As filed with the Securities and Exchange Commission on August 6, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under the Securities Act of 1933
PROFORMIX SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2228828
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
50 Tannery Road
Branchburg, New Jersey 08876
(908) 534-6400
(Address and Telephone Number of Registrant's
Principal Executive Office)(Zip Code)
Consulting Agreement by and between
Seymour Kroll and Proformix Systems, Inc.
(110,000 Shares of Common Stock)
Consulting Agreement by and between
Carl Henn and Proformix Systems, Inc.
(30,000 Shares of Common Stock)
Consulting Agreement by and between
Anthony W. Schweiger and Proformix Systems, Inc.
(210,000 Shares of Common Stock)
Employment Agreement by and between
Michael G. Martin and Proformix Systems, Inc.
(60,000 Shares of Common Stock)
(full title of the plans)
Donald R. Yu, President
702 Marshall Street
Redwood, California 94063
(510) 653-0883
(Name, Address & Telephone number, including area code, of agent for service)
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Copies to:
Michael H. Freedman, Esq.
Silverman, Collura, Chernis & Balzano, P.C.
381 Park Avenue South - Suite 1601
New York, New York 10016
(212) 779-8600
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Title of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per share (1) offering price (1) fee
- --------------------------------------------------------------------------------
Common Stock(1) 410,000 $.0625 $25,625.00 $7.77
- ----------
(1) Calculated in accordance with 457(c) using the average of the bid and asked
price for the Common Stock on July 7, 1997.
(2) Includes 10,000 Shares of Common Stock underlying a stock option.
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PART I - INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The documents containing information specified in Part 1 (plan information
and registrant information) will be sent or given to the consultants as
specified by Rule 428(b)(1). Such documents need not be filed with the
Securities and Exchange Commission either as part of this registration statement
or as prospectuses or prospectus supplements pursuant to Rule 424. These
documents and the documents incorporated by reference in this registration
statement pursuant to Item 3 of Part 2 of this form taken together constitute a
prospectus that meets the requirements of Section 10(a) of the Securities Act of
1933.
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PROFORMIX SYSTEMS, INC.
Cross-Reference Sheet Showing Location in Prospectus
of Information Required by Items of Form S-8
Form S-8 Items and Heading Location in Prospectus
- -------------------------- ----------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of Prospectus....... Front Cover Page
2. Inside Front And Outside Back Cover.............. Inside Front Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges..................... The Company
4. Use of Proceeds.................................. Not Applicable
5. Determination of Offering Price.................. Not Applicable
6. Dilution......................................... Not Applicable
7. Selling Security Holders......................... Selling Stockholders
8. Plan of Distribution............................. Plan of Distribution
9. Description of Securities to be Registered ..... Description of Securities
10. Interest of Named Experts and Counsel............ Legal Matters
11. Material Changes................................. Not Applicable
12. Incorporation of Certain Information by
Reference........................................ Incorporation of
Certain Documents by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................................... Indemnification of
Directors and Officers
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RE-OFFER PROSPECTUS
PROFORMIX SYSTEMS, INC.
50 Tannery Road
Branchburg, New Jersey 08876
Common Stock
This Prospectus relates to offers and sales by certain key consultants and
one employee of Proformix Systems, Inc., a Delaware corporation ("Company"),
named herein ("Selling Stockholders"), of shares of the Company's Common Stock,
$.0001 par value ("Common Stock"), granted to them pursuant to written
compensation contracts. The Company has entered into an agreement with (i)
Seymour Kroll for the issuance of 110,000 shares of Common Stock pursuant to a
consulting agreement dated July 15, 1997 ("Kroll Agreement"); Carl Henn for the
issuance of 30,000 shares of Common Stock pursuant to a consulting agreement
dated July 15, 1997 ("Henn Agreement"); (iii) Anthony W. Schweiger for the
issance of a stock option for the purchase 10,000 shares of Common Stock and for
the issuance of 200,000 shares of Common Stock ("Schweiger Agreement"); and (iv)
Michael G. Martin, the Company's President, for the issuance of 60,000 shares of
Common Stock ("Martin Agreement") (the Kroll Agreement, Henn Agreement,
Schweiger Agreement and Martin Agreement are collectively referred to herein as
the "Plans"). The shares of Common Stock that have been or will be acquired by
such persons pursuant to the Plans are herein referred to as the "Shares".
The Shares may be offered hereby from time to time by any and all of the
Selling Stockholders named herein, for their own benefit. The Company will
receive no portion of the proceeds of sales made hereunder. All expenses of
registration incurred in connection with this offering are being borne by the
Company, but all selling and other expenses incurred by the Selling Stockholders
will be borne by such Selling Stockholders.
All or a portion of the shares of Common Stock offered hereby may be
offered for sale, from time to time, on the OTC Bulletin Board ("Bulletin
Board"), or otherwise, at prices and terms then obtainable. All brokers'
commissions, concessions or discounts will be paid by the Selling Stockholders.
The Selling Stockholders and any broker executing selling orders on behalf
of the Selling Stockholders may be deemed to be an "underwriter" within the
meaning of the Securities Act, in which event commissions received by such
broker may be deemed to be underwriting commissions under the Securities Act.
The Common Stock of the Company was listed on the Bulletin Board under the
symbol WHSN up to July 22, 1997. On July 22, 1997 the symbol was changed to
PRFX. On July 7, 1997, the last reported sale price of the Company's Common
Stock on the Bulletin Board was $.0625.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 19, 1997.
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TABLE OF CONTENTS
Page
Available Information...................................................... 7
The Company................................................................ 8
Risk Factors............................................................... 10
Selling Stockholders....................................................... 14
Transfer Agent and Registrar............................................... 15
Plan of Distribution....................................................... 15
Incorporation of Certain Documents by Reference............................ 15
Legal Matters.............................................................. 17
Experts.................................................................... 17
Indemnification of Directors and Officers.................................. 17
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No person is authorized to give any information or to make any
representation, other than those contained in this Prospectus, in connection
with the offering described herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Selling Stockholders. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, nor shall there be any sale of these
securities by any person in any jurisdiction in which it is unlawful for such
person to make such offer, solicitation or sale. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Room 1204, Everett McKinley Dirksen Building,
219 South Dearborn Street, Chicago, Illinois 60604; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statements of which this Prospectus is a part and which the Company
has filed with the Commission. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed as a part thereof, copies of which can
be inspected at, or obtained at prescribed rates from the Public Reference
Section of the Commission at the address set forth above. Additional updating
information with respect to the Company may be provided in the future by means
of appendices or supplements to the Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the information that has been or may be
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Proformix Systems, Inc., 50 Tannery Road,
Branchburg, New Jersey 08876 (908) 534-6400.
7
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THE COMPANY
Whitestone Industries, Inc. (the "Company" or "Whitestone") was
incorporated as a Delaware corporation on April 19, 1988 under the name
"Fortunistics Inc." as a "blind pool" or "blank check" company to seek
acquisition possibilities, make acquisitions or enter into other business
endeavors. The Company, through its wholly-owned subsidiary, Golden Bear
Entertainment Corporation ("Golden Bear"), has been previously engaged in
developing and marketing electronic, interactive, pre-school children's games
and educational products. In particular, the Company has developed prototypes of
its products and has been negotiating marketing outlets, primarily with large,
national toy store chains. Accordingly, the Company has been considered to be a
development stage company for accounting purposes.
As a result of the inability of the Company to implement its strategic
program for the development of its Golden Bear subsidiary, and the desire to
secure a possible operating base so that the Company's stockholders may receive
a satisfactory return on their investment, the Company and its president, Mr.
Donald Yu, entered into an Agreement on June 16, 1997 with Royal Capital, Inc.
("Royal") whereby Royal (i) acquired 100,000 shares of the Company's Preferred
Stock held by Mr. Yu; and (ii) acquired the voting proxy of 1,120,000 shares of
Common Stock. The consideration paid to Mr. Yu was $100,000. As a result, Royal
obtained a voting majority of the Company's capital stock.
On June 24, 1997, the Company, Royal and Proformix, Inc., a Delaware
company ("Proformix"), entered into a stock exchange agreement whereby the
Company will acquire all or substantially all of the outstanding shares of
capital stock of Proformix. In order to enter into the aforesaid agreement, the
Company's Board of Directors authorized and effectuated a 137:1 reverse split of
its outstanding shares of Common Stock (including shares of Common Stock
underlying the Company's outstanding Preferred Stock) and changed its name to
Proformix Systems, Inc. The Company intends to exchange one share of its Common
Stock for every 3.4676 shares of Proformix common stock. The aforesaid
acquisition will not include Golden Bear Entertainment Corp. ("Golden Bear"),
the Company's wholly owned subsidiary, which will be spun off pursuant to a 5%
stock dividend of the Common Stock of Golden Bear to shareholders of record as
of June 13, 1997.
Proformix is a research based ergonomics company focusing on the
computerized workplace. Computer ergonomics optimizes the design of technology
that allows persons to successfully interact with computers. The Company
believes that the acquisition of Proformix is in the best interests of the
Company's shareholders and should result in increased shareholder value.
8
<PAGE>
RISK FACTORS
The following factors should be considered carefully in evaluating the
Company's business and before making any investment in the Company.
Substantial Competition
Products developed for the computer workplace face intense competition. The
Company will be at a competitive disadvantage in seeking to compete with other
companies having more assets, larger technical staffs, established market shares
and greater financial and operational resources than the Company. There can be
no assurance that the Company will be able to meet the competition and operate
profitably.
Possible Loss of Entire Investment
The Shares offered hereby are highly speculative, involve a high degree of
risk and should not be purchased by any person who cannot afford the loss of his
entire investment. A purchase of the Company's stock in this Offering would be
"unsuitable" for a person who cannot afford to sustain such a loss.
Dependence Upon Key Personnel
The Company is substantially dependent upon the continued services of
Michael G. Martin, its Chairman and Chief Executive Officer. The loss of the
services of Mr. Martin through incapacity or otherwise would have a material
adverse effect upon the Company's business and prospects. To the extent that his
services become unavailable, the Company will be required to retain other
qualified personnel, and there can be no assurance that it will be able to
recruit and hire qualified persons upon acceptable terms. The Company does not
maintain key person life and disability insurance on the life of Mr. Martin.
Possible Volatility of Stock Price
There can be no assurance that a public market price for the Common Stock
will continue or that it will ever be an active trading market. The market
prices of the Common Stock may be significantly affected by factors such as
announcements by the Company or its competitors, as well as variations in the
Company's results of operations and market conditions in general. The market
prices may also be affected by movements in prices of stocks in general. The
relatively limited amount of publicly trading shares (float) renders the
Company's securities especially susceptible to sharp price fluctuations. There
can be no assurance that purchasers of the Shares offered hereby will be able to
resell the Shares at or near the purchase price therefor.
Penny Stock Regulations
The Securities Enforcement Penny Stock Act of 1990 requires specific
disclosure to be made available in connection with trades in the stock of
companies defined as "penny stocks. The Commission has adopted regulations that
generally define a penny stock to be any equity
9
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security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on NASDAQ
or other principal national exchanges, and any equity security issued by an
issuer that has (i) net tangible assets of at least $2,000,000, if such issuer
has been in continuous operation for three years; (ii) net tangible assets of at
least $5,000,000, if such issuer has been in continuous operation for less than
three years; or (iii) average annual revenue of at least $6,000,000, if such
issuer has been in continuous operation for less than three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risk associated therewith as well as the written
consent of the purchaser of such security prior to engaging in a penny stock
transaction. The regulations on penny stocks may limit the ability of the
purchasers of the Company's securities to sell their securities in the secondary
marketplace. The Company's Shares are currently considered a penny stock.
No Cumulative Voting
Holders of the Shares of Common Stock are not entitled to accumulate their
votes for the election of directors or otherwise. Accordingly, the holders of a
majority of the shares present at a meeting of shareholders will be able to
elect all of the directors of the Company, and the minority shareholders will
not be able to elect a representative to the Company's board of directors.
No Foreseeable Dividends
The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future but plans instead to retain earnings, if any, for the
operation and expansion of its business.
10
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SELLING STOCKHOLDERS
The Prospectus covers Shares that have been acquired pursuant to written
compensation contracts by the Selling Stockholders, named herein or to be
supplementally named, as of July 23, 1997.
The following table sets forth the name of each Selling Stockholder, the
nature of his or her position, office, or other material relationship with the
Company, the number of shares of Common Stock beneficially owned by each Selling
Stockholder prior to the offering, and the number of shares and (if one percent
or more) the percentage of the class to be beneficially owned by such Selling
Stockholder after the offering. Non-affiliate Selling Stockholders who hold less
than 1,000 shares of Common Stock issued under the Plans and not named below may
use this Prospectus for reoffers and resales of such Common Stock.
<TABLE>
<CAPTION>
Shares owned
After Offering(2)
Shares Owned Number of Shares -----------------
Name Prior to Offering(1) Offered Herein Number Percent
- ---- -------------------- -------------- ------ -------
<S> <C> <C> <C> <C>
Seymour Kroll, 110,000 110,000 0 **
Consultant
Carl Henn, 30,000 30,000 0 **
Consultant
Anthony W. Schweiger,(3) 210,000 210,000 0 **
Consultant
Michael G. Martin, 60,000 60,000 610,648 17%
President
</TABLE>
- ----------
** less than 1%
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares of Common Stock when such person has the right to
acquire such shares within 60 days of July 23, 1997. For purposes of
computing the percentage of outstanding shares of Common Stock held by each
person named above, any security which such person has the right to acquire
within such date is deemed to be outstanding but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the Company believes based
on information supplied by such persons, that the persons named in this
table have sole voting and investment power with respect to all shares of
Common Stock which they beneficially own.
(2) For purposes of this table, the number and percentage of Shares owned after
the offering presumes the sale and/or exercise of all Shares offered
herein.
(3) Includes 10,000 shares of Common Stock underlying a stock option.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
Securities Transfer Corp., 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell shares of Common Stock in any of the
following ways (i) through dealers; (ii) through agents; or (iii) directly to
one or more purchasers. The distribution of the shares of Common Stock may be
effected from time to time in one or more transactions (which may involve
crosses or block transactions) (A) on Nasdaq or the BSE (or on such other
national stock exchanges on which the shares of Common Stock may be traded from
time to time) in transactions which may include special offerings, exchange
distributions and/or secondary distributions pursuant to and in accordance with
rules of such exchanges, (B) in the over-the-counter market, or (C) in
transactions other than on such exchanges or in the over-the-counter market, or
a combination of such transactions. Any such transaction may be effected at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or fixed prices. The Selling
Stockholders may effect such transactions by selling shares of Common Stock to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from Selling Stockholders
and/or commissions from purchasers of shares of Common Stock for whom they may
act as agent. The Selling Stockholders and any broker-dealers or agents that
participate in the distribution of shares of Common Stock by them might be
deemed to be underwriters, and any discounts, commissions or concessions
received by any such broker-dealers or agents might be deemed to be underwriting
discounts and commissions, under the Securities Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Forms 10-QSB for the periods ended
March 31, 1997 and June 30, 1997;
(c) All other reports filed by the Company pursuant to Section 13(a) and
15(d) of the Exchange Act since the Company's fiscal year ended December 31,
1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the
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offering of securities made by this Prospectus shall be deemed to be
incorporated by reference herein and to be part hereof from their respective
dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus, to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 30,000,000 shares of Common Stock,
$.0001 par value ("Common Stock") and 3,000,000 shares of Preferred Stock, $.001
par value.
Holders of Common Stock are entitled to one vote per share on each matter
submitted to vote at any meeting of shareholders. Shares of Common Stock do not
carry cumulative voting rights and therefore, holders of a majority of the
outstanding shares of Common Stock will be able to elect the entire board of
directors of the Company. The Company's board of directors has authority,
without action by the Company's shareholders, to issue all or any portion of the
authorized but unissued shares of Common Stock, which would have the effect of
reducing the percentage of securities ownership of the Company's shareholders
and diluting the book value of the Common Stock.
Shareholders of the Company have no preemptive rights to acquire additional
shares of Common Stock. The Common Stock is not subject to redemption and
carries no subscription or conversion rights. In the event of liquidation of the
Company, the holders of shares of Common Stock are entitled to share equally in
corporate assets after the holders, if any, of Preferred Stock and after
satisfaction of liabilities. Holders of Common Stock are entitled to receive
such dividends as the Company's board of directors may from time to time declare
out of funds legally available for the payment thereof. The Company has never
paid cash dividends on its Common Stock and does not anticipate that it will pay
such dividends in the future.
LEGAL MATTERS
The legality of the shares offered hereby has been passed upon for the
Company by Silverman, Collura, Chernis & Balzano, P.C., 381 Park Avenue South,
Suite 1601, New York, New York 10016.
EXPERTS
The Company's consolidated financial statements incorporated in this
Registration Statement by reference from the Company's Annual Report on Form
10-KSB for the year ended
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December 31, 1996 have been audited by Feldman Radin & Company, P.C.,
independent auditors, as stated in their report, which is incorporated herein by
reference (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to doubt about the Company's ability to continue
as a going concern) and have been so incorporated in reliance upon the report of
such firm, given upon their authority as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of the Company's Articles of Incorporation contain provisions for
indemnification of officers, directors, employees and agents of the Company. The
Articles of Incorporation require the Company to indemnify such persons to the
full extent permitted by Delaware law. Each person will be indemnified in any
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interest of the Company.
Indemnification would cover expenses, including attorney's fees, judgments,
fines and amounts paid in settlement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expense
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person of the Company in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by a 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 issues.
14
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PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Forms 10-QSB for the periods ended
March 31, 1997 and June 30, 1997;
(c) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the Company's fiscal year ended December 31,
1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the offering of securities made by this Prospectus shall be
deemed to be incorporated by reference herein and to be part hereof from their
respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus, to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
ITEM 4. DESCRIPTION OF SECURITIES
Holders of Common Stock are entitled to one vote per share on each matter
submitted to vote at any meeting of shareholders. Shares of Common Stock do not
carry cumulative voting rights and therefore, holders of a majority of the
outstanding shares of Common Stock will be able to elect the entire board of
directors of the Company. The Company's board of directors has authority,
without action by the Company's shareholders, to issue all or any portion of the
authorized but unissued shares of Common Stock, which would have the effect of
reducing the percentage of securities ownership of the Company's shareholders
and diluting the book value of the Common Stock.
Shareholders of the Company have no preemptive rights to acquire additional
shares of Common Stock. The Common Stock is not subject to redemption and
carries no subscription or conversion rights. In the event of liquidation of the
Company, the holders of shares of Common Stock are entitled to share equally in
corporate assets after the holders, if any, of Preferred Stock and after
satisfaction of liabilities. Holders of Common Stock are entitled to
15
<PAGE>
receive such dividends as the Company's board of directors may from time to time
declare out of funds legally available for the payment thereof. The Company has
never paid cash dividends on its Common Stock and does not anticipate that it
will pay such dividends in the future.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus, to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of the Company's Articles of Incorporation contain provisions for
indemnification of officers, directors, employees and agents of the Company. The
Articles of Incorporation require the Company to indemnify such persons to the
full extent permitted by Delaware law. Each person will be indemnified in any
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interest of the Company.
Indemnification would cover expenses, including attorney's fees, judgments,
fines and amounts paid in settlement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expense
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person of the Company in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by a 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 issues.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
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ITEM 8. EXHIBITS
4.1 Consulting Agreement between Seymour Kroll and the Company
4.2 Consulting Agreement between Carl Henn and the Company
4.3 Employment Agreement between Michael G. Martin and the Company (to be
filed).
4.4 Consulting Agreement between Anthony W. Schweiger and the Company (to
be filed).
5.1 Opinion of Silverman, Collura, Chernis & Balzano, P.C.
23.1 Consent of Silverman, Collura, Chernis & Balzano, P.C. (included in
Exhibit 5.1)
23.2 Consent of Feldman Radin & Company, P.C.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes;
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change of such information in the Registration Statement;
Provided however that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply
to information contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment 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
(3) To remove from registration by means of a post effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
17
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
18
<PAGE>
INDEX TO EXHIBITS
4.1 Consulting Agreement between Seymour Kroll and the Company
4.2 Consulting Agreement between Carl Henn and the Company
4.3 Employment Agreement between Michael G. Martin and the Company (to be
filed).
4.4 Consulting Agreement between Anthony W. Schweiger and the Company (to be
filed).
5.1 Opinion of Silverman, Collura, Chernis & Balzano, P.C.
23.1 Consent of Silverman, Collura, Chernis & Balzano, P.C. (included in Exhibit
5.1)
23.2 Consent of Feldman Radin & Company, P.C.
19
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-8 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, therewith duly authorized, on July 23,
1997.
PROFORMIX SYSTEMS, INC.
By: /s/ Donald R. Yu
-----------------------------
Donald R. Yu, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, hereby constitutes and appoints Donald R. Yu, his true and lawful
attorney-in-fact, with full power of substitution and resubstitution, for his
and in his name, place and stead, in any and all capacities, to sign any or all
amendments or supplements to this Registration Statement and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact full power and authority to do
and perform each and every act and thing necessary or appropriate to be done
with respect to this Registration Statement or any amendments or supplements
hereto and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in their respective
capacities with Heng Fai China Industries, Inc. and on the dates indicated.
SIGNATURES
Signature Title Date
- --------- ----- ----
/s/ Donald R. Yu Chief Executive Officer, July 23, 1997
- -------------------------- Chief Financial Officer,
Donald R. Yu President and Director
(Principal Executive
Officer and Principal
Financial Officer)
20
EXHIBIT 4.1
COMPENSATORY SERVICE AGREEMENT
This Consulting Agreement is made effective this 2nd day of June,
1997, by and between Seymour Kroll ("Consultant") and Proformix Systems, Inc.
("Client") with respect to the following:
WHEREAS, Consultant has been rendering valuable services to Client in
connection with financial advice and locating business opportunities; and
WHEREAS, Client desires to compensate Consultant for his services.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
1. Engagement of Consultant.
Client hereby retains Consultant to continue to
assist Client in general financial activities, including coordinating relations
with market makers, shareholders, investment analysts and stockbrokers. The
foregoing services collectively are referred to herein as the "Consulting
Services".
2. Compensation.
Client shall issue to Consultant, upon execution of
this Agreement, 110,000 shares of the Client's Common Stock. The Client agrees
to register the shares of Client's Common Stock under the Securities Act of
1933, as amended, pursuant to a Registration Statement on Form S-8 or other
appropriate form, to be filed with the Securities and Exchange Commission.
<PAGE>
3. Term of Agreement, Extensions and Renewals.
This Agreement shall have a term of twelve months
from the date hereof.
Client can terminate this Agreement in the event Consultant fails to follow
Client's instructions. Client must advise Consultant that his actions or
inactions are unacceptable and give Consultant a reasonable time to comply. If
Consultant fails to comply, or at later times makes the same unacceptable action
or inaction he can be terminated hereunder by Client' service of notice of
termination to Consultant. In addition, Client can terminate this Agreement if
in the reasonable judgment of its Board of Directors, Consultant's actions or
conduct would make it unreasonable to require Client to retain Consultant. Such
acts are limited to dishonesty, illegal activities, activities harmful to the
reputation of the Client, activities which create civil or criminal liability
for the Client. In the event of termination pursuant to this paragraph, the
Consultant shall be entitled to exercise the Warrant and the Client will be
responsible to reimburse costs and expenses to Consultant as set forth in this
Agreement.
4. Nondisclosure of Confidential Information.
In consideration for the Client entering into this
Agreement, Consultant agrees that the following items used in the Clients
business are secret, confidential, unique, and valuable, were developed by
Client at great cost and over a long period of time, and disclosure of any of
the items to anyone other than Client's officers, agents, or authorized
employees will cause Client irreparable injury.
A. Non public financial information, accounting
information, plans of operations, possible
mergers or acquisitions prior to the public
announcement.
2
<PAGE>
B. Customer lists, call lists, and other
confidential customer data;
C. Memoranda, notes, records concerning the
technical processes conducted by Client;
D. Sketches, plans, drawings and other
confidential research and development data
or;
E. Manufacturing processes, chemical formulae,
and the composition of Client's products.
5. Best Efforts Basis.
Consultant agrees that he will at all times
faithfully and to the best of his experience, ability and talents, perform all
the duties that may be required of and from Consultant pursuant to the terms of
this Agreement. Consultant does not guarantee that his efforts will have any
impact on Client's business or that any subsequent financial improvement will
result of Consultant's efforts. Client understands and acknowledges that the
success or failure of Consultant's efforts will be predicated on Client's assets
and operating results.
5. Client's Right to Approve Transactions.
Client expressly retains the right to approve, in its
sole discretion, each and every transaction introduced by Consultant that
involves Client as a party to any agreement. Consultant and Client mutually
agree that Consultant is not authorized to enter into agreements on behalf of
Client.
6. Place of Services.
The Consulting Services contemplated to be performed
by Consultant will be performed at locations selected by Consultant.
3
<PAGE>
7. Costs and Expenses.
Client shall be responsible for all reasonable
out-of-pocket expenses, travel expenses, third party expenses, filing fees, copy
and mailing expenses that Consultant may incur in performing Consulting Services
under this Agreement, provided that such expenses are authorized by the Client.
8. Work Stoppage or Early Termination.
Notwithstanding anything to the contrary contained
herein, Client shall have the right at any time to direct Consultant to cease
work or abandon its efforts on Client's behalf, and to refrain from commencing
any new work or providing any further Consulting Services hereunder.
9. Non-Exclusive Services.
Client acknowledges that Consultant is currently
providing services of the same or similar nature to other parties and Client
agrees that Consultant is not prevented or barred from rendering services of the
same nature or a similar nature to any other individual or entity. Consultant
understands and agrees that Client shall not be prevented or barred from
retaining other persons or entities to provide services of the same or similar
nature as those provided by Consultant. Consultant will advise Client of its
position with respect to any activity, employment, business arrangement or
potential conflict of interest which may be relevant to this Agreement.
10. All Prior Agreements Terminated.
This Agreement constitutes the entire understanding
of the parties with respect to the engagement of Consultant for the services set
forth in Article 1 hereof and all
4
<PAGE>
prior agreements and understandings with respect thereto are hereby terminated
and shall be of no force or effect.
11. Representations and Warranties of Client.
Client hereby represents and warrants to Consultant
that:
A. Corporate Existence. Client is a corporation
duly organized and validly existing, under
the laws of the State of Delaware, with
corporate power to own property and carry on
its business as it is now being conducted.
B. No Conflict. This Agreement has been duly
executed by Client and the execution and
performance of this Agreement will not
violate, or result in a breach of, or
constitute a default in any agreement,
instrument, judgment, decree or order to
which Client is a party or to which Client
is subject, nor will such execution and
performance constitute a violation or
conflict of any fiduciary duty to which
Client is subject.
C. Validity of Shares. The shares of Common
Stock are and will be when issued, duly
authorized, validly issued, fully paid, non-
assessable, and free and clear of all liens
and encumbrances.
D. Authority. Client has the full legal right,
power, authority and approval required to
enter into, execute and deliver the shares
of Common Stock and to fully perform all of
its obligations hereunder.
5
<PAGE>
12. Representations and Warranties of Consultant.
Consultant hereby represents and warrant to Client
that:
A. Form S-8. Consultant hereby represents that
he has not engaged in any direct or indirect
capital raising activities on behalf of the
Client and/or its affiliates.
B. Prior Experience. Consultant has extensive
experience in the areas of the services he
is to perform hereunder and has performed
the services contemplated by this Agreement
for the benefit of other client-companies.
C. Information. No representation or warranty
contained herein, nor a statement in any
document, certificate or schedule furnished
or to be furnished pursuant to this
Agreement by Consultant, or in connection
with the transaction contemplated hereby,
contains or contained any untrue statement
of material fact.
D. Inside Information - Securities Laws
Violations. In the course of the performance
of his duties, Consultant may become aware
of information which may be considered
"inside information" within the meaning of
the Federal Securities Laws, Rules and
Regulations. Consultant acknowledge that his
use of such information to purchase or sell
securities of Client, or its affiliates, or
to transmit such information to any other
party with a view to
6
<PAGE>
buy, sell or otherwise deal in Client's
securities is prohibited by law and would
constitute a breach of this Agreement.
E. Agreement Does not Contemplate Corrupt
Practice, Domestic or Foreign. All payments
under this Agreement constitute compensation
for services performed and this Agreement
any all payments, and the use of the
payments by Consultant, do and shall not
constitute an offer, payment or promise or
authorization of payment of any money or
gift to an official or political party of,
or candidate for political office in any
jurisdiction within or outside the United
States. These payments may not be used to
influence any act or decision of an
official, party, or candidate to use
his/her/its influence with a government to
assist Client in obtaining, retaining, or
directing business to Client or any person
or other corporate entity. As used in this
paragraph, the term "official" means any
officer or employee of a government, or any
person acting in an official capacity for or
on behalf of any government; the term
"government" includes any department,
agency, or instrumentality of a government.
F. Reliance upon Representations. The
information provided pursuant to this
Agreement may be relied upon by Client, as
true and correct as of the date hereof.
Further, Consultant represents as follows:
7
<PAGE>
(a) by reason of Consultant's knowledge
and experience of financial and
business matters in general, and
investments in particular
Consultant is capable of evaluating
the merits and risks of this
transaction and in bearing the
economic risks of an investment in
the Common Stock and the Client in
general and fully understand the
speculative nature of such
securities and the possibility of
such loss; and
(b) Consultant has had the opportunity
to ask questions and receive
answers concerning the terms and
conditions of the shares to be
issued hereby and reserved for
issuance pursuant hereto, and to
obtain any additional information
which Client possess or can acquire
without reasonable effort or
expense that is necessary to verity
the accuracy of information
furnished; and
(c) Consultant has been furnished with
a copy of Client's most recent
Annual Report on Form 10-KSB and
all reports or documents required
to be filed under Section 13(a),
14(a) and 15(d) of the Securities
Exchange Act of 1934, including but
not limited to quarterly reports on
Form 10-QSB; and,
8
<PAGE>
in addition, that Consultant has
been furnished with a brief
description of the Client's capital
structure and any material changes
in Client's affairs that may not
have been disclosed in the
aforementioned documents.
G. Subsequent Events. Consultant will notify
Client if, subsequent to the date hereof,
either party incurs obligations which could
compromise its efforts and obligations under
this Agreement.
13. Consultant is not an Agent or Employee.
Consultant's obligations under this Agreement consist
solely of the Consulting Services described herein. In no event shall Consultant
be considered to act as the employee or agent of Client or otherwise represent
or bind Client. For the purposes of this Agreement, Consultant is an independent
contractor. All final decisions with respect to acts of Client or its
affiliates, whether or not made pursuant to or in reliance on information or
advice furnished by Consultant hereunder, shall be those of Client or such
affiliates and Consultant shall under no circumstances be liable for any expense
incurred or loss suffered by Client as a consequence of such action or
decisions.
14. Miscellaneous.
A. Authority. The execution and performance of
this Agreement have been duly authorized by
all requisite corporate action. This
Agreement constitutes a valid and binding
obligation of the parties hereto.
9
<PAGE>
B. Amendment. This Agreement may be amended or
modified at any time and in any manner only
by an instrument in writing executed by the
parties hereto.
C. Waiver. All the rights and remedies of
either party under this Agreement are
cumulative and not exclusive of any other
rights and remedies provided by law. No
delay or failure on the part of either party
in the exercise of any right or remedy
arising from a breach of this Agreement
shall operate as a waiver of any subsequent
right or remedy arising from a subsequent
breach of this Agreement. The consent of any
party where required hereunder to any act of
occurrence shall not be deemed to be a
consent to any other act of occurrence.
D. Assignment.
(i) Neither this Agreement nor
any obligation created by
it shall be assignable by
either party without the
prior written consent of
the other.
(ii) Nothing in this Agreement,
expressed or implied, is
intended to confer upon any
person, other than the
parties and their
successors, any rights or
remedies under this
Agreement.
E. Notices. Any notice or other communication
required or permitted by this Agreement must
be in writing and shall be
10
<PAGE>
deemed to be properly given when delivered
in person to an officer of the other party,
when deposited in the United States mails
for transmittal by certified or registered
mail, postage prepaid, or when deposited
with a public telegraph company for
transmittal or when sent by facsimile
transmission, charges prepared provided that
the communication is addressed to the
respective party at the place indicated on
the first page of this Agreement or to such
other person or address designed by the
parties to receive notice.
F. Headings and Captions. The headings of
paragraph are included solely for
convenience. If a conflict exists between
any heading and the text of this Agreement,
the text shall control.
G. Entire Agreement. This Agreement annexed as
an exhibit hereto contain the entire
Agreement between the parties with respect
to the transaction contemplated by the
Agreement. This Agreement may be executed in
any number of counterparts but the aggregate
of the counterparts together constitute only
one and the same instrument.
H. Effect of Partial Invalidity. In the event
that any one or more of the provisions
contained in this Agreement shall for any
reason be held to be invalid, illegal, or
unenforceable in any respect, such
invalidity, illegality or unenforceability
shall not affect any
11
<PAGE>
other provisions of this Agreement, but this
Agreement shall be constructed as if it
never contained any such invalid, illegal or
unenforceable provisions.
I. Controlling Law. The validity,
interpretation, and performance of this
Agreement shall be controlled by and
construed under the laws of the State of New
York.
J. Attorney's Fees. If any action at law or in
equity, including an action for declaratory
relief, is brought to enforce or interpret
the provisions of this Agreement, the
prevailing party shall be entitled to
recover actual attorney's fee from the other
party. The attorney's fees may be ordered by
the court in the trial of any action
described in this paragraph or may be
enforced in a separate action brought for
determining attorney's fees.
K. Time is of the Essence. Time is of the
essence of this Agreement and of each and
every provision hereof.
L. Mutual Cooperation. The parties hereto shall
cooperate with each other to achieve the
purpose of this Agreement, and shall execute
such other and further documents and take
such other and further actions as may be
necessary or convenient to effect the
transactions described herein.
M. Further Actions. At any time and from tie to
time, each party agrees, at its or their
expense, to take actions and to execute and
12
<PAGE>
deliver documents as may be reasonably
necessary to effectuate the purpose of this
Agreement.
N. Indemnification. Client and Consultant agree
to indemnify, defend and hold each other
harmless form and against all demands,
claims, actions, losses, damages,
liabilities, costs and expenses, including
without limitation, interest, penalties and
attorneys' fees and expenses asserted
against or imposed or incurred by either
party by reason of or resulting from a
breach of any representation, warranty,
covenant condition or agreement of the other
party to this Agreement.
O. No Third Party Beneficiary. Nothing in this
Agreement, expressed or implied, is intended
to confer upon any person, other than the
parties hereto and their successors, any
rights or remedies under or by reason of
this Agreement, unless this Agreement
specifically states such intent.
13
<PAGE>
P. Facsimile Counterparts. If a party signs
this Agreement and transmits an electronic
facsimile of the signature page to the other
party, the party who receives the
transmission may rely upon the electronic
facsimile a signed original of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date herein above written.
PROFORMIX SYSTEMS, INC.
By: /s/ Donald R. Yu
------------------------------------
Donald R. Yu, President
/s/ Seymour Kroll
---------------------------------------
Seymour Kroll
14
EXHIBIT 4.2
COMPENSATORY SERVICE AGREEMENT
This Consulting Agreement is made effective this 2nd day of June,
1997, by and between Carl Henn ("Consultant") and Proformix Systems, Inc.
("Client") with respect to the following:
WHEREAS, Consultant has been rendering valuable financial and consulting
services to Client and locating business opportunities for the Client; and
WHEREAS, Client desires to compensate Consultant for his services.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
1. Engagement of Consultant.
Client hereby retains Consultant to continue to
assist Client in general financial activities, including coordinating relations
with market makers, shareholders, investment analysts and stockbrokers. The
foregoing services collectively are referred to herein as the "Consulting
Services".
2. Compensation.
Client shall issue to Consultant, upon execution of
this Agreement, 30,000 shares of the Client's Common Stock. The Client agrees to
register the shares of Client's Common Stock under the Securities Act of 1933,
as amended, pursuant to a Registration Statement on Form S-8 or other
appropriate form, to be filed with the Securities and Exchange Commission.
<PAGE>
3. Term of Agreement, Extensions and Renewals.
This Agreement shall have a term of twelve months
from the date hereof. Client can terminate this Agreement in the event
Consultant fails to follow Client's instructions. Client must advise Consultant
that his actions or inactions are unacceptable and give Consultant a reasonable
time to comply. If Consultant fails to comply, or at later times makes the same
unacceptable action or inaction he can be terminated hereunder by Client'
service of notice of termination to Consultant. In addition, Client can
terminate this Agreement if in the reasonable judgment of its Board of
Directors, Consultant's actions or conduct would make it unreasonable to require
Client to retain Consultant. Such acts are limited to dishonesty, illegal
activities, activities harmful to the reputation of the Client, activities which
create civil or criminal liability for the Client. In the event of termination
pursuant to this paragraph, the Consultant shall be entitled to exercise the
Warrant and the Client will be responsible to reimburse costs and expenses to
Consultant as set forth in this Agreement.
4. Nondisclosure of Confidential Information.
In consideration for the Client entering into this
Agreement, Consultant agrees that the following items used in the Clients
business are secret, confidential, unique, and valuable, were developed by
Client at great cost and over a long period of time, and disclosure of any of
the items to anyone other than Client's officers, agents, or authorized
employees will cause Client irreparable injury.
A. Non public financial information, accounting
information, plans of operations, possible
mergers or acquisitions prior to the public
announcement.
2
<PAGE>
B. Customer lists, call lists, and other
confidential customer data;
C. Memoranda, notes, records concerning the
technical processes conducted by Client;
D. Sketches, plans, drawings and other
confidential research and development data
or;
E. Manufacturing processes, chemical formulae,
and the composition of Client's products.
5. Best Efforts Basis.
Consultant agrees that he will at all times
faithfully and to the best of his experience, ability and talents, perform all
the duties that may be required of and from Consultant pursuant to the terms of
this Agreement. Consultant does not guarantee that his efforts will have any
impact on Client's business or that any subsequent financial improvement will
result of Consultant's efforts. Client understands and acknowledges that the
success or failure of Consultant's efforts will be predicated on Client's assets
and operating results.
5. Client's Right to Approve Transactions.
Client expressly retains the right to approve, in its
sole discretion, each and every transaction introduced by Consultant that
involves Client as a party to any agreement. Consultant and Client mutually
agree that Consultant is not authorized to enter into agreements on behalf of
Client.
6. Place of Services.
The Consulting Services contemplated to be performed
by Consultant will be performed at locations selected by Consultant.
3
<PAGE>
7. Costs and Expenses.
Client shall be responsible for all reasonable
out-of-pocket expenses, travel expenses, third party expenses, filing fees, copy
and mailing expenses that Consultant may incur in performing Consulting Services
under this Agreement, provided that such expenses are authorized by the Client.
8. Work Stoppage or Early Termination.
Notwithstanding anything to the contrary contained
herein, Client shall have the right at any time to direct Consultant to cease
work or abandon its efforts on Client's behalf, and to refrain from commencing
any new work or providing any further Consulting Services hereunder.
9. Non-Exclusive Services.
Client acknowledges that Consultant is currently
providing services of the same or similar nature to other parties and Client
agrees that Consultant is not prevented or barred from rendering services of the
same nature or a similar nature to any other individual or entity. Consultant
understands and agrees that Client shall not be prevented or barred from
retaining other persons or entities to provide services of the same or similar
nature as those provided by Consultant. Consultant will advise Client of its
position with respect to any activity, employment, business arrangement or
potential conflict of interest which may be relevant to this Agreement.
10. All Prior Agreements Terminated.
This Agreement constitutes the entire understanding
of the parties with respect to the engagement of Consultant for the services set
forth in Article 1 hereof and all
4
<PAGE>
prior agreements and understandings with respect thereto are hereby terminated
and shall be of no force or effect.
11. Representations and Warranties of Client.
Client hereby represents and warrants to Consultant
that:
A. Corporate Existence. Client is a corporation
duly organized and validly existing, under
the laws of the State of Delaware, with
corporate power to own property and carry on
its business as it is now being conducted.
B. No Conflict. This Agreement has been duly
executed by Client and the execution and
performance of this Agreement will not
violate, or result in a breach of, or
constitute a default in any agreement,
instrument, judgment, decree or order to
which Client is a party or to which Client
is subject, nor will such execution and
performance constitute a violation or
conflict of any fiduciary duty to which
Client is subject.
C. Validity of Shares. The shares of Common
Stock are and will be when issued, duly
authorized, validly issued, fully paid, non-
assessable, and free and clear of all liens
and encumbrances.
D. Authority. Client has the full legal right,
power, authority and approval required to
enter into, execute and deliver the shares
of Common Stock and to fully perform all of
its obligations hereunder.
5
<PAGE>
12. Representations and Warranties of Consultant.
Consultant hereby represents and warrant to Client
that:
A. Form S-8. Consultant hereby represents that
he has not engaged in any direct or indirect
capital raising activities on behalf of the
Client and/or its affiliates.
B. Prior Experience. Consultant has extensive
experience in the areas of the services he
is to perform hereunder and has performed
the services contemplated by this Agreement
for the benefit of other client-companies.
C. Information. No representation or warranty
contained herein, nor a statement in any
document, certificate or schedule furnished
or to be furnished pursuant to this
Agreement by Consultant, or in connection
with the transaction contemplated hereby,
contains or contained any untrue statement
of material fact.
D. Inside Information - Securities Laws
Violations. In the course of the performance
of his duties, Consultant may become aware
of information which may be considered
"inside information" within the meaning of
the Federal Securities Laws, Rules and
Regulations. Consultant acknowledge that his
use of such information to purchase or sell
securities of Client, or its affiliates, or
to transmit such information to any other
party with a view to
6
<PAGE>
buy, sell or otherwise deal in Client's
securities is prohibited by law and would
constitute a breach of this Agreement.
E. Agreement Does not Contemplate Corrupt
Practice, Domestic or Foreign. All payments
under this Agreement constitute compensation
for services performed and this Agreement
any all payments, and the use of the
payments by Consultant, do and shall not
constitute an offer, payment or promise or
authorization of payment of any money or
gift to an official or political party of,
or candidate for political office in any
jurisdiction within or outside the United
States. These payments may not be used to
influence any act or decision of an
official, party, or candidate to use
his/her/its influence with a government to
assist Client in obtaining, retaining, or
directing business to Client or any person
or other corporate entity. As used in this
paragraph, the term "official" means any
officer or employee of a government, or any
person acting in an official capacity for or
on behalf of any government; the term
"government" includes any department,
agency, or instrumentality of a government.
F. Reliance upon Representations. The
information provided pursuant to this
Agreement may be relied upon by Client, as
true and correct as of the date hereof.
Further, Consultant represents as follows: 7
7
<PAGE>
(a) by reason of Consultant's
knowledge and experience of
financial and business
matters in general, and
investments in particular
Consultant is capable of
evaluating the merits and
risks of this transaction
and in bearing the economic
risks of an investment in
the Common Stock and the
Client in general and fully
understand the speculative
nature of such securities
and the possibility of such
loss; and
(b) Consultant has had the
opportunity to ask questions
and receive answers
concerning the terms and
conditions of the shares to
be issued hereby and
reserved for issuance
pursuant hereto, and to
obtain any additional
information which Client
possess or can acquire
without reasonable effort or
expense that is necessary to
verity the accuracy of
information furnished; and
(c) Consultant has been
furnished with a copy of
Client's most recent Annual
Report on Form 10-KSB and
all reports or documents
required to be filed under
Section 13(a), 14(a) and
15(d) of the Securities
Exchange Act of 1934,
including but not limited to
quarterly reports on Form
10-QSB; and,
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<PAGE>
in addition, that Consultant
has been furnished with a
brief description of the
Client's capital structure
and any material changes in
Client's affairs that may
not have been disclosed in
the aforementioned
documents.
G. Subsequent Events. Consultant will notify
Client if, subsequent to the date hereof,
either party incurs obligations which could
compromise its efforts and obligations under
this Agreement.
13. Consultant is not an Agent or Employee.
Consultant's obligations under this Agreement consist
solely of the Consulting Services described herein. In no event shall Consultant
be considered to act as the employee or agent of Client or otherwise represent
or bind Client. For the purposes of this Agreement, Consultant is an independent
contractor. All final decisions with respect to acts of Client or its
affiliates, whether or not made pursuant to or in reliance on information or
advice furnished by Consultant hereunder, shall be those of Client or such
affiliates and Consultant shall under no circumstances be liable for any expense
incurred or loss suffered by Client as a consequence of such action or
decisions.
14. Miscellaneous.
A. Authority. The execution and performance of
this Agreement have been duly authorized by
all requisite corporate action. This
Agreement constitutes a valid and binding
obligation of the parties hereto.
9
<PAGE>
B. Amendment. This Agreement may be amended or
modified at any time and in any manner only
by an instrument in writing executed by the
parties hereto.
C. Waiver. All the rights and remedies of
either party under this Agreement are
cumulative and not exclusive of any other
rights and remedies provided by law. No
delay or failure on the part of either party
in the exercise of any right or remedy
arising from a breach of this Agreement
shall operate as a waiver of any subsequent
right or remedy arising from a subsequent
breach of this Agreement. The consent of any
party where required hereunder to any act of
occurrence shall not be deemed to be a
consent to any other act of occurrence.
D. Assignment.
(i) Neither this Agreement nor
any obligation created by
it shall be assignable by
either party without the
prior written consent of
the other.
(ii) Nothing in this Agreement,
expressed or implied, is
intended to confer upon any
person, other than the
parties and their
successors, any rights or
remedies under this
Agreement.
E. Notices. Any notice or other communication
required or permitted by this Agreement must
be in writing and shall be
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<PAGE>
deemed to be properly given when delivered
in person to an officer of the other party,
when deposited in the United States mails
for transmittal by certified or registered
mail, postage prepaid, or when deposited
with a public telegraph company for
transmittal or when sent by facsimile
transmission, charges prepared provided that
the communication is addressed to the
respective party at the place indicated on
the first page of this Agreement or to such
other person or address designed by the
parties to receive notice.
F. Headings and Captions. The headings of
paragraph are included solely for
convenience. If a conflict exists between
any heading and the text of this Agreement,
the text shall control.
G. Entire Agreement. This Agreement annexed as
an exhibit hereto contain the entire
Agreement between the parties with respect
to the transaction contemplated by the
Agreement. This Agreement may be executed in
any number of counterparts but the aggregate
of the counterparts together constitute only
one and the same instrument.
H. Effect of Partial Invalidity. In the event
that any one or more of the provisions
contained in this Agreement shall for any
reason be held to be invalid, illegal, or
unenforceable in any respect, such
invalidity, illegality or unenforceability
shall not affect any
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<PAGE>
other provisions of this Agreement, but this
Agreement shall be constructed as if it
never contained any such invalid, illegal or
unenforceable provisions.
I. Controlling Law. The validity,
interpretation, and performance of this
Agreement shall be controlled by and
construed under the laws of the State of New
York.
J. Attorney's Fees. If any action at law or in
equity, including an action for declaratory
relief, is brought to enforce or interpret
the provisions of this Agreement, the
prevailing party shall be entitled to
recover actual attorney's fee from the other
party. The attorney's fees may be ordered by
the court in the trial of any action
described in this paragraph or may be
enforced in a separate action brought for
determining attorney's fees.
K. Time is of the Essence. Time is of the
essence of this Agreement and of each and
every provision hereof.
L. Mutual Cooperation. The parties hereto shall
cooperate with each other to achieve the
purpose of this Agreement, and shall execute
such other and further documents and take
such other and further actions as may be
necessary or convenient to effect the
transactions described herein.
M. Further Actions. At any time and from tie to
time, each party agrees, at its or their
expense, to take actions and to execute and
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<PAGE>
deliver documents as may be reasonably
necessary to effectuate the purpose of this
Agreement.
N. Indemnification. Client and Consultant agree
to indemnify, defend and hold each other
harmless form and against all demands,
claims, actions, losses, damages,
liabilities, costs and expenses, including
without limitation, interest, penalties and
attorneys' fees and expenses asserted
against or imposed or incurred by either
party by reason of or resulting from a
breach of any representation, warranty,
covenant condition or agreement of the other
party to this Agreement.
O. No Third Party Beneficiary. Nothing in this
Agreement, expressed or implied, is intended
to confer upon any person, other than the
parties hereto and their successors, any
rights or remedies under or by reason of
this Agreement, unless this Agreement
specifically states such intent.
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<PAGE>
P. Facsimile Counterparts. If a party signs
this Agreement and transmits an electronic
facsimile of the signature page to the other
party, the party who receives the
transmission may rely upon the electronic
facsimile a signed original of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date herein above written.
PROFORMIX SYSTEMS, INC.
By: /s/ Donald R. Yu
------------------------------------
Donald R. Yu, President
/s/ Carl Henn
---------------------------------------
Carl Henn
14
EMPLOYMENT AGREEMENT dated as of August ___, 1997 (the "Agreement") between
Proformix Systems, Inc. ("Proformix") and Michael Martin, presently residing at
65 Nicole Terrace, Bridgewater, New Jersey 08807(the "Executive").
WHEREAS, the Executive is presently employed by Proformix, Inc., a
subsidary of Proformix Systems, Inc.; and
WHEREAS, Proformix, Inc. was recently the subject of a business
combination, as of July 18, 1997 with Whitestone Industries, Inc., a Delaware
corporation ("Whitestone"), since renamed Proformix Systems, Inc., pursuant to
which Whitestone sought to acquire all or substantially all of the outstanding
Common Stock of Proformix, Inc. (the "Sale"); and
WHEREAS, in connection with the Sale, the parties desire to enter into this
Agreement in order to insure Executive continued employment by Proformix and
Proformix, Inc. (collectively "the Company"), in his current capacity, and to
insure the Company that it will have the benefit of his continued services for
at least the Term of Employment herein described;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1. General. The Company hereby employs the Executive, and the Executive
agrees to serve as President and Chief Executive Officer of Proformix and as a
Director upon the terms and conditions herein contained, and in such capacities
the Executive agrees to serve the Company faithfully and to the best of his
ability under the direction of the Board of Directors of Proformix (the
"Board"). Nothing contained herein shall restrict the Executive from acting
<PAGE>
as a director of or owning shares in other companies not in competition with the
Company, provided that such services and ownership interests do not materially
interfere with the Executive's performance of his duties hereunder.
1.2. Exclusive Services. For so long as the Executive is employed by the
Company, he shall devote his full-time working hours to his duties hereunder.
The Executive shall not, directly or indirectly, render services to any other
person or organization for which he receives compensation without the unanimous
consent of the Board or otherwise engage in activities which would interfere
significantly with his faithful performance of his duties hereunder.
1.3. Term of Employment. The Executive's employment under this Agreement
shall commence on the date of the Sale (the "Effective Date") and shall
terminate on the earliest of (i) the fifth anniversary of the Effective Date,
(ii) the death of the Executive or (iii) the termination of the Executive's
employment pursuant to this Agreement; provided, however, that the term of the
Executive's employment under this Agreement may be extended by mutual agreement
between the parties for a period of up to three years by notice of approval from
the Board to the Executive at least six months prior to the expiration of the
then effective term of employment but not earlier than the fourth anniversary of
the Effective Date, acceptance in writing to be tendered by the Executive within
60 days thereafter. The period commencing on the Effective Date and ending on
the fifth anniversary of the Effective Date, or such later date to which the
term of the Executive's employment shall have been extended, is hereinafter
referred to as the "Employment Term".
2
<PAGE>
2. SALARY
2.1. Base Salary. From the Effective Date, the Executive shall be entitled
to receive a base salary ("Base Salary") at a rate of $108,000 per annum,
payable in equal installments not less frequently than bi-weekly in accordance
with Proformix's payroll practices, with such increases as may be provided by
Proformix' Board of Directors. Once increased, such higher amount shall
constitute the Executive's annual Base Salary. During the term hereof, his
salary shall not be reduced below $108,000 per year.
2.2. Annual Increases. Annual increases will be evaluated and determined by
the Board of Directors.
2.3. Stock Bonuses. Executive shall receive a bonus consisting of 140,000
shares of Proformix's Common Stock, for the first year, and 200,000 shares in
any year thereafter, in any of which years Proformix's after tax net profits
exceed $1,000,000 for each of its first three full fiscal years during the
Employment Term, beginning with calendar year 1998. The bonus shall be paid
during the calendar quarter following completion of the audit of Proformix's
financial statements for the calendar year in question. Net profits shall be
computed using generally accepted accounting principles. There shall be no stock
bonus paid after the first three full fiscal years.
3. EMPLOYMENT BENEFITS
3.1. General Benefits. The Executive shall receive the following benefits
during the Employment Term:
(a) the Executive will be eligible to participate in benefit programs of
the Company
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<PAGE>
consistent with those benefit programs provided to other senior executives of
the Company excluding any key employee stock option plan that may be adopted by
Proformix so long as the stock bonus programs reflected in Section 2.3 above is
in effect; and
(b) a fully paid medical/hospitalization policy for Executive and his
family.
3.2. Vacation. The Executive shall be entitled to four weeks paid vacation
each year in accordance with company policies and procedures. The Executive must
take at least five (5) consecutive days during each twelve (12) months period.
3.3. Reimbursement of Expenses. The Company will reimburse the Executive
for reasonable, ordinary and necessary business expenses incurred by him in the
fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company practices
consistently applied. The Executive will be provided with a car allowance of
$500 per month or such other amount as the Board of Directors may approve from
time to time. The allowance covers a single vehicle to be utilized for Company
business, however the Company will not be required to otherwise pay for the use
of said automobile.
3.4. Non-Renewal of Agreement. In the event this Agreement is not renewed
by the Company as provided in Section 1.3, the Executive shall be entitled to
three (3) months of his Base Salary as severance, payable in equal installments
on the same terms as at the end of the Employment Term ("Severance Pay").
4
<PAGE>
4. TERMINATION OF EMPLOYMENT
4.1. Termination for Cause; Resignation.
4.1.1. General. If, prior to the expiration of the Employment Term,
the Executive's employment is terminated by the Company for Cause, the Executive
shall be entitled only to his Severance Pay, if applicable, unless such
termination is for a Disloyalty Termination Event (as described in Section 4.2
below), in which case the Executive shall be entitled only to payment of his
Base Salary as then in effect through and including the date of termination. If
the Executive resigns from his employment hereunder, the Executive shall be
entitled only to payment of his Base Salary as then in effect through and
including the date of resignation. The Executive shall have no further right to
receive any other compensation, or to participate in any other plan,
arrangement, or benefit, after such termination or resignation of employment,
subject to the terms of such plans or arrangements.
4.1.2. Date of Termination/Resignation. The date of termination for a
Felony Termination Event (as defined in Section 4.2 below) shall be the date of
the written Notice of Termination provided for in Section 4.1.3. The date of
termination for a Conduct, Performance or Disloyalty Termination Event shall be
the date the Event is finally determined through arbitration. The date of
resignation shall be the date specified in the written notice of resignation
from the Executive to the Company, or if no date is specified therein, 10
business days after receipt by the Company of written notice of resignation from
the Executive.
4.1.3. Notice of Termination for Felony Termination Event. Unless
first terminated by a written notice of the Board, termination of the
Executive's employment for a Felony Termination Event (as defined in Section 4.2
below) shall be effected by delivery of a
5
<PAGE>
written notice of termination from Proformix to the Executive, which notice
shall specify the event or events set forth in Section 4.2 giving rise to such
termination (the "Notice of Termination").
4.1.4. Arbitration. All disputes involving termination of the
Executive's employment for a Conduct, Performance or Disloyalty Termination
Event shall be resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the terms of this
Agreement, and the Commercial Arbitration Rules of the AAA. In the event of any
inconsistency between such rules and this Agreement, this Agreement shall
control. The arbitration process shall commence when the Executive has received
written notice by Proformix that the Executive is being dismissed for any of the
above referenced reasons. Either party may then notify the AAA who shall then
supply the parties with a list of three potential arbitrators. Each party shall
then have four (4) business days to object to one of the potential arbitrators.
The remaining potential arbitrator (and if more than one is remaining, then one
shall be selected by lot) shall serve as the single arbitrator. Each party shall
then have sixty (60) days to conduct discovery pursuant to the terms and
provisions of the New Jersey Rules of Civil Procedure. Upon conclusion of the
sixty (60) day period or such earlier time as the parties may agree the parties
shall participate in an arbitration proceeding in accordance the with AAA's then
current policies and procedures. The arbitration proceedings shall be conducted
in New Jersey at the offices of AAA or such other place in New York as the
parties shall mutually agree. The arbitrator shall be empowered to impose
sanctions and take such other actions as the arbitrator deems necessary to the
same extent a judge could do pursuant to the New York Rules of Civil Procedure
and applicable law. Judgment upon the award rendered by
6
<PAGE>
the arbitrator may be entered in any court having jurisdiction. Unless the
termination is decided by the arbitrator to be appropriate, Proformix shall be
liable to the Executive for damages for wrongful termination.
4.2. Cause. Termination for "Cause" shall mean termination of the
Executive's employment because the Executive (a) has engaged in fraudulent or
criminal conduct in connection with the performance of his duties hereunder,
which conduct materially and adversely affects the Company (a "Conduct
Termination Event"), (b) admits to or has been convicted of a crime punishable
by imprisonment for more than one year (a "Felony Termination Event"), (c) has
failed to perform in all material respects (following a written warning
specifying such deficiency) the normal and customary duties required of his
position of employment (a "Performance Termination Event"), (d) has been
disloyal to the Company by assisting competitors of the Company to the
disadvantage of the Company by a breach of Section 6 or by otherwise actively
assisting competitors to the disadvantage of the Company (a "Disloyalty
Termination Event"), or (e) has failed to heed a reasonable directive issued by,
or policy approved by the Board.
5. PERMANENT DISABILITY
In the event the Executive shall fail because of illness, physical or mental
disability or other incapacity, for a period of six consecutive months, or for
shorter periods aggregating six months during any twelve-month period, to render
the services provided for by this Agreement, then the Company may, by written
notice to the Executive after the last day of the six consecutive months of
disability or the day on which the shorter periods of disability equal an
aggregate of
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<PAGE>
six months, reduce the Executive's compensation hereunder for "Permanent
Disability" as follows:
First Six Months No Reduction
Following 12 months Fifty percent (50%)
(or if less, the of compensation
balance of the
Employment Term)
The Executive will use his reasonable best efforts to cooperate with any
physician practicing in the State of New Jersey selected by the Company to
determine whether or not Permanent Disability exists, and the determination of
such physician made in writing to the Company and the Executive shall be final
and conclusive for all purposes of this Agreement; provided that if such
physician declines to make a determination as to medical disability, the matter
will be referred to arbitration in the manner set forth in Section 4.1.4. Any
payments provided for in this Section 5 shall be reduced to the extent that such
payments, together with any disability payments received by the Executive under
any plan, program or arrangements, exceed the Executive's Base Salary. Except
(i) as to the obligation to continue to pay the Executive's medical insurance
premiums for a period of 18 months following delivery of the written notice of
"Permanent Disability" to the Executive or (ii) as otherwise provided in this
Section 5, upon final determination of permanent disability, the Company shall
have no further obligation to the Executive under this Agreement.
6. NONCOMPETITION/NONSOLICITATION AND CONFIDENTIALITY
6.1. Noncompetition/Nonsolicitation. The Executive shall not, directly or
indirectly,
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<PAGE>
as a sole proprietor, member of a partnership, stockholder or investor, officer
or director of a corporation, or as an employee, associate, consultant or agent
of any person, partnership, corporation or other business organization or entity
other than the Company: (a) engage in any business that is in competition with
any business actively conducted by Proformix or any of its subsidiaries within
the various states in which Proformix conducts business; (b) solicit or endeavor
to entice away from Proformix or any of its subsidiaries any person who is, or
was during the then most recent 24-month period, employed by or associated with
Proformix or any of its subsidiaries; (c) solicit or endeavor to entice away
from Proformix or any of its subsidiaries any person or entity who is, or was
within the then most recent 24-month period, a customer, client or prospect of
Proformix or any of its subsidiaries; or (d) perform any services in competition
with Proformix for or on behalf of any such customer, client or prospect. The
obligations of this Section 6.1 shall apply for 36 months after termination of
employment of, or resignation by the Executive as well as after the end of the
Term of Employment and during employment and shall be extended by a period of
time equal to any period during which the Executive shall be in breach of such
obligations.
6.2. Confidentiality. The Executive covenants and agrees with the Company
that he will not at any time, except in performance of his obligations to the
Company hereunder or with the prior written consent of the Company, directly or
indirectly, disclose any secret or confidential information that he may learn or
has learned by reason of his association with the Company or any of its
subsidiaries and affiliates. The term "confidential information" includes
information not previously disclosed to the public or to the trade by the
Company's management, or otherwise in the public domain, with respect to the
Company's, or any of its affiliates or
9
<PAGE>
subsidiaries, products, services, facilities, applications and methods, trade
secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product or service price lists, customer lists, technical
information, financial information (including the revenues, costs or profits
associated with any of the Company's products), business plans, prospects or
opportunities.
6.3. Exclusive Property . The Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by the Executive relating to
the business of the Company shall be and remain the property of the Company.
Similarly, all patents and/or inventions or new products developed by the
Executive, alone or with others during the term of this Agreement shall
constitute "work product" as such term is generally used and shall remain the
property of the Company upon termination or expiration of this Agreement.
6.4. Injunctive Relief. Without intending to limit the remedies available
to the Company, the Executive acknowledges that a breach of any of the covenants
contained in this Section 6 may result in material and irreparable injury to the
Company or its affiliates or subsidiaries for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 6 or such other relief as may be required
specifically to enforce any of the covenants in this Section 6. If for any
reason a final decision of any court determines that the restrictions under this
Section 6 are not reasonable or that consideration therefor is inadequate, such
10
<PAGE>
restrictions shall be interpreted, modified or rewritten by such court to
include as much of the duration and scope identified in this Section 6 as will
render such restrictions valid and enforceable
6.5 Executive shall immediately receive 60,000 shares of the Company's
Common Stock as consideration for the non-competition clause contained in
Section 6.1 above.
7. MISCELLANEOUS
7.1. Notices. All notices or communications hereunder shall be in writing,
addressed as follows:
To Company:
Chief Financial Officer
or Chairman of The Board
Proformix Systems, Inc.
50 Tannery Road
Branchburg, New Jersey
cc: Paul Chernis, Esq.
Silverman, Collura, Chernis
& Balzano, P.C.
381 Park Avenue South
Suite 1601
New York, New York 10016
To the Executive:
Michael Martin
65 Nicole Terrace
Bridgewater, New Jersey 08807
Any such notice or communication shall be sent certified or registered mail,
return receipt requested, addressed as above (or to such other address as such
party may designate in writing from time to time), and the actual date of
receipt, as shown by the receipt therefor, shall
11
<PAGE>
determine the time at which notice was given.
7.2. Severability. If a court of competent jurisdiction determines that any
term or provision hereof is invalid or unenforceable, (a) the remaining terms
and provisions hereof shall be unimpaired and (b) such court shall have the
authority to replace such invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.
7.3. Assignment. This Agreement shall inure to the benefit of the heirs and
representatives of the Executive and the assigns and successors of the Company,
but neither this Agreement nor any rights hereunder shall be assignable or
otherwise subject to hypothecation by the Executive.
7.4. Entire Agreement. This Agreement represents the entire agreement of
the parties and shall supersede any and all previous contracts, arrangements or
understandings between the Company and the Executive, including the Prior
Agreement. The Agreement may be amended at any time by mutual written agreement
of the parties hereto.
7.5. Withholding. The Company shall be entitled to withhold, or cause to be
withheld, from payment any amount of withholding taxes required by law with
respect to payments made to the Executive in connection with his employment
hereunder.
7.6. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of New Jersey without reference to rules
relating to conflict of law.
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<PAGE>
IN WITNESS WHEREOF, Proformix has caused this Agreement to be duly executed
and the Executive has hereunto set his hand, as of the day and year first above
written.
PROFORMIX SYSTEMS, INC.
By:____________________________________
Name:
Title:
_______________________________________
MICHAEL G. MARTIN
13
[Letterhead of Schweiger & Associates]
May 12, 1997
Mr. Michael G. Martin
President
Proformix
50 Tannery Road
Branchburg, NJ - 808876
Dear Mike:
Subject: Consulting Engagement
This letter confirms our several conversations concerning management consulting
services and the ongoing needs of Proformix, Inc., a Delaware Corporation having
its principal office at 50 Tannery Road, Branchburg, NJ ("Proformix") and
Anthony W. Schweiger, a sole proprietor doing business as Schweiger & Associates
("Schweiger"). Since December 15, 1997 I have been providing management
consulting services to Proformix and fulfilling the role of Acting Chief
Operating Officer with the primary focus on orchestrating the Company's
turnaround. An integral part of the turnaround has required me to forego receipt
cash payments and change the focus of my original assignment.
We have agreed that at some time in the near future, we will negotiate a
mutually acceptable employment agreement which will address appropriate terms
and conditions, including title, compensation, term and an opportunity to
participate in the value I can help create. Accordingly, we have agreed to the
following:
1. The consulting agreement term shall be extended to October 31, 1997.
2. In consideration of the need of Proformix to substantially change and defer
payment of the compensation Proformix and Schweiger agree to continue the
retainer to $6000 per month until June 30, 1997 at which time the retainer
shall cease and a consulting fee in the amount of $8000 per month for July
and August and $9000 per month until the agreement is terminated. Up to
$40,000 of the paid retainer shall be credited against a flat cash bonus of
$100,000 which shall be payable upon the Company having adequate cash
resources to make the payment, but in no event later than December 1, 1997
3. As additional consideration for orchestrating the business turnaround and
implementing substantive changes in the marketing and sales organization
including cooperative marketing agreements with entities acceptable to
Proformix, Anthony W. Schweiger shall receive an immediate grant of 400,000
shares. As additional consideration for continued deferral of fees and
services rendered, Proformix shall grant to Anthony W. Schweiger 50,000
shares per month commencing May 1, 1997 and continuing until October 1,
1997. In lieu of the foregoing, the grant of options totaling 750,000
shares hereby reduced to 150,000. In addition, the grant of options on the
remaining 150,000 shares of Proformix common stock shall be made concurrent
with the completion of a merger or acquisition with a public entity.
Notwithstanding the terms of the original understanding, the strike price
of the options shall be $.50 per share. The value of the grant shall be
determined in accordance with Generally Accepted Accounting Principles
(GAAP) and applicable Internal Revenue rules and regulations.
<PAGE>
4. It is the intent of Proformix and Schweiger that at some time in the near
future and prior to December 31, 1997, Schweiger and Proformix will agree
on some ongoing employment understanding.
Please acknowledge your acceptance of these changes by signing and returning the
copy of this letter enclosed for your convenience. I look forward to continuing
work with you and making Proformix realize your vision for a successful business
focused on delivering ergonomic products for the computerized work place.
Sincerely,
Accepted this 12 day of May, 1997
/s/ Anthony W. Schweiger /s/ Michael G. Martin
---------------------------------
[LETTERHEAD OF SILVERMAN, COLLURA, CHERNIS & BALZANO, P.C.]
August 6, 1997
Proformix Systems, Inc.
50 Tannery Road
Branchburg, New Jersey 08876
Re: Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Proformix Systems, Inc. ("Company"), a Delaware
corporation, pursuant to a Registration Statement on Form S-8, as filed with the
Securities and Exchange Commission on August 6, 1997 (the "Registration
Statement"), covering an aggregate of 410,000 shares of the Company's Common
Stock, $.0001 par value (the "Common Stock") representing (i) 110,000 shares of
Common Stock issuable pursuant to a consulting agreement between the Company and
Seymour Kroll; (ii) 30,000 shares of Common Stock issuable pursuant to a
consulting agreement between the Company and Carl Henn; (iii) 10,000 shares of
Common Stock underlying a stock option and 200,000 shares of Common Stock issued
to Anthony W. Schreger; and (iv) 60,000 shares of Common Stock issued to Michael
G. Martin.
In acting as counsel for the Company and arriving at the opinions as
expressed below, we have examined and relied upon originals or copies, certified
or otherwise identified to our satisfaction, of such records of the Company,
agreements and other instruments, certificates of officers and representatives
of the Company, certificates of public officials and other documents as we have
deemed necessary or appropriate as a basis for the opinions expressed herein.
In connection with our examination we have assumed the genuineness of
all signatures, the authenticity of all documents tendered to us as originals,
the legal capacity of natural persons and the conformity to original documents
of all documents submitted to us as certified or photostated copies.
Based on the foregoing, and subject to the qualifications and
limitations set forth herein, it is our opinion that:
1. The Company has authority to issue the Common Stock in the
manner and under the terms set forth in the Registration Statement.
<PAGE>
Proformix Systems, Inc.
August 6, 1997
Page 2
2. The Common Stock has been duly authorized and when issued,
delivered and paid for by recipients in accordance with their respective terms,
will be validly issued, fully paid and non-assessable.
We express no opinion with respect to the laws other than those of the
State of New York and Federal Laws of the United States of America, and we
assume no responsibility as to the applicability or the effect of the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and its use as part of the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement. It is not to be used, circulated,
quoted or otherwise referred to for any other purpose. Other than the Company,
no one is entitled to rely on this opinion.
Very truly yours,
SILVERMAN, COLLURA, CHERNIS and BALZANO, P.C.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report dated July 8, 1997, relating to the
financial statements of Proformix Systems, Inc. (formerly Whitestone Industries,
Inc.) for the year ended December 31, 1996 and the reference to our firm under
the caption "Experts".
/s/ Feldman Radin & Co., P.C.
FELDMAN RADIN & CO., P.C.
Certified Public Accountants
New York, New York
August 1, 1997
