352,685
========== ========== =========
See Accompanying Notes to Financial Statements
</TABLE>
F-16
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(formerly Robotic Lasers, Inc.)
( A development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
DURING THE DEVELOPMENT STAGE
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
March 7, 1994
(Commencement
of Development
Nine Months Nine Months Three Months Three Months
Stage Activities)
Ended Ended Ended Ended
Through
Sept 30, 1996 Sept 30, 1995 Sept 30, 1996 Sept 30, 1995 Sept 30, 1996
REVENUES AND EXPENSES DURING
THE DEVELOPMENT STAGE
Revenue $ -- $ -- $ -- $ -- $ --
Expenses -
General and Administrative 561,808 233,695 181,880 105,384 1,100,299
Depreciation and Amortization 82,026 4,876 36,817 4,495 100,813
Interest Expense, net 90,715 14,222 42,222 8,112 127,237
734,549 252,793 260,919 117,991 1,328,349
NET (LOSS) INCURRED DURING
THE DEVELOPMENT STAGE ($734,549) ($ 252,793) ($260,919) ($117,991) ($1,328,349)
NET (LOSS) INCURRED
PER COMMON SHARE ($ .26) ($ .15 ) ($ .09) ($ .06) ($ .62)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,828,625 1,737,377 2,834,866 1,844,509 2,142,588
See Accompanying Notes to Financial Statements
</TABLE>
F-17
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(formerly Robotic Lasers, Inc.)
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During The
Common Stock Paid-In Development
Total Shares Value Capital Stage
BALANCE - DECEMBER 31, 1995 ($574,881) 2,804,866 $280 $ 18,639 ($593,800)
PROCEEDS FROM ISSUANCE
OF COMMON STOCK 60,000 30,000 3 59,997
PROCEEDS FROM ISSUANCE
OF WARRANTS, LESS RELATED
COSTS OF $1,150 10,350 10,350
CONTRIBUTION OF CAPITAL
BY STOCKHOLDER/OFFICER 41,700 41,700
NET (LOSS) FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, 1996 ( 734,549) -- -- -- ( 734,549)
-------- ---------------- -------- -------------- --------
BALANCE - SEPTEMBER 30, 1996 ($1,197,380) 2,834,866 $283 $130,686 ($1,328,349)
See Accompanying Notes to Financial Statements
</TABLE>
F-18
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(formerly Robotic Lasers, Inc.)
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
March 7, 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
(Commencement
of Development
Stage Activities)
Nine Months Ended Nine Months Ended Through
September 30, September 30, September 30,
1996 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) ($734,549) ( $252,793 ) ( $1,328,349)
Adjustment to Reconcile Net (Loss) to Cash
Flows from Operating Activities:
Depreciation and Amortization 82,026 4,876 100,813
Common Stock issued for services rendered -- 9,600 19,600
Changes in operating assets and liabilities:
Other Assets ( 1,979) ( 2,000) (29,381)
Accounts Payable and Accrued Expenses 210,808 (21,357) 304,733
Prepaid Expenses ( 15,419) ( 1,867) (16,122)
Accrued Interest Payable 67,365 15,938 95,461
--------- -------------- ---------------
NET CASH FLOWS FROM
OPERATING ACTIVITIES ( 391,748) (247,603) (853,245)
-------------- ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment ( 332,691) (241,255) (652,465)
--------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Notes Payable 100,000 500,000 750,000
Payments under Computer Equipment Lease ( 33,322) -- (43,046)
Proceeds from sale and lease-back 25,117 -- 169,599
Proceeds from Issuance of Common Stock 60,000 -- 60,000
Advances from related parties 37,381 -- 56,507
Contribution of capital - stockholder/officer 41,700 -- 41,700
Proceeds from issuance of 10% Promissory
Notes Payable and Related Warrants 575,000 -- 575,000
Costs paid upon issuance of Promissory
Notes and Warrants ( 57,500) -- (57,500)
Proceeds from issuance of
Convertible Notes Payable 30,000 -- 30,000
---------------- ------------------------------
NET CASH FLOWS FROM
FINANCING ACTIVITIES 778,376 500,000 1,582,260
-------------- ------------ -------------
NET INCREASE IN CASH 53,937 11,142 76,550
CASH - BEGINNING OF PERIOD 22,613 5 --
--------------- -----------------------------
CASH - END OF PERIOD $ 76,550 $11,147 $ 76,550
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 24,170 $ -- $ 32,596
=============== ===============================
Net liabilities assumed
in reverse acquisition $ -- $ -- $ 14,087
===================== ===============================
See Accompanying Notes to Financial Statements
</TABLE>
F-19
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(formerly Robotic Lasers, Inc.)
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 Basis of Presentation
The consolidated balance sheet at December 31, 1995, has been
derived from the audited consolidated balance sheet and is presented for
comparative purposes. All other financial statements are unaudited. In the
opinion of management, all adjustments which include only normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows of all periods presented have been made. The results
of operations for interim periods are not necessarily indicative of the
operating results for the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with the generally accepted accounting principles have
been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto for the most recent fiscal year.
Note 2 Activities of the Company
The Company is in the development stage and has not yet
generated any revenues from operations. The Company's funds have been provided
from Loeb Holding Corporation, LTI Ventures Leasing Corporation, and from
certain private offerings.
As reflected in the accompanying consolidated financial
statements, the Company has incurred net losses of $1,328,349 since inception,
and at September 30, 1996, had a working capital deficiency of $1,178,598
(proforma deficiency - $1,171,895). These factors, among others, indicate that
if the Company is unable to secure additional financing, it may be unable to
continue in existence. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue in existence.
Note 3 Notes Payable - Stockholder
---------------------------
In February 1995, the Company signed an agreement with Loeb
Holding Corporation, as escrow agent (Loeb), pursuant to which the Company
borrowed $500,000 as evidenced by a series of Convertible Promissory Notes. In
September 1995, the Convertible Promissory Notes were converted into 841,455
shares of the Company's common stock and two Promissory Notes with principal
amounts of $475,000 and $25,000, respectively. Simultaneously, 841,455 shares
outstanding were contributed back to the Company by its original shareholders.
For accounting purposes, such transaction has been treated as a reverse stock
split. The common stock issued upon conversion has been recorded based upon its
estimated fair value and that of the notes.
The principal amount of the $475,000 note is to be repaid in
12 equal quarterly payments commencing two (2) years from the date of said note.
Prepayments may be made at any time without penalty. Interest is accrued at the
rate of nine percent (9%) per annum and interest payments are to be made
quarterly at the end of each calendar quarter, or at such earlier date that this
Note becomes due and payable as a result of acceleration, prepayment or as
otherwise provided therein. Interest shall begin to run from the date that the
monies are or were advanced to the Maker. On March 31, 1996, all interest
accrued through that date was calculated and was to be paid in four equal
installments on March 31, 1996, June 30, 1996, September 30, 1996 and December
31, 1996. In addition, the first quarterly interest
F-20
<PAGE>
payment was to be made on March 31, 1996, for interest due for the first quarter
of 1996, and quarterly interest payments shall be made thereafter on March 31st,
June 30th, September 30th and December 31st of each year.
The Promissory Note for $25,000 accrues interest at the rate
of nine percent (9%) per annum payable quarterly and is convertible at the sole
option of the holder into a maximum of an additional 30% of the common shares of
the Company determined by a sliding scale based on the audited pretax profits of
the Company during the second and third years of operations of the Company on a
sliding scale based upon the Company achieving between 50% and 80% of the
projections provided to Loeb. (Example: If the Company achieves 80% or better of
projection, no conversion; if the Company achieves 50% or less of projection,
conversion into 30% of the Company; if the Company achieves between 50% and 80%
of projection, the note is convertible into the pro-rata portion of 30% of the
Company, i.e., 70% achievement equals one-third of the 30% of the Company).
Unless previously converted, the principal amount of this note shall be repaid
by the Company in twelve (12) equal quarterly installments, the first principal
payment to be made on April 1, 1998.
In December 1995, the Company and Loeb signed an additional
loan agreement whereby Loeb agreed to loan the Company up to an additional
$250,000. On December 1, 1995, Loeb loaned the Company the sum of $50,000 due in
60 days together with interest of 9% to be used as working capital. Additionally
on December 4, 1995, January 16, 1996, February 23, 1996, and March 12, 1996,
Loeb loaned the Company the sums of $100,000, $50,000, $25,000 and $25,000
respectively. Each of these additional loans were due in 60 days from the date
of each agreement and accrued interest at 9% per annum.
In November 1996, Loeb converted the additional loans into two
term Promissory Notes, one in the principal amount of $237,500 and the other in
the principal amount of $12,500. In consideration for the conversion of the
loans into the two term Promissory Notes, Loeb received 420,728 shares of Common
Stock of the Company. The accompanying proforma balance sheet at September 30,
1996, reflects the effect of this debt conversion, the related issuance of
common stock and corresponding charge ($6,703) to unamortized debt discount.
The principal amount of the $237,500 note is to be repaid in
12 equal quarterly payments commencing two (2) years from the date of said note.
Prepayments may be made at any time without penalty. Interest is accrued at a
rate of nine percent (9%) per annum and interest payments are to be made
quarterly at the end of each calendar quarter, or at such earlier date that the
Note becomes due and payable as a result of acceleration, prepayment or as
otherwise provided therein. Interest shall begin to run from the date that the
monies are or were advanced to the Maker.
The Promissory Note for $12,500 accrues interest at the rate
of nine percent (9%) per annum payable quarterly and is convertible at the sole
option of the holder into a maximum of an additional 15% of the common shares of
the Company determined by a sliding scale based on the audited pretax profits of
the Company during the second and third years of operations of the Company on a
sliding scale based upon the Company achieving between 50% and 80% of the
projections provided to Loeb. (Example: If the Company achieves 80% or better of
projection, no conversion; if the Company achieves 50% or less of projection,
conversion into 15% of the Company; if the Company achieves between 50% and 80%
of projection, the note is convertible into the pro-rata portion of 15% of the
Company, i.e., 70% achievement equals one-third of the 15% of the Company).
Unless previously converted, the principal amount of this note shall be repaid
by the Company in twelve (12) equal quarterly installments, the first principal
payment to be made on April 1, 1998.
There was no cash paid for interest for the nine months ended
September 30, 1996. As of the date of this report, no cash has been paid to Loeb
for interest and the Company is technically in default on the Loeb Notes.
Accordingly, such notes payable are classified as current liabilities in the
accompanying financial statements.
F-21
<PAGE>
Note 4 Computer Equipment Lease
On September 30, 1995, the Company entered into a sale and
lease-back arrangement with LTI Ventures Leasing Corp. (LTI) whereby the Company
sold the bulk of its computer hardware and commercially purchased software to
LTI. In consideration of the sale, the Company received a total of $169,599 and
agreed to lease back the hardware and software for initial terms ranging from 24
to 30 months at a monthly rental totaling $7,039. As a consideration for
entering into the aforementioned agreement with the Company, LTI was granted a
5-year warrant to purchase a maximum of 12,721 shares of Common Stock of the
Company for cash at a price of $2.00 per share.
Note 5 10% Promissory Notes Payable
----------------------------
Pursuant to a private offering, the Company issued 11.5 units
to various unaffiliated third parties in May and June 1996. Each $50,000 unit
consists of a $49,000 three year promissory note bearing interest at 10% per
annum and a Class A redeemable common stock purchase warrant valued at $1,000
per unit. Costs paid in connection with the issuance of these units totaled
$57,500.
The principal and interest on the promissory notes are to be
repaid the earlier of three years from issuance or thirty days after the closing
date of the first underwritten public offering of the Company's securities.
Each Class A common stock purchase warrant entitles the holder
to purchase up to 25,000 shares of the Company's common stock at an exercise
price of $5.75 per share. The rights represented by this warrant are exercisable
commencing 90 days after the effective date of the public offering registration
statement until four years thereafter. The terms and conditions of these
warrants are subject to adjustment to conform with the warrants to be registered
upon effectiveness of the registration statement filed with the Securities and
Exchange Commission. At September 30, 1996, warrants to purchase 287,500 shares
of the Company's common stock are outstanding, pursuant to this offering.
Note 6 Convertible Notes Payable
In April and June 1996, the Company borrowed a total of
$30,000 from two unaffiliated third parties. The maturity date is the earlier of
January 1, 1998, or the consummation of a public offering of the Company's
common stock. These notes bear interest at a rate of 7% per annum, payable on
the last day of each calendar quarter of each year, commencing March 31, 1997,
to the maturity date. If the maturity date of these notes shall occur prior to
January 1, 1998, in lieu of the $30,000 payment of the principal amount due, the
principal amount due shall be converted into 15,000 fully paid and
non-assessable shares of common stock of the Company.
Note 7 Stockholders' Equity
Stock Split - At the annual meeting, stockholders approved an
amendment to the Company's Certificate of Incorporation effecting a 2 for 1
reverse stock split of the outstanding shares of Common Stock of the Company as
of the record date (June 25, 1996) from 5,669,731 shares to 2,834,866 shares.
The accompanying financial statements give retroactive effect to the stock
split.
Common Stock - In August 1996, the Company gave notice to
Steven E. Pollan that it was canceling the 333,216 shares of its Common Stock
which had been issued to him for services to be provided to the Company. The
reason for such cancellation related to various claims made by the Company
against Mr. Pollan as a result of the failure to provide services to the
Company. Mr. Pollan has informed the Company that he intends to legally contest
any attempt by the Company to cancel his shares. Pending return of the shares,
they will be considered outstanding for all periods presented.
F-22
<PAGE>
Contribution to Capital - During the quarter ended September
30, 1996, in order to raise additional working capital for the Company, Joseph
Cutrona, President of the Company, sold a total of 26,100 shares of restricted
common stock of the Company owned by him, to sixteen unaffiliated third parties
at prices ranging from $2.00 to $2.50 per share for total proceeds of $53,700.
During the quarter ended September 30, 1996, Mr. Cutrona remitted $41,700 of
these proceeds in the form of a capital contribution. Subsequent to September
30, 1996, Mr. Cutrona remitted $12,000, which represents the balance of the
proceeds from the sale of this stock, to the Company in the form of an
additional capital contribution. In October, November and December 1996, Mr.
Cutrona sold an additional 11,500 shares of restricted common stock of the
Company owned by him to 3 unaffiliated third parties at a price of $2.00 per
share for total proceeds of $23,000 which Mr. Cutrona remitted to the Company in
the form of an additional capital contribution. Mr. Mark Kenny formerly
Executive Vice President of the Company, has agreed to use his own shares of
restricted common stock of the Company to reimburse Mr. Cutrona for one-half of
the number of shares sold by Mr. Cutrona.
Note 8 Subsequent Events
Long-Term Debt - During November and December 1996, the
Company and Loeb Holding Corporation signed four 18 month Promissory Notes
whereby Loeb Holding Corporation loaned the Company the sums of $75,000,
$30,000, $10,000 and $95,000 (Total $210,000). The Promissory Notes which bear
interest at 10%, mature on May 11, 1998, May 25, 1998, June 2, 1998 and June 9,
1998.
Sale of Common Stock - In November 1996, the Company sold
25,000 shares of the Company's restricted common stock to an unaffiliated party
for $50,000.
Consulting Agreement - In October 1996, the Company executed a
consulting agreement to develop software to operate the Genisys Payment system
for a total price of $218,000 of which $109,000 would be paid in cash and
$109,000 in shares of the Company's common stock at an estimated fair value of
$3.75/share. The shares are to be transferred by two stockholders and,
accordingly, will be considered a contribution to capital. The stockholders may
obtain one-sixth of the shares contributed if certain events occur upon each of
six specified dates.
Notes Payable - Stockholder - In January 1997, the Company and
Loeb agreed to change the conversion privilege under both the $25,000 and
$12,500 Promissory Notes. The Notes are now convertible at the sole option
of the holder into 266,667 and 133,333 common shares of the Company,
respectively.
F-23
<PAGE>
70
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this Offering
other than those contained in this Prospectus and, if given or made, such
information or representations must not be relied on
as having been
authorized by the Company. This
Prospectus does not constitute an offer
to sell or a solicitation of
an offer to buy any security other than
the securities offered by this
Prospectus, or an offer or solicitation
of an offer to buy any securities by any
person in any jurisdiction in which such
offer or solicitation is not authorized
or is unlawful. The delivery of this
Prospectus shall not, under any circum
stances, create any implication that the
information herein is correct as of any
time subsequent to the date of this
Prospectus.
- ----------------------------
TABLE OF CONTENTS Page
Available Information
Prospectus Summary 900,000 Shares Of Common Stock
Risk Factors 1,500,000 Class A Redeemable
Use of Proceeds Warrants
Capitalization 900,000 Class B Redeemable
Dilution Warrants
Dividend Policy
Management's Discussion R.D. WHITE & CO., INC.
and Analysis of
Financial Condition
and Results of
Operations
Business
Management
Certain Transactions
Principal Stockholder
Selling Stockholders
Description of Securities
Underwriting
Concurrent Sales by
Selling Stockholders
Legal Matters
Experts
Financial Statements
Until _________, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Debentures, whether or not participating in the
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with regard to their unsold allotments or subscription.
<PAGE>
Alternate Cover Page - The Offering
SUBJECT TO COMPLETION, DATED JANUARY 22, 1997
PROSPECTUS
287,500 Class A Redeemable Warrants and
287,500 Shares of Common Stock Underlying such Warrants
GENISYS RESERVATION SYSTEMS, INC.
This Prospectus relates to the offering of 287,500 Class A Redeemable
Warrants and 287,500 shares of common stock ("Common Stock"), par value $.0001
per share, of Genisys Reservation Systems, Inc. a New Jersey corporation (the
"Company") issuable upon exercise of Class A Redeemable Warrants issued in a
private placement. The securities offered hereby may not be transferred for
eighteen (18) months from the date hereof, subject to earlier release at the
sole discretion of R.D. White & Co., Inc. which is acting as the underwriter in
connection with a public offering of the Company's securities (the
"Underwriter"). The certificates evidencing such securities include a legend
with such restrictions. The Underwriter may release the securities held by the
Selling Stockholder at any time.
The Securities offered by this Prospectus may be sold from time to time
by the Selling Stockholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Stockholders. The
distribution of the securities by the Selling Stockholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with sales of such securities. Transfers of the
securities may also be made pursuant to applicable exemptions under the
Securities Act of 1933 (the "Securities Act") including but not limited to sales
under Rule 144 under the Securities Act.
The Selling Stockholders and intermediaries through whom such
securities may be sold may be deemed "underwriters" within the meaning of the
Securities Act with respect to the securities offered, and any profits realized
or commissions received may be deemed underwriting compensation. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
On the date hereof, the Company commenced pursuant to the Registration
Statement of which this Prospectus is a part of a public offering of 900,000
shares of Common Stock, 1,500,000 Class A Redeemable Warrants, and 900,000 Class
B Redeemable Warrants. See "Concurrent Sales."
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Stockholders, but will receive proceeds from the
options covered by such shares. All costs in incurred in the registration of the
securities of the Selling Stockholders are being borne by the Company. See
"Selling Stockholders."
The Company intends to furnish its security holders with annual reports
containing audited financial statements and the audit report of the independent
certified public accountants and such interim reports as it deems appropriate or
as may be required by law. The Company's fiscal year ends December 31.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS", WHICH BEGINS ON PAGE , AND "DILUTION" page .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------------
The date of this Prospectus ______ __ , 1997
<PAGE>
The Offering
Securities Offered by
SellingStockholders.............287,500 Class A Redeemable Warrants
and 287,500 Shares Issuable
upon exercise of outstanding
Class A Redeemable Warrants
Securities Outstanding
Prior to the Company's
Offering:
Common Stock(3).............. 4,195,594 Shares
Series A Warrants............ 1,787,500 Warrants
Series B Warrants............ 900,000 Warrants
Securites Outstanding
After the Company's
Offering:
Common Stock(1)(3)............ 4,483,094 Shares
Series A Warrants(2).......... 1,500,000 Warrants
Series B Warrants(2).......... 900,000 Warrants
Use of Net Proceeds........... See "Use of Proceeds"
Proposed Symbol(4)
Common Stock.................GENS
Class A Warrants..... .......GENSW
Class B Warrants.............GENSZ
- ------------------------------
(1) Does not include: (a) 2,400,000 shares of Common Stock issuable upon
exercise of the Class A and Class B Warrants; (b) 135,000 shares of
Common Stock issuable upon exercise of the Over-Allotment Option and
360,000 shares of Common Stock issuable upon the exercise of the
Redeemable Warrants contained therein. See "Description of Securities,"
"Principal Stockholders," and "Underwriting."
(2) Does not include the issuance of 360,000 Redeemable Warrants issuable
upon exercise of the Over-Allotment Option. See "Underwriting" and
"Description of Securities."
(3) Includes 15,000 shares of Common Stock issuable upon the conversion of
two promissory notes at the completion of this Offering in the
principal amounts of $20,000 and $10,000 respectively (the "Convertible
Notes").
(4) The Shares of Common Stock and the Class A Redeemable Warrants and Class
B Redeemable Warrants are expected to be listed for quotation on NASDAQ
under the symbols: "GENS", "GENSW" and "GENSZ", respectively. There can
be no assurance given that the Company will be able to satisfy on a
continuing basis the requirements for quotation of such securities on
NASDAQ. See "Risk Factors" and "Market for the Company's Securities and
Other Related Stockholder Matters."
72
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this Offering
other than those contained in this Prospectus and, if given or made, such
information or representations must
not be relied on as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or a solicitation of
an offer to buy any security other
than the securities offered by this
Prospectus, or an offer or solicita
tion of an offer to buy any securities
by any person in any jurisdiction in
which such offer or solicitation is
not authorized or is unlawful. The
delivery of this Prospectus shall not,
under any circumstances, create any
implication that the information
herein is correct as of any time
subsequent to the date of this
Prospectus.
____________________________ 287,500 Class A Warrants
TABLE OF CONTENTS Page and
287,500 Shares Of
Available Information Common Stock Issuable
Prospectus Summary upon exercise of
Risk Factors outstanding Class A
Use of Proceeds Warrants
Capitalization
Dilution
Dividend Policy
Management's Discussion
and Analysis of
Financial Condition
and Results of
Operations
Business
Management
Certain Transactions
Principal Stockholder
Selling Stockholders
Description of Securities
Underwriting
Concurrent Sales by
Selling Stockholders
Legal Matters
Experts
Financial Statements
Until _________, 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Debentures, whether or not
participating in the distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus
when acting as underwriters and with regard to their unsold allotments or
subscription.
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 24. Indemnification of Officers and Directors
The Company's Certificate of Incorporation provides in Article Fourth
that no Director of this Corporation shall be liable to the Corporation or
any of its shareholders for damages for breach of any duty owed to the
Corporation or its shareholders except for liability for any breach of duty
based upon an act or omission (i) in breach of such person's duty of loyalty
to the Corporation or its shareholders, (ii) not in good faith or involving
a knowing violation of law, or (iii) resulting in receipt by such person of
an improper personal benefit.
ITEM 25. Other Expenses of Issuance and Distribution
The expenses payable by Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts and commissions, non-accountable expenses of $132,600 ($152,484 if
the over-allotment option is exercised) are estimated as follows:
Securities and Exchange Commission Fees...............$ 8,026.86
NASDAQ Stock Market listing fee........................$
10,000.00
Transfer/Warrant Agent's fee and expenses..............$
3,500.00
NASD filing fee.......................................$ 934.00
Accounting fees and expenses..........................$ 35,000.00
Blue Sky fees and expenses............................$ 30,000.00
Tombstone Advertisement...............................$ 10,000.00
Printing Expenses (including Securities)...............$
40,000.00
Legal fees............................................$ 90,000.00
Miscellaneous.........................................$ 7,539.14
Total............................................$235,000
ITEM 26. Recent Sales of Unregistered Securities
During February 1995, the Company issued 45,765 shares of its Common
Stock in repayment of certain liabilities totaling $251,702. Those
liabilities included notes payable to Saddle Brook Investors of $149,633, a
note payable plus accrued interest to a director of $34,273 and certain
accounts payable of $67,796.
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In February 1995, Loeb Holding Corporation, as escrow agent ("Loeb"),
for Warren D. Bagatelle, HSB Capital, trusts for the benefit of families of
two principals of Loeb and three unaffiliated individuals, agreed to loan
the Company $500,000 evidenced by a series of Convertible Promissory Notes.
In September 1995, Loeb converted the Convertible Promissory Notes into
841,455 common shares of the Company and two Term Promissory Notes, one in
the principal amount of $475,000 and the other in the principal amount of
$25,000.
The principal amount of the $475,000 note is to be repaid in twelve
equal quarterly payments commencing two (2) years from the date of said
note. Prepayments may be made at any time without penalty. Interest is
accrued at a rate of 9% per annum and interest payments are to made
quarterly at the end of each calendar quarter, or at such earlier date that
the Note becomes due and payable as a result of acceleration, prepayment or
as otherwise provided therein. Interest began to run from the date that the
monies were advanced to the Company.
The Promissory Note for $25,000 and the Note for $12,500 have been
modified. Each Note provides for accrued interest at the rate of 9% per
annum payable quarterly and unless previously converted the principal amount
of each note is to be repaid in twelve equal quarterly installments,
commencing April 1, 1998, or on such earlier date as the Notes provide. The
Notes are convertible at the sole option of the holder into an aggregate of
400,000 common shares of the Company.
During March 1995, John H. Wasko, then President of the Company, upon
exercise of his own option, acquired 70,520 shares of the Common Stock of
the Company at an exercise price of $0.02145 per share.
During the quarter ended March 31, 1996, the Company sold 5,000 shares
of the Company`s restricted Common Stock to a former officer and the
director of the Company for $10,000. During the same period, the Company
sold 25,000 shares of the Company's restricted Common Stock to an
unaffiliated party for $50,000.
II-2
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On August 11, 1995, Robotic Lasers acquired Corporate Travel Link,
Inc., by issuing 1,682,924 shares of restricted new Common Stock of the
Company in exchange for the shares of the common stock of Corporate Travel
Link owned by Joseph Cutrona, Mark A. Kenny and Steven E. Pollan, which
represented all the issued and outstanding shares of common stock of
Corporate Travel Link.
In August 1994 Joseph Cutrona and Mark Kenny each received 666,433
shares of common stock in the Company for contributed services to be
provided to the Company.
In August 1995 the Company granted Mr. Wasko a 5 year option to
purchase 25,000 shares of the Company's common stock at a price of $0.60 per
share and a 5-year option to purchase 35,000 shares of the Company's common
stock at a price of $2.00 per share granted to Mr. Wasko by the Company on
November 1, 1996.
During December, 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes. In November, 1996,
Loeb converted the Convertible Promissory Notes into two Term Promissory
Notes, one in the principal amount of $237,500 and the other in the
principal amount of $12,500 plus 420,728 shares of Common Stock of the
Company, of which 420,000 shares are owned by four unaffiliated parties.
In May, 1996, Pursuant to a private offering, the Company issued 11.5
units to sixteen unaffiliated third parties in May and June 1996. The
Underwriter acted as placement agent for the private placement. Each $50,000
unit consists of a $49,000 promissory note and a Class A redeemable Common
Stock purchase Warrant valued at $1,000 per unit. Each warrant entitles the
holder to purchase 25,000 shares of the Company's common stock at $5.75 per
share. Total proceeds received from this offering was $575,000 and warrants
to purchase 287,500 shares of the Company's common stock were issued. The
Underwriter was paid a fee of $57,500 in connection with the private
placement.
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Neither the Company nor any person acting on its behalf offered or sold
the securities described above by means of any form of general solicitation
or general advertising. Each purchaser represented in writing that he
acquired the securities for his own
account. A legend was placed on the certificate stating that the
restrictions on their transferability and sale. Each purchaser signed a
written agreement that the securities will not be sold without registration
under the Act or exemption therefrom. The Registrant believes such issuances
are exempt transactions not involving a public offering under Section 4(2)
of the Securities Act of 1933, as amended.
During the quarter ended September 30, 1996, in order to raise
additional working capital for the Company, Joseph Cutrona, President of the
Company, sold a total of 26,100 shares of restricted common stock of the
Company owned by him, to sixteen unaffiliated third parties at prices
ranging from $2.00 to $2.50 per share for total proceeds of $53,700. During
the quarter ended September 30, 1996, Mr. Cutrona remitted $41,700 of these
proceeds to the Company in the form of a capital contribution. Subsequent to
September 30, 1996, Mr. Cutrona remitted $12,000, which represents the
balance of the proceeds from the sale of this stock, to Company in the form
of an additional capital contribution. In October, November and December
1996, Mr. Cutrona sold an additional 11,500 shares of restricted common
stock of the Company owned by him to 3 unaffiliated third parties at a price
of $2.00 per share for total proceeds of $23,000 which Mr. Cutrona remitted
to the Company in the form of an additional capital contribution. Mr. Mark
Kenny formerly Executive Vice President of the Company, has agreed to use
his own shares of restricted common stock of the Company to reimburse Mr.
Cutrona for one-half of the number of shares sold by Mr. Cutrona.
In November, 1996, the Company sold 25,000 shares of the Company`s
restricted common stock to an unaffiliated party for $50,000.
During November and December 1996, the Company and Loeb Holding
Corporation signed four 18 month Promissory Notes whereby Loeb Holding
Corporation loaned the Company the sums of $75,000, $30,000, $10,000 and
$95,000 (total of $210,000). The Promissory Notes which bear interest at
10%, mature on May 11, 1998, May 25, 1998, June 2, 1998 and June 9, 1998.
II-4
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ITEM 27. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 * Form of Underwriting Agreement
1.2 * Selected Dealer Agreement
3.1 Registrant's Articles of Incorporation
3.2 Registrant's By-Laws
4.1 * Form of Common Stock Certificate
4.2 * Redeemable Warrant Agreement with Form of
Class A and Class B Warrant and Warrant
Agreement
4.3 * Form of Representative's Unit Purchase
Option
5. * Opinion of McLaughlin & Stern, LLP
10.1 Employment Agreement dated October 17, 1996
between Registrant and Joseph Cutrona.
10.2 Consulting Agreement dated October 18, 1996
between the Registrant and Mark A. Kenny.
10.3 Employment Agreeement dated October 17, 1996
between Registrant and John H. Wasko.
10.4 Copy of lease dated November 1, 1995 between
Unicom and Corporate Travel Link, Inc.
10.5 Copy of Agreement dated June 22, 1995
between American Airlines, Inc., and
Corporate Travel Link, Inc., relating to
Sabre Extension Program - Associate
Distribution and Services Agreement.
10.6 Copy of Agreement dated June 30, 1995
between American Airlines, Inc. and
Corporate Travel Link, Inc., relating to
Associate Sabre Equipment Lease Agreement.
10.7 Copy of Agreement dated June 30, 1995
between American Airlines, Inc., and
Corporate Travel Link, Inc. - non-standard
system amendment to Corporate Sabre
Equipment Lease Agreement.
II-5
<PAGE>
10.8 Copy of Script Consulting Agreement dated
June 21, 1995 between Worldspan, LP and
Corporate Travel Link, Inc.
10.9 Copy of Script Services agreement dated June
21, 1995 between Worldspan, LP and Corporate
Travel Link, Inc.
10.10 Copy of Galileo Services Display and
Reservation Agreement dated August 28, 1995
between Galileo International Partnership
and Corporate Travel Link, Inc.
10.11 Copy of Ancillary Services Agreement dated
August 28, 1995 between Galileo
International Partnership and Corporate
Travel Link, Inc.
10.12 Copy of Worldspan Car Rental Associate
Reservation Agreement between Worldspan, LP
and Corporate Travel Link, Inc.
10.13 Copy of Interim Loan Agreement between the
registrant and Loeb Holding Corporation,
as escrow agent, and certain executives of
the Registrant.
10.14 Prosoft Consulting Agreement
10.15* Copy of Consulting and Investment Banking
Agreement between the Company and Loeb
Partners Coproration.
10.16* Copy of Promissory Notes of the Company
dated November 6, 1996 in the principal
amounts of $12,500 and $237,500 payable to
Loeb Holding Corporation, as escrow agent.
21 List of Subsidiaries
24.1 Consent of Wiss & Company, LLP
24.2 Consent of McLaughlin & Stern, LLP
28.1 Executive Stock Issuance
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<PAGE>
Schedules other than those listed above have been omitted since they are
either not required, are not applicable or the required information is shown
in the financial statements or related notes.
* Filed herewith
ITEM 28. Undertakings
The undersigned Registrant hereby undertakes to:
(a) (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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(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 for 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; and
(b) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors,
II-7
<PAGE>
officers and controlling persons of the small business issuer pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suite 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.
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b) (1) or (4) or 497 (h) under the Securities Act shall be deemed to be
part of this registration as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form SB-2 of our report dated July 8, 1996,
relating to the consolidated financial statements of Genisys Reservation
Systems, Inc., and Subsidiary which appears in such the Prospectus.
We also consent to the reference to us under "Experts" in the
Prospectus.
Wiss & Company, LLP
Woodbridge, New Jersey
January 21, 1997
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<PAGE>
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized
this registration statement to be signed on its behalf by the undersigned,
in the City of Union, State of New Jersey, on January 22, 1997.
GENISYS RESERVATION SYSTEMS, INC.
By: /s/ Joseph Cutrona
Joseph Cutrona
President
In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following persons in the
capacities and on the dates stated.
/s/Joseph Cutrona President and Director January 22, 1997
Joseph Cutrona
/s/John H. Wasko Secretary, Treasurer
John H. Wasko and Director January 22, 1997
(Chief Financial
Officer and
Chief Accounting Officer)
/s/Mark A. Kenny Director January 22, 1997
Mark A. Kenny
/s/Warren D. Bagatelle Chairman and Director January 22, 1997
Warren D. Bagatelle (Chief Executive Officer)
II-10
<PAGE>
Exhibit 1.1
GENISYS RESERVATION SYSTEMS, INC.
UNDERWRITING AGREEMENT
900,000 Shares of Common Stock and
2,400,000 Redeemable Warrants
, 1997
R.D. White & Co., Inc.
950 Third Avenue - 3rd. Floor
New York, New York 10022
Gentlemen:
Genisys Reservation Systems, Inc., a New Jersey corporation (the "Company"),
confirms its agreement with R.D. White & Co., Inc. ("R.D. White") ( the
"Underwriter") with respect to the sale by the Company and the purchase by the
Underwriter of 900,000 shares (the "Shares") of the Company's common stock,
$.0001 par value per share (the "Common Stock"), and 2,400,000 redeemable
warrants to acquire one additional share of Common Stock ("Public Warrants").
The shares of Common Stock and Public Warrants will be immediately separable and
tradeable upon issuance and will not trade as units. The Public Warrants will be
comprised of 1,500,000 Class A Redeemable Warrants (the "Class A Warrants") and
900,000 Class B Redeemable Warrants (the "Class B Warrants"). Each Public
Warrant is exercisable from , 1997 until, , 2002. Each Class A Warrant will have
an initial exercise price of $5.75 for one (1) share of Common Stock, and each
Class B Warrant shall have an initial exercise price of $6.75 for one (1) share
of Common Stock. The Public Warrants will be subject to prior redemption by the
Company as more fully described in the Registration Statement and Prospectus
referred to below. The Shares, Class A Warrants and Class B Warrants are
hereinafter referred to as the "Firm Securities." Upon your request, as provided
in Section 2(b) of this Agreement, the Company shall also issue and sell to you
up to an additional 135,000 Shares and/or 225,000 Class A Warrants and 135,000
Class B Warrants for the purpose of covering over-allotments, if any, in the
sale of the Firm Securities. Such 135,000 Shares and/or 225,000 Class A Warrants
and 135,000 Class B Warrants are hereinafter referred to as the "Option
Securities" The Firm Securities and the Options Securities are hereinafter
collectively referred to as the "Public Offering Securities." The Company also
proposes to issue and sell to you warrants (the "Underwriter's Warrants")
pursuant to the Underwriter's Warrant Agreement dated , 1997 between the
Underwriter and the Company (the "Underwriter's Warrant Agreement") for the
purchase of an additional 90,000 Shares and 150,000 Class A Warrants and 90,000
Class B Warrants.
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<PAGE>
The Shares and/or Public Warrants issuable upon exercise of the Underwriter's
Warrants are hereinafter referred to as the "Underwriter's Securities." The
shares of Common Stock issuable upon exercise of the Public Warrants (including
the Public Warrants issuable upon exercise of the Underwriter's Warrants) are
hereinafter sometimes referred to as the "Warrant Shares." The Public Offering
Securities, the Shares, the Public Warrants, the Underwriter's Warrants, the
Underwriter's Securities and the Warrant Shares are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties. (a) The Company represents and warrants to,
and agrees with, each of the Underwriters as of the date hereof, and as of the
Closing Date (hereinafter defined) and the Option Closing Date (hereinafter
defined), if any, as follows:
(i) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333 - 15011), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Shares, the Public Warrants, the Underwriter's Securities and the Warrant Shares
under the Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company in
conformity with the requirements of the Act, and the Rules and Regulations of
the Commission thereunder. The Company will promptly file a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not file any other amendment thereto to which the Underwriter shall
have objected in writing after having been furnished with a copy thereof. Except
as the context may otherwise require, such registration statement, as amended,
on file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents or information incorporated by reference therein) and
all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the rules and regulations) is hereinafter called
the "Registration Statement", and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the rules and regulations is
hereinafter called the "Prospectus." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(ii) Neither the Commission nor any state regulatory authority has issued any
order preventing or suspending the use of any Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and Prospectus at the time of filing thereof conformed with the requirements of
the Acts and the Rules and Regulations, and none of the Preliminary Prospectus,
the Registration Statement or Prospectus at the time of filing thereof contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein and necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made in
reliance upon and in conformity with written information furnished to the
2
<PAGE>
Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus or any amendment or supplement thereto. It is understood that the
statements set forth in the Prospectus on page 2 with respect to stabilization,
under the heading "Underwriting" and the identity of counsel to the Underwriter
under the heading "Legal Matters" constitute the only information furnished in
writing by or on behalf of the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be.
(iii) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (hereinafter defined) and each Option
Closing Date (hereinafter defined), if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, contains or will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided, however, that this representation and warranty does not apply to
statements made or statements omitted in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of the
Underwriter (as set forth in paragraph 1(a)(ii) hereof) expressly for use in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
(iv) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its incorporation.
The Company does not own an equity interest in any corporation, partnership,
trust, joint venture or other business entity. The Company is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing except where the failure(s)
to be so qualified, licensed and in good standing, individually or in the
aggregate, would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company. The
Company has all requisite power and authority (corporate and other), and has
obtained any and all authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), necessary to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operations, properties, business, or results of operations of the
Company. The disclosures in the Registration Statement concerning the effects
3
<PAGE>
of federal, state, local, and foreign laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(v) The Company has a duly authorized, issued and outstanding capitalization as
set forth in the Prospectus, and will have the adjusted capitalization set forth
therein on the Closing Date (hereinafter defined) and the Option Closing Date
(hereinafter defined), if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in the
Prospectus. The Common Stock, the Shares, the Public Warrants, the Underwriter's
Warrants, the Underwriter's Securities and the Warrant Shares (collectively,
hereinafter sometimes referred to as the "Securities") and all other securities
issued or issuable by the Company conform or, when issued and paid for, will
conform, in all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Securities are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Securities has been duly and validly taken; and the certificates
representing the Securities are in due and proper form. Upon the issuance and
delivery pursuant to the terms hereof of the Securities to be sold by the
Company hereunder, the Underwriter will acquire good and marketable title to
such Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever.
(vi) The financial statements of the Company together with the related notes and
schedules (if any) thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply and the pro forma financial information included in the
Registration Statement, each Preliminary Prospectus and the Prospectus presents
fairly on a basis consistent with that of the audited financial statements
included therein, the Company's pro forma net income or loss per share, as the
case may be, pro forma net tangible book value, and the pro forma capitalization
and such financial statements have been prepared in conformity with generally
accepted accounting principles and the Rules and Regulations, consistently
applied throughout the periods involved. There has been no material adverse
change or development involving a material change in the condition, financial or
otherwise, or in the earnings, business affairs, position,
4
<PAGE>
prospects, value, operation, properties, business or results of operation of the
Company whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus, and the outstanding debt, the property, both tangible and
intangible, and the business of the Company conforms in all material respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus.
(vii) The Company (A) has paid all federal, state, local, and foreign taxes for
which it is liable, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of 1986, as
amended (the "Code"), and has furnished all information returns it is required
to furnish pursuant to the Code, (B) has established adequate reserves for such
taxes which are not due and payable, and (C) does not have any tax deficiency or
claims outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriter in connection with (A) the issuance by the Company of
the Securities, (B) the purchase by the Underwriter of the Public Offering
Securities, the Shares, the Public Warrants and the Warrant Shares and the
purchase by the Underwriter of the Underwriter's Warrants from the Company, (C)
the consummation by the Company of any of its obligations under this Agreement,
or (D) resales of the Securities in connection with the distribution
contemplated hereby.
(ix) The Company maintains insurance policies, including, but not limited to,
general liability, product liability and property insurance, which insures the
Company and its employees, against such losses and risks generally insured
against by comparable businesses. The Company (A) has not failed to give notice
or present any insurance claim with respect to any matter, including but not
limited to the Company's business, property or employees, under the insurance
policy or surety bond in a due and timely manner, (B) does not have any disputes
or claims against any underwriter of such insurance policies or surety bonds or
has not failed to pay any premiums due and payable thereunder, or (C) has not
failed to comply with all conditions contained in such insurance policies and
surety bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the company.
(x) There is no action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give rise to the same),
or involving the properties or business of the Company which (A) questions the
validity of the capital stock of the Company or this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement (as defined in Section
1(xxxiii) below) or of any action taken or to be taken by the Company pursuant
to or in connection with this Agreement, the Underwriter's Warrant Agreement, or
the Warrant Agreement, (B) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized in all material respects),
or (C) if adversely determined, might materially and adversely affect the
condition, financial or otherwise, or the business affairs or business
prospects, earnings, liabilities, prospects, stockholders' equity,
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<PAGE>
value, properties, business or assets of the Company.
(xi) The Company has full legal right, power and authority to authorize, issue,
deliver and sell the Securities, enter into this Agreement, the Underwriter's
Warrant Agreement and the Warrant Agreement and to consummate the transactions
provided for herein and therein; and each of this Agreement, the Underwriter's
Warrant Agreement and the Warrant Agreement have been duly and properly
authorized, executed and delivered by the Company. This Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement each constitute a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, and neither the Company's issue and sale
of the Securities or execution or delivery of this Agreement, the Underwriter's
Warrant Agreement and the Warrant Agreement or its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the certificate of
incorporation or by- laws of the Company, (B) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or which its properties or
assets (tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties, in each
case except for conflicts, breaches, violations, defaults, creations or
impositions which do not and would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, position,
shareholder's equity, value, operation, properties, business or results of
operations of the Company.
(xii) No consent, approval, authorization or order of, and no filing with, any
court, regulatory body, government agency or other body, domestic or foreign, is
required for the issuance of the Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Underwriter's Warrants, the
execution, delivery or performance of this Agreement, the Underwriter's Warrant
Agreement and the Warrant Agreement, and the transactions contemplated hereby
and thereby, including, without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue and/or
sale of any of the Securities, except such as have been or may be obtained under
the Act or may be required under state securities or Blue Sky laws in connection
with the Underwriter's purchase and distribution of the Securities and the
Underwriter's purchase of the Underwriter's Warrants to be sold by the Company
hereunder and thereunder.
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(xiii) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents and
statutes and regulations are accurate and fairly present the information
required to be shown with respect thereto by Form SB-2, and there are no
contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(xiv) Subsequent to the respective dates as of which information is set forth in
the Registration Statement and Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, the Company has not (A) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, (B) entered into any transaction other than in the ordinary
course of business, or (C) declared or paid any dividend or made any other
distribution on or in respect of its capital stock of any class, and there has
not been any change in the capital stock, or any change in the debt (long or
short term) or liabilities or material change in or affecting the business
affairs or prospects, management, stockholders' equity, properties, business,
financial operations or assets of the Company.
(xv) No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, installment
sale agreement, lease, deed of trust, voting trust agreement, stockholders
agreement, partnership agreement, note, loan or credit agreement, purchase
order, or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which the property
or assets (tangible or intangible) of the Company is subject or affected, which
default would have a material adverse effect on the condition, financial or
otherwise, earnings, business affairs, position, shareholder's equity, value,
operation, properties, business or results of operations of the Company. (xvi)
The Company has generally enjoyed a satisfactory employer-employee relationship
with its employees and is in compliance in all material respects with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. There are no pending investigations involving the Company, by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company and no
collective bargaining agreement or modification
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thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company. No labor dispute with the employees of the
Company exists, or, to the knowledge of the Company is imminent.
(xvii) Except as described in the Prospectus, the Company does not maintain,
sponsor or contribute to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multiemployer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA. No
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, which could subject the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is in
compliance with all material reporting, disclosure and other requirements of the
Code and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees, directors, stockholders,
or affiliates (within the meaning of the Rules and Regulations) of any of the
foregoing has taken or will take, directly or indirectly, any action designed to
or which has constituted or which might be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities
or otherwise.
(xix) None of the patents, patent applications, trademarks, service marks, trade
names and copyrights, and licenses and rights to the foregoing presently owned
or held by the Company are in dispute or are in any conflict with the right of
any other person or entity. The Company (i) owns or has the license or other
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, tradename, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(xx) The Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any trademark, service mark, trade
name or copyright or other intangible asset used or held for use by it in
connection with the conduct of its businesses which,
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singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition, financial or
otherwise, or the business affairs, position, properties, stockholder's equity,
financial operations or assets of the Company.
(xxi) The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus, to be owned or leased by it
free and clear of all liens, charges, claims, encumbrances, pledges, security
interest, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(xxii) Wiss & Company, LLP., Certified Public Accountants, whose report is filed
with the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(xxiii) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of its officers, directors or any
person or entity deemed to be an affiliate of the Company and any stockholders
of the Company has agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock (either pursuant to
Rule 144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than 18 months following the effective
date of the Registration Statement without the prior written consent of the
Underwriter and that any Common Stock which has been issued and is outstanding
on the effective date of the Registration Statement and is to be sold or
otherwise disposed of pursuant to such Rule 144 with the consent of the
Underwriter shall only be sold or otherwise disposed of through the Underwriter.
The Company will cause the Transfer Agent, as defined below, to mark an
appropriate legend on the face of stock certificates representing all of such
securities and to place "stop transfer" orders on the Company's stock ledgers.
(xxiv) There are no claims, payments, issuances, arrangements or understandings,
whether oral or written, for services in the nature of a finder's or origination
fee with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, or any of its officers, directors, stockholders, partners,
employees or affiliates that may affect the Underwriter' compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD") and
the Company is aware that the Underwriter and each of the Underwriter's shall
compensate any of their respective personnel who may have acted in such
capacities as they shall determine in their sole discretion.
(xxv) The Shares, the Common Stock and the Public Warrants have been approved
for quotation on the Nasdaq SmallCap Market.
(xxvi) Neither the Company, nor any of its officers, employees, agents or any
other person acting on behalf of the Company has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business)
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<PAGE>
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which (A)
might subject the Company, or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (B) if not given in the past, might have had a materially adverse
effect on the assets, business, operations or prospects of the Company, or (C)
if not continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(xxvii) Except as set forth in the Prospectus, no officer, director, or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any of
the foregoing persons or entities has or has had, either directly or indirectly,
(A) an interest in any person or entity which (1) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (2) purchases from or sells or furnishes to the Company any
goods or services, or (B) a beneficiary interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected. Except as
set forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, Principal Security Holder (as such term is
defined in the Prospectus) of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company and delivered to
the Underwriter or to Scheichet & Davis, P.C. ("Underwriter' Counsel") shall be
deemed a representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
(xxix) The minute books of the Company have been made available to the
Underwriter and contain a complete summary of all meetings and actions of the
directors and stockholders of the Company, since the time of its incorporation,
and reflects all transactions referred to in such minutes accurately in all
material respects.
(xxx) Except and to the extent described in the Prospectus, no holders of any
securities of the Company or of any options, warrants or other convertible or
exchangeable securities of the Company have the right to include any securities
issued by the Company in the Registration Statement or any registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company.
(xxxi) The Company has as of the effective date of the Registration Statement
(a) entered into employment agreements with Joseph Cutrona and John Wasko
providing for annual salaries of $100,000 and $80,000, respectively, each on
terms and conditions satisfactory to the Underwriter,
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and (ii) purchased "Key-Man" insurance on the life of Joseph Cutrona which names
the Company as the sole beneficiary on terms and conditions satisfactory to the
Underwriter.
(xxxii) The Company has entered into a warrant agreement with respect to the
Public Warrants, substantially in the form filed as Exhibit 4.2 to the
Registration Statement ("Warrant Agreement") with Continental Stock Transfer and
Trust Company in form and substance satisfactory to the Underwriter.
(xxxiii) Immediately prior to the effective date of the Registration Statement
there shall be no more than an aggregate of 3,280,594 shares of Common Stock
issued and outstanding (including 280,485 Shares of Common Stock held by
non-management members of the public). Except for the Underwriter's Warrants, an
option held by John Kelly to acquire 5,000 shares of Common Stock upon
conversion of a $10,000 promissory note, an option held by Jane Andrews to
acquire 10,000 shares of Common Stock upon conversion of a $20,000 promissory
note, options held by John Wasko to purchase 25,000 shares of the Company's
Common Stock at an exercise price of $.60 per share and 35,000 shares of the
Company's Common Stock at a price of $2.00 per share, an option held by Loeb
Holding Corp., as agent, to acquire up to 30% of the issued and outstanding
shares of Common Stock of the Company upon conversion of a $25,000 promissory
note, a warrant held by an unaffiliated equipment lessor to acquire 13,000
shares of Common Stock at an exercise price of $2.00 per share and 287,500 Class
A Redeemable Warrants to purchase shares of Common Stock to be issued to lenders
in the recent bridge financing of the Company, there are no securities with
equivalent rights as the Common Stock, Common Stock or such equivalent
securities, issuable upon the exercise of options, warrants and other contract
rights, or securities convertible directly or indirectly into Common Stock or
such equivalent securities issued or outstanding.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter, severally and
not jointly, agrees to purchase from the Company at a price of $4.50 per Share,
$.18 per Class A Warrant and $.09 per Class B Warrant, that number of Firm
Securities set forth above, subject to such adjustment as the Underwriter in its
sole discretion shall make to eliminate any sales or purchases of fractional
shares.
(b) In addition, on the basis of the representations, warranties, covenants and
agreements, herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriter to purchase all or
any part of an additional 135,000 Shares at a price of $4.50 per Share and
225,000 Class A Warrants and 135,000 Class B Warrants at a price of $.18 per
Class A Warrant and $.09 per Class B Warrant. The option granted hereby will
expire 45 days after the date the Registration Statement becomes effective and
may be exercised in whole or in part from time to time upon notice by the
Underwriter to the Company setting forth the number of Option Securities as to
which the several Underwriter are then exercising the option and the time and
date of payment and delivery for any such Option Securities. Any such time and
date of delivery (an
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"Option Closing Date") shall be determined by the Underwriter, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Date (hereinafter defined), unless otherwise
agreed upon by the Underwriter and the Company. Nothing herein contained shall
obligate the Underwriter to make any over-allotments. No Option Securities shall
be delivered unless the Firm Securities shall be simultaneously delivered or
shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates evidencing
the Firm Securities shall be made at the offices of R.D. White & Co., Inc. at 2
Broadway, New York, New York 10004, or at such other place as shall be agreed
upon by the Underwriter and the Company. Such delivery and payment shall be made
at 10:00 a.m. (New York City time) on , 1997 or at such other time and date as
shall be agreed upon by the Underwriter and the Company, but no less than three
(3) nor more than ten (10) full business days after the effective date of the
Registration Statement (such time and date of payment and delivery being herein
called "Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriter, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above mentioned office of the Underwriter or at such other place as shall be
agreed upon by the Underwriter and the Company on each Option Closing Date as
specified in the notice from the Underwriter to the Company. Delivery of the
certificates for the Firm Securities and the Option Securities if any, shall be
made to the Underwriter against payment by the Underwriter, severally and not
jointly, of the purchase price for the Firm Securities and the Option Securities
if any, to the order of the Company by New York Clearing House Funds. In the
event such option is exercised, the Underwriter shall purchase that number of
Option Securities then being purchased subject to such adjustments as the
Underwriter in its discretion shall make to eliminate any sales or purchases of
fractional shares. Certificates for the Firm Securities and the Option
Securities if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Underwriter may request in writing at least two (2) business days
prior to Closing Date or the relevant Option Closing Date, as the case may be.
The certificates for the Firm Securities and the Option Securities if any, shall
be made available to the Underwriter at such office or such other place as the
Underwriter may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date or the relevant Option
Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the Underwriter the
Underwriter's Warrants at a purchase price of $.0001 per warrant, which warrants
shall entitle the holders thereof to purchase an aggregate of 90,000 Shares and
150,000 Class A Warrants and 90,000 Class B Warrants. The Underwriter's Warrants
shall be exercisable for a period of four (4) years commencing one (1) year from
the Closing Date at a price of $6.00 per Share, $.24 per Class A Warrant and
$.12 per Class B Warrant. The Underwriter's Warrant Agreement and form of
Warrant Certificates with respect to each of the (i) Underwriter's Warrants to
purchase Shares and (ii) Underwriter's Warrants to purchase Public Warrants,
shall be substantially in the form filed as Exhibit 4.3 to the Registration
Statement. Payment for the Underwriter's Warrants shall be made on the Closing
Date.
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3. Public Offering of the Public Offering Securities. As soon after the
Registration Statement becomes effective as the Underwriter deems advisable, the
Underwriter shall make a public offering of the Firm Securities and such of the
Option Securities as it may determine (other than to residents of or in any
jurisdiction in which qualification of the Shares and Public Warrants are
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriter may from time to time increase or
decrease the public offering price after distribution of the Public Offering
Securities has been completed to such extent as the Underwriter, in its sole
discretion deems advisable. The Underwriter may enter into one or more
agreements as it Underwriter, in its sole discretion, deems advisable with one
or more broker-dealers who shall act as dealers in connection with such public
offering. Investors in the public offering will be required to purchase at least
one Share and one Public Warrant together or in multiples thereof. Such Public
Offering Securities will be immediately separable and tradeable upon issuance
and will not be registered or listed on any market or exchange for trading as
units.
4. Covenants and Agreements of the Company. The Company covenants and agrees
with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the Registration Statement
and any amendments thereto to become effective as promptly as practicable (such
Registration Statement to be in form and substance satisfactory to the
Underwriter and Underwriter's Counsel) and will not at any time, whether before
or after the effective date of the Registration Statement, file any amendment to
the Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Public
Offering Securities by the Underwriter of which the Underwriter shall not
previously have been advised and furnished with a copy, or to which the
Underwriter shall have objected or which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the Company
will advise the Underwriter and confirm by notice in writing, (i) when the
Registration Statement, as amended, becomes effective, if the provisions of Rule
430A promulgated under the Act will be relied upon, when the Prospectus has been
filed in accordance with said Rule 430A and when any post- effective amendment
to the Registration Statement becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening, of any
proceeding, suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution of
proceedings for that purpose (iii) of the issuance by the Commission or by any
state securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission; and (v) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If the
Commission or any state securities commission authority shall enter a stop order
or suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
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(c) The Company shall file the Prospectus (in form and substance satisfactory to
the Underwriter and Underwriter's Counsel) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424 (b)(1) (or, if applicable and if consented to by the Underwriter, pursuant
to Rule 424 (b)(47) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriter notice of its intention to file or
prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriter in connection with the offering of the Securities which differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Underwriter with copies of any such amendment or supplement
a reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file any such prospectus to which the Underwriter or
Underwriter' Counsel, shall reasonably object.
(e) The Company shall take all action, in cooperation with the Underwriter, at
or prior to the time the Registration Statement becomes effective, to qualify
the Public Offering Securities for offering and sale under the securities laws
of such jurisdictions as the Underwriter may designate to permit the continuance
of sales and dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and furnish
such information as may be required for such purpose; provided, however, the
Company shall not be required to qualify as a foreign corporation or file a
general or limited consent to service of process in any such jurisdiction. In
each jurisdiction where such qualification shall be effected, the Company will,
unless the Underwriter agrees that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification. It is agreed that Underwriter's
Counsel (or its designees) shall perform all such required Blue Sky legal
services.
(f) During the time when a prospectus is required to be delivered under the Act,
the Company shall use all reasonable efforts to comply with all requirements
imposed upon it by the Act and the Exchange Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the reasonable opinion of counsel for the Company or
Underwriter' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act and
the Rules and Regulations, the Company will notify the Underwriter promptly and
prepare
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and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
satisfactory to Underwriter' Counsel, and the Company will furnish to the
Underwriter copies of such amendment or supplement as soon as available and in
such quantities as the Underwriter may request.
(g) As soon as practicable, but in any event not later than 45 days after the
end of the 12- month period beginning on the day after the end of the fiscal
quarter of the Company during which the effective date of the Registration
Statement occurs (90 days in the event that the end of such fiscal quarter is
the end of the Company's fiscal year), the Company shall make generally
available to its security holders, in the manner specified in Rule 158(b) of the
Rules and Regulations, and to the Underwriter, an earnings statement which will
be in the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(i) concurrently with furnishing such quarterly reports to its stockholders,
statements of income of the Company for each quarter in the form furnished to
the Company's stockholders and certified by the Company's principal financial or
accounting officer;
(ii) concurrently with furnishing such annual reports to its stockholders, a
balance sheet of the Company as at the end of the preceding fiscal year,
together with statements of operations, stockholders' equity, and cash flows of
the Company for such fiscal year, accompanied by a copy of the certificate
thereon of independent certified public accountants; (iii) as soon as they are
available, copies of all reports (financial or other) mailed to
stockholders;
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any securities
exchange;
(v) every press release and every material news item or article of interest to
the financial community in respect of the Company or its affairs which was
released or prepared by or on behalf of the Company; and
(vi) any additional information of a public nature concerning the Company (and
any future subsidiaries) or its businesses which the Underwriter may reasonably
request.
During such seven-year period, if the Company has active subsidiaries, the
foregoing financial
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statements will be on a consolidated basis to the extent that the accounts of
the Company and its subsidiaries are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(i) The Company will maintain a Transfer Agent, counsel, accounting firm,
financial printer and, if necessary under the jurisdiction of incorporation of
the Company, a Registrar (which may be the same entity as the Transfer Agent)
for its Public Offering Securities, Common Stock and Public Warrants all of whom
shall be reasonably acceptable to the Underwriter (it being agreed that the
Company's current financial printer and the Transfer Agent, counsel and
accounting firm described in the Prospectus are acceptable to the Underwriter).
Such Transfer Agent shall, for a period of five years following the Closing
Date, deliver to the Underwriter the monthly securities position of the
Company's stockholders of record.
(j) The Company will furnish to the
Underwriter or on the Underwriter's order, without charge, at such place as the
Underwriter may designate, copies of each Preliminary Prospectus, the
Registration Statement any pre-effective or post-effective amendments thereto
(two of which copies will be signed and will include all financial statements
and exhibits), the Prospectus, and all amendments and supplements thereto,
including any Prospectus prepared after the effective date of the Registration
Statement, in each case as soon as available and in such quantities as the
Underwriter may reasonably request.
(k) On or before the effective date of the Registration Statement, the Company
shall provide the Underwriter with true copies of duly executed, legally binding
and enforceable agreements pursuant to which for a period of not less than 18
months after the effective date of the Registration Statement, each holder of
securities issued by the Company and outstanding at the effective date of the
Registration Statement (including securities convertible into Common Stock of
the Company, but excluding 333,216 shares of Common Stock held by Steven E.
Pollan, 200,000 shares of Common Stock held by Loeb Holding Corporation, as
escrow agent, and 280,485 shares of Common Stock held by non-management members
of the public) agrees that it or he or she will not, directly or indirectly,
issue, offer to sell, sell, grant an option for the sale of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any of such securities
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Underwriter (collectively, the "Lock-up Agreements"). The Lock-up Agreements
shall also provide that any such securities that may be sold pursuant to Rule
144 (with the Underwriter's consent) shall be executed through the Underwriter.
The commission for any such open market transactions shall not exceed 5% and the
sales price shall be reasonably related to the market. During the three year
period commencing with the effective date of the Registration Statement, the
Company shall not, without the prior written consent of the Underwriter, sell,
contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any debt security of the Company
or any shares of Common Stock or any issue of preferred stock of the Company, or
any options, rights or warrants with respect to any shares of Common Stock or
any issue of preferred stock of the Company, (other than upon exercise of the
Underwriter's Warrants). On or before the Closing Date, the Company shall
deliver instructions to
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the Transfer Agent authorizing it to place appropriate legends on the
certificates representing the securities subject to the Lock-up Agreement and to
place appropriate stop transfer orders on the Company's ledgers.
(l) Neither the Company, nor any of its officers, directors, stockholders or
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the Securities in
the manner, and subject to the conditions, set forth under "Use of Proceeds" in
the Prospectus. No portion of the net proceeds will be used, directly or
indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or other documents as
may be required (including, but not limited to, a Form SR as may be required
pursuant to Rule 463 under the Act) from time to time, under the Act, the
Exchange Act and the Rules and Regulations, and all such reports, forms and
documents filed shall comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and the Rules and Regulations.
(o) The Company shall furnish to the Underwriter as early as practicable prior
to each of the date hereof, the Closing Date and each Option Closing Date, if
any, but no later than two (2) full business days prior thereto, a copy of the
latest available unaudited interim financial statements of the Company (which in
no event shall be as of a date more than thirty (30) days prior to the date of
the Registration Statement) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
Section 6(j) hereof.
(p) The Company shall cause the Shares, the Common Stock and the Public Warrants
to be listed on the Nasdaq SmallCap Market and, upon the request of the
Underwriter after the completion of the offering and provided the Company then
meets the then current listing requirements, to be listed on the BSE, and for a
period of five (5) years from the date hereof, use its best efforts to maintain
such listings of the Shares, the Common Stock and the Public Warrants to the
extent outstanding.
(q) For a period of five (5) years from the Closing Date, the Company shall
furnish to the Underwriter at the Underwriter's request and at the Company's
sole expense, the list of holders of all of the Company's securities. The
Company shall also instruct Depository Trust Company ("DTC") to send to the
Underwriter a copy of the securities positions of all of the security holders of
the Company on DTC's records on a weekly basis for a period of three (3)
calendar months following the effective date, on a monthly basis for a period of
three (3) years following the effective date and, in addition thereto, as
frequently as may be reasonably requested by the Underwriter,
(r) The Company shall as soon as practicable, (i) but in no event more than five
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission
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providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than 30 days from the
effective dated of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions or Moody's Manual in order to satisfy the requirements for "manual
execmption" in those states where available and to maintain such inclusion
for as long as the Securities are outstanding.
(s) Until the completion of the distribution of the Securities, the Company
shall not without the prior written consent of the Underwriter and Underwriter's
Counsel, issue, directly or indirectly any press release or other communication
or hold any press conference with respect to the Company or its activities or
the offering contemplated hereby, other than trade releases issued in the
ordinary course of the Company's business consistent with past practices with
respect to the Company's operations.
(t) For a period of three (3) years after the effective date of the Registration
Statement, the Underwriter shall have the right to designate, one (1) individual
for election to the Company's Board of Directors ("Board") and the Company shall
cause such individual to be elected to the Board (provided such person is
reasonably qualified and is not an officer, director, employee or principal of
the Underwriter). In the event the Underwriter shall not have designated such
individual at the time of any meeting of the Board or such person is unavailable
to serve, or at the end of the period of three (3) years, the Company shall
notify the Underwriter of each meeting of the Board and an individual designated
by the Underwriter shall be permitted to attend all meetings of the Board and to
receive all notices and other correspondence and communications sent by the
Company to members of the Board for a period of three (3) years after the
effective date. Such individual shall be reimbursed for all actual out-of-pocket
expenses incurred in connection with his or her service on, or attendance at
meetings of, the Board. The Company shall provide its outside directors with
compensation in the form of cash and/or options on its Common Stock as deemed
appropriate and customary for similar companies.
(u) The Company, for a period of three (3) years from the effective date of the
Registration Statement, will consult, and will cause such present or future
subsidiaries to consult with the Underwriter with regard to any such offering or
placement and will offer, or cause any of its present or future subsidiaries to
offer, to the Underwriter the opportunity, on terms not more favorable to the
Company or such present or future subsidiary than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriter fails to accept in
writing such proposal made by the Company or any of its present or future
subsidiaries within fifteen business days after receipt of a notice containing
such notice, then the Underwriter shall have no further claim or right with
respect to the proposal contained in such notice. If, thereafter, such proposal
is materially modified, the Company shall again consult, and cause each present
or future subsidiary to consult, with the Underwriter in connection with such
modification and shall in all respects have the same obligations and adopt the
same procedures with respect to such proposal as are provided hereinabove with
respect to the original proposal.
(v) For a period equal to the lesser of (i) seven (7) years from the date
hereof, and (ii) the date
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<PAGE>
of the sale to the public of the securities issuable upon exercise of the
Underwriter's Securities, the Company will not take any action or actions which
may prevent or disqualify the Company's use of any form otherwise available for
the registration under the Act of the securities issuable upon exercise of the
Underwriter's Securities.
(w) Commencing one year from the date hereof, the Company shall pay the
Underwriter a commission equal to four percent (4%) of the exercise price of the
Public Warrants, payable on the date of the exercise thereof on terms provided
for in the Warrant Agreement. The Company will not solicit the exercise of the
Public Warrants other than through the Underwriter and will not authorize any
other dealer or engage in such solicitation without the Underwriter's prior
written consent.
(x) The Company agrees that, for a period of seven (7) years from the date of
the closing of the public offering of the shares of the Public Offering
Securities (the "Closing"), if the Company intends to file a Registration
Statement or Statements for the public sale of securities for cash (other than a
Form S-8, Form S-4 or comparable Registration Statement), it will notify all of
the holders of the Underwriter's Securities and if so requested it will include
therein material to permit a public offering of the Representative's Securities
at the expense of the Company (excluding fees and expenses of the holder's
counsel and any underwriting or selling commissions), In addition, for a period
of five (5) years from the Closing, upon the written demand of holder(s)
representing a majority of the Representative's Securities, the Company agrees,
on one occasion, to promptly register the Representative's Securities at the
expense of the Company (excluding fees and expenses of the holder's counsel and
any underwriting or selling commissions).
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and the Option
Closing Date (to the extent not paid at the Closing Date) all expenses and fees
(other than fees of Underwriter' Counsel, except as provided in (iv) below)
incident to the performance of the obligations of the Company under this
Agreement, the Underwriter's Warrant Agreement and the Warrant Agreement
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriter and
such dealers as the Underwriter may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the Securities,
including, but not limited to, (x) the purchase by the Underwriter of the
Securities and the purchase by the Underwriter of the Underwriter's Warrants
from the Company, (y) the consummation by the Company of any of its obligations
under this Agreement, the Underwriter's Warrant Agreement, and the Warrant
Agreement, and (z) resale of the Securities by the Underwriter
19
<PAGE>
in connection with the distribution contemplated hereby, (iv) the qualification
of the Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum", the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
provided, however, that the Company's obligation with respect to such "Blue Sky"
fees and disbursement of counsel shall not exceed $30,000 (v) advertising costs
and expenses, including but not limited to costs and expenses in connection with
the "road show", information meetings and presentations, bound volumes and
prospectus memorabilia, tombstones in the Wall Street Journal and other
appropriate publications, (vi) costs, fees and expenses in connection with due
diligence investigations, including but not limited to the costs of background
checks on key management and/or personnel of the Company and the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent, warrant agent, escrow agent, if any, financial public relations
firm, if any, and registrar, if any, (viii) the costs of applications and
listings in securities manuals such as Standard & Poors and Moodys, (ix) the
fees payable to the Commission, Nasdaq and the NASD, and (x) the fees and
expenses incurred in connection with the listing of the Securities on the Nasdaq
SmallCap Market, the BSE and any other exchange.
(b) If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter' Counsel (and in
addition to fees and expenses of Underwriter's Counsel incurred pursuant to
Section 5(a)(iv) above for which the Company shall remain liable), provided,
however, that in the event of a termination pursuant to Section 10(a) hereof
such obligation of the Company shall not exceed $50,000.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Underwriter on
the Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein
a non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Firm Securities. In the
event the Underwriter elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Underwriter on
each Option Closing Date (by certified or bank cashier's check or, at the
Underwriter's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the relevant Option
Securities.
(d) The Underwriter shall not be responsible for any expense of the Company or
others or for any charge or claim related to the offering contemplated by
hereunder in the event that the sale of the Securities as contemplated hereunder
is not consummated, except for the fees and disbursements of Underwriter's
Counsel. 6. Conditions of the Underwriter' Obligations. The obligations of the
Underwriter
6. Conditions of the Underwriter' Obigations. The obligations of the
Underwriter
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<PAGE>
hereunder shall be subject to the continuing accuracy of the representations and
warranties of the Company herein as of the date hereof and as of the Closing
Date and each Option Closing Date, if any, as if they had been made on and as of
the Closing Date or each Option Closing Date, as the case may be; the accuracy
on and as of the Closing Date or Option Closing Date, if any, of the statements
of the officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement, which shall be in form and substance
satisfactory to the Underwriter and Underwriter's Counsel, shall have become
effective no later than 12:00 p.m., New York time, on the date of this Agreement
or such later date and time as shall be consented to in writing by the
Underwriter, and, at the Closing Date and each Option Closing Date, if any, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Underwriter's Counsel. If the Company has elected
to rely upon Rule 430A of the Rules and Regulations, the price of the Public
Offering Securities and any price-related information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and prior to the Closing Date
the Company shall have provided evidence satisfactory to the Underwriter of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the Registration
Statement, or any amendment thereto, contains an untrue statement of fact which,
in the Underwriter's opinion, is material, or omits to state a fact which, in
the Underwriter's opinion, is material and is required to be stated therein or
is necessary to make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Underwriter's opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. (c) On or prior to the
Closing Date, the Underwriter shall have received from Underwriter's
Counsel, such opinion or opinions with respect to the organization of the
Company, the validity of the Securities, the Underwriter's Warrants, the
Registration Statement, the Prospectus and other related matters as the
Underwriter may request and Underwriter's Counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriter shall have received the favorable
opinion of McLaughlin & Stern, LLP, counsel to the Company, dated the Closing
Date, addressed to the Underwriter and in form and substance satisfactory to
Underwriter's Counsel, to the effect that:
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(i) the Company (A) has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction, and (B) has all
requisite corporate power and authority, and has obtained any and all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing; to such counsel's knowledge, the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely affect the
business, operations, condition, financial or otherwise, or the earnings,
business affairs or prospects, properties, business, assets or results of
operations of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and regulations
on the Company's business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(ii) to such counsel's knowledge, the Company does not own an equity interest in
any other corporation, partnership, joint venture, trust or other business
entity other than as described in the Prospectus;
(iii) the Company has a duly authorized, issued and outstanding capitalization
as set forth in the Prospectus, and any amendment or supplement thereto, under
"Description of Securities" and "Certain Transactions," and, to such counsel's
knowledge, after due inquiry, the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Underwriter's Warrant Agreement, the Warrant Agreement and as described in
the Prospectus. The Securities, and all other securities issued or issuable by
the Company, conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability
under the laws of the State of New Jersey as currently in effect by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company. The Securities
to be sold by the Company hereunder and under the Underwriter's Warrant
Agreement are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
22
<PAGE>
The Public Warrants and the Underwriter's Warrants constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
therefore the number and type of securities of the Company called for thereby.
Upon the issuance and delivery pursuant to this Agreement of the Securities to
be sold by the Company, the Underwriter and the Underwriter will acquire good
and marketable title to the Securities free and clear of any pledge, lien,
charge, claim, encumbrance, pledge, security interest, or other restriction or
equity of any kind whatsoever. No transfer tax is payable by or on behalf of the
Underwriter in connection with (A) the issuance by the Company of the
Securities, (B) the purchase by the Underwriter and the Underwriter of the
Securities from the Company, (C) consummation by the Company of any of its
obligations under this Agreement, or (D) resales of the Securities in connection
with the distribution contemplated hereby.
(iv) the Registration Statement is effective under the Act, and, if applicable,
filing of all pricing information has been timely made in the appropriate form
under Rule 430A, and, to such counsel's knowledge, after due inquiry no stop
order suspending the use of the Preliminary Prospectus, the Registration
Statement or Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending, threatened or contemplated
under the Act;
(v) each of the Preliminary Prospectus, the Registration Statement, and the
Prospectus and any amendments or supplement thereto (other than the financial
statements and other financial and statistical data included therein, as to
which no opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations. (vi) to the best
of such counsel's knowledge, (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration Statement other than
those described in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as exhibits thereto,
and the exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party or by which it is
bound, including any document to which the Company is a party or by which it is
bound, incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate in all material respects and fairly represent
the information required to be shown under the Act and the Rules and Regulations
of the Commission thereunder; (C) except as disclosed in the Prospectus, there
is not pending or threatened against the Company any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, governmental or other proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which (1) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects), (2) questions the validity of the capital stock
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<PAGE>
of the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be described in
the Prospectus is not described as required; and (E) except as disclosed in the
Prospectus, there is no action, suit or proceeding pending, or threatened,
against or affecting the Company before any court or arbitrator or governmental
body, agency or official (or any basis thereof known to such counsel) in which
an adverse decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company, could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement, the
Underwriter's Warrant Agreement or the Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement, the
Underwriter's Warrant Agreement or the Warrant Agreement;
(vii) the Company has full legal right, power and authority to enter into this
Agreement, the Underwriter's Warrant Agreement and the Warrant Agreement and to
consummate the transactions provided for therein; and this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement has been duly
authorized, executed and delivered by the Company. This Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement assuming due
authorization, execution and delivery by each other party hereto and thereto
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and neither the Company's execution or delivery of
this Agreement, the Underwriter's Warrant Agreement and the Warrant Agreement,
its performance hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company, (B) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (C) any statute, judgment, decree, order, rule
or regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties, except for conflicts, breaches, violations,
defaults, creations or impositions which do not and would not have a material
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs, position, shareholder's equity, value, operations,
24
<PAGE>
properties, business or results of operations of the Company.
(viii) except as described in the Prospectus, no consent, approval,
authorization or order, and no filing with, any court, regulatory body,
government agency or other body (other than such as may be required under Blue
Sky laws, as to which no opinion need be rendered) is required in connection
with the issuance of the Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Underwriter's Warrants, the
performance of this Agreement, the Underwriter's Warrant Agreement and the
Warrant Agreement and the transactions contemplated hereby and thereby;
(ix) the Company is not in breach of, or in default under, any term or provision
of any license, contract, indenture, mortgage, installment sale agreement, deed
of trust, lease, voting trust agreement, stockholders' agreement, partnership
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which the property or assets (tangible or intangible) of the Company is
subject or affected, which could materially adversely affect the Company; and
the Company is not in violation of any term or provision of its Certificate of
Incorporation or By-Laws, or in violation of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation the result of which would
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, position, shareholders' equity, value operation,
properties, business or results of operations of the Company.
(x) the Company owns or possesses, free and clear of all liens or encumbrances
and rights thereto or therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses necessary to conduct its
business (including, without limitation any such licenses or rights described in
the Prospectus as being owned or possessed by the Company), and to the best of
such counsel's knowledge after reasonable investigation, there is no claim or
action by any person pertaining to, or proceeding, pending, or threatened, which
challenges the exclusive rights of the Company with respect to any trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications and licenses used in the conduct of the Company's business
(including, without limitations, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company).
(xi) the Company does not maintain, sponsor, or contribute to any ERISA Plans or
defined benefit plans, as defined in Section 3(35) of ERISA,
(xii) the Company's Registration Statement on Form 8-A under the Exchange Act
has become effective.
(xiii) such counsel has no information leading it to believe that the persons
listed under the caption "Principal Stockholders" in the Prospectus are not the
respective "beneficial owners" (as such phrase is defined in regulation 13d-3
under the Exchange Act) of the securities set forth
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opposite their respective names thereunder as and to the extent set forth
therein;
(xiv) to such counsel's knowledge, except as described in the Prospectus, no
person, corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration statement
or, if filed, to include any security in such registration statement;
(xv) to such counsel's knowledge, except as described in the Prospectus, there
are no claims, payments, issuances, arrangements or understandings for services
in the nature of a finder's or origination fee with respect to the sale of the
Public Offering Securities hereunder or the financial consulting arrangement
between the Underwriter and the Company, if any, or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriter' compensation, as determined by the NASD;
(xvi) the Lock-up Agreements are legal, valid and binding obligations of the
parties thereto, enforceable against each such party and any subsequent holder
of the securities subject thereto in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable); and
(xvii) all action under the Act necessary to make the public offering and
consummate the sale of the Securities as provided in this Agreement has been
taken by the Company. The provisions of the Certificate of Incorporation and
By-laws of the Company comply as to form in all material respects with the Act
and the Rules and Regulations.
Such counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Company and representatives of the
independent public accountants for the Company, at which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which
leads counsel to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became effective
or the Preliminary Prospectus or Prospectus or amendment or supplement thereto
as of the date of such opinion contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of
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laws other than the laws of the United States and jurisdictions in which they
are admitted, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriter's Counsel) of other counsel acceptable to
Underwriter's Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriter's Counsel if requested. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form satisfactory
to such counsel and that the Underwriter and they are justified in relying
thereon.
At each Option Closing Date, if any, the Underwriter shall have received the
favorable opinion of McLaughlin & Stern, LLP, counsel to the Company, dated the
Option Closing Date, addressed to the Underwriter and in form and substance
satisfactory to Underwriter's Counsel confirming as of such Option Closing Date
the statements made in its opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option Closing Date, if any,
Underwriter's Counsel shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in subsection (c) of this Section 6,
or in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or covenants of the Company herein contained.
(f) Prior to each of Closing Date and each Option Closing Date, if any, (i)
there shall have been no adverse change nor development involving a prospective
change in the condition, financial or otherwise, prospects, stockholders' equity
or the business activities of the Company, whether or not in the ordinary course
of business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, (iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness; (iv) the Company shall not
have issued any securities (other than the Securities) or declared or paid any
dividend or made any distribution in respect of its capital stock of any class
and there shall not have been any change in the capital or any change in the
debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise); (v) no material amount of the assets of the Company
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus (vi) no action, suit or proceeding, at law or in
equity, shall have been pending or threatened (or circumstances giving rise to
same) against the Company, or affecting any of its properties or business before
or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
adversely affect the business, operations, management prospects or financial
condition or assets of the Company, except as set forth in the Registration
Statement and Prospectus: and (vii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
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(g) At each of the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received a certificate of the principal executive officer
and the chief financial or chief accounting officer of the Company, dated the
Closing Date or Option Closing Date, as the case may be, to the effect that each
of such persons has carefully examined the Registration Statement, the
Prospectus and this Agreement, and that:
(i) The representations and warranties in this Agreement of the Company are true
and correct, as if made on and as of the Closing Date or the Option Closing
Date, as the case may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on its part
to be performed or satisfied at or prior to such Closing Date or Option Closing
Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration Statement or
any part thereof has been issued, and no proceedings for that purpose have been
instituted or are pending or, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any, each amendment
and each supplement thereto, contain all statements and information required to
be included therein, and none of the Registration Statement, the Prospectus nor
any amendment or supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Since the dates as of which information is given in the Registration
Statement and the Prospectus, (A) there has not been any material change in the
shares of Common Stock or liabilities of the Company except as set forth in or
contemplated by the Prospectus; (B) there has not been any material adverse
change in the general affairs, management, business, financial condition or
results of operations of the Company, whether or not arising from transactions
in the ordinary course of business, as set forth in or contemplated by the
Prospectus; (C) the Company has not sustained any material loss or interference
with its business from any court or from legislative or other governmental
action, order or decree, whether foreign or domestic, or from any other
occurrence, not described in the Registration Statement and Prospectus; (D)
there has not occurred any event that makes untrue or incorrect in any material
respect any statement or information contained in the Registration Statement or
Prospectus or that is not reflected in the Registration Statement or Prospectus
but should be reflected therein in order to make the statements or information
therein, in light of the circumstances in which they were made, not misleading
in any material respect; (E) the Company has not incurred up to and including
the Closing Date or the Option Closing Date, as the case may be, other than in
the ordinary course of its business, any material liabilities or obligations,
direct or contingent; (F) the Company has not paid or declared any dividends or
other distributions on its capital stock; (G) the Company has not entered into
any transactions not in the ordinary course of business; (H) there has not been
any change in the capital stock or long-term debt
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or any increase in the short-term borrowings (other than any increase in the
short-terms borrowings in the ordinary course of business) of the Company; (I)
the Company has not sustained any material loss or damage to its property or
assets, whether or not insured; and (J) there has occurred no event required to
be set forth in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriter will have received clearance from the
NASD as to the amount of compensation allowable or payable to the Underwriter,
as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter shall have received
a letter, dated such date, addressed to the Underwriter in form and substance
satisfactory (including the non- material nature of the changes or decreases, if
any, referred to in clause (iii) below) in all respects to the Underwriter and
Underwriter's Counsel, from Wiss & Company, LLP:
(i) confirming that they are independent accountants with respect to the Company
within the meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial statements of the
Company included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriter may rely upon the opinion of
Wiss & Company, LLP, with respect to the financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which included a reading of
the latest available unaudited interim financial statements of the Company (with
an indication of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the boards of directors of the
Company, consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified procedures
and inquiries, nothing has come to their attention which would lead them to
believe that (A) the unaudited financial statements, if any, of the Company
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there has been any
change in the capital stock or long- term debt of the Company, or any decrease
in the stockholders' equity or net current assets or net assets of the Company
as compared with amounts shown in the September 30, 1996 balance sheet included
in the Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or
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decrease;
(iv) setting forth, at a date not later than five (5) days prior to the date of
the Registration Statement, the amount of liabilities of the Company (including
a breakdown of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement;
(vi) stating that they have in addition carried out certain specified
procedures, not constituting an audit, with respect to certain pro forma
financial information which is included in the Registration Statement and the
Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information;
(vii) stating that they have not during the immediately preceding five (5) year
period brought to the attention of any of the Company's management any
"weakness," as defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit," in any of the
Company's internal controls; and
(viii) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriter may request.
(j) On or prior to the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received from Wiss & Company, LLP, a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (i) of this Section, except that the specified date in the referred
to shall be a date not more than five days prior to the Closing Date or the
Option Closing Date, as the case may be, and, if the Company has elected to rely
on Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (i) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Underwriter and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
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(k) On each of Closing Date and Option Closing Date, if any, there shall have
been duly tendered to the Underwriter for the several Underwriter's accounts the
appropriate number of Securities.
(l) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriter pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(m) On or before Closing Date, the Shares, the Common Stock and the Public
Warrants shall have been approved for quotation on the Nasdaq SmallCap Market
and shall have been authorized upon official notice of issuance for trading on
the BSE.
(n) On or before Closing Date, there shall have been delivered to the
Underwriter the Lock- up Agreements, in form and substance satisfactory to the
Underwriter.
(o) On or before the Closing Date, the Company shall have executed the
Underwriter's Warrant Agreement and the Warrant Agreement together with the
applicable Warrant Certificates, each in form and substance satisfactory to the
Underwriter.
(p) On or before the Closing Date the Underwriter shall have received executed
copies of the employment agreements and insurance policies referred to in
Section 1 (a) (xxxi) hereof, each to the satisfaction of the Underwriter.
If any condition to the Underwriter's obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Underwriter may terminate this Agreement or, if
the Underwriter so elects, it may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the Underwriter
(for purposes of this Section 7 "Underwriter" shall include the officers,
directors, partners, employees, agents and counsel of the Underwriter, including
specifically each person who may be substituted for an Underwriter as provided
in Section 11 hereof), and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act, or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any
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Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any time new registration statement and prospectus in which is
included securities of the Company issued or issuable upon exercise of the
Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called "Application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any securities commission or agency,
Nasdaq, the BSE or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any Application, as the case may be. The indemnity agreement in this subsection
(a) shall be in addition to any liability which the Company may have at common
law or otherwise.
(b) the Underwriter agrees to indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the Registration Statement,
and each other person, if any, who controls the Company within the meaning of
the Act, to the same extent as the foregoing indemnity from the Company to the
Underwriter but only with respect to statements or omissions, if any, made in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any Application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to the Underwriter by such Underwriter expressly for use in
such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such Application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriter in connection with this
offering. The Company acknowledges that the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriter expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect
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by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party. Notwithstanding
the foregoing, the indemnified party or parties shall have the right to employ
its or their own counsel in any such case but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in which
(i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriter are the indemnified party, the relative benefits received by
the Company, on the one hand, and the Underwriter, on the other, shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Public Offering Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriter hereunder, in each case as
set forth in the table in the cover page of the Prospectus. Relative fault shall
be determined by reference to, among other
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things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, or by the Underwriter, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to above in this subdivision (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subdivision (d) the Underwriter
shall not be required to contribute any amount in excess of the underwriting
discount applicable to the Securities purchased by the Underwriter hereunder. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Company within the meaning of the Act,
each officer of the Company who has signed the Registration Statement, and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to this subparagraph (d), Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto shall be
deemed to be representations, warranties and agreements at the Closing Date and
any Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity agreements
contained in Section 7 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and deliver of the
Securities to the Underwriter and the Underwriter, as the case may be, for a
period of seven (7) years from the date hereof, except for Section 4(v), in
which case the period shall be eight (8) years.
9. Effective Date. This Agreement shall become effective at 10:00 a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Underwriter, in it's discretion, shall release the Securities for the sale to
the public; provided, however, that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter
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for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Underwriter shall have the
right to terminate this Agreement, (i) if any domestic or international event or
act or occurrence has disrupted, or in the Underwriter's opinion will in the
immediate future disrupt the financial markets; or (ii) any material adverse
change in the financial markets shall have occurred; or (iii) if trading on the
New York Stock Exchange, the American Stock Exchange, or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (v) if a
banking moratorium has been declared by a state or federal authority; or (vi) if
a moratorium in foreign exchange trading has been declared; or (vii) if the
Company, shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Underwriter's opinion, make it inadvisable to proceed with the delivery
of the Securities; or (vii) if there shall have been such a material adverse
change in the condition (financial or otherwise), business affairs or prospects
of the Company, whether or not arising in the ordinary course of business, which
would render, in the Underwriter's judgment, either of such parties unable to
perform satisfactorily its respective obligations as contemplated by this
Agreement or the Registration Statement, or such material adverse change in the
general market, political or economic conditions, in the United States or
elsewhere as in the Underwriter's judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 10(a), the Company shall promptly reimburse and indemnify
the Underwriter for all of its actual out-of-pocket expenses, including the fees
and disbursements of counsel for the Underwriter in an amount not to exceed
$50,000 (less amounts previously paid pursuant to Section 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Underwriter, by reason of any failure on the
part of the Company to perform an undertaking or satisfy any condition of this
Agreement to be performed or satisfied by the Company (including, without
limitation, pursuant to Section 6 or Section 12) then, the Company shall
promptly reimburse and indemnify the Underwriter for all of its actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriter (less amounts previously paid pursuant to Section 5 (c) above). In
addition, the Company shall remain liable for all Blue Sky counsel fees and
expenses and Blue Sky filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections
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6, 10, 11 and 12 hereof), and whether or not this Agreement is otherwise carried
out, the provisions of Section 5 and Section 7 shall not be in any way affected
by such election or termination or failure to carry out the terms of this
Agreement or any part hereof.
11. Omitted
12. Default by the Company. If the Company shall fail at the Closing Date or any
Option Closing Date, as applicable, to sell and deliver the number of Public
Offering Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on any Option Closing Date, the
Underwriter may at the Underwriter's option, by notice from the Underwriter to
the Company, terminate the Underwriter's obligation to purchase Option
Securities from the Company on such date) without any liability on the part of
any non-defaulting party other than pursuant to Section 5, Section 7 and Section
10 hereof. No action taken pursuant to this Section shall relieve the Company
from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at 950 Third Avenue - 3rd Floor, New York, New York 10022,
Attention: Mr. John Piscopo, President, with a copy to Scheichet & Davis, P.C.,
505 Park Avenue, New York, NY 10022, Attention: William J. Davis, Esq. Notices
to the Company shall be directed to the Company at 2401 Morris Avenue, 3rd
Floor, Union, New Jersey 07083, Attn: Joseph Cutrona, President, with a copy to
McLaughlin & Stern, LLP, 260 Madison Avenue, New York, NY 10016, Attention:
David W. Sass, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal Underwriter and assigns and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York without giving effect to
the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which taken together
shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement, the Underwriter's Warrant
Agreement and the Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all
36
<PAGE>
prior written or oral agreements, understandings and negotiations with respect
to the subject matter hereof. This Agreement may not be amended except in a
writing, signed by the Underwriter and the Company.
If the foregoing correctly sets forth the understanding between the Underwriter
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
GENISYS RESERVATION SYSTEMS, INC.
By: Joseph Cutrona, President
Confirmed and accepted as of
the date first above written
R.D. White & Co., Inc.
By: Louis Pagano, Chairman
<PAGE>
Exhibit 1.2
GENISYS INFORMATION SYSTEMS, INC.
SELECTED DEALER AGREEMENT
New York, New York
, 1997
Dear Sirs:
1. We, as the Underwriter named in the Prospectus relating to the above company
(the "Underwriter"), are offering for sale an aggregate of 900,000 shares of
Common Stock, par value $0.0001 per share (the "Shares") and 2,400,000
Redeemable Common Stock Purchase Warrants (the "Public Warrants") of Genisys
Information Systems, Inc. (the "Company"), comprised of 1,500,000 Class A
Redeemable Warrants (the "Class A Warrants") and 900,000 Class B Redeemable
Warrants (the "Class B Warrants") (the Shares and Public Warrants are
collectively referred to as the "Firm Securities"). Each Public Warrant is
exercisable from , 1997 until , 2001. Each Class A Warrant will have an initial
exercise price of $5.75 for one (1) share of Common Stock, and each Class B
Warrant shall have an initial exercise price of $6.75 for one (1) share of
Common Stock. In addition, we, as Underwriter, have been granted an option to
purchase from the Company up to an additional 135,000 Shares and/or 225,000
Class A Warrants and 135,000 Class B Warrants (the "Option Securities") for the
purpose of covering over-allotments, if any, in the sale of the Firm Securities.
The terms under which the Firm Securities and any Option Securities are to be
offered for sale are more particularly described in the Prospectus.
2. The Shares and Public Warrants are to be offered to the public at the
prices set forth on the cover page of the Prospectus (the "Public Offering
Prices"), in accordance with the terms of offering thereof set forth in the
Prospectus.
3. We are offering, subject to the terms and conditions hereof, a portion
of the Shares and Public Warrants for sale to certain dealers who are
actually engaged in the investment banking or securities business and who
are either (i) members in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or (ii) dealers with their principal
places of business located outside the United States, its territories and
its possessions and not registered as brokers or dealers under the
Securities Exchange Act of 1934, as amended (the " 1934 Act"), who have
agreed not to make any sales within the United States, its territories and
its possessions or to persons who are nationals thereof or residents
therein (such dealers who shall agree to purchase Shares and Public
Warrants hereunder being herein called "Selected Dealers"), at the Public
Offering Price, less a selling concession (which may be changed) of not in
excess of $ per Share and $ per Public Warrant payable as hereinafter
provided, out of which concession an amount not exceeding $ per Share and $
per Public Warrant may be reallowed by Selected Dealers to members of the
NASD or foreign dealers qualified as aforesaid. The Selected Dealers have
agreed to comply with the provisions of Section 24 of Article III of the
Rules of Fair Practice of the NASD and, if any such dealer is a foreign
dealer and not a member of the NASD, such Selected Dealer also has agreed
to comply with the NASD's interpretation with respect to free-riding and
withholding, to comply, as though it were a member of the NASD, with the
provisions of Sections 8 and 36 of Article III of such Rules of Fair
Practice, and to comply with Section 25 of Article III thereof as that
Section applies to non-member foreign dealers.
4. We, as the Underwriter, have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the public
offering of the Shares and Public Warrants.
5. If you desire to purchase any of the Shares and Public Warrants, your
application should reach us promptly by mail, express service, telephone or
fax at 950 Third Avenue, 3rd Floor, New York, New York 10022, Attention:
Syndicate Department, Telephone Number (212) 317-9634, Fax Number (212)
317-9745. We reserve the right to reject subscriptions in whole or in part,
to make allotments and to close the subscription books at any time without
notice. The Shares and Public Warrants allotted to you will be confirmed,
subject to the terms and conditions of this Agreement.
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6. The privilege of subscribing for the Shares and Public Warrants is
extended to you only to the extent that we may lawfully sell the Shares and
Public Warrants to dealers in your state or other jurisdiction.
7. Any Shares and Public Warrants purchased by you under the terms of this
Agreement may be immediately reoffered to the public in accordance with the
terms of the offering thereof set forth herein and in the Prospectus,
subject to the securities or blue sky laws of the various states or other
jurisdictions.
You agree to pay us on demand an amount equal to the Selected Dealer
concession as to any Shares and Warrants purchased by you hereunder which,
prior to the termination of this paragraph, we may purchase or contract to
purchase for our account as Underwriter and, in addition, we may charge you
with any broker's commission and transfer tax paid in connection with such
purchase or contract to purchase. Certificates for Shares and Warrants
delivered on such repurchases need not be the identical certificates
originally purchased.
You agree to advise us from time to time, upon request, of the number of
Shares and Public Public Warrants purchased by you hereunder and remaining
unsold at the time of such request, and, if in our opinion any such
securities shall be needed to make delivery of the Shares and Public
Warrants sold or over-allotted for our account as Underwriter, you will,
forthwith upon our request, grant to us for our account as Underwriter the
right, exercisable promptly after receipt of notice from you that such
right has been granted, to purchase, at the Public Offering Prices less the
selling concessions or such part thereof as we shall determine, such number
of Shares and Public Warrants owned by you as shall have been specified in
our request.
No expenses shall be charged to Selected Dealers. A single transfer tax, if
payable,
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<PAGE>
upon the sale of the Shares and Public Warrants by us as Underwriter to you
will be paid when such Shares and Public Warrants are delivered to you.
However, you shall pay any transfer tax on sales of Shares and Public
Warrants by you and you shall pay your proportionate share of any transfer
tax (other than the single transfer tax described above) in the event that
any such tax shall from time to time be assessed against you and other
Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of
the Shares and Public Warrants other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate when we
shall have determined that the public offering of the Shares and Public
Warrants has been completed and upon telegraphic notice to you of such
termination, but, if not theretofore terminated, they will terminate at the
close of business on the 30th full business day after the date hereof,
provided, however, that we shall have the right to extend such provisions
for a further period or periods, not exceeding an additional 30 days in the
aggregate upon telegraphic notice to you.
9. For the purpose of stabilizing the market in the Shares and Public
Warrants, we have been authorized to make purchases and sales of the Shares
and Public Warrants of the Company, in the open market or otherwise, for
long or short account and, in arranging for sales, to over-allot.
10. On becoming a Selected Dealer, and in offering and selling the Shares
and Public Warrants, you agree to comply with all the applicable
requirements of the Securities Act of 1933, as amended (the"1933 Act") and
the l934 Act. You confirm that you are familiar with Rule 15c2-8 under the
1934 Act relating to the distribution of preliminary and final prospectuses
for securities of an issuer (whether or not the issuer is subject to the
reporting requirements of Section 13 or 15(d) of the 1934 Act) and confirm
that you have complied and will comply therewith. We hereby confirm that we
will make available to you such number of copies of the
Prospectus (as amended or supplemented) as you may reasonably request for
the purposes contemplated by the 1933 Act or the 1934 Act, or the Rules and
Regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Shares and Public
Warrants have been qualified for sale under the respective securities or
blue sky laws of such states and other jurisdictions, but we do not assume
any obligation or responsibility as to the right of any Selected Dealer to
sell the Shares or Public Warrants in any state or other jurisdiction or as
to the eligibility of the Shares or Public Warrants for sale therein. We
will, if requested, file a Further State Notice in respect of the Shares
and Public Warrants pursuant to Article 23-A of the General Business Law of
the State of New York.
12. No Selected Dealer is authorized to act as our agent or as agent for us
as Underwriter, or otherwise to act on our behalf as Underwriter, in
offering or selling the Shares and Public Warrants to the public or
otherwise or to furnish any information or make any representation except
as
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<PAGE>
contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or other
separate entity or partner with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim
to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Shares or Public Warrants, or the delivery
of the certificates for the Shares and Public Warrants, or the performance
by anyone of any agreement on its part, or the qualification of the Shares
or Public Warrants for sale under the laws of any jurisdiction, or for or
in respect of any other matter relating to this Agreement, except for lack
of good faith and for obligations expressly assumed by us as the
Underwriter in this Agreement and no obligation on our part shall be
implied here from. The foregoing provisions shall not be deemed a waiver of
any liability imposed under the 1933 Act.
14. Payment for the Shares and Public Warrants sold to you hereunder is to
be made at the Public Offering Prices less the above-mentioned selling
concessions on such time and date as we may advise, at the office of R. D.
White & Co., Inc., 950 Third Avenue, 3rd Floor, New York, N.Y. 10022, by a
certified or official bank check in current New York Clearing House funds,
payable to the order of R. D. White & Co., Inc., as Underwriter, against
delivery of certificates for the Shares and Public Warrants so purchased.
If such payment is not made at such time, you agree to pay us interest on
such funds at the prevailing broker's loan rate.
15. Notices to us should be addressed to R. D. White & Co., Inc., 950 Third
Avenue, 3rd Floor, New York, N.Y. 10022, Attention: Syndicate Department.
Notices to you shall be deemed to have been duly given if telegraphed or
mailed to you at the address to which this letter is addressed.
16. If you desire to purchase any Shares and Public Warrants, please
confirm your application by signing and returning to us your confirmation
on the duplicate copy of this letter enclosed herewith, even though you may
have previously advised us thereof by telephone or fax or telegraph. Our
signature hereon may be by facsimile. Very truly yours,
R. D. White & Co., Inc.
By:_____________________
Authorized Officer
<PAGE>
, 1997
R.D. White & Co., Inc.
950 Third Avenue
3rd Floor
New York, New York 10022
We hereby subscribe for Shares, Class A Redeemable Warrants and
Class B Redeemable Warrants (collectively the "Public Warrants") of GENISYS
INFORMATION SYSTEMS, INC. in accordance with the terms and conditions stated
in the foregoing letter. We hereby acknowledge receipt of the Prospectus
referred to in the first paragraph thereof relating to said Shares and Public
Warrants. We further state that in purchasing said Shares and Public Warrants
we have relied upon said Prospectus and upon no other statement whatsoever,
whether written or oral. We confirm that we are a dealer actually engaged in
the investment banking or securities business and that we are either (i) a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") or (ii) a dealer with its principal place of business located
outside the United States, its territories and its possessions and not
registered as a broker or dealer under the Securities Exchange Act of 1934,
as amended, who hereby agrees not to make any sales within the Unites States,
its territories and its possessions or to persons who are nationals thereof
or residents therein. We hereby agree to comply with the provisions of
Section 24 of Article III of the Rules of Fair Practice of the NASD, and if
we are a foreign dealer and not a member of the NASD, we also agree to comply
with the NASD's interpretation with respect to free-riding and withholding,
to comply, as though we were a member of the NASD, with provisions of Sections
8 and 36 of Article III of such Rules of Fair Practice, and to comply with
Section 25 of Article III thereof as that Section applies to non-member
foreign dealers.
By:___________________________
Authorized Officer
Address:
Date:
<PAGE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
PAR VALUE $.001 PAR VALUE $.001
SHARES
SEE REVERSE FOR CERTAIN
DEFINITIONS AND LIMITATIONS CUSIP
GENYSIS RESERVATION SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF
GENYSIS RESERVATION SYSTEMS, INC.
(hereinafter called the Corporation) transferable on the books of
the Corporation or by the holder hereof, in person or b duly
authorized Attorney, upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Transfer Agent and Registrar
AUTHORIZED SIGNATURE
SECRETARY
PRESIDENT
The following abbreviations, when used in the inscription on the
face of this certificate, shall be constured as though they were
written out in full according to applicable laws or regulations:
<PAGE>
TEN COM - as tentnants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
(Cust) (Minor)
Under Uniform Gifts to Minor Act
(State)
Addtional abbreviations may also be used though not in the above
list.
For Value received hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
Shares
of the Common Stock represented by the within Certificate and do
hereby irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
<PAGE>
Dated
SIGNATURE
Signature(s) Guaranteed
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-1 5.
NOTICE: The signature of this assignment must correspond with
name(s) as written upon the face of the certificate in every
particular without alteration or enlargement or any change
whatever.
<PAGE>
Exhibit 4.2
GENISYS RESERVATION SYSTEMS, INC.
AND
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
REDEEMABLE WARRANT AGREEMENT
Dated as of , 1997
<PAGE>
AGREEMENT, dated as of this _____ day of ___________, 1997, between GENISYS
RESERVATION SYSTEMS, INC., a New Jersey corporation (the "Company"), and
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY, as Warrant Agent (the "Warrant
Agent").
W I T N E S S E T H:
WHEREAS, in connection with (i) the offering to the public pursuant to the
Prospectus (the "Prospectus") contained in the Company's Registration
Statement on Form SB-2 (Registration No. 333-15011) of up to 900,000 shares
of the Company's common stock, $.0001 par value per share (the "Common
Stock"), (ii) the offering to the public pursuant to the Prospectus of up
to 2,400,000 redeemable warrants (the "Warrants") comprised of 1,500,000
Class A Redeemable Warrants ("Class A Warrants") and 900,000 Class B
Redeemable Warrants ("Class B Warrants"), each Warrant entitling the holder
thereof to purchase one additional share of Common Stock, (iii) the over-
allotment option to purchase up to an additional 135,000 shares of Common
Stock and/or 225,000 Class A Warrants and 135,000 Class B Warrants, (the
"Over-allotment Option"), and (iv) the sale to R.D. White & Co., Inc.
("R.D. White"), its successors and assigns (the "Underwriter"), of warrants
(the "Underwriter's Warrants") to purchase up to 90,000 shares of Common
Stock and/or 150,000 Class A Warrants and 90,000 Class B Warrants, the
Company will issue up to 3,000,000 Warrants (subject to increase as
provided in the Underwriter's Warrant Agreement and herein); and WHEREAS,
the Company desires to provide for the issuance of certificates
representing the
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing
the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in
consideration of the premises and the mutual agreements hereinafter set
forth and for the purpose of defining the terms and provisions of the
Warrants and the certificates representing the Warrants and the respective
rights and obligations thereunder of the Company, R.D. White, the holders
of certificates representing the Warrants and the Warrant Agent, the
parties hereto agree as follows:
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<PAGE>
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class whether now
or hereafter authorized, which has the right to participate in the voting
and in the distribution of earnings and assets of the Company without limit
as to amount or percentage.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its principal business in New
York, New York, shall be administered, which office is located on the date
hereof at 2 Broadway, New York, New York 10004.
(c) "Exercise Date" shall mean, subject to the provisions of Section 5(b)
hereof, as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with
the exercise form thereon duly executed by the Registered Holder hereof or
his attorney duly authorized in writing, and (ii) payment in cash or by
check made payable to the Warrant Agent for the account of the Company, of
the amount in lawful money of the United States of America equal to the
applicable Purchase Price in good funds.
(d) "Initial Warrant Exercise Date" shall mean ,1997.
(e) "Initial Warrant Redemption Date" shall mean twelve (12) months after
the date of the Prospectus.
(f) "Purchase Price" shall mean, subject to modification and adjustment as
provided in Section 8, $5.75 per share for each Class A Warrant and $6.75
per share for each Class B Warrant and further subject to the Company's
right, in its sole discretion, to decrease the Purchase Price.
(g) "Registered Holder" shall mean the person in whose name any certificate
representing the Warrants shall be registered on the books maintained by
the Warrant Agent pursuant to Section 6.
(h) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to
elect a majority of the Board of Directors of such corporation (regardless
of whether or not at the time stock of any other class or classes of such
corporation shall have or may have voting power by reason of the happening
of any contingency) is
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<PAGE>
at the time directly or indirectly owned by the Company or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
(i) "Transfer Agent" shall mean Continental Stock Transfer and Trust
Company, or its authorized successor.
(j) "Underwriting Agreement" shall mean the underwriting agreement dated
____________, 1997 between the Company and the Underwriter relating to the
purchase for resale to the public of 900,000 shares of Common Stock,
1,500,000 Class A Warrants and 900,000 Class B Warrants plus an
over-allotment option of 135,000 shares of Common Stock and/or 225,000
Class A Warrants and 135,000 Class B Warrants.
(k) "Underwriter's Warrant Agreement" shall mean the agreement dated as of
, 1997 between the Company and the Underwriter relating to and governing
the terms and provisions of the Underwriter's Warrants.
(l) "Warrant Certificate" shall mean certificates representing each of the
Warrants substantially in the form annexed hereto as Exhibit A.
(m) "Warrant Expiration Date" shall mean, unless the Warrants are redeemed
as provided in Section 9 hereof prior to such date, 5:00 p.m. (New York
time), on , 2001, or, if such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then 5:00 p.m.
(New York time) on the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close, subject to
the Company's right, prior to the Warrant Expiration Date, in its sole
discretion, to extend such Warrant Expiration Date on five business days
prior written notice to the Registered Holders.
(n) "Warrant Agent" shall mean Continental Stock Transfer and Trust
Company, or its authorized successor.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one share of Common Stock upon the exercise thereof,
subject to modification and adjustment as provided in Section 8.
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<PAGE>
(b) Upon execution of this Agreement, Warrant Certificates representing
1,500,000 Class A Warrants to purchase up to an aggregate of 1,500,000
shares of Common Stock and 900,000 Class B Warrants to purchase up to an
aggregate 900,000 shares of Common Stock (subject to modification and
adjustment as provided in Section 8) shall be executed by the Company and
delivered to the Warrant Agent.
(c) Upon exercise of the Over-allotment Option, in whole or in part,
Warrant Certificates representing up to 225,000 Class A Warrants to
purchase up to an aggregate of 225,000 shares of Common Stock and 135,000
Class B Warrants to purchase up to an aggregate of 135,000 shares of Common
Stock (subject to modification and adjustment as provided in Section 8)
shall be executed by the Company and delivered to the Warrant Agent.
(d) Upon exercise of the Underwriter's Warrants as provided therein,
Warrant Certificates representing all or a portion of 150,000 Class A
Warrants to purchase up to an aggregate of 150,000 shares of Common Stock
and 90,000 Class B Warrants to purchase up to an aggregate of 90,000 shares
of Common Stock (subject to modification and adjustment as provided in
Section 8 hereof and in the Underwriter's Warrant Agreement), shall be
countersigned, issued and delivered by the Warrant Agent upon written order
of the Company signed by its Chairman of the Board, President or a Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary
or an Assistant Secretary.
(e) From time to time, up to the Warrant Expiration Date, as the case may
be, the Warrant Agent shall countersign and deliver Warrant Certificates in
required denominations of one or whole number multiples thereof to the
person entitled thereto in connection with any transfer or exchange
permitted under this Agreement. No Warrant Certificates shall be issued
except (i) Warrant Certificates initially issued hereunder, (ii) Warrant
Certificates issued upon any transfer or exchange of Warrants, (iii)
Warrant Certificates issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7, (iv) Warrant
Certificates issued pursuant to the Underwriter's Warrant Agreement
(including Warrants in excess of the Underwriter's Warrants to purchase
90,000 shares of Common Stock and/or 150,000 Class A Warrants and 90,000
Class B Warrants issued as a result of the anti-dilution provisions
contained in the Underwriter's Warrant Agreement), and (v) at the option of
the Company, Warrant Certificates in such form as may be
4
<PAGE>
approved by its Board of Directors, to reflect any adjustment or change in
the Purchase Price, the number of shares of Common Stock purchasable upon
exercise of the Warrants or the redemption price therefor made pursuant to
Section 8 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification
or designation and such legends, summaries or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on
which Warrants may be listed, or to conform to usage. The Warrant
Certificates shall be dated the date of issuance thereof (whether upon
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen
or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President and by its Treasurer
or an Assistant Treasurer or its Secretary or an Assistant Secretary, by
manual signatures or by facsimile signatures printed thereon, and shall
have imprinted thereon a facsimile of the Company's seal. Warrant
Certificates shall be manually countersigned. In case any officer of the
Company who shall have signed any of the Warrant Certificates shall cease
to be such officer of the Company before the date of issuance of the
Warrant Certificates or before countersignature by the Warrant Agent and
issue and delivery thereof, such Warrant Certificates, nevertheless, may be
countersigned by the Warrant Agent, issued and delivered with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be such officer of the Company.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples thereof may
be exercised at any time commencing with the Initial Warrant Exercise Date,
and ending at the close of business on the Warrant Expiration Date, upon
the terms and subject to the conditions set forth herein
5
<PAGE>
(including the provisions set forth in Sections 5 and 9 hereof) and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the Exercise Date,
provided that the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder thereof or his
attorney duly authorized in writing, together with payment in cash or by
check made payable to the Warrant Agent for the account of the Company, of
an amount in lawful money of the United States of America equal to the
applicable Purchase Price has been received in good funds by the Warrant
Agent. The person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder of such securities
as of the close of business on the Exercise Date. As soon as practicable on
or after the Exercise Date and in any event within five business days after
such date, the Warrant Agent on behalf of the Company shall cause to be
issued to the person or persons entitled to receive the same a Common Stock
certificate or certificates for the shares of Common Stock deliverable upon
such exercise, and the Warrant Agent shall deliver the same to the person
or persons entitled thereto. Upon the exercise of any Warrant, the Warrant
Agent shall promptly notify the Company in writing of such fact and of the
number of securities delivered upon such exercise and, subject to
subsection (b) below, shall cause all payments of an amount in cash or by
check made payable to the order of the Company, equal to the Purchase
Price, to be deposited promptly in the Company's bank account.
(b) At any time upon the exercise of any Warrants after 181 days from the
date hereof, the Warrant Agent shall, on a daily basis, within two business
days after such exercise, notify the Underwriter, and its successors or
assigns, of the exercise of any such Warrants and shall, on a
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weekly basis (subject to collection of funds constituting the tendered
Purchase Price, but in no event later than five business days after the
last day of the calendar week in which such funds were tendered), remit to
the Underwriter (so long as the Underwriter solicited the exercise of such
Warrant as indicated upon the Subscription Form attached to the Warrant
Certificate tendered for exercise), an amount equal to four percent (4%) of
the Purchase Price of such Warrants being then exercised unless (1) the
Underwriter shall have notified the Warrant Agent that the payment of such
amount with respect to such Warrant is violative of the General Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), or the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") or applicable state
securities of "blue sky" laws, or (2) the Warrants are those underlying the
Underwriter's Warrants, or (3) the market price of the Common Stock on the
subject Exercise Date is lower than the Purchase Price, or (4) the Warrants
are held in a discretionary account, or (5) the Warrants are exercised in
an unsolicited transaction, in any of which events the Warrant Agent shall
pay such amount to the Company; provided that the Warrant Agent shall not
be obligated to pay any amounts pursuant to this Section 4(b) during any
week that such amounts payable are less than $1,000 and the Warrant Agent's
obligation to make such payments shall be suspended until the amount
payable aggregate $1,000, and provided further, that, in any event, any
such payment (regardless of amount) shall be made not less frequently than
monthly.
(c) The Company shall not be required to issue fractional shares upon the
exercise of Warrants. Warrants may only be exercised in such multiples as
are required to permit the issuance by the Company of one or more whole
shares. If one or more Warrants shall be presented for exercise in full at
the same time by the same Registered Holder, the number of whole shares
which shall be issuable upon such exercise thereof shall be computed on the
basis of the aggregate number of shares purchasable on exercise of the
Warrants so presented. If any fraction of a share would, except for the
provisions provided herein, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal
to such fraction multiplied by the then current market value of a share of
Common Stock, determined as follows:
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(1) If the Common Stock is listed or admitted to unlisted trading
privileges on the New York Stock Exchange ("NYSE") or the American Stock
Exchange ("AMEX") or is traded on The Nasdaq National Market ("
Nasdaq/NM"), the current market value of a share of Common Stock shall be
the closing price of the Common Stock at the end of the regular trading
session on the last business day prior to the date of exercise of the
Warrants on whichever of such exchanges or Nasdaq/NM had the highest
average daily trading volume for the Common Stock on such day; or
(2) If the Common Stock is not listed or admitted to unlisted trading
privileges on either the NYSE or the AMEX and is not traded on Nasdaq/NM,
but is quoted or reported on Nasdaq, the current market value of a share of
Common Stock shall be the last sale price of the Common Stock at the end of
the regular trading session on the last business day prior to the date of
exercise of the Warrants as quoted or reported on Nasdaq, as the case may
be; or
(3) If the Common Stock is not listed or admitted to unlisted trading
privileges on either of the NYSE or the AMEX, and is not traded on
Nasdaq/NM or quoted or reported on Nasdaq, but is listed or admitted to
unlisted trading privileges on the BSE or other national securities
exchange (other than the NYSE or the AMEX), the current market value of a
share of Common Stock shall be the closing price of the Common Stock at the
end of the regular trading session on the last business day prior to the
date of exercise of the Warrants on whichever of such exchanges has the
highest average daily trading volume for the Common Stock on such day; or
(4) If the Common Stock is not listed or admitted to unlisted trading
privileges on
any national securities exchange, or listed for trading on Nasdaq/NM or
quoted or reported on Nasdaq, but is traded in the over-the-counter market,
the current market value of a share of Common Stock shall be the average of
the last reported bid and asked prices of the Common Stock reported by the
National Quotation Bureau, Inc. on the last business day prior to the date
of exercise of the Warrants; or
(5) If the Common Stock is not listed or
admitted to unlisted trading privileges on
any national securities exchange, or listed for trading on Nasdaq/NM or
quoted or reported on Nasdaq, and bid and asked prices of the Common Stock
are not reported by the National Quotation Bureau, Inc., the current market
value of a share of Common Stock shall be an amount, not less than
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the book value thereof as of the end of the most recently completed fiscal
quarter of the Company ending prior to the date of exercise, determined in
accordance with generally accepted accounting principles, consistently
applied.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Warrants shall, at the time of delivery thereof, be
duly and validly issued and fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
securities exchange, if any, on which the other shares of outstanding
Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such
exercise, then the Company will file a registration statement under the
federal securities laws or a post effective amendment, use its best efforts
to cause the same to become effective and use its best efforts to keep such
registration statement current while any of the Warrants are outstanding
and deliver a prospectus which complies with Section 10(a)(3) of the
Securities Act of 1933, as amended, (the "Act"), to the Registered Holder
exercising the Warrant (except, if in the opinion of counsel to the
Company, such registration is not required under the federal securities law
or if the Company receives a letter from the staff of the Securities and
Exchange Commission (the "Commission") stating that it would not take any
enforcement action if such registration is not effected). The Company will
use its best efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws. With respect to any such securities,
however, Warrants may not be exercised by, or shares of Common Stock issued
to, any Registered Holder in any state in which such exercise would be
unlawful.
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(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder
of the Warrant Certificate representing any Warrant being exercised, then
no such delivery shall be made unless the person requesting the same has
paid to the Warrant Agent the amount of transfer taxes or charges incident
thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the Transfer
Agent to requisition from time to time certificates representing shares of
Common Stock or other securities required upon exercise of the Warrants,
and the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants or may be transferred in
whole or in part. Warrant Certificates to be so exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the
Register Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in which, subject
to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the
Company shall execute and the Warrant Agent shall issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for registration of
transfer, or for exchange or exercise, the subscription or exercise form,
as the case may be, on the reverse thereof shall be duly endorsed or be
accompanied by a written instrument or instruments or transfer and
subscription, in form satisfactory to the Company and the Warrant Agent,
duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.
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(d) No service charge shall be made for any exchange or registration of
transfer of Warrant Certificates. However, the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange shall
be promptly canceled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the
case of loss, theft or destruction) of indemnity satisfactory to them, and
(in case of mutilation) upon surrender and cancellation thereof, the
Company shall execute and the Warrant Agent shall countersign and deliver
in lieu thereof a new Warrant Certificate representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Warrant Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of Common
Stock Deliverable.
(a)(i) Except as hereinafter provided, in the event the Company shall, at
any time or from time to time after the date hereof, issue any shares of
Common Stock for a consideration per share less than the "Fair Market
Value" (as defined in Section 8(g)) or issue any shares of Common Stock as
a stock dividend to the holders of Common Stock, or subdivide or combine
the outstanding shares of Common Stock into a greater or lesser number of
shares (any such issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further
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Change of Shares, the Purchase Price for the Warrants (whether or not the
same shall be issued and outstanding) in effect immediately prior to such
Change of Shares shall be changed to a price (including any applicable
fraction of a cent to the nearest cent) determined by dividing (i) the sum
of (a) the total number of shares of Common Stock outstanding immediately
prior to such Change of Shares, multiplied by the Purchase Price in effect
immediately prior to such Change of Shares and (b) the consideration, if
any, received by the Company upon such sale, issuance, subdivision or
combination, by (ii) the total number of shares of Common Stock outstanding
immediately after such Change of Shares; For the purposes of any adjustment
to be made in accordance with this Section 8(a), the
following provisions shall be applicable:
(A) In case of the issuance or sale of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of
Common Stock) for a consideration part or all of which shall be cash, the
amount of the cash portion of the consideration therefor deemed to have
been received by the Company shall be (i) the subscription price, if shares
of Common Stock are offered by the Company for subscription, or (ii) the
public offering price (before deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith), if such securities are sold to
underwriters or dealers for public offering without a subscription
offering, or (iii) the gross amount of cash actually received by the
Company for such securities, in any other case, in each case, without
deduction for any expenses incurred by the Company in connection with such
transaction.
(B) In case of the issuance or sale (other than as a dividend or other
distribution on any stock of the Company) of shares of Common Stock (or of
other securities deemed hereunder to involve the issuance or sale of shares
of Common Stock) for a consideration part or all of which shall be other
than cash, the amount of the consideration therefor other than cash deemed
to have been received by the Company shall be the value of such
consideration as determined in good faith by the Board of Directors of the
Company on the basis of a record of values of similar property or services.
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(C) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the
record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued at
par value.
(D) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to
receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (B) of
this Section 8(a).
(E) The number of shares of Common Stock at any time outstanding shall be
deemed to include the aggregate maximum number of shares issuable (subject
to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(ii) Upon each adjustment of the Purchase Price pursuant to this Section 8,
the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the
Purchase Price in effect prior to such adjustment and dividing the product
so obtained by the applicable adjusted Purchase Price.
(b) In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or
issue any securities convertible into or exchangeable for shares of Common
Stock, for a consideration per share (determined as provided in Section
8(a)(i) and as provided below) less than the Fair Market Value in effect
immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration
(including the issuance of any such securities by way of dividend or other
distribution), the Purchase Price for the Warrants (whether or not the same
shall be issued and outstanding) in effect immediately prior to the
issuance of such options, rights or warrants, or such
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convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making the computation in accordance with
the provisions of Section 8(a)(i) hereof, provided that:
(A) The aggregate maximum number of shares of Common Stock, as the case may
be, issuable or that may become issuable under such options, rights or
warrants (assuming exercise in full even if not then currently exercisable
or currently exercisable in full) shall be deemed to be issued and
outstanding at the time such options, rights or warrants were issued, for a
consideration equal to the minimum purchase price per share provided for in
such options, rights or warrants at the time of issuance, plus the
consideration, if any, received by the Company for such options, rights or
warrants; provided, however, that upon the expiration or other termination
of such options, rights or warrants, if any thereof shall not have been
exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (A) (and for the purposes of
subsection (E) of Section 8(a)(i) hereof) shall be reduced by the number of
shares as to which options, warrants and/or rights shall have expired, and
such number of shares shall no longer be deemed to be issued and
outstanding, and the Purchase Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the shares
actually issued plus the shares remaining issuable upon the exercise of
those options, rights or warrants as to which the exercise rights shall not
have expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common Stock issuable or that
may become issuable upon conversion or exchange of any convertible or
exchangeable securities (assuming conversion or exchange in full even if
not then currently convertible or exchangeable in full) shall be deemed to
be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the
Company upon the conversion or exchange thereof; provided, however, that
upon the termination of the right to convert or exchange such convertible
or exchangeable securities (whether by reason of redemption or otherwise),
the number of shares of Common Stock deemed to be issued and outstanding
pursuant to this subsection (B)
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(and for the purposes of subsection (E) of Section 8(a)(i) hereof) shall be
reduced by the number of shares as to which the conversion or exchange
rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding, and the
Purchase Price then in effect shall forthwith be readjusted and thereafter
be the price that it would have been had adjustment been made on the basis
of the issuance only of the shares actually issued plus the shares
remaining issuable upon conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall
not have expired or terminated unexercised.
(C) If any change shall occur
in the price per share provided for in any of the options, rights or
warrants referred to in subsection (A) of this Section 8(b), or in the
price per share or ratio at which the securities referred to in subsection
(B) of this Section 8(b) are convertible or exchangeable, such options,
rights or warrants or conversion or exchange rights, as the case may be, to
the extent not theretofore exercised, shall be deemed to have expired or
terminated on the date when such price change became effective in respect
of shares not theretofore issued pursuant to the exercise or conversion or
exchange thereof, and the Company shall be deemed to have issued upon such
date new options, rights or warrants or convertible or exchangeable
securities. (c) In case of any reclassification or change of outstanding
shares of Common Stock issuable
upon exercise of the Warrants (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), or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
Subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification or change of the then
outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants (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
subdivision or combination)) or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be,
shall make lawful and adequate provision whereby the Registered Holder of
each Warrant
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then outstanding shall have the right thereafter to receive on exercise of
such Warrant the kind and amount of securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of securities issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger,
sale or conveyance and shall forthwith file at the Corporate Office of the
Warrant Agent a statement signed by its President or a Vice President and
by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provision. Such provisions shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 8(a) and (b). The
above provisions of this Section 8(c) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant Certificates theretofore and thereafter issued shall, unless
the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price
per share and the number of shares purchasable thereunder were expressed in
the Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section 8,
the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, of the Company setting forth: (i) the Purchase
Price as so adjusted, (ii) the number of shares of Common Stock purchasable
upon exercise of each Warrant, after such adjustment, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief
summary thereof to be sent by ordinary first class mail to each Registered
Holder at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in
the mailing thereof shall affect the validity thereof except as the holder
to whom the Company failed to mail such notice, or except as to the holder
whose notice was
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defective. The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has
been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(f) No adjustment of the Purchase Price shall be made as a result of or in
connection with (A) the issuance of shares of Common Stock underlying the
Warrants or the units issuable upon exercise of the Underwriter's Warrants
pursuant to the Underwriter's Warrant Agreement, or (B) the issuance or
sale of shares of Common Stock if the amount of said adjustment shall be
less than $.10, provided, however, that in such case, any adjustment that
would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment that shall amount, together with any adjustment so carried
forward, to at least $.10. In addition, Registered Holders shall not be
entitled to cash dividends paid by the Company prior to the exercise of any
Warrant or Warrants held by them.
(g) "Fair Market Value" shall mean the value of a share of Common Stock as
determined in accordance with the following provisions:
(1) If the Common Stock is listed or admitted to unlisted trading
privileges on the NYSE or the AMEX or is traded on the Nasdaq/NM, the Fair
Market Value of a share of Common Stock shall be equal to the average of
the closing price of the Common Stock during the thirty (30) trading days
immediately preceding the date of the event which requires the
determination of Fair Market Value on whichever of such exchanges or
Nasdaq/NM had the total highest daily trading volume for the Common Stock
during such thirty (30) day trading period.
(2) If the Common Stock is not listed or admitted to unlisted trading
privileges on either the NYSE or the AMEX and is not traded on Nasdaq/NM,
but is quoted or reported on Nasdaq, the Fair Market Value of a share of
Common Stock shall be the last reported price of the Common Stock during
the thirty (30) trading days immediately preceding the date of event which
requires the determination of Fair Market Value.
(3) If the Common Stock is not listed or admitted to unlisted trading
privileges on either of the NYSE or the AMEX and is not traded on Nasdaq/NM
or quoted or reported on Nasdaq, but is listed or admitted to unlisted
trading privileges on the BSE or another national securities
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exchange (other than the NYSE or the AMEX), the Fair Market Value of a
share of Common Stock shall be the last reposted closing price of the
Common Stock during the thirty (30) trading days immediately preceding the
date of the event which requires the determination of Fair Market Value.
(4) If the Common Stock is not listed or admitted to unlisted trading
privileges on any national securities exchange, or listed for trading on
Nasdaq/NM or quoted or reported on Nasdaq, but is traded in the
over-the-counter market, the Fair Market Value of a share of Common Stock
shall be the average of the average of the last reported bid and asked
prices of the Common Stock reported by the National Quotation Bureau, Inc.
for the thirty (30) trading days immediately preceding the date of the
event which requires the determination of Fair Market Value.
(5) If the Common Stock is not listed or admitted to unlisted trading
privileges on any national securities exchange, or listed for trading on
Nasdaq/NM or quoted or reported on Nasdaq, and bid and asked prices of the
Common Stock are not reported by the National Quotation Bureau, Inc., the
Fair Market Value of a share of Common Stock shall be an amount, not less
than the book value thereof as of the end of the most recently completed
fiscal quarter of the company ending prior to the date requiring a
determination of fair market value, determined in accordance with general
accepted accounting principles, consistently applied.
SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the Company may, on
30 days' prior written notice redeem all the Warrants, other than the
Warrants underlying the Underwriter's Warrants which shall not be
redeemable, at ten cents ($.10) per Warrant, provided, however, that before
any such call for redemption of Class A Warrants can take place the closing
sale price of the Common Stock as quoted on the principal market on which
such shares shall then be trading, shall have, for only twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the
fifth (5th) day prior to the date on which the notice contemplated by (b)
and (c) below is given, equalled or exceeded $6.25 per share (subject to
adjustment in the event of any stock splits or other similar events as
provided in Section 8 hereof), and before any such call for redemption of
Class B Warrants can take place the closing sale price of the Common Stock
as quoted on the
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principal market on which such shares shall then be trading, shall have,
for only twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth (5th) day prior to the date on
which the notice contemplated by (b) and (c) below is given, equalled or
exceeded $7.25 per share (subject to adjustment in the event of any stock
splits or other similar events as provided in Section 8 hereof).
(b) In case the Company shall exercise its right to redeem all of the Class
A or Class B Warrants so redeemable, it shall give or cause notice to such
effect to be given to the Underwriter in the same manner that notice is
required to be given by the Underwriter's Warrant Agreement. The
Underwriter may, at its option, solicit exercises of the Warrants. In the
event that the Underwriter does not commence solicitation of exercises of
the Warrants within thirty (30) days of notice from the Company, the
Company may give notice of redemption to the Registered Holders of the
Warrants by mailing to such Registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or
not the Registered Holder receives such notice. Not less than five business
days prior to the mailing to the Registered Holders of the Warrants of the
notice of redemption, the Company shall deliver or cause to be delivered to
the Underwriter a similar notice telephonically and confirmed in writing
together with a list of the Registered Holders (including their respective
addresses and number of Warrants beneficially owned) to whom such notice of
redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption price, (ii)
the date fixed for redemption, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificate shall be delivered and the redemption price shall
be paid, (iv) that the Underwriter is the Company's warrant solicitation
agent and may receive the commission contemplated by Section 4(b) hereof,
and (v) that the right to exercise the Warrant shall terminate at 5:00 p.m.
(New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be
the Redemption Date. No failure to mail such notice nor any defect therein
or in the mailing thereof shall affect the validity of the proceedings for
such redemption except as to a holder (a) to whom notice was not mailed or
19
<PAGE>
(b) whose notice was defective. An affidavit of the Warrant Agent or the
Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of
the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New York
time) on the business day immediately preceding the Redemption Date. The
redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the Underwriter and each person, if any,
who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act against all loss, claim, damage, expense
or liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them
may become subject under the Act, the Exchange Act or otherwise, arising
from the registration statement or prospectus referred to in Section 5(b)
hereof to the same extent and with the same effect (including the
provisions regarding contribution) as the provisions pursuant to which the
Company has agreed to indemnify the Underwriters contained in Section 7 of
the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the Company shall
furnish to the Underwriter (i) an opinion of counsel to the Company, dated
such date and addressed to Underwriter, and (ii) a "cold comfort" letter
dated such date addressed to the Underwriter, signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement
(and the prospectus included therein) and, in the case of such accountants'
letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and
in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(g) The Company shall as soon as practicable after the Redemption Date, and
in any event within 15 months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an
earnings statement (which need not be audited) complying with Section 11(a)
of the Act and covering a period of at least 12 consecutive months
beginning after the Redemption Date.
20
<PAGE>
(h) The Company shall deliver within five business days prior to the
Redemption Date copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to such registration
statement and permit the Underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or
omitted from the registration statement as it deems reasonably necessary to
comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as the Underwriter shall reasonably request.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a ministerial capacity
for the Company and the Underwriter, and its duties shall be determined
solely by the provisions hereof. The Warrant Agent shall not, by issuing
and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or
authorization of the Warrant Certificates or the Warrants represented
thereby or of any securities or other property delivered upon exercise of
any Warrant or whether any stock issued upon exercise of any Warrant is
fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustment, or
with respect to the nature or extent of any such adjustment, when made, or
with respect to the method employed in making the same. It shall not (i) be
liable for any recital or statement of fact contained herein or for any
action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this
Agreement
21
<PAGE>
or in any Warrant Certificate, or (iii) be liable for any act or omission
in connection with this Agreement except for its own gross negligence or
willful misconduct.
(c) The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good
faith in accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board of Directors, President or any Vice President
(unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; the Company further agrees to indemnify the Warrant Agent and
save it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted
by the Warrant Agent in the execution of its duties and powers hereunder
except losses, expenses and liabilities arising as a result of the Warrant
Agent's gross negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own gross negligence or willful misconduct),
after giving 30 days' prior written notice to the Company. At least 15 days
prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period
of 30 days after it has been notified in writing of such resignation by the
resigning Warrant Agent, then the Registered Holder of any Warrant
Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether
appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report
to its stockholders, of not less than $10,000,000 or a stock transfer
22
<PAGE>
company doing business in Massachusetts or New York. After acceptance in
writing of such appointment by the new warrant agent is received by the
Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named
herein as the warrant agent, without any further assurance, conveyance, act
or deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the
same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file
notice thereof with the resigning Warrant Agent and shall forthwith cause a
copy of such notice to be mailed to the Registered Holder of each Warrant
Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be
a party, or any corporation succeeding to the corporate trust business of
the Warrant Agent or any new warrant agent shall be a successor warrant
agent under this Agreement without any further act, provided that such
corporation is eligible for appointment as successor to the Warrant Agent
under the provisions of the preceding paragraph. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed to the Company and to the Registered Holders of each Warrant
Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two years from the date of
exercise any Warrant Certificate received by it upon such exercise.
SECTION 11. Modification of Agreement.
23
<PAGE>
The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; (ii)
to reflect an increase in the number of Warrants which are to be governed
by this Agreement resulting from a subsequent public offering of Company
securities which includes warrants having the same terms and conditions as
the Warrants originally covered by or subsequently added to this Agreement
under this Section 11; or (iii) that they may deem necessary or desirable
and which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, that this Agreement shall not
otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Registered Holders representing not less that
66-2/3% of the Warrants then outstanding (including, for this purpose
Warrants issuable to the Underwriter pursuant to the Underwriter's
Warrants, whether or not then outstanding); provided, further, that no
change in the number or nature of the securities purchasable upon the
exercise of any Warrant, or to increase the Purchase Price therefor, shall
be made without the consent in writing of the Registered Holder of the
Warrant Certificate, other than such changes as are specifically prescribed
by this Agreement as originally executed. In addition, this Agreement may
not be modified, amended or supplemented without the prior written consent
of the Underwriter, other than to cure any ambiguity or to correct any
provision which is inconsistent with any other provision of this Agreement
or to make any such change that is necessary or desirable and which shall
not adversely affect the interests of the Underwriter and except as may be
required by law.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been made when delivered or mailed
first-class postage prepaid, or delivered to a telegraph office for
transmission if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company at Genisys Reservation Systems, Inc., 2401
Morris Avenue, 3rd Floor, Union, New Jersey 07083, Attention: Joseph
Cutrona, President, or at such other address as may have been furnished
24
<PAGE>
to the Warrant Agent in writing by the company; and if to the Warrant
Agent, at its Corporate Office. Copies of any notice delivered pursuant to
this Agreement shall be delivered to R.D. White at R.D. White & Co., Inc.,
950 Third Avenue, 3rd Floor, New York, New York 10022, Attention: John
Piscopo, with a copy to Scheichet & Davis, P.C., 505 Park Avenue, 20th
Floor, New York, New York 10022, Attention: William J. Davis, or at such
other address as may have been furnished to the Company and the Warrant
Agent in writing.
SECTION 13. Construction.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to conflicts of laws.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and
the holders from time to time of Warrant Certificates or any of them.
Except as hereinafter stated, nothing in this Agreement is intended or
shall be construed to confer upon any other person any right, remedy or
claim or to impose upon any other person any duty, liability or obligation.
The Underwriters (as defined in the Underwriting Agreement) are, and shall
at all times irrevocably be deemed to be, third-party beneficiaries of this
Agreement, with full power, authority and standing to enforce the rights
granted to it hereunder.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the first date first above written.
25
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
By: By:
Joseph Cutrona, President
26
<PAGE>
EXHIBIT A
No. Class A W VOID AFTER ____________, 2001
____________ CLASS A WARRANTS
CLASS A REDEEMABLE WARRANT CERTIFICATE
TO PURCHASE ONE SHARE OF COMMON STOCK
GENISYS RESERVATION SYSTEMS, INC.
CUSIP __________
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number
of Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms
and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common
Stock, $.0001 par value, of Genisys Reservation Systems, Inc., a New Jersey
corporation (the "Company"), at any time between , 1997 (the "Initial
Warrant Exercise Date"), and the Expiration Date (as hereinafter defined)
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer and Trust Company, 2 Broadway, New
York, New York 10004, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $5.75 subject to adjustment (the
"Purchase Price"), in lawful money of the United States of America in cash
or by check made payable to the Warrant Agent for the account of the
Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Redeemable Warrant Agreement (the "Warrant Agreement"), dated
________________, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby
are subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case
of the exercise of less than all the Warrant represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
27
<PAGE>
shall execute and deliver a new Warrant Certificate or Warrant Certificates
of like tenor, which the Warrant Agent shall countersign, for the balance
of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on , 2001.
If each such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall
mean 5:00 p.m. (New York time) the next following day which in the State of
New York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act), with respect to such
securities is effective or an exemption thereunder is available. The
Company has covenanted and agreed that it will file a registration
statement under the Federal securities laws, use its best efforts to cause
the same to become effective, use its best efforts to keep such
registration statement current, if required under the Act, while any of the
Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this
Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates
to represent such number of Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment and
payment of any tax or other charge imposed in connection therewith or
incident thereto, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate of Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing six (6) months after the Initial Warrant
Exercise Date, provided that (i) the closing bid price for the Common Stock
is reported by The Nasdaq Stock Market, Inc. ("Nasdaq"), if the Common
Stock is then traded in the over-the-counter market or (ii) the closing
sale price, if the Common Stock is then traded on Nasdaq/NM or a national
securities exchange, shall have equalled or exceeded for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending
on the fifth (5th) day prior to the Notice of Redemption, as defined below,
$6.25 per share (subject to adjustment in the event of any stock splits or
other similar events). Notice of redemption (the "Notice of
28
<PAGE>
Redemption") shall be given not later than the thirtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no
rights with respect to the Warrants except to receive the $.10 per Warrant
upon surrender of this Warrant Certificate.
Under certain circumstances, R.D. White & Co., Inc. collectively shall be
entitled to receive an aggregate of four percent (4%) of the Purchase Price
of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by
anyone other than a duly authorized officer of the Company or the Warrant
Agent) for all purposes and shall not be affected by any notice to the
contrary, except as provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to conflicts
of laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
Dated: ________________, 1997
[SEAL] GENISYS RESERVATION SYSTEMS, INC.
By: _____________________________
Joseph Cutrona, President
By: _____________________________
John Wasko, Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
as Warrant Agent
By: _____________________
29
<PAGE>
Name: _____________________
Title: ____________________
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
(please print or type name and address)
and be delivered to
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the
Registered Holder at the address stated below.
30
<PAGE>
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was
solicited by R.D. White & Co., Inc.
2. The exercise of this Warrant was not
solicited.
Dated: X
Address
Social Security or Taxpayer
Identification Number
Signature Guaranteed
31
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
(please print or type name and address)
___________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the
of the Company, with full power of substitution in the premises.
Dated: X
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST
CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED
BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
CONTINENTAL STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, MIDWEST
STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
32
<PAGE>
EXHIBIT B
No. Class B W VOID AFTER ____________, 2001
____________ CLASS B WARRANTS
CLASS A REDEEMABLE WARRANT CERTIFICATE
TO PURCHASE ONE SHARE OF COMMON STOCK
GENISYS RESERVATION SYSTEMS, INC.
CUSIP __________
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number
of Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms
and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common
Stock, $.0001 par value, of Genisys Information Systems, Inc., a New Jersey
corporation (the "Company"), at any time between , 1997 (the "Initial
Warrant Exercise Date"), and the Expiration Date (as hereinafter defined)
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer and Trust Company, 2 Broadway, New
York, New York 10004, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $6.75 subject to adjustment (the
"Purchase Price"), in lawful money of the United States of America in cash
or by check made payable to the Warrant Agent for the account of the
Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Redeemable Warrant Agreement (the "Warrant Agreement"), dated
________________, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby
are subject to modification or adjustment. Each Warrant represented hereby
is exercisable at the option of the Registered Holder, but
no fractional interests will be issued. In the case of the exercise of less
than all the Warrant represented hereby, the Company shall cancel this
Warrant Certificate upon the surrender hereof and
33
<PAGE>
shall execute and deliver a new Warrant Certificate or Warrant Certificates
of like tenor, which the Warrant Agent shall countersign, for the balance
of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on , 2001.
If each such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall
mean 5:00 p.m. (New York time) the next following day which in the State of
New York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act), with respect to such
securities is effective or an exemption thereunder is available. The
Company has covenanted and agreed that it will file a registration
statement under the Federal securities laws, use its best efforts to cause
the same to become effective, use its best efforts to keep such
registration statement current, if required under the Act, while any of the
Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this
Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates
to represent such number of Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment and
payment of any tax or other charge imposed in connection therewith or
incident thereto, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate of Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing six (6) months after the Initial Warrant
Exercise Date, provided that (i) the closing bid price for the Common Stock
is reported by The Nasdaq Stock Market, Inc. ("Nasdaq"), if the Common
Stock is then traded in the over-the-counter market or (ii) the closing
sale price, if the Common Stock is then traded on Nasdaq/NM or a national
securities exchange, shall have equalled or exceeded for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending
on the fifth (5th) day prior to the Notice of Redemption, as defined below,
$7.25 per share (subject to adjustment in the event of any stock splits or
other similar events). Notice of redemption (the "Notice of
34
<PAGE>
Redemption") shall be given not later than the thirtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no
rights with respect to the Warrants except to receive the $.10 per Warrant
upon surrender of this Warrant Certificate.
Under certain circumstances, R.D. White & Co., Inc. collectively shall be
entitled to receive an aggregate of four percent (4%) of the Purchase Price
of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by
anyone other than a duly authorized officer of the Company or the Warrant
Agent) for all purposes and shall not be affected by any notice to the
contrary, except as provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to conflicts
of laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
Dated: ________________, 1997
[SEAL] GENISYS RESERVATION SYSTEMS, INC.
By: _____________________________
Joseph Cutrona, President
By: _____________________________
John Wasko, Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
as Warrant Agent
By: _____________________
35
<PAGE>
Name: _____________________
Title: ____________________
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
(please print or type name and address)
and be delivered to
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the
Registered Holder at the address stated below.
36
<PAGE>
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was
solicited by R.D. White & Co., Inc.
2. The exercise of this Warrant was not
solicited.
Dated: X
Address
Social Security or Taxpayer
Identification Number
Signature Guaranteed
37
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
(please print or type name and address)
___________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the
of the Company, with full power of substitution in the premises.
Dated: X
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST
CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED
BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
CONTINENTAL STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, MIDWEST
STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
38
<PAGE>
Exhibit 4.3
GENISYS RESERVATION SYSTEMS, INC.
AND
R.D. WHITE & CO., INC.
UNDERWRITER'S
WARRANT AGREEMENT
Dated as of , 1997
<PAGE>
UNDERWRITER'S WARRANT AGREEMENT dated as of , 1997 between GENISYS
RESERVATION SYSTEMS, INC., a New Jersey corporation (the "Company") and
R.D. WHITE & CO., INC., its successors, designees and assigns (hereinafter
referred to as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter warrants
("Warrants") to purchase up to an aggregate of 90,000 shares of common
stock, $.0001 par value, of the Company's ("Common Stock") and/or up to
240,000 warrants consisting of 150,000 Class A Warrants and 90,000 Class B
Warrants ("Underlying Warrants"), each Underlying Warrant entitling the
holder to purchase one share of Common Stock. (One share of Common Stock
and one Underlying Warrant are each hereinafter referred to as a "Warrant
Security" and more than one collectively referred to as the "Warrant
Securities"); and
WHEREAS, the Underwriter has agreed pursuant to the underwriting agreement
(the "Underwriting Agreement") dated as of the date hereof among the
Underwriter and the Company to act as the Underwriter in connection with
the Company's proposed public offering of up to 900,000 shares of Common
Stock and 2,400,000 redeemable warrants consisting of 1,500,000 Class A
Warrants and 900,000 Class B Warrants (collectively the "Redeemable
Warrants") at a public offering price of $5.00 per share of Common Stock
and $.20 per Class A Redeemable Warrant and $.10 per Class B Redeemable
Warrant (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter in consideration for, and as
part of the Underwriter's compensation in connection with, the Underwriter
acting as the Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter
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<PAGE>
to the Company of an aggregate twenty-one dollars ($21.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant The Underwriter is hereby granted by the Company the right to
purchase, at any time from , 1998 until 5:00 P.M., New York time, on ,
2002, up to an aggregate of 90,000 shares of Common Stock (the "Shares")
and 240,000 Underlying Warrants at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $6.00 per Share and $.24 per
Class A Warrant and $.12 per Class B Warrant, subject to the terms and
conditions of this Agreement. Each Underlying Warrant is exercisable to
purchase one additional share of Common Stock at an initial exercise price
of $6.90 per Class A Warrant from , 1998 until 5:00 P.M. New York time on ,
2002 at which time the Class A Underlying Warrants will expire and $ 8.10
per Class B Warrant from , 1998 until 5:00 P.M. New York time on , 2002 at
which time the Class B Underlying Warrants will expire. Except as set forth
herein, the Underlying Warrants issuable upon exercise of the Warrants are
in all respects identical to the Redeemable Warrants being purchased by the
Underwriter for resale to the public pursuant to the terms and provisions
of the Underwriting Agreement and the Redeemable Warrant Agreement dated
1996 between the Company and Continental Stock Transfer & Trust Company
("Redeemable Warrant Agreement"). Except as set forth herein, the shares
issuable upon exercise of the Warrants are in all respects identical to the
shares of Common Stock being purchased by the Underwriter for resale to the
public pursuant to the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement
shall be (i) in the form set forth in Exhibit A, with respect to Class A
Warrants to purchase Underlying Warrants and (ii) in the form set forth in
Exhibit B with respect to Class B Warrants to purchase Underlying Warrants,
each attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions, and other variations as required or
permitted by this Agreement.
2
<PAGE>
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants initially are exercisable at the
initial exercise prices (subject to adjustment as provided in Section 8
hereof) per Share and per Underlying Warrant as set forth in Section 6
hereof payable by certified or official bank check in New York Clearing
House funds, subject to adjustment as provided in Section 8 hereof. Upon
surrender of a Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Warrant Securities purchased at the Company's
principal offices (presently located at 2401 Morris Avenue, Union, NJ
07083) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for
the shares of Common Stock so purchased and a certificate or certificates
for the Underlying Warrants so purchased. The purchase rights represented
by each Warrant Certificate are exercisable at the option of the Holders
thereof, in whole or part (but not as to fractional shares of the Common
Stock and Underlying Warrants). In the case of the purchase of less than
all Warrant Securities purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof
and shall execute and deliver a new Warrant Certificate of like tenor for
the balance of the Warrant Securities purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the method of payment
set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time
and from time to time to exercise the Warrants in full or in part by
surrendering the applicable Warrant Certificates in the manner specified in
Section 3.1. The number of shares of Common Stock to be issued pursuant to
this Section 3.2 shall be equal to the difference between (a) the number of
shares of Common Stock in respect of which the Warrants are exercised and
(b) a fraction, the numerator of which shall be the number of shares of
Common Stock in respect of which the Warrants are exercised multiplied by
the Exercise Price (as hereinafter defined) and the denominator of which
shall be the Market Price. The number of Underlying Warrants to be issued
pursuant to this Section 3.2 shall be equal to the difference between (a)
the number of Underlying Warrants in respect of which the Warrants are
exercised and (b) a fraction, the numerator of which shall be the number of
Underlying Warrants in respect of which the Warrants are exercised
multiplied by the Exercise Price (as hereinafter defined) and the
denominator of which shall be the
<PAGE>
Market Price.
3.3 Definition of Market Price. As used herein, the phrase "Market Price"
at any date shall be deemed to be (i) when referring to the Common Stock,
the last reported price, or, in case no such reported sale takes place on
such day, the average of the last reported prices for the last three (3)
trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq National Market ("NNM"), or, if the Common Stock
is not listed or admitted to trading on any national securities exchange or
quoted by NNM, the average closing price as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the
Common Stock is not quoted on Nasdaq, or such similar organization as
determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it or (ii) when
referring to an Underlying Warrant, the last reported price, or, in the
case no such reported sale takes place on such day, the average of the last
reported prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the
Underlying Warrants are listed or admitted to trading or by NNM, or, if the
Underlying Warrants are not listed or admitted to trading on any national
securities exchange or quoted by NNM, the average closing price as
furnished by the NASD through Nasdaq or similar organization if Nasdaq is
no longer reporting such information, or if the Underlying Warrant is not
quoted on Nasdaq or such similar organization, the Market Price of an
Underlying Warrant shall equal the difference between the Market Price of
the Common Stock and the Exercise Price (as hereinafter defined) of the
Underlying Warrant. Notwithstanding the foregoing, for purposes of Section
8, the Market Price of a share of Common Stock or an Underlying Warrant
shall be determined by reference to the relevant information set forth
above during the thirty (30) trading days immediately preceding the date of
the event requiring the determination of the Market Price (except that, in
the event of a public offering of shares of Common Stock, the Market Price
of a share of Common Stock or an Underlying Warrant shall be determined by
reference to the trading day immediately preceding the effective date of
the public offering and not such thirty (30) trading day period).
4
<PAGE>
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and Underlying Warrants
and other securities, properties or rights underlying such Warrants and,
upon the exercise of the Underlying Warrants, the issuance of certificates
for shares of Common Stock and other securities, properties or rights
underlying such Underlying Warrants, shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable
in respect of the issuance thereof, and such certificates shall (subject to
the provisions of Sections 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares,
Underlying Warrants and the shares of Common Stock underlying such
Underlying Warrants (and other securities, property or rights issuable upon
the exercise of the Warrants or the Underlying Warrants) shall be executed
on behalf of the Company by the manual or facsimile signature of the then
present Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary of the Company. Warrant Certificates shall
be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the Warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one (1) year from the date hereof, except to officers of the
Underwriter.
5
<PAGE>
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each Warrant to purchase
Common Stock shall be $4.50 per share of Common Stock and the initial
exercise price of each Warrant to purchase Underlying Warrants shall be
$.24 per Class A Underlying Warrant and $.12 per Class B Underlying
Warrant. The adjusted exercise price shall be the price which shall result
from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 8 hereof and in
accordance with a reduction by the Company, in its sole discretion, of the
exercise price of each Warrant to purchase Common Stock.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
applicable initial exercise price or with respect to Warrants to purchase
Common Stock the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Current Registration Under the Securities Act of 1933. The Warrants,
the Shares, the Underlying Warrants issuable upon exercise of the
applicable Warrants and the shares of Common Stock issuable upon exercise
of such Underlying Warrants have been registered under the Securities Act
of 1933, as amended (the "Act"), pursuant to the Company's Registration
Statement on Form SB-2 (Registration No.333-15011 ) (the "Registration
Statement"). The Company covenants and agrees to use its best efforts to
maintain the effectiveness of the Registration Statement for a period of
five (5) years from its effective date.
7.2 Contingent Registration Rights.
In the event that, for any reason whatsoever, the Company shall fail to
maintain the effectiveness of the Registration Statement for a period of
five (5) years from its effective date and, in any event, from and after
the fifth (5th) anniversary of the effective date of the Registration
Statement, the Underwriter shall have commencing the date of any such
occasion, the contingent registration rights ("Registration Rights") set
forth in Sections 7.3 and 7.4 hereof.
7.3 Piggyback Registration.
(a) If, at any time commencing after the effective date of the Registration
Rights
6
<PAGE>
and expiring on the seventh (7th) anniversary of the effective date of the
Registration Statement, the Company proposes to register any of its
securities under the Act, either for its own account or the account of any
other security holder or holders of the Company possessing registration
rights ("Other Stockholders") (other than pursuant to Form S-4, Form S-8 or
comparable registration statement), it shall give written notice, at least
thirty (30) days prior to the filing of each such registration statement,
to the Underwriter and to all other Holders of Warrants, Shares, Underlying
Warrants and shares of Common Stock issuable upon exercise of the
Underlying Warrants (collectively, "Registrable Securities") of its
intention to do so. If the Underwriter or other Holders of Registrable
Securities notify the Company within twenty-one (21) days after the receipt
of any such notice of its or their desire to include any such securities in
such proposed registration statement, the Company shall afford the
Underwriter and such other Holders of such securities the opportunity to
have any such securities registered under such registration statement.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Underwriter and such other Holders as part of the written notice
given pursuant to Section 7.3(a) hereof. The right of the Underwriter or
any such other Holder to registration pursuant to this Section 7.3 shall be
conditioned upon their participation in such underwriting and the inclusion
of their Registrable Securities in the underwriting to the extent
hereinafter provided. The Underwriter and all other Holders proposing to
distribute their securities through such underwriting shall (together with
the Company and any officer, directors or Other Stockholders distributing
their securities through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
by the Company. Notwithstanding any other provision of this Section 7.3, if
the underwriter or underwriters advises the Company in writing that
marketing factors require a limitation or elimination of the number of
shares of Common Stock or other securities to be underwritten, the
Underwriter may limit the number of shares of Common Stock or other
securities to be included in the registration and underwriting. The Company
shall so advise the Underwriter and all other Holders of Registrable
Securities requesting registration, and the number of shares of Common
Stock or other securities that are entitled to be included in the
registration and underwriting shall be allocated among the Underwriter and
other Holders requesting registration, in each case, in
7
<PAGE>
proportion, as nearly as practicable, to the respective amounts of
securities which they had requested to be included in such registration at
the time of filing the registration statement. (c) Notwithstanding the
provisions of this Section 7.3, the Company shall have the right at any
time after it shall have given written notice pursuant to Section 7.3(a)
hereof (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior
to the effective date thereof.
7.4 Demand Registration.
(a) At any time commencing after the effective date of the Registration
Rights and ending on the fifth (5th) anniversary of the effective date of
the Registration Statement, the Underwriter and Holders of Registrable
Securities representing a "Majority" (as hereinafter defined) of such
securities (assuming the exercise of all of the Warrants and Underlying
Warrants) (the "Initiating Holders") shall have the right (which right is
in addition to the registration rights under Section 7.3 hereof),
exercisable by written notice to the Company, to have the Company prepare
and file with the Commission, on one occasion, a registration statement and
such other documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the Holders, in
order to comply with the provisions of the Act, so as to permit a public
offering and sale of their respective Registrable Securities for up to two
hundred and seventy (270) days by such Holders and any other Holders of
Registrable Securities, as well as any other security holders possessing
similar registration rights, who notify the Company within twenty-one (21)
days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.4 by any Holder or Holders to all
other registered Holders of Registrable Securities, as well as any other
security holders possessing similar registration rights, within ten (10)
days after the date of the receipt of any such registration request.
(c) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Company as a part of their request made pursuant to Section
7.4(a) hereof. The right of any Holder to registration pursuant to this
Section 7.4 shall be conditioned upon such Holder's participation in such
underwriting and the
8
<PAGE>
inclusion of such Holder's Registrable Securities in the underwriting to
the extent and subject to the limitations provided herein. A Holder may
elect to include in such underwriting all or a part of the Registrable
Securities it holds.
(d) The Company shall (together with all Holders, officers, directors and
Other Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with
the Underwriter of the underwriter of underwriters selected for such
underwriting by the Initiating Holders, which underwriter(s) shall be
reasonably acceptable to the Underwriter. Notwithstanding any other
provision of this Section 7.4, if the Underwriter advises the Initiating
Holders in writing that marketing factors require a limitation or
elimination of the number of shares of Common Stock or other securities to
be underwritten, the Underwriter may limit the number of shares of Common
Stock or other securities to be included in the registration and
underwriting. The Company shall so advise the Underwriter and all Holders
of Registrable Securities requesting registration, and the number of shares
of Common Stock or other securities that are entitled to be included in the
registration and underwriting shall be allocated among the Underwriter and
other Holders requesting registration, in each case, in proportion, as
nearly as practicable, to the respective amounts of securities which they
had requested to be included in such registration at the time of filing the
registration statement. If the Company or any Holder of Registrable
Securities who has requested inclusion in such registration as provided
above disapproves of the terms of any such underwriting, such person may
elect to withdraw its securities therefrom by written notice to the
Company, the underwriter and the Initiating Holders. Any securities so
excluded shall be withdrawn from such registration. No securities excluded
from such registration by reason of such underwriters' marketing
limitations shall be included in such registration. To facilitate the
allocation of shares in accordance with this Section 7.4(d), the Company or
underwriter or underwriters selected as provided above may round the number
of securities of any holder which may be included in such registration to
the nearest 100 shares.
(e) In the event that the Initiating Holders are unable to sell all of the
Registrable Securities for which they have requested registration due to
the provisions of Section 7.4(d) hereof and if, at that time, the
Initiating Holders are not permitted to sell Registrable Securities under
Rule 144(k), the Initiating Holders shall be entitled to require the
Company to afford the Initiating Holders
9
<PAGE>
an opportunity to effect one additional demand registration under this
Section 7.4.
(f) In addition to the registration rights under Section 7.3 and subsection
(a) of Section 7.4 hereof, at any time commencing on the date hereof and
expiring five (5) years thereafter any Holder of Registrable Securities
shall have the right, exercisable by written request to the Company, to
have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for 270
days by any such Holder of its Registrable Securities provided, however,
that the provisions of Section 7.5(b) hereof, shall not apply to any such
registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holder's making such request.
(g) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Registrable
Securities of the Initiating Holders or the Holder(s) referred to in
Section 7.5(f) above (the "Paying Holders"), within the time period
specified in Section 7.5(a) below, the Company shall upon the written
notice of election of the Initiating Holders or the Paying Holders, as the
case may be, repurchase (i) any and all Shares and Underlying Warrants at
the higher of the Market Price per share of Common Stock or per Underlying
Warrant, as the case may be, on (x) the date of the notice sent to the
Company under Section 7.4(a) or (f), as the case may be, or (y) the
expiration of the period specified in Section 7.5(a) and (ii) any and all
Warrants at such Market Price less the Exercise Price of such Warrant. Such
repurchase shall be in immediately available funds and shall close within
five (5) business days after the expiration of the period specified in
Section 7.5(a).
7.5 Covenants of the Company With Respect to Registration. In connection
with any registration under Sections 7.3 and 7.4 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration statement
within thirty (30) days of receipt of any demand therefor, shall use its
best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell
Registrable Securities such number of prospectuses as shall reasonably be
requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all
10
<PAGE>
registration statements filed pursuant to Sections 7.3 and 7.4 hereof
including, without limitation, the Company's legal and accounting fees,
printing expenses, blue sky fees and expenses. If the Company shall fail to
comply with the provisions of Section 7.5(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s),
extend the exercise period of the Warrants by such number of days as shall
equal the delay caused by the Company's failure.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a
registration statement for offering and sale under the securities or blue
sky laws of such states as reasonably are requested by the Holder(s);
provided that the Company shall not be obligated to execute or file any
general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Registrable Securities
to be sold pursuant to any registration statement and each person, if any,
who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject under
the Act, the Exchange Act or otherwise, arising from such registration
statement but only to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify each of
the Underwriters contained in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Registrable Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Act, the exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement
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<PAGE>
pursuant to which the Underwriters have agreed to indemnify the Company.
(f) For a period of one hundred eighty (180) days after the effectiveness
of any registration statement filed pursuant to Section 7.4 hereof, the
Company shall not permit any other registration statement (other than (1) a
registration statement relating to the securities for which the Company has
granted demand registration rights, as described in the Prospectus included
in the Registration Statement, (2) a registration statement relating to the
shares of Common Stock issuable upon exercise of the Redeemable Warrants
issued to the public pursuant to the Registration Statement, (3) a
registration statement relating to the securities for which the Company has
granted piggyback registration rights, as described in the Prospectus
included in the Registration Statement and (4) a registration statement
filed on Forms S-4 or S-8) to be or remain effective during the
effectiveness of a registration statement filed pursuant to Section 7.4
hereof, without the prior written consent of the Holders of the Registrable
Securities representing a Majority of such securities.
(g) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such
Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the
date of the closing under the underwriting agreement), and (ii) a "cold
comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting agreement)
signed by the independent public accountants who have issued a report on
the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities.
(h) The Company shall as soon as practicable after the effective date of
any registration statement filed pursuant to Sections 7.3 and 7.4 hereof,
and in any event within 15 months thereafter, make "generally available to
its security holders" (within the meaning of Rule 158 under the Act) an
earnings statement (which need not be audited) complying with Section 11(a)
of
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<PAGE>
the act and covering a period of at least 12 consecutive months beginning
after the effective date of the registration statement.
(i) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to
the managing underwriters, copies of all written correspondence between the
Commission and the Company, its counsel or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to
the registration statement and permit each Holder and underwriters to do
such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it
deems reasonably necessary to comply with applicable securities laws or
rules of the NASD. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(j) With respect to any registration under Section 7.4 hereof, the Company
shall enter into an underwriting agreement with the managing underwriter
selected for such underwriting by the Initiating Holders or the Paying
Holders, as the case may be, which may be the Underwriter. Such agreement
shall be satisfactory in form and substance to the Company, each Holder and
such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are
customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may,
at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters, except as they may relate
to such Holders and their intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference to the
Holders of Registrable Securities, shall mean in excess of fifty percent
(50%) of the then outstanding Warrants, Shares, Underlying Warrants and
shares of Common Stock issued upon exercise of the Underlying Warrants that
(i) are not held by the Company, an affiliate, officer, creditor, employee
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or agent thereof or any of their respective affiliates, members of their
family, persons acting as nominees or in conjunction therewith and (ii)
have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
(l) Nothing contained in this Agreement shall be construed as requiring the
Holder(s) to exercise their Warrants or Underlying Warrants prior to the
initial filing of any registration statement or the effectiveness thereof.
(m) In addition to the Registrable Securities, upon the written request
therefor, by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of
the date of filing of such registration statement, including without
limitation restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
7.6 Restrictive Legends. In the event that the Company fails to maintain
the effectiveness of the Registration Statement, such that the exercise, in
part or in whole, of the Warrants and the Underlying Warrants are not, at
the time of such exercise, registered under the Act, any certificates
representing the Shares underlying the Warrants, the Underlying Warrants
underlying the Warrants and the shares of Common Stock underlying the
Underlying Warrants, and any of the other securities issuable upon exercise
of the Warrants shall bear the following restrictive legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act"), and may not be
offered or sold except pursuant to (i) an effective registration statement
under the Act, (ii) to the extent applicable, Rule 144 under the Act (or
any similar rule under such Act relating to the disposition of securities),
or (iii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration
under such Act is available.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as hereinafter provided,
in the event the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the issuances or sales referred
to in Section 8.7 hereof), including shares held in the
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Company's treasury and shares of Common Stock issued upon the exercise of
any options, rights or warrants to subscribe for shares of Common Stock and
shares of Common Stock issued upon the direct or indirect conversion or
exchange of securities for shares of Common Stock, for a consideration per
share less than the Exercise Price in effect immediately prior to the
issuance or sale of such shares, or without consideration, then forthwith
upon such issuance or sale, the Exercise Price shall (until another such
issuance or sale) be reduced to the price (calculated to the nearest full
cent) equal to the quotient derived by dividing (i) an amount equal to the
sum of (a) the total number of shares of Common Stock outstanding
immediately prior to the issuance or sale of such shares, multiplied by the
Exercise Price in effect immediately prior to such issuance or sale, and
(b) the aggregate of the amount of all consideration, if any, received by
the Company upon such issuance or sale, by (ii) the total number of shares
of Common Stock outstanding immediately after such issuance or sale;
provided, however, that in no event shall the Exercise Price be adjusted
pursuant to this computation to an amount in excess of the Exercise Price
in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section
8.3 hereof.
For the purposes of this Section 8 the term Exercise Price shall mean the
Exercise Price per share of Common Stock set forth in Section 6 hereof, as
adjusted from time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this
Section 8.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by
the Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price) before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or other
performing similar services, or any expenses incurred in connection
therewith.
(ii) In case of the issuance or sale (other than as a dividend or other
distribution
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<PAGE>
on any stock of the Company) of shares of Common Stock for a consideration
part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of
such consideration as determined in good faith by the Board of Directors of
the Company and shall include any amounts payable to security holders or
any affiliates thereof, including without limitation, pursuant to any
employment agreement, royalty, consulting agreement, covenant not to
compete, earnout or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written; all such amounts being
valued for the purposes hereof at the aggregate amount payable thereunder,
whether such payments are absolute or contingent, and irrespective of the
period or uncertainty of payment, the rate of interest, if any, or the
contingent nature thereof; provided, however, that if any Holder(s) does
not agree with such evaluation, a mutually acceptable independent appraiser
shall make such evaluation, the cost of which shall be borne by the
Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the
record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued
without consideration.
(iv) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to
receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (ii)
of this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and Exchangeable Securities.
In case the Company shall at any time after the date hereof issue options,
rights or
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warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, for a
consideration per share less than the Market Price in effect immediately
prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, or without consideration, the
Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the
case may be, shall be reduced to a price determined by making a computation
in accordance with the provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock, as the case may
be, issuable under such options, rights or warrants shall be deemed to be
issued and outstanding at the time such options, rights or warrants were
issued, and for a consideration equal to the minimum purchase price per
share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with
the terms of the Warrants), if any, received by the Company for such
options, rights or warrants.
(b) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined
in the same manner as consideration received on the issue or sale of shares
of Common Stock in accordance with the terms of the Warrants) received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof.
(c) If any change shall occur in the price per share provided for in any of
the options, rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to
in subsection (b) of this Section 8.2 are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case
may be, shall be deemed to have expired or terminated on the date when such
price change became effective in respect of shares not theretofore issued
pursuant to the exercise or conversion or exchange thereof, and the Company
shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities at the new price in
respect of the number of shares issuable
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upon the exercise of such options, rights or warrants or the conversion or
exchange of such convertible or exchangeable securities.
8.3 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.4 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted exercise
price of each Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Securities issuable upon
exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.5 Definition of Common Stock. For the purpose of this Agreement, the term
"Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as amended as of the
date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par
value to par value. The Company covenants that so long as any of the
Warrants are outstanding, the Company shall not without the prior written
consent of the Underwriter issue any securities whatsoever other than
Common Stock. In the event that the Company shall, upon the consent of the
Underwriter, after the date hereof issue securities with greater or
superior voting rights than the shares of Common Stock outstanding as of
the date hereof, the Holder, at its option, may receive upon exercise of
any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
8.6 Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in
any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the
holder of each Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant)
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<PAGE>
to receive, upon exercise of such warrant, the kind and amount of shares of
stock and other securities and property receivable upon such consolidation
or merger, by a holder of the number of shares of Common Stock of the
Company for which such warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 8. The above provision of this subsection
shall similarly apply to successive consolidations or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment of the
Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants, Underlying Warrants,
Redeemable Warrants or the shares of Common Stock issuable upon the
exercise of (i) the Warrants, (ii) the Underlying Warrants, or (iii) the
Redeemable Warrants;
(b) If the amount of said adjustment shall be less than two (2) cents per
Warrant Security, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall
amount to at least two (2) cents per Warrant Security; or
(c) Upon the conversion of a $25, 000 promissory note, which bears interest
at the rate of 9% per annum and is convertible into up to 30% of the
outstanding shares of Common Stock of the Company, held by Loeb Holding
Corporation, as escrow agent.
8.8 Dividends and Other Distributions. In the event that the Company shall
at any time prior to the exercise of all Warrants declare a dividend (other
than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether
issued by the Company or by another, or any other thing of value, the
Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Common Stock or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise of such
Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled
to receive at the time of such dividend or distribution as if the Warrants
had been exercised immediately prior to such dividend or distribution. At
the time of any
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such dividend or distribution, the Company shall make appropriate reserves
to ensure the timely performance of the provisions of this subsection 8.8.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate
is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Warrant Securities in
such denominations as shall be designed by the Holder thereof at the time
of such surrender. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Warrants, if mutilated,
the Company will make and deliver a new Warrant Certificate of like tenor,
in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required
to issue fractional shares of Common Stock or Underlying Warrants upon the
exercise of Warrants. Warrants may only be exercised in such multiples as
are required to permit the issuance by the Company of one or more whole
shares of Common Stock and Underlying Warrants. If one or more Warrants
shall be presented for exercise in full at the same time by the same
Holder, the number of whole shares of Common Stock or Underlying Warrants
which shall be issuable upon such exercise thereof shall be computed on the
basis of the aggregate number of shares of Common Stock and Underlying
Warrants purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock or Underlying Warrants would, except
for the provisions provided herein, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in
cash equal to such fraction multiplied by the then current market value of
a share of Common Stock or Underlying Warrants, determined as follows:
(1) If the Common Stock or Underlying Warrant, as the case may be, is
listed, or admitted to unlisted trading privileges on the New York Stock
Exchange ("NYSE") or the
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American Stock Exchange ("AMEX"), or is traded on the NNM, the current
market value of a share of Common Stock or Underlying Warrant, as the case
may be, shall be the closing sale price of the Common Stock or the
Underlying Warrant, as the case may be, at the end of the regular trading
session on the last business day prior to the date of exercise of the
Warrants on whichever of such exchanges or NNM had the highest average
daily trading volume for the Common Stock or the Underlying Warrant, as the
case may be, on such day; or
(2) If the Common Stock or the Underlying Warrant, as the case may be, is
not listed or admitted to unlisted trading privileges, on either the NYSE
or the AMEX and is not traded on NNM, but is quoted or reported on Nasdaq,
the current market value of a share of Common Stock or the Underlying
Warrant, as the case may be, shall be the closing price (or the last sale
price, if then reported by Nasdaq) of the Common Stock or the Underlying
Warrant, as the case may be, at the end of the regular trading session on
the last business day prior to the date of exercise of the Warrants as
quoted or reported on Nasdaq, as the case may be; or
(3) If the Common Stock or the Underlying Warrant, as the case may be, is
not listed, or admitted to unlisted trading privileges, on either of the
NYSE or the AMEX, and is not traded on NNM or quoted or reported on Nasdaq,
but is listed or admitted to unlisted trading privileges on the BSE or
another national securities exchange (other than the NYSE or the AMEX), the
current market value of a share of Common Stock or Underlying Warrant, as
the case may be, shall be the closing price of the Common Stock or the
Underlying Warrant, as the case may be, at the end of the regular trading
session on the last business day prior to the date of exercise of the
Warrants on whichever of such exchanges has the highest average daily
trading volume for the Common Stock or the Underlying Warrant, as the case
may be, on such day; or
(4) If the Common Stock or the Underlying Warrant, as the case may be, is
not listed or admitted to unlisted trading privileges on any national
securities exchange, or listed for trading on NNM or quoted or reported on
Nasdaq, but is traded in the over-the-counter market, the current market
value of a share of Common Stock or the Underlying Warrant, as the case may
be, shall be the average of the last reported bid and asked prices of the
Common Stock or the Underlying Warrant, as the case may be, reported by the
National Quotation Bureau, Inc. on the last business day prior to the date
of exercise of the Warrants; or
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(5) If the Common Stock or the Underlying Warrant, as the case may be, is
not listed, admitted to unlisted trading privileges on any national
securities exchange, or listed for trading on NNM or quoted or reported on
Nasdaq, and bid and asked prices of the Common Stock or the Underlying
Warrant, as the case may be, are not reported by the National Quotation
Bureau, Inc., the current market value of a share of Common Stock or the
Underlying Warrant, as the case may be, shall be an amount, not less than
the book value thereof as of the end of the most recently completed fiscal
quarter of the Company ending prior to the date of exercise, determined in
accordance with generally acceptable accounting principles, consistently
applied.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants and
the Underlying Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all shares of Common
Stock and other Securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. The Company further covenants and
agrees that upon exercise of the Underlying Warrants underlying the
Warrants and payment of the respective Underlying Warrant exercise price
therefor, all shares of Common Stock and other securities issuable upon
such exercises shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of
the Warrants and Underlying Warrants and all Underlying Warrants underlying
the Warrants to be listed (subject to official notice of issuance) on all
securities exchanges on which the Common Stock or the Underlying Warrants
issued to the public in connection herewith may then be listed and quoted
on NNM.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
be construed as conferring upon the Holders the right to vote or to consent
or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other
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matter, or as having any rights whatsoever as a stockholder of the Company.
If, however, at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or
distribution payable other than in cash, or a cash dividend or distribution
payable other than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or (c) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation or merger) or a sale of all or substantially all of its
property, assets and business as an entirety shall be proposed; then, in
any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer book, as the
case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration
or payment of any such dividend, or the issuance of any convertible or
exchangeable securities, or subscription rights, options or warrants, or
any proposed dissolution, liquidation, winding up or sale.
13. Underlying Warrants. The form of the certificates representing Class A
and Class B Underlying Warrants (and the form of election to purchase
shares of Common Stock upon the exercise of Underlying Warrants and the
form of assignment printed on the reverse thereof) shall be substantially
as set forth in Exhibits "A" and "B" to the Redeemable Warrant Agreement
provided, however, that the Underlying Warrants will be subject to
redemption only after the Warrants have been exercised and the Underlying
Warrants are outstanding. Each Class A Underlying Warrant shall entitle the
Holder to
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purchase one fully paid and non-assessable share of Common Stock at an
initial purchase price of $6.90 from , 1998 until 5:00 P.M. New York time
on , 2002 at which time the Class A Underlying Warrants shall expire. Each
Class B Underlying Warrant shall entitle the Holder to purchase one fully
paid and non-assessable share of Common Stock at an initial purchase price
of $8.10 from , 1998 until 5:00 P.M. New York time on , 2002 at which time
the Class B Underlying Warrants shall expire. The exercise price of the
Underlying Warrants and the number of shares of Common Stock issuable upon
the exercise of the Underlying Warrants are subject to adjustment, whether
or not the Warrants have been exercised and the Underlying Warrants have
been issued, in the manner and upon the occurrence of the events set forth
in Section 8 of the Redeemable Warrant Agreement, which is hereby
incorporated herein by reference and made a part hereof as if set forth in
its entirety herein. Subject to the provisions of this Agreement and upon
issuance of the Underlying Warrants, each registered holder of such
Underlying Warrant shall have the right to purchase from the Company (and
the Company shall issue to such registered holders) up to the number of
fully paid and non-assessable shares of Common Stock (subject to adjustment
as provided herein and in the Redeemable Warrant Agreement), free and clear
of all preemptive rights of stockholders, provided that such registered
holder complies with the terms governing exercise of the Underlying Warrant
set forth in the Redeemable Warrant Agreement, and pays the applicable
exercise price, determined in accordance with the terms of the Redeemable
Warrant Agreement. Upon exercise of the Underlying Warrants, the Company
shall forthwith issue to the registered holder of any such Underlying
Warrant in his name or in such name as may be directed by him, certificates
for the number of shares of Common Stock so purchased. Except as otherwise
provided herein and in Section 6.1 hereof, the Underlying Warrants shall be
governed in all respects by the terms of the Redeemable Warrant Agreement
except that any notice of redemption that the Company may issue with
respect to the Redeemable Warrants shall not be applicable to the
Underlying Warrants. The Underlying Warrants shall be transferable in the
manner provided in the Redeemable Warrant Agreement, and upon any such
transfer, a new Underlying Warrant Certificate shall be issued promptly to
the transferee. The Company covenants to, and agrees with, the Holder(s)
that without the prior written consent of the Holder(s), which will not be
unreasonably withheld, the Redeemable Warrant Agreement will not be
modified, amended, canceled, altered or superseded,
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<PAGE>
and that the company will send to each Holder, irrespective of whether or
not the Warrants have been exercised, any and all notices required by the
Redeemable Warrant Agreement to be sent to holders of Underlying Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof or to
such other address as the Company may designate by notice to the Holders.
15. Supplements and Amendments. The Company and the Underwriter may from
time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Underwriter may deem necessary or desirable and which the Company and the
Underwriter deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of business on
, 2004. Notwithstanding the foregoing, the indemnification provisions of
Section 7 shall survive such termination until the close of business on ,
2006.
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18. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect
to the rules of said State governing the conflicts of laws. The Company,
the Underwriter and any other registered Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the
State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company, the Underwriter and any other
registered Holders hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company, the Underwriter and the Holders (at the
option of the party bringing such action, proceeding or claim) may be
served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 14 hereof. Such mailing shall be deemed personal
service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company, the Underwriter and any other
registered Holders agree that the prevailing party(ies) in any such action
or proceeding shall be entitled to recover from the other party(ies) all of
its'/their reasonable legal costs and expenses relating to such action or
proceeding and incurred in connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement and the Redeemable Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
may not be modified or amended except by a writing duly signed by the party
against whom enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
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21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
the Underwriter and any other registered Holder(s) of the Warrant
Certificates or Warrants Securities any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole
benefit of the Company and the Underwriter and any other registered Holders
of Warrant Certificates or Warrant Securities.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
GENISYS RESERVATION SYSTEMS, INC.
By:
Name:
Title:
R.D. WHITE & CO., INC.
By:
Name:
Title:
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EXHIBIT A
[FORM OF CLASS A WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2002
No. UW- Class A Warrants to Purchase
Shares of Common Stock
CLASS A WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants to purchase initially, at any time from ,
1998 until 5:00 p.m. New York time on , 2002 ("Expiration Date"), up to
fully-paid and non-assessable shares of common stock, $.0001 par value
("Common Stock") of Genisys Reservation Systems, Inc., a New Jersey
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $6.90 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement
dated as of , 1997 between the Company and R.D. WHITE & CO., INC. (the
"Underwriter's Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company or by surrender of this Warrant
Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
28
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to
for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and number of the Company's
securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise
Price and the number and type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company to issue
such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the
Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate of Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Underwriter's Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with
such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of
any exercise hereof, and of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in
the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of , 1997
Attest: GENISYS RESERVATION SYSTEMS, INC.
By:
Name: Name:
Title: Title:
29
<PAGE>
EXHIBIT B
[FORM OF CLASS B WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2002
No. UW- Class B Warrants to Purchase
Shares of Common Stock
CLASS B WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants to purchase initially, at any time from ,
1998 until 5:00 p.m. New York time on , 2002 ("Expiration Date"), up to
fully-paid and non-assessable shares of common stock, $.0001 par value
("Common Stock") of Genisys Reservation Systems, Inc., a New Jersey
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $8.10 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement
dated as of , 1997 between the Company and R.D. WHITE & CO., INC. (the
"Underwriter's Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company or by surrender of this Warrant
Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
30
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to
for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and number of the Company's
securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise
Price and the number and type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company to issue
such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the
Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate of Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Underwriter's Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with
such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of
any exercise hereof, and of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in
the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of , 1997
Attest: GENISYS RESERVATION SYSTEMS, INC.
By:
Name: Name:
Title: Title:
31
<PAGE>
EXHIBIT C
[FORM OF CLASS A WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2002
No. W- Class A Warrants to Purchase
Underlying Warrants
CLASS A WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants to purchase initially, at any time from ,
1998 until 5:00 p.m. New York time on , 2002 ("Expiration Date"), up to
warrants (each such Underlying Warrant entitling the owner to purchase one
fully-paid and non-assessable share of common stock, $.0001 par value
("Common Stock") of Genisys Reservation Systems, Inc., a New Jersey
corporation (the "Company")), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $.24 per Underlying
Warrant upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement
dated as of , 1997 between the Company and R.D. WHITE & CO., INC. (the
"Underwriter's Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company or by surrender of this Warrant
Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
32
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to
for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and number of the Company's
securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise
Price and the number and type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company to issue
such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the
Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate of Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Underwriter's Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with
such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of
any exercise hereof, and of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in
the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of , 1997
Attest: GENISYS RESERVATION SYSTEMS, INC.
By:
Name: Name:
Title: Title:
33
<PAGE>
EXHIBIT D
[FORM OF CLASS A WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH
ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2002
No. W- Class B Warrants to Purchase
Underlying Warrants
CLASS B WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants to purchase initially, at any time from ,
1998 until 5:00 p.m. New York time on , 2002 ("Expiration Date"), up to
warrants (each such Underlying Warrant entitling the owner to purchase one
fully-paid and non-assessable share of common stock, $.0001 par value
("Common Stock") of Genisys Reservation Systems, Inc., a New Jersey
corporation (the "Company")), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $.12 per Underlying
Warrant upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement
dated as of , 1997 between the Company and R.D. WHITE & CO., INC. (the
"Underwriter's Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company or by surrender of this Warrant
Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
34
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to
for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and number of the Company's
securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise
Price and the number and type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company to issue
such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the
Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate of Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Underwriter's Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with
such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of
any exercise hereof, and of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in
the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of , 1997
Attest: GENISYS RESERVATION SYSTEMS, INC.
By:
Name: Name:
Title: Title:
35
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
Shares
Class A Underlying Warrants
Class B Underlying Warrants
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order of Genisys
Reservation Systems, Inc., in the amount of $ , all in accordance with the
terms of Section 3.1 of the Underwriter's Warrant Agreement dated as of ,
1997 between Genisys Reservation Systems, Inc., and R.D. White & Co., Inc.
The undersigned request that a certificate for such Securities be
registered in the name of whose address is and that such Certificate be
delivered to whose address is .
Signature
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other Identifying
Number of Holder)
36
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and unto
(Please print name and address of transferee)
Warrant Certificate, together with all right, title and interest therein,
and does hereby reasonably constitute and appoint , as Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Date: Signature:
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other Identifying
Number of Assignee)
37
<PAGE>
Exhibit 5
January 16, 1997
Unites States Securities
and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Genisys Reservation Systems, Inc. (the "Company")
Gentlemen:
Reference is made to the registration statement (the "Registration
Statement") on Form SB-2, registration number 333-15011, filed with the
Securities and Exchange Commission by the Company.
We hereby advise you that we have examined originals or copies certified to
our satisfaction of the Certificate of Incorporation and amendments thereto
and the By-Laws and amendments thereto of the Company, minutes of the
meetings of the Board of Directors and Shareholders and such other
documents and instruments, and we have made such examination of law as we
have deemed appropriate as the basis for the opinions hereinafter
expressed.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of New Jersey.
2. The 1,035,000 shares of the Company's Common Stock (including the
Underwriter's Over- Allotment Option) which are due to be sold pursuant to
the Underwriter Agreement ("Agreement") have been duly and validly
authorized and when issued and paid for in accordance with the terms of the
Agreement between the Company and R.D. White, Inc. (the "Underwriter"),
will be validly issued, fully paid and non- assessable shares of Common
Stock of the Company.
3. The Class A Warrants to purchase up to 1,725,000 shares of the Company's
Common Stock will be duly and validly issued and exercisable in accordance
with their terms. The 1,725,000 shares of the Company's Common Stock (the
"Common Stock") issuable upon the exercise of the Class A Warrants, have
been duly and validly authorized and when paid for will be duly authorized
and issued and fully paid and non-assessable.
4. The Class B Warrants to purchase up to 1,035,000 shares of the Company's
Common Stock will be duly and validly issued and exercisable in accordance
with their terms. The 1,035,000 shares of the Company's Common Stock (the
"Common Stock") issuable upon the exercise of the Class B Warrants, have
been duly and validly authorized and when paid for will be duly authorized
and issued and fully paid and non-assessable.
5. The 287,500 shares of the Company's Common Stock issuable upon exercise
of the outstanding Selling Shareholder Warrants, have been duly and validly
authorized, and when paid for will be
<PAGE>
duly issued, fully paid and non-assessable. The Selling Shareholder
Warrants have been duly authorized and issued and are exercisable in
accordance with their terms.
6. The 3,067,500 shares of Common Stock underlying the Class A Warrants,
the Class B Warrants and the Selling Shareholder Warrants have been
reserved for issuance upon exercise thereof.
7. The Underwriter's Purchase Option ("Purchase Option") to be sold to the
Underwriter entitling it to purchase 90,000 shares of Common Stock and
150,000 Class A Warrants and 90,000 Class B Warrants has been duly
authorized and will be issued in accordance with the Agreement, and such
90,000 shares of Common Stock have been duly and validly authorized and
when paid for, will be validly issued fully paid and non-assessable. In
addition, the 150,000 shares of Common Stock issuable upon the exercise of
the Class A Warrants, and the 90,000 shares of Common Stock issuable upon
the exercise of the Class B Warrants granted to the Underwriter pursuant to
the Purchase Option have been duly authorized and issued and when paid for
will be fully paid and non-assessable. The 240,000 shares of Common Stock
issuable upon exercise of the Purchase Option have been duly reserved for
issuance upon exercise thereof, and when issued, and paid for in accordance
with their terms, will be validly issued, fully paid and non-assessable
shares of Common Stock of the Company.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus forming a part of such Registration Statement
and to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
McLAUGHLIN & STERN, LLP
<PAGE>
Exhibit 10.15
September 5, 1995
Mr. Joseph Cutrona
President
Corporate Travel Link, Inc.
P.O. Box 2440
Newark, New Jersey 07114
Dear Mr. Cutrona:
This is to confirm our Agreement whereby Corporate Travel Link, Inc.
(hereby to known as the "Company") has requested Loeb Partners Corporation
("LOEB") to render services to it and LOEB has agreed to render such
services on the terms and conditions set forth herein:
1. The Company hereby retains LOEB for the three (3) year period commencing
on the date hereof to render consulting advice to the Company as its
exclusive investment banker relating to financial and similar matters.
During the term of this Agreement, LOEB will provide the Company with such
regular and customary consulting advice as is reasonably requested by the
Company. It is understood and acknowledged by the parties that the value of
LOEB's advice is not measurable in any quantitative manner and LOEB shall
be obligated to render advice upon the request of the Company in good
faith, but shall not be obligated to spend any specific amount of time in
doing so.
2. As full compensation for the services to be rendered by LOEB pursuant to
Paragraphs 1 and 3 hereof, the Company shall pay LOEB a retainer of $36,000
per annum, payable monthly in installments of $3,000 each, in advance, on
the first day of every month for the duration of this Agreement. In
addition, the Company shall reimburse LOEB for any and all reasonable
out-of- pocket expenses incurred by it on the Company's behalf with the
Company's approval and upon the presentation by LOEB of supporting
documentation.
3. LOEB will, upon the request of the Company, consult with the Company's
management and provide recommendations concerning financial and related
matters, including:
<PAGE>
A. Changes in the capitalization of the Company;
B. Changes in the Company's corporate structure;
C. Redistribution of shareholdings of the Company's stock;
D. Offerings of securities to the public;
E. Sales of securities in private transactions;
F. Alternative uses of corporate assets;
G. Structure and use of debt.
4. If LOEB assists the Company in the private sale or distribution of
securities, LOEB will be paid at the closing of such a transaction a cash
commission of five percent (5%) of the gross amount raised plus
reimbursement of all related expenses. In addition, LOEB shall receive
warrants to purchase securities in the Company equal to five percent (5%)
of the securities sold through such transaction and at the price paid by
the purchasers, for a period of five years commencing from the closing of
the transaction.
5. LOEB agrees to furnish advice to the Company in connection with the
acquisition of and/or merger with other companies, joint ventures with any
third parties and any other financing (other than the private or public
sale of the Company's securities for cash or any ordinary commercial bank
loan or line of credit) including without limitation, the sale of the
Company itself (or any significant percentage, subsidiaries or affiliates
thereof).
In the event that such transaction occur during the term of this Agreement
which result from, or are caused by, introductions made by LOEB, or if
LOEB, at the request of the Company, performs services (other that the
regular and customary consulting advice described in paragraph 1) on a
transaction which it has not so introduced, the Company shall pay fees to
LOEB as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-0- - $1,000,000 - Minimum fee $50,000
$1,000,000 - $3,000,000 - $50,000 plus 5% of legal
consideration in excess of
$1,000,000
$3,000,000 - $5,000,000 - $150,000 plus 3% of legal
consideration in excess of
$3,000,000
Over $5,000,000 - $210,000 plus 1% of legal
consideration in excess of
$5,000,000
</TABLE>
Legal consideration is defined, for the purpose of this Agreement, as the
total of stock (valued at market on the day of closing, or if there is no
public market, valued as set forth herein for other property) cash and
assets and property or other benefits exchanged by the Company as
consideration (all valued at fair market value as agreed or, if not, by any
independent appraiser), irrespective of period of payment or terms.
6. The Company may request that LOEB provide services outside the normal
scope of this Agreement. The fees to be paid for such services shall be
agreed upon separately at the time of such request.
7. All fees where applicable under this Agreement are due and payable to
LOEB in cash at the closing of any transaction. In the event that this
Agreement shall not be renewed for a period of twelve (12) months or if
terminated for any reason notwithstanding any such renewal or termination,
LOEB shall be entitled to a full fee for any transaction contemplated by
Paragraphs 4 and 5 hereof commenced during such period and closed within a
period of twelve (12) months after non-renewal or termination.
8. Use of the LOEB name in annual reports or any other reports of the
Company or releases by the Company shall have the prior written approval of
LOEB.
9. LOEB shall have the right of first refusal on any future private or
public financing for a period of 5 years from the commencement date of this
Agreement.
<PAGE>
If the foregoing correctly sets forth the understanding between LOEB and
the Company with respect to the foregoing, please so indicate your
agreement by signing in the place provided below at which time this letter
shall become a binding contract.
Loeb Partners Corporation
By: ______________________
Warren D. Bagatelle
Managing Director
ACCEPTED & AGREED:
Corporate Travel Link, Inc.
By:_____________________
Joseph Cutrona, President
<PAGE>
Exhibit 10.16
PROMISSORY NOTE
$12,500.00 November 6, 1996
FOR VALUE RECEIVED, the undersigned (The Maker)
promises to pay to the order of Loeb Holding Corporation, as
escrow agent (Loeb), or to any successor holder of this Note
being referred to herein as the Lender, or to such other person
or at such other place as the Lender may from time to time
designate in writing, the principal sum of Twelve Thousand Five
Hundred ($12,500.00) Dollars, together with interest on the
unpaid balance from time to time outstanding from the date of
this Note at the rate of interest and in the manner hereinafter
provided.
1. Advances. Loeb shall advance to The Maker such
sums as The Maker shall require from time to time, up to a
maximum of $12,500.00.
2. Payments.
A. Interest. The Maker shall pay interest on all
sums advanced by Loeb at the rate of nine (9%) per cent per
annum. Said payments shall be made in accordance with the
provisions of this Promissory Note, or at such earlier date that
this Note becomes due and payable as a result of acceleration,
prepayment or as otherwise provided herein. Interest shall begin
to run from the date that the monies are or were advanced to the
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Maker. On March 31, 1997, all interest that has accrued through
that date shall be calculated and shall be paid in four equal
installments on March 31, 1997, June 30, 1997, September 30, 1997
and December 31, 1997. In addition, the first quarterly interest
payment shall be made on March 31, 1997, for interest due for the
first quarter of 1997, and quarterly interest payments shall be
made thereafter on March 31st, June 30th, September 30th and
December 31st of each year.
B. Principal. The principal amount of the note
shall be repaid by the Maker in twelve (12) equal quarterly
installments, the first principal payment to be made on April 1,
1998, or such earlier date that this Note becomes due and payable
as a result of acceleration, prepayment or as otherwise provided
herein.
3. Prepayment. This Note may be paid in part or in
whole at any time prior to maturity only with the prior written
consent of the Lender.
4. Repayment Priority. At the time of payment of all
or any portion of the Loan Balance, the proceeds shall be applied
by the Lender, first, to the payment of interest then due, second
to the payment of the then outstanding principal balance under
this Note and, third, to any other payments and charges due under
this Note.
5. Conversion. This note will be convertible at the
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sole option of the holder under the circumstances more fully
described herein.
A. When Conversion is Permitted. This Note will
be convertible into a maximum of fifteen per cent (15%) of the
fully diluted, fully paid and non-assessable shares of the common
stock of Genisys Reservation Systems, Inc. (Genisys), pursuant to
a sliding scale based upon the audited pre-tax profits of
Genisys, during calendar years 1996 and 1997. If the audited
pre-tax profits of Genisys, equal eighty per cent (80%) or more
of the projected audited profits, Loeb shall have no right of
conversion. If the audited pre-tax profits of Genisys are fifty
per cent (50%) or less of the projected audited pre-tax profits,
Loeb shall have the sole option to convert this Note into fifteen
per cent (15%) of the fully-diluted, fully paid and non-
assessable authorized, issued and outstanding shares of the
common stock of Genisys. If the audited pre-tax profits of
Genisys, are between fifty per cent (50%) and eighty per cent
(80%) of the projected audited pre-tax profits, then this Note is
convertible into a pro rata portion of the shares of stock.
B. Manner of Converting. In order to exercise
the conversion privilege, the holder of this Note shall surrender
it to Genisys. If the stock into which this Note is convertible
is to be issued in a name or names other than that of the
registered owner of this Note, then this Note must be accompanied
by a proper assignment, together with any other applicable
written instructions. After conversion, the holder will not be
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entitled to any interest on this Note not due and payable at or
prior to the date of conversion.
C. Projected pre-tax profits. The projected pre-
tax profits of Genisys are as follows:
Calendar year 1996 $2,200,000.00
Calendar year 1997 $2,700,000.00
D. Computation of Pretax Profits. In determining
whether or not Genisys, has reached its projected pre-tax profit
level for Calendar Year 1996, the audit of the accountants of
Genisys Reservation Systems, Inc., shall be presumed to be
accurate for all purposes pursuant to this Promissory Note.
E. If conversion is permitted pursuant to the
provisions of this agreement, the Lender may at its option
convert only a portion of this Note into an appropriate number of
the fully diluted, fully paid and non-assessable shares of the
common stock of the Maker.
6. Waivers by the Maker. The Maker hereby waives
presentment for payment, protest and demand, notice of protest,
demand and of dishonor and nonpayment of this Note. The Maker's
liability hereunder shall remain unimpaired notwithstanding any
extension of the time of payment or other indulgence granted by
the Lender.
7. Default. The following events shall constitute a
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default by the Maker:
A. Any default under the Memorandum of Sale of
Corporate Stock.
B. The filing of a bankruptcy petition under
either Chapter 7 or Chapter 11 of the United States Bankruptcy
Code, or the filing of an assignment for the benefit of
creditors.
C. The failure to make timely payment of interest
or principal, which has not been cured within ten (10) days of
the date said payment of interest or principal is due.
Lender shall not be required to give notice of default to
the Maker. In the event of a default by the Maker, all amounts
due under both notes shall, at the option of the Lender, become
accelerated and shall be due and payable immediately. From and
after the date of default, the interest rate on both notes shall
be fifteen 15% per annum.
8. Governing Law. The Maker agrees that this Note
shall be construed in accordance with and governed by the Law of
New York.
7. Severability. The terms and provisions of this
Note are severable, and if any term or provision shall be
determined to be superseded, illegal, invalid or otherwise
unenforceable in whole or in part, such determination shall not
in any manner impair or otherwise affect the validity, legality
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or enforceability of any of the remaining terms and provisions of
this Note.
GENISYS RESERVATION SYSTEMS, INC.
By:________________________________
ATTEST: JOSEPH CUTRONA, President
____________________________
JOHN H. WASKO, Secretary By:________________________________
JOHN H.WASKO, Treasurer
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EXHIBIT A
COMPUTATION OF CONVERSION PERCENTAGE
Divide the actual audited pre-tax profit by the projected
pre-tax profit to find the ratio that the audited pre-tax profit
bears to the projected profit. Multiply this number by 100 to
convert it to a percentage figure.
A. If the percentage is 80% or more, then Loeb will
not be entitled to additional stock of Genisys Reservation
Systems, Inc.
B. If the percentage is 50% or less, then Loeb will be
entitled to an additional fifteen per cent (15%) of the stock of
Genisys Reservation Systems, Inc.
C. If the percentage is less than 80% but greater than
or equal to 50%, then Loeb will receive a pro-rated portion of
fifteen per cent (15%) of the stock of Genisys Reservation
Systems, Inc.
Examples:
A. In 1996, the projected pre-tax profit is
$2,200,000.00. Assume that the actual pre-tax profit is
$1,870,000.00. To determine the amount of additional stock (if
any) to which Loeb is entitled, divide 1,870,000 by 2,200,000.
The result of this division is 0.85. Since 0.85 is greater than
0.8, Loeb is not entitled to additional stock.
B. In 1996, the projected pre-tax profit is
$2,200,000.00. Assume that the actual pre-tax profit is
$1,320,000.00. To determine the amount of additional stock to
which Loeb is entitled, divide 1,320,000 by 2,200,000. The
result of this division is 0.6. Since 0.6 is two-thirds of the
distance between 0.8 and 0.5, Loeb would be entitled to an
additional two-thirds of 15% of the stock of Genisys Reservation
Systems, Inc. or an additional 10%.
C. In 1996, the projected pre-tax profit is
$2,200,000.00. Assume that the actual pre-tax profit is
$880,000.00. To determine the amount of additional stock to
which Loeb is entitled, divide 880,000 by 2,200,000. The result
of this division is 0.4. Since 0.4 is less than 0.5, Loeb would
be entitled to an additional 15% of the stock of Genisys
Reservation Systems, Inc.
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PROMISSORY NOTE
$237,500.00 DATED: November 6, 1996
FOR VALUE RECEIVED, the undersigned (The Maker)
promises to pay to the order of Loeb Holding Corporation, as
escrow agent (Loeb), or to any successor holder of this Note
being referred to herein as the Lender, or to such other person
or at such other place as the Lender may from time to time
designate in writing, the principal sum of Two Hundred Thirty
Seven Thousand Five Hundred ($237,500.00) Dollars, together with
interest on the unpaid balance from time to time outstanding from
the date of this Note at the rate of interest and in the manner
hereinafter provided.
1. Advances. Loeb shall advance to The Maker such
sums as The Maker shall require from time to time, up to a
maximum of $237,500.00. The Maker acknowledges receipt of five
advances as follows:
A. On or about December 1, 1995, in the principal
sum of $50,000.00, pursuant to an Interim Loan Agreement executed
on or about that date.
B. On or about December 4, 1995, in the principal
sum of $100,000.00, pursuant to a Second Interim Loan Agreement
executed on or about that date.
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C. On or about January 16, 1996, in the principal
sum of $50,000.00, pursuant to a Third Interim Loan Agreement
executed on or about that date.
D. On or about February 23, 1996, in the
principal sum of $25,000.00, pursuant to a Fourth Interim Loan
Agreement executed on or about that date.
E. On or about March 12, 1996, in the principal
sum of $12,500.00, pursuant to a Fifth Interim Loan Agreement
executed on or about that date.
Repayment of the aforesaid advances shall be governed by
this Promissory Note, and not by the provisions of any of the
Interim Loan Agreements. The said Interim Loan Agreement, Second
Interim Loan Agreement, Third Interim Loan Agreement, Fourth
Interim Loan Agreement, and Fifth Interim Loan Agreement are
hereby declared null and void.
2. Payments.
A. Interest. The Maker shall pay interest on all
sums advanced by Loeb at the rate of nine (9%) per cent per
annum. Said payments shall be made quarterly at the end of each
calendar quarter, or at such earlier date that this Note becomes
due and payable as a result of acceleration, prepayment or as
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otherwise provided herein. Interest shall begin to run from the
date that the monies are or were advanced to the Maker. On March
31, 1997, all interest that has accrued through that date shall
be calculated and shall be paid in four equal installments on
March 31, 1997, June 30, 1997, September 30, 1997 and December
31, 1997. In addition, the first quarterly interest payment
shall be made on March 31, 1997, for interest due for the first
quarter of 1997, and quarterly interest payments shall be made
thereafter on March 31st, June 30th, September 30th and December
31st of each year.
B. Principal. The principal amount of the note
shall be repaid by The Maker in twelve (12) equal quarterly
installments, the first principal payment to be made two years
from the date of this Promissory Note.
3. Prepayment. This Note may be paid in part or in
whole at any time prior to maturity without the prior written
consent of the Lender.
4. Repayment Priority. At the time of payment of all
or any portion of the Loan Balance, the proceeds shall be applied
by the Lender, first, to the payment of interest then due, second
to the payment of the then outstanding principal balance under
this Note and, third, to any other payments and charges due under
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this Note.
5. Waivers by the maker. The Maker hereby waives
presentment for payment, protest and demand, notice of protest,
demand and of dishonor and nonpayment of this Note. The Maker's
liability hereunder shall remain unimpaired notwithstanding any
extension of the time of payment or other indulgence granted by
the Lender.
6. The following events shall constitute a default by
the Maker:
A. Any default under the Memorandum of Sale of
Corporate Stock.
B. The filing of a bankruptcy petition under either
Chapter 7 or Chapter 11 of the United States Bankruptcy Code, or
the filing of an assignment for the benefit of creditors.
C. The failure to make timely payment of interest or
principal, which has not been cured within ten (10) days of the
date said payment of interest or principal is due.
Lender shall not be required to give notice of default to
the Maker. In the event of a default by the Maker, all amounts
due under both notes shall, at the option of the Lender, become
accelerated and shall be due and payable immediately. From and
after the date of default, the interest rate on both notes shall
be fifteen per cent (15%) per annum.
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7. Governing Law. The Maker agrees that this Note
shall be construed in accordance with and governed by the Law of
New York.
8. Severability. The terms and provisions of this
Note are severable, and if any term or provision shall be
determined to be superseded, illegal, invalid or otherwise
unenforceable in whole or in part, such determination shall not
in any manner impair or otherwise affect the validity, legality
or enforceability of any of the remaining terms and provisions of
this Note.
WHEREFORE, GENISYS RESERVATION SYSTEMS, INC., hereby
executes this Note, which has been duly authorized by a
resolution of its Board of Directors, this 6th day of November,
1996.
GENISYS RESERVATION SYSTEMS, INC.
By:________________________________
ATTEST: JOSEPH CUTRONA, President
____________________________
JOHN H. WASKO, Secretary By:________________________________
JOHN H. WASKO, Treasurer
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