SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number: 00-21219
CASDIM INTERNATIONAL SYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 83-0288100
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)
150 East 58th Street
New York, New York 10155 10155
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 829-1700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.01
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulations S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $33,091.
The aggregate market value of voting stock held by non-affiliates computed using
the average of the bid and asked prices reported by the Nasdaq Bulletin Board,
on April 13, 1998 was $1,821,720.25.
As of April 8, 1998, the Registrant had 15,394,001 shares of Common Stock, par
value $0.01, outstanding.
Transitional Small Business Disclosure Format Yes ___ No X.
<PAGE>
PART I
Item 1. Description of Business
General
Casdim International Systems, Inc. and its subsidiaries (collectively
referred to herein as the "Company" or "Casdim") is a multimedia and
communications company engaged in the integration of interactive televisions,
which will be used to provide interactive programs to link vendors and customers
and to supply information and transactions on demand (the "IOD System"). The IOD
System is designed to provide information and video on demand to the hotel guest
community. The IOD System will offer a wide range of local, national and
international activities and services, including business information, leisure
insight, internet connectivity, databanks and members' club facilities through
various Internet/Enthroned services and video on demand activities. Another area
of the Company's business is the development of servers and communications
applications for both satellite-based networks and wide area networks ("WAN"),
that will enable vendors to deliver information services and effect transactions
from their place of business.
Historically, the Company's principal business was the sale and lease of
multimedia kiosks, and the development and sale of databases, kiosk and kiosk
home pages, servers and communications applications. In 1997, the Company
discontinued the operations of its Israeli subsidiary, Casdim Interactive
Systems Ltd., as a result of the substantial losses incurred by it in conducting
its kiosk business, and determined that the best use for its technology in the
North American market was in the context of the lodging industry and in the
transmission of electronic data via satellite.
Products
The IOD System
On March 20, 1997, the Company and Ramada Franchise Systems, Inc. ("RFS"),
a wholly-owned subsidiary of HFS Incorporated, entered into an agreement for
"alpha" and beta" testing of Casdim's IOD System. The IOD System incorporates
interactive television, Internet, video-on-demand, e-mail, and a club member
facility. The IOD System is designed to utilize a WAN to link video and data
servers via satellites and/or cable television systems. Under the proposed
arrangement, Casdim will derive revenues from advertising, vendor commissions
and user fees. RFS currently has over 120,000 lodging rooms in its franchise
network. The Company and RFS have agreed to enter into an agreement for full
system implementation of the IOD System, pursuant to which RFS will exclusively
recommend the IOD System to all of its franchises, upon the successful
completion of the alpha and beta testing at various Ramada Inn locations. The
testing of the IOD System was completed in March 1998. The Company built a demo
hotel room with the IOD System in its N.Y. offices and is presently
demonstrating the
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<PAGE>
operation of the IOD System to hotel managers and owners. No assurance can be
given that RFS will provide the Company the Internet-content for the IOD System
or that RFS will recommend the installation of the IOD System or that the
Company will be able to raise sufficient funds to install its IOD System within
the Ramada Inn franchise system.
It is anticipated hotel guests utilizing the IOD System will access the IOD
System through the Casdim default channel of their television and will have
access to various services pursuant to the following planned directories and
applications:
Hotel Members Club. When a guest checks in to the hotel he or she will have
the option of becoming a hotel club member. Members will enjoy customized IOD,
stock, sport and news screens. The guest will have a personalized screen with
the list of stocks he wishes to follow or see how his favorite sports team is
doing. In addition, some hotels may chose to offer members credit points for use
of certain hotel facilities, such as restaurants and shops. A leisure screen
allows the guest to chat with others on the Internet with common interests.
Business. This directory will allow the hotel guest to keep up to date with
the latest financial information, including stock quotes, financial data and
market research, all of which will be regularly updated. Hotel Club Members will
have their own customized screens detailing their specified securities
portfolio.
News. The news directory will provide the hotel guest with a summary of the
day's events and will supply links to news services on the Internet for more
in-depth coverage. A hotel club member will be able to turn his television into
a customized news device by tailoring his or her preferences to his or her own
personal taste.
City Guide. A local-area guide that will provide neighborhood maps, yellow
pages, and information on the latest films, cultural and sports events. The
guest will be able to find out about local points of interest, restaurants,
shops, and various activities. It is anticipated that tickets for films and
cultural and sports events will be purchased by the guest using a credit card
through the IOD secured system.
E-mail and Fax. This directory will allow guests to send and receive e-mail
and to form their personal e-mail address or Hotel Member's Club e-mail address.
The hotel guest will also have the ability to send faxes worldwide.
Travel. The Travel Directory will provide on-line airfare, hotel and car
rental reservations through carefully selected Internet sites. All purchases
will be charged directly to the guest's credit card through the IOD secured
system.
Weather. This directory will provide local and international weather data,
including synoptic maps and satellite photography, allowing the guests to plan
their day or continue travel arrangements.
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<PAGE>
Hotel Guides. This directory is a customized interactive guide describing
facilities and amenities available in a particular hotel, such as health spas,
restaurants, business services, laundry and other services. The guide will
incorporate a hotel's individual logo into the graphic images.
Messaging. Message retrieval/viewing will provide hotel the guest with the
opportunity to review his or her messages on the television screen.
Http://. This directory will provide the guest unlimited Internet access.
In cases where the Company will install Video on Demand facility in
addition to the IOD System, such facility will include the following features:
Account Review. An interactive guest services application that will enable
the guest to review his or her individual hotel account status on the television
screen.
Video Check-Out. This application will allow the guest to check out of the
hotel via the television screen.
Video Store. This directory will offer movies in three ways; Video on
Demand (offers the guest a variety of video titles from which to choose),
Pay-Per-View (movies that are played on a set schedule), and Pay-Per-Day
(similar to Pay-Per-View, except for the billing cycle and the number of
channels included in the package).
Room Service. Room Service will allow the guest to order meals via the
television screen instead of the telephone. It is anticipated that the basic
types of room service to be provided will include "Tomorrow's Breakfast" and
"All-Day Dining".
Proposed Mexican Venture
The Company and Dick Clark International Cable Ventures Ltd. ("Dick Clark
Ventures") agreed to enter into a joint venture, to be known as Technology
Transfer Corporation, to exploit certain satellite transmission licenses held by
an affiliate of Dick Clark Ventures in Mexico. These licenses, granted by the
Secretaria de Communicaciones y Transports ("SCT") of Mexico, allow for the
installation or utilization of shared teleports, for the bi-directional
transmission of voice, video and data within the footprint of the Mexican
Government's two Solidaridad satellites. The Company agreed to contribute
$500,000 to the joint venture which will design, install and operate an advanced
communications platform based on the satellite platform. To date, the Company
has expended approximately $700,000 in connection with this project. The
satellite network is intended to provide a variety of electronic services,
currently unavailable on a wide scale in Mexico. Initially, the joint venture
intends to provide electronic transactional services under the trade name
DataMex(TM) which service will include transactional banking via an
interconnected ATM network, point of purchase transactions and international
funds transfers.
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<PAGE>
The Company is currently awaiting Dick Clark Ventures to obtain the licenses to
be issued by the Mexican Government. The Company is also waiting for the amended
licenses to be finalized. No assurance can be given that this joint venture will
begin operation, will be able to raise sufficient capital for the initiation of
its proposed business or will be successful in developing the network.
Sales, Marketing and Distribution
In 1996 and 1997, the Company expended substantial efforts on its strategy
of entering the North American market and achieved preliminary success by
entering into relationships with RFS for its IOD System and with Dick Clark
Ventures for the proposed transmission of electronic services via satellite. The
Company intends to devote a substantial portion of its resources to the
development and implementation of the technologies for these projects, with
principal emphasis on the IOD System. No assurance can be given that these
projects will be successful or that the Company will be able to raise sufficient
funding for such projects.
Competition
The electronic information distribution market is rapidly evolving and is
competitive. The Company believes that most, if not all, of its competitors have
greater financial resources and name recognition than the Company. In addition,
some of these competitors, including LodgeNet Entertainment Corp. and
Spectravision, currently offer information products which include some of the
services included in the Company's IOD System. Accordingly, these competitors
may have an advantage in competing with the Company since its IOD System is not
commercially installed as yet. In addition, the Company expects to face
competition from new entrants into its markets. Such competition could
materially adversely affect the Company's business, financial condition and
results of operation. There can be no assurance that the Company will be able to
compete successfully against current or future competitors.
Government Regulation
The Company's proposed joint venture with Dick Clark Ventures will, if
initiated, be subject to regulation by the SCT of the Government of Mexico and
may be subject to federal regulations with respect to the transmission of data
by satellite into the United States.
Trademarks and Patents
In January 1995, the Company acquired a pending patent (No. 108935) for its
medical kiosks from Casdim Software Systems Ltd. ("CSS Ltd."), an affiliated
company owned by Mr. Yehuda Shimshon, for $500,000. The consideration was based
on the man-hours invested in the project by CSS Ltd. This patent is pending both
in Israel and the United States. The Company does not have any registered
trademarks.
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<PAGE>
Employees
At March 17, 1998 the Company and its subsidiaries employed 8 persons, 1 in
technical support, 1 in marketing and sales, and 6 in operations and
administration.
Item 2. Description of Property
The Company's executive offices are currently located in approximately
3,700 square feet of office space at 150 East 58th Street, New York, New York.
The lease for such facilities expires on May 2, 2002. The annual rental for the
lease is approximately $134,000.
Item 3. Legal Proceedings.
An action was initiated against the Company by three investors who have
alleged that they are owed a penalty fee in connection with their investment in
the Company. The investors claimed that the Company failed to promptly file a
registration statement with the Securities and Exchange Commission (the
"Commission") with respect to their shares. Such investors have claimed that
they are owed $210,000 by the Company. The Company intends to defend itself
vigorously against the action brought by the investors.
The Company has been advised that the Commission has entered a formal order
of private investigation in connection with the offer, purchase or sale of
securities of the Company. The Company has not been advised by the Staff of the
Commission of the status of the investigation. There can be no assurance that
the Commission will not initiate a proceeding against the Company and/or certain
of its former or present affiliates in connection with its investigation, which
proceeding could adversely affect the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
During the quarter ended December 31, 1997, the Company held it Annual
Meeting of Stockholders. At the meeting held on December 22, 1997, the Company's
stockholders voted on the election of directors and the appointment of the
Company's auditors. The results of the vote were as follows:
1. For the election of the following directors to hold office for a term
until their successors are duly elected and qualified at the Company's next
Annual Meeting of Stockholders:
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<PAGE>
For Withhold
--- --------
Yehuda Shimshon 8,444,450 12,000
Israel Shimshon 8,444,450 12,000
Doron Leave 8,444,450 12,000
Ilan Mintz 8,444,450 12,000
David Tamir 8,444,450 12,000
2. For the approval of the appointment of Hocker, Lovelett, Hargens &
Yennie, P.C. as the Company's auditors for the year ended December 31, 1997
For Against Abstain
--- ------- -------
8,444,450 4,000 8,000
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Because there has been no established trading market and only a limited
number of market makers have sporadically offered to purchase and sell shares of
the Company's Common Stock, during significant portions of the listed periods,
reliable quotations for the Common Stock were not available.
1996 High Low
- ---- ---- ---
First Quarter.......................... $1 1/8 $ 7/32
Second Quarter......................... 5 3/4 1/2
Third Quarter ......................... 5 1/4 2 3/4
Fourth Quarter......................... 5 1/2 4 1/16
1997
- ----
First Quarter.......................... $3 1/2 $1 1/32
Second Quarter......................... 2 7/16 1 13/32
Third Quarter.......................... 1 11/16 11/16
Fourth Quarter......................... 1 7/32 9/32
The Nasdaq Bulletin Board symbol for the Company's Common Stock is CDMI. As
of March 11, 1998, there were approximately 21 holders of record and 380
beneficial owners of the Company's Common Stock.
The Company has not paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
financial statements.
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<PAGE>
Background
The Company is a Delaware corporation, originally incorporated under the
laws of Colorado on January 5, 1988 under the name of S.W. Financial Corporation
for the purpose of acquiring an interest in one or more business opportunities
in the field of multimedia, information and communication technology. During the
three years prior to 1995, the Company had limited activity. The Company did not
have revenues and expenses consisted principally of general and administrative
costs used in the analysis of prospective business ventures. In keeping with the
stated corporate purpose, the then management of the Company evaluated several
business opportunities and, during the fiscal year ended December 31, 1995,
finalized the Company's first corporate acquisition. The acquisition was
effected by means of an agreement for the exchange of stock and plan of
reorganization dated November 21, 1995, (the "Exchange Agreement"), by and among
the Company, Casdim Interactive Systems USA, Inc. ("Casdim USA"), a Nevada
corporation, and Mr. Yehuda Shimshon. Mr. Shimshon acted on behalf of himself
and Cedarwood Trading & Investment Ltd. ("Cedarwood"), a trust in which he is
primary beneficiary. Pursuant to the terms of the Exchange Agreement, the
Company acquired all the issued and outstanding shares of Casdim USA, in
exchange for 425,000,000 shares of the Company issued to Mr. Shimshon and
Cedarwood in equal amounts. At the time of the exchange, Mr. Shimshon and
Cedarwood were each 50% shareholders of Casdim USA. The Exchange Agreement,
which became effective on December 11, 1995, was approved at a special meeting
of the shareholders of the Company held on October 24, 1995 at which the
shareholders also approved: (i) renaming the Company Casdim International
Systems, Inc.; (ii) the 50:1 stock split of 76,700,000 shares, the then
outstanding number of shares of the Company, into 1,534,000 shares; (iii) the
relocation of the Company's headquarters from Colorado to Nevada and (iv) the
appointment of Mr. Shimshon as President and Chairman of the Board. The exchange
transaction resulted in a change of control in the Company and at December 31,
1995, each of Mr. Shimshon and Cedarwood owned 44.1% of the Company's
outstanding shares of Common Stock. In April 1997 the Company was merged into a
Delaware subsidiary and changed its state of incorporation to Delaware.
Results of Operations
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Product sales decreased to $33,091 during the year ended December 31, 1997
from $508,713 in the year ended December 31, 1996. The decrease in sales was
principally attributable to the Company's Israeli subsidiary inability to
generate substantial revenues from either kiosk sales or leasing and the
discontinuation of operation of the subsidiary in the fourth quarter of 1997.
Cost of sales decreased to $50,547 in 1997 from $379,806 in 1996,
principally as a result of the Company's lower level of sales and the
discontinuation of the operations of its Israeli subsidiary. As a result of the
foregoing, the Company's gross profit for 1997 was negative $17,456 compared to
$128,907 in 1996.
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<PAGE>
Selling, general and administrative expenses increased to $2,774,875 in
1997 from $1,259,347 in 1996, due primarily to the Company's investment of
approximately $700,000 in the Dick Clark Venture project, establishment of
executive offices in New York City, increased compensation, legal and accounting
costs, and increased marketing costs associated with the Company's efforts to
penetrate the United States market. In 1997, the Company also recognized a loss
of approximately $300,000 as a result of the write-off of an uncollectible
account receivable of Kupat Holim Leumit.
In 1997, the Company capitalized approximately $929,000 of product
development costs principally relating to the IOD System as compared to
approximately $943,000 of product development costs relating to this project in
1996.
During 1997, the Company had other income of $40,733 as compared to other
income of $52,537 in 1996. In the first quarter of 1997 the Company recorded a
gain of $145,402 on the sale of an investment.
For the year ended December 31, 1997, the Company incurred an operating
loss of $2,751,598 as compared an operating loss of $1,173,977 for the year
ended December 31, 1996. The increase in the Company's operating loss during
1997 was due primarily to the increase in the Company's selling, general and
administrative expenses and the decline in sales. In addition, in 1997 the
Company recorded a loss of $774,020 from the discontinued operations of its
Israeli subsidiary.
As a result of the foregoing, the Company recorded a net loss of $3,525,618
(or $.23 per share, based on 15,334,001 weighted average shares outstanding) for
the year ended December 31, 1997 as compared to a net loss of $1,173,977 (or
$.09 per share based on 13,349,000 weighted average shares outstanding) for the
year ended December 31, 1996.
Liquidity and Capital Resources
At December 31, 1997, the Company had $216,337 in cash and $332,498 in
working capital as compared to $915,527 in cash and $898,151 in working capital
at December 31, 1996. In 1997, the Company entered into various financings in
order to raise funds for its working capital requirements. In 1997, the Company
received $400,000 upon the exercise of warrants issued in its 1996 Private
Placement and $1.5 million from the sale of 1,200,000 shares of Common Stock in
a private placement. On December 23, 1997, the Company sold $250,000 principal
amount of 10% convertible secured note due on January 5, 1999 (the "December
Note") to an investor. The December Note is convertible into shares of Common
Stock for a period of nine months and fourteen days beginning March 23, 1998 and
ending January 5, 1999, at a 20% discount to the average closing bid price per
share of the Common Stock on the Nasdaq Bulletin Board on the five trading days
prior to the conversion date (the "Market Price"). After the 180th day, the
December Note is convertible at a 30% discount to Market Price. In the event the
Market Price will be less than $0.50 per share, the December Note will be
convertible at 50% discount to the closing bid price for the share of Common
Stock for the five trading days before the conversion date. In addition, the
Company issued to the investor two-year warrants to purchase 50,000 shares of
Common Stock at an exercise price of $0.50 per share. In 1997, the Company's
financial position also benefitted from the conversion of $955,550 of its
Israeli
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<PAGE>
subsidiary's short-term debt into long-term debt. The proceeds from the
Company's financings funded the Company's operations in 1997.
On March 17, 1998, the Company sold an additional $200,000 principal amount
of 10% convertible secured note due on January 8, 1999 (the "March Note"). The
March Note is convertible into shares of Common Stock for six months and twenty
four days beginning June 15, 1998 and ending January 8, 1999, at a 20% discount
to the average closing bid price per share of the Common Stock on the Nasdaq
Bulletin Board for the five trading days prior to the conversion day (the "March
Note Market Price"). After the 180th day, the conversion price is convertible at
a 30% discount to the March Note Market Price. In the event the March Note
Market Price will be less than $0.50, the March Note will be convertible at a
50% discount to the bid price for the Common Stock for the five trading days
before the conversion date. In addition, the Company issued to the investors
two-year warrants to purchase 200,000 shares of Common Stock, at an exercise
price equal to 80% of the average closing bid and asked price of the Company's
Common Stock as reported by the Nasdaq Bulletin Board (and if not quoted on the
Nasdaq Bulletin Board as reported by National Quotation Bureau) on September 17,
1998.
Among the factors that will affect the Company's working capital in the
future will be (i) the amount and timing of the expenditures required to
complete the development, installation and testing of the IOD System, and (ii)
the timing of the payment of the remaining amount due on the capital
contribution which the Company has agreed to make to the joint venture with Dick
Clark Ventures, if such venture ultimately proceeds, for which no assurance can
be given. In 1997 the Company reduced its costs in order to conserve its
financial resources and develop its current projects. Monthly expenses in the
United States were reduced to less than $100,000 per month in the third and
fourth quarters of 1997 in an effort to conserve cash.
Management believes that the Company will require additional financing of
$1.8 million in 1998 to fund the installation of the IOD System at various
Ramada Inn sites. In addition the Company will require $1.2 million for further
development of the IOD System, to start the full marketing and sales activities
for the IOD System and to have sufficient working capital for the remainder of
the year. Although the Company is currently investigating several sources of
financing, no assurance can be given that the Company will be able to raise
sufficient financing on either an equity or debt basis to permit it to continue
operations and implement its IOD System.
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<PAGE>
Item 7. Financial Statements
Index to Financial Statements
Independent Auditors' Report.............................................F-1
Financial Statements:
Consolidated Balance Sheets .......................................F-2
Consolidated Statements of Income..................................F-4
Consolidated Statements of Stockholders Equity.....................F-5
Consolidated Statements of Cash Flows..............................F-6
Notes to Financial Statements......................................F-8
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<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CASDIM INTERNATIONAL SYSTEMS, INC.
We have audited the accompanying consolidated balance sheets of CASDIM
INTERNATIONAL SYSTEMS, INC. (a Delaware corporation) and its subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These consolidated
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CASDIM INTERNATIONAL
SYSTEMS, INC. and its subsidiaries as of December 31, 1997 and 1996 and the
results of their operations, stockholders' equity and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/Hocker, Lovelett, Hargens & Yennie, P.C.
April 7, 1998
Riverton, Wyoming
F-1
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------ -----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $216,337 $915,527
Accounts receivable
Trade - Note 10 -- 438,807
Related parties -- 834,144
Officers 247,695 254,200
Prepaid expenses -- 148,323
Investments 90,000 173,596
------- ---------
Total 554,032 2,764,597
PROPERTY AND EQUIPMENT - Note 4
Property and equipment 95,977 225,361
Less accumulated depreciation (15,159) (36,435)
------- --------
Net 80,818 188,926
OTHER ASSETS
Deposits 55,893 10,200
Start-up and organization
costs, net 44,870 48,304
Patent, net - Note 5 -- 400,000
Product development costs - Note 6 1,872,421 943,164
--------- ---------
TOTAL $2,608,034 $4,355,191
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade $249,335 $ 52,675
Other - Note 13 -- 469,355
Current maturities of long-term debt 574,602 --
Notes payable - Note 14 250,000 1,344,416
------- ---------
Total 1,073,937 1,866,446
LONG-TERM DEBT
Accrued severance pay - Note 7 -- 25,474
Long-term bank debt - Note 11 700,050 --
---------- ---------
TOTAL 1,773,987 1,891,920
STOCKHOLDER'S EQUITY - Note 9
Common stock, $.01 par value,
30,000,000 shares authorized
15,334,001 shares issued and
outstanding, 285,000 shares
held in treasury stock 169,590 985
Additional paid in capital 4,873,057 3,145,268
Less treasury stock (cost) (1,425) ( 1,425)
Gain (loss) from foreign currency translation (51,860) (51,860)
Retained earnings (deficit) (4,155,315) ( 629,697)
---------- ----------
Total shareholders' equity 834,047 2,463,271
--------- ----------
Total liabilities and shareholders' equity $2,608,074 $4,355,191
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
SALES $33,091 $508,713
COST OF SALES 50,547 379,806
--------- ----------
GROSS PROFIT (17,456) 128,907
SALES, ADMINISTRATIVE AND GENERAL 2,774,875 1,259,347
--------- ----------
EXPENSES
INCOME (LOSS) FROM OPERATIONS (2,792,331) (1,121,440)
OTHER INCOME (EXPENSES)
Interest income 25,432 21,309
Dividend income 2,203 35,673
Interest expense (132,304) (109,519)
Investment activity (loss) gain 145,402 --
-------- ---------
Total 40,733 (52,537)
-------- --------
INCOME (LOSS) FROM OPERATIONS BEFORE
TAXES AND DISCONTINUED OPERATIONS (2,751,598) (1,173,977)
(LOSS) FROM DISCONTINUED OPERATIONS (774,020) --
--------- -----------
NET INCOME (LOSS) $(3,525,618) $(1,173,977)
============ ===========
DILUTED (LOSS) PER SHARE $(.23) $(.09)
===== =====
BASIC (LOSS) PER SHARE $(.23) $(.09)
===== =====
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 15,334,001 13,349,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID IN TREASURY RETAINED TRANSLATION
SHARES STOCK STOCK STOCK EARNINGS GAIN (LOSS) TOTAL
------ ------ ------- ------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - 12/31/95 9,634,000 $945 $194,480 $(1,425) $464,744 $ (6,023) $652,541
Contribution of
consolidated
minority interest 79,536 79,536
Sale of stock 4,000,000 40 2,686,725 2,686,765
Warrants exercised 100,000 100,000
Stock options issued 164,063 164,063
Foreign currency
translation (45,657) (45,657)
Net income (loss) (1,173,977) (1,173,977)
----------- -------- ---------- ------- ----------- -------- -----------
Balance - 12/31/96 13,634,000 $985 $3,145,268 $(1,425) $(629,697) (51,860) $2,463,271
Recapitalization 156,605 (156,605)
Sale of Stock 1,400,001 12,000 1,884,394 1,896,394
Net (loss) (3,525,618) (3,525,618)
---------- -------- ---------- ------- ----------- -------- -----------
Balance - 12/31/97 15,534,001 $169,590 $4,873,057 $(1,425) $(4,155,315) $(51,860) $ 834,047
See accompanying notes to consolidated financial statements
</TABLE>
F-5
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(3,525,618) $(1,219,634)
Adjustments to reconcile net income
to net cash provided by operating
activities:
depreciation and amortization 17,878 86,383
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable - trade 438,807 (283,024)
Accounts receivable - other 988,972 (26,998)
(Decrease) increase in:
Accounts payable - trade 196,660 13,912
Accounts payable - other (469,355) 3,938
-------- -------
Net cash (used) by
operating activities (2,352,656) (1,425,423)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 83,596 --
Purchase of property and equipment -- (113,634)
Assets relinquished, net 443,664 --
Purchase of investments -- (173,596)
Payment for start-up costs -- (51,512)
Payment for product development (929,257) (943,164)
Payment of security deposit (45,693) (10,200)
--------- ----------
Net cash (used) in investing activities (397,690) (1,292,106)
-------- - ---------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, net 180,236 669,714
Severance pay relinquished (25,474) 12,488
Proceeds from issuance of stock 1,896,394 2,950,828
--------- ----------
Net cash provided by financing activities 2,051,156 3,633,030
--------- ----------
INCREASE (DECREASE) IN CASH (699,190) 915,501
CASH
Beginning of year 915,527 26
------- ---------
End of year $216,337 $ 915,527
======== ==========
Interest paid $132,304 $ 109,519
======== =========
Income Taxes Paid -- --
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General
CASDIM INTERNATIONAL SYSTEMS, INC. and its subsidiaries (collectively
referred to herein as the "Company") is a multimedia and communications company
engaged in the integration of interactive televisions, which will be used to
provide interactive programs to link vendors and customers and to supply
information and transactions on demand (the "IOD System"). The IOD System is
designed to provide information and video on demand to hotel guests. Another
area of the Company's business is the development of servers and communications
applications for both satellite-based networks and wide area networks ("WAN"),
that will enable vendors to deliver information services and effect transactions
from their place of business.
Historically, the Company's principal business was the sale and lease of
multimedia kiosks, and the development and sale of databases, kiosk and kiosk
home pages, servers and communications applications. In 1997, the Company
discontinued the operations of its Israeli subsidiary, Casdim Interactive
Systems Ltd., as a result of the substantial losses incurred by it in conducting
its kiosk business.
2. Summary of Significant Accounting Policies:
This summary of significant accounting policies of the Company and its
subsidiaries, CASDIM INTERACTIVE SYSTEMS USA, INC. ("Casdim USA") and
CASDIM INTERACTIVE SYSTEMS, LTD., (ISRAEL) ("CISL"), is presented to assist
in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, which
is responsible for their integrity and objectivity.
a. Principles of consolidation - In 1995, the Company issued 8,500,000
shares of stock after a 50:1 reverse stock split to acquire 100% of
Casdim USA, which owns 100% of CISL. The business combination has been
accounted for using the pooling method of accounting. The consolidated
financial statements include the accounts of the Company and its
subsidiaries.
b. Foreign operations - CISL maintains its accounts in nominal New
Israeli Shekels ("NIS"). Certain of the dollar amounts in the
financial statements may represent the dollar equivalent of other
currencies, including the NIS, which may not be exchangeable for
dollars.
Transactions and balances denominated in dollars are presented at
their dollar amounts. Non-dollar transactions and balances are
remeasured into dollars in accordance with the principles set forth in
the Statement of Financial Accounting Standards ("FAS") No. 52,
F-8
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
"Foreign Currency Translation," of the Financial Accounting Standards
Board of the United States ("FASB").
Accordingly, items have been remeasured as follows:
Monetary items-at the current exchange rate at each balance sheet
date;
Nonmonetary items-at historical exchange rates;
Income and expense items-at exchange rates current as of the date of
recognition of those items (excluding depreciation and other items
deriving from nonmonetary items);
Exchange gains and losses from aforementioned remeasurement (which are
immaterial for each year) are reflected in the statements of income.
Linkage Basis - Balances which are linked to the Israeli Consumer
Price Index (the "CPI") are presented on the basis of the index at the
balance sheet date, which index is published subsequently. Balances
denominated in, or linked to, currencies other than the dollar are
presented according to the exchange rates prevailing at the balance
sheet date.
The Israeli CPI increased by 7.0% in the year ended December 31, 1997
and 10.6% in the year ended December 31, 1996.
The effects of the inflationary erosion of monetary items and interest
is included in financial income or expenses, as appropriate.
c. Fixed Assets - Fixed assets are stated at cost. Depreciation has been
calculated by the straight-line method over the estimated useful lives
of the assets.
F-9
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years
-----
Leasehold improvements 10
Motor vehicles 7
Office furniture and equipment 5-20
(mainly computers and peripheral
equipment)
Leasehold improvements are depreciated using the straightline method
over the period of each lease, not to exceed the estimated useful life
of the improvements.
d. Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers cash and cash equivalents to consist of
all cash, either on hand or in banks including time deposits, and any
highly liquid debt instruments purchased with a maturity of three
months or less.
e. Bad Debts - Uncollectible accounts receivables are charged directly
against earnings when they are determined to be uncollectible. Use of
this method does not result in a material difference from the
valuation method required by generally accepted accounting principles.
f. Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
g. Recognition of Income - Income deriving from long term contracts are
recognized upon percentage completion basis. At December 31, 1996, the
Company completed 83% of its $2,074,029 (NIS 6,502,080) contract with
Kupat Holim Leumit. Estimated costs and earnings in excess of billings
at December 31, 1996 amounted to $259,533 (NIS 843,743).
h. Deferred income taxes - Deferred income taxes are provided for
temporary differences between the assets and liabilities, as measured
in the financial statements, and for tax purposes at the tax rate
expected to be in force when these differences reverse, in accordance
with Statement No. 109 of the FASB (Accounting for Income Taxes).
Deferred income taxes are not material to the financial statements.
F-10
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
i. Net Income per share - Net income per share is computed on the
weighted shares adjusted for the issuance of shares and consolidation.
3. Other Receivables and Prepaid Expenses
1997 1996
---- ----
Prepaid expenses -- $ 148,323
Related parties -- 1,088,344
------ ---------
Total -- $1,236,667
====== ==========
4. Fixed Assets
1997 1996
---- ----
Cost
Leasehold improvement $ 10,168 $ 10,168
Furniture & equipment 53,335 182,719
Motor vehicles 32,474 32,474
------ ----------
95,977 225,361
Accumulated depreciation 15,154 36,435
------ ---------
Total $80,818 $ 188,926
======= ==========
5. Patent
In January 1995, the Company acquired a pending patent No. 108935 from
CASDIM SOFTWARE SYSTEMS, LTD. for the sum of $500,000. The patent is being
depreciated using the straight-line method over the period of ten years.
See Note 15 for discussion of discontinued operations.
6. Product Development Costs
Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs
incurred by the Company between completion of the working model and the
point at which the product is ready for general release have been
capitalized. Total costs incurred to December 31, 1997 were $1,872,421. The
costs were principally incurred in the development of the Company's IOD
information on demand project.
F-11
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Capitalized software costs are amortized by the greater of: (i) ratio of
current gross revenues from sales of the software to the total of current
and anticipated future gross revenues from sales of that software or (ii)
the straight-line method over the remaining estimated useful life of the
product (not greater than three years). The Company assesses the
recoverability of this intangible asset by determining whether the
amortization of the asset over its remaining life can be recovered through
undiscounted future operating cash flows from the specific product.
7. Accrued Severance Pay
The liability of the Company for severance pay for the employees of its
Israeli subsidiary is calculated on the basis of the latest salary paid to
its employees and the length of time they have worked for the Company.
Pursuant to Israeli law, the liability is covered by a provision in the
Company's balance sheet and amounts deposited with the severance pay funds
and insurance policies. The insurance policies are owned by CISL and have
been entered into by CISL on behalf of its individual employees. The
amounts accumulated with the insurance company are not under CISL's control
or management and are therefore not reflected in the Company's balance
sheet. See Note 15 for discussion of discontinued operations.
8. Capital Stock
On May 22, 1997, the Company completed a private placement of its
securities in which 1,200,000 shares of Common Stock were issued for
$1,500,000.
9. Stock Warrants and Stock Options
Stock Compensation Plan
Under the Company's 1996 Stock Option Plan (the "Plan"), the Company may
grant options for up to 500,000 shares of its Common Stock to its
employees, directors and consultants. No options have been granted to date.
Under the Plan, the exercise price of incentive stock options ("ISOs") may
not be less than 100% (or 110%, if at the time of grant the optionee owns
more than 10% of the voting stock of the Company) of the fair market value
of the shares of Common Stock at the date of grant. The purchase price of
each share subject to an option, or any portion thereof, which is not
designated as an ISO, may not be less than 75% of the fair market of such
shares on
F-12
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the date of grant. The term of each option under the Plan may be for a
period of up to ten years (five years if the recipient is a 10% or more
shareholder).
Under a public relations retainer agreement (the "Agreement") with Sunrise
Financial Group Inc. ("Sunrise"), the Company agreed to issue Sunrise
options to purchase up to 700,000 shares of its Common Stock as
consideration for its public relations services. Of such options, 460,000
options vested as of April 24, 1996 and options to purchase 10,000 shares
of Common Stock were to vest monthly for a 24-month period, subject to the
continued provision of services by Sunrise. Under the Agreement, the
purchase price of each share subject to an option is $1.00. Options to
purchase 540,000 shares of Common Stock had vested as of December 31, 1996.
In March 1997, the Agreement was terminated and the parties agreed that
Sunrise would retain options to purchase up to 300,000 shares of the
Company's Common Stock. The options will expire in April 2001.
In April 1997, the Company entered into an agreement with Pelican
Consultants U.S.A., Inc. ("Pelican") to provide financial consulting and
financial relations services to the Company. The Company agreed to issue
Pelican options to purchase up to 200,000 shares of the Company's Common
Stock, at a purchase price of $1.00 per share. Of such options, 100,000
options vested as of April 11, 1997 and options to purchase the remaining
shares vest ratably over the next 12-month period beginning May 11, 1997,
subject to the continued provision of services by Pelican.
The Company has accounted for the fair value of the grant of options to
Sunrise and Pelican in accordance with FASB Statement 123. The compensation
costs that have been charged against income for the options granted to
Sunrise and Pelican was $164,063.
Warrants
The Company issued warrants exercisable into 1,150,000 shares of Common
Stock in connection with its May 1996 private placement. As of December 31,
1997, 500,000 of such warrants were exercised and 850,000 warrants remain
available to be exercised. The Company issued additional warrants
exercisable into 200,000 shares of Common Stock in connection with its May
1997 private placement. All of such warrants, which are exercisable at
$1.00 per share, have been included in the computation of fully diluted
earnings per share. In addition, the Company issued warrants exercisable
into 50,000 shares of Common Stock, at an exercise price of $0.50 per
share, in connection with the sale of a convertible note in December 1997
(see Note 14).
F-13
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. Accounts Receivable
In March 1997, CISL was informed by Kupat Holim Leumit, of its continued
postponement of payment of a trade account receivable owed to the Company
in the amount of approximately $300,000. The Company has determined this
account to be uncollectible. The Company has included a loss from this
account in the financial statements.
11. Long Term Bank Debt
On March 3, 1997, CISL converted $900,450 of short-term debt into long-term
debt. The terms of the refinancing call for payments of principal and
interest at a 7.75% annual interest rate.
The following is a schedule of principal payments:
1997 $ 200,400
1998 200,400
1999 200,400
2000 200,400
2001 98,850
---------
$ 900,450
Current Maturities (200,400)
----------
Long-term debt $ 700,050
==========
12. Segment Reporting - Foreign Operations
Included in the consolidated financial statements is the following
financial information relating to the Company's wholly owned foreign
subsidiary, CISL.
BALANCE SHEET AS OF DECEMBER 31, 1997 1996
---- ----
ASSETS
Cash $2,081 $ 1,468
Accounts receivable - trade -- 438,807
Accounts receivable - related parties -- 982,462
Property and equipment - net -- 144,459
Patent - net -- 400,000
------ ----------
Total $2,081 $1,967,196
====== ==========
LIABILITIES AND SHAREHOLDERS EQUITY
Notes payable $574,602 $1,344,416
F-14
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounts payable 118,996 51,588
Other payables -- 469,355
Long-term debt 700,050 --
Accrued severance pay - net -- 25,474
Capital Stock 35 35
Retained earnings (deficit) (1,391,602) 76,328
----------- ----------
Total $ 2,081 $1,967,196
========= ==========
INCOME STATEMENT FOR THE YEARS ENDED
DECEMBER 31,
1997 1996
---- ----
Sales $33,091 $508,713
Cost of sales 50,547 379,806
-------- --------
Gross profit (17,456) 128,907
Sales, administrative and general expense 544,150 623,780
--------
Operating income (loss) (561,606) (494,873)
Interest expense 132,304 109,519
--------- ---------
Net (loss) from Operations $(693,910) $(604,392)
========== ==========
13. Other Payables
Included in other payables are the following:
December 31,
1997 1996
---- ----
Related party $ -- $ --
Accrued payroll -- 49,751
Accrued expenses -- 12,662
Income taxes payable to the State of Israel -- 406,942
---- --------
$ -- $469,355
==== ========
14. Convertible Secured Note
In December 1997 the Company entered into an interim Note financing in the
amount of $250,000. The Note bears interest at the rate of ten percent
(10%) per annum and is due and payable January 5, 1999. At the option of
the Holder, the unpaid principal is convertible into fully paid
nonassessable shares of the Company's Common Stock at a conversion price
F-15
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
of 20% below the price per share. The conversion option is available after
the 90th day from the date of issuance of the Note in increments of
$25,000.
15. Discontinued Operations
In December 1997, the Company entered into a formal arrangement to
discontinue operations of CISL. Included in the consolidated income
statements is the loss resulting from the abandonment of activities of CISL
amounting to $774,020. See Note 13 for segment information.
16. Income Taxes
The Company has a net operating loss carry forward in the amount of
$2,673,437 which will begin to expire in the year 2002.
17. Contingencies
An action was initiated against the Company by three investors who have
alleged that they are owed a penalty fee in connection with their
investment in the Company. The investors claimed that the Company failed to
promptly file a registration statement with the Securities and Exchange
Commission with respect to their shares. Such investors have claimed that
they are owed $210,000 by the Company. The Company intends to defend itself
vigorously against the action brought by the investors.
18. Subsequent Events
On March 17, 1998, the Company sold $200,000 principal amount of 10%
convertible secured note due on January 8, 1999 (the "March Note"). The
March Note is convertible into shares of Common Stock for six months and
twenty four days beginning June 15, 1998 and ending January 8, 1999, at a
20% discount to the average closing bid price per share of the Common Stock
on the Nasdaq Bulletin Board for the five trading days prior to the
conversion day (the "Market Price"). After the 180th day, the conversion
price is convertible at a 30% discount to the Market Price. In the event
the Market Price will be less than $0.50, the March Note will be
convertible at a 50% discount to the bid price for the Common Stock for the
five trading days before the conversion date. In addition, the Company
issued to the investors two-year warrants to purchase 200,000 shares of
Common Stock at an exercise price equal to 80% of the average closing bid
and asked price of the Company's Common Stock as reported by the Nasdaq
Bulletin Board (and if not quoted on the Nasdaq Bulletin Board as reported
by National Quotation Bureau) on September 17, 1998.
F-16
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Directors and Executive Officers of the Company are:
Name Position
- ---- --------
Yehuda Shimshon............................ Chairman of the Board, President
and Chief Executive Officer
Doron Leave................................ Vice President of Operations,
Acting Chief Financial Officer and
Director
Israel Shimshon............................ Director
Gary P. Tober.............................. Secretary
Yehuda Shimshon, 45, Chairman of the Board, President and Chief Executive
Officer of the Company since December 1995, began his career in the Israeli
Defense Forces and rose to the rank of Captain. Upon his discharge from the
Israel Defense Forces in 1977, he began a career as a consultant to
organizations active in international trade throughout Europe and Africa. Mr.
Shimshon became active in the field of computer research, developing and writing
programs which led to the establishment by him of Casdim Software Systems Ltd.
("CSS Ltd."), an Israeli company which develops clinical laboratory management
systems, in 1986. Mr. Shimshon has been the Chief Executive Officer of this
company since its inception.
Doron Leave, 44, a director of the Company since August 1996, has been the
Company's Vice President of Operations since July 1996 and has served as Acting
Chief Financial Officer since May 1997. From September 1990 to July 1996, Mr.
Leave was employed by Bank Hapoalim Ltd., most recently as Branch Manager of its
Allenby, Tel Aviv branch. Mr. Leave holds a degree in Business Administration
from Tel Aviv University.
Israel Shimshon, 68, a director of the Company since March 1996, has been
principally employed as the managing director of Hagadish Insurance Agency, an
Israeli general insurance agency, since 1953. Israel Shimshon is the father of
Yehuda Shimshon.
13
<PAGE>
Gary P. Tober, 48, Secretary of the Company since December 1995, has been a
member of the law firm of Lane Powell Spears Lubersky of Seattle for over five
years. Mr. Tober practices in the areas of international business law, taxation,
and international investment law.
Mr. David Tamir tendered his resignation from the Board of Directors on
December 22, 1997 because of his inability to devote sufficient time to the
affairs of the Company in the future. Mr. Ilan Mintz tendered his resignation
from the Board of Directors on December 31, 1997 due to personal reasons.
All Directors of the Company hold office until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.
Officers serve at the pleasure of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
The federal securities laws require directors and executive officers, and
persons who own more than 10% of Casdim's Common Stock to file with the
Commission initial reports of ownership and reports of changes of ownership of
any equity securities of the Company. To Casdim's knowledge, based solely on
review of the copies of such reports furnished to it and representations that no
other reports were required, all persons subject to these reporting requirements
filed the required reports on a timely basis in 1997.
14
<PAGE>
Item 10. Executive Compensation
The following table sets forth information concerning the total
compensation for the Company's Chief Executive Officer in 1997. During the three
years ended December 31, 1997, no other executive officer received compensation
in excess of $100,000. During the three years ended December 31, 1997, the
Company's Chief Executive Officer did not receive any restricted stock award,
stock appreciation right or payment under any long-term incentive plan.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Securities
Compensation Underlying
Name and Principal Position Year Salary ($) Options (#)
- --------------------------- ---- ---------- -----------
Yehuda Shimshon,
President and CEO (effective 1997 $240,000(1) --
12/11/95) 1996 $240,000(1) --
1995 -- --
________________
(1) The aggregate value of all other perquisites and other personal benefits
furnished to Mr. Shimshon was less than the greater of $50,000 or 10% of
such officer's salary. This amount does not include Mr. Shimson's use of an
apartment leased by the Company when he is in New York.
There are currently no employment agreements between the Company and any of
its executive officers. The Company did not pay any Directors fees in 1997.
STOCK OPTIONS
In 1997 the Chief Executive Officer named above in the Summary Compensation
Table was not granted any options, nor did he hold any options or stock
appreciation rights.
15
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 11, 1998, certain information
regarding the Company's Common Stock for each person known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of the Company's
Common Stock, (ii) by each executive officer named in Item 10 hereof, (iii) by
each of the Company's Directors (iv) by all the executive officers and Directors
of the Company as a group:
Amount of
Name and Address (1) Beneficial Ownership Percent of Class
- -------------------- -------------------- ----------------
Yehuda Shimshon 8,250,000 (2) 53.59%
Cedarwood Trading & Investment Ltd. 4,000,000 25.98%
Doron Leave -- --
Israel Shimshon -- --
All Executive Officers and Directors
as a group (5 persons) 8,250,000 53.59%
___________
(1) The address for Mr. Yehuda Shimshon is 150 East 58th Street, New York, New
York 10155. The address for Cedarwood is c/o Bank of Bermuda, 6 Front
Street, Hamilton HM 11, Bermuda. The address for Messrs. Doron Leave and
Israel Shimshon is 5 Haofan Street, Kiryat-Arie, P.O. Box 3599, Petah
Tikva, Israel 49130.
(2) Includes 4,000,000 shares of Common Stock held by Cedarwood. Mr. Yehuda
Shimshon is the primary beneficiary of this trust. Accordingly, he is
deemed to be the beneficial owner of such shares.
16
<PAGE>
Item 12. Certain Relationships and Related Transactions
In October 1995, Casdim Israel, an Israeli wholly-owned subsidiary of the
Company, entered into an agreement with CSS Ltd., a company wholly-owned by Mr.
Yehuda Shimshon, who beneficially owns (directly and through his control of
Cedarwood) approximately 53.6% of the Company's issued and outstanding shares of
Common Stock. Pursuant to this agreement, Casdim Israel paid CSS Ltd. $700,000
for services and products to be supplied by CSS Ltd. to Casdim Israel. The
consideration was determined based upon actual man-hours spent in providing the
services and products. These products and services included: (i) adaptation of
the Scope(TM) LIS system operating in the 140 laboratories of Kupat Holim Klalit
("Kupat Holim"), Israel largest health maintenance organization, to work with
the medical kiosk; (ii) development and implementation of a central data base
for laboratory test results; (iii) implementation of the "Laboratory Test
Results Central Data Base" to work with the 140 laboratories and 400 clinics of
Kupat Holim; and (iv) communication software and adaptation of various
interfaces between CSS Ltd. and Casdim Israel's products. The agreement also
provided that in the event Kupat Holim or other companies purchased the
above-mentioned products from CSS Ltd., the proceeds, up to the sum of $700,000
would be repaid to Casdim Israel. To date, CSS Ltd. has paid Casdim Israel
$50,000. Mr. Yehuda Shimshon has agreed to place 500,000 of his shares of Common
Stock of the Company in escrow to guarantee the performance of CSS Ltd. pursuant
to the agreement with Casdim Israel. Such shares will remain in escrow until the
performance of the obligation under the agreement is complete.
Also in October 1995, Casdim Israel loaned CSS Ltd. $300,000 at a rate of
interest linked to the Israeli CPI, which loan was repaid in 1996. In January
1995, Casdim Israel purchased a pending patent from CSS Ltd. relating to the
medical multi-media kiosks for the sum of $500,000. The consideration for the
patent was determined based on the actual man-hours spent in the development of
the project.
On November 21, 1995, the Company entered into an agreement with Casdim USA
and Mr. Yehuda Shimshon. Mr. Shimshon acted on behalf of himself and Cedarwood.
Pursuant to the terms of the Exchange Agreement, the Company acquired all the
issued and outstanding shares of Casdim USA, the owner of 100% of the voting and
equity shares of Casdim Israel, in exchange for 425,000,000 shares of the
Company issued to Mr. Shimshon and Cedarwood in equal amounts. At the time of
the exchange, Mr. Shimshon and Cedarwood were each 50% shareholders of Casdim
USA. The Exchange Agreement, which became effective on December 11, 1995, was
approved at a special meeting of the shareholders of the Company held on October
24, 1995 at which the shareholders also approved: (i) renaming the Company
Casdim International Systems, Inc.; (ii) the 50:1 stock split of 76,700,000
shares, the then outstanding number of shares of the Company, into 1,534,000
shares; (iii) the relocation of the Company's headquarters from Colorado to
Nevada; and (iv) the appointment of Mr. Shimshon as President and Chairman of
the Board. The exchange transaction resulted in a change of control in the
Company.
On June 1, 1997, the Company entered into a sublease agreement with Medical
Visions, Inc., a New York corporation in which Mr. Yehuda Shimshon has a
controlling interest ("Medical Visions"), pursuant to which Medical Visions
subleased approximately one third of
17
<PAGE>
the Company's executive offices at 150 East 58th Street, New York, New York for
a three-month period, in consideration for $2,500 per month.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
* 3.1 Articles of Incorporation as amended on December 6, 1995.
* 3.2 By-laws.
** 4.1 Stock Option Agreement with Sunrise Financial Group Inc.
*** 4.2 Stock Option Agreement between the Company and Pelican Consultants
U.S.A., Inc.
*** 4.3 Warrant Agreement dated May 22, 1997 between the Company and
Lydford Ltd..
*** 4.4 Form of Registration Rights Agreement between the Company
and Brayford Ltd., Lydford Ltd. and Stolin Ltd.
4.5 10% Convertible Secured Note dated December 23, 1997 between the
Company and Frank K. Brosens.
4.6 Warrant Agreement dated December 23, 1997 between the Company and
Frank K. Brosens.
4.7 10% Convertible Secured Note dated March 17, 1998 between the
Company and Frank K. Brosens.
4.8 Form of Warrant Agreement dated March 17, 1998 and Form of
Warrant Certificate.
**** 10.1 Software Adaptation Services Agreement dated January 10, 1995
between the Company and CSS Ltd.
* 10.2 Short-term Loan Agreement dated February 10, 1995 between the
Company and CSS Ltd.
10.3 Patent Assignment Agreement dated January 10, 1995 between the
Company and CSS Ltd.
*****10.4 Alpha/Beta Test Agreement between the Company and Ramada
Franchise Systems, Inc.
* 21 Subsidiaries of the Company.
27 Financial Data Schedule.
___________
* Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
** Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
*** Incorporated by reference to the Company's Registration Statement on Form
SB-2, File Number 333-10287.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
*****Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on April 14, 1998.
CASDIM INTERNATIONAL SYSTEMS, INC.
/s/Yehuda Shimshon
------------------
Yehuda Shimshon
Chairman of the Board, President and Chief
Executive Officer
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below on April 14, 1998 by the following persons on behalf of the
Company and in the capacities indicated.
Name Title
- ---- -----
/s/Yehuda Shimshon
- ------------------
Yehuda Shimshon Chairman of the Board, President and Chief
Executive Officer
/s/Doron Leave
- --------------
Doron Leave Vice President of Operations, Acting Chief
Financial Officer and Director
/s/Israel Shimshon
- ------------------
Israel Shimshon Director
19
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page No.
----------- ----------- --------
* 3.1 Articles of Incorporation as amended on December 6, 1995.
* 3.2 By-laws.
** 4.1 Stock Option Agreement with Sunrise Financial Group Inc.
*** 4.2 Stock Option Agreement between the Company and Pelican Consultants
U.S.A., Inc.
*** 4.3 Warrant Agreement dated May 22, 1997 between the Company and
Lydford Ltd..
*** 4.4 Form of Registration Rights Agreement between the Company
and Brayford Ltd., Lydford Ltd. and Stolin Ltd.
4.5 10% Convertible Secured Note dated December 23, 1997 between the
Company and Frank K. Brosens.
4.6 Warrant Agreement dated December 23, 1997 between the Company and
Frank K. Brosens.
4.7 10% Convertible Secured Note dated March 17, 1998 between the
Company and Frank K. Brosens.
4.8 Form of Warrant Agreement dated March 17, 1998 and Form of
Warrant Certificate.
**** 10.1 Software Adaptation Services Agreement dated January 10, 1995
between the Company and CSS Ltd.
* 10.2 Short-term Loan Agreement dated February 10, 1995 between the
Company and CSS Ltd.
10.3 Patent Assignment Agreement dated January 10, 1995 between the
Company and CSS Ltd.
*****10.4 Alpha/Beta Test Agreement between the Company and Ramada
Franchise Systems, Inc.
* 21 Subsidiaries of the Company.
27 Financial Data Schedule.
___________
* Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
** Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
*** Incorporated by reference to the Company's Registration Statement on Form
SB-2, File Number 333-10287.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
*****Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996.
CASDIM INTERNATIONAL SYSTEMS INC.
-------------------------
10% Convertible Secured Note
-------------------------
<PAGE>
THIS CONVERTIBLE 10% SECURED NOTE HAS NOT BEEN, AND WILL NOT BE, REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE LAWS OF
ANY STATE OR ANY OTHER JURISDICTION, AND MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES, EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
$250,000 No. 01
CASDIM INTERNATIONAL SYSTEMS INC.
10% Convertible Secured Note
1. FOR VALUE RECEIVED, CASDIM INTERNATIONAL SYSTEMS INC., a corporation
duly organized and existing under the laws of the State of Delaware, with
offices at 150 East 58th Street, New York, New York 10155 (the "Company"),
hereby promises to pay to the order of Frank Brosen, whose address is 63 East
Field Drive, Bedford, New York 10506, or his registered assigns (hereinafter
termed the "Registered Holder"), the principal sum of Two Hundred Fifty thousand
dollars ($250,000), with interest thereon from the date of this note (the
"Note") in like money at the rate of ten percent (10%) per annum on the unpaid
balance of this Note until paid. Subject to Section 4 herein, principal and
interest shall be payable on the Maturity Date, which shall be January 5, 1999.
The principal payment shall be reduced by that portion of the principal amount
of the Note previously converted into Common Stock, $.01 par value, of the
Company (the "Common Stock").
2. Payment; No Prepayment. Principal and interest shall be payable at such
address as the Registered Holder shall have designated to the Company in writing
at least fifteen (15) business days prior to the Maturity Date, in lawful tender
of the United States. No payment of the principal of the Note or the interest
thereon may be made prior to maturity by the Company without the consent of the
Registered Holder.
3. Issuance of the Note. This Note has been issued the Company pursuant to
authorization of the Board of Directors of the Company (the "Board") and issued
pursuant to a letter agreement (the "Agreement") by and among the Company and .
4. Conversion and Redemption. At the option of the Registered Holder
hereof, the unpaid principal amount of this Note may, upon execution of the
Conversion Form attached hereto and the surrender of this Note to the Company
for conversion, be convertible in increments of $25,000.00 from the 90th day
from the date of issuance of this Note (the
<PAGE>
"Conversion Date") into fully paid nonassessable shares of the Common Stock, at
an initial conversion price (the "Conversion Price") of 20% below the price per
share which is the average of the closing bid price per share of the Common
Stock on the Nasdaq Bulletin Board for the five trading days prior to the
Conversion Date (the "Market Price"). After the 180th day and until the due date
of this Note, the conversion price shall be adjusted to 30% below Market Price.
If the Market Price is less than $.50, the Note shall be convertible at a 50%
discount to the closing bid price for the Common Stock for the five trading days
before the Conversion Date. If the Common Stock shall not have traded on any day
within the aforesaid five trading days, the closing bid price for such day as
reported by Nasdaq Bulletin Board shall be deemed to be the closing bid price on
such day. All accrued interest payable on the Note for which Conversion has been
requested shall be payable in Common Stock at the Conversion Price. Notice of
Conversion may be given, at any time after 90 days from the date hereof. The
Registered Holder may not exercise his conversion rights to the extent such
conversion would cause the Registered Holder to be the owner of 5% or more of
the Company's outstanding Common Stock.
No fractional shares of Common Stock shall be issued upon Conversion. The
Registered Holder expressly waives his rights to receive a certificate for a
fractional share.
If less than all of the unpaid principal amount evidenced by this Note
shall be converted, the Company will, upon such exercise of the conversion
privilege, execute and deliver to the Registered Holder hereof a new Note (dated
the date hereof) evidencing the remaining amount of principal and interest then
owing. Conversions may be effected only into full shares and no fractions of a
share of Common Stock shall be issuable upon conversion. The shares of Common
Stock deliverable upon conversion of the Note shall be delivered to the
Purchasers within three business days of the Conversion Date.
Before the Registered Holder of the Note shall be entitled to convert the
same into shares of Common Stock, he shall surrender the Note, duly endorsed, at
the office of the Company and shall give written notice by mail or overnight
courier, postage prepaid, to the attention of its President at such office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Company shall, as soon as practicable thereafter, issue and deliver
at such office to such Registered Holder of the Note or to the nominee or
nominees of such Registered Holder, a certificate or certificates for the number
of shares of Common Stock to which such Registered Holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the Conversion Date, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date.
5. Conversion. (i) The issuance of certificates for shares of Common Stock
upon conversion of the Note shall be made without charge to the Registered
Holders thereof for any issuance tax in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any
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<PAGE>
certificate in a name other than that of the Registered Holder of the Note which
are being converted.
(ii) The Company will at no time close its stock transfer books
against the transfer of any shares of Common Stock issued or issuable upon
the conversion of the Note in any manner which interferes with the timely
conversion of such Note, except as may otherwise be required to comply with
applicable securities laws.
(iii) As used in this Note, the term "Common Stock" shall mean the
Company's authorized Common Stock, par value $.01 per share, which shall be
the only class of common stock outstanding on and prior to the Conversion
Date.
(iv) The Company will not, by amendment of its Certificate of
Incorporation or By-Laws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Note and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the Registered Holder of the Note against impairment.
(v) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property, or to receive any other right, the Company shall mail to the
Registered Holder of the Note, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and
the amount and character of such dividend, distribution or right.
(vi) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Note in full, in addition to such other
remedies as shall be available to the Registered Holder of the Note, the
Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
-3-
<PAGE>
Notwithstanding anything contained herein to the contrary, no adjustment of
the Conversion Price shall be made by reason of the issuance of shares pursuant
to the acquisition by the Company of all or substantially all of the stock or
assets of any other corporation or corporations.
6. Taxes. The issuance of stock certificates upon the conversion of this
Note shall be made without charge to the converting Registered Holder of the
Note for any tax with respect to such issue. The Company shall not, however, be
required to pay any tax which may be payable with respect to any transfer
involved in the issuance and delivery of stock in a name other than that of the
Registered Holder of the converted Note; and the Company shall not be required
to issue or deliver any stock certificate unless and until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of any
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
7. Security. In order to secure the due and punctual payment of the
principal of and interest on this Note payable by the Company when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of this Note, Mr. Yehuda Shimshon, President
of the Company, has granted the Registered Holder a security interest in
1,000,000 shares of Common Stock of the Company owned by him.
8. Guarantee. Mr. Yehuda Shimshon, in order to induce the Registered Holder
to purchase this Note shall guarantee the payment of interest and principal due
on this Note.
9. No Rights as Stockholder. The Registered Holder of this Note shall not,
by reason of the ownership or possession of this Note, have any rights
whatsoever as a stockholder of the Company, or any other rights, whatsoever,
except as stated in the Note.
10. Limitation on Certain Corporate Acts. The Company hereby covenants and
agrees that upon any consolidation or merger or upon the transfer of all or
substantially all of the property or assets of the Company, the due and punctual
payment of the principal and interest on all the Note according to their tenor
and the due and punctual performance and observance of all the terms, covenants
and conditions of the Note to be kept and performed by the Company shall be
expressly assumed by the corporation formed by such consolidation, or into which
the Company shall have merged or by the purchaser of such property or assets;
and such assumption shall be an express condition of such merger or
consolidation agreement or agreement for the transfer of property or assets.
11. Covenants. (a) The Company will pay all taxes, assessments and govern
mental charges lawfully levied or assessed upon it, its property and any part
thereof, and upon its income or profits, and any part thereof, before the same
shall become delinquent; and will duly observe, and conform to, all lawful
requirements of any governmental authority relative to any of its property, and
all covenants, terms and conditions upon or under which any of its property is
held; provided that nothing in this Section 11 shall require the Company to
observe
-4-
<PAGE>
or conform to any requirement of governmental authority or to pay any such tax,
assessment or governmental charges so long as the validity thereof shall be
contested in good faith; and provided further that the Company shall not be
required to pay any such taxes, assessments or charges, if, in the judgment of
the Board, such payment shall not be in the best interests of the Company in the
conduct of its business.
(b) Subject to the other provisions of this Note, the Company at all times
will maintain its corporate existence and right to carry on its business and
duly procure all necessary renewals and extensions thereof and use its best
efforts to maintain, preserve and renew all its rights, powers, privileges and
franchises; provided, however, that nothing herein contained shall be construed
to prevent the Company from ceasing or omitting to exercise any rights, powers,
privileges or franchises which, in the judgment of the Board, can no longer be
profitably exercised, nor to prevent the consolidation, merger or liquidation of
any subsidiary or subsidiaries of the Company with or into the Company.
12. Events of Default. In case one or more of the following events of
default shall have occurred:
(i) default in the due and punctual payment of interest upon or
principal of any of the Note as and when the same becomes due and payable
either at maturity, or otherwise; or
(ii) failure to deliver the shares of Common Stock required to be
delivered upon conversion of Note which have been presented for conversion
within three business days of the Conversion Date.
(iii) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company
contained in the Note or to cure any material breach in a material
representation contained in the Agreement for a period of forty-five (45)
days after the date on which written notice of such failure requiring the
same to be remedied has been given by a Registered Holder to the Company;
or
(iv) a decree or order by a court having jurisdiction in the premises
has been entered adjudging the Company a bankrupt or insolvent, or
approving a petition seeking reorganization of the Company under any
applicable bankruptcy law or code and such decree or order has continued
undischarged or unstayed for a period of sixty (60) days; or a decree or
order of a court, having jurisdiction in the premises, for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of all or substantially all of its property,
or for the winding-up or liquidation of its affairs, has been entered, and
has remained in force undischarged or unstayed for a period of sixty (60)
days; or
-5-
<PAGE>
(v) the Company institutes proceedings to be adjudicated a voluntary
bankrupt, or consents to the filing of a bankruptcy proceeding against it,
or files a petition or answer or consent seeking reorganization under
applicable law, or consents to the filing of any such petition or to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of it or of all or substantially all of its
property, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as the become due;
then, and in each and every such case, so long as such event of default has not
been remedied and unless the principal of the Note has already become due and
payable, the Registered Holder of the Note, by notice in writing to the Company,
may declare the principal of all the Note then outstanding and the interest
accrued thereof, if not already due and payable, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything herein contained to the contrary
notwithstanding. Notwithstanding the above, the Company shall have a five-day
period to cure a default pursuant to subsections (i) and (ii) hereof
13. Exemption From Registration Under the Securities Act of 1933;
Registration Requirements and Penalty
(a) The Registered Holder of this Note, by acceptance hereof, agrees that
this Note and the shares of Common Stock issuable upon conversion hereof have
been and will be acquired for investment and not with a view to distribution or
resale, and that neither this Note, nor any such shares, will be transferred or
disposed of except in accordance with the requirements of the 1933 Act (as
hereinafter defined), and then existing rules and regulations promulgated
thereunder. The Note and the shares of Common Stock of the Company issued upon
the conversion of any of the Note into Common Stock of the Company shall not be
transferable except upon the conditions specified in this Section 12, which
conditions are intended to effect compliance with the provisions of the 1933 Act
in respect of the transfer of any Note or of any such shares of Common Stock of
the Company.
(b) As used in this Section 12, the following terms shall have the
following respective meanings:
"1933 Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" shall include any disposition of any Note or of any share
of Common Stock or of any interest in either thereof which would constitute
a sale thereof within the meaning of the 1933 Act.
-6-
<PAGE>
(c) Each certificate for Common Stock issuable upon conversion of the Note
shall (unless otherwise permitted by the provisions of subsections (d) and (f)
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE 10% CONVERTIBLE
SECURED NOTE DUE JANUARY 5, 1999 OF CASDIM INTERNATIONAL
SYSTEMS INC. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR THE SECURITIES LAW OF ANY OTHER JURISDICTION. NO
DISPOSITION OF SUCH SECURITIES OR ANY SHARES ISSUED UPON
CONVERSION OR EXERCISE OF THE SECURITIES MAY BE EFFECTED
UNLESS REGISTERED UNDER SUCH ACT OR UNLESS SUCH DISPOSITION,
IN THE OPINION OF COUNSEL TO THE COMPANY, IS EXEMPT FROM
REGISTRATION THEREUNDER."
(d) The Company agrees at its sole expense to (i) file the requisite
registration statement under the 1933 Act with the Securities and Exchange
Commission with respect to the resale of the Common Stock issuable upon
conversion of the Note, and use its best efforts to cause such registration
statement to become effective prior to March 30, 1998; (ii) prepare and file
with the Securities and Exchange Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
nine months and to comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such registration statement until
such time; (iii) not file any amendment or supplement to such registration
statement or prospectus to which any such seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the 1933 Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least five business
days prior to the filing thereof; and (iv) otherwise use its best efforts to
comply with all applicable rules and regulations of the Securities and Exchange
Commission, including the rules and regulations relating to filings under the
Securities Exchange Act of 1934.
(e) If the Registration Statement referred to in clause (d)(i) above is not
declared effective by March 30, 1998 the Registered Holder shall be entitled to
receive $5,000.00 per month in cash or shares of Common Stock valued at a 30%
discount to the Market Price, the term of which payment shall be at the option
of the Company (the "Penalty Payment"). Such Penalty Payment shall continue if
the Registration Statement is not declared effective until
-7-
<PAGE>
the due date of this Note. This issuance of such additional shares shall not
relieve the Company from using its best efforts to cause the aforementioned
registration statement to be declared effective.
(f) To the extent a Registration Statement is not in effect on the
Conversion Date, the holder of each Note and each certificate representing
Common Stock by acceptance thereof agrees, prior to any proposed transfer
thereof, to give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail and shall contain an
undertaking by the person giving such notice to furnish such further information
as may be required to enable counsel for the Company to render the opinion
referred to below. Promptly upon receiving any such notice, the Company shall
submit copies thereof to its counsel and shall use its best efforts to obtain
the opinion hereafter referred to as promptly as possible. Such proposed
transfer may be effected only if, in the opinion of counsel for the Company or
other counsel reasonably satisfactory to the Company, the proposed transfer may
be effected without registration under the 1933 Act (and applicable state
securities or Blue Sky laws) of such Note and the related Common Stock. If
counsel is of the opinion that the transfer may be effected, the Company shall
promptly notify the holder of such Note or Common Stock to that effect. Each
certificate evidencing the shares of Common Stock thus to be transferred (and
each certificate evidencing any untransferred balance of the shares of Common
Stock) shall bear the restrictive legend set forth in subsection (c) hereof
unless in the opinion of counsel for the Company such legend is not required by
the applicable provisions of the 1933 Act (and applicable state securities or
Blue Sky laws).
14. Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Registered Holder whose shares of Common Stock are covered by
a registration statement, its officers, directors and agents, and each person,
if any, who controls such Registered Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934 (the
"1934 Act") from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the shares of
Common Stock (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by such Registered Holder
or on such Registered Holder's behalf expressly for use therein; Provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity agreement contained in this paragraph shall
not apply to the extent that any such loss, claim, damage, liability or expense
results from the fact that a current copy of the prospectus (or, in the case of
a prospectus, the prospectus as amended or supplemented) was not sent or given
to the person
-8-
<PAGE>
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the shares of Common Stock concerned to such
person if it is determined that the Company had provided such prospectus and it
was the responsibility of such Registered Holder to provide such person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
15. Indemnification by Registered Holder. The Registered Holder whose
Shares are included in any registration statement agrees, severally but not
jointly, to indemnify and hold harmless the Company, its officers, directors and
agents and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the 1934 Act to the
same extent as the foregoing indemnity from the Company to such Registered
Holder, but only (i) with respect to information furnished in writing by such
Registered Holder or on such Registered Holder's behalf, in each case, only with
respect to information concerning such Registered Holder, expressly for use in
any registration statement or prospectus relating to the shares of Common Stock,
or any amendment or supplement thereto, or any preliminary prospectus, or (ii)
to the extent that any loss, claim, damage, liability or expense described in
the prior section results from the fact that a current copy of the prospectus
(or, in the case of a prospectus, the prospectus as amended or supplemented) was
not sent or given to the person asserting any such loss, claim, damage,
liability or expense at or prior to the written confirmation of the sale of the
shares of Common Stock concerned to such person if it is determined that it was
the responsibility of such Registered Holder to provide such person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
16. Transferability. This Note is transferable only in writing by the
Registered Holder hereof, in person or by his duly authorized attorney, on the
register of the Company maintained at its offices in New York, New York, or at
such other place in the State of New York as the Company may specify by five
business days prior written notice to the holder. The Company may deem and treat
the person in whose name this Note is registered as the absolute owner hereof,
for the purpose of receiving payment of the principal thereof and interest
hereon, whether or not the same shall be overdue, and for all other purposes
whatsoever, including but without limitation, the giving of any written notices
required hereunder, and the Company shall not be affected by any notice to the
contrary.
17. Non-Recourse. Except as provided in Sections 7 and 8 hereof, no
recourse shall be had for the payment of the principal of or the interest on
this Note or any part hereof, or for any claim based hereon or otherwise in
respect hereof, or of the indebtedness represented hereby, against any
incorporator, stockholder, officer or director, as such, past, present or future
of the Company either directly or through the Company whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise;
-9-
<PAGE>
all liability, if any, of that character against any such incorporator,
stockholder, officer or director being by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
18. Acceptance by Holder. This Note is subject to all of the covenants,
conditions, rights, limitations and other provisions stated herein, to all of
which the holder and each successive holder hereof by acceptance of any Note
assents.
19. Amendments and Modifications. Changes in or additions to this Note may
be made, and compliance with any covenant or condition herein set forth may be
omitted only if the Company shall obtain the written consent from the Registered
Holder of the Note.
20. Non-Waivers. Neither any failure nor any delay on the part of the
Registered Holder of this Note in exercising any right, power, or privilege
hereunder shall operate as a waiver of any rights of any holder hereof, nor
shall a single or partial exercise of any right preclude any other or further
exercise of any other right, power of privilege accorded to any holder hereof.
21. Attorney's Fees. If this Note shall not be paid when due and shall be
placed by the Registered Holder hereof in the hands of an attorney for
collection, through legal proceedings or otherwise or if this Note shall not be
converted into shares of Common Stock on the Conversion Date, subject to the
provisions of Section 4 hereof, and an action is brought by the Registered
Holder with respect thereto, the Company shall pay a reasonable attorney's fee
to the Registered Holder hereof together with reasonable costs and expenses of
collection or enforcement incurred in connection with any such action.
22. Specific Performance. The Company expressly agrees that the Registered
Holder will be irreparably damaged and will not have adequate remedies at law if
the Company does not perform its obligations under the Note. Upon a breach of
the terms or covenants of this Note by the Company, the Registered Holder shall,
each in addition to all other remedies, be entitled to obtain injunctive relief,
and an order for specific performance of the Company's obligations hereunder.
23. Interpretation. This Note is made and delivered in the State of New
York and shall be construed and enforced in accordance with and governed by the
laws of such state without giving effect to conflict of laws and principles.
24. Governing Law. The Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the conflict
of laws principles thereof.
25. Headings. The headings contained in this Note are for reference
purposes only and shall not affect the meaning or interpretation of this Note.
-10-
<PAGE>
IN WITNESS WHEREOF, Casdim International Systems Inc. has caused this Note
to be executed by its President and its Assistant Secretary, this 23rd day of
December, 1997.
CASDIM INTERNATIONAL SYSTEMS INC.
By /s/Yehuda Shimshon
------------------
Yehuda Shimshon, President
Guaranteed by:
/s/Yehuda Shimshon
- ------------------
Yehuda Shimshon, individually
-11-
<PAGE>
NOTICE
The conversion form appearing below should only be executed by the Registered
Holder desiring to convert all or part of the principal amount of the Note
attached hereto [in increments of $25,000].
CONVERSION FORM
DATE:___________
TO: CASDIM INTERNATIONAL SYSTEMS INC.
150 East 58th Street
New York, New York 10155
The undersigned hereby exercises the conversion privilege upon the terms
and conditions set forth in this Note, to the extent of the maximum number of
shares of Common Stock issuable pursuant to the terms of Section 4 of the Note,
and accordingly, authorizes the Company to apply $ principal amount of the
attached Note to payment in full for such shares. Please register such shares
and make delivery thereof as follows:
Register in Name of (Giving First or Middle Name in Full)
Name_____________________________________________________
(Please Print)
Address__________________________________________________
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to other than the
Registered Holder.
Name_____________________________________________________
(Please Print)
Address__________________________________________________
Signature____________________________
Address:_____________________________
-12-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
___________________ the within Note and all rights thereunder, hereby
irrevocably authorizing the Company to transfer said Note on the books of the
Company, with full power of substitution in the premises.
Dated: _______________________
______________________________________
In the presence of:
_______________________________
-13-
WARRANT AGREEMENT
-------------------------------------------
CASDIM INTERNATIONAL SYSTEMS INC.
-------------------------------------------
THIS WARRANT AGREEMENT (this "Agreement") dated as of December 23, 1997 is
made by and between Casdim International Systems Inc., a corporation organized
under the laws of the State of Delaware (the "Company"), and Frank Brosens (the
"Warrantholder").
Subject to the terms and conditions hereof, the Company agrees to issue to
the Warrantholder, pursuant to a letter agreement by and between the Company and
the Warrantholder dated as of December 23, 1997 (the "Agreement"), warrants as
hereinafter described (the "Warrants") to purchase up to an aggregate of 50,000
shares of the common stock of the Company, par value $.01 per share (the "Common
Stock"), at a Warrant Price of $0.50 per share of Common Stock, subject to
adjustment pursuant to Section 7 hereof. As used herein (i) the terms "Share" or
"Shares" shall mean collectively the Common Stock issuable upon exercise of the
Warrants together with any other securities issuable upon such exercise as
provided in Section 7 of this Agreement; (ii) the term "Warrants" shall include
any and all warrants outstanding pursuant to this Agreement, including those
evidenced by a certificate or certificates issued upon division, exchange or
substitution pursuant to this Agreement; and (iii) the term "Warrant Price"
shall mean the price per share of Common Stock at which the Common Stock shall
at any time be purchasable upon exercise of the Warrants. In addition to the
adjustments provided in Section 7 hereof, any fixed dollar per share amounts
referenced in this Agreement shall be appropriately adjusted for any stock
splits, subdivisions, stock dividends or stock distributions, combinations,
reclassifications or consolidations or other changes to the Company's capital
structure.
For the purpose of defining the terms and provisions of the Warrants and
the respective rights and obligations thereunder, the Company and the
Warrantholder, for value received, hereby agree as follows:
Section 1. Transferability and Form of Warrants.
1.1. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company when issued, in accordance with Delaware corporate
practice.
<PAGE>
1.2. Transfer. The Warrants shall be transferable only on the books of the
Company maintained at its principal office in New York, New York or wherever its
principal office may then be located, upon delivery thereof duly endorsed by the
Warrantholder seeking such transfer or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver new Warrants to the person entitled thereto.
1.3. Form of Warrants. The form of certificate evidencing the Warrants
shall be substantially as set forth in Exhibit 1 attached hereto. Certificates
evidencing the Warrants shall be executed on behalf of the Company by its
President or by any Vice President, shall be attested to by its Secretary or any
Assistant Secretary, and shall be dated as of the date of execution thereof.
1.4. Legend on Warrants and Shares. The Warrants, and the Shares issuable
upon the exercise thereof, have not been registered under the Securities Act of
1933, as amended (the "Securities Act"). Each certificate for the Warrants shall
bear the following legend:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
WARRANTS MAY NOT BE SOLD, AS SIGNED, EXCHANGED OR OTHERWISE
TRANSFERRED IN ANY MANNER AND SUCH COMMON STOCK MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
And each certificate for the Shares shall bear the following legend:
"THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY
NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
2
<PAGE>
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear a like
legend unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling a Warrantholder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Term of Warrants; Exercise of Warrants; Market Price
(a) Subject to the terms of this Agreement, each Warrantholder shall have
the right, at any time during the period commencing at 9:00 a.m., Eastern Time,
on December 24, 1997 (the "Commencement Date") and ending at 5:00 p.m., Eastern
Time, on December 23, 1999 (the "Termination Date"), to purchase from the
Company up to the number of fully paid and nonassessable Shares which such
Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company at its principal office of the
certificates evidencing the Warrants to be exercised, with the purchase form
duly completed and signed, and upon payment to the Company of the Warrant Price
(as determined in accordance with the provisions of Section 7 hereof) for the
number of Shares in respect of which such Warrants are then exercised, but in no
event for fewer than 100 Shares (unless fewer than an aggregate of 100 Shares
are then purchasable under all outstanding Warrants held of record by a
Warrantholder). The Termination Date shall be extended for such number of days
as (i) the Shares are not covered by and may not be sold pursuant to an
effective registration statement under the Securities Act for any reason
whatsoever (including, without limitation, any stop order or suspension), (ii)
the Common Stock is not listed and trading on any national exchange or on the
Nasdaq Stock Market, or is not traded on the Nasdaq OTC Bulletin Board, or (iii)
the Shares are not listed on the principal exchange on which the Common Stock is
listed or the Nasdaq Stock Market, if the Common Stock is listed thereon, or are
not eligible for trading on the Nasdaq OTC Bulletin Board, and for a period of
30 days thereafter. Payment of the aggregate Warrant Price shall be made in cash
or by certified or cashier's check or any combination thereof.
(b) Upon surrender of Warrant certificates and payment of the Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of a Warrantholder, and (subject to
Section 11 hereof) in such name or names as such Warrantholder may designate, a
certificate or certificates for the number of full Shares so
3
<PAGE>
acquired upon the exercise of the Warrant, together with cash, as provided in
Section 9 hereof, in respect of any fractional Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of surrender of the
Warrants being exercised and payment of the Warrant Price notwithstanding that
the certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed. The Warrants shall be exercisable at the election of a Warrantholder
either in full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining portion of the Warrants shall be issued by the Company.
(c) For all purposes of this Agreement, the term "Market Price" as of any
specified date shall mean: (i) if the Common Stock is listed or admitted for
trading on one or more United States national securities exchanges, the average
daily closing price for the last five trading days for the Common Stock on such
exchanges as may be designated by the Board of Directors of the Company (the
"Board") as the principal exchange in the United States on which the Common
Stock is listed; (ii) if the Common Stock is not listed or admitted for trading
on any United States national securities exchange, the average daily closing bid
price for the last five trading days for the Common Stock on the Nasdaq National
or SmallCap Market ("Nasdaq"); or (iii) if the Common Stock is not listed or
admitted for trading on a United States national securities exchange or on
Nasdaq, the average closing bid price for the last five trading days of the
Common Stock on the Nasdaq OTC Bulletin Board as reported by the National
Quotation Bureau Inc. In the event that it is impracticable for the Board to
establish the Market Price of the Common Stock pursuant to this Section 3 on any
specified date, the "Market Price" shall be determined in good faith by the
Board, such determination to be conclusive.
Section 4. Payment of Taxes. The Company will pay all taxes and fees, if
any, attributable to the initial issuance of the Warrants or the issuance of the
Shares upon exercise of the Warrants, except that the Company shall not be
required to pay any tax or fee which may be payable in respect of any secondary
transfer of the Warrants or such Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing any Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the affected Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of the loss, theft
or destruction of such Warrant and, if requested, at the cost and expense of the
Warrantholder, a bond of indemnity in form and amount
4
<PAGE>
satisfactory to the Company. Applicants for such substitute Warrant certificates
shall also comply with such other reasonable regulations as the Company may
prescribe.
Section 6. Reservation of Shares. There has been reserved, and the Company
shall at all times keep reserved so long as any Warrants remain outstanding, out
of its authorized share capital, such number of shares of Common Stock as shall
be subject to purchase under all outstanding Warrants. Every transfer agent for
the Common Stock and other securities of the Company issuable upon the exercise
of Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares of Common Stock and other securities as shall
be requisite for such purpose. The Company will supply every such transfer agent
with duly executed stock and other certificates, as appropriate, for such
purpose and will provide or otherwise make available any cash which may be
payable as provided in Section 9 hereof.
Section 7. Adjustment of Number and Kind of Securities. The Warrant Price
and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
7.1. Adjustments.
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) subdivide its outstanding Common
Stock, (iii) combine its outstanding Common Stock into a smaller number of
shares of Common Stock, or (iv) issue, by reclassification of its Common
Stock, other securities of the Company, the number of shares of Common
Stock or other securities purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that each Warrantholder
shall be entitled to receive the kind and number of shares of Common Stock
or other securities of the Company which it would have owned or would have
been entitled to receive immediately after the happening of any of the
events described above, had the Warrants been exercised immediately prior
to the happening of such event or any Record Date (as defined below) with
respect thereto. For purposes hereof, "Record Date" shall mean the date of
closing the transfer books of the Company for the determination of the
shareholders entitled to any relevant dividend, distribution, subscription
rights or other rights or for the determination of shareholders entitled to
vote on any proposed merger, dissolution, liquidation or winding up of the
Company. Any adjustment made pursuant to this subsection 7.1(a) shall
become effective immediately on the effective date of such event
retroactive to the Record Date, if any, for such event.
(b) In the event the Company shall issue or sell any shares of Common
Stock for a consideration per share less than the Warrant Price in effect
immediately prior to such issue or sale, then the Warrant Price in effect
immediately prior to such issue or sale,
5
<PAGE>
shall be reduced to such lesser price calculated to the nearest cent) as
shall be determined prior thereto by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to the issuance or sale of such additional shares and
(ii) the number of shares of Common Stock which the aggregate consideration
received for the issuance or sale of such additional shares would purchase
at the Warrant Price then in effect, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after the
issuance or sale of such additional shares.
(c) For the purpose of subsection 7.1(b), the following subparagraphs
(i) to (iii), inclusive, shall be applicable:
(i) If at any time the Company shall issue or sell any rights to
subscribe for, or any rights or options to purchase, Common Stock or
any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities
being hereinafter called "Convertible Securities"), whether or not
such rights or options or the right to convert or exchange any such
Convertible Securities shall be immediately exercisable, and the price
per share for which Common Stock shall be issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (1) the total amount,
if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the exercise
of such rights or options, plus, in the case of any such rights or
options which shall relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (2) the total number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights or options) shall be less than the
Warrant Price in effect immediately prior to the time of the issue or
sale of such rights or options, then the total number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such rights or options shall
(as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per share, and
except as provided in Section 7.1(i) below, no further adjustments of
the Warrant Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities, upon the exercise of such
rights or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
6
<PAGE>
(ii) If at any time the Company shall issue or sell any
Convertible Securities, whether or not the rights to exchange or
convert thereunder shall be immediately exercisable, and the price per
share for which Common Stock shall be issuable upon such conversion or
exchange (determined by dividing (1) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (2) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then the total
number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall (as of the date of the issue
or sale of such Convertible Securities) be deemed to be outstanding
and to have been issued for such price per share, and, except as
provided in Section 7.1(i) below, no further adjustments of the
Warrant Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities. In
addition, if any issue or sale of such Convertible Securities shall be
made upon exercise of any rights to subscribe for or to purchase or
any option to purchase any such Convertible Securities for which
adjustments of the Warrant Price shall have been or shall be made
pursuant to other provisions of this subsection 7.1(c), no further
adjustment of the Warrant Price shall be made by reason of such issue
or sale.
(iii) If at any time the Company shall set a Record Date for the
purpose of entitling holders of Common Stock (1) to receive a dividend
or other distribution payable in Common Stock or in Convertible
Securities, or (2) to subscribe for or purchase Common Stock or
Convertible Securities, then such Record Date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred
to in subsection 7.1(b) above and rights in connection with a shareholder
rights plan), then in each case the number of Shares thereafter purchasable
upon the exercise of the Warrants shall be determined by multiplying the
number of Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then effective Warrant Price
as of the date of such distribution
7
<PAGE>
calculated pursuant to this Section 7, and of which the denominator shall
be such then effective Warrant Price on such date minus the then Fair Value
(determined as provided below) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options,
warrants or convertible securities applicable to one share. Such adjustment
shall be made whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the Record Date for
the determination of shareholders entitled to receive such distribution.
For all purposes of this Agreement, "Fair Value" shall be determined
in good faith by the Board, such determination to be conclusive.
(e) No adjustment in the number of Shares purchasable pursuant to the
Warrants shall be required unless such adjustment would require an increase
or decrease of at least one percent in the number of Shares then
purchasable upon the exercise of the Warrants; provided that any
adjustments which by reason of this subsection 7.1(e) are not required to
be made immediately shall be carried forward and taken into account in any
subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of a
Warrant is adjusted, as herein provided, the Warrant Price payable upon
exercise of such Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Shares so purchasable upon the exercise
of the Warrant immediately thereafter. In addition, whenever the Warrant
Price shall be adjusted, the number of Shares purchasable upon exercise
hereof simultaneously shall be adjusted by multiplying the number of Shares
issuable immediately prior to such adjustment by the Warrant Price in
effect immediately prior to such adjustment and dividing the product so
obtained by the Warrant Price, as adjusted.
(g) Whenever the number of Shares purchasable upon the exercise of
Warrants, and/or the Warrant Price, are adjusted as herein provided, the
Company shall cause to be promptly mailed to the Warrantholders by first
class mail, postage prepaid, notice of such adjustment and a statement of
the chief accounting officer of the Company setting forth the number of
Shares purchasable upon the exercise of the Warrants and the Warrant Price
after such adjustment, a brief statement of the facts requiring such
adjustment, and the computation by which such adjustment was made.
(h) For the purpose of this subsection 7.1, the term Common Stock
shall mean (i) the class of Common Stock designated as the Common Stock of
the Company at the date of this Agreement, or (ii) any other class of
shares resulting from successive changes
8
<PAGE>
or reclassification of the Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 7, a Warrantholder shall become entitled to
purchase any securities of the Company other than Common Stock, (i) if the
Warrantholders' right to purchase is on any other basis than that available
to all holders of the Common Stock, the Board shall determine the Fair
Value of such other securities and (ii) thereafter the number of such other
securities so purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Common Stock contained
in this Section 7.
(i) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Shares
purchasable upon exercise of the Warrants, to the extent the Warrants have
not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may
be) on the basis of (A) the fact that the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold
upon the exercise of such rights, options, warrants or conversion
privileges, and (B) the fact that such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options,
warrants or conversion privileges whether or not exercised; provided,
however, that no such readjustment shall have the effect of decreasing the
number of Shares purchasable upon exercise of the Warrants by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion
privileges.
7.2. No Adjustment for Dividends. Except as provided in subsection 7.1, no
adjustment to the Warrants or any provision or condition thereof in respect of
any dividends or distributions out of earnings of the Company shall be made
during the term of the Warrants or upon the exercise of Warrants.
7.3 No Adjustment in Certain Cases. No adjustment shall be made pursuant to
Section 7 hereof in connection with the grant or exercise of options to purchase
Common Stock under any of the Company's employee benefit plans existing as of
the date hereof or of the exercise of any outstanding warrants.
7.4. Preservation of Purchase Rights upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another entity or in case of any sale or conveyance to another entity of
the property, assets or business of the Company as an entirety or substantially
as an entirety, the Company or such successor or
9
<PAGE>
purchasing entity, as the case may be, shall execute with the Warrantholders an
agreement that the Warrantholders shall have the right thereafter, upon exercise
of the Warrants and payment of the Warrant Price in effect immediately prior to
such consolidation, merger or sale, to purchase the kind and amount of shares
and other securities and property which it would have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had the
Warrants been exercised immediately prior thereto. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986 (or any
successor provision), in which the Company is the surviving corporation, the
right to purchase Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void, but only if the
controlling corporation (after such event) shall agree to substitute for the
Warrants its warrants entitling the holder thereof to purchase the kind and
amount of shares and other securities and property which it would have been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this subsection 7.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 7 hereof, and shall contain substantially
the same terms, conditions and provisions as are contained herein immediately
prior to such event. The provisions of this subsection 7.4 shall similarly apply
to successive consolidations, mergers, sales or conveyances.
7.5. Nominal Value of Common Stock. Before taking any action which would
cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each share of Common Stock below the then nominal value per share
of Common Stock issuable upon exercise of the Warrants, the Company will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully-paid and
nonassessable Shares upon exercise of the Warrants.
7.6. Independent Public Accountants. The Company may retain a firm of
independent public accountants in the United States (which may be any such firm
regularly employed by the Company) to make any computation required under this
Section 7, and a certificate signed by such firm shall be evidence of the
correctness of any computation made under this Section 7.
7.7. Statement on Warrant Certificates. Irrespective of any adjustments in
the number of securities issuable upon exercise of the Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its reasonable discretion, make any change in the form of the Warrant
certificate that it may deem appropriate and that does not affect the substance
thereof; and any Warrant certificate hereafter issued, whether upon registration
of transfer of, or in exchange or substitution for, an outstanding Warrant
certificate, may be in the form so changed.
10
<PAGE>
Section 8. Fractional Interests. The Company shall not be required to issue
fractional Shares upon the exercise of any Warrant. If any fraction of a Share
would, except for the provisions of this Section 8 be issuable on the exercise
of any Warrant (or specified portion thereof), the Company shall pay an amount
in cash equal to the Market Price (of the Common Stock for the 20 consecutive
trading days immediately preceding the date the certificates evidencing the
Warrants to be exercised are received by the Company at its principal office)
multiplied by such fraction.
Section 9. No Rights as Shareholder; Notices to Warrantholders. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or any transferee of any rights as a shareholder of the
Company, including (without limitation) the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
their exercise in full, any one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to Section
7.1 or 7.4; or
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall
be proposed;
then the Company shall give notice in writing of such event to each of the
Warrantholders, as provided in Section 12 hereof, at least 20 days prior to the
date fixed as the Record Date. Such notice shall specify such Record Date.
Failure to mail or receive such notice or any defect therein shall not affect
the validity of any action taken with respect thereto.
Section 10. Restrictions on Transfer. The Warrantholder agrees and
undertakes that if the Warrantholder proposes to sell or otherwise transfer any
Warrants or Shares issuable upon exercise thereof, and if such Shares are not
then registered for resale pursuant to an effective registration statement under
the Securities Act, the Warrantholder proposing to make such transfer shall give
written notice to the Company describing briefly the manner in which any such
proposed transfer is to be made and no such transfer shall be made unless the
Company shall have received an opinion of counsel for the Warrantholder
reasonably acceptable to the Company, that registration under the Securities Act
is not required with respect to such transfer.
Section 11. Registration Rights.
11.1 Registration Statement. The Company shall:
11
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(a) promptly, prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering the resale of the Shares issuable upon exercise of the
Warrants by the Warrantholder from time to time on the Nasdaq OTC Bulletin
Board, or on such securities market or system on which the Common Stock
shall then be publicly traded, or in privately negotiated transactions;
(b) use its best efforts, subject to receipt of necessary information
from the Warrantholder, to cause the Registration Statement to become
effective as soon as possible thereafter;
(c) prepare and file with the Commission such supplements and
amendments to the Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act until the later of such time as all of the Shares have
been sold pursuant thereto or, by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect, such Shares are no
longer required to be registered for the unrestricted sale thereof by the
Warrantholder;
(d) furnish to the Warrantholder such number of copies of prospectuses
and preliminary prospectuses in conformity with the requirements of the
Securities Act and such other documents as the Warrantholder may reasonably
request, in order to facilitate the public sale or other disposition of all
or any of the Shares held by the Warrantholder, provided, however, that the
obligation of the Company to deliver copies of prospectuses or preliminary
prospectuses to the Warrantholder shall be subject to the receipt by the
Company of reasonable assurances from the Warrantholder that the
Warrantholder will comply with the applicable provisions of the Securities
Act and of such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses or preliminary prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in all states, provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraphs
(a) through (e) of this Section 11.1, other than brokerage commissions or
placement agent fees and fees and expenses, if any, of counsel or other
advisers to the Warrantholder with respect to the registration and resale
of the Shares; and
(g) use its best efforts to have the Registration Statement (or any
supplement or amendment to the Registration Statement, if applicable)
declared effective by the
12
<PAGE>
Commission as soon as practicable after the filing thereof, but in no event
later than March 30 1998.
11.2 Limitations on Transfer. The Warrantholder agrees that it will not
effect any disposition of the Shares that would constitute a sale within the
meaning of the Securities Act except as contemplated in the Registration
Statements referred to in Section 11.1 or pursuant to an available exemption
from registration under the Securities Act and applicable state securities laws,
and further that as a condition to inclusion of the Shares in the Registration
Statement the Warrantholder agrees to provide to the Company such information as
it may reasonably request in order to include such Shares in such Registration
Statement.
11.3 Prospectus Delivery Requirements. The Warrantholder agrees not to make
any sale of the Shares, pursuant to the Registration Statement referred to in
Section 11.1 without effectively causing the prospectus delivery requirements
under the Securities Act to be satisfied. The Warrantholder acknowledges that
there may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the Registration Statement until such time as an
amendment to such Registration Statement has been filed by the Company and
declared effective by the Commission or until the Company has amended or
supplemented such prospectus. In the event that the Registration Statement has
been suspended, the Company shall provide written notice of such suspension to
the selling shareholders listed in the Registration Statement. In the event that
such Registration Statement is no longer subject to such suspension, the Company
shall provide written notice to such selling Shareholders that such Selling
Shareholder may thereafter effect sales pursuant to said Registration Statement.
11.4 Indemnification and Contribution.
(a) For the purpose of this Section 11.4:
(i) the term "Selling Shareholder" shall mean any person or entity
selling Common Stock pursuant to the Registration Statement, and any
affiliate thereof;
(ii) the term "Registration Statement" shall include any preliminary
prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement; and
(iii) the term "untrue statement" shall mean any untrue statement or
alleged untrue statement of a material fact in the Registration
Statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
13
<PAGE>
(b) The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to
which such Selling Shareholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon,
any untrue statement, or arise out of any failure by the Company to fulfill
any undertaking included herein or in the Registration Statement, and the
Company promptly will reimburse such Selling Shareholder for any legal or
other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim; provided, however, that the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue
statement made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement, or the
failure of such Selling Shareholder to comply with the covenants and
agreements contained herein; provided further, that the indemnification
contained in this Section 11.4 with respect to any prospectus after it has
been amended or supplemented, shall not inure to the benefit of any Selling
Shareholder (or any person controlling such Selling Shareholder) from whom
the person asserting such loss, claim, damage, or liability shall have
purchased Common Stock, that are the subject thereof if, after copies
thereof have been delivered by the Company to such Selling Shareholder,
such Selling Shareholder shall have failed to send or give a copy of the
prospectus as then amended or supplemented, as the case may be, to such
person at or prior to the confirmation of such sale of such Common Stock,
to such person, and, if such loss, claim, damage or liability would not
have arisen but for the failure of such Selling Shareholder to deliver the
same.
(c) The Warrantholder agrees to indemnify and hold harmless the
Company (and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company
who signs the Registration Statement and each director of the Company) from
and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject
(under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any failure of the Warrantholder to comply with
its covenants and agreements contained herein, or any untrue statement if
such untrue statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Warrantholder
specifically for use in preparation of the Registration Statement, and the
Warrantholder promptly will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim.
14
<PAGE>
(d) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 11.4, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein,
and, to the extent it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by
such indemnified person in connection with the defense thereof. In the
event that the indemnifying party shall have assume the defense of such
action, such indemnifying party shall not enter into any compromise or
settlement without the indemnified party's prior written consent, which
consent shall not be unreasonably withheld, delayed or denied.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section
11.4 is due in accordance with its terms but for any reason is held to be
unavailable or insufficient to hold harmless an indemnified party, the
Company on the one hand and the Warrantholder on the other hand shall, in
lieu of indemnifying such indemnified party, contribute to the aggregate
losses, claims, damages or liabilities referred to in this Section 11.4
(including costs of any investigation and legal and other expenses
reasonably incurred in connection therewith, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted), in
such proportions as is appropriate to reflect the relative benefits
received by the Company and the Warrantholder from any offering of Common
Stock and the relative fault of the Company and the Warrantholder in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the
Warrantholder shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission related to information supplied by the Company (including for this
purpose information supplied by any officer, director, employee or agent of
the Company) or to written information furnished to the Company by or on
behalf of the Warrantholder specifically for use in the preparation of the
Registration Statement or any amendment thereof or supplement thereto, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 11.4 in no case shall the
Warrantholder be liable or responsible for any amount in excess of the
proceeds received by the Warrantholder from the sale of the Registerable
Shares included in the Registration Statement, provided, however, that no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act)
15
<PAGE>
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 11.4, each
person, if any, who controls the Warrantholder within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") shall have the same
rights to contribution as the Warrantholder, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, each director of the Company and
each officer of the Company who shall have signed the Registration
Statement shall have the same rights to contribution as the Company,
subject to the immediately preceding sentence of this Section 11.4. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party
or parties under this Section 11.4, notify such party or parties from whom
contribution may be sought, and the omission so to notify such party or
parties from whom contribution may be sought shall relieve the party or
parties from whom contribution may be sought (if such party was unaware of
such action, suit, or proceeding and was materially prejudiced by such
omission) from any liability under this Section 11.4, but not from any
other obligation it or they may have hereunder or other than under this
Section 11.4. No party shall be liable for contribution with respect to the
settlement of any action, suit, proceeding or claim effected without its
written consent. The obligations of the Warrantholder to contribute
pursuant to this Section 11.4 are several in proportion to its respective
number of Registerable Shares included in the Registration Statement and
not joint.
11.5 Elimination of Transfer Restrictions. The limitations imposed by
Section 11.2 upon the transferability of the Shares shall cease and terminate as
to any particular Shares when such Shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration Statement or at
such time as an opinion of counsel of the Warrantholder satisfactory to the
Company shall have been rendered to the effect that such restrictions are not
necessary in order to comply with the Securities Act.
11.6 Furnishing of Information. The Company shall:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act
("Rule 144");
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to the Warrantholder, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of the Securities Act
16
<PAGE>
and the Exchange Act, (ii) a copy of the most recent annual or periodic
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit the Warrantholder to sell such securities pursuant to Rule 144
without registration.
Section 12. Notices. Any notice pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given (i) if given by facsimile
transmission on the business day on which such transmission is sent and
confirmed, (ii) if given by air courier, two business days following the date it
was sent or (iii) if mailed by certified mail, return receipt requested, ten
business days following the date it was mailed, to the following addresses
(unless another address is herein specified):
If to the Warrantholder:
To the address of the Warrantholder as shown on the books of the Company.
If to the Company, addressed to:
Casdim International Systems Inc.
150 East 58th Street
New York, New York 10155
Attention: President
Facsimile#: (212) 829-1705
Each party may from time to time change the address or fax number to which
notices to it are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.
Section 13. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company and the Warrantholder shall bind and inure
to the benefit of their respective successors and assigns.
Section 14. Applicable Law. This Agreement shall be deemed to be a contract
made under the laws of the state of New York and for all purposes shall be
construed in accordance with the internal laws of said sate (without reference
to its rules as to conflicts of laws).
Section 15. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Warrantholder any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company and the Warrantholder.
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the date and year first above written.
CASDIM INTERNATIONAL SYSTEMS INC.
By: /s/Yehuda Shimshon
------------------
Yehuda Shimshon
President
<PAGE>
[FORM OF WARRANT CERTIFICATE]
EXHIBIT 1
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
WARRANTS MAY NOT BE SOLD, ASSIGNED, EXCHANGED OR OTHERWISE
TRANSFERRED IN ANY MANNER AND SUCH COMMON STOCK MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
Warrant Certificate No. 01
CASDIM INTERNATIONAL SYSTEMS INC.
(ORGANIZED UNDER THE LAWS
OF THE STATE OF DELAWARE)
WARRANTS TO PURCHASE COMMON STOCK
This certifies that, for value received, Frank Brosens (the
"Warrantholder") is the registered owner of 50,000 warrants (the "Warrants") to
purchase from Casdim International Systems Inc. (the "Company"), at any time
prior to 5:00 p.m., Eastern Time, on December 23, 1999 (the "Termination Date"),
one share of common stock of the Company, par value $0.01 per share (the "Common
Stock") at an initial purchase price of U.S. $0.50 per share of Common Stock
(the "Warrant Price"). The Warrants are subject to, and each Warrantholder, by
acceptance of this certificate, consents to, all the terms and provisions of,
the Warrant Agreement dated as of December 23, 1997, by and between the Company
and the Warrantholder, pursuant to which the Warrants were issued (the "Warrant
Agreement"). Any capitalized terms used herein and not defined herein shall have
the
<PAGE>
meanings assigned to such terms in the Warrant Agreement. The Termination Date
may be extended for a further period as provided in Section 3 of the Warrant
Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form herein duly
executed, and simultaneous payment of the Warrant Price for each Warrant
exercised, at the principal office of the Company. Payment of such price shall
be made at the option of each Warrantholder in cash or by certified or cashier's
check.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder effecting such partial exercise a new
Warrant Certificate in respect of the Common Stock as to which the Warrants
evidenced hereby shall not have been exercised. These Warrants may be exchanged
at the office of the Company by surrender of this Warrant Certificate properly
endorsed for one or more new Warrants of the same aggregate number of shares of
Common Stock as here evidenced by the Warrant or Warrants exchanged. No
fractional shares of Common Stock will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable at
the office of the Company in the manner and subject to the limitations set forth
in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a shareholder of the Company.
[This space intentionally left blank.]
2
<PAGE>
CASDIM INTERNATIONAL SYSTEMS INC.
By:
------------------
Yehuda Shimshon
President
ATTEST:
By: ____________________________
Dated: December 23, 1997
3
<PAGE>
PURCHASE FORM
Casdim International Systems Inc.
150 East 58th Street
New York, New York 10155
Pursuant to Section 3 of the Warrant Agreement, the undersigned hereby
irrevocably elects to exercise the right of purchase represented by this Warrant
Certificate for, and to purchase thereunder, __________ shares of Common Stock
provided for therein, and requests that certificates for such Common Stock be
issued in the name of:
-----------------------------------
(Please Print or Type Name(s), Address and Taxpayer Identification Number(s))
-----------------------------------
-----------------------------------
-----------------------------------
If this Warrant Certificate is hereby being exercised with respect to fewer than
all the shares of Common Stock specified herein, please issue a new Warrant
Certificate for the unexercised balance of the Warrants, registered in the name
of the undersigned Warrantholder or his assignee as below indicated and
delivered to the address stated below.
Dated: _______________________
Name of Warrantholder(s)
or Assignee(s) (Please Print): _____________________________
-----------------------------
Address (Please Print): ______________________________________
--------------------------------------------
Signature(s): ____________________________________________
--------------------------------------------
Note: The above signature(s) must correspond exactly with the
name(s) as written upon the face of this Warrant Certificate, without
alteration or enlargement or any change whatever, unless these Warrants
have been assigned.
1
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
-----------------------------------
-----------------------------------
-----------------------------------
(Name(s) and Address(es) of Assignee(s) Must be Printed or Typewritten)
the within Warrants, hereby irrevocably constituting and appointing
________________________ the undersigned's attorney-in-fact to transfer said
Warrants on the books of the Company, with full power of substitution.
Dated: __________ ___________________________________
-----------------------------------
Signature(s) of Registered Holder(s)
Note: The above signature(s) must correspond exactly with the
name(s) as written upon the face of this Warrant Certificate, without
alteration or enlargement or any change whatever.
2
CASDIM INTERNATIONAL SYSTEMS INC.
-------------------------
10% Convertible Secured Note
-------------------------
<PAGE>
THIS CONVERTIBLE 10% SECURED NOTE HAS NOT BEEN, AND WILL NOT BE, REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE LAWS OF
ANY STATE OR ANY OTHER JURISDICTION, AND MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES, EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
$100,000 No.___
CASDIM INTERNATIONAL SYSTEMS INC.
10% Convertible Secured Note
1. FOR VALUE RECEIVED, CASDIM INTERNATIONAL SYSTEMS INC., a corporation
duly organized and existing under the laws of the State of Delaware, with
offices at 150 East 58th Street, New York, New York 10155 (the "Company"),
hereby promises to pay to the order of [Frank Brosen, whose address is 63 East
Field Drive, Bedford, New York 10506], or his registered assigns (hereinafter
termed the "Registered Holder"), the principal sum of One Hundred Thousand
dollars ($100,000), with interest thereon from the date of this note (the
"Note") in like money at the rate of ten percent (10%) per annum on the unpaid
balance of this Note until paid. Subject to Section 4 herein, principal and
interest shall be payable on the Maturity Date, which shall be January 5, 1999.
The principal payment shall be reduced by that portion of the principal amount
of the Note previously converted into Common Stock, $.01 par value, of the
Company (the "Common Stock").
2. Payment; No Prepayment. Principal and interest shall be payable at such
address as the Registered Holder shall have designated to the Company in writing
at least fifteen (15) business days prior to the Maturity Date, in lawful tender
of the United States. No payment of the principal of the Note or the interest
thereon may be made prior to maturity by the Company without the consent of the
Registered Holder.
3. Issuance of the Note. This Note has been issued the Company pursuant to
authorization of the Board of Directors of the Company (the "Board") and issued
pursuant to a letter agreement (the "Agreement") by and among the Company and .
4. Conversion and Redemption. At the option of the Registered Holder
hereof, the unpaid principal amount of this Note may, upon execution of the
Conversion Form attached hereto and the surrender of this Note to the Company
for conversion, be convertible in increments of $25,000.00 from the 90th day
from the date of issuance of this Note (the
<PAGE>
"Conversion Date") into fully paid nonassessable shares of the Common Stock, at
an initial conversion price (the "Conversion Price") of 20% below the price per
share which is the average of the closing bid price per share of the Common
Stock on the Nasdaq Bulletin Board for the five trading days prior to the
Conversion Date (the "Market Price"). After the 180th day and until the due date
of this Note, the conversion price shall be adjusted to 30% below Market Price.
If the Market Price is less than $.50, the Note shall be convertible at a 50%
discount to the closing bid price for the Common Stock for the five trading days
before the Conversion Date. If the Common Stock shall not have traded on any day
within the aforesaid five trading days, the closing bid price for such day as
reported by Nasdaq Bulletin Board shall be deemed to be the closing bid price on
such day. All accrued interest payable on the Note for which Conversion has been
requested shall be payable in Common Stock at the Conversion Price. Notice of
Conversion may be given, at any time after 90 days from the date hereof. The
Registered Holder may not exercise his conversion rights to the extent such
conversion would cause the Registered Holder to be the owner of 5% or more of
the Company's outstanding Common Stock.
No fractional shares of Common Stock shall be issued upon Conversion. The
Registered Holder expressly waives his rights to receive a certificate for a
fractional share.
If less than all of the unpaid principal amount evidenced by this Note
shall be converted, the Company will, upon such exercise of the conversion
privilege, execute and deliver to the Registered Holder hereof a new Note (dated
the date hereof) evidencing the remaining amount of principal and interest then
owing. Conversions may be effected only into full shares and no fractions of a
share of Common Stock shall be issuable upon conversion. The shares of Common
Stock deliverable upon conversion of the Note shall be delivered to the
Purchasers within three business days of the Conversion Date.
Before the Registered Holder of the Note shall be entitled to convert the
same into shares of Common Stock, he shall surrender the Note, duly endorsed, at
the office of the Company and shall give written notice by mail or overnight
courier, postage prepaid, to the attention of its President at such office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Company shall, as soon as practicable thereafter, issue and deliver
at such office to such Registered Holder of the Note or to the nominee or
nominees of such Registered Holder, a certificate or certificates for the number
of shares of Common Stock to which such Registered Holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the Conversion Date, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date.
5. Conversion. (i) The issuance of certificates for shares of Common Stock
upon conversion of the Note shall be made without charge to the Registered
Holders thereof for any issuance tax in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any
-2-
<PAGE>
certificate in a name other than that of the Registered Holder of the Note which
are being converted.
(ii) The Company will at no time close its stock transfer books
against the transfer of any shares of Common Stock issued or issuable upon
the conversion of the Note in any manner which interferes with the timely
conversion of such Note, except as may otherwise be required to comply with
applicable securities laws.
(iii) As used in this Note, the term "Common Stock" shall mean the
Company's authorized Common Stock, par value $.01 per share, which shall be
the only class of common stock outstanding on and prior to the Conversion
Date.
(iv) The Company will not, by amendment of its Certificate of
Incorporation or By-Laws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Note and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the Registered Holder of the Note against impairment.
(v) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property, or to receive any other right, the Company shall mail to the
Registered Holder of the Note, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and
the amount and character of such dividend, distribution or right.
(vi) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Note in full, in addition to such other
remedies as shall be available to the Registered Holder of the Note, the
Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
-3-
<PAGE>
Notwithstanding anything contained herein to the contrary, no adjustment of
the Conversion Price shall be made by reason of the issuance of shares pursuant
to the acquisition by the Company of all or substantially all of the stock or
assets of any other corporation or corporations.
6. Taxes. The issuance of stock certificates upon the conversion of this
Note shall be made without charge to the converting Registered Holder of the
Note for any tax with respect to such issue. The Company shall not, however, be
required to pay any tax which may be payable with respect to any transfer
involved in the issuance and delivery of stock in a name other than that of the
Registered Holder of the converted Note; and the Company shall not be required
to issue or deliver any stock certificate unless and until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of any
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
7. Security. In order to secure the due and punctual payment of the
principal of and interest on this Note payable by the Company when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of this Note, Mr. Yehuda Shimshon, President
of the Company, has granted the Registered Holder a security interest in 400,000
shares of Common Stock of the Company owned by him.
8. Guarantee. Mr. Yehuda Shimshon, in order to induce the Registered Holder
to purchase this Note shall guarantee the payment of interest and principal due
on this Note.
9. No Rights as Stockholder. The Registered Holder of this Note shall not,
by reason of the ownership or possession of this Note, have any rights
whatsoever as a stockholder of the Company, or any other rights, whatsoever,
except as stated in the Note.
10. Limitation on Certain Corporate Acts. The Company hereby covenants and
agrees that upon any consolidation or merger or upon the transfer of all or
substantially all of the property or assets of the Company, the due and punctual
payment of the principal and interest on all the Note according to their tenor
and the due and punctual performance and observance of all the terms, covenants
and conditions of the Note to be kept and performed by the Company shall be
expressly assumed by the corporation formed by such consolidation, or into which
the Company shall have merged or by the purchaser of such property or assets;
and such assumption shall be an express condition of such merger or
consolidation agreement or agreement for the transfer of property or assets.
11. Covenants. (a) The Company will pay all taxes, assessments and govern
mental charges lawfully levied or assessed upon it, its property and any part
thereof, and upon its income or profits, and any part thereof, before the same
shall become delinquent; and will duly observe, and conform to, all lawful
requirements of any governmental authority relative to any of its property, and
all covenants, terms and conditions upon or under which any of its property is
held; provided that nothing in this Section 11 shall require the Company to
observe
-4-
<PAGE>
or conform to any requirement of governmental authority or to pay any such tax,
assessment or governmental charges so long as the validity thereof shall be
contested in good faith; and provided further that the Company shall not be
required to pay any such taxes, assessments or charges, if, in the judgment of
the Board, such payment shall not be in the best interests of the Company in the
conduct of its business.
(b) Subject to the other provisions of this Note, the Company at all times
will maintain its corporate existence and right to carry on its business and
duly procure all necessary renewals and extensions thereof and use its best
efforts to maintain, preserve and renew all its rights, powers, privileges and
franchises; provided, however, that nothing herein contained shall be construed
to prevent the Company from ceasing or omitting to exercise any rights, powers,
privileges or franchises which, in the judgment of the Board, can no longer be
profitably exercised, nor to prevent the consolidation, merger or liquidation of
any subsidiary or subsidiaries of the Company with or into the Company.
12. Events of Default. In case one or more of the following events of
default shall have occurred:
(i) default in the due and punctual payment of interest upon or
principal of any of the Note as and when the same becomes due and payable
either at maturity, or otherwise; or
(ii) failure to deliver the shares of Common Stock required to be
delivered upon conversion of Note which have been presented for conversion
within three business days of the Conversion Date.
(iii) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company
contained in the Note or to cure any material breach in a material
representation contained in the Agreement for a period of forty-five (45)
days after the date on which written notice of such failure requiring the
same to be remedied has been given by a Registered Holder to the Company;
or
(iv) a decree or order by a court having jurisdiction in the premises
has been entered adjudging the Company a bankrupt or insolvent, or
approving a petition seeking reorganization of the Company under any
applicable bankruptcy law or code and such decree or order has continued
undischarged or unstayed for a period of sixty (60) days; or a decree or
order of a court, having jurisdiction in the premises, for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of all or substantially all of its property,
or for the winding-up or liquidation of its affairs, has been entered, and
has remained in force undischarged or unstayed for a period of sixty (60)
days; or
-5-
<PAGE>
(v) the Company institutes proceedings to be adjudicated a voluntary
bankrupt, or consents to the filing of a bankruptcy proceeding against it,
or files a petition or answer or consent seeking reorganization under
applicable law, or consents to the filing of any such petition or to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of it or of all or substantially all of its
property, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as the become due;
then, and in each and every such case, so long as such event of default has not
been remedied and unless the principal of the Note has already become due and
payable, the Registered Holder of the Note, by notice in writing to the Company,
may declare the principal of all the Note then outstanding and the interest
accrued thereof, if not already due and payable, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything herein contained to the contrary
notwithstanding. Notwithstanding the above, the Company shall have a five-day
period to cure a default pursuant to subsections (i) and (ii) hereof
13. Exemption From Registration Under the Securities Act of 1933;
Registration Requirements and Penalty
(a) The Registered Holder of this Note, by acceptance hereof, agrees that
this Note and the shares of Common Stock issuable upon conversion hereof have
been and will be acquired for investment and not with a view to distribution or
resale, and that neither this Note, nor any such shares, will be transferred or
disposed of except in accordance with the requirements of the 1933 Act (as
hereinafter defined), and then existing rules and regulations promulgated
thereunder. The Note and the shares of Common Stock of the Company issued upon
the conversion of any of the Note into Common Stock of the Company shall not be
transferable except upon the conditions specified in this Section 12, which
conditions are intended to effect compliance with the provisions of the 1933 Act
in respect of the transfer of any Note or of any such shares of Common Stock of
the Company.
(b) As used in this Section 12, the following terms shall have the
following respective meanings:
"1933 Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" shall include any disposition of any Note or of any share
of Common Stock or of any interest in either thereof which would constitute
a sale thereof within the meaning of the 1933 Act.
-6-
<PAGE>
(c) Each certificate for Common Stock issuable upon conversion of the Note
shall (unless otherwise permitted by the provisions of subsections (d) and (f)
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE 10% CONVERTIBLE
SECURED NOTE DUE JANUARY 5, 1999 OF CASDIM INTERNATIONAL
SYSTEMS INC. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR THE SECURITIES LAW OF ANY OTHER JURISDICTION. NO
DISPOSITION OF SUCH SECURITIES OR ANY SHARES ISSUED UPON
CONVERSION OR EXERCISE OF THE SECURITIES MAY BE EFFECTED
UNLESS REGISTERED UNDER SUCH ACT OR UNLESS SUCH DISPOSITION,
IN THE OPINION OF COUNSEL TO THE COMPANY, IS EXEMPT FROM
REGISTRATION THEREUNDER."
(d) The Company agrees at its sole expense to (i) file the requisite
registration statement under the 1933 Act with the Securities and Exchange
Commission with respect to the resale of the Common Stock issuable upon
conversion of the Note, and use its best efforts to cause such registration
statement to become effective prior to March 30, 1998; (ii) prepare and file
with the Securities and Exchange Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
nine months and to comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such registration statement until
such time; (iii) not file any amendment or supplement to such registration
statement or prospectus to which any such seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the 1933 Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least five business
days prior to the filing thereof; and (iv) otherwise use its best efforts to
comply with all applicable rules and regulations of the Securities and Exchange
Commission, including the rules and regulations relating to filings under the
Securities Exchange Act of 1934.
(e) If the Registration Statement referred to in clause (d)(i) above is not
declared effective by June 30, 1998 the Registered Holder shall be entitled to
receive $5,000.00 per month in cash or shares of Common Stock valued at a 30%
discount to the Market Price, the term of which payment shall be at the option
of the Company (the "Penalty Payment"). Such Penalty Payment shall continue if
the Registration Statement is not declared effective until
-7-
<PAGE>
the due date of this Note. This issuance of such additional shares shall not
relieve the Company from using its best efforts to cause the aforementioned
registration statement to be declared effective.
(f) To the extent a Registration Statement is not in effect on the
Conversion Date, the holder of each Note and each certificate representing
Common Stock by acceptance thereof agrees, prior to any proposed transfer
thereof, to give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail and shall contain an
undertaking by the person giving such notice to furnish such further information
as may be required to enable counsel for the Company to render the opinion
referred to below. Promptly upon receiving any such notice, the Company shall
submit copies thereof to its counsel and shall use its best efforts to obtain
the opinion hereafter referred to as promptly as possible. Such proposed
transfer may be effected only if, in the opinion of counsel for the Company or
other counsel reasonably satisfactory to the Company, the proposed transfer may
be effected without registration under the 1933 Act (and applicable state
securities or Blue Sky laws) of such Note and the related Common Stock. If
counsel is of the opinion that the transfer may be effected, the Company shall
promptly notify the holder of such Note or Common Stock to that effect. Each
certificate evidencing the shares of Common Stock thus to be transferred (and
each certificate evidencing any untransferred balance of the shares of Common
Stock) shall bear the restrictive legend set forth in subsection (c) hereof
unless in the opinion of counsel for the Company such legend is not required by
the applicable provisions of the 1933 Act (and applicable state securities or
Blue Sky laws).
14. Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Registered Holder whose shares of Common Stock are covered by
a registration statement, its officers, directors and agents, and each person,
if any, who controls such Registered Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934 (the
"1934 Act") from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the shares of
Common Stock (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by such Registered Holder
or on such Registered Holder's behalf expressly for use therein; Provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity agreement contained in this paragraph shall
not apply to the extent that any such loss, claim, damage, liability or expense
results from the fact that a current copy of the prospectus (or, in the case of
a prospectus, the prospectus as amended or supplemented) was not sent or given
to the person
-8-
<PAGE>
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the shares of Common Stock concerned to such
person if it is determined that the Company had provided such prospectus and it
was the responsibility of such Registered Holder to provide such person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
15. Indemnification by Registered Holder. The Registered Holder whose
Shares are included in any registration statement agrees, severally but not
jointly, to indemnify and hold harmless the Company, its officers, directors and
agents and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the 1934 Act to the
same extent as the foregoing indemnity from the Company to such Registered
Holder, but only (i) with respect to information furnished in writing by such
Registered Holder or on such Registered Holder's behalf, in each case, only with
respect to information concerning such Registered Holder, expressly for use in
any registration statement or prospectus relating to the shares of Common Stock,
or any amendment or supplement thereto, or any preliminary prospectus, or (ii)
to the extent that any loss, claim, damage, liability or expense described in
the prior section results from the fact that a current copy of the prospectus
(or, in the case of a prospectus, the prospectus as amended or supplemented) was
not sent or given to the person asserting any such loss, claim, damage,
liability or expense at or prior to the written confirmation of the sale of the
shares of Common Stock concerned to such person if it is determined that it was
the responsibility of such Registered Holder to provide such person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense.
16. Transferability. This Note is transferable only in writing by the
Registered Holder hereof, in person or by his duly authorized attorney, on the
register of the Company maintained at its offices in New York, New York, or at
such other place in the State of New York as the Company may specify by five
business days prior written notice to the holder. The Company may deem and treat
the person in whose name this Note is registered as the absolute owner hereof,
for the purpose of receiving payment of the principal thereof and interest
hereon, whether or not the same shall be overdue, and for all other purposes
whatsoever, including but without limitation, the giving of any written notices
required hereunder, and the Company shall not be affected by any notice to the
contrary.
17. Non-Recourse. Except as provided in Sections 7 and 8 hereof, no
recourse shall be had for the payment of the principal of or the interest on
this Note or any part hereof, or for any claim based hereon or otherwise in
respect hereof, or of the indebtedness represented hereby, against any
incorporator, stockholder, officer or director, as such, past, present or future
of the Company either directly or through the Company whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise;
-9-
<PAGE>
all liability, if any, of that character against any such incorporator,
stockholder, officer or director being by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
18. Acceptance by Holder. This Note is subject to all of the covenants,
conditions, rights, limitations and other provisions stated herein, to all of
which the holder and each successive holder hereof by acceptance of any Note
assents.
19. Amendments and Modifications. Changes in or additions to this Note may
be made, and compliance with any covenant or condition herein set forth may be
omitted only if the Company shall obtain the written consent from the Registered
Holder of the Note.
20. Non-Waivers. Neither any failure nor any delay on the part of the
Registered Holder of this Note in exercising any right, power, or privilege
hereunder shall operate as a waiver of any rights of any holder hereof, nor
shall a single or partial exercise of any right preclude any other or further
exercise of any other right, power of privilege accorded to any holder hereof.
21. Attorney's Fees. If this Note shall not be paid when due and shall be
placed by the Registered Holder hereof in the hands of an attorney for
collection, through legal proceedings or otherwise or if this Note shall not be
converted into shares of Common Stock on the Conversion Date, subject to the
provisions of Section 4 hereof, and an action is brought by the Registered
Holder with respect thereto, the Company shall pay a reasonable attorney's fee
to the Registered Holder hereof together with reasonable costs and expenses of
collection or enforcement incurred in connection with any such action.
22. Specific Performance. The Company expressly agrees that the Registered
Holder will be irreparably damaged and will not have adequate remedies at law if
the Company does not perform its obligations under the Note. Upon a breach of
the terms or covenants of this Note by the Company, the Registered Holder shall,
each in addition to all other remedies, be entitled to obtain injunctive relief,
and an order for specific performance of the Company's obligations hereunder.
23. Interpretation. This Note is made and delivered in the State of New
York and shall be construed and enforced in accordance with and governed by the
laws of such state without giving effect to conflict of laws and principles.
24. Governing Law. The Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the conflict
of laws principles thereof.
25. Headings. The headings contained in this Note are for reference
purposes only and shall not affect the meaning or interpretation of this Note.
-10-
<PAGE>
IN WITNESS WHEREOF, Casdim International Systems Inc. has caused this Note
to be executed by its President and its Assistant Secretary, this 17th day of
March 1998.
CASDIM INTERNATIONAL SYSTEMS INC.
By /s/Yehuda Shimshon
------------------
Yehuda Shimshon, President
Guaranteed by:
/s/Yehuda Shimshon
- ------------------
Yehuda Shimshon, individually
-11-
<PAGE>
NOTICE
The conversion form appearing below should only be executed by the Registered
Holder desiring to convert all or part of the principal amount of the Note
attached hereto [in increments of $25,000].
CONVERSION FORM
DATE:___________
TO: CASDIM INTERNATIONAL SYSTEMS INC.
150 East 58th Street
New York, New York 10155
The undersigned hereby exercises the conversion privilege upon the terms
and conditions set forth in this Note, to the extent of the maximum number of
shares of Common Stock issuable pursuant to the terms of Section 4 of the Note,
and accordingly, authorizes the Company to apply $ principal amount of the
attached Note to payment in full for such shares. Please register such shares
and make delivery thereof as follows:
Register in Name of (Giving First or Middle Name in Full)
Name_____________________________________________________
(Please Print)
Address__________________________________________________
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to other than the
Registered Holder.
Name_____________________________________________________
(Please Print)
Address__________________________________________________
Signature____________________________
Address:__________________________________________________________
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
_______________ the within Note and all rights thereunder, hereby irrevocably
authorizing the Company to transfer said Note on the books of the Company, with
full power of substitution in the premises.
Dated: _______________________
_______________________________________________
In the presence of:
_______________________________
-13-
FORM OF
WARRANT AGREEMENT
-------------------------------------------
CASDIM INTERNATIONAL SYSTEMS INC.
-------------------------------------------
THIS WARRANT AGREEMENT (this "Agreement") dated as of March 17, 1998 is
made by and between Casdim International Systems Inc., a corporation organized
under the laws of the State of Delaware (the "Company"), and [ ] (the
"Warrantholder").
Subject to the terms and conditions hereof, the Company agrees to issue to
the Warrantholder, pursuant to a letter agreement by and between the Company and
the Warrantholder dated as of March 17, 1998 (the "Agreement"), warrants as
hereinafter described (the "Warrants") to purchase up to an aggregate of 100,000
shares of the common stock of the Company, par value $.01 per share (the "Common
Stock"), at a Warrant Price equal to 80% of the average closing bid and asked
price of the Company's common stock as reported by the Nasdaq Bulletin Board
(and if not quoted on the Nasdaq Bulletin Board as reported by National
Quotation Bureau) on September 17, 1998, subject to adjustment pursuant to
Section 7 hereof. As used herein (i) the terms "Share" or "Shares" shall mean
collectively the Common Stock issuable upon exercise of the Warrants together
with any other securities issuable upon such exercise as provided in Section 7
of this Agreement; (ii) the term "Warrants" shall include any and all warrants
outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange or substitution
pursuant to this Agreement; and (iii) the term "Warrant Price" shall mean the
price per share of Common Stock at which the Common Stock shall at any time be
purchasable upon exercise of the Warrants. In addition to the adjustments
provided in Section 7 hereof, any fixed dollar per share amounts referenced in
this Agreement shall be appropriately adjusted for any stock splits,
subdivisions, stock dividends or stock distributions, combinations,
reclassifications or consolidations or other changes to the Company's capital
structure.
For the purpose of defining the terms and provisions of the Warrants and
the respective rights and obligations thereunder, the Company and the
Warrantholder, for value received, hereby agree as follows:
Section 1. Transferability and Form of Warrants.
1.1. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company when issued, in accordance with Delaware corporate
practice.
<PAGE>
1.2. Transfer. The Warrants shall be transferable only on the books of the
Company maintained at its principal office in New York, New York or wherever its
principal office may then be located, upon delivery thereof duly endorsed by the
Warrantholder seeking such transfer or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver new Warrants to the person entitled thereto.
1.3. Form of Warrants. The form of certificate evidencing the Warrants
shall be substantially as set forth in Exhibit 1 attached hereto. Certificates
evidencing the Warrants shall be executed on behalf of the Company by its
President or by any Vice President, shall be attested to by its Secretary or any
Assistant Secretary, and shall be dated as of the date of execution thereof.
1.4. Legend on Warrants and Shares. The Warrants, and the Shares issuable
upon the exercise thereof, have not been registered under the Securities Act of
1933, as amended (the "Securities Act"). Each certificate for the Warrants shall
bear the following legend:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
WARRANTS MAY NOT BE SOLD, AS SIGNED, EXCHANGED OR OTHERWISE
TRANSFERRED IN ANY MANNER AND SUCH COMMON STOCK MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
And each certificate for the Shares shall bear the following legend:
"THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY
NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
2
<PAGE>
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the securities represented thereby) shall also bear a like
legend unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling a Warrantholder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Term of Warrants; Exercise of Warrants; Market Price
(a) Subject to the terms of this Agreement, each Warrantholder shall have
the right, at any time during the period commencing at 9:00 a.m., Eastern Time,
on March 17, 1998 (the "Commencement Date") and ending at 5:00 p.m., Eastern
Time, on March 16, 2000 (the "Termination Date"), to purchase from the Company
up to the number of fully paid and nonassessable Shares which such Warrantholder
may at the time be entitled to purchase pursuant to this Agreement, upon
surrender to the Company at its principal office of the certificates evidencing
the Warrants to be exercised, with the purchase form duly completed and signed,
and upon payment to the Company of the Warrant Price (as determined in
accordance with the provisions of Section 7 hereof) for the number of Shares in
respect of which such Warrants are then exercised, but in no event for fewer
than 100 Shares (unless fewer than an aggregate of 100 Shares are then
purchasable under all outstanding Warrants held of record by a Warrantholder).
The Termination Date shall be extended for such number of days as (i) the Shares
are not covered by and may not be sold pursuant to an effective registration
statement under the Securities Act for any reason whatsoever (including, without
limitation, any stop order or suspension), (ii) the Common Stock is not traded
on the Nasdaq OTC Bulletin Board, or (iii) the Shares are not listed on the
principal exchange on which the Common Stock is listed or the Nasdaq Stock
Market, if the Common Stock is listed thereon, or are not eligible for trading
on the Nasdaq OTC Bulletin Board, and for a period of 30 days thereafter.
Payment of the aggregate Warrant Price shall be made in cash or by certified or
cashier's check or any combination thereof.
(b) Upon surrender of Warrant certificates and payment of the Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of a Warrantholder, and (subject to
Section 11 hereof) in such name or names as such Warrantholder may designate, a
certificate or certificates for the number of full Shares so
3
<PAGE>
acquired upon the exercise of the Warrant, together with cash, as provided in
Section 9 hereof, in respect of any fractional Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of surrender of the
Warrants being exercised and payment of the Warrant Price notwithstanding that
the certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed. The Warrants shall be exercisable at the election of a Warrantholder
either in full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining portion of the Warrants shall be issued by the Company.
(c) For all purposes of this Agreement, the term "Market Price" as of any
specified date shall mean: (i) if the Common Stock is listed or admitted for
trading on one or more United States national securities exchanges, the average
daily closing price for the last five trading days for the Common Stock on such
exchanges as may be designated by the Board of Directors of the Company (the
"Board") as the principal exchange in the United States on which the Common
Stock is listed; (ii) if the Common Stock is not listed or admitted for trading
on any United States national securities exchange, the average daily closing bid
price for the last five trading days for the Common Stock on the Nasdaq National
or SmallCap Market ("Nasdaq"); or (iii) if the Common Stock is not listed or
admitted for trading on a United States national securities exchange or on
Nasdaq, the average closing bid price for the last five trading days of the
Common Stock on the Nasdaq OTC Bulletin Board as reported by the National
Quotation Bureau Inc. In the event that it is impracticable for the Board to
establish the Market Price of the Common Stock pursuant to this Section 3 on any
specified date, the "Market Price" shall be determined in good faith by the
Board, such determination to be conclusive.
Section 4. Payment of Taxes. The Company will pay all taxes and fees, if
any, attributable to the initial issuance of the Warrants or the issuance of the
Shares upon exercise of the Warrants, except that the Company shall not be
required to pay any tax or fee which may be payable in respect of any secondary
transfer of the Warrants or such Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing any Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the affected Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of the loss, theft
or destruction of such Warrant and, if requested, at the cost and expense of the
Warrantholder, a bond of indemnity in form and amount
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satisfactory to the Company. Applicants for such substitute Warrant certificates
shall also comply with such other reasonable regulations as the Company may
prescribe.
Section 6. Reservation of Shares. There has been reserved, and the Company
shall at all times keep reserved so long as any Warrants remain outstanding, out
of its authorized share capital, such number of shares of Common Stock as shall
be subject to purchase under all outstanding Warrants. Every transfer agent for
the Common Stock and other securities of the Company issuable upon the exercise
of Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares of Common Stock and other securities as shall
be requisite for such purpose. The Company will supply every such transfer agent
with duly executed stock and other certificates, as appropriate, for such
purpose and will provide or otherwise make available any cash which may be
payable as provided in Section 9 hereof.
Section 7. Adjustment of Number and Kind of Securities. The Warrant Price
and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
7.1. Adjustments.
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) subdivide its outstanding Common
Stock, (iii) combine its outstanding Common Stock into a smaller number of
shares of Common Stock, or (iv) issue, by reclassification of its Common
Stock, other securities of the Company, the number of shares of Common
Stock or other securities purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that each Warrantholder
shall be entitled to receive the kind and number of shares of Common Stock
or other securities of the Company which it would have owned or would have
been entitled to receive immediately after the happening of any of the
events described above, had the Warrants been exercised immediately prior
to the happening of such event or any Record Date (as defined below) with
respect thereto. For purposes hereof, "Record Date" shall mean the date of
closing the transfer books of the Company for the determination of the
shareholders entitled to any relevant dividend, distribution, subscription
rights or other rights or for the determination of shareholders entitled to
vote on any proposed merger, dissolution, liquidation or winding up of the
Company. Any adjustment made pursuant to this subsection 7.1(a) shall
become effective immediately on the effective date of such event
retroactive to the Record Date, if any, for such event.
(b) In the event the Company shall issue or sell any shares of Common
Stock for a consideration per share less than the Warrant Price in effect
immediately prior to such issue or sale, then the Warrant Price in effect
immediately prior to such issue or sale, shall be reduced to such lesser
price calculated to the nearest cent) as shall be determined
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prior thereto by a fraction, the numerator of which shall be the sum of (i)
the number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such additional shares and (ii) the number of shares of
Common Stock which the aggregate consideration received for the issuance or
sale of such additional shares would purchase at the Warrant Price then in
effect, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance or sale of such
additional shares.
(c) For the purpose of subsection 7.1(b), the following subparagraphs
(i) to (iii), inclusive, shall be applicable:
(i) If at any time the Company shall issue or sell any rights to
subscribe for, or any rights or options to purchase, Common Stock or
any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities
being hereinafter called "Convertible Securities"), whether or not
such rights or options or the right to convert or exchange any such
Convertible Securities shall be immediately exercisable, and the price
per share for which Common Stock shall be issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (1) the total amount,
if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the exercise
of such rights or options, plus, in the case of any such rights or
options which shall relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (2) the total number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights or options) shall be less than the
Warrant Price in effect immediately prior to the time of the issue or
sale of such rights or options, then the total number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such rights or options shall
(as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per share, and
except as provided in Section 7.1(i) below, no further adjustments of
the Warrant Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities, upon the exercise of such
rights or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
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(ii) If at any time the Company shall issue or sell any
Convertible Securities, whether or not the rights to exchange or
convert thereunder shall be immediately exercisable, and the price per
share for which Common Stock shall be issuable upon such conversion or
exchange (determined by dividing (1) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (2) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then the total
number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall (as of the date of the issue
or sale of such Convertible Securities) be deemed to be outstanding
and to have been issued for such price per share, and, except as
provided in Section 7.1(i) below, no further adjustments of the
Warrant Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities. In
addition, if any issue or sale of such Convertible Securities shall be
made upon exercise of any rights to subscribe for or to purchase or
any option to purchase any such Convertible Securities for which
adjustments of the Warrant Price shall have been or shall be made
pursuant to other provisions of this subsection 7.1(c), no further
adjustment of the Warrant Price shall be made by reason of such issue
or sale.
(iii) If at any time the Company shall set a Record Date for the
purpose of entitling holders of Common Stock (1) to receive a dividend
or other distribution payable in Common Stock or in Convertible
Securities, or (2) to subscribe for or purchase Common Stock or
Convertible Securities, then such Record Date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred
to in subsection 7.1(b) above and rights in connection with a shareholder
rights plan), then in each case the number of Shares thereafter purchasable
upon the exercise of the Warrants shall be determined by multiplying the
number of Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then effective Warrant Price
as of the date of such distribution
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calculated pursuant to this Section 7, and of which the denominator shall
be such then effective Warrant Price on such date minus the then Fair Value
(determined as provided below) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options,
warrants or convertible securities applicable to one share. Such adjustment
shall be made whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the Record Date for
the determination of shareholders entitled to receive such distribution.
For all purposes of this Agreement, "Fair Value" shall be determined
in good faith by the Board, such determination to be conclusive.
(e) No adjustment in the number of Shares purchasable pursuant to the
Warrants shall be required unless such adjustment would require an increase
or decrease of at least one percent in the number of Shares then
purchasable upon the exercise of the Warrants; provided that any
adjustments which by reason of this subsection 7.1(e) are not required to
be made immediately shall be carried forward and taken into account in any
subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of a
Warrant is adjusted, as herein provided, the Warrant Price payable upon
exercise of such Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Shares so purchasable upon the exercise
of the Warrant immediately thereafter. In addition, whenever the Warrant
Price shall be adjusted, the number of Shares purchasable upon exercise
hereof simultaneously shall be adjusted by multiplying the number of Shares
issuable immediately prior to such adjustment by the Warrant Price in
effect immediately prior to such adjustment and dividing the product so
obtained by the Warrant Price, as adjusted.
(g) Whenever the number of Shares purchasable upon the exercise of
Warrants, and/or the Warrant Price, are adjusted as herein provided, the
Company shall cause to be promptly mailed to the Warrantholders by first
class mail, postage prepaid, notice of such adjustment and a statement of
the chief accounting officer of the Company setting forth the number of
Shares purchasable upon the exercise of the Warrants and the Warrant Price
after such adjustment, a brief statement of the facts requiring such
adjustment, and the computation by which such adjustment was made.
(h) For the purpose of this subsection 7.1, the term Common Stock
shall mean (i) the class of Common Stock designated as the Common Stock of
the Company at the date of this Agreement, or (ii) any other class of
shares resulting from successive changes
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or reclassification of the Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 7, a Warrantholder shall become entitled to
purchase any securities of the Company other than Common Stock, (i) if the
Warrantholders' right to purchase is on any other basis than that available
to all holders of the Common Stock, the Board shall determine the Fair
Value of such other securities and (ii) thereafter the number of such other
securities so purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Common Stock contained
in this Section 7.
(i) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Shares
purchasable upon exercise of the Warrants, to the extent the Warrants have
not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may
be) on the basis of (A) the fact that the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold
upon the exercise of such rights, options, warrants or conversion
privileges, and (B) the fact that such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options,
warrants or conversion privileges whether or not exercised; provided,
however, that no such readjustment shall have the effect of decreasing the
number of Shares purchasable upon exercise of the Warrants by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion
privileges.
7.2. No Adjustment for Dividends. Except as provided in subsection 7.1, no
adjustment to the Warrants or any provision or condition thereof in respect of
any dividends or distributions out of earnings of the Company shall be made
during the term of the Warrants or upon the exercise of Warrants.
7.3 No Adjustment in Certain Cases. No adjustment shall be made pursuant to
Section 7 hereof in connection with the grant or exercise of options to purchase
Common Stock under any of the Company's employee benefit plans existing as of
the date hereof or of the exercise of any outstanding warrants.
7.4. Preservation of Purchase Rights upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another entity or in case of any sale or conveyance to another entity of
the property, assets or business of the Company as an entirety or substantially
as an entirety, the Company or such successor or
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purchasing entity, as the case may be, shall execute with the Warrantholders an
agreement that the Warrantholders shall have the right thereafter, upon exercise
of the Warrants and payment of the Warrant Price in effect immediately prior to
such consolidation, merger or sale, to purchase the kind and amount of shares
and other securities and property which it would have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had the
Warrants been exercised immediately prior thereto. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986 (or any
successor provision), in which the Company is the surviving corporation, the
right to purchase Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void, but only if the
controlling corporation (after such event) shall agree to substitute for the
Warrants its warrants entitling the holder thereof to purchase the kind and
amount of shares and other securities and property which it would have been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this subsection 7.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 7 hereof, and shall contain substantially
the same terms, conditions and provisions as are contained herein immediately
prior to such event. The provisions of this subsection 7.4 shall similarly apply
to successive consolidations, mergers, sales or conveyances.
7.5. Nominal Value of Common Stock. Before taking any action which would
cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each share of Common Stock below the then nominal value per share
of Common Stock issuable upon exercise of the Warrants, the Company will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully-paid and
nonassessable Shares upon exercise of the Warrants.
7.6. Independent Public Accountants. The Company may retain a firm of
independent public accountants in the United States (which may be any such firm
regularly employed by the Company) to make any computation required under this
Section 7, and a certificate signed by such firm shall be evidence of the
correctness of any computation made under this Section 7.
7.7. Statement on Warrant Certificates. Irrespective of any adjustments in
the number of securities issuable upon exercise of the Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its reasonable discretion, make any change in the form of the Warrant
certificate that it may deem appropriate and that does not affect the substance
thereof; and any Warrant certificate hereafter issued, whether upon registration
of transfer of, or in exchange or substitution for, an outstanding Warrant
certificate, may be in the form so changed.
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Section 8. Fractional Interests. The Company shall not be required to issue
fractional Shares upon the exercise of any Warrant. If any fraction of a Share
would, except for the provisions of this Section 8 be issuable on the exercise
of any Warrant (or specified portion thereof), the Company shall pay an amount
in cash equal to the Market Price (of the Common Stock for the 20 consecutive
trading days immediately preceding the date the certificates evidencing the
Warrants to be exercised are received by the Company at its principal office)
multiplied by such fraction.
Section 9. No Rights as Shareholder; Notices to Warrantholders. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or any transferee of any rights as a shareholder of the
Company, including (without limitation) the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
their exercise in full, any one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to Section
7.1 or 7.4; or
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall
be proposed;
then the Company shall give notice in writing of such event to each of the
Warrantholders, as provided in Section 12 hereof, at least 20 days prior to the
date fixed as the Record Date. Such notice shall specify such Record Date.
Failure to mail or receive such notice or any defect therein shall not affect
the validity of any action taken with respect thereto.
Section 10. Restrictions on Transfer. The Warrantholder agrees and
undertakes that if the Warrantholder proposes to sell or otherwise transfer any
Warrants or Shares issuable upon exercise thereof, and if such Shares are not
then registered for resale pursuant to an effective registration statement under
the Securities Act, the Warrantholder proposing to make such transfer shall give
written notice to the Company describing briefly the manner in which any such
proposed transfer is to be made and no such transfer shall be made unless the
Company shall have received an opinion of counsel for the Warrantholder
reasonably acceptable to the Company, that registration under the Securities Act
is not required with respect to such transfer.
Section 11. Registration Rights.
11.1 Registration Statement. The Company shall:
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(a) promptly, prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering the resale of the Shares issuable upon exercise of the
Warrants by the Warrantholder from time to time on the Nasdaq OTC Bulletin
Board, or on such securities market or system on which the Common Stock
shall then be publicly traded, or in privately negotiated transactions;
(b) use its best efforts, subject to receipt of necessary information
from the Warrantholder, to cause the Registration Statement to become
effective as soon as possible thereafter;
(c) prepare and file with the Commission such supplements and
amendments to the Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act until the later of such time as all of the Shares have
been sold pursuant thereto or, by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect, such Shares are no
longer required to be registered for the unrestricted sale thereof by the
Warrantholder;
(d) furnish to the Warrantholder such number of copies of prospectuses
and preliminary prospectuses in conformity with the requirements of the
Securities Act and such other documents as the Warrantholder may reasonably
request, in order to facilitate the public sale or other disposition of all
or any of the Shares held by the Warrantholder, provided, however, that the
obligation of the Company to deliver copies of prospectuses or preliminary
prospectuses to the Warrantholder shall be subject to the receipt by the
Company of reasonable assurances from the Warrantholder that the
Warrantholder will comply with the applicable provisions of the Securities
Act and of such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses or preliminary prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in all states, provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraphs
(a) through (e) of this Section 11.1, other than brokerage commissions or
placement agent fees and fees and expenses, if any, of counsel or other
advisers to the Warrantholder with respect to the registration and resale
of the Shares; and
(g) use its best efforts to have the Registration Statement (or any
supplement or amendment to the Registration Statement, if applicable)
declared effective by the
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Commission as soon as practicable after the filing thereof, but in no event
later than June 30,1998.
11.2 Limitations on Transfer. The Warrantholder agrees that it will not
effect any disposition of the Shares that would constitute a sale within the
meaning of the Securities Act except as contemplated in the Registration
Statements referred to in Section 11.1 or pursuant to an available exemption
from registration under the Securities Act and applicable state securities laws,
and further that as a condition to inclusion of the Shares in the Registration
Statement the Warrantholder agrees to provide to the Company such information as
it may reasonably request in order to include such Shares in such Registration
Statement.
11.3 Prospectus Delivery Requirements. The Warrantholder agrees not to make
any sale of the Shares, pursuant to the Registration Statement referred to in
Section 11.1 without effectively causing the prospectus delivery requirements
under the Securities Act to be satisfied. The Warrantholder acknowledges that
there may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the Registration Statement until such time as an
amendment to such Registration Statement has been filed by the Company and
declared effective by the Commission or until the Company has amended or
supplemented such prospectus. In the event that the Registration Statement has
been suspended, the Company shall provide written notice of such suspension to
the selling shareholders listed in the Registration Statement. In the event that
such Registration Statement is no longer subject to such suspension, the Company
shall provide written notice to such selling Shareholders that such Selling
Shareholder may thereafter effect sales pursuant to said Registration Statement.
11.4 Indemnification and Contribution.
(a) For the purpose of this Section 11.4:
(i) the term "Selling Shareholder" shall mean any person or entity
selling Common Stock pursuant to the Registration Statement, and any
affiliate thereof;
(ii) the term "Registration Statement" shall include any preliminary
prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement; and
(iii) the term "untrue statement" shall mean any untrue statement or
alleged untrue statement of a material fact in the Registration
Statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(b) The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to
which such Selling Shareholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon,
any untrue statement, or arise out of any failure by the Company to fulfill
any undertaking included herein or in the Registration Statement, and the
Company promptly will reimburse such Selling Shareholder for any legal or
other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim; provided, however, that the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue
statement made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement, or the
failure of such Selling Shareholder to comply with the covenants and
agreements contained herein; provided further, that the indemnification
contained in this Section 11.4 with respect to any prospectus after it has
been amended or supplemented, shall not inure to the benefit of any Selling
Shareholder (or any person controlling such Selling Shareholder) from whom
the person asserting such loss, claim, damage, or liability shall have
purchased Common Stock, that are the subject thereof if, after copies
thereof have been delivered by the Company to such Selling Shareholder,
such Selling Shareholder shall have failed to send or give a copy of the
prospectus as then amended or supplemented, as the case may be, to such
person at or prior to the confirmation of such sale of such Common Stock,
to such person, and, if such loss, claim, damage or liability would not
have arisen but for the failure of such Selling Shareholder to deliver the
same.
(c) The Warrantholder agrees to indemnify and hold harmless the
Company (and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company
who signs the Registration Statement and each director of the Company) from
and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject
(under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any failure of the Warrantholder to comply with
its covenants and agreements contained herein, or any untrue statement if
such untrue statement was made in reliance upon and in conformity with
written information furnished by or on behalf of the Warrantholder
specifically for use in preparation of the Registration Statement, and the
Warrantholder promptly will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim.
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(d) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 11.4, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein,
and, to the extent it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by
such indemnified person in connection with the defense thereof. In the
event that the indemnifying party shall have assume the defense of such
action, such indemnifying party shall not enter into any compromise or
settlement without the indemnified party's prior written consent, which
consent shall not be unreasonably withheld, delayed or denied.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section
11.4 is due in accordance with its terms but for any reason is held to be
unavailable or insufficient to hold harmless an indemnified party, the
Company on the one hand and the Warrantholder on the other hand shall, in
lieu of indemnifying such indemnified party, contribute to the aggregate
losses, claims, damages or liabilities referred to in this Section 11.4
(including costs of any investigation and legal and other expenses
reasonably incurred in connection therewith, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted), in
such proportions as is appropriate to reflect the relative benefits
received by the Company and the Warrantholder from any offering of Common
Stock and the relative fault of the Company and the Warrantholder in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the
Warrantholder shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission related to information supplied by the Company (including for this
purpose information supplied by any officer, director, employee or agent of
the Company) or to written information furnished to the Company by or on
behalf of the Warrantholder specifically for use in the preparation of the
Registration Statement or any amendment thereof or supplement thereto, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 11.4 in no case shall the
Warrantholder be liable or responsible for any amount in excess of the
proceeds received by the Warrantholder from the sale of the Registerable
Shares included in the Registration Statement, provided, however, that no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act)
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shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 11.4, each
person, if any, who controls the Warrantholder within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") shall have the same
rights to contribution as the Warrantholder, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, each director of the Company and
each officer of the Company who shall have signed the Registration
Statement shall have the same rights to contribution as the Company,
subject to the immediately preceding sentence of this Section 11.4. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party
or parties under this Section 11.4, notify such party or parties from whom
contribution may be sought, and the omission so to notify such party or
parties from whom contribution may be sought shall relieve the party or
parties from whom contribution may be sought (if such party was unaware of
such action, suit, or proceeding and was materially prejudiced by such
omission) from any liability under this Section 11.4, but not from any
other obligation it or they may have hereunder or other than under this
Section 11.4. No party shall be liable for contribution with respect to the
settlement of any action, suit, proceeding or claim effected without its
written consent. The obligations of the Warrantholder to contribute
pursuant to this Section 11.4 are several in proportion to its respective
number of Registerable Shares included in the Registration Statement and
not joint.
11.5 Elimination of Transfer Restrictions. The limitations imposed by
Section 11.2 upon the transferability of the Shares shall cease and terminate as
to any particular Shares when such Shares shall have been effectively registered
under the Securities Act and sold or otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration Statement or at
such time as an opinion of counsel of the Warrantholder satisfactory to the
Company shall have been rendered to the effect that such restrictions are not
necessary in order to comply with the Securities Act.
11.6 Furnishing of Information. The Company shall:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act
("Rule 144");
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to the Warrantholder, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of the Securities Act
16
<PAGE>
and the Exchange Act, (ii) a copy of the most recent annual or periodic
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit the Warrantholder to sell such securities pursuant to Rule 144
without registration.
Section 12. Notices. Any notice pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given (i) if given by facsimile
transmission on the business day on which such transmission is sent and
confirmed, (ii) if given by air courier, two business days following the date it
was sent or (iii) if mailed by certified mail, return receipt requested, ten
business days following the date it was mailed, to the following addresses
(unless another address is herein specified):
If to the Warrantholder:
To the address of the Warrantholder as shown on the books of the Company.
If to the Company, addressed to:
Casdim International Systems Inc.
150 East 58th Street
New York, New York 10155
Attention: President
Facsimile#: (212) 829-1705
Each party may from time to time change the address or fax number to which
notices to it are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.
Section 13. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company and the Warrantholder shall bind and inure
to the benefit of their respective successors and assigns.
Section 14. Applicable Law. This Agreement shall be deemed to be a contract
made under the laws of the state of New York and for all purposes shall be
construed in accordance with the internal laws of said sate (without reference
to its rules as to conflicts of laws).
Section 15. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Warrantholder any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company and the Warrantholder.
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the date and year first above written.
CASDIM INTERNATIONAL SYSTEMS INC.
By: _______________________________
Yehuda Shimshon
President
18
<PAGE>
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
WARRANTS MAY NOT BE SOLD, ASSIGNED, EXCHANGED OR OTHERWISE
TRANSFERRED IN ANY MANNER AND SUCH COMMON STOCK MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
Warrant Certificate No. __
CASDIM INTERNATIONAL SYSTEMS INC.
(ORGANIZED UNDER THE LAWS
OF THE STATE OF DELAWARE)
WARRANTS TO PURCHASE COMMON STOCK
This certifies that, for value received, [ ] (the "Warrantholder") is the
registered owner of 100,000 warrants (the "Warrants") to purchase from Casdim
International Systems Inc. (the "Company"), at any time prior to 5:00 p.m.,
Eastern Time, on March 16, 2000 (the "Termination Date"), one share of common
stock of the Company, par value $0.01 per share (the "Common Stock") at an
initial purchase price equal to 80% of the average closing bid and asked price
of the Company's Common Stock as reported by the Nasdaq Bulletin Board (and if
not quoted on the Nasdaq Bulletin Board as reported by National Quotation
Bureau) on September 17, 1998 (the "Warrant Price"). The Warrants are subject
to, and each Warrantholder, by acceptance of this certificate, consents to, all
the terms and provisions of, the Warrant Agreement dated as of March 17, 1998,
by and between the Company and the Warrantholder, pursuant to which
<PAGE>
the Warrants were issued (the "Warrant Agreement"). Any capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Warrant Agreement. The Termination Date may be extended for a further period
as provided in Section 3 of the Warrant Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form herein duly
executed, and simultaneous payment of the Warrant Price for each Warrant
exercised, at the principal office of the Company. Payment of such price shall
be made at the option of each Warrantholder in cash or by certified or cashier's
check.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder effecting such partial exercise a new
Warrant Certificate in respect of the Common Stock as to which the Warrants
evidenced hereby shall not have been exercised. These Warrants may be exchanged
at the office of the Company by surrender of this Warrant Certificate properly
endorsed for one or more new Warrants of the same aggregate number of shares of
Common Stock as here evidenced by the Warrant or Warrants exchanged. No
fractional shares of Common Stock will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable at
the office of the Company in the manner and subject to the limitations set forth
in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a shareholder of the Company.
[This space intentionally left blank.]
2
<PAGE>
CASDIM INTERNATIONAL SYSTEMS INC.
By: _______________________
Yehuda Shimshon
President
ATTEST:
By: ____________________________
Dated: March 17, 1998
3
<PAGE>
PURCHASE FORM
Casdim International Systems Inc.
150 East 58th Street
New York, New York 10155
Pursuant to Section 3 of the Warrant Agreement, the undersigned hereby
irrevocably elects to exercise the right of purchase represented by this Warrant
Certificate for, and to purchase thereunder, __________ shares of Common Stock
provided for therein, and requests that certificates for such Common Stock be
issued in the name of:
-----------------------------------
(Please Print or Type Name(s), Address and Taxpayer Identification Number(s))
-----------------------------------
-----------------------------------
-----------------------------------
If this Warrant Certificate is hereby being exercised with respect to fewer than
all the shares of Common Stock specified herein, please issue a new Warrant
Certificate for the unexercised balance of the Warrants, registered in the name
of the undersigned Warrantholder or his assignee as below indicated and
delivered to the address stated below.
Dated: _______________________
Name of Warrantholder(s)
or Assignee(s) (Please Print): _____________________________
-----------------------------
Address (Please Print): ______________________________________
--------------------------------------------
Signature(s): ____________________________________________
--------------------------------------------
Note: The above signature(s) must correspond exactly with the
name(s) as written upon the face of this Warrant Certificate, without
alteration or enlargement or any change whatever, unless these Warrants
have been assigned.
1
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
-----------------------------------
-----------------------------------
-----------------------------------
(Name(s) and Address(es) of Assignee(s) Must be Printed or Typewritten)
the within Warrants, hereby irrevocably constituting and appointing
________________________ the undersigned's attorney-in-fact to transfer said
Warrants on the books of the Company, with full power of substitution.
Dated: __________ ___________________________________
-----------------------------------
Signature(s) of Registered Holder(s)
Note: The above signature(s) must correspond exactly with the
name(s) as written upon the face of this Warrant Certificate, without
alteration or enlargement or any change whatever.
2
AGREEMENT
Made in Petach-Tiqwa as of the .. day of ............, 199..
BETWEEN CASDIM SOFTWARE SYSTEMS LTD.
R.N. 51-109719-8
of 5 Ha'ofan Street, Petach-Tiqwa
(hereinafter referred to as "the Seller")
of the first party
AND BETWEEN C.I.S. CLINICAL INFORMATION SYSTEMS LTD.
R.N. 51-187451-3
of 5 Ha'ofan Street, Petach-Tiqwa
(hereinafter referred to as "the Purchaser")
WHEREAS on the 10yh day of March, 1994, the Seller has submitted to
the Israeli Patent Registrer an application to register
patent no. 108935, concerning an information system and
multimedia terminal;
AND WHEREAS the Seller is interested in selling to the Purchaser all its
rights connected with the application, the patent that will
be registered and the invention forming the subject of the
application and /or the Patent, and the Purchaser is
interested in purchasing all the rights as above indicated
from the Seller;
Thus it was declared, termed and agreed by the parties as
follows:
1. The preamble to this Agreement forms an integral part thereof.
2. The Seller hereby sells to the Purchaser and the Purchaser hereby
purchases form the Seller the entire rights connected with the Patent.
3. The Patent as in its meaning within this Agreement is that which is
the subject of the application to register a Patent no. 108935.
<PAGE>
- 2-
4. 4.1 In consideration for the complete fulfillment of all the
Seller's obligations under this Agreement and the transfer
of the full rights to the Patent with all that this entails
to the Purchaser, the Purchaser shall pay the Seller the
amount of $500,000 - (five hundred thousand US Dollars
(hereinafter referred to as "the Consideration").
4.2 The Consideration shall be paid in NIS at the representative
rate of the exchange of the Dollar that will be known on the
day each payment is made.
4.3 The Consideration shall be paid on the dates and in the
installments that are to be agreed between the parties, but
not later than the lst of June, 1995.
5. The ownership of the Patent with all that this implies and/or that
arises out of it shall be transferred to the Purchaser only on
completion of payment of the Consideration as stated in clause 4.
6. The Purchaser shall be entitled to continue with the proceedings for
registration of the Patent and also to register the Patent in any
country whatsoever, at its discretion.
7. The Purchaser shall, at its sole discretion, be entitled to allow
others to participate and/or to transfer to others, either in Israel
or outside Israel, its rights in accordance with this Agreement or in
accordance with any law, for consideration and/or without it.
8. Subject to the provisions of clause 5 above, the Seller shall not, at
any time, have any rights in the Patent with all that is connected
with and/or arises from it and it shall not be entitled to make any
demand and/or claim to the Purchaser and/or [to] any third party
whatsoever in connection with the aforesaid Patent concerning the past
and/or the future.
9. 9.1 The parties shall sign any document and appear before any
person, company and/or authority, either in Israel or
outside Israel in order with the utmost efficiency to put
into effect the provisions of this Agreement providing only
that the Purchaser shall bear all the Seller's expenditure
that shall be caused to the latter in according with this
clause.
<PAGE>
- 3-
9.2 Without detracing from the provisions in clause 9.1 above,
the parties shall, at the time of signing this Agreement,
sign a bill of transfer of the rights under the patent
application [to be] phrased as hereto appended.
10. A party that shall be in breach of its undertakings according to this
Agreement shall pay the party fullfilling [the same] compensation
agreed in advance amounting to $50,000- (fifty thousand US Dollars)
and this without detracing from the fulfilling party's right to any
additional compensation under any law.
11. Any notification sent by one party to the other shall be deemed to
have reached its destination with delivery by hand and/or after 72
hours from the moment it has been handed in to any post office in
Israel and of its dispatch by registered mail, according to the
addresses indicated in the heading to this Agreement.
IN WITNESS HEREOF, THE PARTIES SET FORTH THEIR HAND AT THE
ABOVE TIME AND PLACE
__________ _____________
THE SELLER THE PURCHASER
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