U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-QSB
Mark one
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________to _________
Commission File No. 1-10623
Pamet Systems, Inc.
____________________________________________________________________
(exact name of small business issuer as specified in its charter)
Massachusetts 04-2985838
____________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, Acton, Massachusetts 01720
____________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (978) 263-2060
--------------
Check whether the issurer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the close of the period covered by this report:
Title of each class Number of share outstanding
------------------- ---------------------------
Common stock 2,548,700
($.01 par value)
Transitional Small Business Disclosure Format
YES NO X
------ ------
<PAGE>
PAMET SYSTEMS, INC.
FORM 10-QSB TABLE OF CONTENTS
Part I - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets
March 31, 1999 and December 31, 1998
Condensed Statements of Operations
for the quarter ended March 31, 1999
and 1998
Condensed Statement of Cash Flows
for the three months ended March 31,
1999 and 1998
Item 2 - Management's Discussion and Analysis of
Financial Condition or Plan of Operations
Part II - Other Information
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of
Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Signature(s)
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Condensed Balance Sheets March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
CURRENT ASSETS (unaudited)
Cash $ 93,051 $54,817
Accounts receivable, net of allowance for
doubtful accounts of $60,000 and factored 229,169 418,229
receivables
Accounts Receivable, factored 62,180 119,176
Inventory, net of reserve of $15,000 59,575 50,254
Prepaid expenses and other current assets 67,907 81,421
TOTAL CURRENT ASSETS 511,882 723,897
PROPERTY AND EQUIPMENT, net 932,659 947,188
OTHER ASSETS 4,190 4,190
RESTRICTED CASH 28,675 28,534
CAPITALIZED SOFTWARE DEVELOPMENT COSTS 253,907 195,665
TOTAL ASSETS $1,731,313 $1,899,474
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Line of credit (vendor) $298,220 $169,934
Mortgage note payable 475,473 479,743
Due to Factor -- 65,980
Accounts payable, trade 790,203 $787,764
Accounts payable, related party 21,940 20,513
Accrued expenses 309,487 265,267
Notes payable-related party 110,000 --
Deferred software maintenance revenue 192,460 295,669
TOTAL CURRENT LIABILITIES 2,197,783 2,084,870
LONG TERM DEBT, less current portion 1,400,000 1,050,000
UNEARNED SUPPORT REVENUE 3,802 3,802
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued
Common Stock, $.01 par value, 7,500,000 shares
authorized; 2,548,700 issued and outstanding 25,487 25,353
Additional paid-in Capital 5,306,956 5,306,924
Accumulated deficit (7,202,715) (6,571,577)
TOTAL STOCKHOLDERS EQUITY (1,870,272) (1,239,198)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY 1,731,313 $1,899,474
========== ==========
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)"
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Operations
(Unaudited)
Three Months Ended
March 31
------------------
<S> <C> <C>
1999 1998
Net sales $ 395,790 $604,163
Cost of product 149,779 294,131
-------- --------
246,011 310,032
Operating expenses:
Personnel costs 303,567 336,408
Rent, utilities and telephone 21,972 28,717
Travel and entertainment 25,272 53,494
Professional fees 68,280 62,570
Depreciation 20,335 18,042
Research and Development 301,026 179,138
Other operating expenses 62,636 49,075
-------- --------
Total operating expenses 803,088 727,444
-------- --------
Income (loss) from operations (557,077) (417,412)
Interest Income (expense), Net (74,060) (23,649)
Net Income (loss) (631,137) (441,061)
======= =======
Earnings (loss) per common share $(.25) $(.17)
===== =====
Shares used in Computing 2,548,700 2,535,250
Earnings per Share
Earnings (loss) per common share- -- --
assuming dilution ===== =====
Shares used in Computing -- --
Earnings Per Share-
assuming dilution
</TABLE>
See accompanying "Notes to Financial Statements (unaudited)"
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income/(loss) $(631,137) $(441,061)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and amortization 20,335 18,042
Capitalized software development costs (58,242) --
Change in assets and liabilities:
(Increase) Decrease in accounts receivable 189,060 (74,738)
Decrease in accounts receivable, factored 56,996 --
(Increase) Decrease in inventory (9,321) 12,502
(Increase) Decrease in prepaids and
other current assets 13,514 (28,009)
(Increase) in other assets and restricted
cash (141) (4,369)
(Decrease) in due to factor (65,980) --
Increase in accounts payable 2,439 96,785
Increase in accounts payable,related party 1,427 --
Increase in accrued expenses
and other current liabilities 44,219 34,482
(Decrease) in deferred software
maintenance revenue (103,209) (122,589)
--------- --------
Total adjustments 91,097 (67,894)
Net cash provided by (used
in) operating activities (540,040) (508,955)
Cash flows from investing
activities:
Expenditures for property and equipment (5,806) (20,209)
--------- ---------
Net cash used in investing activities (5,806) ( 20,209)
</TABLE>
(continued on following page)
<PAGE>
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Payment of mortgage (4,270) ( 3,903)
Net change note payable
related party 110,000 --
Net change line of credit-vendor 128,286 --
Proceeds from long term convertible
promissory notes 350,000 --
Issuance of capital stock 64 531,250
--------- ---------
Net cash provided by
financing activities 584,080 527,347
Net increase (decrease) in cash 38,234 (1,817)
Cash and cash equivalents at 54,817 40,522
beginning of period
Cash and cash equivalents at
end of period $93,051 $38,705
====== ======
Supplemental disclosure of cash
flow information:
Cash paid for interest: $31,307 $16,232
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)"
<PAGE>
PAMET SYSTEMS, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note (1) Statement Presentation
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of March
31, 1999, the results of operations for the three month period and
changes in cash flows for the period then ended. There were no material
unusual charges or credits to operations during the recently completed
fiscal quarter.
The results reported for the three months ended March 31, 1999 are
necessarily indicative of the results of operations which may be expected
for the entire year.
Note (2) Mortgage on Corporate Training, Development and Headquarters
Facility
On April 21, 1992 the Company consummated an agreement with the
Lexington Savings Bank of Lexington, MA. to mortgage the Company's
development, training and headquarters facility, located at 1000 Main
Street, Acton, Massachusetts. The original principal amount of the
mortgage was $560,000. In October 1997 the note was extended for a one
year term through October 21, 1998 with monthly payments of $5,423.00,
determined according to a twenty-year amortization period including
interest at 10.0%. Lexington Savings Bank's parent company, Affiliated
Community Bankcorp, Inc. was purchased by UST Corp., the parent company of
USTrust in August 1998. The mortgage was not renewed in October 1998,
however, the Company has received a mortgage proposal from USTrust. The
principal of the loan has therefore been reclassified as a current
liability. The remaining balance at March 31, 1999 was $475,473 The bank
has required an interest bearing compensating balance account. On March
31, 1998 this account equaled $28,675.
<PAGE>
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Overview
Pamet Systems, Inc. (the Company or Pamet Systems), founded in
1987, designs and implements broad-based information technology solutions
for public safety agencies enabling them to realize cost efficiencies and
provide better service. The company's suite of products is composed of
four major components: PoliceServer, FireServer, CADServer and JailServer
The Company also offers several companion products including ImageServer,
MobileServer, QueryStation and Mapping. The Company's revenues consist
primarily of sales of these software applications, the associated hardware
and systems integration, and support and update service fees.
The Company's revenues for the 3 month period ended March 31, 1999
(the 1999 period) decreased 34.5% to $395,790 from $604,163 for the 3 month
period ending March 31, 1998 (the 1998 period). Revenues from the
Company's principal products continued to decline in the 1999 period as a
result of market expectations for a complete Microsoft operating
environment using Microsoft NT Server and a Windows 95/98 or NT Desktop
graphical user interface. In response to the market, the Company began
rebuilding its products on the NT platform late in 1997 at considerable
expense. The Company has invested over $1,280,000 to date developing what
management believes will be one of the only fully integrated native NT
suites of public safety applications available in the market. Sales for
the 1999 period consisted of MobileServer systems (MDT) and sales to
existing customers of server upgrades procured in preparation for the new
NT-based applications. Management believes that sales of the Company's
records management (RMS) and computer-aided dispatch (CAD) products will
become a significant portion of the Company's revenue subsequent to the
release of the NT-based versions of these products in the third quarter of
1999.
The Company continues to believe there are significant market
opportunities based on the federal Crime bill funding expected in 1999 and
beyond, the establishment of E911 centers, heightened emphasis on crime
prevention and control in most communities and the awareness by
municipalities that computer systems can improve the efficiency and
effectiveness of their public safety resources. The Company has also seen
increased emphasis on the coordination of public safety systems between
neighboring towns, county, and state police organizations. The Company's
products are designed and marketed with the option to be used in this type
of regional application.
The primary focus of management during the 1999 period has been in
three areas: current revenue and development of a sales pipeline for
the NT product, completion of the development and integration of the new
applications for release during the third quarter of 1999 and the
acquisition of adequate funding to ensure the completion of the NT
development program and the establishment of the sales and operations
infrastructure required to support anticipated sales growth. Relative to
the acquisition of investment, during the 1999 period $350,000 was received
in the private placement program and, subsequent to the end of the 1999
period, an additional $410,000 was received.
Three Months Ended March 31, 1999 vs.
Three Months Ended March 31, 1998
Net sales in the 1999 period decreased 34.5% to $395,790 from
$604,163 for the 1998 period. The revenues for the 1999 period reflected
the continued slowing of system sales while customers await the release of
the Company's NT-based product as discussed above. Prospective customers
who have received COPS More grant awards are either delaying spending the
funds or purchasing companion products such as MobileServer and ImageServer
or upgrading server capability while they await the release of the NT
product suite. The revenues for the 1999 period were comprised of two
hardware upgrades, two ImageServer systems, and three MobileServer systems
compared to one hardware upgrade, three ImageServer systems, eight
MobileServer systems during the 1998 period. The MobileServer sales in the
1999 period represented 61.3% of net hardware and software sales, down from
74.3% of net hardware and software sales in the 1998 period. Support
revenues increased 28.8% to $158,071 for the 1999 period from $122,688 for
the 1998 period reflecting the increase in the customer base from the 1998
period. Cost of product decreased 49.1% or $144,352 to $149,779 for the
1999 period from $294,131 for the 1998 period reflecting decreased revenues
in the 1999 period and the increase of high margin support revenues
during the period. The resulting increase in gross margin from from 51.3%
in the 1998 period to 62.2% in the 1999 period can be attributed to the
significant increase in the support revenues and improved margins on the
MobileServer sales.
Operating expenses increased $75,644 or 10.4% to $803,088 for the
1999 period compared to $727,444 for the 1998 period primarily due to the
addition of sales and customer support resources and continued spending on
research and product development. Total research and development
expenditures, including non-capitalized spending on the NT suite of
products for outside resources and the deployment of current staff to
product development and testing, represented $121,888 or 161.1% of the
increase. In addition, the Company capitalized $58,242 of development
costs relating to PoliceServer NT and CADServer the 1999 period. During
the development cycle of the NT products, the Company has utilized outside
resources to accomplish product development goals while minimizing the long
term financial commitments of the Company. As the products near release,
management has focused internal resources on the projects to ensure timely
completion of development and testing and product release on schedule in
the third quarter of 1999. NT product development will continue throughout
1999 until all functionality in PoliceServer and FireServer have been ported
to the NT platform consistent with market demands.
Personnel costs show a decrease of 9.8% to $303,567 for the 1999
period compared to $336,408 for the 1998 period. However, gross personnel
expenditures, prior to the reclassification of expense for employees
assigned to the NT development program, reflect an increase of 9.5 %. The
Company has continued to add strategic personnel in the areas of sales,
support, and engineering to support expected increased revenue growth with
an expanded market and the introduction of an NT-based product. Rent,
utilities and telephone decreased 23.5% to $21,972 for the 1999 period from
$28,717 for the 1998 period due primarily to an error in recording
telephone expense in the fourth quarter of 1998. Travel and entertainment
expenses decreased $28,222 or 52.8% to $25,272 for the 1999 period from
$53,494 for the 1998 period. This decrease primarily reflects the reduction
is sales travel in the Southeast region due to the resignation of the sales
person in the region. Professional fees increased 9.1% to $68,280 for the
1999 period from $62,570 for the 1998 period due to increased legal fees
that resulted from services associated with the ongoing private placement
of debt and equity financing, the sale of the company headquarters
building, and the issues associated with transactional activity.
Depreciation expense increased 12.7% to $20,335 for the 1999 period from
$18,042 for the 1998 period due to the purchase of several internally used
software programs supporting the increased level of infrastructure. Other
operating expenses increased 27.6% to $62,636 for the 1999 period from
$49,075 for the 1998 period primarily due to increases in internet access
and usage costs and increased expenditures on office supplies and equipment
Net interest expense for the 1999 period was $74,060 compared to
$23,649 for the 1998 period, reflecting an increase of $50,411 or 213.2%.
This increase can be attributed to the fees incurred from utilization of
the receivables financing agreement with Silicon Bank and the interest
associated with the convertible promissory notes and vendor line of credit
secured in the fourth quarter of 1998 and the first quarter of 1999.
The net loss for the 1999 period was $(631,137) or $(.25) per share
compared to net loss of $441,061 or $(.17) per share for the 1998 period.
The loss is due primarily to a decrease in sales in the 1999 period in
conjunction with increased operating expenses resulting from product
development and the increased infrastructure costs which will position the
Company for expected future revenue growth.
Liquidity and Capital Resources
The Company's working capital was a deficit of $(1,685,901) at
March 31, 1999 compared to a deficit of $(1,360,973) at December 31, 1998
due to the reduced sales, the current level of research and development
spending and the additional expenses associated with the increased
corporate infrastructure. In addition, the mortgage note on the Company's
headquarters building was not renewed as of March 31, 1999 and the entire
loan amount outstanding of $475,473 is included in current liabilities for
the 1999 period. Nevertheless, the Company remains highly leveraged.
During the first quarter of 1999, the Company secured $350,000 of
additional financing in the form of long-term convertible debt, received
commitments from investors to convert $600,000 in long-term convertible
debt to equity, and received $300,000 in loan commitments from directors.
Subsequent to the end of the 1999 period, an additional $410,000 was
secured in the form of long term convertible debt. In general, the
outstanding long-term convertible debt funding accrues interest at 11%, has
a two-year term, carries the option of conversion of the principal to
common stock by the debt holder or repayment of principal and accrued
interest by the Company, and has 100% warrant coverage attached that
allows for purchase of additional shares of common stock at the conversion
price of $2.50.
Cash increased to $93,051 at March 31,1999 from $54,817 at December
31, 1998. Accounts receivable decreased to $229,169 at March 31, 1999 from
$418,229 at December 31, 1998 due to the reduced sales for the 1999 period.
While resources necessary to fund the completion of the NT
development program and provide working capital for operations continue to
be a focus of concern for the Company, the Company believes that the
additional funding which has been secured or committed, the anticipated
funds from the sale of the headquarters building, anticipated awards from
the "COPS More 98" grant submissions combined with sales of the Company's
existing and anticipated suite of products should ensure continued
operations through the end of the year. If additional funds are required,
the Board of Directors is willing to increase its investment or seek
additional financing. Backlog at March 30, 1999 was $345,000. The Company
is continuing to consider projects to increase its cash position such as
activities to raise capital, mergers, acquisitions or other business
combinations.
As of March 31, 1999, the Company had accumulated approximately
$7,000,000 of federal net operating loss carryforwards that expire
beginning in the year 2004. In addition, the Company has state net
operating losses to carryforward of $3,950,000 which expire between the
years 1999 and 2003. Under the Internal Revenue Code of 1986, as amended,
the rate at which a corporation may utilize its net operating losses to
offsets income for federal tax purposes is subject to specified limitations
during periods after the corporation has undergone an "ownership change".
It has been determined that an ownership change did take place at the time
of the Registrant's initial public offering. However, the limitations on
the loss carryforward exceed the accumulated loss at the time of
the"ownership change". Thus there is no restriction on its use.
Seasonality
The majority of the Company's installed base has a fiscal year that
commences on July 1 and, therefore, the Company bills its customers for
their annual software support and update service on July 1 of each year.
Consequently, cash flow representing software support revenues has tended
to be higher in the second half of the Registrant's fiscal year, although
software support revenues are recognized ratably throughout the fiscal
year.
Revenue Recognition
Revenues from software license fees are recognized when a contract
has been executed, the product has been delivered, all significant
contractual obligations have been satisfied and collection of the related
receivable is probable. Maintenance revenues, including those bundled with
the initial license fee, are deferred and recognized ratably over the
service period. Consulting and training service revenues are recognized as
the services are performed.
Year 2000
Company engineers have performed extensive testing to insure that
all of the Company's supported software products are compliant with the
year 2000 transition. The Company's software was developed to store and
calculate date related information using 4 digit values, so records dated
December 31, 1999 will be followed by records dated January 1, 2000.
Testing has shown that the Company's software successfully manages the year
2000 rollover while maintaining data and system integrity. For the turnkey
systems that the Company sells, the Company continues to monitor the
progress of other third party suppliers on whom it depends, such as
Microsoft and Compaq. Although the Company cannot certify these third party
products, the Company will continue to monitor the published status of
their compliance and notify its supported customers of any findings. The
Company's customers have been informed that year 2000 compliance may not
apply to older computer equipment or non-current versions of system
software.
Internally the Company utilizes some third-party vendor computer
hardware, networking equipment, telecommunication products and software
products that may or may not be year 2000 compliant. However, the Company
has been assured, by third party vendors that the software products that
the Company relies on to manage its internal finance, materials and support
activities are all year 2000 compliant. Internal testing to verify these
assurances will not be completed until July 1999. The Company also relies,
directly or indirectly, on the external systems of suppliers, creditors,
financial organizations and governmental entities for accurate exchange of
data. The impact of year 2000 non-compliance by any of these entities is
being monitored at this time.
Inflation
Inflation has not had a significant impact on the Company's
operations to date.
Forward Looking Statements
This Form 10-QSB contains statements which are not historical facts.
These statements may constitute "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities and Exchange Act of
1934 as amended. Certain, but not necessarily all, of such forward looking
statements can be identified by the use of such words as "believes",
"expects", "may", "will", "should", or "anticipates"or the negative thereof or
other variations thereon of similar terminology, and/or which include, without
limitation, statements regarding the following: the timing of the development
and release of the NT products, adequacy of the funding for the completion of
the NT development, and market expectation for the NT operating environment;
building a sales and marketing initiative; law enforcement trends regarding
E911 and mobile systems; sufficiency of working capital and adequacy of the
corporate infrastructure to support operations and anticipated growth;
economic and competitive factors affecting market growth; year 2000
compliance; and discussions of strategies involving risk and uncertainties
that reflect management's current views. These statements are based on many
assumptions and factors and may involve risks and uncertainties. The actual
results of the Company or industry results may be materially different from
any future results expressed or implied by such forward looking statements
because of factors such as problems in the development of the NT products;
insufficient capital resources to complete development and operate the
Company; inability to successfully market and sell the NT product; changes in
the marketplace including variations in the demand for public safety software;
and changes in the economic and competitive environment. These factors and
other information contained in this Form 10-Q could cause such views,
assumptions and factors and the Company's results of operations to be
materially different.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
c. Sales of Securities
On January 22, 1999 the Company issued a $100,000 convertible
promissory note with five year warrants attached to an accredited
investor as defined in Rule 501(a) under the Securities Act of
1933, as amended. The note allows the noteholder to convert the
principal amount of the note and purchase up to 40,000 shares of
Pamet Systems Common Stock at $2.50 per share. The attached five
year warrants allow the noteholder to purchase 40,000 shares of
Pamet Systems Common Stock at a price of $2.50 per share. The
note accrues interest at 11% per year and both the principal
balance of the note and unpaid accrued interest are due on
January 21, 2001. No principal has been converted to Common
Stock or warrants exercised at March 31, 1999.
On February 8, 1999 the Company issued a $250,000 convertible
promissory note with five year warrants attached to an accredited
investor as defined in Rule 501(a) under the Securities Act of
1933, as amended. The note allows the noteholder to convert the
principal amount of the note and purchase up to 100,000 shares of
Pamet Systems Common Stock at $2.50 per share. The attached five
year warrants allow the noteholder to purchase 100,000 shares of
Pamet Systems Common Stock at a price of $2.50 per share. The
note accrues interest at 11% per year and both the principal
balance of the note and unpaid accrued interest are due on
February 7, 2001. No principal has been converted to Common
Stock or warrants exercised at March 31, 1999.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
4.16 Convertible Note issued to William Bell 1993 Trust dated
February 8, 1999
4.17 Warrant issued to William Bell 1993 Trust dated February 8,
1999
4.18 Convertible Note issued to Stephen F. Wilder dated
January 22, 1999
4.19 Warrant issued to Stephen F. Wilder dated January 22, 1999
27 Financial Date Schedule
b. Reports on form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized
Pamet Systems, Inc.
-------------------------
(Registrant)
May 20, 1999 Richard C. Becker
_______________________________ ______________________
Date Richard C. Becker
Vice President
Principal Financial Officer
<PAGE>
EXHIBIT 4.16
Convertible Note issued to William Bell 1993 Trust dated February 8, 1999
<PAGE>
No. L-007
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE
NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL
AMOUNT OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO
MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR
QUALIFIED THEREUNDER OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION
IS AVAILABLE.
CONVERTIBLE PROMISSORY NOTE
$250,000 Acton, Massachusetts
February 8, 1999
FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the
"Company"), hereby promises to pay to William James Bell 1993 Trust ("Payee"),
10539 Bellagio Road, Los Angeles, CA 90077, the principal sum of Two Hundred
Fifty Thousand Dollars ($250,000), on the dates and in the amounts hereinafter
set forth. This Promissory Note is issued by the Company pursuant to the
Securities Purchase Agreement, dated as of the date hereof, among the Company
and Payee (the "Securities Purchase Agreement"). Capitalized terms used but
not defined shall have the respective meanings ascribed to them in the
Securities Purchase Agreement. This Promissory Note is hereinafter referred to
as this "Note."
1. Principal and Maturity Date. The principal amount of this Note
outstanding together with all accrued interest hereon shall be due and payable
on February 7, 2001 (the "Maturity Date").
2. Interest. The outstanding principal amount of this Note shall
accrue interest at the per annum rate of eleven percent (11.0%) through the
earlier of the date of repayment or conversion (in each case computed on the
basis of a 365 day year and actual days elapsed). Interest shall be payable in
full on the Maturity Date with respect to the principal amount of the Note
then outstanding. No interest shall be deemed to have accrued or be payable on
any portion of this Note which is Converted on or prior to the Maturity Date.
3. Prepayment. This Note may be prepaid, in whole or in part,
without penalty or premium upon not less than thirty (30) days prior written
notice from the Company to the Payee, at any time or from time to time. All
prepayments made on this Note shall be applied first to the payment of all
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of the payment. Prepayment, in
whole or in part, shall be noted in the accounting records of the Company.
4. General Payment Provisions. All payments or prepayments of
principal and interest and other sums due pursuant to this Note shall be made
by check payable to the Payee at the address set forth above or at such other
address as Payee shall have previously designated to the Company in writing
not later than two Business Days (as defined below) prior to the date on which
such payment becomes due.
If the due date of any payment under this Note would otherwise
fall on a day which is not a Business Day, such date will be extended to the
immediately succeeding Business Day and interest shall be payable at the rate
set forth herein for the period of the extension. The term "Business Day"
shall mean any day on which commercial banks in the State of New York are not
authorized or required to close.
5. Conversion; Repayment.
(a) Conversion/Repayment and Conversion Price. The Payee may,
subject to the terms and conditions of this Section 5, at any time, or from
time to time, exercise its right to convert this Note to Common Stock by
delivering a duly executed notice, in the form substantially similar to
Exhibit A hereto, of such intention to the Company (the "Conversion Notice");
provided, however, that if, and to the extent, this Note or any portion
thereof is called for prepayment, the holder may exercise its right to convert
to Common Stock such portion of this Note as was called for prepayment.
The Payee shall have the right, subject to the terms and
conditions of this Section 5, to, no more frequently than four times per annum
in the aggregate, convert all or any part of the principal amount then
outstanding under this Note (the "Note Amount"), in an amount not less than
$25,000 (or such lesser amount as may then be outstanding), into that number
of fully-paid and nonassessable shares of Common Stock (the "Conversion
Shares"), obtained by dividing the Note Amount or such portion thereof
presented for conversion by the Conversion Price. The "Conversion Price" shall
initially be $2.50 per share of Common Stock subject to adjustment as provided
in Section 6 below.
Upon a partial conversion or repayment of this Note, the Company
shall execute and deliver to or on the order of the holder hereof, a new Note
or Notes of authorized denominations in principal amount equal to the
unconverted or unredeemed, as the case may be, portion of this Note.
(b) Issuance of Common Stock on Conversion. In order to effect the
conversion of this Note, the Payee shall deliver to the Company at its
principal office, this Note and a duly executed Conversion Notice; provided,
however, that if the Payee desires to convert the Note on the Maturity Date,
Payee shall notify the Company in writing of its intention to convert the Note
at least five (5) days prior to the Maturity Date. The date upon which the
Company receives the Conversion Notice, the Note and any other documentation
required under this Section 5 of this Note or the Conversion Notice shall be
referred to herein as the "Effective Date." Upon the Effective Date, this Note
(or portion thereof) shall be deemed converted into shares of Common Stock in
accordance with this Section 5, at which time the rights of the Payee with
respect to this Note and the amount so converted shall cease and, subject to
the following provisions of this paragraph, the person or persons entitled to
receive the shares of Common Stock upon conversion of this Note (or portion
thereof) shall be treated for all purposes as having become the record holder
or holders of such Common Stock. As promptly as practicable after the
Effective Date, the Company shall deliver or cause to be delivered to the
Payee, at the address set forth above or at such other address as the Payee
shall designate in writing, certificates representing the number of fully paid
and nonassessable shares of Common Stock into which this Note (or portion
thereof), shall be converted in accordance with the provisions of this Section
5. If this Note is called for prepayment it may be converted as provided
herein up to and including the close of business on the business day preceding
the date of prepayment.
No fractional shares of Common Stock shall be issued upon
conversion of this Note (or portion thereof). In lieu of any fractional share
of Common Stock which would otherwise be issuable upon conversion of this Note
(or portion thereof), the Company shall pay a cash adjustment in respect of
such fraction in an amount equal to such fraction multiplied by the Conversion
Price.
(c) Reserves. The Company covenants that it will at all times
reserve and keep available, free from pre-emptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of issue upon
conversion of this Note as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of this Note. The Company
covenants that all shares of Common Stock which shall be so issuable shall,
upon issuance, be duly and validly issued and fully paid and nonassessable.
The Company shall from time to time, in accordance with applicable law,
increase the authorized amount of its Common Stock if at any time the
authorized amount of its Common Stock remaining unissued shall not be
sufficient to permit the conversion of this Note at the time outstanding.
(d) Taxes Upon Conversion. The issuance of certificates for shares
of Common Stock upon the conversion of this Note shall be made without charge
to the converting noteholder for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names
of, or in such names as may be directed by, the holder of this Note; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate in a name other than that of the holder of this Note, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid; and provided,
further, that in no event shall the Company be required to pay or reimburse
the holder for any income tax payable by such holder as a result of such
issuance.
(e) Legends. All certificates representing Conversion Shares shall
bear a conspicuous legend stating in substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER
ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN
REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION
FROM REGISTRATION OR QUALIFICATION IS AVAILABLE."
The Company shall, upon the request of any holder of a stock certificate
representing Conversion Shares and the surrender of such certificate, issue a
new stock certificate without such legend if (i) the stock evidenced by such
certificate has been effectively registered under the Securities Act and
qualified under any applicable state securities law and sold by the holder
thereof in accordance with such registration and qualification or (ii) such
holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth
herein are no longer required or necessary under the Securities Act or any
applicable state law.
6. Conversion Price Protection.
(a) In the event of a stock split, reverse stock split or stock
dividend, the Board of Directors of the Company shall adjust the Conversion
Price to appropriately reflect such event.
(b) Subject to adjustment in accordance with Section 6(a), if at
any time, beginning April 1, 1999, the average of the Closing Prices (as
defined herein) of the Common Stock for any 50 consecutive Trading Days (as
defined herein) after April 1, 1999 (the "Average Closing Price") is less than
$2.50 per share, then, so long as the Average Closing Price remains below
$2.50 per share (a "Price Protection Period"), upon the conversion of all or
any part of the principal amount outstanding under this Note, the Conversion
Price of the Note shall be reduced to the Average Closing Price of the Common
Stock for the 50 consecutive Trading Days immediately preceding the date of
conversion. Notwithstanding any reduction of the Conversion Price pursuant to
this Section 6(b), a Price Protection Period shall end if the Average Closing
Price is equal to or greater than $2.50 (subject to adjustment in accordance
with Section 6(a)) and the Conversion Price shall return to $2.50.
Notwithstanding the foregoing, the Conversion Price shall not be reduced below
$1.50 (subject to adjustment in accordance with Section 6(a)).
(c) As used in this Section 6, Trading Day means, in the event
that the Common Stock is listed or admitted to trading on the New York Stock
Exchange (or any successor to such exchange), a day on which the New York
Stock Exchange (or such successor) is open for the transaction of business,
or, if the Common Stock is not listed or admitted to trading on such exchange,
a day on which the principal national securities exchange on which the Common
Stock is listed is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, a day on which any New York Stock Exchange member firm is open for
the transaction of business.
(d) As used in this Section 6, the Closing Price of the Company's
Common Stock shall be the last reported sale price as shown on the Composite
Tape of the New York Stock Exchange, or, in case no such reported sale price
is quoted on such day, the average of the reported closing bid and asked
prices on the New York Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on such exchange, the last reported sales price, or in
case no such reported sales price is quoted on such day, the average of the
reported closing bid and asked prices, on the principal national securities
exchange (including, for purposes hereof, the National Association of
Securities Dealers, Inc. National Market System) on which the Common Stock is
listed or admitted to trading, or, if it is not listed or admitted to trading
on any national securities exchange, the average of the high closing bid price
and the low closing asked price as reported on an inter-dealer quotation
system. In the absence of any available public quotations for the Common
Stock, the Board of Directors of the Company shall determine in good faith the
fair value of the Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Company.
7. Subordination.
(a) The Company irrevocably covenants and agrees, and the Holder
of this Note, by its acceptance thereof, irrevocably covenants and agrees,
that the payment of the principal of and interest on this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
to the prior payment and/or cancellation (as shall be appropriate) in full of
all Senior Indebtedness (as defined herein). The provisions of this Section 7
are made for the benefit of the holders of Senior Indebtedness, and such
holders shall, at any time, be entitled to enforce such provisions against the
Company or Noteholder. No holder of any Senior Indebtedness shall be deemed to
owe any fiduciary duty or any other obligation to any Holder of this Note now
or at any time hereafter. Notwithstanding anything herein contained to the
contrary, all the provisions of this Note shall, except as otherwise provided
herein, be subject to the provisions of this Section 7, so far as the same may
be applicable thereto.
(b) For purposes of this Section 7 (and subject to Section 2.07 of
the Securities Purchase Agreement), "Senior Indebtedness" shall mean any
indebtedness, liability or obligation, contingent or otherwise, other than
that arising pursuant to this Note, of the Company (any such indebtedness,
liability or obligation being hereinafter in this definition referred to as an
"Obligation") (i) which is created, assumed or incurred by the Company after
the date of this Note and which, when created, assumed or incurred, is
specifically designated by the Company as Senior Indebtedness for the purposes
hereof in the instrument creating or evidencing the Company's liability with
respect to such Obligations or (ii) any increases, guarantees, refundings,
renewals, rearrangements or extensions of and amendments, modifications and
supplements to any indebtedness, liability or obligation described in clause
(i) above.
9. No Assignment. This Note may not be assigned by the Payee
without the prior written consent of the Company.
10. Governing Law. This Note shall be construed in accordance
with, and governed by, the laws of the Commonwealth of Massachusetts as
applied to contracts made and to be performed entirely in the Commonwealth of
Massachusetts without regard to principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the Commonwealth of Massachusetts or any federal
court sitting in the Commonwealth of Massachusetts for purposes of any suit,
action or other proceeding arising out of this Note (and agrees not to
commence any action, suit or proceedings relating hereto except in such
courts). Each of the parties hereto agrees that service of any process,
summons, notice or document by U.S. registered mail at its address set forth
herein shall be effective service of process for any action, suit or
proceeding brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Note, which is
brought by or against it, in the courts of the Commonwealth of Massachusetts
or any federal court sitting in the Commonwealth of Massachusetts and hereby
further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
11. Adjustment of Interest Rate. No provision of this Note shall
require the payment of interest to the extent that receipt of any such payment
by the Company would be contrary to the provisions of law applicable to the
Company limiting the maximum amount of interest that may be charged to or
collected from the Company, and if any sum in excess of such maximum rate of
interest is paid or charged, the excess will be deemed to have been a
prepayment of principal of this Note when paid, without premium or penalty,
and all payments made thereafter will be appropriately applied to interest and
principal to give effect to such maximum rate, and after such application any
excess shall be immediately refunded to the Company.
PAMET SYSTEMS, INC.
By: _____________________________________
Name: David McKay
Title: President & CEO
Attested:
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT A TO PROMISSORY NOTE
[Form of Conversion Notice]
To Pamet Systems, Inc.:
The undersigned registered holder (the "Payee") of the Note in the
principal amount indicated below and bearing the certificate number indicated
below (the "Note"), hereby irrevocably exercises its right to convert the
principal amount of the Note indicated herein into shares of common stock, par
value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance
with the terms of the Note, and directs that the shares issuable and
deliverable upon such conversion together with a check in payment for
fractional shares, be issued and delivered to the Payee unless a different
name has been indicated below. If shares are to be issued in the name of a
person other than the Payee (such person being referred to as the
"Transferee"), the Note must be duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company and duly executed
by the undersigned, and the undersigned will pay all transfer taxes payable
with respect thereto. In addition, the Transferee must sign this notice. All
capitalized terms used in this notice and not otherwise defined shall have the
respective meanings ascribed to them in the Note.
The Payee, or in the event a Transferee shall receive the
Conversion Shares issued upon conversion of this Note, the Transferee, hereby
represents and warrants to the Company that (i) he has sufficient knowledge
and experience in financial and business matters to be capable of evaluating
the merits and risks of an investment in the Company, (ii) he is acquiring the
Conversion Shares for its own account for investment and not with a view to,
or for distribution or sale in connection with any public offering in
violation of the Securities Act of 1933, as amended (the "Securities Act"),
(iii) he understands that (x) the Conversion Shares will not have been
registered for sale under the Securities Act or qualified under applicable
state securities laws and may not be resold without registration under the
Securities Act and qualification under any applicable state securities law,
(y) such Conversion Shares will be issued to him pursuant to one or more
exemptions from the registration or qualification requirements of the
Securities Act and that the representations and warranties contained herein
are given with the intention that the Company may rely thereon for purposes of
claiming such exemptions and (z) the Conversion Shares shall contain a legend
substantially as set forth in Section 5(e) of the Note, (iv) he is an
"accredited investor" as defined in Section 501 of Regulation D promulgated
under the Securities Act, (v) he understands he must bear the economic risk of
Conversion Shares issued upon conversion of the Note for an indefinite period
of time as the Conversion Shares cannot be sold unless registered under the
Securities Act and any other applicable state securities laws or sold in a
transaction exempt from such registration thereunder and (vi) representatives
of the Company have (x) fully and satisfactorily answered any questions which
he deemed to ask concerning the Company and (y) furnished him with such
additional information and documents regarding the Company as he has
reasonably requested.
Principal amount of Note to be converted: $________________
Certificate Number of Note: __
Print name, address (including zip code) and social security or other taxpayer
identification number of the person in whose name the Common Stock will be
issued:
_________________________________
_________________________________
_________________________________
(Zip Code)
_________________________________
Social Security or other
Taxpayer Identification
Number
Dated:___________________________ _________________________________
Signature of Noteholder
Dated:___________________________ _________________________________
Signature of Transferee
<PAGE>
EXHIBIT 4.17
Warrant issued to William Bell 1993 Trust dated February 8, 1999
<PAGE>
No. LW-007
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on February 7, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a
Massachusetts corporation, hereby certifies that William James Bell 1993
Trust, a trust with its address at 10539 Bellagio Road, Los Angeles, CA 90077,
or its permitted assigns, is entitled to purchase from the Company, at any
time or from time to time commencing February 8, 1999, and prior to 5:00 P.M.,
Eastern Standard Time, on February 7, 2004, a total of one hundred thousand
(100,000) fully paid and nonassessable shares of Common Stock, par value $.01
per share, of the Company for an aggregate purchase price of Two Hundred Fifty
Thousand Dollars ($250,000) (computed on the basis of $2.50 per share).
(Hereinafter, (i) said Common Stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock," (ii) the shares of the Common
Stock purchasable hereunder are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable hereunder for the Warrant Shares is referred
to as the "Aggregate Warrant Price," (iv) the price payable hereunder for each
of the Warrant Shares is referred to as the "Per Share Warrant Price," (v)
this Warrant, and all warrants hereafter issued in exchange or substitution
for this Warrant are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder.") The number of Warrant Shares for
which this Warrant is exercisable is subject to adjustment as hereinafter
provided.
This Warrant is issued by the Company pursuant to the Securities
Purchase Agreement, dated as of the date hereof, among the Company and William
James Bell 1993 Trust (the "Securities Purchase Agreement"). Capitalized terms
used but not defined shall have the respective meanings ascribed to them in
the Securities Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part
from time to time, commencing February 8, 1999, and prior to 5:00 P.M.,
Eastern Standard Time, on February 7, 2004, by the Holder of this Warrant by
the surrender of this Warrant (with the subscription form at the end hereof
duly executed) at the address set forth in Subsection 9(a) hereof, together
with proper payment of the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall
be paid in cash by certified or official bank check payable to the order of
the Company.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which the
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above (an "Exercise Date"). At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates.
(d) If this Warrant is exercised in part, the Holder shall be
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of the Holder for the shares of the
Common Stock to which the Holder shall be entitled, and (b) deliver the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of the Warrant.
(e) No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Holder an amount in cash equal to such fraction multiplied by the fair
value of a share.
2. Reservation of Warrant Shares. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock as
from time to time shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make
a distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the number of Warrant Shares for which this Warrant may
be exercised shall be adjusted so that if the Holder surrendered this Warrant
for exercise after such action the Holder would be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which
he would have been entitled to receive had such Warrant been exercised
immediately prior to such action. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the Holder of this Warrant shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice
to the Holder of this Warrant promptly after such adjustment) shall determine
the allocation of the adjusted Per Share Warrant Price between or among shares
of such classes of capital stock or shares of Common Stock and other capital
stock.
(b) In case of any consolidation or merger to which the Company is
a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the holder shall have the right
thereafter to exercise this Warrant for the kind and amount of securities,
cash or other property which he would have owned or have been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had such Warrant been exercised immediately prior to the
effective date of such consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the conversion
of this Warrant. The above provisions of this subsection (b) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales or
conveyances. Notice of any such consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be made, shall be
mailed to the Holder not less than 30 days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or merger
for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares
issuable upon exercise of this Warrant, the Per Share Warrant Price shall be
adjusted by multiplying the Per Share Warrant Price in effect immediately
prior to such adjustment by a fraction the numerator of which is the aggregate
number of Warrant Shares for which this Warrant may be exercised immediately
prior to such adjustment and the denominator of which is the aggregate number
of Warrant Shares for which this Warrant may be exercised immediately after
such adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided
in this Warrant and upon any modification of the rights of the Holder of this
Warrant in accordance with this Section 3, the Company shall promptly prepare
a certificate of an officer of the Company, setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause a copy of such
certificate to be mailed to the Holder.
4. Per Share Warrant Price Protection.
(a) Subject to adjustment in accordance with Section 3, if at any
time, beginning April 1, 1999, the average of the Closing Prices (as defined
herein) of the Common Stock for any 50 consecutive Trading Days (as defined
herein) after April 1, 1999 (the "Average Closing Price") is less than $2.50
per share, then, so long as the Average Closing Price remains below $2.50 per
share (a "Price Protection Period"), upon the exercise of all or any part of
this Warrant, the Per Share Warrant Price shall be reduced to the Average
Closing Price of the Common Stock for the 50 consecutive Trading Days
immediately preceding the date of exercise. Notwithstanding any reduction of
the Per Share Warrant Price pursuant to this Section 4(a), a Price Protection
Period shall end if the Average Closing Price is equal to or greater than
$2.50 (subject to adjustment in accordance with Section 3) and the Per Share
Warrant Price shall return to $2.50. Notwithstanding the foregoing, the Per
Share Warrant Price shall not be reduced below $1.50 (subject to adjustment in
accordance with Section 3).
(b) In the event of any adjustment to the Per Share Warrant Price,
the number of Warrant Shares issuable upon exercise of this Warrant during the
relevant Price Protection Period shall be adjusted by multiplying the
aggregate number of Warrant Shares for which this Warrant may be exercised
immediately prior to such adjustment by a fraction the numerator of which is
the Per Share Warrant Price immediately prior to such adjustment and the
denominator of which is the Per Share Warrant Price immediately after such
adjustment.
(c) As used in this Section 4, Trading Day means, in the event
that the Common Stock is listed or admitted to trading on the New York Stock
Exchange (or any successor to such exchange), a day on which the New York
Stock Exchange (or such successor) is open for the transaction of business,
or, if the Common Stock is not listed or admitted to trading on such exchange,
a day on which the principal national securities exchange on which the Common
Stock is listed is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, a day on which any New York Stock Exchange member firm is open for
the transaction of business.
(d) As used in this Section 4, the Closing Price of the Company's
Common Stock shall be the last reported sale price as shown on the Composite
Tape of the New York Stock Exchange, or, in case no such reported sale price
is quoted on such day, the average of the reported closing bid and asked
prices on the New York Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on such exchange, the last reported sales price, or in
case no such reported sales price is quoted on such day, the average of the
reported closing bid and asked prices, on the principal national securities
exchange (including, for purposes hereof, the National Association of
Securities Dealers, Inc. National Market System) on which the Common Stock is
listed or admitted to trading, or, if it is not listed or admitted to trading
on any national securities exchange, the average of the high closing bid price
and the low closing asked price as reported on an inter-dealer quotation
system. In the absence of any available public quotations for the Common
Stock, the Board of Directors of the Company shall determine in good faith the
fair value of the Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Company.
5. Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock represented by each and every certificate for Warrant Shares
delivered on the proper exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 6(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor. The
Holder covenants and agrees that it shall pay, when due and payable, any and
all federal, state and local income or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor.
6. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state securities
laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of unless an exemption from such
registration is available. In the event the Holder desires to transfer this
Warrant or any of the Warrant Shares issued, the Holder must give the Company
prior written notice of such proposed transfer including the name and address
of the proposed transferee. Such transfer may be made only either (i) upon
publication by the Securities and Exchange Commission (the "Commission") of a
ruling, interpretation, opinion or "no action letter" based upon facts
presented to said Commission, or (ii) upon receipt by the Company of an
opinion of counsel acceptable to the Company to the effect that the proposed
transfer will not violate the provisions of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and
regulations promulgated under either such act, or to the effect that the
Warrant or Warrant Shares to be sold or transferred have been registered under
the Securities Act of 1933, as amended, and that there is in effect a current
prospectus meeting the requirements of Subsection 11(a) of the Securities Act,
which is being or will be delivered to the purchaser or transferee at or prior
to the time of delivery of the certificates evidencing the Warrant or Warrant
Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer
(including, without limitation, a transfer by will or pursuant to the laws of
descent and distribution), and as a condition thereto, if such transfer is not
made pursuant to an effective registration statement under the Securities Act,
the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (iii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iv)
an agreement by the transferee to indemnify the Company to the same extent as
set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands
the meaning and legal consequences of this Section 6, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage or
liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or
any other breach by the Holder of, this Warrant, (b) any transfer of the
Warrant or
(c) any untrue statement or omission to state any material fact in connection
with the investment representations or with respect to the facts and
representations supplied by the Holder to counsel to the Company upon which
its opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at
the office of its stock transfer agent, if any, with assignment documentation
duly executed and funds sufficient to pay any transfer tax, and upon
compliance with the foregoing provisions, the Company shall, without charge,
execute and deliver a new Warrant in the name of the assignee named in such
instrument of assignment, and this Warrant shall promptly be canceled. Any
assignment, transfer, pledge, hypothecation or other disposition of this
Warrant attempted contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon the Warrant, shall be
null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of
the Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the
face thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this
certificate have not been registered under the
Securities Act of 1933, as amended, and may not
be sold, offered for sale, assigned, transferred
or otherwise disposed of unless registered
pursuant to the provisions of that Act or an
opinion of counsel to the Company is obtained
stating that such disposition is in compliance
with an available exemption from such registration."
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.
9. Communication. No notice or other communication under this
Warrant shall be effective unless the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720,
or such other address as the Company has designated in writing to the Holder,
or
(b) the Holder at 10539 Bellagio Road, Los Angeles, CA 90077, or
such other address as the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the Commonwealth of Massachusetts
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant
to be signed by a duly authorized officer as of this ______ day of
____________, 1999.
ATTEST: PAMET SYSTEMS, INC.
_______________________ By:___________________________________
Name: David T. McKay
Title: President
<PAGE>
SUBSCRIPTION
The undersigned, __________________________________________,
pursuant to the provisions of the foregoing Warrant, hereby agrees to
subscribe for the purchase of _________________________ shares of the Common
Stock of PAMET SYSTEMS, INC. covered by said Warrant, and makes payment
therefor in full at the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns
and transfers unto _________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto
_________________________ the right to purchase _________________________
shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced hereby, and
does irrevocably constitute and appoint _________________________, attorney,
to transfer that part of said Warrant on the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address____________________________
____________________________
<PAGE>
EXHIBIT 4.18
Convertible Note issued to Stephen F. Wilder dated January 22, 1999
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of January 21, 1999 by and between PAMET SYSTEMS, INC., a
Massachusetts corporation whose principal place of business is 1000 Main
Street, Acton, Massachusetts 01720 (the "Company"), and Mr. Stephen F. Wilder
(the "Purchaser"), an individual with his address at Apartment 11E, 888
Eighth Avenue, New York, New York 10019.
WHEREAS, the Company is desirous of selling, and the Purchaser is
desirous of acquiring, (i) a convertible promissory note in substantially the
form attached hereto as Exhibit A in the principal amount of One Hundred
Thousand Dollars ($100,000) (the "Note") and (ii) a five-year warrant (the
"Warrant") in substantially the form attached hereto as Exhibit B to purchase
up to Forty Thousand (40,000) shares ("Warrant Shares") of the common stock,
par value $.01 per share (the "Common Stock"), of the Company (the Note and
the Warrant together sometimes hereinafter are referred to as the
"Securities"), on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the promises and of the
mutual obligations hereinafter set forth, and for such other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE NOTES AND WARRANTS; CLOSINGS
Section 1.01 Purchase and Sale of the Notes and Warrants.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company agrees to issue and sell to the Purchaser at the
Closing, and the Purchaser agrees to purchase from the Company at the
Closing, the Note and the Warrant for an aggregate purchase price of One
Hundred Thousand Dollars ($100,000) (the "Purchase Price").
(b) The exercise price per share of the Warrant and the
conversion price per share of the Note to be issued at the Closing shall
initially be set at Two Dollars and Fifty Cents ($2.50).
Section 1.02 Closing. The sale of the Securities by the Company to
the Purchaser shall take place on January 21, 1999 at the offices of the
Company or at such other place and time as may be agreed upon by the
Purchaser and the Company (the "Closing"). At the Closing, the Company shall
deliver to the Purchaser certificates evidencing the Securities against
payment of the Purchase Price for the Securities, by certified or official
bank check or wire transfer of immediately available funds to an account
designated by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees with, the
Purchaser, as of the date hereof and as of the date of each Closing, as
follows:
Section 2.01 Incorporation and Corporate Existence. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts and has all necessary corporate
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by the Company and to carry on the business of the
Company, as it is now being conducted.
Section 2.02 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company has taken all necessary
corporate action to authorize the execution, delivery and performance by it
of this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, and
assuming due execution and delivery of the Agreement by the Purchaser, this
Agreement constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency (including,
without limitation, all laws relating to fraudulent transfers), moratorium or
similar laws affecting creditors' rights and remedies generally, subject, as
to enforceability, to the effect of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law) and subject to the effect of applicable securities laws as to rights to
indemnification.
Section 2.03 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Company from performing any of its
material obligations under this Agreement and would not have a material
adverse effect on the Company; (ii) conflict with or violate the charter or
by-laws of the Company; or (iii) conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to the Company, except as would not prevent the Company from
performing any of its material obligations under this Agreement and would not
have a material adverse effect on the Company.
Section 2.04 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Company,
threatened, which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Company's ability to consummate the
transactions contemplated hereby.
Section 2.05 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to, and agrees with, the
Company, as of the date hereof and as of each Closing, as follows:
Section 3.01 Authority. The Purchaser has all necessary power and
authority to execute and deliver this Agreement, to purchase the Securities
from the Company and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and, and
assuming due authorization, execution and delivery of the Agreement by the
Company, this Agreement constitutes a legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), moratorium or similar laws affecting creditors' rights and
remedies generally, subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and subject to the effect of applicable
securities laws as to rights to indemnification.
Section 3.02 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of
this Agreement by the Purchaser will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Purchaser from performing any of its
material obligations under this Agreement; or (ii) except as would not
prevent the Purchaser from performing any of its material obligations under
this Agreement, conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Purchaser.
Section 3.03 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Purchaser,
threatened, which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
Section 3.04 Investment Purpose; Legend; Private Placement.
(a) The Purchaser is acquiring the Securities solely for the
purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
(b) The Purchaser acknowledges that neither the Securities nor
the Warrant Shares are registered under the Securities Act and that none of
the Securities or the Warrant Shares may be transferred or sold except
pursuant to the registration provisions of the Securities Act or pursuant to
an applicable exemption therefrom and subject to state securities laws and
regulations, as applicable. The Purchaser acknowledges that the certificates
evidencing the Securities and the Warrant Shares shall contain a legend
substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND SUCH SECURITIES MAY NOT BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH
ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Purchaser acknowledges that the Securities involve a
great deal of risk and that there is a limited or no market for the
Securities and the Warrant Shares. The Purchaser is able to (i) bear the
economic risk of the investment in the Company, (ii) afford a complete loss
of such investment, and (iii) hold indefinitely the Securities. In reaching
an informed decision to invest in the Company, the Purchaser has sufficient
information to evaluate the merits and risks of an investment in the
Securities of the Company. In that connection, (x) the Purchaser has received
(A) the Company's proxy statement, dated May 14, 1998, for the Company's 1998
annual meeting of stockholders, (B) the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997, as amended to date, and (C) the
Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 and (y) representatives of the
Company have (A) fully and satisfactorily answered any questions which duly
authorized representatives of the Purchaser desired to ask concerning the
Company, and (B) furnished the Purchaser with any additional information or
documents requested to verify the accuracy of or supplement any information
previously delivered to or discussed with duly authorized representatives of
the Purchaser.
(d) The address of the Purchaser set forth on page 1 of this
Agreement is the true and correct address of the Purchaser and the Purchaser
has no present intention of becoming a resident or domiciliary of any other
state or jurisdiction.
Section 3.05 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under
the Securities Act because (please check as appropriate):
[x] (a) the Purchaser is an individual whose net worth, either
individually or with his spouse, exceeds $1,000,000 on the
date hereof;
[ ] (b) the Purchaser is an individual whose individual income
exceeded $200,000 in each of the two previous years or whose
joint income with his spouse exceeded $300,000 in each of the
three previous years, and has a reasonable expectation of
reaching the same income level in the current year;
[ ] (c) the Purchaser is a corporation, partnership or Massachusetts
or similar business trust, not formed for the specific purpose of
acquiring the Securities, with total assets in excess of
$5,000,000; or
[ ] (d) the investor hereby certifies that it is an accredited
investor because it is an entity in which each of the equity
owners qualifies as an accredited investor under items (a), (b)
or (c) above.
Section 3.06 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
Section 3.07 No General Solicitation. The Securities were not offered
or sold by any form of general solicitation or general advertising.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Expenses. The Purchaser hereby agrees that all fees and
expenses incurred by the Purchaser in connection with this Agreement shall be
borne by the Purchaser, and the Company hereby agrees that all fees and
expenses incurred by the Company shall be borne by the Company, in each case
including without limitation all fees and expenses of such party's counsel
and accountants.
Section 4.02 Public Announcements. Except as required by law, neither
the Company nor the Purchaser shall make any public announcements in respect
of this Agreement or the transactions contemplated herein or otherwise
communicate with any news media without prior notification to the other
party.
Section 4.03 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution
and delivery of this Agreement, the Closings and any investigation at any
time made by or on behalf of either party hereto.
Section 4.04 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and supersedes any prior oral or written agreement between the
parties.
Section 4.05 No Third-Party Beneficiaries; Assignment. This Agreement
is for the sole benefit of and binding upon the parties hereto and their
permitted successors and assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of and be enforceable by the parties hereof and their respective
successors and assigns.
Section 4.06 Amendment. This Agreement may be amended or modified
only by an instrument in writing signed by the Company and the Purchaser.
Section 4.07 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
Section 4.08 Gender and Number; Headings. Whenever used in this
Agreement, the singular number shall include the plural, the plural the
singular, and the use of any gender shall be applicable to all genders. The
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement
Section 4.09 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth
of Massachusetts without giving effect to the principles of conflicts of laws
thereof. The Company and the Purchaser hereby consent to the jurisdiction of
the state and federal courts of the Commonwealth of Massachusetts for all
disputes arising under this Agreement.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above.
PAMET SYSTEMS, INC.
Attest:__________________________ By:_____________________________
Name: Name: David T. McKay
Title: Title: President & CEO
Corporate Seal
____________________________________
By:_____________________________
Name: Stephen F. Wilder
Title:
<PAGE>
No. L-007
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE
NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL
AMOUNT OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO
MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR
QUALIFIED THEREUNDER OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION
IS AVAILABLE.
CONVERTIBLE PROMISSORY NOTE
$100,000 Acton, Massachusetts
January 22, 1999
FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the
"Company"), hereby promises to pay to Mr. Stephen F. Wilder ("Payee"), an
individual with his address at Apartment 11E, 888 Eighth Avenue, New York, New
York 10019, the principal sum of One Hundred Thousand Dollars ($100,000), on
the dates and in the amounts hereinafter set forth. This Promissory Note is
issued by the Company pursuant to the Securities Purchase Agreement, dated as
of the date hereof, among the Company and Payee (the "Securities Purchase
Agreement"). Capitalized terms used but not defined shall have the respective
meanings ascribed to them in the Securities Purchase Agreement. This
Promissory Note is hereinafter referred to as this "Note."
1. Principal and Maturity Date. The principal amount of this Note
outstanding together with all accrued interest hereon shall be due and payable
on January 21, 2001 (the "Maturity Date").
2. Interest. The outstanding principal amount of this Note shall
accrue interest at the per annum rate of eleven percent (11.0%) through the
earlier of the date of repayment or conversion (in each case computed on the
basis of a 365 day year and actual days elapsed). Interest shall be payable in
full on the Maturity Date with respect to the principal amount of the Note
then outstanding. No interest shall be deemed to have accrued or be payable on
any portion of this Note which is Converted on or prior to the Maturity Date.
3. Prepayment. This Note may be prepaid, in whole or in part,
without penalty or premium upon not less than thirty (30) days prior written
notice from the Company to the Payee, at any time or from time to time. All
prepayments made on this Note shall be applied first to the payment of all
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of the payment. Prepayment, in
whole or in part, shall be noted in the accounting records of the Company.
4. General Payment Provisions. All payments or prepayments of
principal and interest and other sums due pursuant to this Note shall be made
by check payable to the Payee at the address set forth above or at such other
address as Payee shall have previously designated to the Company in writing
not later than two Business Days (as defined below) prior to the date on which
such payment becomes due.
If the due date of any payment under this Note would otherwise
fall on a day which is not a Business Day, such date will be extended to the
immediately succeeding Business Day and interest shall be payable at the rate
set forth herein for the period of the extension. The term "Business Day"
shall mean any day on which commercial banks in the State of New York are not
authorized or required to close.
5. Conversion; Prepayment.
(a) Conversion/Prepayment and Conversion Price. The Payee may,
subject to the terms and conditions of this Section 5, at any time, or from
time to time, exercise its right to convert this Note to Common Stock by
delivering a duly executed notice, in the form substantially similar to
Exhibit A hereto, of such intention to the Company (the "Conversion Notice");
provided, however, that if, and to the extent, this Note or any portion
thereof is called for prepayment, the holder may exercise its right to convert
to Common Stock such portion of this Note as was called for prepayment.
The Payee shall have the right, subject to the terms and
conditions of this Section 5, to, no more frequently than four times per annum
in the aggregate, convert all or any part of the principal amount then
outstanding under this Note (the "Note Amount"), in an amount not less than
$25,000 (or such lesser amount as may then be outstanding), into that number
of fully-paid and nonassessable shares of Common Stock (the "Conversion
Shares"), obtained by dividing the Note Amount or such portion thereof
presented for conversion by the Conversion Price. The "Conversion Price" shall
initially be $2.50 per share of Common Stock.
Upon a partial conversion or prepayment of this Note, the Company
shall execute and deliver to or on the order of the holder hereof, a new Note
or Notes of authorized denominations in principal amount equal to the
unconverted or unredeemed, as the case may be, portion of this Note.
(b) Issuance of Common Stock on Conversion. In order to effect the
conversion of this Note, the Payee shall deliver to the Company at its
principal office, this Note and a duly executed Conversion Notice; provided,
however, that if the Payee desires to convert the Note on the Maturity Date,
Payee shall notify the Company in writing of its intention to convert the Note
at least five (5) days prior to the Maturity Date. The date upon which the
Company receives the Conversion Notice, the Note and any other documentation
required under this Section 5 of this Note or the Conversion Notice shall be
referred to herein as the "Effective Date." Upon the Effective Date, this Note
(or portion thereof) shall be deemed converted into shares of Common Stock in
accordance with this Section 5, at which time the rights of the Payee with
respect to this Note and the amount so converted shall cease and, subject to
the following provisions of this paragraph, the person or persons entitled to
receive the shares of Common Stock upon conversion of this Note (or portion
thereof) shall be treated for all purposes as having become the record holder
or holders of such Common Stock. As promptly as practicable after the
Effective Date, the Company shall deliver or cause to be delivered to the
Payee, at the address set forth above or at such other address as the Payee
shall designate in writing, certificates representing the number of fully paid
and nonassessable shares of Common Stock into which this Note (or portion
thereof), shall be converted in accordance with the provisions of this Section
5. If this Note is called for prepayment it may be converted as provided
herein up to and including the close of business on the business day preceding
the date of prepayment.
No fractional shares of Common Stock shall be issued upon
conversion of this Note (or portion thereof). In lieu of any fractional share
of Common Stock which would otherwise be issuable upon conversion of this Note
(or portion thereof), the Company shall pay a cash adjustment in respect of
such fraction in an amount equal to such fraction multiplied by the Conversion
Price.
(c) Reserves. The Company covenants that it will at all times
reserve and keep available, free from pre-emptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of issue upon
conversion of this Note as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of this Note. The Company
covenants that all shares of Common Stock which shall be so issuable shall,
upon issuance, be duly and validly issued and fully paid and nonassessable.
The Company shall from time to time, in accordance with applicable law,
increase the authorized amount of its Common Stock if at any time the
authorized amount of its Common Stock remaining unissued shall not be
sufficient to permit the conversion of this Note at the time outstanding.
(d) Taxes Upon Conversion. The issuance of certificates for shares
of Common Stock upon the conversion of this Note shall be made without charge
to the converting noteholder for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names
of, or in such names as may be directed by, the holder of this Note; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate in a name other than that of the holder of this Note, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid; and provided,
further, that in no event shall the Company be required to pay or reimburse
the holder for any income tax payable by such holder as a result of such
issuance.
(e) Legends. All certificates representing Conversion Shares shall
bear a conspicuous legend stating in substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER
ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN
REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION
FROM REGISTRATION OR QUALIFICATION IS AVAILABLE."
The Company shall, upon the request of any holder of a stock certificate
representing Conversion Shares and the surrender of such certificate, issue a
new stock certificate without such legend if (i) the stock evidenced by such
certificate has been effectively registered under the Securities Act and
qualified under any applicable state securities law and sold by the holder
thereof in accordance with such registration and qualification or (ii) such
holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth
herein are no longer required or necessary under the Securities Act or any
applicable state law.
6. Subordination.
(a) The Company irrevocably covenants and agrees, and the Holder
of this Note, by its acceptance thereof, irrevocably covenants and agrees,
that the payment of the principal of and interest on this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
to the prior payment and/or cancellation (as shall be appropriate) in full of
all Senior Indebtedness (as defined herein). The provisions of this Section 6
are made for the benefit of the holders of Senior Indebtedness, and such
holders shall, at any time, be entitled to enforce such provisions against the
Company or Noteholder. No holder of any Senior Indebtedness shall be deemed to
owe any fiduciary duty or any other obligation to any Holder of this Note now
or at any time hereafter. Notwithstanding anything herein contained to the
contrary, all the provisions of this Note shall, except as otherwise provided
herein, be subject to the provisions of this Section 6, so far as the same may
be applicable thereto.
(b) For purposes of this Section 6 (and subject to Section 2.06 of
the Securities Purchase Agreement), "Senior Indebtedness" shall mean any
indebtedness, liability or obligation, contingent or otherwise, other than
that arising pursuant to this Note, of the Company (any such indebtedness,
liability or obligation being hereinafter in this definition referred to as an
"Obligation") (i) which is created, assumed or incurred by the Company after
the date of this Note and which, when created, assumed or incurred, is
specifically designated by the Company as Senior Indebtedness for the purposes
hereof in the instrument creating or evidencing the Company's liability with
respect to such Obligations or (ii) any increases, guarantees, refundings,
renewals, rearrangements or extensions of and amendments, modifications and
supplements to any indebtedness, liability or obligation described in clause
(i) above.
8. No Assignment. This Note may not be assigned by the Payee
without the prior written consent of the Company.
9. Governing Law. This Note shall be construed in accordance with,
and governed by, the laws of the Commonwealth of Massachusetts as applied to
contracts made and to be performed entirely in the Commonwealth of
Massachusetts without regard to principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the Commonwealth of Massachusetts or any federal
court sitting in the Commonwealth of Massachusetts for purposes of any suit,
action or other proceeding arising out of this Note (and agrees not to
commence any action, suit or proceedings relating hereto except in such
courts). Each of the parties hereto agrees that service of any process,
summons, notice or document by U.S. registered mail at its address set forth
herein shall be effective service of process for any action, suit or
proceeding brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Note, which is
brought by or against it, in the courts of the Commonwealth of Massachusetts
or any federal court sitting in the Commonwealth of Massachusetts and hereby
further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
10. Adjustment of Interest Rate. No provision of this Note shall
require the payment of interest to the extent that receipt of any such payment
by the Company would be contrary to the provisions of law applicable to the
Company limiting the maximum amount of interest that may be charged to or
collected from the Company, and if any sum in excess of such maximum rate of
interest is paid or charged, the excess will be deemed to have been a
prepayment of principal of this Note when paid, without premium or penalty,
and all payments made thereafter will be appropriately applied to interest and
principal to give effect to such maximum rate, and after such application any
excess shall be immediately refunded to the Company.
PAMET SYSTEMS, INC.
By: ____________________________________
Name: David T. McKay
Title: President & CEO
Attested:
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT A TO PROMISSORY NOTE
[Form of Conversion Notice]
To Pamet Systems, Inc.:
The undersigned registered holder (the "Payee") of the Note in the
principal amount indicated below and bearing the certificate number indicated
below (the "Note"), hereby irrevocably exercises its right to convert the
principal amount of the Note indicated herein into shares of common stock, par
value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance
with the terms of the Note, and directs that the shares issuable and
deliverable upon such conversion together with a check in payment for
fractional shares, be issued and delivered to the Payee unless a different
name has been indicated below. If shares are to be issued in the name of a
person other than the Payee (such person being referred to as the
"Transferee"), the Note must be duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company and duly executed
by the undersigned, and the undersigned will pay all transfer taxes payable
with respect thereto. In addition, the Transferee must sign this notice. All
capitalized terms used in this notice and not otherwise defined shall have the
respective meanings ascribed to them in the Note.
The Payee, or in the event a Transferee shall receive the
Conversion Shares issued upon conversion of this Note, the Transferee, hereby
represents and warrants to the Company that (i) he has sufficient knowledge
and experience in financial and business matters to be capable of evaluating
the merits and risks of an investment in the Company, (ii) he is acquiring the
Conversion Shares for its own account for investment and not with a view to,
or for distribution or sale in connection with any public offering in
violation of the Securities Act of 1933, as amended (the "Securities Act"),
(iii) he understands that (x) the Conversion Shares will not have been
registered for sale under the Securities Act or qualified under applicable
state securities laws and may not be resold without registration under the
Securities Act and qualification under any applicable state securities law,
(y) such Conversion Shares will be issued to him pursuant to one or more
exemptions from the registration or qualification requirements of the
Securities Act and that the representations and warranties contained herein
are given with the intention that the Company may rely thereon for purposes of
claiming such exemptions and (z) the Conversion Shares shall contain a legend
substantially as set forth in Section 5(e) of the Note, (iv) he is an
"accredited investor" as defined in Section 501 of Regulation D promulgated
under the Securities Act, (v) he understands he must bear the economic risk of
Conversion Shares issued upon conversion of the Note for an indefinite period
of time as the Conversion Shares cannot be sold unless registered under the
Securities Act and any other applicable state securities laws or sold in a
transaction exempt from such registration thereunder and (vi) representatives
of the Company have (x) fully and satisfactorily answered any questions which
he deemed to ask concerning the Company and (y) furnished him with such
additional information and documents regarding the Company as he has
reasonably requested.
Principal amount of Note to be converted: $________________
Certificate Number of Note: __
Print name, address (including zip code) and social security or other taxpayer
identification number of the person in whose name the Common Stock will be
issued:
_________________________________
_________________________________
_________________________________
(Zip Code)
_________________________________
Social Security or other
Taxpayer Identification
Number
Dated:___________________________ ___________________________________
Signature of Noteholder
Dated:___________________________ ___________________________________
Signature of Transferee
<PAGE>
EXHIBIT 4.19
Warrant issued to Stephen F. Wilder dated January 22, 1999
<PAGE>
LW - 007
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on January 21, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a
Massachusetts corporation, hereby certifies that Mr. Stephen F. Wilder, an
individual with his address at Apartment 11E, 888 Eighth Avenue, New York, New
York 10019, or his permitted assigns, is entitled to purchase from the
Company, at any time or from time to time commencing January 22, 1999, and
prior to 5:00 P.M., Eastern Standard Time, on January 21, 2004, a total of
Forty Thousand (40,000) fully paid and nonassessable shares of Common Stock,
par value $.01 per share, of the Company for an aggregate purchase price of
One Hundred Thousand Dollars ($100,000) (computed on the basis of $2.50 per
share). (Hereinafter, (i) said Common Stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares
of the Common Stock purchasable hereunder are referred to as the "Warrant
Shares," (iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price," (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Per Share
Warrant Price," (v) this Warrant, and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrant" and
(vi) the holder of this Warrant is referred to as the "Holder.") The number of
Warrant Shares for which this Warrant is exercisable is subject to adjustment
as hereinafter provided.
This Warrant is issued by the Company pursuant to the Securities
Purchase Agreement, dated as of the date hereof, among the Company and Mr.
Stephen F. Wilder (the "Securities Purchase Agreement"). Capitalized terms
used but not defined shall have the respective meanings ascribed to them in
the Securities Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part
from time to time, commencing January 22, 1999, and prior to 5:00 P.M.,
Eastern Standard Time, on January 21, 2004, by the Holder of this Warrant by
the surrender of this Warrant (with the subscription form at the end hereof
duly executed) at the address set forth in Subsection 9(a) hereof, together
with proper payment of the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall
be paid in cash by certified or official bank check payable to the order of
the Company.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which the
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above (an "Exercise Date"). At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates.
(d) If this Warrant is exercised in part, the Holder shall be
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of the Holder for the shares of the
Common Stock to which the Holder shall be entitled, and (b) deliver the
proportionate part thereof if this Warrant is exercised in part, pursuant to
the provisions of the Warrant.
(e) No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Holder an amount in cash equal to such fraction multiplied by the fair
value of a share.
2. Reservation of Warrant Shares. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock as
from time to time shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make
a distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the number of Warrant Shares for which this Warrant may
be exercised shall be adjusted so that if the Holder surrendered this Warrant
for exercise after such action the Holder would be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which
he would have been entitled to receive had such Warrant been exercised
immediately prior to such action. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the Holder of this Warrant shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice
to the Holder of this Warrant promptly after such adjustment) shall determine
the allocation of the adjusted Per Share Warrant Price between or among shares
of such classes of capital stock or shares of Common Stock and other capital
stock.
(b) In case of any consolidation or merger to which the Company is
a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the holder shall have the right
thereafter to exercise this Warrant for the kind and amount of securities,
cash or other property which he would have owned or have been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had such Warrant been exercised immediately prior to the
effective date of such consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the conversion
of this Warrant. The above provisions of this subsection (b) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales or
conveyances. Notice of any such consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be made, shall be
mailed to the Holder not less than 30 days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or merger
for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares
issuable upon exercise of this Warrant, the Per Share Warrant Price shall be
adjusted by multiplying the Per Share Warrant Price in effect immediately
prior to such adjustment by a fraction the numerator of which is the aggregate
number of Warrant Shares for which this Warrant may be exercised immediately
prior to such adjustment and the denominator of which is the aggregate number
of Warrant Shares for which this Warrant may be exercised immediately after
such adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided
in this Warrant and upon any modification of the rights of the Holder of this
Warrant in accordance with this Section 3, the Company shall promptly prepare
a certificate of an officer of the Company, setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause a copy of such
certificate to be mailed to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock represented by each and every certificate for Warrant Shares
delivered on the proper exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights, and the Company will take all such actions
as may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 5(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable
in respect of the issuance of any Warrant Shares or certificates therefor. The
Holder covenants and agrees that it shall pay, when due and payable, any and
all federal, state and local income or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state securities
laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of unless an exemption from such
registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only either (i) upon publication by the Securities
and Exchange Commission (the "Commission") of a ruling, interpretation,
opinion or "no action letter" based upon facts presented to said Commission,
or (ii) upon receipt by the Company of an opinion of counsel acceptable to the
Company to the effect that the proposed transfer will not violate the
provisions of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the rules and regulations promulgated under
either such act, or to the effect that the Warrant or Warrant Shares to be
sold or transferred have been registered under the Securities Act of 1933, as
amended, and that there is in effect a current prospectus meeting the
requirements of Subsection 11(a) of the Securities Act, which is being or will
be delivered to the purchaser or transferee at or prior to the time of
delivery of the certificates evidencing the Warrant or Warrant Shares to be
sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer
(including, without limitation, a transfer by will or pursuant to the laws of
descent and distribution), and as a condition thereto, if such transfer is not
made pursuant to an effective registration statement under the Securities Act,
the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (iii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iv)
an agreement by the transferee to indemnify the Company to the same extent as
set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands
the meaning and legal consequences of this Section 5, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage or
liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or
any other breach by the Holder of, this Warrant, (b) any transfer of the
Warrant or (c) any untrue statement or omission to state any material fact in
connection with the investment representations or with respect to the facts
and representations supplied by the Holder to counsel to the Company upon
which its opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at
the office of its stock transfer agent, if any, with assignment documentation
duly executed and funds sufficient to pay any transfer tax, and upon
compliance with the foregoing provisions, the Company shall, without charge,
execute and deliver a new Warrant in the name of the assignee named in such
instrument of assignment, and this Warrant shall promptly be canceled. Any
assignment, transfer, pledge, hypothecation or other disposition of this
Warrant attempted contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon the Warrant, shall be
null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of
the Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the
face thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this
certificate have not been registered under the
Securities Act of 1933, as amended, and may not
be sold, offered for sale, assigned, transferred
or otherwise disposed of unless registered pursuant
to the provisions of that Act or an opinion of
counsel to the Company is obtained stating that
such disposition is in compliance with an available
exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.
8. Communication. No notice or other communication under this
Warrant shall be effective unless the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720,
or such other address as the Company has designated in writing to the Holder,
or
(b) the Holder at the address contained in the first paragraph of
this Warrant, or such other address as the Holder has designated in writing to
the Company.
9. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the Commonwealth of Massachusetts
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed
by a duly authorized officer as of this 28th day of January, 1999.
ATTEST: PAMET SYSTEMS, INC.
_______________________ By:___________________________________
Name: David T. McKay
Title: President & CEO
<PAGE>
SUBSCRIPTION
The undersigned, __________________________________________,
pursuant to the provisions of the foregoing Warrant, hereby agrees to
subscribe for the purchase of _________________________ shares of the Common
Stock of PAMET SYSTEMS, INC. covered by said Warrant, and makes payment
therefor in full at the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns
and transfers unto _________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and
transfers unto _________________________ the right to purchase
_________________________ shares of the Common Stock of PAMET SYSTEMS, INC. by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced hereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer that part of said Warrant on
the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address____________________________
____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 93,051
<SECURITIES> 0
<RECEIVABLES> 291,349
<ALLOWANCES> 60,000
<INVENTORY> 59,575
<CURRENT-ASSETS> 511,882
<PP&E> 1,605,662
<DEPRECIATION> 673,003
<TOTAL-ASSETS> 1,731,313
<CURRENT-LIABILITIES> 2,197,783
<BONDS> 0
<COMMON> 25,487
0
0
<OTHER-SE> (1,870,272)
<TOTAL-LIABILITY-AND-EQUITY> 1,731,313
<SALES> 395,790
<TOTAL-REVENUES> 395,790
<CGS> 149,779
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 803,088
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,060
<INCOME-PRETAX> (631,137)
<INCOME-TAX> 0
<INCOME-CONTINUING> (631,137)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (631,137)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
