As filed with the Securities and Exchange Commission on June 5, 1996
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Access Solutions International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 3572 05-0426298
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
650 Ten Rod Road, North Kingstown, Rhode Island 02852 (401) 295-2691
(Address and telephone number of principal executive offices)
(Address of principal place of business or intended principal place of business)
------------------
CHRISTINE M. MARX, Esq.
Edwards & Angell
Three Gateway Center
Newark, New Jersey 07102
(201) 623-2626
(Name, address and telephone number of agent for service)
------------------
Please address a copy of all communications to:
RUBI FINKELSTEIN, Esq.
Orrick, Herrington & Sutcliffe
666 Fifth Avenue
New York, New York 10103
(212) 506-5000
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Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
<S> <C> <C>
Proposed Maximum
Title of Each Class of Securities to be Registered Aggregate Offering Amount of
Price (1) Registration Fee
- ----------------------------------------------------------------------- ------------------ ----------------
Units, each consisting of two shares of Common Stock, $ 9,200,003 $ 3,172
$.01 par value, and one Redeemable Common Stock Purchase
Warrant to purchase Common Stock (2)
- ------------------------------------------------------------------------ -------------------- ----------------
Common Stock included in Units - -
- ------------------------------------------------------------------------ -------------------- ----------------
Redeemable Common Stock Purchase Warrants included in Units - -
- ------------------------------------------------------------------------ -------------------- ----------------
Redeemable Common Stock Purchase Warrants issuable in $ 150,000 $ 52
exchange for bridge warrants
- ------------------------------------------------------------------------ -------------------- ----------------
Common Stock issuable upon exercise of Redeemable Common $ 9,883,335 $ 3,408
Stock Purchase Warrants
- ------------------------------------------------------------------------ -------------------- ----------------
Representative's Warrants $ 11 $ 0
- ------------------------------------------------------------------------ -------------------- ----------------
Units issuable upon exercise of Representative's Warrants $ 960,003 $ 331
- ------------------------------------------------------------------------ -------------------- ----------------
Common Stock included in Units issuable upon exercise of - -
Representative's Warrants
- ------------------------------------------------------------------------ -------------------- ----------------
Redeemable Common Stock Purchase Warrants included in Units issuable
upon exercise of Representative's Warrants $ - $ -
- ------------------------------------------------------------------------ -------------------- ----------------
Common Stock issuable upon exercise of Redeemable Common Stock $ 533,335 $ 184
Purchase Warrants
- ------------------------------------------------------------------------ -------------------- ----------------
Common Stock $ 375,000 $ 129
- ------------------------------------------------------------------------ -------------------- ----------------
Total $ 21,101,687 $ 7,276
======================================================================== ==================== ================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 160,000 Units which the Underwriters have the option to purchase
solely to cover over-allotments.
------------------
Pursuant to Rule 416, there are also being registered such additional
shares of Common Stock as may become issuable pursuant to anti-dilution
provisions of the Redeemable Common Stock Purchase Warrants and the
Representative's Warrant.
------------------
The registrant hereby amends this Registration Statement on such date as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 5, 1996
PROSPECTUS
- ----------
ACCESS SOLUTIONS INTERNATIONAL, INC.
1,066,667 UNITS
EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK
AND
ONE REDEEMABLE WARRANT
This Prospectus relates to an offering (the "Offering") of 1,066,667 Units
(the "Units"), each Unit consisting of two shares of common stock, $.01 par
value per share ("Common Stock"), and one redeemable common stock purchase
warrant ("Redeemable Warrant") of Access Solutions International, Inc., a
Delaware corporation (the "Company"). The shares of Common Stock and Redeemable
Warrants comprising the Units are separately tradable commencing upon issuance.
Each Redeemable Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an initial exercise price of $ ______ [66 2/3% of the
initial public offering price per Unit], subject to adjustment, at any time from
issuance until ___________________, 2001 [60 months after the date of this
Prospectus]. The Company shall have the right to redeem all, but not less than
all, of the Redeemable Warrants, commencing ____________, 1997 [12 months after
the date of this Prospectus] at a price of $.05 per Redeemable Warrant on 30
days' prior written notice, provided that the Company shall have obtained the
consent of Joseph Stevens & Company, L.P., the representative of the several
underwriters (the "Representative"), and the average closing bid price of the
Common Stock equals or exceeds 150% of the then exercise price per share,
subject to adjustment, for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. See "Description of Securities -- Redeemable Warrants."
Prior to the Offering, there has been no public market for the Units, the
Common Stock or the Redeemable Warrants, and there can be no assurance that such
a market will develop after the completion of the Offering or, if developed,
that it will be sustained. It is currently anticipated that the initial public
offering price will be $7.50 per Unit. The offering price of the Units and the
exercise price and other terms of the Redeemable Warrants were determined by
negotiation between the Company and the Representative and are not necessarily
related to the Company's asset or book values, results of operations or any
other established criteria of value.
(continued on the following page)
<PAGE>
See "Risk Factors," "Description of Securities" and "Underwriting." The Company
has applied to include the Units, the Common Stock and the Redeemable Warrants
on the Nasdaq SmallCap Market ("Nasdaq") under the symbols "ASICU," "ASIC" and
"ASICW," respectively, and on the Boston Stock Exchange ("BSE") under the
symbols "__________," "__________" and "____________," respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" LOCATED ON PAGE ____ AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATES SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Public Underwriting Discounts (1) Proceeds to Company (2)
--------------- ------------------------- -----------------------
Per Unit $ $ $
- ----------- --------------- ------------------------- -----------------------
Total (3) $ $ $
- ----------- --------------- ------------------------- -----------------------
(1) Does not include additional compensation payable to the Representative in
the form of a non-accountable expense allowance. In addition, see
"Underwriting" for information concerning indemnification and contribution
arrangements with the Underwriters and other compensation payable to the
Representative.
(2) Before deducting estimated expenses of $_____ payable by the Company,
including the Representative's non-accountable expense allowance.
(3) The Company has granted to the Underwriters an option (the "Over-Allotment
Option"), exercisable for a period of 45 days after the date of this
Prospectus, to purchase up to 160,000 additional Units upon the same terms
and conditions set forth above, solely to cover over-allotments, if any. If
the Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Proceeds to Company will be $__________,
$___________ and $__________, respectively. See "Underwriting."
The Units are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by their counsel and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify the
Offering and to reject any order in whole or in part. It is expected that
delivery of the Units offered hereby will be made against payment, at the
offices of' Joseph Stevens & Company, L.P., New York, New York, on or about
________________, 1996.
JOSEPH STEVENS & COMPANY, L.P.
The date of this Prospectus is ______________, 1996.
<PAGE>
(continued from cover page)
This Prospectus also relates to 750,000 Redeemable Warrants (the "Selling
Securityholder Warrants") and 750,000 shares of Common Stock (the "Selling
Securityholder Shares") issuable upon exercise of the Selling Securityholder
Warrants. The Selling Securityholder Warrants will be issued at the consummation
of the Offering to certain security holders (the "Selling Securityholders") upon
the automatic conversion of certain warrants (the "Bridge Warrants ") issued to
the Selling Securityholders in a private financing consummated in May 1996 (the
"Bridge Financing"). Neither the Selling Securityholder Warrants nor the Selling
Securityholder Shares may be sold for a period of eighteen (18) months from the
effective date of the Registration Statement without the prior written consent
of the Representative. The Selling Securityholder Warrants and the Selling
Securityholder Shares are not being underwritten in the Offering. The Company
will not receive any proceeds from the sale of the Selling Securityholder
Warrants or the Selling Securityholder Shares by the holders thereof, although
the Company will receive proceeds from the exercise, if any, of the Selling
Securityholder Warrants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," "The
Company -- Recent Bridge Financing" and "Selling Securityholders."
In addition, this Prospectus relates to 100,000 shares of Common Stock
beneficially owned by adult children of the Company's President and Chief
Executive Officer (the "Selling Shareholders"). The shares of Common Stock held
by the Selling Shareholders are not being underwritten in the Offering. The
shares of Common Stock held by the Selling Shareholders may not be sold for a
period of eighteen (18) months from the effective date of the Registration
Statement without the prior written consent of the Representative. The Company
will not receive any proceeds from the sale of the Common Stock held by the
Selling Shareholders. The expenses of the concurrent offering by the Selling
Securityholders and the Selling Shareholders (collectively referred to herein as
the "Holders") will be paid by the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Selling Securityholders."
<PAGE>
[PHOTOGRAPHS]
The Company intends to furnish to the registered holders of the Units,
Common Stock and Redeemable Warrants, annual reports containing financial
statements audited by its independent accounting firm.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE BOSTON STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. In January 1996, the Company effected a one-to-74
reverse stock split (the "reverse stock split") of the Company's Common Stock.
Except as otherwise noted, all information in this Prospectus: (i) gives effect
to the reverse stock split; (ii) assumes no exercise of the Underwriters'
over-allotment option; (iii) assumes no exercise of the Bridge Warrants; (iv)
assumes no exercise of the Redeemable Warrants included in the Units; (v)
assumes no exercise of the Redeemable Warrants to be exchanged at the
consummation of the Offering for the Bridge Warrants; and (vi) assumes no
exercise of the Representative's Warrants. Investors should carefully consider
the information set forth under the heading "Risk Factors."
The Company
Access Solutions International, Inc. (the "Company") develops, assembles,
sells and services optical data storage systems consisting of integrated
computer hardware and software for the archival storage and retrieval of massive
quantities of computer-generated information. The Company believes that its
proprietary computer output to laser disk ("COLD") data storage systems provide
a faster, more reliable and more economical method of storing vast quantities of
computer-generated data than is generally available from other COLD systems or
from traditional data storage methods. The Company's optical data storage
systems, which are marketed under the brand names OAS, ODSM and GIGAPAGE, are
sold principally to large organizations that need to store and retrieve large
quantities of computer-generated data. Currently, COLD systems developed and
manufactured by the Company are used by companies such as Pershing Securities, a
division of Donaldson Lufkin & Jenrette Inc., Securities Industry Automation
Corporation, Policy Management Systems Corporation and Nationwide Mutual
Insurance Company.
The Company's optical data storage systems consist of both hardware and
software products. The hardware component of the systems is the Optical
Archiving System ("OAS") which consists of an optical disk robotic autochanger
and a controller that commands the robotic autochanger to automatically mount
and dismount optical disks in response to instructions received from data
storage and retrieval software. The software components of the Company's systems
include a systems level "driver" and an end-user application software for report
storage and retrieval. The driver is a software module that communicates with an
external device such as a disk or tape drive, thereby allowing the OAS to be
used with software designed for use with IBM-compatible tape drives and robotic
tape mounting systems.
When the Company's application software products are integrated with the
OAS, the Company believes that several technological and competitive advantages
are achieved. As compared with other COLD systems, the Company's patented
directory structure and hardware data compression capability enables more data
to be stored on, and retrieved faster from, an optical disk, thereby maximizing
the performance of the user's system while reducing the cost of storage. The
Company's integrated COLD systems also enable a user to display a retrieved
document or report based upon criteria established by the user. Additionally,
the Company's integrated COLD systems allow data written to an optical disk by
one computer to be read on any other OAS-equipped computer, regardless of
whether such computer is a mainframe, minicomputer or workstation. This feature
protects the user's investment in stored data and allows data to be interchanged
with satellite data centers.
Business organizations need to archive data for a number of reasons,
including compliance with governmental regulations, retention of historical
records and maintenance of strategically valuable historical business
information. The widespread use of computers has resulted in exponential growth
in the amount of data that must be economically archived and stored while
remaining readily accessible for retrieval. In the past, organizations have
attempted to solve this problem by using one or more of four traditionally
available data storage and retrieval alternatives: magnetic disk; paper;
magnetic tape; and computer output microfiche or microfilm ("COM"). Each of
these traditional storage methods has inherent disadvantages as an archival
storage medium. Magnetic disk is expensive and subject to failure. Paper is
manually cumbersome, bulky and an expensive means of long-term storage. Magnetic
tape provides response times as long as 15 minutes when storing or retrieving
data even when mounting is automated using robotics. COM is cumbersome to access
and time consuming to generate. The storage alternatives of paper, magnetic tape
and COM have nonetheless been used for archiving because of the high cost of the
most popular storage method: magnetic disk (in IBM mainframe terminology, direct
access storage devices ("DASD")). The Company's COLD storage system is an
alternative system which permits the storage of data in a less expensive manner
than with DASD, paper or COM while allowing for quicker retrieval of such data
than is possible with magnetic tape, paper or COM.
The market for COLD storage systems is segmented into the mainframe, PC
(stand-alone or LAN-based), client/server and CD-ROM markets. To expand its
market penetration beyond the IBM-compatible mainframe market segment in which
it currently competes, the Company intends to develop enhancements to its
application software products and further develop certain software products for
use in other COLD systems market segments.
Business organizations that are subject to government regulation of data
retention are the primary prospects for purchases of the Company's products.
According to a 1994 industry report published by Frost & Sullivan, the estimated
aggregate sales of COLD systems in all market segments are projected to reach
approximately $333.9 million, $693.8 million and $986.9 million in l996, l997
and l998, respectively, and the average annual growth rate in all market
segments of the number of COLD system units sold was projected to be
approximately 48% during the period from l994 to l998. Additionally, the report
forecasted that total product and service revenue in the mainframe segment of
the COLD systems market will be approximately $118.7 million, $120.7 million and
$124.7 million in 1996, 1997 and 1998, respectively.
The Company's objective is to become a leading provider of COLD systems. To
achieve this objective, the Company is pursuing a business strategy that
includes the following principal elements:
Identify and Pursue Customers With Multiple CPUs and Massive Document
Storage and Retrieval Requirements. By targeting its sales and marketing efforts
towards large business entities equipped with mainframe computers, the Company
believes it can maximize its opportunities to encourage the purchase and use of
its COLD systems.
Establish Strategic Alliances. The Company believes that the establishment
of collaborative relationships with certain software companies which produce
complementary products will enable the Company to more effectively market its
products and gain greater access and credibility with prospective customers.
Develop a Network of International Resellers. The Company is developing a
network of international resellers that will enable it to pursue opportunities
arising in the international COLD systems market. The Company believes that the
size of the international COLD systems market is equal to or larger than the
domestic COLD systems market.
Exploit Opportunities in Growth Segments of the COLD Systems Market.
Recognizing that significant opportunities are expected to develop in the
client/server segment of the COLD systems market, the Company intends to further
develop certain of its software products in an open architecture multiplatform
implementation. The Company anticipates such development will enable it to
penetrate the client/server market segment.
The Offering
Securities offered by the Company: 1,066,667 Units, each Unit consisting of two
shares of Common Stock and one Redeemable
Warrant. The Common Stock and the Redeemable
Warrants will be detachable and separately
transferable immediately upon issuance. Each
Redeemable Warrant entitles the holder
thereof to purchase one share of Common Stock
at an initial exercise price of $_______ [66
2/3% of the initial public offering price per
Unit], subject to adjustment, from the date
of issuance until ________, 2001 [60 months
after the date of this Prospectus].
Commencing 12 months from the date of this
Prospectus, the Company shall have the right
at any time to redeem all, but not less than
all, of the Redeemable Warrants at a
redemption price of $.05 per Redeemable
Warrant, on 30 days' prior written notice,
provided that (i) the average closing bid
price of the Common Stock for any 20 trading
days within a period of 30 consecutive
trading days ending on the fifth trading day
prior to the date of the notice of
redemption, equals or exceeds 150% of the
then exercise price per share, subject to
adjustment, and (ii) the Company shall have
obtained the written consent of the
Representative. See "Description of
Securities."
Securities offered by Selling
Securityholders and Selling
Shareholders: 750,000 Redeemable Warrants, which will be
issued to the Selling Securityholders upon
the automatic conversion of the Bridge
Warrants, an aggregate of 750,000 shares of
Common Stock issuable upon exercise of such
Redeemable Warrants and 100,000 shares of
Common Stock which are held by the Selling
Shareholders (collectively, the "Concurrent
Offering"). The Redeemable Warrants and the
shares of Common Stock being registered for
the account of the Holders at the Company's
expense are not being underwritten in the
Offering, but may be offered for resale at
any time on or after the date hereof by the
Selling Securityholders and Selling
Shareholders. The Company will not receive
any proceeds from the sale of these
securities, although it will receive proceeds
from the exercise, if any, of the Redeemable
Warrants. See "Selling Securityholders."
Common Stock Outstanding
before the Offering: 1,510,606 shares (1)
Common Stock to be
outstanding after the Offering: 3,643,940 shares (1)
Redeemable Warrants to be
Outstanding after the Offering: 1,816,667(2)
Use of Proceeds: The net proceeds will be used for: (i)
repayment of indebtedness, including
indebtedness in the principal amount of
$1,500,000 incurred in connection with the
Bridge Financing; (ii) research and
development expenses in the approximate
amount of $1,650,000 to be incurred in
connection with the development of a
multi-platform, device independent, user
transparent modular software package with a
client/server interface and external
contracting of software enhancements; (iii)
approximately $2,000,000 for the development
of a client/server product; (iv)
approximately $500,000 to further develop and
enhance the Company's sales and marketing
departments; and (v) general corporate
purposes.
Proposed Trading Symbols:
NASDAQ SmallCap Market Units: ASICU
Common Stock: ASIC
Redeemable Warrants: ASICW
Boston Stock Exchange Units:
Common Stock:
Redeemable Warrants:
(1) Excludes 214,189 shares of Common Stock reserved for issuance pursuant to
the Company's 1987 Stock Option and Purchase Plan (the "1987 Plan"), the
Company's 1994 Stock Option Plan (the "1994 Employee Plan"), a stock option
plan for non-employee directors (the "1994 Directors' Plan"), the Company's
1996 Stock Option Plan (the "1996 Plan") and certain non-plan options.
Options to purchase an aggregate of 10,112 shares of Common Stock at
exercise prices ranging from $74 to $400 per share are outstanding as of
May 1, 1996. Upon consummation of the Offering, the exercise price of the
outstanding options will be reduced to a price equal to the initial public
offering price of each share of Common Stock included in the Units
(assuming that the public offering price is attributed solely to the shares
of Common Stock included in the Units). See "Management -- Executive
Compensation -- Stock Option Plans" and "-- Non-Plan Options."
(2) Includes 750,000 New Warrants.
<PAGE>
Summary Financial Information
The summary financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements, the notes thereto and other financial
and statistical information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
June 30, March 31,
------------------------------- -------------------------
1994 1995 1995 1996
---- ---- ---- ----
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales
Products.................................... $ 519 $ 3,126 $ 2,111 $ 1,178
Services.................................... 358 476 301 440
---------- ----------- ---------- ------------
Total net sales.......................... 877 3,602 2,412 1,618
Cost of sales.................................. 504 1,300 875 515
---------- ----------- ---------- ------------
Gross profit................................... 373 2,302 1,537 1,103
Operating expenses............................. 2,796 4,681 3,089 4,462(3)
---------- ----------- ---------- ------------
Loss from operations........................... (2,423) (2,379) (1,552) (3,359)
Interest expense, net.......................... 47 92 70 156
---------- ----------- ---------- ------------
Loss before extraordinary gain................. (2,470) (2,471) (1,622) (3,515)
Extraordinary gain on debt restructuring....... - - - 320
---------- ----------- ---------- ------------
Net loss....................................... $ (2,470) $ (2,471) $ ( 1,622) $ (3,195)
========== =========== ========== ============
Net loss applicable to common stock:
Net loss..................................... $ (2,470) $ (2,471) $ (1,622) $ (3,195)
Accrued dividends on preferred stock......... - (88) (41) (109)
---------- ----------- ---------- ------------
$ (2,470) $ (2,559) $ (1,663) $ (3,304)
========== =========== ========== ============
Net loss per common share:
Loss before extraordinary item............... $ (1.10) $ (1.14) $ (.74) $ (1.61)
Extraordinary item........................... - - - .14
---------- ----------- ---------- ------------
$ (1.10) $ (1.14) $ (.74) $ (1.47)
========== =========== ========== ============
Weighted average shares of Common Stock (1).... 2,236,087 2,250,259 2,249,946 2,254,241
</TABLE>
<TABLE>
<CAPTION>
June 30, March 31, 1996
--------------------------- --------------------------
1994 1995 Actual As Adjusted (2)
---- ---- ------ ---------------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency)................... $ (630) $ (625) (1,012) 5,313
Total assets................................... 1,628 2,527 1,979 8,219
Total liabilities.............................. 1,695 2,353 2,161 2,076
Total stockholders' equity (deficit)........... (67) (1,914) (182) 6,143
</TABLE>
- ---------------------------
(1) Computed using the weighted average number of shares of Common Stock
outstanding during the period and other potentially dilutive instruments
issued at prices below the assumed initial public offering price during the
twelve month period prior to the date of effectiveness of the Registration
Statement of which this Prospectus forms a part. See Note 1 to the
Financial Statements.
(2) Adjusted to reflect (i) the receipt and initial application of the net
proceeds from the Offering, (ii) the initial application of such net
proceeds as described herein, including recognition of non-recurring
interest expense of $150,000 for the unamortized portion of the original
issue discount relating to the repayment of the Bridge Notes as defined
herein. See "The Company", "Use of Proceeds" and "Capitalization."
(3) Includes $744,000 of compensation expense for an officer, including
$424,830 of non-cash expenses associated with the fair value of the stock
issued.
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the
securities offered hereby.
Working Capital Deficiencies; History of Losses; Accumulated Deficit; Going
Concern Opinion. The Company has a history of limited working capital and has
had working capital deficiencies in each of the fiscal years ended June 30, 1994
and 1995 and for the nine months ended March 31, 1996. As of June 30, 1994, June
30, 1995 and March 31, 1996, the Company had working capital deficiencies of
approximately $630,000, $625,000 and $1,012,000, respectively. In addition,
except for the fiscal years ended June 30, 1989, 1990 and 1991, the Company has
incurred net losses since its incorporation in 1986. For the fiscal years ended
June 30, 1994 and 1995 and for the nine months ended March 31, 1995 and 1996,
the Company incurred net losses of approximately $2,500,000, $2,600,000,
$1,700,000, and $3,300,000, respectively. There can be no assurance that the
Company's operations will achieve profitability at any time in the future or, if
achieved, sustain such profitability. Although the Company has Federal and state
net operating loss carryforwards of approximately $4,900,000 available as of
March 31, 1996 and expected to be utilized to reduce future taxable income
generated within the carryforward period, due to various limitations imposed by
the Internal Revenue Service, management estimates that the utilization of such
losses will be limited to no more than $330,000 per year. See Note 8 to the
Financial Statements. As of March 31, 1996, the Company had an accumulated
deficit of $10,629,182. The Company's independent auditors have included an
explanatory paragraph in their report dated June 3, 1996 on the Company's
Financial Statements stating that the financial statements have been prepared
based on the assumption that the Company will continue as a going concern and
that the Company has suffered recurring losses from operations and has a working
capital deficiency that raises substantial doubt about its ability to continue
as a going concern. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and notes
thereto.
Future Capital Needs; Uncertainty of Additional Funding. Based on its
current operating plan, the Company anticipates that its existing capital
resources together with the proceeds of this Offering will be adequate to
satisfy its capital requirements for a period of at least twelve months from the
date of this Prospectus. Thereafter, additional financing will be necessary for
the continued support of the Company's products. Historically, the Company has
been dependent upon debt and equity financing from its affiliates. There can be
no assurance that the Company's affiliates will continue to make debt or equity
financing available to the Company. A portion of the proceeds of the Offering
will be used to repay certain indebtedness to Malcolm G. Chace, III, a director
and principal stockholder. See "Use of Proceeds" and "The Company -- Recent
Bridge Financing." Additional financing may be either equity, debt or a
combination of debt and equity. An equity financing could result in dilution in
the Company's net tangible book value per share of Common Stock. There can be no
assurance that the Company will be able to secure additional debt or equity
financing or that such financing will be available on favorable terms. In
addition, the Company has agreed not to sell or offer for sale any of its
securities for a period of 18 months following the effective date of this
Registration Statement without the consent of the Representative. If the Company
is unable to obtain such additional financing, the Company's ability to repay
its debts and its ability to maintain its current level of operations will be
materially and adversely affected. In such event, the Company will be required
to reduce its overall expenditures, including its research and development
activity, and may default on its obligations. See "Business," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Securities Eligible for Future Sale."
Variable Operating Results; Lengthy Sales Cycles. The Company's operating
results have in the past and may in the future fluctuate significantly depending
upon a variety of factors which vary substantially over time, including industry
conditions; the timing of orders from customers; the timing of new product
introductions by the Company and competitors; customer acceleration,
cancellation or delay of shipments; the length of sales cycles; the level and
timing of selling, general and administrative expenses and research and
development expenses; specific feature needs of customers; and production
delays. A substantial portion of the Company's quarterly revenues are derived
from the sale of a relatively small number of COLD systems which range in price
from approximately $150,000 to $900,000. As a result, the timing of recognition
of revenue from a single order has in the past and may in the future have a
significant impact on the Company's net sales and operating results for
particular financial periods. The decision to purchase a COLD system from the
Company involves a significant commitment of capital by the Company's customers
and generally the consent of a number of internal decision-makers. Therefore,
there are frequently lengthy periods of time between the initiation of customer
contact by the Company and the closing of a sale of the Company's products.
During the lengthy sales cycle for the Company's products, the Company may
expend substantial funds and management effort in anticipation of a sale which
may not occur. These expenditures will adversely affect the Company's revenues
and results of operations.
Dependence on Principal Product. The Company currently derives
substantially all of its revenues from sales of its COLD systems and related
software products and maintenance services. As a result, any factor adversely
affecting sales of the COLD systems would have a material adverse effect on the
Company. The Company's future financial performance will depend in part on its
ability to successfully develop and introduce new and enhanced versions of the
COLD systems and other products. There can be no assurance of the Company's
ability to develop or introduce such systems or products. See "Business --
Products."
Rapid Technological Change; Product Development. The market for the
Company's products is characterized by rapid technological developments,
evolving industry standards, swift changes in customer requirements and frequent
new product introductions and enhancements. The Company currently devotes and
intends to continue to devote substantial resources to research and development
to enhance product features and the Company's proprietary technology and
knowledge. The Company's continued success will be dependent upon its ability to
continue to enhance its existing products and to develop and introduce in a
timely manner new products incorporating technological advances and responding
to customer requirements. To the extent one or more of the Company's competitors
introduces products that more fully address customer requirements, the Company's
business could be adversely affected. There can be no assurance that the Company
will be successful in developing and marketing enhancements to its existing
products or new products on a timely basis or that any new or enhanced products
will adequately address the changing needs of the marketplace. If the Company is
unable to develop and introduce new products or enhancements to existing
products in a timely manner in response to changing market conditions or
customer requirements, the Company's business and operating results could be
adversely affected. From time to time, the Company or its competitors may
announce new products, capabilities or technologies that have the potential to
replace or shorten the life cycles of the Company's existing products. There can
be no assurance that announcements of currently planned or other new products
will not cause customers to delay their purchasing decisions in anticipation of
such products. Such delay could have a material adverse effect on the Company's
business and operating results.
Reliance on Single or Limited Sources of Supply. The Company relies on
single or limited sources for the supply of several components of its products,
including optical disk storage libraries, CPU boards, fiber optic channel
hardware and high-density integrated circuits. The Company does not maintain
supply commitments with any of its suppliers. The loss of any such source, any
disruption in such source's business or failure by it to meet the Company's
needs on a timely basis could cause shortages in component parts and could have
a material adverse effect on the Company's operations. See "Business --
Manufacturing."
Competition. The computer data storage and retrieval market is highly
competitive and the Company expects such competition to intensify. Certain
competitors of the Company have substantially greater financial, marketing,
development, technological and production resources than the Company. The
Company's major competitors in the COLD systems market include IBM Corporation,
FileTek Corporation, Data/Ware Corporation and Network Imaging Systems Corp. The
Company believes that the competitive factors affecting the market of its
products and services include vendor and product reputation, system features,
product quality, performance and price, as well as the quality of customer
support services and training. The relative importance of each of these factors
depends upon the specific customer involved. There can be no assurance that the
Company will be able to compete successfully in all or any of these areas
against current or future competitors. Moreover, the Company's present or future
competitors may be able to develop products comparable or superior to those
offered by the Company, offer lower price products or adapt more quickly than
the Company to new technologies or evolving customer requirements. In order to
be successful in the future, the Company must respond to technological change,
customer requirements and competitors' current products and innovations. There
can be no assurance that the Company will be able to continue to compete
effectively in its present market segment, in any new market segment into which
the Company may expand, or that future competition will not have a material
adverse effect on its business, operating results and financial condition. See
"Business -- Competition."
Ability to Manage Growth. As part of its business strategy, the Company
intends to continue to expand its research and development and its sales
operations. This strategy will require expanded customer services and support,
increased personnel throughout the Company, expanded operational and financial
systems and implementation of new control procedures. There can be no assurance
that the Company will be able to attract qualified personnel or successfully
manage expanded operations. Competition for technical personnel in the Company's
industry is intense. As the Company expands, it may from time to time experience
constraints that will adversely affect its ability to satisfy customer demand in
a timely fashion or to provide consistent levels of support to existing
customers. There can be no assurance that the Company will anticipate all of the
changing demands that expansion may place on the Company's operational,
management and financial systems and controls or that the Company will be able
to continue to improve such systems and controls. If the Company's management is
unable to manage growth effectively, the Company's business, results of
operations, financial condition and liquidity could be materially and adversely
affected.
Dependence on Significant Customers. Historically, the Company has sold its
products to a relatively small number of significant customers. Sales to
Prudential Securities Incorporated, Security Industry Automation Corporation,
Chevron Information Technologies, Inc., Korea Computer Technology, and Nomura
Research Institute of America, Inc. accounted for 21%, 20%, 19%, 9% and 9%,
respectively, of the Company's total net sales in the nine month period ended
March 31, 1995. Sales to Nationwide Mutual Insurance Company, Bank of Boston
Corporation Technology Services, and Bell SYGMA Systems Management, Inc.
accounted for 42%, 24% and 12%, respectively, of the Company's total net sales
in the nine month period ended March 31, 1996. During the year ended June 30,
1994, sales to Bank of Boston Corporation Technology Services, MCI, and ARC
Professional Services Group accounted for 38%, 25% and 12%, respectively, of the
Company's total net sales. Sales to Bank of Boston Corporation Technology
Services, Chevron Information Technologies, Inc., Securities Industry Automation
Corporation, Prudential Securities Incorporated, and Bell SYGMA Systems
Management, Inc. accounted for 18%, 16%, 15%, 14% and 10%, respectively, of the
total net sales for the year ended June 30, 1995. The loss of any one of these
significant customers or the inability of the Company to attract new customers
could have a material adverse effect on the Company's operations and financial
condition. See "Business -- Customers."
Dependence on Key Personnel. The success of the Company will depend
significantly upon the personal efforts and abilities of its key employees,
particularly Christopher Neefus, Vice President-Sales, and George H. Steele,
Vice President-Product Marketing. The Company does not have employment contracts
with Mr. Neefus, Mr. Steele or with Hector D. Wiltshire, President and Chief
Executive Officer, nor does the Company maintain key person life insurance
policies on any personnel. Mr. Wiltshire was retained in January 1996 on an
interim basis to effect a restructuring of the Company's operations and
financial condition, to evaluate the Company's technology and to manage and
oversee the Company's research and development efforts. The Company anticipates
that Mr. Wiltshire will leave the office of President and Chief Executive
Officer as soon as a suitable replacement can be identified and hired. Recently,
Mr. Wiltshire has experienced problems with his health. Although Mr. Wiltshire
is expected to continue to render services to the Company from his residence in
Florida, the loss of his services as a result of the deterioration of his health
or for any other reason, before a successor has been installed, would have a
material adverse effect on the Company. Additionally, the loss of the services
of any of these other key employees could have a material adverse effect on the
Company. See "Business -- Employees," "Management -- Directors and Executive
Officers" and "Management -- Search for President and Chief Executive Officer."
Protection of Intellectual Property. The Company's success depends in
significant part on maintenance and protection of its intellectual property. The
Company attempts to protect its intellectual property rights through a range of
measures, including patents, trade secrets and confidentiality agreements. The
Company has not sought and would be unable to obtain patent protection in any
foreign country for any of its technology currently patented in the United
States. There can be no assurance that the Company will be able to effectively
protect its technology, that others will not be able to develop similar
technology independently or that the Company will have the resources necessary
to adequately protect and enforce rights it may have with respect to its
intellectual property. There can be no assurance that third party claims
alleging infringement of intellectual property rights, including infringement of
patents that have been or may be issued in the future, will not be asserted
against the Company. Any assertions of intellectual property claims could
require the Company to discontinue the use of certain processes or to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and damages, or to develop noninfringing technology or acquire
licenses to the alleged infringed technology. Litigation may also divert the
efforts of management and technical personnel from other matters. There can be
no assurance that the Company would be able to obtain such licenses on
acceptable terms or to develop noninfringing technology. See "Business --
Intellectual Property."
Absence of Dividends. The Company has not paid any cash dividends on the
Common Stock since its inception and the Company does not anticipate paying cash
dividends in the foreseeable future. See "Dividend Policy."
Securities Eligible for Future Sale. Sales of substantial amounts of Common
Stock after the Offering could adversely affect the market price of the
Company's Common Stock. The number of shares of Common Stock available for sale
on the public market is limited by restrictions under the Securities Act and
lock-up agreements under which the holders of ______ shares have agreed not to
sell or otherwise dispose of any of their shares for a period of 18 months after
the date of this Prospectus (the "Lock-up Period") without the prior written
consent of the Representative. The Representative may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements. Of the 3,643,940 shares of Common Stock that will
be outstanding after the Offering, the 2,133,334 shares sold in this Offering
will be freely tradable without restriction or further registration under the
Securities Act, except that shares owned by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), may
generally only be sold in compliance with applicable provisions of Rule 144.
Beginning 90 days following the date of this Prospectus, approximately _________
additional shares will become eligible for sale in compliance with Rule 144
promulgated under the Securities Act. A total of approximately 98% of the
outstanding shares are subject to lock-up agreements and will be eligible for
sale, subject to the volume limitations of Rule 144, beginning upon the
expiration of the Lock-up Period. In addition, subject to the consent of the
Representative, the Company intends to register after the effectiveness of the
Offering a total of up to 214,189 shares of Common stock issued or issuable
pursuant to the Company's Stock Option Plans. Of the up to 214,189 shares to be
registered, 10,112 shares are subject to outstanding options as of May 1, 1996,
of which options to purchase a total of 5,933 shares are exercisable. Of the
shares subject to such exercisable options, _________ are subject to lock-up
agreements. The remaining _________ shares subject to exercisable options are
not subject to lock-up agreements and will be available for sale after the
Company registers such shares. See "Management -- Stock Option Plans,"
"Description of Securities," "Securities Eligible for Future Sale" and
"Underwriting."
The Redeemable Warrants underlying the Units offered hereby and the shares
of Common Stock underlying such Redeemable Warrants, upon exercise thereof, will
be freely tradable without restriction under the Securities Act, except for any
Redeemable Warrants or shares of Common Stock purchased by Affiliates, which
will be subject to the resale limitations of Rule 144 under the Securities Act.
In addition, 750,000 New Warrants and the underlying shares of Common Stock and
100,000 shares of Common Stock are being registered in the Concurrent Offering.
Holders of such New Warrants and of such shares of Common Stock have agreed not
to, directly or indirectly, issue, offer to sell, sell, grant an option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose
of (collectively, "Transfer") such shares of Common Stock for a period of 18
months from the effective date of the Registration Statement without the prior
written consent of the Representative and the Company.
Absence of Public Market; Arbitrary Determination of Offering Price;
Possible Volatility of Stock Price. Prior to this Offering, there has been no
public market for the Units, Common Stock or Redeemable Warrants. Consequently,
the initial public offering price of the Units has been determined by
negotiations among the Company and the Representative and bears no relationship
to the price of the Company's securities after this Offering. See
"Underwriting." There can be no assurance that any active public market for the
Units, Common Stock or Redeemable Warrants will develop or be sustained after
the Offering, or that the market price of the Units, Common Stock or Redeemable
Warrants will not decline below the initial public offering price. The trading
prices of the Units, Common Stock and Redeemable Warrants could be subject to
wide fluctuations in response to actual or anticipated quarterly operating
results of the Company, announcements of technological innovations or new
applications by the Company or its competitors and general market conditions, as
well as other events or factors. In addition, stock markets have experienced
extreme price and volume trading volatility in recent years. This volatility has
had a substantial effect on the market price of many technology companies, and
has often been unrelated to the operating performance of those companies. This
volatility may adversely affect the market price of the Units, Common Stock and
Redeemable Warrants.
Dilution. Persons purchasing Units at the initial public offering price
will incur immediate and substantial dilution in the net tangible book value per
share of Common Stock. See "Dilution."
Lack of Experience of Representative. Although the Representative commenced
operations in May 1994, it does not have extensive experience as an underwriter
of public offerings of securities. In addition, the Representative is a
relatively small firm and no assurance can be given that the Representative will
be able to participate as a market maker in the Units, Common Stock or
Redeemable Warrants, and no assurance can be given that any broker-dealer will
make a market in the Units, Common Stock or Redeemable Warrants. See
"Underwriting."
Representative's Potential Influence on the Market. It is anticipated that
a significant amount of Units will be sold to customers of the Representative.
Although the Representative has advised the Company that it intends to make a
market in the Units, Common Stock and Redeemable Warrants, it will have no legal
obligation to do so. The prices and the liquidity of the Units, Common Stock and
Redeemable Warrants may be significantly affected by the degree, if any, of the
Representative's participation in the market. No assurance can be given that any
market activities of the Representative, if commenced, will be continued. See
"Underwriting."
Continued Quotation on the Nasdaq SmallCap Market. The Company has applied
to have the Units, Common Stock and Redeemable Warrants approved for quotation
on the Nasdaq SmallCap Market and believes it will meet the initial listing
requirements upon consummation of this Offering. However, no assurance can be
given that it will be able to satisfy the criteria for continued quotation on
the Nasdaq SmallCap Market following this Offering. Failure to meet the
maintenance criteria in the future may result in the Units, Common Stock and
Redeemable Warrants not being eligible for quotation. In such event, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Units, Common Stock and Redeemable Warrants.
If the Company were removed from the Nasdaq SmallCap Market, trading, if
any, in the Units, the Common Stock or the Redeemable Warrants would thereafter
have to be conducted in the over-the-counter market in the so-called "pink
sheets" or, if then available, Nasdaq's OTC Bulletin Board. As a result, an
investor would find it more difficult to dispose of, and to obtain accurate
quotations as to the value of, such securities.
In addition, if the Units, Common Stock or Redeemable Warrants are delisted
from trading on Nasdaq and the trading price of the Common Stock is less than
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of Rule 15g-9 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under such rule, broker/dealers who
recommend such low-priced securities to persons other than established customers
and accredited investors must satisfy special sales practice requirements,
including a requirement that they make an individualized written suitability
determination for the purchaser and receive the purchaser's written consent
prior to the transaction. The Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 also requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally, according to
recent regulations adopted by the Securities and Exchange Commission (the
"Commission"), any equity security not traded on an exchange or quoted on Nasdaq
that has a market price of less than $5.00 per share, subject to certain
exceptions), including the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Such requirements could severely limit the market liquidity of the
Units, Common Stock and Redeemable Warrants and the ability of purchasers in the
Offering to sell their securities in the secondary market. There can be no
assurance that the Units, Common Stock and Redeemable Warrants will not be
delisted or treated as a penny stock.
Registration of Shares Underlying the Redeemable Warrants. The Redeemable
Warrants issued in the Offering are not exercisable unless, at the time of
exercise, the Company has distributed a current prospectus covering the shares
of Common Stock issuable upon exercise of such Redeemable Warrants and such
shares have been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the holder who wishes to exercise
such Redeemable Warrants. In addition, in the event any Redeemable Warrants are
exercised at any time after nine months from the date of this Prospectus, the
Company will be required to file a post-effective amendment and deliver a
current prospectus before the Redeemable Warrants may be exercised. Although the
Company will use its best efforts to have all such shares so registered or
qualified on or before the exercise date and to maintain a current prospectus
relating thereto until the expiration of such Redeemable Warrants, there is no
assurance that it will be able to do so. Holders of Redeemable Warrants who
exercise such Redeemable Warrants at a time the Company does not have a current
prospectus may receive unregistered and, therefore, restricted shares of Common
Stock. Although the Units will not knowingly be sold to purchasers in
jurisdictions in which the Units are not registered or otherwise qualified for
sale, purchasers may buy Redeemable Warrants in the after market or may move to
jurisdictions in which the shares underlying the Redeemable Warrants are not
registered or qualified during the period that the Redeemable Warrants are
exercisable. In this event, the Company would be unable to issue shares to those
persons desiring to exercise their Redeemable Warrants unless and until the
shares and Redeemable Warrants could be qualified for sale in the jurisdiction
in which such purchasers reside, or an exemption from such qualification exists
in such jurisdiction, and holders of Redeemable Warrants would have no choice
but to attempt to sell the Redeemable Warrants in a jurisdiction where such sale
is permissible or allow them to expire unexercised.
Redemption of Redeemable Warrants. Commencing , 1997 [12 months after the
date of this Prospectus], the Company shall have the right to redeem all, but
not less than all, of the Redeemable Warrants, at a price of $.05 per Redeemable
Warrant on 30 days' prior written notice, provided that the Company shall have
obtained the consent of the Representative, and the average closing bid price of
the Common Stock equals or exceeds 150% of the then exercise price per share,
subject to adjustment, for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. In the event the Company exercises the right to redeem the
Redeemable Warrants, such Redeemable Warrants will be exercisable until the
close of business on the date fixed for redemption in such notice. If any
Redeemable Warrant called for redemption is not exercised by such time, it will
cease to be exercisable and the holder will be entitled only to the redemption
price.
Reduced Probability of Change of Control or Acquisition of Company Due to
Existence of Anti-Takeover Provisions. The Company's Amended and Restated
Certificate of Incorporation, as amended (the "Restated Certificate"), contains
certain provisions that reduce the probability of any change of control or
acquisition of the Company. Pursuant to the Restated Certificate, the Board of
Directors has the ability to issue Preferred Stock in one or more series with
such rights, obligations and preferences as the Board of Directors may determine
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. Although the Company
has no present plans to issue any shares of Preferred Stock, there can be no
assurance that it will not issue Preferred Stock at some future date. Further,
certain provisions of Delaware law could delay or make more difficult a merger,
tender offer or proxy contest involving the Company. While such provisions are
intended to enable the Board of Directors to maximize stockholder value, they
may have the effect of discouraging takeovers which could be in the best
interest of certain stockholders. There is no assurance that such provisions
will not have an adverse effect on the market value of the Company's stock in
the future. See "Description of Securities." In addition, the Company's Restated
Certificate provides that its directors shall not be personally liable to the
Company or its stockholders for monetary damages in the event of a breach of
fiduciary duty to the extent permitted by Delaware law.
<PAGE>
THE COMPANY
The Company, which was incorporated in Delaware in 1986 under the name
Aquidneck Systems International, Inc., develops, assembles, sells and services
optical data storage systems consisting of integrated computer hardware and
software for the archival storage and retrieval of massive quantities of
computer-generated information. In May 1996, the Company changed its name to
Access Solutions International, Inc.
The Company's executive offices are located at 650 Ten Rod Road, North
Kingstown, Rhode Island 02852 and its telephone number is (401) 295-2691.
Recent Bridge Financing. On May 28, 1996, the Company consummated a bridge
financing (the "Bridge Financing") pursuant to which it issued an aggregate of:
(i) $1,500,000 in principal amount of promissory notes (the "Bridge Notes")
which bear interest at the rate of 10% per annum and are due and payable upon
the earlier of: (a) the closing of the sale of securities or other financing of
the Company from which the Company or its subsidiary receives gross proceeds of
at least $2,500,000 or (b) May 28, 1997, and (ii) 750,000 warrants (the "Bridge
Warrants"), each Bridge Warrant entitling the holder to purchase one share of
Common Stock at an initial exercise price of $1.50 per share (subject to
adjustment upon the occurrence of certain events) during the three-year period
commencing May 28, 1997. Original issue discount in the amount of $150,000
associated with the Bridge Financing will be amortized to interest expense over
the term of the bridge debt. The net proceeds of approximately $1,342,500 from
the Bridge Financing are being used for: (i) repayment of indebtedness in the
principal amount of $85,000 to a director and principal stockholder; (ii)
research and development expenses in the approximate amount of $472,000; (iii)
selling expenses in the approximate amount of $235,000; (iv) sales commissions
in the approximate amount of $65,000; (v) customer support expenses in the
amount of $194,000; and (vi) general working capital purposes. Upon the
consummation of the Offering, each Bridge Warrant shall automatically, without
any action by the holder thereof, be converted into a Redeemable Warrant (the
"New Warrant") having terms identical to those of the Redeemable Warrants
underlying the Units offered hereby. The New Warrants and the underlying shares
of Common Stock issuable upon exercise of the New Warrants are being registered
under the Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement of which this Prospectus is a part. The Company intends
to use a portion of the proceeds of this Offering to repay the entire principal
amount of, and accrued interest on, the Bridge Notes, including $254,500 to
Malcolm G. Chace, III, a director and principal stockholder. See "Use of
Proceeds."
Recapitalization. In January 1996, the Company effected a recapitalization
(the "Recapitalization") of its capital without a formal reorganization. As part
of the Recapitalization, the Board of Directors approved the reverse stock
split, negotiated a conversion (the "Conversion") of debt in the amount of
$2,635,415 plus unpaid interest in the amount of $62,129 plus warrants to
purchase 6890 shares of common stock into 1,041,012 shares of Common Stock and
retained Hector D. Wiltshire as its President and Chief Executive Officer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources" and "Certain Transactions."
Following the Recapitalization, approximately 2.8% of the issued and outstanding
Common Stock was held by holders of Common Stock prior to the Recapitalization
and approximately 69% of the issued and outstanding Common Stock was held by the
holders of debt who participated in the Conversion. Additionally, in January
1996, the Company issued 416,500 shares of Common Stock to Mr. Wiltshire in
consideration for (i) his agreement to serve as the Company's President and
Chief Executive Officer; (ii) his agreement to relinquish warrants he had
acquired in connection with the $500,000 bridge financing he provided to the
Company in September 1995; and (iii) his agreement to loan the Company $250,000
on a short-term basis. Such shares represent approximately 28% of the issued and
outstanding Common Stock. See "Certain Transactions-- Transactions with Mr.
Wiltshire" and Notes 2 and 13 to the Financial Statements.
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units offered by the
Company hereby, after deduction of underwriting discounts, non-accountable
expense allowance and Offering expenses, are estimated to be $6,482,500
($7,526,500 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $7.50 per Unit.
The Company intends to use the net proceeds as follows: (i) approximately
$1,527,000 to repay the Bridge Notes including $254,500 to Malcolm G. Chace,
III, a director and principal stockholder; (ii) approximately $1,650,000 for
research and development expenses to be incurred in connection with the
development of a multi-platform, device independent, user transparent modular
software package with a client/server interface and external contracting of
software enhancements; (iii) approximately $2,000,000 for the development of a
client/server product; (iv) approximately $1,500,000 to further develop and
enhance the Company's sales and marketing departments; and (v) general corporate
purposes. In the event the Underwriters exercise their over-allotment option in
full, the Company will receive an additional approximately $1,044,000, after
deduction of the underwriting discounts and non-accountable expense allowance,
and will utilize those proceeds for general corporate purposes, including
research and development and working capital.
The Bridge Notes bear interest at the rate of 10% per annum and mature on
the earlier of: (i) the closing of a sale of securities or other financing of
the Company from which the Company or its subsidiary receives gross proceeds of
at least $2,500,000 or (ii) May 28, 1997, one year from the date of issuance.
The proceeds of the Bridge Notes were used (i) to repay indebtedness in the
principal amount of $85,000 to Malcolm G. Chace, III, a director and principal
stockholder; (ii) for research and development, selling and customer support
expenses; and (iii) for other general corporate purposes. See "The Company --
Recent Bridge Financing."
The Company anticipates that the proceeds from the Offering, together with
projected cash flow from operations, will be sufficient to fund its operations
for at least 12 months from the date of this Prospectus. Thereafter, the Company
may need to raise additional funds. There can be no assurance that additional
financing will be available or if available will be on favorable terms. If the
Company is unable to obtain such additional financing, the Company's ability to
maintain its current level of operations will be materially and adversely
affected. See "Risk Factors -- Future Capital Needs; Uncertainty of Additional
Funding."
Pending application of the proceeds of the Offering, the Company intends to
invest the net proceeds in certificates of deposit, money market accounts,
United States government obligations or other short-term interest bearing
obligations of investment grade.
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock,
presently intends to retain earnings for use in its business and does not
anticipate paying cash dividends in the foreseeable future. The payment of
future cash dividends by the Company on its Common Stock will be at the
discretion of the Board of Directors and will depend on its earnings, financial
condition, cash flows, capital requirements and other considerations as the
Board of Directors may consider relevant, including any contractual prohibitions
with respect to the payment of dividends.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, actual, pro forma to give effect to the Bridge Financing and pro forma
as adjusted to give effect to the sale of the Units offered hereby by the
Company at an assumed initial public offering price of $7.50 per Unit and the
initial application of the net proceeds therefrom. See "Use of Proceeds" and
"The Company--Recent Bridge Financing."
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------
Actual Pro Forma Pro Forma
------ --------- ---------
(in thousands) As Adjusted
-------------- -----------
<S> <C> <C> <C>
Current liabilities........................................... $ 2,123 $ 3,388 $ 2,038
---------- --------- --------
Total long-term debt, excluding current portion............... $ 38 $ 38 $ 38
---------- --------- --------
Stockholders' Equity:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, -0- outstanding............................ - - -
Common Stock, $.01 par value, 8,000,000 shares
authorized, 1,511,865 shares issued, actual and
pro forma, and 3,645,199 shares, pro forma
as adjusted (1)......................................... 15 15 36
Additional paid-in capital..................................... 10,450 10,600 (2) 16,904
Accumulated deficit............................................ (10,629) (10,629) (10,779)(3)
Less treasury stock (1,259 shares)........................ (18) (18) (18)
---------- --------- --------
Total stockholders' equity................................ (182) (32) 6,143
---------- --------- ---------
Total capitalization...................................... $ 1,979 $ 3,394 $ 8,219
========== ========= =========
</TABLE>
- ---------------------------
(1) Excludes 214,189 shares of Common Stock reserved for issuance pursuant to
the 1987 Plan, the 1994 Employee Plan, the 1994 Directors' Plan and the
1996 Plan and certain non-plan options. Options to purchase an aggregate of
10,112 shares of Common Stock at exercise prices ranging from $74 to $400
per share are outstanding as of May 1, 1996. Upon consummation of the
Offering, the exercise price of the outstanding options will be reduced to
a price equal to the initial public offering price of each share of Common
Stock included in the Units (assuming that the public offering price is
attributed solely to the shares of Common Stock included in the Units). See
"Management -- Executive Compensation -- Stock Option Plans" and
"-- Non-Option Plans."
(2) The value of the 750,000 Bridge Warrants included in the Bridge Financing
was estimated to be $.20 per warrant or $150,000, representing prepaid
interest. Prepaid interest is amortizable to interest expense over the life
of the bridge debt.
(3) Includes non-recurring interest expense of $150,000 for the unamortized
portion of the original issue discount relating to the repayment of the
Bridge Notes.
<PAGE>
DILUTION
"Net tangible book value per share" represents the amount of total tangible
assets of the Company reduced by the amount of total liabilities and divided by
the number of shares of Common Stock outstanding. "Dilution" represents the
difference between the price per share to be paid by new investors for the
shares of Common Stock included in the Units issued in the Offering and the pro
forma net tangible book value per share as of March 31, 1996. At March 31, 1996,
the net tangible book value of the Common Stock was $(240,931) in the aggregate,
or $(.16) per share of Common Stock. After giving effect to the sale of the
shares of Common Stock included in the Units offered hereby (at an assumed
initial public offering price of $3.75 per share, net of estimated underwriting
discounts and Offering expenses, and assuming no exercise of the Underwriters'
over-allotment option), the pro forma net tangible book value of the Common
Stock as of March 31, 1996 would have been $6,084,069 in the aggregate, or $1.67
per share. This represents an immediate increase in net tangible book value of
$1.83 per share of Common Stock to existing stockholders and an immediate
dilution per share of $2.08 to new investors purchasing shares of Common Stock
in the Offering.
The following table illustrates the dilution per share as described above:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of Common Stock......................... $ 3.75
Net tangible book value per share
of Common Stock before the Offering........................... $(.16)
Increase attributable to new investors................................. 1.83
------
Pro forma net tangible book value per share of Common Stock after
the Offering........................................................... 1.67 (1)
-------
Dilution per share of Common Stock to new investors............................. $ 2.08
=======
</TABLE>
- ----------------------
(1) If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value at March 31, 1996 after the Offering would be
approximately $7,164,069 or $1.81 per share and the dilution per share to
new investors would be approximately $1.94.
Based on the foregoing assumptions, the following table sets forth, as of
completion of the Offering, the number of shares purchased from the Company, the
total consideration paid to the Company and the average price per share paid by
the existing stockholders and by new investors purchasing shares of Common Stock
included in the Units in the Offering (at an assumed initial public offering
price of $3.75 per share):
<TABLE>
<CAPTION>
Shares of Common Total Consideration Average Price Per Share
Stock Acquired of Common Stock
--------------------------------------------------------------------------------------------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 1,510,606 41% $10,422,871 57% $6.90
New Stockholders 2,133,334 59 8,000,000 43 $3.75
--------- ---- ----------- ----
Total 3,643,940 100% $18,422,871 100%
========= ==== =========== ====
</TABLE>
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company for
the two years ended June 30, 1994 and 1995 and for the nine month periods ended
March 31, 1995 and 1996. The data as of June 30, 1994 and 1995 and March 31,
1996 has been derived from the audited financial statements of the Company
appearing elsewhere herein. The selected financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements, the notes
thereto and other financial and statistical information included elsewhere in
this Prospectus. Selected financial information for the nine months ended March
31, 1995 is derived from unaudited financial statements of the Company. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial position and
results of operations have been included in such unaudited financial statements.
Such results may not be indicative of the results expected for a full year.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
June 30, March 31,
------------------------ -----------------------
1994 1995 1995 1996
---- ---- ---- ----
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales
Products...................................... $ 519 $ 3,126 $ 2,111 $ 1,178
Services...................................... 358 476 301 440
---------- ----------- ---------- ----------
Total net sales..................... 877 3,602 2,412 1,618
Cost of sales
Products ..................................... 375 1,115 756 324
Services...................................... 129 185 119 191
---------- ---------- ---------- ----------
Total cost of sales.................. 504 1,300 875 515
---------- ---------- ---------- ----------
Gross profit......................................... 373 2,302 1,537 1,103
Operating expenses
Selling expenses.................................. 484 891 528 718
General and administrative expenses............... 807 2,034 1,245 1,623
Research and development expenses................. 1,505 1,756 1,316 1,377
Stock compensation expense........................ - - - 744(2)
---------- ---------- ---------- ----------
Total operating expense...................... 2,796 4,681 3,089 4,462
---------- ---------- ---------- ----------
Loss from operations.............................. (2,423) (2,379) (1,552) (3,359)
Interest expense, net............................. 47 92 70 156
---------- ----------- ---------- ----------
Loss before extraordinary gain.................... (2,470) (2,471) (1,622) (3,515)
---------- ----------- ---------- ----------
Extraordinary gain on debt restructuring.......... - - - 320
---------- ----------- ---------- ----------
Net Loss....................................... $ (2,470) $ (2,471) $ (1,622) $ (3,195)
========== =========== ========== ==========
Net Loss applicable to common stock:
Net loss...................................... $ (2,470) $ (2,471) $ (1,622) $ (3,195)
---------- ----------- ---------- ----------
Accrued dividends on preferred stock.......... - (88) (41) (109)
--------- ----------- ---------- ----------
$ (2,470) $ (2,559) $ (1,663) $ (3,304)
========== =========== ========== ==========
Net loss per common share:
Net loss before extradordinary item........... $ (1.10) $ (1.14) $ (.74) $ (1.61)
---------- ----------- ---------- ----------
Extraordinary item............................ - - - -
---------- ----------- ---------- ----------
$ (1.10) $ (1.14) $ (.74) $ (1.47)
========== =========== ========== ==========
Weighted average shares of Common Stock(1)........ 2,236,087 2,250,259 2,249,946 2,254,241
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
June 30, March 31,
------------------------- ----------------------
1994 1995 1995 1996
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency)......................... $ (630) $ (625) $ 267 $ (1,012)
Total assets......................................... 1,628 2,527 2,581 1,979
Total liabilities.................................... 1,695 2,353 1,677 2,161
Total redeemable securities.......................... - 2,088 2,041 -
Total stockholders' equity (deficit)................. (67) (1,914) (1,137) (182)
</TABLE>
(1) Computed using the weighted average number of shares of Common Stock
outstanding during the period and other potentially dilutive instruments issued
at prices below the assumed initial public offering price during the twelve
month period prior to the date of effectiveness of the Registration Statement of
which this Prospectus forms a part. See Note 1 to the Financial Statements.
(2) Compensation award to an officer, including $424,830 of non-cash expenses
associated with the fair value of the stock issued. See Note 13 to the Financial
Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's sales consist of sales of products and services. Products
sold by the Company consist of COLD systems, software and hardgoods including
replacement disk drives, subassemblies and miscellaneous peripherals. Services
rendered by the Company include post-installation maintenance and support. The
Company recognizes revenue from customers upon installation of COLD systems and,
in the case of COLD systems installed for evaluation, upon acceptance by such
customers of the products. The Company sells extended service contracts on the
majority of the products it sells. Such contracts are one year in duration with
payments received either annually in advance of the commencement of the contract
or quarterly in advance. The Company recognizes revenue from service contracts
on a straight line basis over the term of the contract. The unearned portion of
the service revenue is reflected as deferred revenue. As of March 31, 1996, the
Company had deferred revenue in the amount of $346,097.
The Company's operating results have in the past and may in the future
fluctuate significantly depending upon a variety of factors which vary
substantially over time, including industry conditions; the timing of orders
from customers; the timing of new product introductions by the Company and
competitors; customer acceleration, cancellation or delay of shipments; the
length of sales cycles; the level and timing of selling, general and
administrative and research and development expenses; specific feature needs of
customers; and production delays. A substantial portion of the Company's
quarterly revenues are derived from the sale of a relatively small number of
COLD systems which range in price from approximately $150,000 to $900,000. As a
result, the timing of recognition of revenue from a single product order has in
the past and may in the future have a significant impact on the Company's net
sales and operating results for particular financial periods. This volatility is
counter balanced by the increase in sales of annual service contracts which
generally accompanies an increase in systems sales. The revenue from service
contracts is recognized on a straight line basis over the term of the contract.
The Company's primary operating expenses include selling expenses, general
and administrative expenses and research and development expenses. General and
administrative expenses consist primarily of employee compensation and customer
support expenses. Research and development expenses include compensation paid to
internal research and development staff members and expenses incurred in
connection with the retention of independent research and development
consultants. The Company utilizes its own employees for research and development
functions except in certain circumstances involving product enhancements. In
those circumstances, the Company regularly retains independent experts to
consult and design new software modules which are subsequently evaluated and
tested by the Company's internal research and development staff. Upon successful
testing of such product enhancements, the Company's internal staff integrates
the new products with the Company's existing COLD systems and products. See
"Business -- Research and Development."
The Company has historically incurred net losses and anticipates that
further net losses will be incurred prior to the time, if ever, that the Company
achieves profitability. However, the Company has recently taken certain steps
intended to limit the incurrence of future net losses. Such steps include: (i)
the retention in January 1996 of Hector D. Wiltshire as President and Chief
Executive Officer; (ii) the Recapitalization (see "The
Company--Recapitalization"); (iii) the November l995 reduction in the Company's
workforce from 52 to 30 full-time employees as of March 31, 1996; (iv) other
reductions in overhead costs and expenses; and (v) the administration of tighter
internal controls with respect to preservation of the integrity of the Company's
proprietary software products. The immediate effect realized by the
implementation of these measures was to reduce average monthly operating
expenses during January, February and March 1996 to approximately $310,000,
exclusive of the cost associated with shares granted to an officer in January
1996. This represents a 34% reduction in the average monthly operating expenses
as compared to those incurred during the first half of fiscal 1996. During such
period, average operating expenses approximated $467,000 per month. While no
assurance can be given that such steps will be sufficient to limit losses which
may be incurred in the future, the Company believes that such steps, when fully
implemented, may enable the Company to realize improved operating results.
<PAGE>
Results of Operations
Nine Months Ended March 31, 1995 Compared to Nine Months Ended March 31, 1996
The following table presents certain items from the Company's Statement of
Operations, and such amounts as percentages of net sales, for the periods
indicated.
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1995 Nine Months Ended March 31, 1996
-------------------------------- --------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales
Products....................... $ 2,111,028 88% $ 1,177,670 73%
Services....................... 301,294 12 440,257 27
------------ ---- ------------ -----
Total net sales............ $ 2,412,322 100 $ 1,617,927 100
Cost of sales
Products....................... 756,167 31 323,923 20
Services....................... 119,048 5 190,872 12
------------ ---- ------------ -----
Total cost of sales........ 875,215 36 514,795 32
------------ ---- ------------ -----
Gross profit........................ $ 1,537,107 64 1,103,132 68
Operating expenses
Selling........................ 528,131 22 717,557 44
General and administrative .... 1,244,898 52 1,623,330 100
Research and development....... 1,316,302 54 1,377,461 85
Stock compensation............. - - 744,000 46
------------ ---- ------------ -----
Total operating expenses... 3,089,331 128 4,462,348 275
Interest expense, net............... 69,863 3 155,962 10
------------ ---- ------------ -----
Loss before extraordinary item...... (1,622,087) (67) (3,515,178) (217)
Extraordinary gain on debt
restructuring.................... - - 320,387 20
------------ ------------
Net loss............................ $ 1,622,087 (67%) $(3,194,791) (197%)
============ ============
</TABLE>
Net sales. Net sales decreased by 33% from $2,412,322 for the nine months
ended March 31, 1995 to $1,617,927 for the nine months ended March 31, 1996.
This decrease was primarily the result of a delay in completion of software
enhancements which resulted in installation postponements. See "Risk Factors --
Variable Operating Results; Lengthy Sales Cycle."
Sales of products and services during the nine month period ending March
31, 1995 were $2,111,028 and $301,294, respectively, compared to $1,177,670 and
$440,257, respectively, for the nine months ending March 31, 1996. Products
sales decreased 44% due to the sale of fewer units during the period ending
March 31, 1996 compared to the nine months ending March 31, 1995. Service
revenue, which increases as the Company's base of installed units expands, was
46% higher than in the corresponding prior period. Approximately half of this
increase is attributable to an ODSM consulting contract in the amount of $66,000
that was completed and fully recognized in the second quarter of fiscal 1996.
Service revenue exclusive of revenue generated by this consulting contract would
have increased 24% over the corresponding period.
Cost of sales. Cost of sales in the aggregate decreased 41% from
approximately $875,215 for the nine months ended March 31, 1995 to approximately
$514,795 for the nine months ended March 31, 1996, primarily due to the reduced
volume of sales. In addition, cost of sales as a percentage of sales decreased
from 36% for the nine months ended March 31, 1995 to 32% for the nine months
ended March 31, 1996. This decrease was due to negotiated price reductions for
the purchase of the Company's optical hardware and from the sale of a larger,
higher margin system.
The cost of product sales decreased 57% from approximately $756,167 for the
nine months ended March 31, 1995 to approximately $323,923 for the nine months
ended March 31, 1996, primarily due to the reduced volume of product sales. The
cost of services increased by 60% from $119,048 for the nine months ended March
31, 1995 to $190,872 for the nine months ended March 31, 1996. Cost of services
as a percentage of service revenues increased from 40% for the nine months ended
March 31, 1995 to 43% for the nine months ended March 31, 1996. During the first
year following a product sale, maintenance services are generally less expensive
to provide than in subsequent years due to the product being under the
manufacturer's warranty. After the warranty expires, third-party maintenance
contract costs typically increase by 100%. The increase in the percentage of
cost of services is a result of maintenance contracts from fiscal 1995 crossing
the one-year threshold.
Selling expenses. Selling expenses increased 36% from approximately
$528,131 for the nine months ended March 31, 1995 to $717,557 for the nine
months ended March 31, 1996. This increase was due to increased trade show
activity in the first quarter of fiscal 1996 and higher personnel and
non-recurring recruiting costs incurred in connection with the hiring of a vice
president of sales. These increases were in part offset by lower sales
commissions and the reduction of the work-force in early November 1995.
General and administrative expenses. General and administrative expenses
consist of administrative expenses and customer support expenses. Administrative
expenses increased 56% from $623,532 for the nine months ended March 31, 1995 to
$972,356 for the nine months ended March 31, 1996. This increase was primarily
due to costs incurred in connection with a bridge financing and a proposed
initial public offering of Common Stock that was abandoned in December 1995,
increased salary expense for two Company officers hired in September 1994 and
January 1995 and costs incurred in connection with the Recapitalization. This
amount was partially offset by the termination of the above-mentioned officers
in February 1996 and November 1995, and a reduction in salary of the remaining
senior manager in November 1995.
Customer support expenses increased 5% from $621,366 for the nine months
ended March 31, 1995 to $650,974 for the nine months ended March 31, 1996. The
increase was primarily the result of higher salary expense due to the 1995
increase in engineering staff offset by lower travel expenses resulting from a
geographical redistribution of service engineers to locations with higher demand
for service personnel.
Research and development expenses. Research and development expenses
increased 5% from $1,316,302 for the nine months ended March 31, 1995 to
$1,377,461 for the nine months ended March 31, 1996. This increase reflected
payroll increases necessary to maintain competitive salaries for personnel in
the research and development area and increased depreciation incurred as a
result of computer equipment upgrades. These costs were offset by a temporary
reduction in consulting expenses resulting from a change in the primary
independent consulting firm retained by the Company. The increase in salary
expense was partially contained by a 31% staffing reduction in November 1995.
Stock compensation expense. The Company incurred a one-time expense
relating to the issuance of 416,500 shares of Common Stock to an officer of the
Company. Compensation expense in the aggregate amount of $744,000 was recognized
in conjunction with this transaction, including a non-cash charge of $424,830,
representing the fair value of the Common Stock as determined by independent
appraisal. The difference represents an accural of an agreed upon reimbursement
of the potential tax cost of the stock grant to the officer.
Interest expense, net. Interest expense, net, increased 123% from $69,863
for the nine months ended March 31, 1995 to $155,962 for the nine months ended
March 31, 1996, primarily due to interest accrued on additional bridge notes and
secured borrowings not outstanding in the prior period.
Net loss. As a result of the foregoing, the Company's net loss increased
97% from $1,622,087 for the nine months ended March 31, 1995 to $3,194,791 for
the nine months ended March 31, 1996.
<PAGE>
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
The following table presents certain items from the Company's Statement of
Operations, and such amounts as percentages of net sales, for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended June 30, 1994 Year Ended June 30, 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Net sales
Products....................... $ 519,132 59% $ 3,126,022 87%
Services....................... 358,133 41 476,039 13
------------ ---- ------------ ----
Total net sales.............. 877,265 100 3,602,061 100
Cost of sales
Products....................... 375,245 43 1,114,964 31
Services....................... 128,598 14 184,744 5
------------ ---- ------------ ----
Total cost of sales.......... 503,843 57 1,299,707 36
------------ ---- ------------ ----
Gross profit........................ 373,422 43 2,302,354 64
Operating expenses
Selling........................ 483,678 55 890,868 25
General and administrative .... 807,594 92 2,033,851 56
Research and development....... 1,505,010 172 1,755,891 49
------------ ---- ----------- ----
Total operating expenses...... 2,796,282 319 4,680,610 130
Interest expense, net............... 47,119 5 92,319 3
------------ ------------
Net loss............................ $(2,469,979) (281%) $(2,470,575) (69%)
============ ============
</TABLE>
Net sales. Net sales increased from $877,265 for the year ended June 30,
1994 to $3,602,061 for the year ended June 30, 1995 primarily as a result of
increased product sales volume. See "Risk Factors -- Variable Operating Results;
Lengthy Sales Cycle." Net product and service sales were $519,132 and $358,133,
respectively, for the year ended June 30, 1994 compared to $3,126,022 and
$476,039 for the year ended June 30, 1995. Product sales increased due to the
availability throughout the entire 1995 period of software products which were
available only during the latter portion of the 1994 period. Service revenues,
which increase as the Company's base of installed units expands, were 33% higher
than for the prior year as a result of increased installations of units.
Cost of sales. Cost of sales in the aggregate increased 158% from $503,843
for the year ended June 30, 1994 to $1,299,707 for the year ended June 30, 1995,
primarily due to higher sales volume.
The cost of product sales increased 197% from approximately $375,245 for
the year ended June 30, 1994 to approximately $1,114,964 for the year ended June
30, 1995 due to an increase in the volume of product sales. Cost of sales as a
percentage of sales decreased from 57% for the year ended June 30, 1994 to 36%
for the year ended June 30, 1995 as a result of inventory write-downs and higher
installation start-up costs incurred in fiscal 1994. The cost of services
increased by 44% from $128,598 for the year ended June 30, 1994 to $184,744 for
the year ended June 30, 1995 due to higher service revenues.
Selling expenses. Selling expenses increased 84% from $483,678 for the year
ended June 30, 1994 to $890,868 for the year ended June 30, 1995. This increase
was due to expansion of the sales staff and increased commissions resulting from
increased sales.
General and administrative expenses. General and administrative expenses
consist of administrative expenses and customer support expenses. Administrative
expenses increased 89% from $685,081 for the year ended June 30, 1994 to
$1,293,121 for the year ended June 30, 1995. This increase related primarily to
increases in personnel, including two Company officers hired in September 1994
and January 1995.
Customer support expenses increased from $122,513 for the year ended June
30, 1994 to $740,730 for the year ended June 30, 1995. In fiscal 1995, the
Company replaced its repair and installation work force with a customer support
function that included a manned help desk and field engineering support to
provide more comprehensive services to its expanding customer base.
Research and development expenses. Research and development expenses
increased 17% from $1,505,010 for the year ended June 30, 1994 to $1,755,891 for
the year ended June 30, 1995 reflecting the addition of seven employees and the
retention of a research and development management consultant during the second
half of fiscal 1995. Amortization expense increased due to the acquisition of an
IBM mainframe computer in late fiscal 1995.
Interest expense, net. Interest expense, net, increased 96% from $47,119
for the year ended June 30, 1994 to $92,319 for the year ended June 30, 1995.
Such expense increased as a result of borrowings under a secured loan and an
increase in secured borrowings during the 1995 period.
Net loss. As a result of the foregoing, the Company's net loss did not
materially change from the year ended June 30, 1994 to the year ended June 30,
1995.
Liquidity and Capital Resources
The Company had a working capital deficit of $624,608 at June 30, 1995 as
compared to a working capital deficit of $1,011,792 at March 31, 1996.
Total cash used by operating activities during the nine months ended March
31, 1996 was $2,123,967. The company's net loss of $3,194,791 included non-cash
expenses aggregating $709,618, the largest of which was the $424,830 charge
associated with the fair value of the stock granted to an officer of the
Company. Non-cash expenses were offset by a non-cash extraordinary gain of
$320,387 relating to debt restructuring during the period. The principal sources
of cash from operating activities were reductions in receivables ($417,880) and
increases in accrued salaries and wages ($330,127). The principal use of cash
was the reduction in accounts payable ($130,506).
Cash used in investing activities for the nine months ended March 31, 1996
was $152,236. Additions to fixed assets in the amount of $97,837, financing
costs related to the Offering in the amount of $46,275 and investments in other
assets in the amount of $8,124 constituted the major use of cash in investing
activities.
The Company's operations for the first nine months of fiscal 1996 have been
funded primarily through borrowings and equity investments. During this period,
the Company raised approximately $2,600,000 (gross proceeds) from Malcolm G.
Chace, III, a director and principal stockholder, and certain outside investors
consisting of (i) a bridge loan in September 1995 (the "September Bridge Loan")
by Mr. Chace and other private investors (the "September Bridge Loan Investors")
in the amount of $1,300,000 in anticipation of an initial public offering in
December 1995 that was subsequently abandoned, and (ii) $1,335,415 in secured
borrowings from Mr. Chace. See "Management," "Principal Stockholders" and
"Certain Transactions -- Debt Transactions with Mr. Chace and his Affiliates."
During that period, the Company also settled an employment bonus obligation in
the amount of $180,000 in exchange for 7,500 shares of Common Stock, and certain
consulting fees and earned sales commissions in the aggregate approximate amount
of $20,807 in exchange for 5,290 shares of Common Stock. See "Management --
Employment Agreements."
The Company had a working capital deficit of $630,107 at June 30, 1994 as
compared to a working capital deficit of $624,608 at June 30, 1995.
Total cash used by operating activities in fiscal 1995 was $2,562,736. The
major use of cash was a net loss of $2,470,575. Accounts receivable increased
from $107,914 at June 30, 1994 to $815,609 at June 30, 1995 due to higher sales
in fiscal 1995 and increased sales activity in the latter part of that fiscal
year. Inventory increased by $107,045 due to the Company's commitment to
purchase optical autochangers from its major supplier in anticipation of sales
which were not realized in fiscal 1995. Prepaid expenses increased by $57,234 to
$75,388 at June 30, 1995 as a result of the increase in service maintenance
contracts subcontracted to a third party. Such contracts were payable quarterly
or annually in advance.
Cash used in investing activities increased from $195,943 at June 30, 1994
to $255,308 at June 30, 1995. The major use of cash in investing activities was
the purchase of diagnostic equipment, software and computers in the amount of
$254,628.
During fiscal 1995, cash provided by financing activities included gross
proceeds in the approximate amount of $593,000 from an October 1994 private
placement of 2,671 shares of Common Stock, $2,000,000 from the issuance of
50,000 shares of the Company's Series A 10% Cumulative Convertible Preferred
Stock, $.01 par value (the "Preferred Stock"), and an increase in net secured
borrowings in the principal amount of $375,000 in June 1995 from affiliates of
Malcolm G. Chace, III, a director and principal stockholder. See "Management,"
"Principal Stockholders" and "Certain Transactions -- Debt Transactions with Mr.
Chace and his Affiliates." Cash used by financing activities included the
repayment of the Company's capital leases in the approximate amount of $150,000
and the repayment of a portion of the principal of the Company's short-term
secured bank loan in the approximate amount of $60,000.
As of March 31, 1996, the Company had indebtedness outstanding under a
short-term secured bank loan in the amount of $320,000. The loan, originally in
the amount of $500,000, was subject to a $70,000 principal reduction in
September 1995 and further reductions of principal in the amount of $10,000 each
month thereafter until the loan matures in full on June 30, 1996. The loan is
secured by substantially all of the Company's assets. Borrowings outstanding
under the loan accrue interest at a rate equal to the prime rate plus 2% (10.25%
as of April 29, 1996).
In January 1996, the holders of the Preferred Stock converted all of the
Company's issued and outstanding Preferred Stock and accrued but unpaid
Preferred Stock dividends in the aggregate approximate amount of $2,200,000 to
Common Stock and effected the reverse stock split. In connection with the
Recapitalization, the Company purchased 897 treasury shares for a cost of
$85,274. Of this amount, $915, representing the fair value of the 897 shares
acquired, was charged to treasury stock and $84,359, representing the excess of
the amount paid over the fair value of the shares, was charged to general and
administrative expenses. The fair value of the shares acquired was determined by
independent appraisal. Additionally, the Company reached an agreement with Mr.
Chace to convert all of the then outstanding indebtedness of the Company held by
him, excluding the September Bridge Loan, in the amount of $1,335,415 into
426,279 shares of Common Stock. During January and February 1996, the Company
also reached agreement with the September Bridge Loan Investors, including Mr.
Chace, to convert bridge notes in the principal amount of $1,300,000 into
614,733 shares of Common Stock.
The Company intends to utilize the net proceeds from the Offering for (i)
repayment of the Bridge Notes and accrued interest in the approximate amount of
$1,527,000; (ii) research and development expenses in the approximate amount of
$1,650,000 incurred in connection with the development of a multi-platform,
device independent, user transparent modular software package with a
client/server interface; (iii) approximately $2,000,000 for the development of a
client/server COLD product; (iv) approximately $1,500,000 to further develop and
enhance the Company's sales and marketing departments; and (v) general corporate
purposes. See "Use of Proceeds" and "Certain Transactions -- Debt Transactions
with Mr. Chace and his Affiliates." The Company has certain obligations under
capital and operating leases. See Note 7 to the Financial Statements.
The Company believes that the estimated net proceeds of the Offering,
together with funds generated from operations, will be sufficient to meet the
Company's working capital requirements for a period of at least twelve months
from the date of this Prospectus. Thereafter, additional funds will be required.
If the Company has insufficient funds from operations, it will be required to
seek additional debt or equity financing. There can be no assurance that such
additional funds can be obtained on acceptable terms, if at all. If additional
funds are not available, the Company's business will be materially adversely
affected. See "Risk Factors -- Future Capital Needs; Uncertainty of Additional
Funding" and the Financial Statements and notes thereto.
The Company has suffered recurring losses from operations, has negative
cash flows from operating activities and has a working capital deficiency. As a
result, the Company's independent auditors in their report dated June 3, 1996 on
the Financial Statements have included an explanatory paragraph that describes
factors raising substantial doubt about the Company's ability to continue as a
going concern. See "Risk Factors -- Working Capital Deficiencies; History of
Losses; Accumulated Deficit; Going Concern Opinion."
At March 31, 1996, the Company had Federal and state net operating loss
("NOL") carryforwards available to reduce any future taxable income in the
approximate amount of $7,900,000, which expire in various amounts between the
years 2002 and 2010, if not previously utilized. In the event of an ownership
change, as defined in Section 382 of the Internal Revenue Code, utilization of
NOL carryforwards in periods following the ownership change can be significantly
limited. Management believes that the Company has incurred several changes of
ownership under these rules. As a result, utilization of the NOL carryforwards
is subject to various limitations, depending upon the year in which the NOL
originated. As of March 31, 1996, management estimates that approximately
$4,900,000 of the Company's Federal NOL carryforwards will be available to
offset taxable income that may be generated within the carryforward period. Of
this amount, approximately $2,200,000 is available for future utilization
without limitation and the remaining $2,700,000 is subject to a limitation of
approximately $180,000 of utilization per year. However, because the underlying
calculations are complex and are subject to review by the Internal Revenue
Service, these limitations could be adjusted at a later date. In addition, upon
consummation of the Offering, it is expected that another change of ownership
will occur. As a result of this change, management expects that all prior
limitations will remain in place, except that additional limitations will be
imposed on the $2,200,000 NOL carryforward previously available for utilization
without limitation, as described above. Management estimates that the $2,200,000
NOL carryforward will be subject to a limitation of approximately $150,000 of
utilization per year.
The Company believes that its current corporate infrastructure can support
significant increases in sales without proportionate increases in costs.
However, there can be no assurances that sales will increase or that any cost
advantage will result.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on the
Company's operations.
<PAGE>
BUSINESS
The Company develops, assembles, sells and services optical data storage
systems consisting of integrated computer hardware and software for the archival
storage and retrieval of massive quantities of computer-generated information.
The Company believes that its proprietary computer output to laser disk ("COLD")
data storage systems provide a faster, more reliable and more economical method
of storing vast quantities of computer generated data than is generally
available from other COLD systems or from traditional data storage methods. The
Company's optical data storage systems, which are marketed under the brand names
OAS, ODSM and GIGAPAGE, are sold principally to large organizations that have
the need to store and retrieve large quantities of computer-generated data.
Currently, COLD systems developed and manufactured by the Company are used by
companies such as Pershing Securities, a division of Donaldson Lufkin & Jenrette
Inc., Securities Industry Automation Corporation, Policy Management Systems
Corporation and Nationwide Mutual Insurance Company.
Industry Overview
Business organizations need to archive data for a number of reasons,
including compliance with governmental regulations, retention of historical
records and maintenance of strategically valuable historical business
information. The widespread use of computers has resulted in exponential growth
in the amount of data that must be economically archived and stored while
remaining readily accessible for retrieval. In the past, organizations have
attempted to solve this problem by using one or more of four traditionally
available data storage and retrieval alternatives: magnetic disk; paper;
magnetic tape; and computer output microfiche or microfilm ("COM"). Each of
these traditional storage methods has inherent disadvantages as an archival
storage medium. Magnetic disk is currently expensive and subject to failure.
Paper is a manually cumbersome, bulky and expensive means of long-term storage.
Magnetic tape provides response times as long as 15 minutes when storing or
retrieving data even when mounting is automated using robotics. COM is
cumbersome to access and time-consuming to generate. The storage alternatives of
paper, magnetic tape, and COM have nonetheless been used for archiving because
of the high cost of magnetic disk or DASD, traditionally the most popular
storage method.
The Company's Solution: Products and Services
The Company's COLD systems permit both the storage of archival data in a
less expensive manner than with DASD, paper or COM, and quicker retrieval of
such data than is possible with magnetic tape, paper or COM. When combined with
the Company's software, the result is an integrated hardware and software
solution which economically addresses archival storage and on-line retrieval of
large quantities of computer-generated data. The Company believes its solution
also achieves several technological and competitive advantages which are not
available in other COLD systems. As compared to other COLD systems, the
Company's patented directory structure and hardware data compression capability
enables more data to be stored on, and retrieved faster from, an optical disk,
thereby maximizing the performance of the user's system while reducing the cost
of storage. The Company's integrated COLD systems also enable a user to display
a retrieved document or report based upon criteria established by the user.
Additionally, the Company's integrated COLD systems allow data written to an
optical disk by one computer to be read on any other OAS-equipped computer,
regardless of whether such computer is a mainframe, minicomputer or workstation.
This feature protects the user's investment in stored data and allows data to be
interchanged with satellite data centers.
Business Strategy
The Company's objective is to become a leading provider of COLD systems. To
achieve this objective, the Company is pursuing a business strategy which
includes the following principal elements: (i) identify and pursue customers
with multiple CPUs and massive document storage and retrieval requirements; (ii)
establish strategic alliances; (iii) develop a network of international
resellers; and (iv) exploit opportunities in growth segments of the COLD systems
market.
Identify and Pursue Customers with Multiple CPUs and Massive Document
Storage and Retrieval Requirements. The Company's sales and marketing efforts
are focused primarily towards business entities that are mandated by government
regulation to maintain extensive data archives. Management believes that such
sales and marketing efforts will encourage the purchase and use of the Company's
products by such businesses. To capitalize on the acceptance of its products by
businesses that are generally recognized as leaders with respect to the early
use of new information technologies, the Company will continue to rely upon
successful product installations for strategic industry-specific references to
foster follow-on sales.
Establish Strategic Alliances. The Company is pursuing strategic alliances
with certain software companies. The Company believes that the establishment of
collaborative relationships with such companies and the integration of products
produced by the Company and such strategic partners will create competitive
advantages for the Company. Such competitive advantages include the opportunity
to access the strategic partner's existing and potential customer base and the
development of products which will provide technological advantages for end
users. The Company has qualified its ODSM software package and optical libraries
to work in conjunction with Computer Associates' Prevail/XP View package. The
Company has also qualified its software to work in conjunction with the Folders
product from RSD America, Inc., a report and document management company, and
with IBM's DFSMShsm, a hierarchical storage management software package. The
Company believes these strategic alliances and others will give the Company
greater access to the approximately 2000 IBM-compatible mainframe sites in North
America and others throughout the world.
Develop a Network of International Resellers. The Company believes the
number of IBM-compatible mainframe sites internationally equals or exceeds the
number of sites in the United States. The Company believes that substantially
all of these sites are potential users of COLD systems. It is not practical,
however, for the Company at this stage of its development to attempt to reach
these sites directly as a result of the geographical dispersion, language
barriers and costs associated with such effort. To reach these potential
customers, the Company intends to increase the number of international resellers
with which it does business. By expanding its international resale distribution
network, the Company believes it will be in a position to pursue opportunities
arising in the international COLD systems market.
Exploit Opportunities in Growth Segments of the COLD Systems Market. The
Company's long-term strategic direction is to further develop its software
products towards an open architecture multiplatform implementation. The Company
intends to structure its software products into functional modules which may be
linked together over a network, thereby permitting such products to run on any
computing platform found in a large enterprise. Such developments will create a
transparent, consistent user interface across platforms and allow the specific
functions within the product to be distributed across the enterprise in a
client/server configuration. This will allow each function, or multiple
functions such as data extraction and collection, to occur at the locations
within the enterprise that are operationally most efficient. For example, the
storage component may reside on a mainframe in a data center with all of the
attendant security, management and back-up systems, while the data collection
and extraction modules may be running on a dedicated server in a payment receipt
department at the same time customer service agents are accessing the data from
PCs in a telemarketing center.
Products
COLD Systems
Computer output to laser disk data storage systems are high-density optical
disk storage systems that store, index and retrieve formatted computer output.
COLD systems consist of a controller, an optical disk subsystem and application
software.
Hardware Products
The hardware portion of the Company's solution, the OAS, is a high
capacity, mainframe channel-attached hybrid magnetic/optical disk storage
system, composed of the OAS controller and an optical disk robotic
"autochanger." The OAS controller can direct various types and models of robotic
autochanger systems, which are manufactured by a number of vendors, commanding
such robots to mount and dismount disks automatically as needed in response to
requests from the host software. These autochangers, which the Company purchases
from independent third party suppliers, are installed by the Company as a part
of the integrated system at the customer site. Autochangers of varying
capacities are available to meet the needs of the marketplace, for storage
requirements from 80 million pages to multiple tens of billions of pages.
Autochangers. The entry-level autochanger supports customers with
relatively modest storage volumes. When used in conjunction with the Company's
data compression technology, the capacity of this autochanger is significantly
enlarged. In such instance, the entry-level autochanger will have the capacity
to store over 80 million typical report pages.
Because the optical drives housed within the Company's most commonly
installed autochangers are American National Standards Institute
("ANSI")-standard 5 1/4 inch multifunction drives, the optical disk platters
used within the autochanger may be a mixture of rewritable and write-once
("WORM") types. The rewritable disks are used to store those reports that do not
have to be retained for long time periods. The disks are then re-used when the
useful life of the reports has elapsed. WORM disks preclude modification of
data, as required for data such as securities industry reports subject to the
record retention rules of the Securities and Exchange Commission.
Customer need for greater capacity is addressed by a field-upgradeable
family of autochangers. Middle-range requirements are accommodated by a system
which can store from 295 to 590 million report pages in a compact (3 foot by 3
foot) floor area, while large capacity needs are served by the Company's largest
system, which stores from 429 million to more than 1 billion pages. Multiple
systems may be combined for even greater capacity. The Company also provides 12
and 14 inch format WORM solutions.
The OAS Control Unit. The control unit of the OAS system is directly
attached to the mainframe via a conventional IBM-compatible interface to an
input-output ("I/O") channel of the IBM-compatible mainframe. The control unit's
dedicated I/O hardware passes data back and forth over the channel between the
mainframe and the optical disk autochanger at up to 3 megabytes per second. The
control unit is an intelligent storage management subsystem, with self-contained
software to track platter and file locations and automate the movement of disks
into and out of the optical disk drives within the robotic autochanger.
The OAS control unit contains a cache buffer (a large bank of RAM used for
temporary storage when transferring data from one device to another) to permit
data to be exchanged rapidly between the mainframe and the optical disk drives.
In addition, the control unit performs data compression using a hardware-based
implementation of the Lempel-Ziv compression algorithm. When this hardware-based
compression is combined with GIGAPAGE's host-based software data compression,
compound compression ratios of 7.5:1 and higher are achieved. The robustness of
the compression capability is illustrated by the fact that on reports containing
redundant data, some users have achieved compression ratios as high as 40:1.
While not reflective of typical reports, this high compression illustrates the
adaptive capabilities of the dual data compression architecture of GIGAPAGE and
the OAS.
Software Products
During the last three years, the Company has developed two application
software products for IBM mainframe systems, ODSM and GIGAPAGE -- both of which
can be installed either separately or together in conjunction with the OAS.
ODSM is a system level "driver", a software module that communicates with
an external device such as a disk or tape drive, thereby allowing the OAS to be
used by software designed for use with IBM-compatible tape drives and robotic
tape mounting systems. Many data centers over the last decade have invested in
large robotic tape mounting systems which provide labor-free access to large
amounts of data stored on tape. These systems have a relatively slow access time
- -- occasionally several minutes -- which is acceptable for some batch operations
and backup of critical files, but is unacceptable for on-line retrieval of
reports or archival data. ODSM, however, when used with the OAS and an optical
disk autochanger, provides access times of 15 seconds or less to terabytes (one
trillion bytes) of "near-line" data (mountable volume data that is serviced by
robot). This allows users to access archival data through existing on-line
applications software with more satisfactory data access performance, yet at an
acceptable price. The Company has installed ODSM with the OAS at ComTek, a
Korean systems integrator, the Defense Logistics Agency on behalf of IBM
Corporation, Wright Patterson Air Force Base on behalf of Atlantic Research
Corp., and Nationwide Mutual Insurance Company.
GIGAPAGE is an end-user application for report storage and retrieval.
GIGAPAGE stores and retrieves computer-generated reports (such as customer
statements) on various combinations of DASD, optical disk or tape storage. This
enables organizations to eliminate their existing COM systems and reduce staff
used for manual retrieval of microfilm, microfiche and paper reports. Based on
information provided by its customers, the Company believes that a user of a
COLD system developed by the Company may recover its investment in GIGAPAGE
within a period as short as one year after the installation of such COLD system.
Such a return may be realized as a result of the low cost per megabyte
achievable through use of the OAS autochanger system and its hardware data
compression capability. GIGAPAGE also provides its users with the ability to
access report data efficiently, by displaying a retrieved document based upon
criteria established by the user. The Company believes that this creates
competitive advantages for end users who must quickly respond to customer
inquiries. GIGAPAGE changes report access from a slow, cumbersome,
manually-intensive process to a fast, near-line computer-based process. The
Company has successfully installed GIGAPAGE with the OAS at Pershing Securities
(a division of Donaldson Lufkin & Jenrette Inc.), Securities Industry Automation
Corporation and Nationwide Mutual Insurance Company.
Customer Support and Service
In addition to being a source of revenue generation, the Company believes
that its approach to customer service and support has been and will continue to
be a significant factor in the market acceptance of its products. As a result,
the Company intends to expand its customer service and technical support
organization. Because most of the Company's products are used in complex, large
scale mainframe data centers, the successful implementation and utilization of
the Company's products substantially depends on the Company providing a high
level of customer service, training and support. Consequently, the Company
typically allocates substantial resources to customer installations,
particularly in the first few weeks before and the first several weeks after a
new installation. These resources include field support personnel who assess the
systems operating environment of the customer prior to installation, install and
test the hardware, support the hardware and coordinate the efforts of
third-party service providers that service the Company's installed base of
systems; systems engineering personnel who install and configure the software
components of the Company's systems, assist the customer in assuring that the
other elements of the customer's data center properly interface with the
Company's system, assist the customer in defining reports to be stored on the
Company's system and in supporting the Company's software; training personnel
who train the customer's data center managers and users on the operation and use
of the Company's system; a 24 hour help desk to field all customer support and
service inquiries; and third-party service organizations with whom the Company
contracts to provide on-site customer response for hardware-related issues.
In the nine month periods ended March 31, 1995 and 1996, service revenue
generated from the post-sale maintenance of COLD systems accounted for
approximately 12% and 27%, respectively, of the Company's total revenues.
Substantially all of the Company's customers have elected to extend their
service contracts with the Company beyond the one year period that is
customarily afforded to customers at the time of installation of new products.
The Company anticipates that its service-generated revenues will continue to
increase as the number of COLD system installations increases.
As of May 1, 1996, the customer service and support group consisted of 8
employees, 4 of whom are in-house and the remainder in the field. These
personnel provide support for the engineers maintaining customer equipment in
the field and provide the Company with an opportunity to recommend future system
sales to such customers.
Future Development Projects
The Company plans to continue the enhancement of its hardware and software
product offerings in response to both customer feedback regarding desired
product capabilities and analysis of competitive offerings to keep pace with
technological advances. Current enhancements planned for the GIGAPAGE system
include improvements to its indexing capabilities, increasing the speed with
which reports can be captured by the system and enhancing the retrieval
performance to expand the range of applications into which the system may be
introduced.
The Company also intends to pursue extensions to its mainframe-based
GIGAPAGE product by creating strategic alliances with other companies which
produce complementary products in the areas of workflow, imaging, and
client/server extensions. The OAS is expected to undergo continuous product
improvement focusing on increasing aggregate data throughput, expanding the
number of simultaneous optical drives supported, enhancing mainframe
connectivity via fiber optic (ESCON) channels, maintaining technological
currency through the addition of next generation optical disk drives and RAID
(redundant array of independent disks), further increasing the system's on-line
transaction performance through integration of RAID technology, and capitalizing
on the cost benefits achievable with the product's integrated hardware data
compression capability.
Further enhancements and evolution of the Company's product are anticipated
to occur in connection with the Company's intended development of its software
products to move such products towards an open architecture multiplatform
implementation. The Company expects that such developments will be accomplished
by structuring the products into functional modules which may be linked together
over a network, thereby permitting such products to run on any computing
platform found in a large enterprise. This will create a transparent, consistent
user interface across platforms and allow the specific functions within the
product to be distributed across the enterprise in a client/server
configuration. Such developments will permit each function, or multiple
functions, to occur at the locations within the enterprise that are
operationally most efficient.
Marketing
The market for COLD systems is segmented into the mainframe, PC
(stand-alone or LAN-based), client/server and CD-ROM markets. Within each market
segment, product offerings may be divided into two categories: (i) COLD software
packages and (ii) COLD turnkey systems. COLD turnkey systems are generally
comprised of COLD software bundled with a controller and an optical disk system.
Generally, the highest priced COLD systems are those that are mainframe or
client/server based. Additionally, the market for COLD systems includes a
revenue component derived from the service and support of COLD systems products.
A 1994 industry report published by Frost & Sullivan estimated that COLD
systems revenues, including revenues for software, turnkey system and service
support, would approximate $755 million in 1999. In 1989, the market for COLD
systems amounted only to $24.7 million. Growth in the market has been fostered
by an increasing awareness of the performance and economic benefits which may be
achieved through the use of COLD systems products. The report predicted that
growth in the COLD systems market during the 1994 to 1999 period would be
enhanced by the further development of the client/server and CD-ROM segments of
the market. The report further predicted that client/server based COLD systems
would become the dominant architecture in 1999, outpacing mainframe-based COLD
systems sales. Additionally, the report forecasted that COLD system suppliers
with the capability to provide post-installation service support would benefit
as the number of installed system units increases. Participation in the service
side of the business not only provides COLD system suppliers with incremental
revenue sources but also positions such COLD system suppliers to capitalize on
future systems sales opportunities with those customers for whom the supplier
provides system support.
The Company advertises and markets its products and services through direct
mailings, participation and exhibition of products at industry trade shows,
personal solicitations at businesses which have been identified as likely
purchasers of the Company's products and industry referrals. The Company
believes that its customer support function, which provides pre- and
post-installation training and services to end users, is a significant factor in
the market acceptance of its products. The Company intends to continue to expand
its customer support function as the number of system installations increase.
To explore opportunities in market segments in which it does not currently
compete, the Company has begun to create strategic business alliances and
intends to further develop certain of its software products to facilitate
integration with those of its corporate partners. To access international
markets, the Company has developed relationships with certain foreign resellers.
To capitalize on opportunities arising in the client/server segment of the COLD
systems market, the Company intends to reconfigure its software products into
functional modules. Additionally, the Company has established collaborative
relationships with certain software companies to market its products more
effectively and gain greater access and credibility with prospective customers.
Customers
Sales to Prudential Securities Incorporated, Securities Industry Automation
Corporation, Chevron Information Technologies, Inc., Korea Computer Technology,
and Nomura Research Institute of America, Inc. accounted for 21%, 20%, 19%, 9%
and 9%, respectively, of the Company's total net sales in the nine month period
ended March 31, 1995. Sales to Nationwide Mutual Insurance Company, Bank of
Boston Corporation Technology Services and Bell SYGMA Systems Management, Inc.
accounted for 42%, 24% and 12%, respectively, of the Company's total net sales
in the nine month period ended March 31, 1996.
During the year ended June 30, 1994, sales to Bank of Boston Corporation
Technology Services, MCI, and ARC Professional Services Group accounted for 38%,
25% and 12%, respectively, of the Company's net sales. Sales to Bank of Boston
Corporation Technology Services Incorporated, Chevron Information Technologies,
Inc., Securities Industry Automation Corporation, Prudential Securities
Incorporated, and Bell SYGMA Systems Management, Inc. accounted for 18%, 16%,
15%, 14% and 10%, respectively, of the total net sales for the year ended June
30, 1995.
Representative purchasers of the Company's GIGAPAGE product include
Pershing Securities, a division of Donaldson Lufkin & Jenrette Inc., Securities
Industry Automation Corporation and Nationwide Mutual Insurance. While certain
of these customers have purchased multiple systems, there can be no assurance
that they will purchase the Company's products in the future. See "Risk Factors
- -- Dependence on Significant Customers."
Competition
The computer data storage and retrieval industry is highly competitive and
the Company expects this level of competition to intensify. There are certain
competitors of the Company that have substantially greater financial, marketing,
development, technological and production resources than the Company. The
Company's primary competitors in the GIGAPAGE market are IBM Corporation,
FileTek Corporation, Data/Ware Corporation, and Network Imaging Systems Corp.
The primary competition for the OAS in conjunction with ODSM comes from
automated tape mounting systems produced by Storage Technology, Inc., Grau,
Inc., IBM Corporation and others. The Company believes that participants in the
data storage and retrieval market compete on the basis of a number of factors
including vendor and product reputation, system features, product quality,
performance and price, and quality of customer support services and training.
The Company positions itself to compete effectively with its competitors by
offering what it believes is superior customer service and technical support in
connection with hardware and software products which provide certain
technological and user application advantages. See "Risk Factors --
Competition."
Intellectual Property
Although the Company believes that its continued success will depend
primarily on its continuing product innovation, sales, marketing and technical
expertise, product support and customer relations, the Company believes it also
needs to protect the proprietary technology contained in its products. The
Company holds three United States patents on its directory structure and its
implementation of hardware data compression. The Company relies primarily on a
combination of copyright, trademark, trade secret laws and contractual
provisions to establish and protect proprietary rights in its products. The
Company typically enters into confidentiality and/or license agreements with its
employees, strategic partners, customers and suppliers and limits access to and
distribution of its proprietary information. Despite these precautions, it may
be possible for unauthorized third parties to copy certain portions of the
Company's products, reverse engineer or otherwise obtain and use information the
Company regards as proprietary.
The Company is subject to the risk of litigation alleging infringement of
third-party intellectual property rights. There can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products. Any such assertion, if found to be
true and legally enforceable, could require the Company to pay damages and could
require the Company to develop non-infringing technology or acquire licenses of
technology that is the subject of the asserted infringement, resulting in
product delays, increased costs, or both. See "Risk Factors--Protection of
Intellectual Property."
Assembly
Assembly of the Company's OAS is done at the Company's facility in North
Kingstown, Rhode Island. The Company designs and assembles portions of its COLD
systems which are then integrated at the Company's plant with optical disk
autochanger systems manufactured by a variety of third parties. Production of
the OAS entails testing, assembling and integrating standard and
Company-designed components and subassemblies built by and purchased from
independent suppliers. The Company has one full-time hardware engineer and two
manufacturing personnel. The Company configures and tests the Company-built and
third-party-supplied hardware and software in combinations to meet a wide
variety of customer requirements.
Although the Company generally uses standard parts and components for its
products, certain components, such as CPU boards, ESCON hardware and
high-density integrated circuits, are presently available only from single or
limited sources. The Company has no supply commitments with its vendors and
generally purchases components on a purchase order basis, as opposed to entering
into long-term procurement agreements with vendors. The Company has generally
been able to obtain adequate supplies of components in a timely manner from
current vendors or, when necessary to meet production needs, from alternate
vendors. The Company believes that alternative sources of supply would not be
difficult to develop over a short period of time but that an interruption in
supply or a significant increase in the price of these components could
adversely affect the Company's operating results and business. See "Risk
Factors--Reliance on Single or Limited Sources of Supply."
Research and Development
The COLD market is characterized by rapid technological developments,
evolving industry standards, swift changes in customer requirements and frequent
new product introductions and enhancements. As a result, the Company devotes and
intends to continue to devote substantial resources to research and development
to enhance its proprietary technology and knowledge. The Company utilizes its
own employees for research and development except in certain circumstances
involving product enhancements. In those circumstances, the Company regularly
retains independent experts to consult and to design new software modules. Such
product enhancements are then evaluated and integrated with the Company's
existing products by the Company's internal research and development staff. In
the nine months ended March 31, 1995 and 1996 and the years ended June 30, 1994
and 1995, the Company spent $1,316,302, $1,377,461, $1,505,010 and $1,755,891,
respectively, on research and development activities.
Employees
As of May 1, 1996, the Company had 31 full-time employees, including 11 in
product development, 4 in sales and marketing, 2 in manufacturing, 1 in data
facilities support, 8 in customer support services and 5 in finance and
administration. The Company considers its relations with its employees to be
satisfactory.
Competition for technical personnel in the Company's industry is intense.
The Company believes that its future success will depend on its continued
ability to attract and retain qualified personnel. See "Risk Factors--Ability to
Manage Growth."
Facilities
The Company's corporate headquarters are located in North Kingstown, Rhode
Island, in a leased facility consisting of approximately 10,300 square feet of
space occupied under a lease expiring in December 1997. The Company also leases
office space in New York City on a short-term basis. The Company believes its
existing facilities are adequate for its present needs.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name and Age Position
- ------------ --------
Malcolm G. Chace III, 61 (1)(2) Director, Chairman of the Board
Christopher C. Ingraham, 62 (2) Vice Chairman, Director
Hector D. Wiltshire, 54 President, Chief Executive Officer, Director
Thomas E. Gardner, 58 (1)(2) Chief Financial Officer, Treasurer, Director
Marvyn Carton, 77 (1) Director
Matthias E. Lukens, Jr., 45 Vice President - Research & Development
Christopher Neefus, 40 Vice President - Sales
George H. Steele III, 51 Vice President - Product Marketing
Denis L. Marchand, 43 Financial Controller
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
All directors hold office until the annual meeting of stockholders next
following their election and/or until their successors are elected and
qualified. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board. Information with respect to the business experience
and affiliations of the directors and the executive officers of the Company is
set forth below.
Mr. Chace has been Chairman of the Board of the Company since December 1994
and a director of the Company since 1991. Mr. Chace has been a Vice President
and director of Point Gammon Corporation, a Chace family investment company,
since 1984. Mr. Chace is also Chairman of Mossberg Industries, Inc.
("Mossberg"), a manufacturer of plastic reels principally used by the wire
industry, Chairman of Bank Rhode Island, and a director of Berkshire Hathaway
Company. He previously served as a director of Rhode Island Hospital Trust
National Bank.
Mr. Ingraham has been a director of the Company since July 1989. Mr.
Ingraham has served as President of CCI Group Ltd., a consulting firm which he
founded, from 1989 through the present. From 1971 to 1988, Mr. Ingraham was a
corporate officer at Polaroid Corp. where his responsibilities ranged from
Worldwide Camera Manufacturing to Diversified Business Development.
Mr. Wiltshire was appointed to the Board of Directors and elected President
and Chief Executive Officer of the Company in January 1996. From 1990 to
present, Mr. Wiltshire has served as President and Chief Executive Officer of
Wiltshire Technologies, Inc., a consulting firm providing strategic planning and
capital raising services for clients in the medical and technology industries.
From 1988 to 1990, Mr. Wiltshire served as President and Chief Executive Officer
of Riso, Inc., a developer and distributor of high speed printing systems. From
1968 to 1988, Mr. Wiltshire served in various senior positions, including
Director of Gestetner Holdings P.L.C. and President and Chief Executive Officer
of Gestetner U.S.A. and Canada, a manufacturer and distributor of printing and
duplicating equipment. Mr. Wiltshire was responsible for all Gestetner
activities in the Western Hemisphere, including North and South America, and in
Japan. Mr. Wiltshire is a member of the Association of Certified and Corporate
Accountants and the British Computer Society.
Mr. Gardner has served as Chief Financial Officer of the Company since
April l996, Treasurer of the Company since May 1994 and has been a director of
the Company since May 1994. Mr. Gardner does not serve full time as the
Company's Chief Financial Officer or Treasurer. Mr. Gardner has also served as
the President of LJT Associates (a planning and financial consulting firm) since
October 1993. From 1979 to April 1992, Mr. Gardner was Senior Vice President at
Rhode Island Hospital Trust National Bank. Mr. Gardner has served on various
Rhode Island and Providence commissions and committees and currently serves as
the Rhode Island Governor's appointee to the Depositors' Economic Protection
Corporation Performance Review Committee. Mr. Gardner, though LJT Associates, is
presently providing consulting services to Point Gammon Corporation.
Mr. Carton has been a director of the Company since 1994. Mr. Carton is
presently Director Emeritus of Allen & Company, Incorporated, an investment
banking and financial services company. Mr. Carton began his employment at Allen
& Company, Incorporated in September 1948 and held various positions at Allen &
Company, Incorporated until his retirement in 1991 from the office of Executive
Vice President. Mr. Carton has been a Director of Acquisition Resources Ltd., an
oil and gas company, since 1993, the Chairman of Brown University Third Century
Fund from 1981 to 1987 and Co-Chairman since 1989. Mr. Carton has also served in
the past as a member of the boards of directors of Syntex Corporation (a
pharmaceuticals company), Frank B. Hall (an insurance and financial services
firm), and American Axle & Manufacturing Co.
Mr. Lukens has been Vice President - Research and Development since January
1996. From May 1994 to January 1996 Mr. Lukens served as the Company's President
and Chief Executive Officer. From 1992 to 1994, Mr. Lukens served as President
of WHR Corp., a local and wide area network equipment compressing router
company. From 1990 to 1992, Mr. Lukens was President of Watch Hill Research
Inc., a producer of a high speed data compressor for wide area network
communications.
Mr. Neefus has been Vice President - Sales of the Company since October
1995. Mr. Neefus was previously employed by Anacomp, Inc., a manufacturer and
distributor of microfiche and microfiche reading equipment, from 1989 to 1995
where he held various management positions in both the service bureau and
hardware sales divisions, including Region Vice President for the New York/New
Jersey Business Operations. Prior to 1989, Mr. Neefus held various sales
positions, including positions relating to the sale of IBM-compatible mainframe
software solutions.
Mr. Steele has served as Vice President - Product Marketing since June
1995. Mr. Steele, a founder of the Company, previously served as Director of
Marketing from April 1988 to June 1995.
Mr. Marchand has served as Financial Controller of the Company since
September 1994. From July 1993 to September 1994 he was a Firm Administrator for
Rubin, Hay & Gould, P.C., a law firm located in Framingham, MA. From October
1990 through May 1993 he was the financial controller of the U.S. subsidiary of
EWAG Corporation, a high precision grinding machine manufacturer. Mr. Marchand
holds an M.B.A degree from Bryant College, is a certified internal auditor and
has successfully passed the Uniform Certified Public Accountant's examination.
Board Committees
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee is responsible for reviewing, approving and
recommending to the Board of Directors all compensation arrangements for
executive officers of the Company and for administering the 1987 Plan, the 1994
Employee Plan, the 1994 Directors' Plan and the 1996 Plan. The Audit Committee
is responsible for recommending to the Board of Directors the annual engagement
of the independent auditors and for reviewing with the independent auditors the
scope and results of audits, the internal accounting controls of the Company,
audit practices and professional services furnished by the independent auditors.
Director Compensation
The Company's directors currently do not receive any cash compensation for
service on the Board of Directors or any committee thereof, but directors may be
reimbursed for certain expenses in connection with attendance at Board or
committee meetings. Directors of the Company are eligible to participate in the
l994 Directors' Plan pursuant to which non-employee directors are automatically
granted options to purchase 338 shares of Common Stock upon their election to
the Board of Directors. The exercise price of such options is equal to the fair
market value of the underlying Common Stock on the date of grant. See
"--Executive Compensation--Stock Option Plans." The Company presently intends to
continue this compensation practice for its directors. However, the Company may
reconsider its policy if additional director compensation is necessary to enable
the Company to attract and retain qualified independent directors.
Search For President and Chief Executive Officer
The Company is currently engaged in a search for an executive to replace
Mr. Wiltshire as the Company's President and Chief Executive Officer. Such
search has been initiated as a result of Mr. Wiltshire's desire to serve the
Company only until such time as a suitable replacement can be identified and
hired. Mr. Wiltshire was retained in January 1996 as the Company's President and
Chief Executive Officer on an interim basis to effect a refinancing and
restructuring of the Company, to evaluate the Company's technology and to manage
and oversee the Company's research and development efforts. As a result of the
interim nature of his service, a search was initiated to find a suitable
long-term replacement for Mr. Wiltshire. Recently, Mr. Wiltshire has experienced
problems with his health. Although Mr. Wiltshire is expected to continue to
render services to the Company from his residence in Florida, the loss of his
services, before a successor has been installed, would have a material adverse
effect on the Company. See "Risk Factors -- Dependence on Key Personnel."
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information with respect to the compensation paid by the Company for services
rendered during the fiscal year ended June 30, 1995 to the chief executive
officer and the other executive officers of the Company whose compensation
exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
---------
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying All Other
Name and Principal Position Salary Bonus Options Compensation
- --------------------------- ------ ----- ---------- ------------
<S> <C> <C> <C> <C>
Matthias E. Lukens, Jr., $120,000 $30,000 -- --
President and Chief Executive
Officer (1)
Charles H. Boisseau, 53,077(3) 32,885(4) 676 --
Chief Financial Officer (2)
George H. Steele, Vice President - 60,000 -- -- $66,073(5)
Product Marketing
John Bonevich, 87,000 -- -- 89,741(5)
Vice President - Sales (6)
Louis A. Unger, 88,846 -- 676 --
Vice President-Development (7)
</TABLE>
- -------------------
(1) Effective January 2, 1996, Mr. Lukens' duties were changed. Mr. Lukens now
serves as Vice President-Research and Development.
(2) Effective November 6, 1995, Mr. Boisseau's service to the Company ended.
(3) Excludes consulting fees in the amount of $22,000 paid to Mr. Boisseau
during fiscal year 1995 prior to his commencement of service as an employee
of the Company.
(4) In lieu of cash payment of certain bonus compensation, the Company also
issued 7,500 shares of Common Stock to Mr. Boisseau. See "-Employment
Agreements."
(5) Represents sales commissions paid during fiscal 1995.
(6) Effective September 29, 1995, Mr. Bonevich's service to the Company ended.
(7) Effective February 2, l996, Mr. Unger's service to the Company ended.
Option Grants in Last Fiscal Year. The following table sets forth certain
information with respect to option grants during the fiscal year ended June 30,
1995 to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/SH) Date
- ---- ------- ----------- ------------ ----
<S> <C> <C> <C> <C>
Matthias E. Lukens, Jr. -- -- -- --
Charles H. Boisseau (1) 676 14% $222 2/5/96
George H. Steele -- -- --
John Bonevich -- -- --
Louis A. Unger(1) 676 14% $222 5/2/96
</TABLE>
(1) As a result of the termination of service by each of Messrs. Boisseau and
Unger, the unexercised options held by each of them lapsed 90 days
following their respective severance dates.
Year-end Option Table. During the fiscal year ended June 30, 1995, none of
the Named Executive Officers exercised any options issued by the Company. The
following table sets forth information regarding the stock options held as of
July 1, 1995 by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised Value of Unexercised In-the-Money-
Name Options at Fiscal Year-End Options at Fiscal Year End
- ----
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Matthias E. Lukens, Jr. 1,599(1) 1,549(1) (2) (2)
Charles H. Boisseau(3) 83 1,006 (2) (2)
George H. Steele 402(1) 5(1) (2) (2)
John Bonevich(3) 83 153 (2) (2)
Louis A. Unger(3) -- 676 (2) (2)
</TABLE>
- -------------------
(1) Upon consummation of the Offering, the exercise price of the outstanding
options will be reduced to a price equal to the public offering price of
each share of Common Stock included in the Units (assuming that the public
offering price is attributed solely to the shares of Common Stock included
in the Units).
(2) The exercise price of the options outstanding at June 30, 1995 was greater
than the estimated fair market value of the Company's Common Stock on such
date. In the absence of a public trading market, the fair market value was
estimated to be equal to the Company's book value on such date.
(3) As a result of the termination of service by each of Messrs. Boisseau,
Bonevich and Unger, the unexercised options held by each of them lapsed 90
days following their respective severance dates.
Stock Option Plans
The Company adopted the 1987 Plan pursuant to which key employees of the
Company are eligible to receive grants of options to purchase Common Stock in
the discretion of the Compensation Committee. An aggregate of 3,412 shares of
Common Stock have been reserved for issuance under the 1987 Plan and options to
purchase 2,197 shares of Common Stock have been granted at exercise prices
ranging from $74 to $240.50. Upon consummation of the Offering, the exercise
price of the outstanding options will be reduced to a price equal to the public
offering price of each share of Common Stock included in the Units (assuming
that the public offering price is attributed solely to the shares of Common
Stock included in the Units).
The Company also adopted the 1994 Employee Plan pursuant to which key
employees of the Company, including directors who are employees, are eligible to
receive grants of options to purchase Common Stock in the discretion of the
Compensation Committee. The Company has reserved 8,750 shares of Common Stock
for issuance under the 1994 Employee Plan. Such number of reserved shares is
equal to the difference between 12,162 and the number of shares issuable upon
the exercise of options from time to time under the 1987 Plan. Options to
purchase 6,499 shares of Common Stock have been granted at exercise prices
ranging from $74 to $259. Upon consummation of the Offering, the exercise price
of the outstanding options will be reduced to a price equal to the public
offering price of each share of Common Stock included in the Units (assuming
that the public offering price is attributed solely to the shares of Common
Stock included in the Units).
Options granted under the 1987 Plan and the 1994 Employee Plan may be
either incentive stock options (within the meaning of Section 422 of the
Internal Revenue Code of 1986) or non-qualified options, in the discretion of
the Compensation Committee. Incentive stock options granted pursuant to either
the 1987 Plan or the 1994 Employee Plan may be for terms not exceeding 10 years
from the date of grant, except in the case of incentive stock options granted to
persons owning more than 10% of the total combined voting power of all classes
of stock of the Company, which may be granted for terms not exceeding five
years. In the case of non-qualified options granted pursuant to the 1987 Plan,
the terms and prices are determined in the discretion of the Compensation
Committee, but cannot be less than 50% of the fair market value of the shares
subject to the option. Non-qualified options under the 1994 Plan must be granted
at exercise prices not less than 100% of the fair market value of the shares
subject to the option. Incentive stock options granted under either the 1987
Plan or the 1994 Employee Plan may not be granted at a price which is less than
100% of the fair market value of the shares (110% in the case of persons owning
more than 10% of the total combined voting power of all classes of the stock of
the Company) subject to the option. Options may be granted only within 10 years
from the date of the plan's adoption.
In November 1994, the Company adopted the 1994 Directors' Plan, which is a
stock option plan for non-employee directors. The Company has reserved 2,027
shares for the 1994 Directors' Plan. There are options outstanding to purchase
1,013 shares pursuant to the 1994 Directors' Plan. Under the 1994 Directors'
Plan, upon a director's election to the Board, the director is automatically
awarded an option to purchase 338 shares of Common Stock, at an exercise price
equal to 100% of the fair market value on the date the option is granted. The
option is not exercisable until the director has served one full year term from
the date such director was elected. The option then vests 25% on each of the
first through fourth anniversaries of the date of the grant. Upon consummation
of the Offering, the exercise price of the outstanding options will be reduced
to a price equal to the public offering price of each share of Common Stock
included in the Units (assuming that the public offering price is attributed
solely to the shares of Common Stock included in the Units).
In April 1996, the Company adopted the 1996 Plan pursuant to which key
employees of the Company, including directors who are employees, are eligible to
receive grants of options to purchase Common Stock, at the discretion of the
Compensation Committee. The Company has reserved 200,000 shares of Common Stock
for issuance under the 1996 Plan. Options granted under the 1996 Plan can be
either incentive stock options or non-qualified options, at the discretion of
the Compensation Committee. To date, no options have been granted under the 1996
Plan.
Non-Plan Options
From time to time, the Company has issued options to purchase shares of its
Common Stock to certain consultants and in connection with certain equity and
debt financings provided to the Company. As of May 1, 1996, the Company had
non-plan options to purchase 765 shares of Common Stock outstanding; of such
amount, options to purchase 216 shares, 20 shares and 202 shares were held by
Mr. Ingraham, Mr. Lukens and Mossberg, respectively. Mr. Chace is the Chairman
of Mossberg. The non-plan options are all 100% vested and the exercise price of
the options range from $222 to $240.50 per share. Each of Messrs. Ingraham and
Lukens received his options as compensation for services rendered to the Company
as a consultant and Mossberg received its options in connection with certain
debt financing it provided to the Company. Upon consummation of the Offering,
the exercise price of the outstanding options will be reduced to a price equal
to the public offering price of each share of Common Stock included in the Units
(assuming that the public offering price is attributed solely to the share of
Common Stock included in the Units).
Employment Agreements
The Company has entered into an employment agreement with Mr. Lukens
pursuant to which he is currently employed full-time as the Company's Vice
President-Research and Development. Mr. Lukens began his employment with the
Company in May 1994 as the Company's President and Chief Executive Officer. On
January 2, 1996, Mr. Luken's position and duties were changed to Vice
President-Research and Development. Pursuant to the terms of the employment
agreement, if Mr. Lukens voluntarily terminates his employment with the Company
prior to July 31, 1996 as a result of the change in his position and duties, he
will be entitled to severance benefits equal to six months salary. The
employment agreement expires on August 31, 1997, subject to successive automatic
one year renewals unless terminated by the Company at least 90 days before
expiration of the term. Mr. Lukens receives an annual base salary of $119,000,
subject to increase at the discretion of the Compensation Committee.
Additionally, Mr. Lukens is entitled to participate in any incentive
compensation, bonuses and stock options established for the benefit of executive
level employees of the Company as determined by the Board of Directors or the
Compensation Committee. Mr. Lukens is restricted from competing with the Company
and prohibited from disclosing any confidential information regarding the
Company during and following his period of employment.
In January 1995, the Company entered into an employment agreement with Mr.
Boisseau, which was amended and restated as of September 1, 1995. Pursuant to
the terms of the employment agreement, Mr. Boisseau was to receive an annual
base salary in the amount of $115,000, which base salary was subject to
automatic increase to $150,000 after the Company had achieved either: (i) two
consecutive profitable quarters and had consummated an initial public offering
of the Common Stock, or (ii) three consecutive profitable quarters. Mr. Boisseau
was also entitled to bonus compensation in the amount of $180,000. In lieu of
cash payment of such bonus compensation, the Company issued 7,500 shares of
Common Stock to Mr. Boisseau. Additionally, the Board of Director awarded Mr.
Boisseau additional performance-based bonus compensation in the amount of
$32,885. Mr. Boisseau's service to the Company terminated in November 1995.
However, pursuant to the terms of the employment agreement, the Company was
required to pay to Mr. Boisseau severance benefits in an amount equal to six
months salary. The final payments to Mr. Boisseau pursuant to the employment
agreement were made on May 8, 1996. Mr. Boisseau has released the Company from
any and all future obligations which might arise under or in connection with his
former employment by the Company.
CERTAIN TRANSACTIONS
Debt Transactions with Mr. Chace and his Affiliates
In November 1994, the Company entered into a secured line of credit with
Mossberg, pursuant to which Mossberg loaned the Company $300,000 secured by
certain accounts receivable of the Company. The interest rate on the outstanding
balance of the line of credit was 9 3/4% per annum. The line of credit was
repaid and terminated in January 1995. Mr. Chace, the Chairman of Mossberg, owns
17.15% of the common stock of Mossberg.
In December 1994, the Company entered into a secured line of credit with
Mr. Chace, pursuant to which Mr. Chace loaned the Company $200,000 secured by
certain accounts receivable of the Company. The interest rate on the outstanding
balance of the line of credit was the prime rate of Fleet National Bank in
effect on the date of each advance plus 2% per annum. The line of credit was
repaid and terminated in January 1995.
In May 1995, the Company entered into a secured line of credit with
Mossberg, pursuant to which Mossberg loaned the Company $200,000 secured by
certain accounts receivable of the Company. The interest rate on the outstanding
balance of the line of credit was the prime rate of Fleet National Bank in
effect on the date of each advance plus 2% per annum. The line of credit was
repaid and terminated in September 1995.
In May 1995, the Company entered into a secured line of credit with
Elizabeth Z. Chace and Christian Nolen, as Trustees u/a/d/ August 30, 1938 f/b/o
Malcolm G. Chace III ("Trustees"), pursuant to which the Trustees loaned the
Company $250,000 secured by certain accounts receivable of the Company. The
interest rate on the outstanding balance of the line of credit was the prime
rate of Fleet National Bank in effect on the date of each advance plus 2% per
annum. Mr. Chace is the beneficiary of said trust. The line of credit was
increased to $300,000 in June 1995 and the additional $50,000 was immediately
borrowed by the Company. The line of credit was repaid and terminated in
December 1995.
In August 1995, the Company entered into an additional line of credit with
Mr. Chace, pursuant to which Mr. Chace loaned to the Company $500,000 secured by
certain future accounts receivable of the Company. The interest rate on the
outstanding balance of the line of credit was 10% per annum. The line of credit
was increased to $1,085,415 in December 1995 and the additional $585,415 was
immediately borrowed by the Company. See "The Company" and "Management's
Discussion and Analysis of Financial Condition -- Liquidity and Capital
Resources."
In connection with the Recapitalization, Mr. Chace exchanged promissory
notes in the aggregate principal amount of $1,335,415 plus $40,759 of accrued
but unpaid interest for 426,279 shares of Common Stock. See "The Company" and
"Management's Discussion and Analysis of Financial Condition -- Liquidity and
Capital Resources."
In January 1996, the Company borrowed $250,000 from Mr. Chace. Such
borrowings were evidenced by a demand promissory note which bore interest at the
rate of 10.25% per annum. The note, which was secured by certain accounts
receivable, was repaid in full in February 1996.
In February 1996, the Company borrowed $250,000 from Mr. Chace. Such
borrowings were evidenced by a demand promissory note which bore interest at the
rate of 10.25% per annum. The note, which was secured by certain accounts
receivable, was repaid in full in February 1996.
In March 1996, the Company borrowed $250,000 from Mr. Chace. Such
borrowings were secured by certain accounts receivable and were evidenced by a
demand promissory note which bore interest at the rate of 10% per annum. This
note was exchanged for units in the Bridge Financing.
In April 1996, the Company borrowed $85,000 from Mr. Chace for working
capital purposes. Such borrowings were evidenced by a demand promissory note
which bore interest at the rate of 10.25%. The note was repaid in full in May
1996 from the proceeds of the Bridge Financing. See "--Securities Offerings"
below.
Agreements with Former Officers
The Company is a party to a Consulting Agreement dated December 20, 1994
with Mario Briccetti, a former President and Chief Executive Officer of the
Company. Pursuant to the agreement, Mr. Briccetti agreed to provide the Company
with his assistance in matters in which he was involved on behalf of the Company
prior to his termination. Such assistance is to be rendered without
compensation, other than reimbursement of out-of-pocket expenses, except in
those instances requiring out-of-town travel for which he will be compensated
$650 per day. Pursuant to the agreement, in January 1995, Mr. Briccetti: (i)
exercised options to purchase 229 shares of Common Stock at an exercise price of
$74.00 per share, by delivering 76 shares of Common Stock owned by him valued at
$224.00 per share and paying $2.00 in cash for an aggregate exercise price of
$16,931; and (ii) exchanged options to acquire 915 shares of Common Stock
pursuant to the 1987 Plan for options to acquire 915 shares of Common Stock at
an exercise price of $92.50 pursuant to the 1994 Employee Plan. The exchange of
options created a new measurement date and the Company recognized compensation
expense in the amount of $118,517 based on the difference between the exercise
price and the fair market value of the options granted. The Company has no
existing obligations pursuant to this agreement with the exception of payment
for travel expenses and compensation for out of town travel if the Company
engages the services of Mr. Briccetti.
From time to time, the Company has issued options to purchase shares of its
Common Stock to certain consultants and in connection with certain equity and
debt financings provided to the Company. As of March 31, 1996 the Company had
non-plan options to purchase 916 shares of Common Stock outstanding; of such
amounts, options to purchase 216 shares, 20 shares and 202 shares were held by
Mr. Ingraham, Mr. Lukens and Mossberg respectively. Mr. Chace is the Chairman,
President and Chief Executive Officer of Mossberg. The non-plan options are all
100% vested. The exercise price of the options range from $222 to $240.50 per
share. Each of Messrs. Ingraham and Lukens received his options as compensation
for services rendered to the Company as a consultant and Mossberg received its
options in connection with certain financing it provided to the Company.
Securities Offerings
In May 1994, the Company sold 6,757 shares of Common Stock for $148 per
share in cash in a private placement. Manold Company, a general partnership in
which Mr. Chace is a partner, purchased 2,252 shares of Common Stock for an
aggregate purchase price of $333,334. As a result of such sale, the Company was
required, pursuant to anti-dilution provisions in agreements with certain
holders of Common Stock, to issue 5,255 shares of Common Stock to such
stockholders. Prior to this Offering, all rights of such holders to receive
additional shares of Common Stock pursuant to such anti-dilution provisions have
been terminated.
During the second quarter of fiscal 1995, the Company sold 2,671 shares of
Common Stock in a private placement for a total of $593,000 in cash to certain
of the Company's directors and their affiliates. The following directors and
affiliates purchased shares of Common Stock from the Company: Mr. Carton
purchased 338 shares, Mr. Gardner purchased 67 shares, Mr. Ingraham purchased 13
shares, Manold Company purchased 751 shares, Paul A. Gould purchased 225 shares,
Allen & Company, Inc., a company on whose Board of Directors Mr. Carton serves,
purchased 526 shares and Brown University Third Century Fund, an entity on whose
Board of Directors Mr. Carton serves, purchased 751 shares.
In January 1995, the Company sold 50,000 shares of Preferred Stock for
$2,000,000 in cash in a private placement to the Trustees.
In September 1995, the Company sold 26 units, each unit consisting of a
$50,000 promissory note and a warrant to purchase 265 shares of Common Stock, in
a private placement for a total of $1,300,000 in cash. Among the purchasers, Mr.
Chace purchased 4 units for $200,000 and Mr. Wiltshire purchased 10 units for
$500,000. The promissory notes and warrants subsequently have been either
canceled or exchanged for shares of Common Stock. See "The Company --
Recapitalization."
In connection with the Bridge Financing, Mr. Chace purchased from the
Company five units, each consisting of a $50,000 promissory note and a warrant
to purchase 25,000 shares of Common Stock. A portion of the proceeds of this
Offering will be used to repay the indebtedness incurred in connection with the
Bridge Financing. Additionally, upon consummation of this Offering, Mr. Chace
will receive 125,000 New Warrants in exchange for the Bridge Warrants he had
acquired in connection with the Bridge Financing. Mr. Chace is one of the
Selling Securityholders who are offering hereby to sell certain securities. See
"The Company -- Recent Bridge Financing" and "Selling Securityholders."
Transactions with Mr. Wiltshire
In January 1996, the Company issued 416,500 shares of Common Stock to
Hector D. Wiltshire in consideration for: (i) Mr. Wiltshire's agreement to serve
as the Company's President and Chief Executive Officer; (ii) his agreement to
relinquish the warrants he had acquired in connection with the $500,000 bridge
financing he provided to the Company in September 1995; and (iii) his agreement
to lend the Company $250,000 on a short-term basis. As a result, the Company
incurred a compensation expense in the amount of $744,000, including a non-cash
charge of $424,830 representing the fair value of the Common Stock as determined
by independent appraisal. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations." Mr. Wiltshire
simultaneously transferred 208,250 shares to each of his two adult children. In
January 1996, the Company borrowed $250,000 from Mr. Wiltshire. This loan,
secured by certain accounts receivable of the Company, bore interest at the rate
of the prime rate plus 2% per annum (10.25% on February 29, 1996) and was repaid
in full on February 29, 1996. See "-Securities Offerings" above.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of May 1,
1996 by (i) each stockholder who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) each of the Company's directors, (iii)
the Named Executive Officers, and (iv) all directors and executive officers of
the Company as a group. Unless otherwise indicated, each has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Percentage of Common Stock
--------------------------
Shares of
Common Stock Prior to the After the
Name Beneficially Owned Offering Offering(3)
---- ------------------ ------------ -----------
<S> <C> <C> <C>
Malcolm G. Chace, III(1) 757,212 50.13% 20.78%
A.I.M. Overseas N.V. 236,500 15.66 6.49
Hector D. Wiltshire - -
Raymond Wiltshire (2) 208,250 13.79 5.71
Sandra Wiltshire (2) 208,250 13.79 5.71
Marvyn Carton (4) 422 * *
Thomas E. Gardner (5) 13,975 * *
Christopher C. Ingraham (6) 2,423 * *
George H. Steele (7) 1,138 * *
Matthias E. Lukens, Jr. (8) 1,588 * *
Charles H. Boisseau 7,500 * *
John Bonevich - - -
Louis A. Unger - - -
Directors and executive officers 776,758 51.34% 21.30
as a group (8 persons) (9)
</TABLE>
- -------------------
* Less than one percent.
(1) Excludes 203 shares of Common Stock owned of record by Mossberg Industries,
Inc. of which Mr. Chace is the Chairman of the Board of Directors. Mr.
Chace disclaims beneficial ownership of the shares of Common Stock owned of
record by Mossberg Industries, Inc.
(2) Raymond Wiltshire and Sandra Wiltshire are each adult children of Mr.
Hector Wiltshire. See "Selling Securityholders." Mr. Hector Wiltshire
disclaims beneficial ownership of the shares of Common Stock owned of
record by each of Raymond and Sandra Wiltshire.
(3) Assumes that all Common Stock held by such stockholder is sold in the
Concurrent Offering.
(4) Includes 84 shares of Common Stock issuable upon exercise of currently
exercisable stock options.
(5) Includes 84 shares of Common Stock issuable upon exercise of currently
exercisable options.
(6) Includes 320 shares of Common Stock issuable upon exercise of currently
exercisable options.
(7) Includes 402 shares of Common Stock issuable upon exercise of currently
exercisable options.
(8) Consists of currently exercisable options to purchase 1,588 shares of
Common Stock.
(9) Includes 3,538 shares of Common Stock issuable upon exercise of currently
exercisable options.
SELLING SECURITYHOLDERS
An aggregate of 750,000 Redeemable Warrants which will be issued to certain
Selling Securityholders in exchange for the Bridge Warrants, together with
750,000 shares of Common Stock issuable upon the exercise of such Redeemable
Warrants, and an additional 100,000 shares of Common Stock are being offered
hereby, at the expense of the Company, for the account of the Selling
Shareholders. See "Securities Eligible for Future Sale." The Bridge Warrants
were issued as part of the Bridge Financing. Sales of such Common Stock, such
Redeemable Warrants and the underlying shares of Common Stock may depress the
price of the Common Stock or Redeemable Warrants in any market that may develop
for such securities.
The following table sets forth information with respect to persons for whom
the Company is registering the Redeemable Warrants and shares of Common Stock
for resale to the public in the Concurrent Offering. Beneficial ownership of
Redeemable Warrants and Common Stock by such Selling Securityholders after the
Offering will depend on the number of securities sold by each Selling
Securityholder in the Concurrent Offering.
<TABLE>
<CAPTION>
Ownership After the Offering and Ownership After the Offering and
Prior to Sales in the Concurrent Offering(1) After Sales in the Concurrent Offering (1)
-------------------------------------------- ------------------------------------------
Redeemable Warrants Common Stock Redeemable Warrants Common Stock
------------------- ------------ ------------------- ------------
Selling Securityholder Number Percent Number Percent Number Percent Number Percent
- ---------------------- ------- ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Malcolm G. Chace, III 125,000 16.6% 757,213 20.78% -0- -0- 757,213 20.78%
Celeste C. Grynberg 37,500 5.0 - - -0- -0- - -
Stephen J. Nicholas 37,500 5.0 - - -0- -0- - -
Stanley S. Arkin 37,500 5.0 - - -0- -0- - -
Ery W. Kehaya and
Helga L. Kehaya 37,500 5.0 - - -0- -0- - -
Ronald J. Frank 37,500 5.0 - - -0- -0- - -
Lincolnwoods
Investments, LLC 37,500 5.0 - - -0- -0- - -
Joseph Jurgensmeyer 37,500 5.0 - - -0- -0- - -
Barry Lind and Neil
Bluhm 37,500 5.0 - - -0- -0- - -
Daniel R. Lee 37,500 5.0 - - -0- -0- - -
Charles Johnston 37,500 5.0 - - -0- -0- - -
Michael Trokel 125,000 16.6 - - -0- -0- - -
Allen Meisels 125,000 16.6 - - -0- -0- - -
Raymond Wiltshire - - 208,250 5.71 - - 158,250 4.34
Sandra Wiltshire - - 208,250 5.71 - - 158,250 4.34
------- ---- --------- ------ --- --- --------- ------
Total 750,000 100% 1,173,713 32.20% -0- -0- 1,073,713 29.46%
</TABLE>
- --------------------------
(1) Assuming no purchase by any Holder of Common Stock or Redeemable Warrants
offered in the Offering.
The securities offered by the Holders are not being underwritten by the
Underwriters. The Holders have agreed not to sell or otherwise dispose of any of
their securities during the Lock-up Period unless the prior consent of the
Representative is obtained. With such consent, the Holders may sell the
Redeemable Warrants or the shares of Common Stock at any time on or after the
date hereof. In addition, the Holders have agreed with the Company that, during
the period ending on the second anniversary of the effective date of the
Registration Statement, the holders will not sell such securities other than
through the Representative, and that the Holders shall compensate the
Representative in accordance with its customary compensation practices. Subject
to these restrictions, the Company anticipates that sales of the Redeemable
Warrants or the shares of Common Stock may be effected from time to time in
transactions (which may include block transactions) in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, or at negotiated prices. The Holders may effect such transactions by
selling the Redeemable Warrants or the shares of Common Stock directly to
purchasers or through broker-dealers that may act as agent or principals. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the holders or the purchasers of the Redeemable Warrants or the
shares of Common Stock for whom such broker-dealers may act as agents or to whom
they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Holders and any broker-dealers that act in connection with the sale of
the Redeemable Warrants or the shares of Common Stock as principals may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act and any commission received by them and any profit on the resale
of such securities as principals might be deemed to be underwriting discounts
and commissions under the Securities Act. The Holders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of such securities against certain liabilities, including liabilities arising
under the Securities Act. The Company will not receive any proceeds from the
sales of the Redeemable Warrants or the shares of Common Stock by the Holders,
although the Company will receive proceeds from the exercise of the Redeemable
Warrants. Sales of the Redeemable Warrants or shares of Common Stock by the
Holders, or even the potential of such sales, would likely have an adverse
effect on the market price of the Units, the Redeemable Warrants and Common
Stock.
At the time a particular offer of Redeemable Warrants or the shares of
Common Stock is made, except as herein contemplated, by or on behalf of a
Holder, to the extent required, a Prospectus will be distributed which will set
forth the number of Redeemable Warrants or shares of Common Stock being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for shares
purchased from the Holder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the securities of the Company offered by this Prospectus
may not simultaneously engage in market-making activities with respect to such
securities of the Company during the applicable "cooling-off" period (two or
nine days) prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Holders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-6 and 10b-7, in connection with
transactions in such securities, which provisions may limit the timing of
purchases and sales of such securities by the Holders.
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 8,000,000 shares of
Common Stock, $.01 par value, and 1,000,000 shares of Preferred Stock, $.01 par
value. Immediately prior to the issuance and sale of the Units pursuant to this
Offering, the Company will have outstanding 1,510,606 shares of Common Stock
held of record by approximately 127 stockholders and no shares of Preferred
Stock.
Description of Units
Each Unit consists of two shares of Common Stock, $.01 par value, and one
Redeemable Warrant, which entitles the holder to purchase one share of Common
Stock at an initial exercise price of $______ [66-2/3% of the initial public
offering price per Unit] (subject to adjustment). The Common Stock and
Redeemable Warrants will be detachable and separately transferable commencing on
the date of issuance.
Description of New Warrants and Redeemable Warrants
The Redeemable Warrants, including the New Warrants, will be issued under
and subject to the terms of a Warrant Agreement dated as of _________, 1996
between the Company and Continental Stock Transfer & Trust Company, as warrant
agent (the "Warrant Agent"). The summaries of certain provisions of the Warrant
Agreement hereunder do not purport to be complete and are subject to and are
qualified in their entirety by reference to all of the provisions of the Warrant
Agreement. A copy of the Warrant Agreement is being filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
General
Each Redeemable Warrant will entitle the registered owner thereof (the
"Warrantholder") to purchase one share of Common Stock at an initial exercise
price of $_____ [66-2/3% of the initial public offering price per Unit], subject
to adjustment, commencing on the date of issuance until 5:00 p.m. New York time,
on _______, 2001 [60 months after the date of this Prospectus] (the "Expiration
Date"), unless previously redeemed. Each Redeemable Warrant shall be issued in
registered form and is transferable from and after the date of issuance and
prior to the Expiration Date. Warrantholders are not entitled, by virtue of
being Warrantholders, to receive dividends or to consent to or receive notice as
shareholders in respect of any meeting of shareholders for the election of
directors of the Company or any other matter, or to vote at any such meetings or
to exercise any rights whatsoever as shareholders of the Company. Commencing
______, 1997 [12 months from the date of this Prospectus], the Company shall
have the right at any time to redeem all, but not less than all, of the
Redeemable Warrants at a redemption price of $.05 per Redeemable Warrant, on 30
days' prior written notice, provided that (i) the average closing bid price of
the Common Stock for any 20 trading days in a period of 30 consecutive trading
days ending on the fifth trading day prior to the date of the notice of
redemption, equals or exceeds 150% of the then exercise price per share, subject
to adjustment, and (ii) the Company shall have obtained the written consent of
the Representative.
Adjustments
The exercise price of the Redeemable Warrants and the number of shares of
Common Stock issuable upon exercise of the Redeemable Warrants are subject to
adjustment in certain events including subdivisions or combinations of the
Company's outstanding Common Stock, stock dividends and distributions, mergers
and consolidations.
Amendments
The Board of Directors of the Company, in its discretion, may amend the
terms of the Redeemable Warrants to, among other things, reduce the exercise
price; provided, however, that no amendment adversely affecting the rights of
the holders of the Redeemable Warrants may be made without the approval of the
holders of not less than a majority of the Redeemable Warrants then outstanding.
Exercise of Redeemable Warrants
The Redeemable Warrants may be exercised by surrendering to the Warrant
Agent a warrant certificate duly executed by the Warrantholder or his duly
authorized agent and indicating such Warrantholder's election to exercise all or
a portion of the Redeemable Warrants evidenced by such warrant certificate.
Surrendered warrant certificates must be accompanied by payment of the aggregate
exercise price of the Redeemable Warrants to be exercised, which payment may be
made, at the Warrantholder's option, in cash or by delivery of a cashier's or
certified check or any combination of the foregoing. A current Prospectus must
be in effect in order for holders of Redeemable Warrants to exercise such
Redeemable Warrants. Pursuant to the terms of the Warrant Agreement, the Company
has agreed to maintain a current Prospectus in effect until the Expiration Date.
Upon receipt of duly executed Redeemable Warrants and payment of the
exercise price, the Company shall issue and cause to be delivered, to or upon
the written order of exercising Warrantholders, certificates representing the
number of shares of Common Stock so purchased. If fewer than all of the
Redeemable Warrants evidenced by any warrant certificates are exercised, a new
warrant certificate evidencing the Redeemable Warrants remaining unexercised
will be issued to the Warrantholder.
The Company has authorized and will reserve for issuance a number of shares
of Common Stock sufficient to provide for the exercise of all of the Redeemable
Warrants. When delivered in accordance with the Warrant Agreement, such shares
of Common Stock will be fully paid and nonassessable.
Common Stock
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding Preferred Stock. Holders of Common Stock have no preemptive
rights and no right to convert their Common Stock into any other securities.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All shares of Common Stock to be issued in connection with this Offering,
upon completion of this Offering, will be fully paid and nonassessable.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock, par value $.01 per share. Such shares of
Preferred Stock may be issued in one or more series from time to time with such
designations, rights, preferences and limitations as the Board of Directors may
determine. The rights, preferences and limitations of separate series of
Preferred Stock may differ with respect to such matters as may be determined by
the Board of Directors, including, without limitation, the rate of dividends,
method or nature of payment of dividends, terms of redemption, amounts payable
on liquidation, sinking fund provisions, conversion rights and voting rights.
Such undesignated shares could also be used as an anti-takeover device by the
Company since they could be issued with "super-voting rights" and placed in the
control of parties friendly to the current management. The Company has no
present plans to issue any of the undesignated shares. See "Risk
Factors--Reduced Probability of Change of Control or Acquisition of Company Due
to Existence of Anti-Takeover Provisions."
Registration Rights
Pursuant to the terms of the warrants which the Company has agreed to issue
to the Representative at the closing of the Offering (the "Representative's
Warrants"), the holders of the Representative's Warrants are entitled to certain
rights with respect to the registration of the shares of Common Stock issuable
upon exercise of the Representative's Warrants. Subject to certain limitations,
if the Company proposes to register any of its securities under the Securities
Act, either for its own account or for the account of other security holders
during the seven year period following the closing of the Offering, the holders
of the Representative's Warrants are entitled to written notice of the
registration and are entitled to include, at the Company's expense, such shares
therein. All expenses of the holders of the Representative's Warrants or the
shares of Common Stock issuable upon its exercise will be borne by the Company.
In addition, during the five year period following the closing of the Offering,
the holders of the Representative's Warrants or the shares of Common Stock
issuable upon its exercise may require, subject to certain conditions and
limitations, on not more than one occasion, the Company to use its best efforts
to file a registration statement under the Securities Act with respect to the
shares of Common Stock issuable upon the exercise of the Representative's
Warrants.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock of the Company is
Continental Stock Transfer & Trust Company.
<PAGE>
SECURITIES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding an
aggregate of 3,643,940 shares of Common Stock assuming (i) the issuance by the
Company of 2,133,334 shares of Common Stock included in the Units offered
hereby, (ii) no issuance of shares of Common Stock relating to outstanding
warrants to purchase Common Stock, and (iii) no exercise of outstanding options
to purchase Common Stock. Of these shares, the 2,133,334 shares included in the
Units will be freely tradable without restriction or further registration under
the Securities Act, except for shares held by Affiliates of the Company (whose
sales would be subject to certain limitations and restrictions described below)
and the regulations promulgated thereunder.
The remaining 1,510,606 shares were sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities Act.
Of these shares, ______________ will become eligible for sale in the public
markets under Rule 144 90 days after the Effective Date. An additional
__________________ of these shares will first become eligible for sale in the
public markets under Rule 144 on ___________, although they have the benefit of
certain registration rights. See "Description of Securities -- Registration
Rights."
The Redeemable Warrants underlying the Units offered hereby and the shares
of Common Stock underlying such Redeemable Warrants, upon exercise thereof, will
be freely tradable without restriction under the Securities Act, except for any
Redeemable Warrants or shares of Common Stock purchased by an Affiliate, which
will be subject to the resale limitations of Rule 144 under the Securities Act.
In addition, 750,000 Redeemable Warrants, 750,000 shares of Common Stock
underlying such Redeemable Warrants and 100,000 shares of Common Stock are being
registered in the Concurrent Offering. Holders of such Redeemable Warrants have
agreed not to transfer such securities for a period of 18 months from the
effective date of the Registration Statement, without the prior written consent
of the Representative. An appropriate legend shall be marked on the face of the
certificates representing such securities.
In addition, without the consent of the Representative, the Company has
agreed not to sell or offer for sale any of its securities during the Lock-up
Period, except pursuant to outstanding options and warrants and pursuant to the
Company's existing option plans and no option shall have an exercise price that
is less than the fair market value per share of Common Stock on the date of
grant. An appropriate legend shall be marked on the face of certificates
representing all such securities.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of Common Stock (approximately 36,439 shares immediately
after this Offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale, subject to the filing
of a Form 144 with respect to such sale and certain other limitations and
restrictions. In addition, a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least three years would
be entitled to sell such shares under Rule 144 without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of the Company, such stockholder's holding period for the purpose of
effecting a sale under Rule 144 commences on the date of transfer from the
affiliate. The Commission has recently proposed to amend Rule 144 to shorten
each of the two-year and three-year periods by one year.
Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities.
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Joseph Stevens
& Company, L.P. is acting as Representative, have severally agreed, subject to
the terms and conditions contained in the Underwriting Agreement (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of Units set forth opposite their names:
<PAGE>
Number of
Underwriter Units
- ----------- ---------
Joseph Stevens & Company, L.P. ........................
---------
Total 1,066,667
=========
The Underwriters are committed to purchase all the Units offered hereby, if
any of the Units are purchased. The Underwriting Agreement provides that the
obligations of the several Underwriters are subject to the conditions precedent
specified therein.
The Company has been advised by the Representative that the Underwriters
initially propose to offer the Units to the public at the public offering price
set forth on the cover page of this Prospectus and that the Underwriters may
allow to certain dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD") concessions not in excess of $ per Unit, of
which amount a sum not in excess of $ per Unit may in turn be reallowed by such
dealers to other dealers. After the commencement of the Offering, the public
offering price, concessions and reallowances may be changed. The Representative
has informed the Company that it does not expect sales to discretionary accounts
by the Underwriters to exceed five percent of the securities offered by the
Company hereby.
The Company has granted to Underwriters an option, exercisable within 45
days of the date of this Prospectus, to purchase from the Company at the
offering price, less underwriting discounts and the non-accountable expense
allowance, all or part of an additional 160,000 Units on the same terms and
conditions of the Offering for the sole purpose of covering over-allotments, if
any.
The Company and the Selling Securityholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. The Company has agreed to pay to the Representative a
non-accountable expense allowance equal to three percent of the gross proceeds
derived from the sale of the Units underwritten, $25,000 of which has been paid
to date.
Upon the exercise of any Redeemable Warrants more than one year after the
date of this Prospectus, which exercise was solicited by the Representative, and
to the extent not inconsistent with the guidelines of the NASD and the Rules and
Regulations of the Commission, the Company has agreed to pay the Representative
a commission which shall not exceed five percent of the aggregate exercise price
of such Redeemable Warrants in connection with bona fide services provided by
the Representative relating to any warrant solicitation. In addition, the
individual must designate the firm entitled to such warrant solicitation fee.
However, no compensation will be paid to the Representative in connection with
the exercise of the Redeemable Warrants if (a) the market price of the Common
Stock is lower than the exercise price of the Redeemable Warrants, (b) the
Redeemable Warrants were held in a discretionary account or (c) the Redeemable
Warrants are exercised in an unsolicited transaction. Unless granted an
exemption by the Commission from its Rule 10b-6 promulgated under the Exchange
Act, the Representative will be prohibited from engaging in any market making
activities with regard to the Company's securities for the period from nine
business days (or such applicable periods as Rule 10b-6 may provide) prior to
any solicitation of the exercise of the Redeemable Warrants until the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right the Representative may have to receive a fee. As a
result, the Representative may be unable to continue to provide a market for the
Company's Units, Common Stock or Redeemable Warrants during certain periods
while the Redeemable Warrants are exercisable. If the Representative has engaged
in any of the activities prohibited by Rule 10b-6 during the periods described
above, the Representative undertakes to waive unconditionally its rights to
receive a commission on the exercise of such Redeemable Warrants.
Of the 3,643,940 shares of Common Stock to be outstanding upon completion
of the Offering, the holders of __________ shares of Common Stock have agreed
(i) not to Transfer any securities issued by the Company, including shares of
Common Stock or securities convertible into or exchangeable or exercisable for
or evidencing any right to purchase or subscribe for any shares of Common Stock
during the Lock-up Period, without the prior written consent of the
Representative and (ii) that, for 24 months following the effective date of the
Registration Statement, any sales of the Company's securities shall be made
through the Representative in accordance with its customary brokerage practices
either on a principal or agency basis. An appropriate legend shall be marked on
the face of certificates representing all such securities.
In connection with the Offering, the Company has agreed to issue and sell
to the Representative and/or its designees, at the closing of the proposed
underwriting, for nominal consideration, the Representative's Warrants to
purchase 106,667 Units. The Representative's Warrants are exercisable at any
time during a period of four years commencing at the beginning of the second
year after their issuance and sale at a price of $__________ [120% of the
offering price of the Units] per Unit. The shares of Common Stock, Redeemable
Warrants, and shares of Common Stock underlying the Redeemable Warrants issuable
upon the exercise of the Representative's Warrant are identical to those offered
to the public. The Representative's Warrants contain anti-dilution provisions
providing for adjustment of the number of warrants and exercise price under
certain circumstances. The Representative's Warrants grant to the holders
thereof and to the holders of the underlying securities certain rights of
registration of the securities underlying the Representative's Warrants.
In connection with the Bridge Financing, the Company paid to the
Representative, as placement agent, $75,000 in cash as commissions, a
non-accountable expense allowance of $22,500 and warrants (the "Placement Agent
Warrants") to purchase 150,000 shares of Common Stock at an exercise price of
$1.50 per share commencing May 28, 1997. The Placement Agent Warrants will be
canceled prior to the consummation of the Offering.
The Company has agreed that for five years from the effective date of the
Registration Statement, the Representative may designate one person for election
to the Company's Board of Directors (the "Designation Right"). In the event that
the Representative elects not to exercise its Designation Right, then it may
designate one person to attend all meetings of the Company's Board of Directors
for a period of five years. The Company has agreed to reimburse the
Representative's designee for all out-of-pocket expenses incurred in connection
with the designee's attendance at meetings of the Board of Directors. The
Company has also agreed to retain the Representative as the Company's financial
consultant for a period of 24 months from the date hereof and to pay the
Representative a monthly retainer of $2,000, all of which is payable in advance
on the closing date set forth in the Underwriting Agreement.
Prior to this Offering, there has been no public market for the Units, the
Common Stock, or the Redeemable Warrants. Accordingly, the initial public
offering price of the Units and the terms of the Redeemable Warrants were
determined by negotiation between the Company and the Representative. The
factors considered in determining such prices and terms, in addition to the
prevailing market conditions, included the history of and the prospects for the
industry in which the Company competes, the market price of the Common Stock, an
assessment of the Company's management, the prospects of the Company, its
capital structure and such other factors that were deemed relevant. The offering
price does not necessarily bear any relationship to the assets, results of
operations or net worth of the Company.
The Representative commenced operations in May 1994 and therefore does not
have extensive expertise as an underwriter of public offerings of securities. In
addition, the Representative is a relatively small firm and no assurance can be
given that the Representative will be able to participate as a market maker in
the Units, the Common Stock or in the Redeemable Warrants, and no assurance can
be given that any broker-dealer will make a market in the Units, the Common
Stock or the Redeemable Warrants.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Available Information."
LEGAL MATTERS
The validity of the Units offered hereby will be passed upon for the
Company by Edwards & Angell, Providence, Rhode Island. Orrick, Herrington &
Sutcliffe, New York, New York, has acted as counsel for the Underwriters in
connection with the Offering.
EXPERTS
The financial statements of the Company as of June 30, 1995 and March 31,
1996 and for each of the years in the two year period ended June 30, 1995 and
the nine months ended March 31, 1996 included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, and given on the authority of said firm as experts in auditing and
accounting.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2, including amendments thereto, relating to the Units offered hereby, the
Common Stock and Redeemable Warrants included therein and the New Warrants and
the Common Stock underlying each of the Redeemable Warrants and the New
Warrants. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
For further information with respect to the Company and the Units offered
hereby, reference is made to such Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and will also be available for inspection and copying at the regional offices of
the Commission located at 7 World Trade Center, New York, New York 10048 and at
Citicorp Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. As a result of the Offering, the Company will be subject to
the informational requirements of the Exchange Act. So long as the Company is
subject to the periodic reporting requirements of the Exchange Act, it will
furnish the reports and other information required thereby to the Commission.
The Company intends to furnish holders of Common Stock with annual reports
containing, among other information, audited financial statements certified by
an independent accounting firm. The Company also intends to furnish such other
reports as it may determine or as may be required by law.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements:
Report of Independent Accountants F-2
Balance Sheet F-3
Statement of Operations F-5
Statement of Mandatorily Redeemable Preferred Stock and
Stockholders' Equity (Deficit) F-6
Statement of Cash Flows F-7
Notes to Financial Statements F-9
<PAGE>
Report of Independent Accountants
The Board of Directors and Stockholders
Access Solutions International, Inc. (formerly
Aquidneck Systems International, Inc.)
In our opinion, the accompanying balance sheet and the related statements of
operations, of mandatorily redeemable preferred stock and stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Access Solutions International, Inc. (formerly Aquidneck
Systems International, Inc.), at June 30, 1995 and March 31, 1996, and the
results of its operations and its cash flows for the two years ended June 30,
1995 and for the nine months ended March 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company
has suffered recurring losses from operations and has a working capital
deficiency which raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
June 3, 1996
Boston, Massachusetts
<PAGE>
Access Solutions International, Inc.
Balance Sheet
<TABLE>
<CAPTION>
June 30, March 31,
1995 1996
---------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash $ 148,842 $ 140,649
Trade accounts receivable, net of
allowance for doubtful accounts of $60,000 and
$37,142, respectively 815,609 420,587
Inventories 590,673 501,581
Prepaid expenses and other current assets 75,388 49,234
---------------- -----------------
Total current assets 1,630,512 1,112,051
---------------- -----------------
Fixed assets, net 726,944 644,243
---------------- -----------------
Other assets:
Deposits and other assets 92,666 92,006
Service contract inventory 76,893 84,775
Deferred financing costs - 46,275
---------------- -----------------
Total other assets 169,559 223,056
---------------- -----------------
Total assets $ 2,527,015 $ 1,979,350
================ =================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Access Solutions International, Inc.
Balance Sheet
<TABLE>
<CAPTION>
June 30, March 31,
1995 1996
--------------- -----------------
<S> <C> <C>
Liabilities, Mandatorily Redeemable Preferred Stock
and Stockholders' Equity (Deficit)
Current liabilities:
Note payable - bank $ 440,000 $ 320,000
Notes payable - related parties 375,000 250,000
Current installments of capital lease obligations 181,171 119,282
Accounts payable 466,751 336,247
Accrued expenses 94,805 241,060
Accrued salaries and wages 327,285 511,157
Deferred revenue - prepaid service contracts 370,108 346,097
--------------- -----------------
Total current liabilities 2,255,120 2,123,843
Capital lease obligations, excluding current installments 97,505 37,906
--------------- -----------------
Total liabilities 2,352,625 2,161,749
--------------- -----------------
Mandatorily redeemable preferred stock, Series A, $.01
par value; redemption value of $40 per share;
1,000,000 shares authorized; 50,000 and 0 shares
issued and outstanding, respectively 2,088,462 -
--------------- -----------------
Commitments (Note 7)
Stockholders' equity (deficit):
Common stock, $.01 par value; 8,000,000
shares authorized; 34,140 and 1,511,865
shares issued, respectively 341 15,119
Additional paid-in-capital 5,428,229 10,449,720
Accumulated deficit (7,325,501) (10,629,182)
--------------- -----------------
(1,896,931) (164,343)
Treasury stock, at cost (362 and
1,259 shares, respectively) (17,141) (18,056)
--------------- -----------------
Total stockholders' equity (deficit) (1,914,072) (182,399)
--------------- -----------------
Total liabilities, mandatorily redeemable
preferred stock and stockholders' equity (deficit) $ 2,527,015 $ 1,979,350
=============== =================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Access Solutions International, Inc.
Statement of Operations
Years Ended June 30, 1994 and 1995 and Nine Months Ended March 31, 1995 and 1996
================================================================================================================================
Year Ended Nine Months Ended
June 30, March 31,
----------------------------------------- -------------------------------------------
1994 1995 1995 1996
------------------ ------------------- -------------------- -------------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales:
Products $ 519,132 $ 3,126,022 $ 2,111,028 $ 1,177,670
Services 358,133 476,039 301,294 440,257
------------------ ------------------- -------------------- -------------------
Total net sales 877,265 3,602,061 2,412,322 1,617,927
------------------ ------------------- -------------------- -------------------
Cost of sales:
Products 375,245 1,114,963 756,167 323,923
Services 128,598 184,744 119,048 190,872
------------------ ------------------- -------------------- -------------------
Total cost of sales 503,843 1,299,707 875,215 514,795
------------------ ------------------- -------------------- -------------------
Gross profit 373,422 2,302,354 1,537,107 1,103,132
------------------ ------------------- -------------------- -------------------
General and administrative
expense 807,594 2,033,851 1,244,898 1,623,330
Research and development
expense 1,505,010 1,755,891 1,316,302 1,377,461
Selling expense 483,678 890,868 528,131 717,557
Stock related compensation - - - 744,000
------------------ ------------------- -------------------- -------------------
Total expenses 2,796,282 4,680,610 3,089,331 4,462,348
------------------ ------------------- -------------------- -------------------
Operating loss (2,422,860) (2,378,256) (1,552,224) (3,359,216)
Interest income 6,950 15,059 10,283 7,056
Interest expense - related
party (4,113) (13,329) (10,652) (82,833)
Interest expense - other (49,956) (94,049) (69,494) (80,185)
------------------ ------------------- -------------------- -------------------
Loss before extraordinary gain (2,469,979) (2,470,575) (1,622,087) (3,515,178)
Extraordinary gain on debt
restructuring - - - 320,387
------------------ ------------------- -------------------- -------------------
Net Loss $ (2,469,979) $ (2,470,575) $ (1,622,087) $ (3,194,791)
================== =================== ==================== ===================
Net loss applicable to common stock:
Net loss $ (2,469,979) $ (2,470,575) $ (1,622,087) $ (3,194,791)
Accrued dividends on
preferred stock - (88,462) (41,096) (108,890)
------------------ ------------------- -------------------- -------------------
$ (2,469,979) $ (2,559,037) $ (1,663,183) $ (3,303,681)
================== =================== ==================== ===================
Net loss per common share:
Loss before extraordinary
item $ (1.10) $ (1.14) $ (.74) $ (1.61)
Extraordinary item - - - .14
------------------ ------------------- -------------------- -------------------
$ (1.10) $ (1.14) $ (.74) $ (1.47)
================== =================== ==================== ===================
Weighted average number of
common shares 2,236,087 2,250,259 2,249,946 2,254,241
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Access Solutions International, Inc.
Statement of Mandatorily Redeemable Preferred Stock and Stockholders' Equity (Deficit)
Years Ended June 30, 1994 and 1995 and Nine Months Ended March 31, 1996
====================================================================================================================================
Stockholders' Equity (Deficit)
------------------------------
Mandatorily
Redeemable
Preferred Stock Common Stock Additional
--------------- ------------ Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1993 - $ - 19,074 $ 191 $ 3,654,478
Proceeds from stock subscription receivable - - - - -
Shares issued in private offering for cash - - 6,756 68 999,932
Shares issued to meet anti-dilution - - 5,255 52 (52)
provisions
Shares issued as payment for services - - 155 1 45,452
Net loss - - - - -
----------- ------------ ------------ ---------- -------------
Balances at June 30, 1994 - - 31,240 312 4,699,810
Shares issued in private offerings 50,000 2,000,000 2,671 27 592,973
Shares purchased for Treasury - - - - -
Exercise of stock options - - 229 2 16,929
Compensation associated with award of stock
options - - - - 118,517
Accrued dividends on preferred stock - 88,462 - - -
Net loss - - - - -
----------- ------------ ------------ ---------- -------------
Balances at June 30, 1995 50,000 2,088,462 34,140 341 5,428,229
Accrued dividends on preferred stock - 108,890 - - -
Conversion of preferred stock (50,000) (2,197,352) 7,423 75 2,197,277
Conversion of debt, primarily related party - - 1,053,802 10,538 2,403,549
Compensation related to stock grant - - 416,500 4,165 420,665
Shares purchased for treasury - - - - -
Net loss - - - - -
----------- ------------ ------------ ---------- -------------
Balances at March 31, 1996 - $ - 1,511,865 $ 15,119 $10,449,720
=========== ============ ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
------------------------------
Treasury Stock Stock
Accumulated -------------- Subscription Total
Deficit Shares Amount Receivable Equity
------- ------ ------ ------------ ------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1993 $ (2,296,485) 286 $ (212) $ (185,004) $ 1,172,968
Proceeds from stock subscription receivable - - - 185,004 185,004
Shares issued in private offering for cash - - - - 1,000,000
Shares issued to meet anti-dilution - - - - -
provisions
Shares issued as payment for services - - - - 45,453
Net loss (2,469,979) - - - (2,469,979)
--------------- ----------- ------------- --------------- -----------------
Balances at June 30, 1994 (4,766,464) 286 (212) - (66,554)
Shares issued in private offerings - - - - 593,000
Shares purchased for Treasury - 76 (16,929) - (16,929)
Exercise of stock options - - - - 16,931
Compensation associated with award of stock
options - - - - 118,517
Accrued dividends on preferred stock (88,462) - - - (88,462)
Net loss (2,470,575) - - - (2,470,575)
--------------- ----------- ------------- --------------- -----------------
Balances at June 30, 1995 (7,325,501) 362 (17,141) - (1,914,072)
Accrued dividends on preferred stock (108,890) - - - (108,890)
Conversion of preferred stock - - - - 2,197,352
Conversion of debt, primarily related party - - - - 2,414,087
Compensation related to stock grant - - - - 424,830
Shares purchased for treasury - 897 (915) - (915)
Net loss (3,194,791) - - - (3,194,791)
--------------- ----------- ------------- --------------- ------------------
Balances at March 31, 1996 $(10,629,182) 1,259 $ (18,056) $ - $ (182,399)
=============== =========== ============= =============== =================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
Access Solutions International, Inc.
Statement of Cash Flows
Years Ended June 30, 1994 and 1995 and Nine Months Ended March 31, 1995 and 1996
===============================================================================================================================
Year Ended Nine Months Ended
June 30, March 31,
-------------------------------------- --------------------------------------
1994 1995 1995 1996
----------------- ----------------- ----------------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,469,979) $ (2,470,575) $ (1,622,087) $ (3,194,791)
----------------- ----------------- ----------------- -------------
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 155,784 214,264 162,242 185,724
Stock option compensation - 118,517 - -
Stock compensation award - - - 424,830
Debt restructuring gain - - - (320,387)
Interest expense settled with - - -
issuance of common stock - - - 62,129
Provision for doubtful accounts 35,999 40,000 - (22,858)
Other non-cash expenses 45,453 - - 36,930
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 584,490 (747,695) (416,172) 417,880
Inventories (17,632) (107,045) (81,174) 81,209
Deposits (70,800) (8,269) (6,025) 3,603
Prepaid expenses and
other current assets 6,643 (57,234) (55,182) 26,154
Increase (decrease) in:
Accounts payable 452,825 (81,867) (76,757) (130,506)
Accrued expenses 72,517 256,933 44,655 330,127
Deferred revenue (127,747) 280,235 152,868 (24,011)
----------------- ----------------- ----------------- ----------------
Total adjustments 1,137,532 (92,161) (275,545) 1,070,824
----------------- ----------------- ----------------- ----------------
Cash used by operating activities (1,332,447) (2,562,736) (1,897,632) (2,123,967)
----------------- ----------------- ----------------- ----------------
Cash flows from investing activities :
Additions to fixed assets (194,338) (254,628) (194,073) (97,837)
Additions to other assets (1,605) (680) (680) (8,124)
Deferred financing costs - - - (46,275)
----------------- ----------------- ----------------- ----------------
Cash used for investing activities $ (195,943) $ (255,308) $ (194,753) $ (152,236)
================= ================= ================= ================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
Access Solutions International, Inc.
Statement of Cash Flows (continued)
Years Ended June 30, 1994 and 1995 and Nine Months Ended March 31, 1995 and 1996
===============================================================================================================================
Year Ended Nine Months Ended
June 30, March 31,
-------------------------------------- --------------------------------------
1994 1995 1995 1996
----------------- ----------------- ----------------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from stock subscription
receivable $ 185,004 $ - $ - $ -
Proceeds from sale of common stock 1,000,000 593,000 593,000 -
Proceeds from sale of preferred stock - 2,000,000 2,000,000 -
Proceeds from the exercise of
stock options - 2 2 -
Proceeds from related party loans - 1,715,940 500,000 2,383,415
Repayments of related party loans - (1,340,940) (500,000) (1,173,000)
Repayments on long-term debt (106,300) - - -
Proceeds from bridge loans - - - 1,300,000
Repayments on capital lease
obligations (98,942) (150,629) (78,703) (121,490)
Net (payments) borrowings under note
payable - bank 500,000 (60,000) (60,000) (120,000)
Purchase of treasury stock - - - (915)
----------------- ---------------- ----------------- ----------------
Cash provided by financing
activities 1,479,762 2,757,373 2,454,299 2,268,010
----------------- ---------------- ----------------- ----------------
Net (decrease) increase in cash (48,628) (60,671) 361,914 (8,193)
Cash, beginning of year 258,141 209,513 209,513 148,842
----------------- ---------------- ----------------- ----------------
Cash, end of period $ 209,513 $ 148,842 $ 571,427 $ 140,649
================= ================ ================= ================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
Notes to Financial Statements
1. Business purpose and significant accounting policies
Business
Access Solutions International, Inc. (formerly Aquidneck Systems
International, Inc.) (the "Company") develops, assembles, sells and
services optical data storage systems consisting of integrated computer
hardware and software for the archival storage and retrieval of
computer-generated information. The Company's optical data storage systems
are sold principally to large organizations that need to store and retrieve
large quantities of computer-generated data. To date, the Company's
customers primarily operate in the financial services and insurance
industries.
The Company has suffered recurring losses from operations as it continued
to develop its products and infrastructure and has a net working capital
deficit at March 31, 1996. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The Company has recently
made significant reductions in overhead costs and completed a
recapitalization which eliminated substantially all of the Company's
long-term indebtedness. These actions have reduced the Company's breakeven
point. The Company is actively recruiting qualified candidates to
complement its existing management team and is planning to redesign certain
of its software products. The Company anticipates such redesign will permit
it to penetrate the client/server market segment. The Company is also
planning to establish additional collaborative relationships with vendors
and customers which will create new opportunities to foster sales of its
products and services. The Company has obtained $1.5 million of short-term
financing (see Note 14) and is anticipating consummating an initial public
offering ("IPO") of securities including its common stock. The Company
anticipates improved financial performance based upon a reduced breakeven
point, a more focused management team and increased sales resulting from
its product redesign, product enhancements and new collaborative
relationships. Accordingly, the financial statements do not include any
adjustments relating to the recoverability of assets and classification of
liabilities or any other adjustments that might be necessary should the
Company be unable to continue as a going concern.
In January 1996 the Company completed a recapitalization (see Note 2) which
included a reverse stock split in which each share of issued common stock
was converted into 1/74th of a share of common stock. Accordingly, all
references in these financial statements to number of shares, per share
amounts (other than par value) and stock option data have been
retroactively restated to give effect to this reverse split.
A summary of significant accounting policies used by the Company in the
preparation of these financial statements is as follows:
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventories consist primarily
of components used in production, finished goods held for sale and for
service needs, and optical disk storage libraries purchased from third
party vendors for resale to the Company's customers as part of integrated
systems. Base stock service inventories are maintained at customer
locations as required under service contracts and are amortized over a
four-year period using the straight-line method subject to acceleration in
the event of impairment or obsolescence.
The Company's products consist of integrated computer hardware and
software. Rapid technological change and frequent new product introductions
and enhancements could result in excess inventory quantities over current
requirements based on the projected level of sales. No estimate can be made
of a range of amounts of loss that are reasonably possible should such
technological developments be realized.
Fixed assets
Fixed assets are stated at cost. Depreciation and amortization are computed
using the straight-line method over the estimated useful lives of the
assets. The estimated useful life of all fixed assets is 5 years.
Revenue recognition
Product revenues include the sale of optical archiving systems, software
licenses and miscellaneous peripheral hardware.
Revenue from the sale of optical archiving systems and software licenses is
recognized when the system is installed and only insignificant
post-installation obligations remain. In the case of systems installed
subject to acceptance criteria, revenue is recognized upon acceptance of
the system by the customer. Revenues from hardware upgrades are recognized
upon shipment.
Service revenues include post-installation software and hardware
maintenance and consulting services.
The Company provides the first year of software maintenance to customers as
part of the software license purchase price and recognizes the revenue upon
installation of the software. Costs associated with initial year
maintenance are not significant. All software maintenance contracts after
the first year are billed in advance of the service period and revenues are
deferred and recognized ratably over the contract term. Hardware
maintenance is billed for varying terms, and is deferred and recognized
ratably over the term of the agreement. Revenues from consulting services
are recognized upon customers' acceptances or during the period in which
services are provided if customer acceptance is not required and such
amounts are fixed and determinable.
Software development costs
Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as
incurred until technological feasibility has been established. After
technological feasibility is established, any additional material amounts
of development costs are capitalized and amortized over the economic life
of the related product in accordance with Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. Costs capitalizable subject to technological
feasibility have not been significant to date.
Income taxes
Income taxes are accounted for in accordance with the Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires an asset and liability method of accounting for deferred income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those differences are expected to be recovered
or settled.
Net loss per share
Net loss per share is computed based on the weighted average number of
shares of common stock. Common stock equivalents have not been included in
the computation because their effect would be antidilutive. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
stock or other potentially dilutive instruments issued at prices below the
estimated public offering price per share during the twelve month period
prior to the filing or subsequent to the balance sheet date but before the
effective date of the initial public offering have been included in the
calculation as if outstanding for all periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates.
Reliance on single or limited sources of supply
The Company currently purchases all of its optical disk storage libraries,
CPU boards, fiber optic channel hardware and high-density integrated
circuits from single or limited sources. Although there are a limited
number of manufacturers of these components, management believes that other
suppliers could provide similar products on comparable terms. Total or
partial loss of any such source, however, could cause a delay in
manufacturing and a possible loss of sales, which would affect operating
results adversely.
Deferred financing costs
Legal and other costs incurred in conjunction with a planned initial public
offering of securities will be charged to paid-in capital when the offering
is consummated. If the offering is withdrawn, these capitalized costs will
be charged to expense.
Recent accounting pronouncements
In March 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of
("Statement 121"). Statement 121 addresses the accounting for the
impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used. It also addresses the
accounting for long-lived assets and certain identifiable intangibles to be
disposed of. Statement 121 establishes guidance for recognizing and
measuring impairment losses and requires that the carrying amount of
impaired assets be reduced to fair value. Statement 121 will be effective
for the Company's fiscal year beginning July 1, 1996. The Company does not
expect the adoption of Statement 121 to have a material impact on the
Company's financial condition, results of operations or liquidity.
In October 1995 the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("Statement 123").
Statement 123 defines a fair value based method of accounting for an
employee stock option or similar equity instrument and encourages (but does
not require) all entities to adopt that method of accounting for all of
their employee stock compensation plans. Entities electing to remain with
the accounting in APB Opinion 25, Accounting for Stock Issued to Employees,
must make pro forma disclosures of operating results and, if presented,
operating results per share, as if the fair value based method of
accounting defined in Statement 123 had been applied. Statement 123 will be
effective for the Company's fiscal year beginning July 1, 1996. The Company
has not determined whether the fair value based method will be adopted.
Interim financial statements
The accompanying statements of operations and accumulated deficit and of
cash flows for the nine months ended March 31, 1995 are unaudited, but in
the opinion of management include all adjustments (consisting only of
normal, recurring adjustments) necessary for a fair presentation of the
results of this interim period.
2. Recapitalization (including related party transactions)
In January 1996 the Company effected several changes to its debt and equity
capital. The changes included a reverse stock split in which each share of
issued common stock was converted into 1/74th of a share of common stock.
In September 1995 the Company sold 26 units, each unit consisting of a
$50,000 promissory note and a warrant to purchase 265 shares of common
stock at a price per share of $220. The value of the warrants was
insignificant. The total proceeds from the private placement were
$1,300,000. In January 1996 the promissory notes and warrants plus unpaid
interest in the amount of $21,370 were converted into 614,733 shares of
common stock of the Company. A director of the Company was among the
private investors who received shares of the Company in the exchange. Total
interest expense on these promissory notes was $55,562, of which $21,370
was satisfied through the issuance of shares. The Company recognized an
extraordinary gain relating to the portion of the debt restructuring
involving non-related parties. The extraordinary gain of $320,387 was based
on the difference between the fair value of the equity interest granted,
$289,476 and the carrying amount of the non-related party debt, $609,863.
The fair value of the equity interest granted was determined by independent
appraisal.
In January 1996 a director of the Company exchanged the balance due him
under a line of credit agreement totalling $1,335,415 plus unpaid interest
of $40,759 for 426,279 shares of common stock of the Company. Total
interest expense on this line of credit was $40,759, all of which was
satisfied through the issuance of shares.
The Company converted all of its outstanding Series A preferred stock into
7,423 shares of common stock as described in Note 12.
In conjunction with the recapitalization, the Company purchased 897 shares
of common stock from certain shareholders. The shareholders surrendered
certain anti-dilution rights they had previously obtained in a May 1993
private placement offering. The total amount paid by the Company for the
purchase of these shares and shareholder rights was $85,274. Of this
amount, $915, representing the fair value of the 897 shares acquired, was
charged to treasury stock and $84,359, representing the excess of the
amount paid over the estimated fair value of the shares, was charged to
general and administrative expenses. The fair value of the shares acquired
was determined by independent appraisal.
3. Inventories
Inventories consist of the following:
June 30, 1995 March 31, 1996
Production inventory $ 389,201 $ 465,391
Service inventory 134,193 120,965
Consigned inventory 144,172 -
--------------- ------------------
667,566 586,356
Inventory for service contracts (76,893) (84,775)
--------------- ------------------
Inventory available for sale $ 590,673 $ 501,581
=============== ==================
Consigned inventory at June 30, 1995 consisted of an installed optical data
storage system at a customer site which was awaiting customer acceptance.
In accordance with the Company's revenue recognition accounting policy
described in Note 1, revenue from this sale was recognized in fiscal 1996
upon acceptance of the system by the customer. Inventory required at
customer sites under service contacts is excluded from current assets as it
is not expected to be consumed in the next year.
4. Fixed assets
Fixed assets consist of the following:
June 30, 1995 March 31, 1996
Computers and office
equipment $ 740,701 $ 801,052
Furniture and fixtures 37,326 38,261
Purchased computer
software 149,866 152,122
Computer equipment held
under capital leases 526,954 561,249
---------------- -----------------
1,454,847 1,552,684
Accumulated depreciation
and amortization (727,903) (908,441)
---------------- -----------------
Net fixed assets $ 726,944 $ 644,243
================ =================
Depreciation and amortization expense was $180,538 during the period ended
March 31, 1996, and was $208,580 and $155,784 during fiscal 1995 and fiscal
1994, respectively.
5. Note payable to bank
The Company has indebtedness outstanding under a short-term bank loan in
the amount of $440,000 at June 30, 1995 and $320,000 at March 31, 1996 with
interest paid monthly at the bank's prime rate (8.25% at March 31, 1996)
plus 2%. The borrowings are secured by substantially all assets of the
Company. The loan requires a reduction of principal in the amount of
$10,000 each month until June 30, 1996 when the balance, $290,000, is
payable in full. As a result of the variable attributes of this loan, the
carrying amount approximates fair value.
6. Notes payable - related parties
In November 1994 the Company entered into a line of credit with a
corporation pursuant to which that corporation loaned the Company $300,000
secured by certain accounts receivable of the Company. The interest rate on
the outstanding balance of the line of credit was 9.75% per annum. The line
of credit was repaid and terminated in January 1995. A director of the
Company is the Chairman of that corporation.
In December 1994 the Company entered into a line of credit with a director
pursuant to which the Company borrowed $200,000 secured by certain accounts
receivable of the Company. The interest rate on the outstanding balance of
the line of credit was the prime rate in effect on the date of each advance
plus 2% per annum. The line of credit was repaid and terminated in January
1995.
In May 1995 the Company entered into a line of credit with a corporation
pursuant to which the Company borrowed $200,000 secured by certain accounts
receivable of the Company. The interest rate on the outstanding balance of
the line of credit was the prime rate in effect on the date of each advance
plus 2% per annum. The balance outstanding was $100,000 at June 30, 1995.
The line of credit was repaid and terminated in September 1995. A director
of the Company is the Chairman of that corporation.
In May 1995 the Company entered into a line of credit with a trust pursuant
to which the Trustees loaned the Company $250,000 secured by certain
accounts receivable of the Company. The interest rate on the outstanding
balance of the line of credit was the prime rate in effect on the date of
each advance plus 2% per annum. The line of credit was increased to
$300,000 in June 1995 and the balance outstanding was $275,000 at June 30,
1995. The line of credit was repaid in July 1995. The Company made several
additional borrowings and repayments under this line of credit throughout
1995. The final repayment was made in December 1995 when the line of credit
was terminated. A director of the Corporation is the beneficiary of said
trust.
In July 1995 the Company entered into a line of credit agreement with a
director pursuant to which the Company borrowed $1,335,415 at various
dates. This amount was partially secured by certain future accounts
receivable of the Company. Interest on the outstanding balance of the line
of credit was payable at the prime rate plus 2%. In connection with the
restructuring described in Note 2, the director subsequently exchanged all
indebtedness due under the line of credit in the principal amount of
$1,335,415, plus $40,759 of unpaid interest, for 426,279 shares of common
stock.
In January 1996 the Company borrowed $250,000 from an officer. This loan,
secured by certain accounts receivable of the Company, bore interest at the
prime rate plus 2% per annum. The loan was repaid in full in February 1996.
In February 1996 the Company borrowed $250,000 from a director. Such
borrowings were evidenced by a demand promissory note which bore interest
at the rate of 10.25% per annum. The note, which was secured by certain
accounts receivable, was repaid in full in February 1996.
In March 1996 the Company borrowed $250,000 from a director. Such
borrowings are secured by certain accounts receivable and are evidenced by
a demand promissory note which bears interest at the rate of 10% per annum.
Based on borrowing rates currently available to the Company for debt with
similar terms and maturities, the carrying amount of this note approximates
fair value. (See Note 14)
In April 1996 the Company borrowed $85,000 from a director for working
capital purposes. Such borrowings are evidenced by a demand promissory note
which bears interest at the rate of 10.25% per annum.
7. Leases
Operating
The Company leases building space for office and plant facilities. In
February 1996 the Company renegotiated the lease, extending it at
substantially the same rate through December 31, 1997. Under the revised
terms either party may terminate the lease with 60 days notice after
December 31, 1996. Total rent expense for the years ended June 30, 1994 and
1995 and for the nine months ended March 31, 1996 amounted to approximately
$52,000, $62,000 and $72,000, respectively.
The Company's remaining obligation under the building lease through the
lease extension is approximately $120,000.
Capital
The Company leases certain computer equipment under two capital lease
obligations totalling $157,188 at March 31, 1996. The related assets are
included in fixed assets. Amortization expense related to leased assets was
approximately $74,000 and $104,000 for the years ended June 30, 1994 and
June 30, 1995, respectively, and $84,000 during the nine months ended March
31, 1996. Accumulated amortization related to leased assets was $261,043 at
March 31, 1996.
Obligations under the capital leases are recorded at the present value of
future minimum lease payments using the interest rate implicit in the lease
agreements. As of March 31, 1996 the future minimum annual lease payments,
together with the present value of the net minimum annual lease payments
under the capital leases, are as follows:
Period ending
March 31, 1997 $ 130,046
March 31, 1998 27,314
March 31, 1999 13,657
------------------
171,017
Less: amount representing interest 13,829
------------------
Present value of net minimum lease payments 157,188
Less: current portion 119,282
------------------
Long-term portion of obligation under
capital leases $ 37,906
==================
8. Income taxes
On July 1, 1993 the Company prospectively adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("Statement
109"). In connection with the adoption, the Company recorded a deferred tax
asset of $1,405,000, primarily comprised of the potential tax benefit
associated with the Company's net operating loss ("NOL") carryforwards. At
the same time, the Company recorded a valuation allowance of $1,405,000
since based on the weight of available evidence, it was more likely than
not that the deferred tax assets would not be realized. The adoption of
Statement 109 did not have a material impact on the financial statements.
The Company has not recorded a provision for income taxes in the years
ended June 30, 1994 or 1995 or in the nine months ended March 31, 1996
because no net current or deferred benefit is recognizable for net losses
incurred in those years.
The tax effects of NOL carryforwards and temporary differences that give
rise to the deferred tax assets and liabilities at June 30, 1994 and 1995
and March 31, 1996 are as follows:
<TABLE>
<CAPTION>
June 30, March 31,
--------------------------------------- -----------------
1994 1995 1996
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $1,871,700 $2,700,000 $ 3,160,000
Research and development costs
capitalized for tax purposes - - 450,000
Compensation related reserves 18,400 30,200 17,500
Provision for doubtful accounts 8,000 24,000 14,900
Inventory 13,400 71,800 89,800
----------------- ----------------- ------------------
1,911,500 2,826,000 3,732,200
Deferred tax liabilities:
Fixed assets (18,000) (1,600) (1,600)
Valuation allowance (1,893,500) (2,824,400) (3,730,600)
----------------- ----------------- ------------------
Net deferred tax asset $ - $ - $ -
================= ================= ==================
</TABLE>
Statement 109 requires that a valuation allowance be established for
deferred tax assets, if based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset
will not be realized. The Company has determined that a valuation allowance
is required in light of its history of operating losses since its
inception.
At March 31, 1996 the Company has Federal and state NOL carryforwards
available to reduce future taxable income of approximately $7,900,000,
which expire in various amounts between the years 2002 and 2010, if not
previously utilized. In the event of an ownership change, as defined under
Section 382 of the Internal Revenue Code, utilization of NOL carryforwards
in the period following the ownership change can be significantly limited.
Management believes that the Company has incurred several changes of
ownership under these rules. As a result, utilization of the NOLs is
subject to various limitations, depending upon the year in which the NOL
originated. As of March 31, 1996 management estimates that approximately
$4,900,000 of the Company's Federal NOL carryforwards will be available to
offset taxable income that may be generated within the carryforward period.
Of this amount, approximately $2,200,000 is available for future
utilization without limitation. The other $2,700,000 is subject to a
limitation of approximately $180,000 of utilization per year. However,
because the limitation calculations are complex and subject to review by
the Internal Revenue Service, these limitations could be adjusted at a
later date.
In addition, in the event the Company consummates a public offering of
common stock, it is expected that another change of ownership will occur.
As a result of this change, management expects that all prior limitations
will remain in place, except that additional limitations will be imposed on
the $2,200,000 NOL carryforward previously available for utilization
without limitation, as described above. Management estimates that the
$2,200,000 NOL carryforward will be subject to a limitation of
approximately $150,000 of utilization per year.
9. Stock options
In 1987 the Company adopted an employee and director stock option plan (the
"1987 Plan"), pursuant to which the Company made grants of options through
November 1994. As of March 31, 1996, there were options outstanding to
purchase 2,197 shares under the 1987 Plan. In November 1994 the Company
adopted a new employee stock option plan (the "1994 Employee Plan") and a
stock option plan for non-employee directors (the "1994 Directors Plan").
The Company has reserved a number of shares of common stock for the 1994
Employee Plan equal to the difference between 12,162 and the number of
shares issuable upon the exercise of options outstanding from time to time
under the 1987 Plan. As of March 31, 1996 there were options outstanding to
purchase 6,499 shares under the 1994 Employee Plan. In addition, the
Company has reserved 2,027 shares for the 1994 Directors Plan. As of March
31, 1996 there were options outstanding to purchase 1,013 shares under the
1994 Directors Plan. The Company has also granted options from time to time
to consultants and in connection with equity and debt offerings. These
options were granted at exercise prices which were not less than the fair
market value of the common stock on the date the option was granted. As of
March 31, 1996 there were non-plan options outstanding to purchase 765
shares. Both the 1987 Plan and the 1994 Plan provide for the grant of
incentive stock options and non-qualified stock options. Incentive stock
options under both plans must be granted at an exercise price not less than
the fair market value of the common stock on the date the option is
granted. Non-qualified stock options under the 1987 Plan must be granted at
exercise prices not less than 50% of the fair market value of the common
stock on the date the option is granted, while non-qualified stock options
under the 1994 Plan must be granted at exercise prices not less than the
fair market value of the common stock on the date the option is granted.
Options must be exercised within ten (10) years from grant, except for
incentive stock options issued to 10% stockholders which must be exercised
within five (5) years from grant. Options outstanding under the 1987 Plan
and the 1994 Employee Plan vest at the rate of 20% on the first anniversary
of the date of grant and 5% at the end of each additional three-month
period of service. Options under the 1994 Directors Plan vest ratably over
four years. Non-plan options vest in accordance with the terms of the
particular option agreement. The range of vesting periods under non-plan
options is from zero to three years.
As of March 31, 1996 the Company had outstanding stock options to purchase
10,474 common shares:
Option Exercise Price Options
Per Share Outstanding
--------------------- -----------
$ 74.00 939
119.88 193
148.00 145
222.00 8,478
240.50 417
351.50 14
399.60 288
-----------
Total 10,474
============
The following is a summary of stock option activity for the years ended
June 30, 1994 and 1995 and for the nine months ended March 31, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Outstanding, beginning of period 5,029 8,381 11,278
Granted during period 4,968 4,792 4,750
Cancelled during period (1,616) (1,666) (5,554)
Exercised during period - (229) -
-------------- ------------- ----------
Outstanding, end of period 8,381 11,278 10,474
============== ============= ==========
</TABLE>
Options for 229 shares were exercised at $74.00 per share in December 1994.
During fiscal 1995 the Company granted options to acquire 915 shares of
common stock at an exercise price of $92.50 pursuant to the 1994 Employee
Plan to a former officer of the Company in exchange for an equivalent
number of options previously granted to that officer under the 1987 Plan.
The exchange of options created a new measurement date and the Company
recognized compensation expense in the amount of $118,517 based on the
difference between the adjusted exercise price and the fair market value of
the options granted. These options to acquire 915 shares were subsequently
cancelled during 1996.
Upon consummation of the IPO the exercise price of the outstanding stock
options will be reduced to a price equal to the IPO price. This action will
result in a new measurement date but will not result in any compensation
charge to the Company because the outstanding stock options will be
remeasured at the then fair market value.
10. International sales and major customers
The Company sells optical archiving systems and related licenses for
software products to customers domestically and internationally.
International sales have all been denominated in U.S. dollars and were
$772,000 in the year ended June 30, 1995 and $191,000 for the nine month
period ended March 31, 1996. The Company's sales to Canada represented 10%
and 12% of total revenues for the twelve months ended June 30, 1995 and the
nine months ended March 31, 1996, respectively. There were no export sales
during the year ended June 30, 1994.
Sales to three customers accounted for 38%, 25%, and 12% of revenues for
the year ended June 30, 1994 and sales to five customers represented 18%,
16%, 15%, 14% and 10% of revenue for the year ended June 30, 1995. Sales to
three customers accounted for 42%, 24% and 12% of revenues for the nine
month period ended March 31, 1996.
11. Proceeds from sales of common stock
During May 1994 the Company sold 6,756 shares of common stock for
approximately $148 per share in a private placement offering for a total of
$1,000,000.
During the second quarter of fiscal 1995 the Company sold 2,671 shares in a
private placement of common stock for a total of $593,000.
12. Mandatorily redeemable preferred stock
In January 1995 the Company sold 50,000 shares of Series A preferred stock,
$.01 par value, in a private placement to a trust for the benefit of one of
the Company's directors. The selling price of $40 per share resulted in
gross proceeds of $2,000,000. The Series A preferred stock had certain
preferred liquidation, dividend and other rights, and was convertible into
common stock upon consummation of an initial public offering of at least
$4,000,000, at a rate of .135 shares of common stock for each share of
Series A preferred stock. Dividends on the Series A preferred stock were
cumulative at a rate of $4 per share annually. Unpaid dividends at June 30,
1995, in the amount of $88,462 are charged to accumulated deficit in the
statement of mandatorily redeemable preferred stock and stockholders'
equity (deficit).
During the nine months ended March 31, 1996 the Company converted all of
these shares and accumulated dividends on the preferred shares in the
amount of $197,352 into 7,423 shares of common stock.
13. Supplemental disclosures of cash flow information
Cash paid for interest for the nine months ended March 31, 1996 and for the
years ended June 30, 1995 and 1994 was approximately $101,000, $104,000 and
$54,000, respectively.
On various dates during fiscal 1994 the Company issued 155 shares of common
stock to certain vendors for a total of $45,453 in satisfaction of amounts
owed for services rendered to the Company. In addition, during fiscal 1994
the Company issued 5,255 shares of common stock to the shareholders who
purchased stock in the May 1993 private placement offering in order to
prevent dilution of those shares in accordance with such shareholders'
subscription agreements.
During the nine months ended March 31, 1996 there were a number of
transactions in which the Company issued common stock without receiving any
cash proceeds. As discussed in Note 12, the Company issued 7,423 shares of
common stock in exchange for outstanding preferred stock and accumulated
unpaid dividends in the aggregate amount of $2,197,352. In conjunction with
the recapitalization discussed in Note 2, the Company issued 1,041,012
shares of common stock in forgiveness of debt totalling $2,697,544. In
January 1996, the Company issued 416,500 shares of common stock to an
officer. Compensation expense in the aggregate amount of $744,000 was
recognized in conjunction with this transaction including a non-cash charge
of $424,830, representing the fair value of the common stock as determined
by independent appraisal. The Company also issued 12,790 shares of common
stock to various related parties (including 7,500 shares issued to a former
officer of the Company) in satisfaction of services rendered to the Company
totalling $36,930.
In addition, during the twelve months ended June 30, 1995 and the nine
months ended March 31, 1996 the Company acquired approximately $37,000 and
$34,000, respectively, of computer equipment under capital leases.
14. Subsequent event
On May 28, 1996 the Company consummated a bridge financing pursuant to
which it issued an aggregate of $1,500,000 principal amount of promissory
notes which bear interest at 10% per annum. The notes are due and payable
on the earlier of the closing of the sale of securities or other financing
of the Company from which the Company or its subsidiary receives gross
proceeds of at least $2,500,000 or May 28, 1997. In conjunction with the
bridge financing the Company issued 750,000 warrants. Each warrant entitles
the holder to purchase one share of common stock for $1.50 during the three
year period commencing May 28, 1997. Upon consummation of a public offering
each warrant will automatically convert to a warrant with the same terms
and conditions as the warrants issued in conjunction with the public
offering. In addition, the March 31, 1996 $250,000 note payable to a
director was converted to promissory notes issued in conjunction with this
financing.
<PAGE>
<TABLE>
<S> <C>
========================================================== =====================================
No underwriter, dealer, salesperson or any other person
has been authorized to give any information or to make
any representations other than those contained in this [LOGO]
Prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized by the Company or any Underwriter. Neither Access Solutions International, Inc.
the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs 1,066,667 Units
of the Company since the date hereof or that the Each Unit Consisting
information contained herein is correct as of any date of
subsequent to the date hereof. This Prospectus does not Two Shares of Common Stock
constitute an offer to sell or a solicitation of an offer and
to buy any securities offered hereby by anyone in any One Redeemable Warrant
jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.
--------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary
Risk Factors
The Company
Use of Proceeds
Capitalization
Dilution
Dividend Policy
Selected Financial Data
Management's Discussion and Analysis ____________________
of Financial Condition and Results of
Operations PROSPECTUS
Business ____________________
Management
Certain Transactions
Principal Stockholders
Selling Securityholders JOSEPH STEVENS & COMPANY, L.P.
Description of Securities
Securities Eligible for Future Sale
Underwriting
Legal Matters __, 1996
Experts
Additional Information
Index to Financial Statements F-1
Until , 1996, all dealers effecting transactions
in the registered securities, whether or not
participating in this distribution, may be required to
deliver a Prospectus. This delivery requirement is in
addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
========================================================== =====================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
Offering described in this Registration Statement. All amounts are estimated
except the registration and NASD fees.
Registration fee $ 7,224
NASD fee 2,610
NASDAQ SmallCap Market application fee *
Boston Stock Exchange listing fee *
Printing costs for Registration Statement, Prospectus,
stock certificates and related documents *
Accounting fees and expenses *
Legal fees and expenses *
Blue sky fees and expenses 40,000
Transfer Agent and Registrar fees and expenses *
Miscellaneous *
-----------------
Total $ *
=================
- --------------
*To be provided by amendment.
All of the above expenses of the offering will be paid by the Company.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended, provides
in regard to indemnification of directors and officers as follows:
"145. Indemnification of Officers, Directors, Employees and Agents;
Insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action,
suit or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plans; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Company's By-Laws provides in regard to indemnification of directors
and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful;
provided, however, that in the case of an action by or in the right of the
corporation, no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that he shall have been adjudged to be entitled
nevertheless to indemnity for such expenses; and provided, further, that any
indemnification under this Article shall be made only as authorized in the
specific case upon a determination that such person has met the applicable
standard of conduct set forth herein, such determination to be made (a) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, event or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders. Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or proceeding, upon
receipt of an undertaking by the person indemnified to repay such payment if he
shall be adjudicated to be not entitled to indemnification under these
provisions. The rights of indemnification hereby provided shall not be exclusive
of or affect other rights to which any director, officer, employee or agent may
be entitled. As used in this paragraph, the terms "director", "officer",
"employee" or "agent" include their respective heirs, executors and
administrators; an "interested" director or officer is one against whom as such
the proceeding in question or another proceeding on the same or similar grounds
is then pending; references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on or involves
services by such person with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
herein. Any indemnification to which a person is entitled under this paragraph
shall be provided although the person to be indemnified is no longer such a
director, officer, employee or agent."
Pursuant to such by-law and as authorized by statute, the Company maintains
insurance on behalf of its directors and officers against liability asserted
against such persons in such capacity whether or not such directors or officers
have the right to indemnification pursuant to the by-law or otherwise.
Reference is made to Section 7 of the Underwriting Agreement filed as
Exhibit 1 to the Registration Statement for the Company's and Underwriter's
respective agreements to indemnify each other and to provide contribution in
circumstances where indemnification is unavailable.
Item 15. Recent Sales of Unregistered Securities.
In May 1993, the Company sold 4,204 shares of unregistered Common Stock for
consideration, paid in cash, in the aggregate amount of $1,399,856 to nine
purchasers. With the exception of Messrs. William J. Weiland and Stephen Ruvolo,
each of whom purchased 37 shares, Brown University Third Century Fund which
purchased 2,162 shares and Ms. Barbara Kenerson who purchased 75 shares, each of
the purchasers, were holders of Common Stock prior to this purchase.
During the period between July 1993 and October 1993 the Company issued 83
shares of Common Stock to Donald J. Schattle as compensation for services
rendered to the Company by an affiliate of Mr. Schattle. The aggregate value of
the compensation paid in shares of Common Stock for such services amounted to
$34,878.
In May 1994, the Company sold 6,757 shares of Common Stock to existing
shareholders in a private placement. The aggregate purchase price in the amount
of $1,000,036 was paid in cash. As a result of such sale, the Company was
required, pursuant to anti-dilution provisions in agreements with certain
persons who purchased Common Stock from the Company in May 1993, to issue 5,255
shares of Common Stock to such stockholders.
In June 1994, the Company issued 72 shares of Common Stock to Napoleon
Holmes as compensation for services. The aggregate compensation paid in such
shares of Common Stock amounted to $10,656.
In October 1994, the Company sold 2,671 shares of Common Stock in a private
placement for a total of $593,000 to certain of the Company's directors and
their affiliates. The purchase price was paid in cash.
In January 1995, the Company sold 50,000 shares of Series A Preferred Stock
in a private placement to a trust for the benefit of Mr. Chace. The purchase
price of $2,000,000 was paid in cash. In September 1995, the Company issued
warrants to purchase 6,890 shares of Common Stock. The warrants were issued as
part of a unit, each consisting of a $50,000 promissory note and a warrant to
purchase 265 shares of Common Stock. The aggregate consideration paid for the
units by the purchasers, each accredited investors, was $1,300,000. Mr. Chace
purchased four units and Mr. Wiltshire purchased 10 units.
In January 1996, the Company issued to Mr. Gardner (as a successor to a
trust for the benefit of Mr. Chace) 41,563 shares of Common Stock in connection
with the conversion of all of the Company's issued and outstanding preferred
stock. The Company also issued (i) 2,000 shares of Common Stock to Christopher
Ingraham, director of the Company, in consideration for management consulting
services he had rendered to the Company; (ii) 426,279 shares of Common Stock to
Mr. Chace in exchange for the retirement of indebtedness of the Company in the
amount of $1,335,415 owed to Mr. Chace; (iii) 330,933 shares of Common Stock to
Mr. Chace in exchange for the retirement indebtedness of the Company in the
amount of $711,506 incurred and the surrender of 3,710 warrants obtained in
connection with bridge financing Mr. Chace had provided to the Company in
September 1995 (the "September Bridge"); (iv) 283,800 shares of Common Stock to
three other investors in exchange for the retirement of indebtedness in the
amount of $609,863 incurred and the surrender of 3,180 warrants obtained in
connection with the September Bridge; (v) 3,290 shares of Common Stock issued to
an employee of the Company in payment of sales commissions in the amount of
$14,807; (vi) 416,500 shares of Common Stock shares of Common Stock to Mr.
Wiltshire in consideration for (x) his agreement to serve as the Company's
President and Chief Executive Officer, (y) his agreement to relinquish warrants
he had acquired in connection with the $500,000 bridge financing he provided to
the Company in connection with the September Bridge; and (z) his agreement to
lend the Company $250,000 on a short-term basis; and (vii) 7,500 unregistered
shares of Common Stock to Mr. Boisseau in satisfaction of certain bonus
compensation owed to Mr. Boisseau in the aggregate amount of $180,000.
In May 1996, the Company issued warrants to purchase 750,000 shares of
Common Stock. The warrants were issued as part of a unit, each consisting of a
$50,000 promissory note and a warrant to purchase 25,000 shares of Common Stock.
The aggregate consideration for the units by the purchasers, each accredited
investors, was $1,500,000. Mr. Chace purchased five units.
In each of these sales, the Company relied on Section 4(2) of the
Securities Act for exemption from registration. Each of the above named
purchasers represented, at the time of purchase, that they were purchasing the
securities for investment without a view towards resale. No brokers or
underwriters were engaged in connection with such sales. All certificates
representing capital stock of the Company bear restrictive legends.
<PAGE>
Item 16. Exhibits and Financial Schedules.
(a) Exhibits
Exhibit
Number Description of Exhibit
- ------ ----------------------
1(a) Form of Underwriting Agreement
3(a) Amended and Restated Certificate of Incorporation (to be filed by
amendment)
3(b) By-Laws
4(a) Loan Agreement dated as of February 25, 1993 and Revolving Line of
Credit Agreement dated February 25, 1993 by and between the Company
and Fleet National Bank, as amended by Modification Agreement dated as
of April 29, 1994, as further amended by Restructure, Reaffirmation
and Forbearance Agreement dated as of October 21, 1994, as further
amended by letter agreement dated as of June 15, 1995, as further
amended by letter agreement dated September 25, 1995, and as further
amended by letter agreement dated May 21, 1996.
5 Opinion of Edward & Angell (to be filed by amendment)
10(a) Real Estate Lease dated 1993 by and between Bakeford Properties and
the Company, as amended by Agreement dated December 6, 1995, and as
further amended by Agreement dated February 8, 1996.
10(b) The Company's 1987 Stock Option Plan.
10(c) The Company's 1994 Stock Option Plan.
10(d) The Company's 1996 Stock Option Plan (to be filed by amendment)
10(e) The Company's Non-Employee Directors' Stock Option Plan.
10(f) Employment Agreement dated as of September 1995 by and between the
Company and Matthias E. Lukens, Jr., as amended by letter dated April
5, 1996.
10(g) Employment Agreement dated as of August 16, 1993 by and between the
Company and John Bonevich.
10(h) Employment Agreement dated as of December 15, 1994 by and between the
Company and Charles H. Boisseau.
10(i) Consulting Agreement dated as of December 20, 1994 by and between the
Company and Mario Briccetti.
10(j) Series A Preferred Stock Purchase Agreement dated as of January 23,
1995 by and between the Company and Elizabeth Z. Chace and Christian
Nolen, Trustees u/a/d August 30, 1938 f/b/o Malcolm G. Chace, III, as
amended by letter agreement dated as of May 9, 1996.
10(k) Loan Agreement dated as of November 7, 1994 by and between the Company
and Mossberg Industries, Inc., as amended by First Amendment dated as
of December 1, 1994.
10(l) Loan Agreement dated as of December 21, 1994 by and between the
Company and Malcolm G. Chace, III.
10(m) Loan Agreement dated as of May 9, 1995 by and between the Company and
Elizabeth Z. Chace and Christian Nolen, Trustees u/a/d August 30, 1938
f/b/o Malcolm G. Chace, III, as amended by a First Amendment dated
June 1995.
10(n) Loan Agreement dated as of May 18, 1995 by and between the Company and
Mossberg Industries, Inc.
10(o) Loan Agreement dated as of August 15, 1995 by and between the Company
and Malcolm G. Chace, III, as amended and restated on January 22,
1996.
10(p) Loan Agreement dated as of January 22, 1996 by and between the Company
and Hector D. Wiltshire.
10(q) Promissory Note dated as of March 26, 1996 by and between the Company
and Malcolm G. Chace, III.
10(r) Promissory Note dated as of April 10, 1996 by and between the Company
and Malcolm G. Chace, III.
10(s) Subscription Agreements of August 1992 Private Placement Offering by
and between the Company and each of Thomas E. Gardner (successor to
Manold Company), Allen & Company Inc. and Paul A. Gould, as amended by
Agreements dated February 29, 1996.
10(t) Subscription Agreements of May 1993 Private Placement Offering by and
between the Company and each of Stephen Ruvolo, Barbara Kenerson,
Allen & Company, Inc., Brown University Third Century Fund, William J.
Weiland, Paul Gould, Mario Briccetti, Thomas E. Gardner (successor to
Manold Company) and Christopher Ingraham, as amended by Agreements
dated February, 1996 (with respect to Gardner, Allen & Company, and
Gould, included in Exhibit 10(s)) and Purchase Agreements dated March
1996.
10(u) Subscription Agreements of May 1994 Private Placement Offering by and
between the Company and each of Thomas E. Gardner (successor to Manold
Company), Allen & Company, Inc., Brown University Third Century Fund
and Paul A. Gould, as amended by Agreements dated February 29, 1996
(included in Exhibits 10(s) and 10(t).
10(v) Subscription Agreements of October 1994 Private Placement Offering by
and between the Company and each of Thomas E. Gardner (successor to
Manold Company), Thomas E. and Leslie A. Gardner, Allen & Company,
Inc., Brown University Third Century Fund, Paul A. Gould, Christopher
Ingraham, and Marvyn Carton as amended by Agreements dated February
29, 1996 (included in Exhibits 10(s) and 10(t) and May 1996.
10(w) Subscription Agreements of September 1995 Private Placement Offering
by and between the Company and each of A.I.M. Overseas NV, John Bakos,
Lewis and Pauline Bakos Family Trust, Hector and C. Wiltshire, Richard
C. Close and Malcolm G. Chace, III as amended by Recapitalization
Agreement dated February 29, 1996.
10(x) Representative's Warrant Agreement
10(y) Financial Advisory and Consulting Agreement
10(z) Warrant Agreement (with form of warrant attached)
23(a) Consent of Price Waterhouse LLP.
23(b) Consent of Edwards & Angell (to be included in Exhibit 5).
27 Financial Data Schedule
(b) Financial Statement Schedules
Schedules for which provision are made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
Item 17. Undertakings.
The undersigned registrant hereby undertakes the following:
A. The undersigned registrant will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii)include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
B. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C. (1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Access
Solutions International, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2 and
authorized this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of North Kingstown, State of
Rhode Island, on this 5th day of June, 1996.
ACCESS SOLUTIONS INTERNATIONAL, INC.
By /s/ Hector D. Wiltshire
--------------------------------------
Hector D. Wiltshire
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Hector D. Wiltshire, Thomas E. Gardner and John
E. Ottaviani, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead in any and all capacities, to sign any or all amendments
to this Registration Statement, to any registration statement pursuant to Rule
462(b) under the Securities Act of 1933 for the purpose of registering
additional shares of Common Stock for the same offering covered by this
Registration Statement, and to file any of the same, with all exhibits thereto,
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
<PAGE>
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 5, 1996.
Signatures Title
/s/ Malcolm G. Chace III
- -----------------------------
Malcolm G. Chace III Director, Chairman of the Board
/s/Hector D. Wiltshire
- -----------------------------
Hector D. Wiltshire President and Chief Executive Officer, Director
/s/ Denis L. Marchand
- -----------------------------
Denis L. Marchand Company Controller and Chief Accounting Office
/s/ Christopher C. Ingraham
- -----------------------------
Christopher C. Ingraham Director
/s/ Marvyn Carton
- -----------------------------
Marvyn Carton Director
/s/ Thomas E. Gardner
- -----------------------------
Thomas E. Gardner Chief Financial Officer and Director
Exhibit 1.a
1,066,667 UNITS, EACH
UNIT CONSISTING OF TWO SHARES OF
COMMON STOCK AND ONE REDEEMABLE WARRANT
ACCESS SOLUTIONS INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
New York, New York
____________, 1996
JOSEPH STEVENS & COMPANY, L.P.
As Representative of the
Several Underwriters listed
on Schedule A hereto
33 Maiden Lane, 8th Floor
New York, New York 10038
Ladies and Gentlemen:
Access Solutions International, Inc., a Delaware corporation (the
"Company"), confirms its agreement with Joseph Stevens & Company, L.P. ("JSLP")
and each of the several underwriters named in Schedule A hereto (collectively,
the "Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom JSLP is acting as representative
(in such capacity, JSLP shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Representative of 1,066,667 units (the "Units"), each Unit consisting of two
(2) shares of common stock, $.01 par value (the "Common Stock") and one (1)
redeemable warrant (the "Redeemable Warrants"). Each Redeemable Warrant is
exercisable for one share of Common Stock. The Common Stock and Redeemable
Warrants will be separately tradeable upon issuance and are hereinafter referred
to as the "Firm Units". The Redeemable Warrants are exercisable commencing
________________, 1996 [the effective date of the Registration Statement] until
_____________, 2001 [60 months from the effective date of the Registration
Statement], unless previously redeemed by the Company, at an initial exercise
price equal to $__________ [66 2/3% of the initial public offering price per
unit] per share, subject to adjustment. The Redeemable Warrants may be redeemed
by the Company, in whole, and not in part, at a redemption price of five cents
($.05) per Redeemable Warrant at any time commencing ______________, 1997 [12
months after the effective date of the Registration Statement] on 30 days' prior
written notice provided that the average closing bid price of the Common Stock
equals or exceeds 150% of the then exercise price per share (subject to
adjustment) for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth (5th) trading day prior to the date
of the notice of redemption. Upon the Representative's request, as provided in
Section 2(b) of this Agreement, the Company shall also issue and sell to the
Underwriters up to an additional 160,000 Units for the purpose of covering
over-allotments, if any. Such 160,000 Units are hereinafter collectively
referred to as the "Option Units." The shares of Common Stock issuable upon
exercise of the Redeemable Warrants are hereinafter referred to as the "Warrant
Shares." The Company also proposes to issue and sell to the Representative or
its designees warrants (the "Representative's Warrants"), pursuant to a
representative's warrant agreement (the "Representative's Warrant Agreement"),
for the purchase of an additional 106,667 Units. The redeemable common stock
purchase warrants issuable upon exercise of the Representative's Warrants are
hereinafter sometimes referred to herein as the "Representative's Redeemable
Warrants." The shares of Common Stock issuable upon exercise of the
Representative's Warrants and the shares of Common Stock issuable upon exercise
of the Representative's Redeemable Warrants are hereinafter collectively
referred to as the "Representative's Shares." The Representatives Redeemable
Warrants and the Representative's Shares are sometimes referred to herein as the
"Representative's Securities." Further, an additional 750,000 Redeemable
Warrants (and the 750,000 shares of Common Stock underlying such Redeemable
Warrants) (collectively, the "Selling Security Holders' Securities") are being
registered for the account of certain selling security holders in connection
with this offering which are not being underwritten by the Underwriter. The Firm
Units, the Option Units, the Representative's Warrants, the Representative's
Redeemable Warrants, the Representative's Shares, the Warrant Shares and the
Selling Security Holders' Securities are hereinafter collectively referred to as
the "Securities" and are more fully described in the Registration Statement and
the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and covenants and agrees with, the Representative as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and amendments thereto,
on Form SB-2 (Registration No. __________), including any related preliminary
prospectus or prospectuses (each a "Preliminary Prospectus"), for the
registration of the Securities, under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act. The Company will not file
any other amendment to such registration statement which the Representative
shall have objected to in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time it becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to, those documents or that information incorporated
by reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430A of the rules and regulations under
the Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the rules and regulations under the Act is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary Prospectus, the
Registration Statement or the Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus and the Registration Statement
and the Prospectus, at the time of filing thereof, conformed with the
requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement nor the Prospectus, at the
time of filing thereof, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, the Registration Statement or the Prospectus. The
Company has filed all reports, forms or other documents required to be filed
under the Act and the Exchange Act and the respective Rules and Regulations
thereunder, and all such reports, forms or other documents, when so filed or as
subsequently amended, complied in all material respects with the Act and the
Exchange Act and the respective Rules and Regulations thereunder.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date, if any,
and during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Representative or a dealer, the Registration
Statement and the Prospectus will contain all statements which are required to
be stated therein in accordance with the Act and the Rules and Regulations, and
will conform to the requirements of the Act and the Rules and Regulations; and,
at and through such dates, neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
this representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations require such qualification
or licensing. The Company does not own, directly or indirectly, an interest in
any corporation, partnership, trust, joint venture or other business entity. The
Company has all requisite power and authority (corporate and other), and has
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and with all federal, state,
local and foreign laws, rules and regulations to which it is subject; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, prospects, stockholders'
equity, value, operations, properties, business or results of operations of the
Company. The disclosure in the Registration Statement concerning the effects of
federal, state, local and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all respects
and do not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Representative's Warrant Agreement and the Warrant Agreement (as defined in
Section 1(ff) hereof of this Agreement) and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company on or
prior to the Closing Date and each Option Closing Date, if any, conform or, when
issued and paid for, will conform, in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holder of any security of the Company
or any similar contractual right granted by the Company. The Securities to be
sold by the Company hereunder and pursuant to the Representative's Warrant
Agreement and the Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof and
thereof, will be validly issued, fully paid and non-assessable and conform to
the descriptions thereof contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the Securities,
when delivered by the Company, will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof and the Representative's Warrant
Agreement of the Securities to be sold by the Company hereunder and thereunder
to the Underwriters, the Underwriters will acquire good and marketable title to
such Securities, free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
asserted against the Company or any affiliate (within the meaning of the Rules
and Regulations) of the Company.
(f) The audited financial statements of the Company and the notes thereto
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus fairly present the financial position, income, changes in
stockholders' equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the Company,
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus;
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. The financial
information set forth in the Prospectus under the headings "The Company,"
"Capitalization," "Selected Financial Data" and "Management's Discussion and
Analysis of Results of Operations and Financial Condition" fairly presents, on
the basis stated in the Prospectus, the information set forth therein and such
financial information has been derived from or compiled on a basis consistent
with that of the audited financial statements included in the Prospectus.
(g) The Company (i) has paid all federal, state, local and foreign taxes
for which it is liable, including, but not limited to, withholding taxes and
amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Securities, (ii) the purchase by the Underwriters of the Securities from the
Company, (iii) the consummation by the Company of any of its obligations under
this Agreement or the Representative's Warrant Agreement, or (iv) resales of the
Securities in connection with the distribution contemplated hereby.
(i) The Company maintains insurance policies, including, but not limited
to, general liability, property, personal and product liability insurance, and
surety bonds which insure the Company and its employees against such losses and
risks generally insured against by comparable businesses. The Company (i) has
not failed to give notice or present any insurance claim with respect to any
insurable matter under the appropriate insurance policy or surety bond in a due
and timely manner, (ii) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds, nor has the Company
failed to pay any premiums due and payable thereunder, or (iii) has not failed
to comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those pertaining to environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give rise to
the same), or involving the properties or business of, the Company which (i)
questions the validity of the capital stock of the Company, this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement or the Consulting
Agreement (as defined in Section 1(gg) hereof) or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement or the Consulting
Agreement, (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), or (iii) might materially
and adversely affect the condition, financial or otherwise, or the earnings,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company.
(k) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, to enter into this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement and to consummate the transactions provided for in such agreements;
and each of this Agreement, the Representative's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement have been duly and properly authorized,
executed and delivered by the Company. Each of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). None of the
Company's issue and sale of the Securities, execution or delivery of this
Agreement, the Representative's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the Prospectus and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company,
(ii) any license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement or
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which it
is or may be bound or to which its properties or assets (tangible or intangible)
are or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties.
(l) No consent, approval, authorization or order of, and no filing with,
any arbitrator, court, regulatory body, administrative agency, government agency
or other body, domestic or foreign, is required for the issuance of the
Securities pursuant to the Prospectus and the Registration Statement, this
Agreement, the Representative's Warrant Agreement and the Warrant Agreement, the
performance of this Agreement, the Representative's Warrant Agreement, the
Warrant Agreement and the Consulting Agreement and the transactions contemplated
hereby and thereby, except such as have been obtained under the Act, state
securities laws and the rules of the National Association of Securities Dealers,
Inc. (the "NASD") in connection with the Representative's purchase and
distribution of the Securities.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company, and
constitute legal, valid and binding agreements of the Company, enforceable
against the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form SB-2; and there are no agreements, contracts or
other documents which are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required; and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and the Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, the Company has not (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, (ii) entered into any transaction other than in the ordinary
course of business, or (iii) declared or paid any dividend or made any other
distribution on or in respect of any class of its capital stock; and, subsequent
to such dates, and except as may otherwise be disclosed in the Prospectus, there
has not been any change in the capital stock, debt (long or short term) or
liabilities of the Company or any material change in the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
(o) No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, lease, deed
of trust, voting trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company is or may be bound or to which the property or
assets (tangible or intangible) of the Company is or may be subject.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and the Company is in compliance with all
federal, state, local and foreign laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by the
United States Department of Labor or any other governmental agency responsible
for the enforcement of any federal, state, local or foreign laws, rules and
regulations relating to employment. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees of
the Company, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or is imminent.
(q) The Company does not maintain, sponsor or contribute to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan" or a "multiemployer plan," as such terms are defined in Sections
3(2), 3(l) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain
or contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401(a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
(r) Neither the Company, nor any of its employees, directors, stockholders
or affiliates (within the meaning of the Rules and Regulations), has taken or
will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act or otherwise, the stabilization or manipulation of the price of any security
of the Company, whether to facilitate the sale or resale of the Securities or
otherwise.
(s) To the best of the Company's knowledge, none of the trademarks, trade
names, service marks, service names, copyrights, patents and patent
applications, and none of the licenses and rights to the foregoing, presently
owned or held by the Company are in dispute or are in conflict with the right of
any other person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever, all
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications, and licenses and rights with respect to the foregoing, used
in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, trade name, service mark,
service name, copyright, patent or patent application. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental or
other proceeding, domestic or foreign, pending or threatened (or circumstances
that may give rise to the same) against the Company which challenges the
exclusive rights of the Company with respect to any trademarks, trade names,
service marks, service names, copyrights, patents, patent applications or
licenses or rights to the foregoing used in the conduct of its business.
(t) The Company owns and has the unrestricted right to use all trade
secrets, know-how (including all unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), inventions, technology,
designs, processes, works of authorship, computer programs and technical data
and information that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company,
free and clear of and without violating any right, lien, or claim of others,
including, without limitation, former employers of its employees.
(u) The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in the
Prospectus to be owned or leased by it, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other restrictions
or equities of any kind whatsoever, other than liens for taxes not yet due and
payable.
(v) Price Waterhouse LLP, whose reports are filed with the Commission as a
part of the Registration Statement, are independent certified public accountants
as required by the Act and the Rules and Regulations.
(w) Each holder of any securities of the Company and each director and
officer of the Company has executed an agreement (collectively, the "Lock-Up
Agreements") pursuant to which he, she or it has agreed, (i) for a period
extending eighteen (18) months following the effective date of the Registration
Statement, not to, directly or indirectly, offer, offer to sell, sell, grant an
option for the purchase or sale of, transfer, assign, pledge, hypothecate or
otherwise encumber (whether pursuant to Rule 144 of the Rules and Regulations or
otherwise) any securities issued or issuable by the Company, whether or not
owned by or registered in the name of such persons, or dispose of any interest
therein, without the prior written consent of the Representative and, (ii) for a
period extending twenty-four (24) months following the effective date of the
Registration Statement, that all sales of such securities issued by the Company
shall be made through JSLP in accordance with its customary brokerage policies.
The Company will cause its transfer agent to mark an appropriate legend on the
face of stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriters' compensation, as determined by the NASD.
(y) The Units, the Common Stock, the Representative's Shares, the
Representative's Redeemable Warrants and the Redeemable Warrants have been
approved for quotation on The Nasdaq SmallCap Market ("Nasdaq") and for listing
on the Boston Stock Exchange ("BSE").
(z) Neither the Company nor any of its directors, officers, stockholders,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or any official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any other person who was, is or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) might subject the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (ii) if not
given in the past, might have had a material and adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company, or (iii) if not continued in the future, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(aa) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, and no affiliate or associate (as these terms are
defined in the Rules and Regulations) of any of the foregoing persons or
entities, has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company is
a party or by which the Company may be bound. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company and
any officer, director or any person listed in the "Principal Stockholders"
section of the Prospectus or any affiliate or associate of any of the foregoing
persons or entities.
(cc) The minute books of the Company have been made available to the
Representative, contain a complete summary of all meetings and actions of the
directors and stockholders of the Company since the time of its incorporation,
and reflect all transactions referred to in such minutes accurately in all
respects.
(dd) Except and to the extent described in the Prospectus, no holder
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company has the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. Except as set forth in the Prospectus, no person
or entity holds any anti-dilution rights with respect to any securities of the
Company.
(ee) Any certificate signed by any officer of the Company and
delivered to the Representative or to Underwriters' Counsel (as defined in
Section 4(d) herein), shall be deemed a representation and warranty by the
Company to the Representative as to the matters covered thereby.
(ff) The Company has entered into a warrant agreement, substantially
in the form filed as Exhibit ___ to the Registration Statement (the "Warrant
Agreement"), with Continental Stock Transfer & Trust Company, in form and
substance satisfactory to the Representative, with respect to the Redeemable
Warrants and providing for the payment of warrant solicitation fees contemplated
by Section 4(w) hereof. The Warrant Agreement has been duly and validly
authorized by the Company and, assuming due execution by the parties thereto
other than the Company, constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law).
(gg) The Company has entered into a financial advisory and consulting
agreement substantially in the form filed as Exhibit ____ to the Registration
Statement (the "Consulting Agreement") with the Underwriter, with respect to the
rendering of consulting services by the Underwriter to the Company. The
Consulting Agreement has been duly and validly authorized by the Company and
assuming due execution by the parties thereto other than the Company,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law).
(hh) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form 8-A
has been declared effective by the Commission.
(ii) Each Redeemable Warrant that is a Selling Security Holders'
Security has been automatically converted into a Redeemable Warrant without any
action by the holder thereof and all of such Redeemable Warrants, as converted
(and the shares of Common Stock underlying such Redeemable Warrants, as
converted), have been registered in the Registration Statement.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters, and the Underwriters
agree to purchase from the Company, the Firm Units at a price equal to $____ per
Unit [90% of the initial public offering price].
(b) In addition, on the basis of the representations, warranties, covenants
and agreement, herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Representative to purchase
all or any part of the Option Units at a price equal to $________ per Unit [90%
of the initial public offering price]. The option granted hereby will expire
forty-five (45) days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Units upon notice by the Representative to the Company
setting forth the number of Option Units as to which the Representative is then
exercising the option and the time and date of payment and delivery for any such
Option Units. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Representative, but shall not be later than seven (7)
full business days after the exercise of said option, nor in any event prior to
the Closing Date, unless otherwise agreed upon by the Representative and the
Company. Nothing herein contained shall obligate the Representative to exercise
the option granted hereby. No Option Units shall be delivered unless the Firm
Units shall be simultaneously delivered or shall theretofore have been delivered
as herein provided.
(c) Payment of the purchase price for, and delivery of certificates for,
the Firm Units shall be made at the offices of the Representative at 33 Maiden
Lane, New York, New York 10038, or at such other place as shall be agreed upon
by the Representative and the Company. Such delivery and payment shall be made
at 10:00 a.m. (New York City time) on __________, 1996 or at such other time and
date as shall be agreed upon by the Representative and the Company but not less
than three (3) nor more than seven (7) full business days after the effective
date of the Registration Statement (such time and date of payment and delivery
being herein called the "Closing Date"). In addition, in the event that any or
all of the Option Units are purchased by the Representative, payment of the
purchase price for, and delivery of certificates for, such Option Units shall be
made at the above mentioned office of the Representative or at such other place
as shall be agreed upon by the Representative and the Company. Delivery of the
certificates for the Firm Units and the Option Units, if any, shall be made to
the Representative against payment by the Representative of the purchase price
for the Firm Units and the Option Units, if any, to the order of the Company by
New York Clearing House funds. Certificates for the Firm Units and the Option
Units, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Representative may request in writing at least two (2) business
days prior to the Closing Date or the relevant Option Closing Date, as the case
may be. The certificates for the Firm Units and the Option Units, if any, shall
be made available to the Representative at such offices or such other place as
the Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to the Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative or its designees the Representative's Warrants for an aggregate
purchase price of $.0001 per warrant, which warrants shall entitle the holders
thereof to purchase an aggregate of an additional 106,667 Units. The
Representative's Warrants shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement at
a price equaling one hundred and twenty percent (120%) of the initial public
offering price of the Units. The Representative's Warrant Agreement and the form
of the certificates for the Representative's Warrant shall be substantially in
the form filed as Exhibit ____ to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Units. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Firm Units and such of the Option Units as the
Representative may determine (other than to residents of or in any jurisdiction
in which qualification of the Units is required and has not become effective) at
the price and upon the other terms set forth in the Prospectus. The
Representative may from time to time increase or decrease the public offering
price after distribution of the Units has been completed to such extent as the
Representative, in its sole discretion, deems advisable. The Representative may
enter into one or more agreements as the Representative, in its sole discretion,
deems advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or the
Exchange Act before termination of the offering of the Securities to the public
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act and the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the same in writing, (i) when
the Registration Statement, as amended, becomes effective, when any
post-effective amendment to the Registration Statement becomes effective and, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding the outcome of which may result in the suspension
of the effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of any proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission, and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities regulatory authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or, if
applicable and if consented to by the Representative, pursuant to Rule 424(b)(4)
of the Rules and Regulations) within the time period specified in Rule 424(b)(1)
(or, if applicable and if consented to by the Representative, Rule 424(b)(4)).
(d) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use in
connection with the offering of any of the Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish the Representative with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement to which the
Representative or Orrick, Herrington & Sutcliffe, its counsel ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may reasonably designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution contemplated hereby, and shall make such
applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or file a general or limited consent to
service of process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may reasonably be required by the laws of such jurisdiction to continue
such qualification.
(f) During the time when a prospectus is required to be delivered under the
Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, the Exchange Act and the Rules and
Regulations so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of counsel
for the Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading, or if it is necessary at any time to amend or supplement the
prospectus to comply with the Act, the Company will notify the Representative
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be satisfactory to Underwriters' Counsel, and the Company will
furnish to the Representative copies of such amendment or supplement as soon as
available and in such quantities as the Representative may request.
(g) As soon as practicable, but in any event not later than forty five (45)
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (ninety (90) days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve (12) consecutive months after the effective
date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings and will deliver to the Representative:
i) concurrently with furnishing such quarterly reports to its
stockholders statements of income of the Company for such quarter in
the form furnished to the Company's stockholders and certified by the
Company's principal financial and accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of the Company's
independent certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
v) every press release and every material news item or article of
interest to the financial community in respect of the Company or its
affairs which was released or prepared by or on behalf of the Company;
and
vi) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its business which the
Representative may request.
During such seven-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer and warrant agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for the Units, the Common
Stock and the Redeemable Warrants.
(j) The Company will furnish to the Representative, without charge and
at such place as the Representative may designate, copies of each Preliminary
Prospectus, the Registration Statement and any pre-effective or post-effective
amendments thereto (one of which will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Representative may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with originally-executed copies of duly
executed, legally binding and enforceable Lock-Up Agreements which are in form
and substance satisfactory to the Representative. On or before the Closing Date,
the Company shall deliver instructions to its transfer agent authorizing such
transfer agent to place appropriate legends on the certificates representing the
securities of the Company subject to the Lock-Up Agreements and to place
appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for a period of eighteen (18) months
commencing on the effective date of the Registration Statement, and except as
contemplated by this Agreement, it and its present and future subsidiaries will
not, without the prior written consent of the Representative (i) issue, sell,
contract or offer to sell, grant an option for the purchase or sale of, assign,
transfer, pledge, distribute or otherwise dispose of, directly or indirectly,
any shares of capital stock or any option, right or warrant with respect to any
shares of capital stock except pursuant to stock options or warrants issued on
the date hereof, and (ii) file any registration statement for the offer or sale
of securities issued or to be issued by the Company or any present or future
subsidiaries.
(m) Neither the Company nor any of its officers, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to stabilize or
manipulate the price of any securities of the Company, or which might in the
future reasonably be expected to cause or result in the stabilization or
manipulation of the price of any such securities.
(n) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under "Use of Proceeds"
in the Prospectus. No portion of the net proceeds will be used, directly or
indirectly, to acquire any securities issued by the Company.
(o) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, any Form SR
required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date hereof, the Closing Date or the relevant Option Closing
Date, as the case may be) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
Section 6(k) hereof.
(q) The Company shall cause the Units, the Common Stock and the
Redeemable Warrants to be quoted on Nasdaq and listed on the BSE and, for a
period of seven (7) years from the date hereof, use its best efforts to maintain
the Nasdaq quotation and BSE listing of the Units, the Common Stock and the
Redeemable Warrants to the extent outstanding.
(r) For a period of five (5) years from the Closing Date, the Company
shall at the request of the Representative, furnish or cause to be furnished to
the Representative and at the Company's sole expense, (i) daily consolidated
transfer sheets relating to the Units, the Common Stock and the Redeemable
Warrants and (ii) a list of holders of all of the Company's securities.
(s) For a period of five (5) years from the Closing Date, the Company
shall, at the Company's sole expense, (i) promptly provide the Representative,
upon any and all requests of the Representative, with a "blue sky trading
survey" for secondary sales of the Company's securities, prepared by counsel to
the Company, and (ii) take all necessary and appropriate actions to further
qualify the Company's securities in all jurisdictions of the United States in
order to permit secondary sales of such securities pursuant to the "blue sky"
laws of those jurisdictions, provided that such jurisdictions do not require the
Company to qualify as a foreign corporation.
(t) As soon as practicable, but in no event more than thirty (30) days
after the effective date of the Registration Statement, the Company agrees to
take all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's OTC Manual and to continue such inclusion
for a period of not less than seven (7) years.
(u) Without the prior written consent of the Representative, the
Company hereby agrees that it will not, for a period of eighteen (18) months
from the effective date of the Registration Statement, (i) adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or arrangement permitting the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right (x) at an exercise price that is less than the greater of 50% of the
initial public offering price of the Units set forth herein and the fair market
value per share of Common Stock on the date of grant or sale or (y) to any of
its executive officers or directors or to any holder of five percent (5%) or
more of the Common Stock or any holder of five percent (5%) or more of the
Common Stock as the result of the exercise or conversion of equivalent
securities, including, but not limited to options, warrants or other contract
rights and securities convertible, directly or indirectly, into shares of Common
Stock; (ii) permit the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options, warrants
or other contract rights to exceed 214,189 shares of Common Stock; (iii) permit
the existence of stock appreciation rights, phantom options or similar
arrangements or (iv) grant any options, warrants or other contract rights or
securities convertible, exercisable or exchangeable directly or indirectly into
securities of the Company for any consideration other than cash.
(v) Until the completion of the distribution of the Units to the
public and during any period during which a prospectus is required to be
delivered, the Company shall not, without the prior written consent of the
Representative, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(w) For a period of five (5) years after the effective date of the
Registration Statement, the Company shall cause one (1) individual selected by
the Representative, subject to the good faith approval of the Company, to be
elected to the Board of Directors of the Company (the "Board"), if requested by
the Representative. In the event the Representative shall not have designated
such individual at the time of any meeting of the Board or such person has not
been elected or is unavailable to serve, the Company shall notify the
Underwriter of each meeting of the Board. An individual selected by the
Representative shall be permitted to attend all meetings of the Board and to
receive all notices and other correspondence and communications sent by the
Company to members of the Board. The Company shall reimburse the
Representative's designee for his or her out-of-pocket expenses reasonably
incurred in connection with his or her attendance of the Board meetings.
(x) Commencing one year from the date hereof, to pay the
Representative a warrant solicitation fee equal to five percent (5%) of the
exercise price of the Redeemable Warrants, payable on the date of the exercise
thereof on terms provided in the Warrant Agreement. The Company will not solicit
the exercise of the Redeemable Warrants through any solicitation agent other
than the Representative. The Representative will not be entitled to any warrant
solicitation fee unless the Representative provides bona fide services in
connection with any warrant solicitation and the investor designates, in
writing, that the Representative is entitled to such fee.
(y) For a period equal to the lesser of (i) seven (7) years from the
date hereof, and (ii) the sale to the public of the Representative's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Forms SB-2 or S-1 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(z) The Company agrees that, for a period of three (3) years beginning
with the effective date of the Registration Statement, the Representative shall
have a right of first refusal for all sales of any securities made by the
Company or any of its present or future affiliates or subsidiaries.
(aa) For a period of twenty four (24) months after the effective
date of the Registration Statement, the Company shall not restate, amend or
alter any term of any written employment, consulting or similar agreement
entered into between the Company and any officer, director or key employee as of
the effective date of the Registration Statement in a manner which is more
favorable to such officer, director or key employee, without the prior written
consent of the Representative.
(bb) The Company will use its best efforts to maintain the
effectiveness of the Registration Statement for a period of five years after the
date hereof.
5. Payment of Expenses.
(a) The Company hereby agrees to pay (such payment to be made, at the
discretion of the Representative, on the Closing Date and any Option Closing
Date (to the extent not paid on the Closing Date or a previous Option Closing
Date)) all expenses and fees (other than fees of Underwriters' Counsel) incident
to the performance of the obligations of the Company under this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage, overnight
delivery or courier charges with respect thereto) of the Registration Statement
and the Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage, overnight delivery or courier charges
with respect thereto) and delivery of this Agreement, the Representative's
Warrant Agreement, the Warrant Agreement, and agreements with selected dealers,
and related documents, including the cost of all copies thereof and of each
Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Representative and such dealers as the
Representative may request, in such quantities as the Representative may
request, (iii) the printing, engraving, issuance and delivery of the Securities,
(iv) the qualification of the Securities under state or foreign securities or
"blue sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, and disbursements and fees of counsel in connection
therewith, (v) advertising costs and expenses, including, but not limited to
costs and expenses in connection with "road shows," information meetings and
presentations, bound volumes and prospectus memorabilia and "tombstone"
advertisement expenses, (vi) costs and expenses in connection with due diligence
investigations, including, but not limited to, the fees of any independent
counsel or consultants, (vii) fees and expenses of a transfer and warrant agent
and registrar for the Securities, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the Commission and the NASD, and (x) the fees and expenses incurred in
connection with the listing of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 6, Section 10(a) or Section 11 hereof,
the Company shall reimburse and indemnify the Representative for all of its
actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less any amounts already paid pursuant to Section 5(c)
hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to Section 5(a) hereof, it will pay to the Representative on
the Closing Date by certified or bank cashier's check, or, at the election of
the Representative, by deduction from the proceeds of the offering of the Firm
Units, a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Firm Units,
twenty-five thousand dollars ($25,000) of which has been paid to date by the
Company. In the event the Representative elects to exercise the overallotment
option described in Section 2(b) hereof, the Company further agrees to pay to
the Representative on each Option Closing Date, by certified or bank cashier's
check, or, at the Representative's election, by deduction from the proceeds of
the Option Units purchased on such Option Closing Date, a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of such Option Units.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date and each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
provisions hereof; the performance by the Company on and as of the Closing Date
and each Option Closing Date, if any, of its covenants and obligations
hereunder; and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 p.m., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Units and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances in which they were made not misleading, or that the Prospectus, or
any supplement thereto, contains an untrue statement of fact which, in the
Representative's opinion, is material, or omits to state a fact which, in the
Representative's opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and such other related matters as the Representative
may request and Underwriters' Counsel shall have received such papers and
information as they may request in order to enable them to pass upon such
matters.
(d) At the time this Agreement is executed, the Underwriters shall
have received the favorable opinion of Edwards & Angell, counsel to the Company,
dated the Closing Date, addressed to the Underwriters, in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, (B) is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of
its operations requires such qualification or licensing, and (C) has
all requisite power and authority (corporate and other) and has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits obtained by it
from governmental or regulatory officials and agencies and all
federal, state, local and foreign laws, rules and regulations to which
it is subject; and, the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the
earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The
disclosure in the Registration Statement concerning the effects of
federal, state, local and foreign laws, rules and regulations on the
Company's business as currently conducted and as contemplated are
correct in all respects and do not omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading;
ii) the Company does not own, directly or indirectly, an interest
in any corporation, partnership, joint venture, trust or other
business entity;
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization"
and except as set forth in the Prospectus, the Company is not a party
to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options
or other securities, except for this Agreement, the Representative's
Warrant Agreement and the Warrant Agreement and as described in the
Prospectus. The Securities and all other securities issued or issuable
by the Company conform, or when issued and paid for, will conform, in
all respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of
any security of the Company or any similar contractual right granted
by the Company. The Securities to be sold by the Company hereunder and
under the Representative's Warrant Agreement and the Warrant Agreement
are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof and
thereof, will be validly issued, fully paid and non-assessable and
conform to the descriptions thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities are in
due and proper form. The Representative's Warrants constitute valid
and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement of the Securities to be sold by
the Company hereunder and thereunder, the Representative will acquire
good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever asserted against
the Company or any affiliate (within the meaning of the Rules and
Regulations) of the Company. No transfer tax is payable by or on
behalf of the Underwriters in connection with (A) the issuance by the
Company of the Securities, (B) the purchase by the Underwriters of the
Securities from the Company, (C) the consummation by the Company of
any of its obligations under this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement, or (D) resales of the
Securities in connection with the distribution contemplated hereby;
iv) the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and no stop order suspending
the use of the Preliminary Prospectus, the Registration Statement or
the Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules and other
financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
vi) to such counsel's knowledge, (A) there are no agreements,
contracts or other documents required by the Act to be described in
the Registration Statement and the Prospectus and filed as exhibits to
the Registration Statement (or required to be filed under the Exchange
Act if upon such filing they would be incorporated, in whole or in
part, by reference therein) other than those described in the
Registration Statement and the Prospectus and filed as exhibits
thereto, and the exhibits which have been filed are correct copies of
the documents of which they purport to be copies; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or
amendment thereto of agreements, contracts and other documents to
which the Company is a party or by which it is bound are accurate and
fairly represent the information required to be shown by Form SB-2;
(C) there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including,
without limitation, those pertaining to environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the
properties or business of, the Company which (I) is required to be
disclosed in the Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), or (II) questions the validity
of the capital stock of the Company or of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with any of the foregoing; (D) no
statute or regulation or legal or governmental proceeding required to
be described in the Prospectus is not described as required; and (E)
there is no action, suit or proceeding pending or threatened against
or affecting the Company before any court, arbitrator or governmental
body, agency or official (or any basis thereof known to such counsel)
in which there is a reasonable possibility of an adverse decision
which may result in a material adverse change in the condition,
financial or otherwise, or the earnings, prospects, stockholders'
equity, value, operation, properties, business or results of
operations of the Company taken as a whole, which could adversely
affect the present or prospective ability of the Company to perform
its obligations under this Agreement, the Representative's Warrant
Agreement, the Warrant Agreement or the Consulting Agreement or which
in any manner draws into question the validity or enforceability of
this Agreement, the Representative's Warrant Agreement, the Warrant
Agreement or the Consulting Agreement;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Representative's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement and to
consummate the transactions provided for herein and therein; and each
of this Agreement, the Representative's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement has been duly authorized,
executed and delivered by the Company. Each of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement, assuming due authorization, execution and
delivery by each other party thereto, constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
obligations to indemnify or contribute to losses may be limited by
applicable law). None of the Company's execution or delivery of this
Agreement, the Representative's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein
and therein, or the conduct of its business as described in the
Registration Statement and the Prospectus and any amendments or
supplements thereto, conflicts with or will conflict with or results
or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or
result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible
or intangible) of the Company pursuant to the terms of (A) the
certificate of incorporation or bylaws of the Company, (B) any
license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company is a party or by which it is or may be bound or to
which its properties or assets (tangible or intangible) are or may be
subject, (C) any statute applicable to the Company or (D) any
judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation,
those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of
their activities or properties;
viii) no consent, approval, authorization or order of, and no
filing with, any arbitrator, court, regulatory body, administrative
agency, government agency or other body, domestic or foreign (other
than such as may be required under "blue sky" laws, as to which no
opinion need be rendered), is required in connection with the issuance
of the Securities pursuant to the Prospectus, the Registration
Statement, this Agreement, the Representative's Warrant Agreement and
the Warrant Agreement, or the performance of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement and the transactions contemplated hereby and
thereby;
ix) the properties and business of the Company conform to the
description thereof contained in the Registration Statement and the
Prospectus; and the Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities
of any kind whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable;
x) the Company is not in breach of, or in default under, any term
or provision of any license, contract, indenture, mortgage, lease,
deed of trust, voting trust agreement, stockholders' agreement, note,
loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is or may be
bound or to which its property or assets (tangible or intangible) are
or may be subject; and the Company is not in violation of any term or
provision of (A) its certificate of incorporation or by-laws, (B) any
authorization, approval, order, license, certificate, franchise or
permit of any governmental or regulatory official or body, or (C) any
judgement, decree, order, statute, rule or regulation to which it is
subject;
xi) the statements in the Prospectus under "Prospectus Summary,"
"The Company," "Risk Factors," "Business," "Management," "Principal
Stockholders," "Certain Transactions," "Shares Eligible For Future
Sale," and "Description of Securities" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
xii) the Units, the Common Stock, the Representative's Shares,
the Representative's Redeemable Warrants and the Redeemable Warrants
have been accepted for quotation on Nasdaq and listing on the BSE;
xiii) the Company owns or possesses, free and clear of all liens
or encumbrances and right thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service
marks, copyrights, service names, tradenames, patents, patent
applications and licenses necessary to conduct its business (including
without limitation any such licenses or rights described in the
Prospectus as being owned or possessed by the Company) and there is no
claim or action by any person pertaining to, or proceeding, pending or
threatened, which challenges the exclusive rights of the Company with
respect to any trademarks, service marks, copyrights, service names,
trade names, patents, patent applications and licenses used in the
conduct of the Company's business (including, without limitation, any
such licenses or rights described in the Prospectus as being owned or
possessed by the Company);
xiv) the persons listed under the caption "Principal
Stockholders" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in Rule 13d-3 under the Exchange Act) of
the securities set forth opposite their respective names thereunder as
and to the extent set forth therein;
xv) except as disclosed in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
xvi) there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of
a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangement or any other
arrangements, agreements, understandings, payments or issuances that
may affect the Underwriters' compensation, as determined by the NASD;
xvii) assuming due execution by the parties thereto, the Lock-Up
Agreements are legal, valid and binding obligations of the parties
thereto, enforceable against such parties and any subsequent holder of
the securities subject thereto in accordance with their terms.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus and related matters and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement or the Prospectus, on the
basis of the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment became
effective, or the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, as of the date of the Preliminary Prospectus and the
Prospectus, and as of the date of such opinion, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial statements
and schedules and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
supplements or amendments thereto).
In rendering such opinion, such counsel may rely (a) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; and (b) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company and
certificates or other written statements of officers of departments of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel, if requested. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991) or any comparable state accord. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representative and
they are justified in relying thereon. Such opinion shall also state that
Underwriter's Counsel is entitled to rely thereon.
(e) At the time this Agreement is executed, the Underwriters shall
have received the favorable opinion of Pennie & Edmonds, patent counsel to the
Company, dated the Closing Date, addressed to the Underwriters, in substantially
the form attached as Schedule A to this Agreement.
(f) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received the favorable opinions of Edwards & Angell,
counsel to the Company, and Pennie & Edmonds, patent counsel to the Company,
dated the Closing Date or the relevant Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming, as of the Option Closing Date, the statements made by Edwards &
Angell and Pennie & Edmonds, in their respective opinions delivered at the time
this Agreement is executed.
(g) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
Section 6(c) hereof, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(h) Prior to the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or the
earnings, stockholders' equity, value, operations, properties, business or
results of operations of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such matters are set forth in the
Registration Statement and the Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and the Prospectus; (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) the Company shall not have issued any securities
(other than the Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there shall not
have been any change in the capital stock, debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise) from the
latest dates as of which such matters are set forth in the Registration
Statement and the Prospectus; (v) no material amount of the assets of the
Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and the Prospectus; (vi) no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially and adversely affect the condition,
financial or otherwise, or the earnings, stockholders' equity, value,
operations, properties, business or results of operations of the Company taken
as a whole, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act with respect to the
Registration Statement and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(i) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or the relevant Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option Closing Date, as
the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, are contemplated or
threatened under the Act;
iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus or any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading and neither the Preliminary Prospectus
nor any supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A) the
Company has not incurred any material liabilities or obligations,
direct or contingent; (B) the Company has not paid or declared any
dividends or other distributions on its capital stock; (C) the Company
has not entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other
than any increase in short-term borrowings in the ordinary course of
business) of the Company (E) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured; (F) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the
foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (G) there
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this Section 6(i)
are to such documents as amended and supplemented at the date of such
certificate.
(j) By the Closing Date, the Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters and in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters and Underwriters' Counsel, from Price Waterhouse LLP.
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the Rules and Regulations;
ii) stating that it is their opinion that the financial
statements of the Company included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations and
that the Underwriters may rely upon the opinion of Price Waterhouse
LLP with respect to such financial statements and supporting schedules
included in the Registration Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest unaudited interim consolidated
financial statements of the Company, a reading of the latest available
minutes of the stockholders and board of directors and the various
committees of the board of directors of the Company, consultations
with officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would lead them
to believe that (A) the unaudited consolidated financial statements
and supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements
of the Company included in the Registration Statement, or (B) at a
specified date nor more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity or net current assets or net assets of the
Company as compared with amounts shown in the March 31, 1996 balance
sheet included in the Registration Statement, other than as set forth
in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from March 31, 1996 to a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues, net
earnings or net earnings per share of Common Stock, in each case as
compared with the corresponding period beginning March 31, 1995, other
than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such
decrease;
iv) setting forth, at a date not later than five (5) days prior
to the effective date of the Registration Statement, the amount of
liabilities of the Company (including a break-down of commercial paper
and notes payable to banks);
v) stating that they have not during the immediately preceding
five (5) year period brought to the attention of any of the Company's
management any material "weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's internal
controls;
vi) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in
the Prospectus, in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an audit in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
and
vii) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Price Waterhouse LLP a letter, dated as of
the Closing Date or the relevant Option Closing Date, as the case may be, to the
effect that (i) it reaffirms the statements made in the letter furnished
pursuant to Section 6(k), (ii) if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that Price Waterhouse LLP
has carried out procedures as specified in clause (v) of Section 6(k) hereof
with respect to certain amounts, percentages and financial information as
specified by the Underwriters and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(m) On each of Closing Date and Option Closing Date, if any, there
shall have been duly tendered to the Underwriters the appropriate number of
Securities.
(n) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriters pursuant to Section 4(e) hereof shall have been
issued on either the Closing Date or the Option Closing Date, if any, and no
proceedings for that purpose shall have been instituted or shall be
contemplated.
(o) On or before the effective date of the Registration Statement, the
Company shall have executed and delivered to the Representative the
Representative's Warrant Agreement, substantially in the form filed as Exhibit
____ to the Registration Statement. On or before the Closing Date, the Company
shall have executed and delivered to the Representative the Representative's
Warrants in such denominations and to such designees as shall have been provided
to the Company.
(p) On or before Closing Date, the Securities shall have been duly
approved for quotation on Nasdaq, subject to official notice of issuance.
(q) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-Up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
(r) On or before the Closing Date, the Company shall have (i) executed
and delivered to the Representative the Consulting Agreement, substantially in
the form filed as Exhibit ____ to the Registration Statement and (ii) paid the
Representative $48,000 representing the retainer fee pursuant to the Consulting
Agreement.
(s) On or before the effective date of the Registration Statement, the
Company and Continental Stock Transfer & Trust Company shall have executed and
delivered to the Representative the Warrant Agreement, substantially in the form
filed as Exhibit ___ to the Registration Statement.
(t) At least two (2) full business days prior to the date hereof, the
Closing Date and each Option Closing Date, if any, the Company shall have
delivered to the Representative the unaudited interim consolidated financial
statements required to be so delivered pursuant to Section 4(p) of this
Agreement.
If any condition to the Representative's or the Underwriters'
obligations hereunder to be fulfilled prior to or at the Closing Date or at any
Option Closing Date, as the case may be, is not so fulfilled, the Representative
may terminate this Agreement or, if the Representative so elects, it may waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriters
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
(A) any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 7, collectively referred to as
"applications") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, the NASD, Nasdaq or any securities exchange;
(B) the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances in which they were
made); or (C) any breach of any representation, warranty, covenant or agreement
of the Company contained herein or in any certificate by or on behalf of the
Company or any of its officers delivered pursuant hereto, unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to any Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be. The indemnity agreement in this Section 7(a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Underwriters but only with respect
to statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or the Prospectus directly relating to
the transactions effected by the Underwriters in connection with the offering
contemplated hereby. The Company acknowledges that the statements with respect
to the public offering of the Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement in this Section 7(b) shall be in addition to
any liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against one or more indemnifying
parties under this Section 7, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure to so
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 (except to the extent that it has been prejudiced
in any material respect by such failure) or from any liability which it may have
otherwise). In case any such action is brought against any indemnified party,
and it notifies an indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate therein, and
to the extent it or they may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, an
indemnified party shall have the right to employ its own counsel in any such
case but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the defense
of such action at the expense of the indemnifying party, (ii) the indemnifying
parties shall not have employed counsel reasonably satisfactory to such
indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to one
or all of the indemnifying parties (in which event the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle, compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent may not be
unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriters are the indemnified party, the
relative benefits received by the Company, on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts received by the Underwriters
hereunder, in each case as set forth in the table on the cover page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to in the first (1st) sentence of this Section 7(d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 12(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7(d), each person, if any, who controls the Company or the Underwriter
within the meaning of the Act, each officer of the Company who has signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company or the Underwriter, as the case may be,
subject in each case to this Section 7(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action against
such party in respect to which a claim for contribution may be made against
another party or parties under this Section 7(d), notify such party or parties
from whom contribution may be sought, but the omission to so notify such party
or parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have hereunder or otherwise than under
this Section 7(d), or to the extent that such party or parties were not
adversely affected by such omission. Notwithstanding anything in this Section 7
to the contrary, no party will be liable for contribution with respect to the
settlement of any action or claim effected without its written consent. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
8. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company contained in this Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, shall be deemed to be representations,
warranties, covenants and agreements at the Closing Date and each Option Closing
Date, if any, and such representations, warranties, covenants and agreements of
the Company, and the respective indemnity and contribution agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive the termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. Effective Date. This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the Securities
for sale to the public; provided, however, that the provisions of Sections 5, 7
and 10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to Section 10(b) hereof, the Representative shall have the
right to terminate this Agreement: (i) if any domestic or international event or
act or occurrence has materially adversely disrupted, or in the Representative's
opinion will in the immediate future materially adversely disrupt, the financial
markets; or (ii) if any material adverse change in the financial markets shall
have occurred; or (iii) if trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Boston Stock Exchange, the
Commission or any governmental authority having jurisdiction over such matters;
or (iv) if trading of any of the securities of the Company shall have been
suspended, or if any of the securities of the Company shall have been delisted,
on any exchange or in any over-the-counter market; or (v) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities, or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium shall have been declared by any state or federal authority; or (vii)
if a moratorium in foreign exchange trading shall have been declared; or (viii)
if the Company shall have sustained a material or substantial loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will, in
the Representative's opinion, make it inadvisable to proceed with the delivery
of the Securities; or (ix) if there shall have been such a material adverse
change in the conditions or prospects of the Company, or if there shall have
been such a material adverse change in the general market, political or economic
conditions, in the United States or elsewhere, as in the Representative's
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 6, Section 10(a) or Section 11 hereof
the Company shall promptly reimburse and indemnify the Representative for all
its actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less amounts previously paid pursuant to Section 5(c)
hereof. In addition, the Company shall remain liable for all "blue sky" counsel
fees and expenses and "blue sky" filing fees. In addition, the Company shall
remain liable for all "blue sky" counsel fees and expenses and "blue sky" filing
fees. Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10(a) and 11 hereof), and whether or not
this Agreement is otherwise carried out, the provisions of Section 5 and Section
7 shall not be in any way be affected by such election or termination or failure
to carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Units to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Units, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Units to be purchased on an Option Closing Date, the Representative may,
at its option, by notice from the Representative to the Company, terminate the
Representative's obligation to purchase Option Units from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken pursuant
to this Section 12 shall relieve the Company from liability, if any, in respect
of such default.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Joseph Stevens & Company, L.P., 33 Maiden Lane, 8th Floor, New
York, NY 10038, Attention: Mr. Joseph Sorbara, with a copy to Orrick, Herrington
& Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention: Rubi
Finkelstein, Esq. Notices to the Company shall be directed to the Company at
Access Solutions International, Inc., 650 Ten Rod Road, North Kingstown, RI
02852, Attention: Hector D. Wiltshire, with a copy to Edwards & Angell, 2700
Hospital Trust Tower, Providence, RI 02903, Attention: John E. Ottaviani, Esq.
14. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Units from the Underwriters shall be deemed to be a
successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement, the Representative's
Warrant Agreement and the Consulting Agreement constitute the entire agreement
of the parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written.
JOSEPH STEVENS & COMPANY, L.P.
As Representative of the
Several Underwriters
By:
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
UNDERWRITER FIRM UNITS
Joseph Stevens & Company, L.P........................... -----------
Total........................................... 1,066,667
===========
<PAGE>
EXHIBIT A
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________, 1996
Joseph Stevens & Company, L.P.
33 Maiden Lane
New York, NY 10038
Ladies and Gentlemen:
We have acted as U.S. patent counsel to Aquidneck Systems International,
Inc., a Delaware corporation (the "Company"), in connection with the entering
into by the Company of that certain Underwriting Agreement (the "Underwriting
Agreement"), dated as of ________ , 1996, by and between Joseph Stevens &
Company, L.P. and the Company.
For the purposes of rendering the opinions set forth below, we have
reviewed the following (collectively, the "Documents"):
(1) that certain Registration Statement on Form SB-2 (the
"Memorandum"), dated _________, 1996;
(2) the results of a search of the United States Patent and Trademark
Office records relevant to ownership of patents and trademarks; and
(3) the results of intellectual property litigation search of the Lit
Alert database conducted on __________, 1996 with regard to ASII and
its U.S. patents.
Whenever our opinions herein are qualified by the phrase "to the best
of our knowledge," such language means that based upon our review of the
Documents and such review of our files and inquiries of officers of the Company
as we have deemed appropriate, we believe that such opinions are factually
correct.
Based upon a review of such matters of law as we have deemed
appropriate, and subject to the foregoing, it is our opinion and judgment that:
1. To the best of our knowledge, the statements in the Memorandum
relating to United States patent matters under the headings Protection of
Intellectual Property and Intellectual Property, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
2. To the best of our knowledge, the following patents were obtained
by Pennie & Edmonds on behalf of the Company, and are currently assigned to the
Company based upon the assignment records of the United States Patent and
Trademark Office:
(a) U.S. Patent 4,775,969 issued October 4, 1988;
(b) U.S. Patent 5,034,914 issued July 23, 1991; and
(c) U.S. Patent 5,247,646 issued September 21, 1993.
3. To the best of our knowledge, no claims have been asserted against
the Company relating to the potential infringement of, or conflict with, any
patents, trademarks, copyrights, or trade secrets, of others.
4. To the best of our knowledge, the Company has not received any
notice challenging the validity or enforceability of the U.S. Patents identified
above in paragraph 2.
Furthermore, we call to your attention that our opinion is limited to
such facts as they existed on the date of this letter and does not take into
account any changes of circumstances, fact, or law, subsequent thereto.
This opinion is furnished to Joseph Stevens & Company, L.P., as
Placement Agent. This opinion is for recipient's information only, is to be
relied upon only by recipient, and is to be used only in connection with the
transaction reflected in the Underwriting Agreement. This opinion is not to be
quoted, or referred to, in whole or in part, in the Memorandum, or in any
literature or oral presentations used in connection with the sale of securities.
Very truly yours,
PENNIE & EDMONDS
By:
-------------------------
Allan A. Fanucci
A Member of the Firm
Exhibit 3.b
BY-LAWS
OF
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
ARTICLE I.
----------
Certificate of Incorporation
----------------------------
These by-laws, the powers of the corporation and of its directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the corporation shall be subject to such provisions in regard
thereto as are set forth in the certificate of incorporation filed pursuant to
the General Corporation Law of Delaware which is hereby made a part of these
by-laws.
The term "certificate of incorporation" in these by-laws, unless the
context requires otherwise, includes not only the original certificate of
incorporation filed to create the corporation but also all other certificates,
agreements of merger or consolidation, plans of reorganization, or other
instruments, howsoever designated, filed pursuant to the General Corporation Law
of Delaware which have the effect of amending or supplementing in some respect
the corporation's original certificate of incorporation.
ARTICLE II.
-----------
Annual Meeting
--------------
An annual meeting of stockholders shall be held for the election of
directors and for the transaction of any other business at such place, within or
without the State of Delaware, and at such time as shall be fixed by the board
of directors and specified in the notice of the meeting. Any other proper
business may be transacted at the annual meeting. If the annual meeting for the
election of directors shall not be held on the date designated therefor, the
directors shall cause the meeting to be held as soon thereafter as is
convenient.
ARTICLE III.
------------
Special Meetings of Stockholders
--------------------------------
Special meetings of the stockholders may be held either within or
without the State of Delaware, at such time and place and for such purposes as
shall be specified in a call for such meeting made by the board of directors or
by a writing filed with the secretary signed by the president or by a majority
of the directors.
ARTICLE IV.
-----------
Notice of Stockholders' Meetings
--------------------------------
Whenever stockholders are required or permitted to take any action at
a meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, which notice shall be given
not less than ten nor more than sixty days before the date of the meeting,
except where longer notice is required by law, to each stockholder entitled to
vote at such meeting, by leaving such notice with him or by mailing it, postage
prepaid, directed to him at his address as it appears upon the records of the
corporation. In case of the death, absence, incapacity or refusal of the
secretary, such notice may be given by a person designated either by the
secretary or by the person or persons calling the meeting or by the board of
directors. When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
An affidavit of the secretary or an assistant secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
ARTICLE V.
----------
Quorum of Stockholders; Stockholder List
----------------------------------------
At any meeting of the stockholders, a majority of all shares issued
and outstanding and entitled to vote upon a question to be considered at the
meeting shall constitute a quorum for the consideration of such question when
represented at such meeting by the holders thereof in person or by their duly
constituted and authorized attorney or attorneys, but holders of a lesser
interest may adjourn any meeting from time to time, and the meeting may be held
as adjourned without further notice. When a quorum is present at any meeting a
majority of the stock so represented thereat and entitled to vote shall, except
where a larger vote is required by law, by the certificate of incorporation or
by these by-laws, decide any question brought before such meeting.
The secretary or other officer having charge of the stock ledger shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten days prior to the
meeting, either at a place within the city or town where the meeting is to be
held, which place shall have been specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. Said list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders required by this Article or
the books of the corporation, or the stockholders entitled to vote in person or
by proxy at any meeting of stockholders.
ARTICLE VI.
-----------
Proxies and Voting
------------------
Except as otherwise provided in the certificate of incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote
for each share of the capital stock held by such stockholder. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy but (except as otherwise expressly permitted by
law) no proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period or the proxy (a) states that is is
irrevocable and (b) is coupled with an interest sufficient in law to support an
irrevocable power.
Unless otherwise provided in the certificate of incorporation, any
action required by law to, or which may, be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote therein were present and
voted. Prompt notice of the taking of such action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE VII.
------------
Stockholders' Record Date
-------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
If no record date is fixed:
(l) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(3) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
ARTICLE VIII.
-------------
Board of Directors
------------------
Except as otherwise provided by law or by the certificate of
incorporation, the business and affairs of the corporation shall be managed by
the board of directors.
The board of directors shall consist of one or more members; as may be
fixed for any corporate year and elected by the stockholders at the annual
meeting. During any year, the board of directors may be enlarged and additional
directors elected to complete the enlarged number, by the stockholders at any
meeting or by a vote of a majority of the directors then in office. The
stockholders may, at any meeting held for the purpose during such year, decrease
the number of directors as thus fixed or enlarged and remove directors to the
decreased number. Each director shall hold office until his successor is elected
and qualified or until his earlier resignation or removal. Any director may
resign at any time upon written notice to the corporation. No director need be a
stockholder.
ARTICLE IX.
-----------
Committees
----------
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee and may define the number
and qualifications which shall constitute a quorum of such committee. Except as
otherwise limited by law, any such committee, to the extent provided in the
resolution appointing such committee, shall have and may exercise the powers of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
ARTICLE X.
----------
Meetings of the Board of Directors and of Committees
----------------------------------------------------
Regular meetings of the board of directors may be held without call or
formal notice at such places either within or without the State of Delaware and
at such times as the board may by vote from time to time determine.
Special meetings of the board of directors may be held at any place
either within or without the State of Delaware at any time when called by the
president, treasurer, secretary or two or more directors, reasonable notice of
the time and place thereof being given to each director. A waiver of such notice
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to such
notice. In any case it shall be deemed sufficient notice to a director to send
notice by mail at least forty-eight hours, or to deliver personally or to send
notice by telegram at least twenty-four hours, before the meeting, addressed to
him at his usual or last known business or residence address.
Unless otherwise restricted by the certificate of incorporation or by
other provisions of these by-laws, (a) any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all members of the board or of such committee, as
the case may be, consent thereto in writing and such writing or writings are
filed with the minutes of proceedings of the board or committee, and (b) members
of the board of directors or of any committee designated by the board may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
ARTICLE XI.
-----------
Quorum of the Board of Directors
--------------------------------
Except as otherwise expressly provided in the certificate of
incorporation or in these by-laws, a majority of the total number of directors
at the time in office shall constitute a quorum for the transaction of business,
but a smaller number of directors may adjourn any meeting from time to time.
Except as otherwise so expressly provided, the vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the board of directors, provided, that the affirmative vote in good faith of
a majority of the disinterested directors, even though the disinterested
directors shall be fewer than a quorum, shall be sufficient to authorize a
contract or transaction in which one or more directors have interest if the
material facts as to such interest and the relation of the interested directors
to the contract or transaction have been disclosed or are known to the
directors.
ARTICLE XII.
------------
Waiver of Notice of Meetings
----------------------------
Whenever notice is required to be given under any provision of law or
the certificate of incorporation or these bylaws, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the certificate of incorporation or the by-laws.
ARTICLE XIII.
-------------
Officers and Agents
-------------------
The corporation shall have a president, secretary and treasurer, who
shall be chosen by the directors, each of whom shall hold his office until his
successor has been chosen and qualified or until his earlier resignation or
removal. The corporation may have such other officers and agents as are desired,
each of whom shall be chosen by the board of directors and shall hold his office
for such term and have such authority and duties as shall be determined by the
board of directors. The board of directors may secure the fidelity of any or all
of such officers or agents by bond or otherwise. Any number of offices may be
held by the same person. Each officer shall, subject to these by-laws, have in
addition to the duties and powers herein set forth, such duties and powers as
the board of directors shall from time to time designate. In all cases where the
duties of any officer, agent or employee are not specifically prescribed by the
by-laws, or by the board of directors, such officer, agent or employee shall
obey the orders and instructions of the president. Any officer may resign at any
time upon written notice to the corporation.
ARTICLE XIV.
------------
President
---------
The president shall, subject to the direction and under the
supervision of the board of directors, be the chief executive officer of the
corporation and shall have general and active control of its affairs and
business and general supervision over its officers, agents and employees. Except
as otherwise voted by the board, he shall preside at all meetings of the
stockholders and of the board of directors at which he is present. The president
shall have custody of the treasurer's bond, if any.
ARTICLE XV.
-----------
Secretary
---------
The secretary shall record all the proceedings of the meetings of the
stockholders and directors in a book, which shall be the property of the
corporation, to be kept for that purpose; and perform such other duties as shall
be assigned to him by the board of directors. In the absence of the secretary
from any such meeting, a temporary secretary shall be chosen, who shall record
the proceedings of such meeting in the aforesaid book.
ARTICLE XVI.
------------
Treasurer
---------
The treasurer shall, subject to the direction and under the
supervision of the board of directors, have the care and custody of the funds
and valuable papers of the corporation, except his own bond, and he shall,
except as the board of directors shall generally or in particular cases
authorize the endorsement thereof in some other manner, have power to endorse
for deposit or collection all notes, checks, drafts and other obligations for
the payment of money to the corporation or its order. He shall keep, or cause to
be kept, accurate books of account, which shall be the property of the
corporation.
ARTICLE XVII.
-------------
Removals
--------
The stockholders may, at any meeting called for the purpose, by vote
of a majority of the holders of the capital stock issued and outstanding and
entitled to vote thereon, remove any director from office.
The board of directors may, at any meeting called for the purpose, by
vote of a majority of their entire number remove from office any officer or
agent of the corporation or any member of any committee appointed by the board
of directors or by any committee appointed by the board of directors or by any
officer or agent of the corporation.
ARTICLE XVIII.
--------------
Vacancies
---------
Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors, may be filled by a majority
of the directors then in office (though less than a quorum) or by a sole
remaining director and each of the incumbents so chosen shall hold office for
the unexpired term in respect of which the vacancy occurred and until his
successor shall have been duly elected and qualified or for such shorter period
as shall be specified in the filling of such vacancy or, if such vacancy shall
have occurred in the office of director, until such a successor shall have been
chosen by the stockholders.
ARTICLE XIX.
------------
Indemnification
---------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful;
provided, however, that in the case of an action by or in the right of the
corporation, no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that he shall have been adjudged to be entitled
nevertheless to indemnity for such expenses; and provided, further, that any
indemnification under this Article shall be made only as authorized in the
specific case upon a determination that such person has met the applicable
standard of conduct set forth herein, such determination to be made (a) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, event or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders. Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification under these provisions. The
rights of indemnification hereby provided shall not be exclusive of or affect
other rights to which any director, officer, employee or agent may be entitled.
As used in this paragraph, the terms "director", "officer", "employee" or
"agent" include their respective heirs, executors and administrators; an
"interested" director or officer is one against whom as such the proceeding in
question or another proceeding on the same or similar grounds is then pending;
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at the request of
the corporation" shall include any service as a director, officer, employee or
agent of the corporation which imposes duties on or involves services by such
person with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to herein. Any
indemnification to which a person is entitled under this paragraph shall be
provided although the person to be indemnified is no longer such a director,
officer, employee or agent.
ARTICLE XX.
-----------
Certificate of Stock
--------------------
Every holder of stock in the corporation shall be entitled to have a
certificate signed by, or in the name of the corporation by the chairman or
vice-chairman of the board of directors (if one shall be incumbent) or the
president or a vice-president and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, certifying the number of shares owned
by him in the corporation. If such certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a registrar
other than the corporation or its employee, any other signatures on the
certificate may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificates which the corporation shall issue to represent such
class or series of stock or there shall be set forth on the face or back of the
certificates which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish, without charge to each
stockholder who so requests, the designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Any restriction imposed upon the transfer of shares or
registration of transfer of shares shall be noted conspicuously on the
certificate representing the shares subject to such restriction.
ARTICLE XXI.
------------
Loss of Certificate
-------------------
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the directors may require the owner of the lost, stolen of
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate in its place and upon such other terms or
without any such bond as the board of directors shall prescribe.
ARTICLE XXII.
-------------
Seal
----
The corporate seal shall, subject to alteration by the board of
directors, consist of a flat-faced circular die with the word "Delaware"
together with the name of the corporation and the year of its organization cut
or engraved thereon. The corporate seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE XXIII.
--------------
Execution of Papers
-------------------
Except as otherwise provided in these by-laws or as the board of
directors may generally or in particular cases authorize the execution thereof
in some other manner, all deeds, leases, transfers, contracts, bonds, notes,
checks, draft and other obligations made, accepted or endorsed by the
corporation, shall be signed by the president or by the treasurer.
ARTICLE XXIV.
-------------
Fiscal Year
-----------
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the corporation shall end on the last day of
December of each year.
ARTICLE XXV.
------------
Amendments
----------
Except as otherwise provided by law or by the certificate of
incorporation, these by-laws, as from time to time altered or amended, may be
made, altered or amended at any annual or special meeting of the stockholders
called for the purpose, of which the notice shall specify the subject matter of
the proposed alteration or amendment or new by-law or the article or articles to
be affected thereby. If the certificate of incorporation so provides, these
by-laws may also be made, altered or amended by a majority of the whole number
of directors. Such action may be taken at any meeting of the board of directors,
of which notice shall have been given as for a meeting of stockholders.
Exhibit 4.a
LOAN AGREEMENT
This Loan Agreement made the 25th day of February, 1993, by and
between Aquidneck Systems International, Inc., a Delaware corporation with a
place of business located at 650 Ten Rod Road, North Kingstown, Rhode Island
02852 (the "Borrower") and FLEET NATIONAL BANK, a national banking association,
with an office located at 4 Old Tower Hill Road, Wakefield, Rhode Island 02879
(the "Lender").
W I T N E S S E T H T H A T :
I. In consideration of loans made and to be made by Lender to Borrower and
for other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to be bound as shall be set forth herein
and in other loan instruments of even date herewith with regard to any and all
indebtedness (which indebtedness is sometimes referred to as "Obligations",
"Loan" or "Loans") of Borrower to Lender.
A. The Loan to Borrower:
1) Subject to the terms hereof and provided there shall have been
no material adverse change in Borrower's financial condition since the time of
Borrower's request for the most recent prior disbursement hereunder, Lender will
lend to the Borrower from time to time until the earlier of (a) demand by the
Lender (b) February 24, 1994 or (c) any event which would constitute an Event of
Default hereunder or under any other loan documents executed by and between the
parties hereto, such sums, on a revolving basis, as the Borrower may request,
which sums shall not exceed the aggregate principal amount of eighty percent
(80%) of the sum of Borrower's eligible trade receivables arising within ninety
(90) days prior to any advance and fifty percent (50%) of the lower of cost or
market value of Borrower's inventory, provided, however, in no event shall
inventory value exceed Two Hundred Thousand and 00/100 ($200,000.00) Dollars,
(as defined in the Revolving Line of Credit Agreement) provided further, that
the aggregate outstanding balance of the Revolving Loan shall not exceed at any
one time the sum of Five Hundred Thousand and 00/100 ($500,000.00) Dollars, all
as documented in Lender's records. Advances under the Line of Credit Loan shall
further be made in accordance with the provisions contained in the Revolving
Line of Credit Agreement of even date herewith.
a) Advances made under the Revolving Line of Credit Loan shall
bear interest on the unpaid principal amounts thereof outstanding from the date
of advance until payment in full, at a rate per annum equal to Two percent (2%)
greater than the lowest prime rate published in the Wall Street Journal or
equivalent publication.
B. Notwithstanding anything contained herein to the contrary, or
contained in the U.S. Small Business Administration's Revolving Line of Credit
Authorization, Revolving Line of Credit Agreement, Promissory Note, or contained
in any other document to be executed or delivered by Borrower in connection
herewith, the principal amount available to Borrower hereunder shall be limited
to the amount of Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars.
This limitation shall terminate only at such time as a loan between Borrower and
the Business Development Company of Rhode Island (the "BDC Loan"), is
terminated. Upon receipt of evidence satisfactory to Lender that the BDC Loan
has been paid in full and all collateral pledged as security for the BDC Loan
has been terminated, Lender shall make available to Borrower the amounts set
forth in paragraph I, section A, subsection 1.
C. Borrower shall execute and deliver to the Lender, security
instruments in such form as the Lender shall require which shall grant to the
Lender a valid security interest in all of its accounts receivable, general
intangibles, inventory, machinery, equipment, including power driven machinery
and equipment, furniture, fixtures, leasehold improvements, accessions thereto
and proceeds thereof, now owned or hereafter acquired.
D. The Loan to Borrower referred to herein shall be guaranteed by
Mario Briccetti (the "Guarantor").
II. At the request of Lender, Borrower and Guarantor shall execute and
deliver to Lender such other security instruments, financing statements, loan
instruments or other documents as the Lender may require in order to perfect or
assure to Lender the perfection, validity or effectiveness of any security
interest in property of Borrower as provided for herein.
III. All of the collateral and every part or item thereof shall secure all
of the Obligations herein and Borrower hereby grants to Lender a continuing
security interest in the collateral for this purpose. Unless otherwise
specifically provided in any other agreement, upon occurrence of an event of
default under this Loan Agreement or in any other loan instrument of even date
herewith, Lender may at its sole discretion apply the proceeds of the sale of
any collateral to such Obligation as Lender may in its absolute discretion
determine.
IV. Borrower further represents and warrants to Lender as follows:
A. That it is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware and has full power and
authority to enter into and perform this Loan Agreement and all other documents
to be executed, delivered and performed hereunder, all of which are legal, valid
and binding obligations of the Borrower, enforceable in accordance with their
terms. That the execution, delivery and performance of this Loan Agreement and
the borrowings hereunder, and the execution and delivery of the promissory note
or notes and all other documents and instruments required hereunder to be
delivered to Lender have been duly authorized by all requisite corporate action.
That it hereby agrees to maintain in good standing its corporate existence while
any indebtedness, liabilities and/or obligations to Lender are outstanding.
B. That it possesses full power and authority including all requisite
and sufficient licenses, franchises, permits and the like, to own all of its
properties and assets and to carry on its business where and as it is now being
conducted.
C. That it is solvent.
D. That neither the execution and delivery of this Loan Agreement nor
of the other documents nor the consummation of any transaction herein or therein
contemplated, nor the fulfillment of the terms hereof or thereof will constitute
or result in the breach of the provisions of any contract or agreement to which
Borrower is or may be a party or the charter or by-laws of Borrower or a
violation of any applicable law, ordinance, order, judgment, decree, government
order, rules or regulations or the imposition of any lien, charge or encumbrance
or the acceleration of any indebtedness.
E. That it has filed all Federal, State and local tax returns which
are required to be filed by it under applicable law and has paid all taxes shown
to be due and payable on such returns. No claims for additional taxes are now
being asserted against it, and further it is currently accruing adequate
reserves for all current taxes.
F. That its financial statements furnished to Lender are complete and
accurate presentations of its financial condition as of the respective dates
thereof, and have been prepared in accordance with generally accepted accounting
principles consistently applied; and since the respective dates of the financial
statements there has been no material adverse change in its financial condition
and there has been no transaction other than in the ordinary course of its
business. That it further covenants that since the date of its financial
statements that there has not been:
1) any change in the condition of its assets or liabilities,
other than changes in the ordinary course of business, none of which have been
materially adverse, nor has there been any depletion of cash or decrease of
working capital which has been materially adverse;
2) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its properties or business;
3) any declaration of, setting aside of, or making of a payment
or any dividends or other distribution with respect to its capital stock or any
direct or indirect redemption, purchase or other acquisition of any such stock;
4) any increase in the compensation paid by it to any of its
executive officers, or any general wage increase;
5) any materially adverse controversy with any labor organization
or employees;
6) any materially adverse claim or controversy involving any
federal, state, or local government agencies; or
7) any other event or condition affecting its business or
properties.
G. There is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to its
knowledge, threatened against or affecting it, which, if adversely determined,
would have a material adverse effect on its business operations, properties,
assets or condition (financial or otherwise). That it is not in default with
respect to any order of any court, arbitrator or governmental body arising out
of any action, suit or proceeding under any statute or other law or any
mortgage, indenture, contract or other agreement to which it is a party or which
purports to be binding upon it or upon any of its properties or assets which
will result in the creation or imposition of any lien, charge or encumbrance on,
or security interest in, any of its properties or assets, except in favor of
Lender.
H. That it is not a party to any agreement or instrument or subject to
any restrictions (except franchise agreements entered into in the ordinary
course of business) adversely affecting its business, properties, or assets,
operations or conditions, financial or otherwise, with the exception of the BDC
Loan. That it is not in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument to which it is a party or by which its assets may be bound, and no
default or event of default as hereinafter specified has occurred and is
continuing thereunder.
I. That it has good title to all of its properties and assets, pledged
as collateral for this Loan, free and clear of all liens and encumbrances,
except for the BDC Loan and/or as previously disclosed to Lender.
J. That it is not contemplating either the filing of a petition under
any state or federal bankruptcy or insolvency law or the liquidation of all or a
major portion of its property and has no knowledge of any person contemplating
the filing of any such petition against it.
K. That it utilizes no tradenames in the conduct of its business,
except as set forth herein; has not changed its name, been the surviving entity
in a merger, acquired any business, or changed the location of its principal
place of business or principal executive office.
L. That the address of its principal executive office and principal
place of business is 650 Ten Rod Road, North Kingstown, Rhode Island 02852 and
it has no other places of business.
M. That no consent or approval of any person other than the Business
Development Company of Rhode Island (the "BDC") or its Shareholders and
Directors, no waiver of any lien or other similar right, and no consent,
license, approval, authorization or declaration of any governmental authority,
bureau or agency is or will be required in connection with the execution,
delivery, performance, validity or enforcement or priority of this Loan
Agreement or any other agreement, instrument or document to be executed or
delivered by it in connection herewith.
N. That except as may have been previously disclosed to Lender, it has
no pension, profit sharing, stock option, insurance or other similar plan
providing for a program of deferred compensation or benefits for any employee or
officer.
O. That all "Defined Benefit Pension Plans" (as defined in the
Employee Retirement Income Security Act of 1974 [hereinafter referred to as
"ERISA"]) of Borrower, if any, meet as of the date hereof, the minimum funding
standards of Section 302 of ERISA, and no "Reportable Event", as defined in
ERISA, has occurred with respect to any such Plan.
V. Guarantor represents and warrants to the Lender as follows:
A. That he has full power and authority to enter into and perform this
Loan Agreement and to execute, deliver and perform each of the documents or acts
which are contemplated herein, all of which are valid and binding obligations,
enforceable in accordance with their terms.
B. That he is solvent.
C. That he has filed all Federal, State and local tax returns which
are required to be filed by them under applicable law and has paid all taxes
shown to be due and payable on such returns.
D. That the financial statements furnished to Lender by him are
complete and accurate presentations of his financial condition as of the
respective dates thereof, have been prepared in accordance with generally
accepted accounting principles consistently applied; and since the respective
dates of the financial statements there have been no material adverse change in
his financial condition.
E. That there is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or other agency now pending or, to
his knowledge, threatened against or affecting him, which, if adversely
determined, would have a material adverse effect on his business operations,
properties, assets or condition (financial or otherwise). He is not in default
with respect to any order of any court, arbitrator or governmental body arising
out of any action, suit or proceeding under any statute or other law or any
mortgage, indenture, contract or other agreement to which he is a party or which
purports to be binding upon him or upon any of his properties or assets.
F. That he is not a party to any agreement or instrument or subject to
any restrictions adversely affecting his business, properties, or assets,
operations or conditions, financial or otherwise. He is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which he is a party or by
which his assets may be bound, and no default or event of default as hereinafter
specified has occurred and is continuing thereunder.
G. He is not contemplating either the filing of a petition under any
state or federal bankruptcy or insolvency law or the liquidation of all or a
major portion of his property and has no knowledge of any person contemplating
the filing of any such petition against him.
VII. Borrower shall during the term of this Loan:
A. Duly and punctually, pay all interest, principal and all other
amounts of money becoming due from it to Lender and will duly and punctually
perform all things on its part to be done or performed under this Loan Agreement
and all other loan documents of even date herewith.
B. Maintain a consistent system of accounting in accordance with
generally accepted accounting principles consistently applied. For the purpose
of this Loan Agreement and all other agreements referred to herein, changes in
accounting principles which result from recommendations or directives by the
Financial Accounting Standards Board, the Securities and Exchange Commission or
the American Institute of Certified Public Accountants shall not be deemed to
create any inconsistent application of accounting principles.
C. Keep all such true and accurate records and accounts, both manual
and/or computer, as are required by good accounting practices and as are
necessary to reflect their business operations in reasonable detail. Lender, its
agents and employees shall, at all reasonable times, have free access to their
premises, books and accounts for the purpose of examining the same, inspecting
the same, and making extracts or reproductions thereof, arranging for
verification of collateral and taking any action it deems advisable in
connection therewith. Borrower further authorizes Lender to make or cause to be
made, at Borrower's expense and in such manner and at such times as Lender may
require, (1) inspections and audits of any books, records and papers in the
custody or control of Borrower or others relating to Borrower's financial or
business conditions, including the making of copies thereof and extracts
therefrom, and (2) after an event of default, inspections and appraisals of any
of Borrower's assets.
D. Provide to Lender, within ten (10) days of each month end, a cash
flow statement detailing the actual results of monthly operations prepared by
Borrower and verified by the President or Treasurer of Borrower.
E. Provide to Lender, within ten (10) days of each month end, an aging
of accounts receivables and payable prepared by Borrower and verified by the
President or Treasurer of Borrower.
F. Provide to Lender, within ten (10) days of each month end, a report
of inventory levels and values, prepared in accordance with generally accepted
principles of accounting consistently applied.
G. Provide to Lender, quarterly financial statements within forty-five
(45) days after the close of such period of the Borrower, prepared by
management.
H. Provide to Lender, reviewed annual financial statements, within one
hundred twenty (120) days following the end of each fiscal year, prepared by a
certified public accountant, acceptable to Lender, in accordance with generally
accepted principles of accounting consistently applied.
I. Promptly, from time to time, furnish to Lender such other
information regarding its operations, assets, business affairs, and financial
condition, as Lender may reasonably request and in form satisfactory to Lender.
J. Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its rights, licenses, permits and franchises and
comply with all laws and regulations applicable to it; at all times maintain,
preserve, and protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its business and keep
the same in good repair, working order and condition, and from time to time,
make, or cause to be made, all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.
K. Give prompt written notice to Lender of any proceedings instituted
against it by or in any federal or state court or before any commission or other
regulatory body, federal, state, or local, which if adversely determined, would
have a materially adverse effect upon its business operations, properties,
assets, or conditions, financial or otherwise.
L. Provide insurance as follows:
1) Maintain casualty insurance coverage on its physical assets
and other insurance against other risks, including public liability insurance in
such amounts and of such types as may be reasonably requested by Lender, and in
any event, as are ordinarily carried by similar businesses and, in the case of
all policies insuring property in which Lender shall have a security interest of
any kind whatsoever, all such insurance policies shall provide that the proceeds
thereof shall be payable to Borrower, Lender and the United States Small
Business Administration, as their respective interest may appear. All said
policies or certificates thereof, including all endorsements thereof and those
required hereunder, shall be deposited with Lender; and such policies shall
contain provisions that no such insurance may be cancelled without thirty (30)
days prior written notice to Lender; and, in the event of acquisition of
additional property, real or personal, or of incurrence of additional risks of
any nature, Borrower shall cause such insurance coverage to be increased in such
manner and to such extent as prudent business judgment would dictate. If
Borrower shall at any time or times hereunder fail to obtain and/or maintain any
of the policies of insurance required hereunder, or fail to pay any premium in
whole or in part relating to any such policies, Lender may, but shall not be
obligated to, obtain and/or cause to be maintained, insurance coverage
including, but at Lender's option, the coverage provided by all or any of the
policies of Borrower, and pay all or any part of the premium therefor, without
waiving any event of default by Borrower, and any sums so disbursed by Lender
shall be additional Obligations of Borrower to Lender payable on demand. Lender
shall have the right to settle and compromise any and all claims under any of
the policies required to be maintained by Borrower hereunder and Borrower hereby
appoints Lender as its attorney in fact, with power to demand, receive and
receipt for all monies payable thereunder, to execute in the name of the
Borrower or both any proof of loss, notice, draft, or other instruments in
connection with such policies or any loss thereunder and generally to do and
perform any and all acts as Borrower, but for this appointment, might or could
perform.
2) Borrower shall have free choice of agent and insurer through
or by which such insurance is to be placed or written provided said insurer is
authorized to write such insurance in the jurisdiction wherein the collateral is
located, has a licensed resident agent in said jurisdiction, and has at all
times while this Loan Agreement is in effect, a general policyholder's rating of
A or A+ in Best's latest Rating Guide. If any proceeds under any insurance
policies are paid to Lender while any Obligations are outstanding, Lender may,
at its sole option, pay over all or a portion of such proceeds to Borrower for
the purpose of replacing the lost, damaged or destroyed collateral with respect
to which such proceeds were paid.
M. Prior to the initial disbursement of this Loan, Borrower shall
submit to Lender in form and substance satisfactory to Lender:
a) detailed cash flow projection by month for the twelve month
period commencing with the date of submission of the loan application;
b) a listing and aging of accounts receivable and payable;
c) a detailed description of its inventory and a certification of
values thereof consistent with generally accepted accounting principles;
d) satisfactory evidence that all taxes are current and that a
depository plan for the payment of future withholding taxes is in effect; and
e) a Revolving Line of Credit Agreement in form satisfactory to
Lender and the Small Business Administration.
N. Maintain a maximum leverage position of 3.0. Leverage is defined as
the Borrower's total debt less fifty percent (50%) of deferred sales divided by
net worth minus intangible assets. This ratio shall be tested by Lender on an
annual basis.
O. Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon its respective
income and profits or upon any of its property, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided that Borrower shall not be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim, contested by it in good faith; and further provided, that payment
with respect to any such tax, assessment, charge, levy or claim shall be made
before any of its property shall be seized and sold in satisfaction thereof.
P. Promptly notify Lender of any condition or event which constitutes,
or would constitute with the passage of time or giving of notice or both, an
event of default under this Loan Agreement.
Q. Notify Lender within thirty (30) days prior to (a) the use of any
tradenames; or (b) any change in the address of the principal executive office
and/or principal place of business of Borrower.
VIII. Guarantor shall during the term of this Loan:
A. Submit to Lender, complete personal financial statements and tax
returns filed with the Internal Revenue Service, annually by April 30 or within
fifteen (15) days of filing returns with the Internal Revenue Service, during
the term of this Loan.
B. Provide Lender, from time to time, such other information regarding
his operations, assets, business affairs, and financial condition, as the Lender
may request and in form satisfactory to the Lender.
C. Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon his respective
income and profits or upon any of his property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided that he shall not be required to pay and discharge
or cause to be paid and discharged any such tax, assessment, charge, levy or
claim, contested by him in good faith; and further provided, that payment with
respect to any such tax, assessment, charge, levy or claim shall be made before
any of his property shall be seized and sold in satisfaction thereof.
D. Promptly notify Lender of any condition or event which constitutes,
or would constitute with the passage of time or giving of notice or both, an
event of default under this Loan Agreement.
IX. Borrower shall not, without obtaining in each instance the prior
written consent of the Lender, which consent will not be unreasonably withheld,
do or permit to be done any of the following:
A. Change its name or enter into any merger or consolidation with any
other corporation, partnership or effect any reorganization or recapitalization.
B. Incur, create, assume, or guaranty, or become or be liable in any
manner with respect to, or permit to exist, any indebtedness, obligation,
liability or lease commitment, direct, indirect or contingent, except usual
trade indebtedness incurred in the ordinary course of business which said trade
indebtedness shall at all times during the term hereof remain current.
C. Create or permit to exist, except hereunder or to the BDC, any
pledge, mortgage, lien or other encumbrance against any of its assets now owned
or hereafter acquired and pledged as collateral for this Loan.
D. Permit any indebtedness now or hereafter outstanding to any other
person to be accelerated as to maturity or paid otherwise than in accordance
with the regular amortization provided in any instrument evidencing such
indebtedness, with the exception of the BDC Loan.
E. Sell, lease, transfer or otherwise dispose of its properties,
assets, rights, licenses and franchises to any person, except in the ordinary
course of its business, or turn over the management of, or enter into a
management contract with respect to such properties, assets, rights, licenses
and franchises.
F. Engage in any business other than business in which it is currently
engaged or a business reasonably allied thereto.
G. Enter into any arrangement, directly or indirectly, with any
individual, corporation or partnership whereby it shall sell or transfer any
property, real, personal and/or mixed, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property.
H. Purchase, invest in or otherwise acquire or hold securities,
including, without limitation, capital stock and evidences of indebtedness of,
or make loans and advances to, or enter into any arrangement for the purpose of
providing funds or credit to, except in the ordinary course of its business, any
other individual or partnership, except investments of deposit of the Lender of
one (1) year or less from the date of investment.
I. Dissolve, liquidate, consolidate with, or merge with, or engage,
directly or indirectly, in any business substantially different from the
business now being conducted.
J. Declare or pay any dividends, or make any distribution of cash or
property, or both, to holders of shares of its capital stock, or directly or
indirectly, redeem, purchase or otherwise acquire for a consideration, any
shares of its capital stock, of any class. Notwithstanding anything contained
herein to the contrary, in the event that Borrower shall for any fiscal year be
an "S corporation" as defined in Section 1361 of the Internal Revenue Code of
1986, as amended (the "Code"), Borrower may, before the end of the sixth month
after the end of such fiscal year, distribute to its shareholders, in accordance
with their proportionate shareholdings, amounts not to exceed in the aggregate
the lesser of (A) the Federal and state income taxes payable by the shareholders
in respect of the shareholders' pro rata share of the taxable income of Borrower
determined in accordance with the highest marginal tax rates then in effect for
individual taxpayers or (B) the Federal and state income taxes (excluding taxes
imposed by Section 531 or 541 of the Code) which would have been payable by
Borrower for such fiscal year had the Borrower not been an S corporation for
such fiscal year. Promptly upon making any distribution pursuant to this clause,
Borrower shall furnish Lender with a calculation showing that such distribution
is in compliance with this clause.
K. With the exception of the proceeds from this Loan, make any loans
or advances to any individual, firm, corporation, or including, without
limitation, its officers or employees, without the prior written approval of
Lender. It may make advances to its officers or employees only when such
advances for expenses or otherwise are ordinarily reimbursable by it.
L. Directly or indirectly use or apply all or any portion of the
proceeds of this Loan made hereunder to purchase or carry any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings thereunder, as
amended.
M. Borrow funds from any other party except Lender or incur any other
obligation or debt whatsoever, except usual trade indebtedness incurred in the
ordinary course of business which said trade indebtedness shall at all times
during the term hereof remain current.
X. The occurrence of any one or more of the following events shall
constitute an event of default hereunder:
A. Any statement, representation, warranty or certificate made or
furnished to the Lender by Borrower or Guarantor in connection herewith or in
any separate statement or document to be delivered hereunder to Lender or in
connection with any other agreement between the parties, shall be materially
false, incorrect or incomplete;
B. Default by Borrower in payment to the Lender, whether after due
date, at maturity, upon demand if so provided, or upon acceleration of any and
all principal amounts, interest, installments or other liabilities to Lender, of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or to become due, now existing or hereafter arising,
regardless of how they arise and without limiting the generality of the
foregoing, the Loan specifically referred to in paragraph I, section A,
subsection 1;
C. A default in or breach of any term, condition, warranty,
representation, covenant or agreement contained in this Loan Agreement, in any
note or other loan instrument by Borrower or Guarantor and such default remains
uncured for thirty (30) days after written notice;
D. A default under any document, agreement or instrument now or
hereafter evidencing or securing any other obligation or indebtedness of
Borrower or any other person, corporation, or entity now or hereafter liable,
absolutely or contingently for the whole or any part of the Loan to Lender, now
existing or hereafter arising and not cured within thirty (30) days of said
default;
E. Failure by Borrower to pay when due any principal or interest
payable for money borrowed, or monies payable under any finance lease agreement,
security agreement or real estate mortgage or guaranty held by any party other
than Lender and such failure shall continue beyond any applicable grace or
notice period; or Borrower shall suffer to exist any other event of default
under any such aforesaid agreement, mortgage or guaranty binding upon it,
notwithstanding the fact that such event of default is waived by the other party
to such agreement or mortgage; as used herein, "finance lease agreement" means
an agreement that, in accordance with generally accepted accounting principles,
is or should be reflected on its balance sheet;
F. The falsity in any material respect of any covenant,
representation, statement or certificate made or delivered by or on behalf of
Borrower or Guarantor to the Lender;
G. Substantial loss, theft, damage, destruction or encumbrance of any
of Borrower's assets not adequately covered by insurance or a materially adverse
change in its business operations, assets or financial condition, as determined
by the Lender in its sole discretion;
H. The discontinuance of business by Borrower at any location;
I. Any change for any reason whatsoever in the office of President
and/or Chief Executive Officer of Borrower which shall in the reasonable
judgment of Lender adversely affect future prospects for the successful
operation of the business of Borrower;
J. The sale or conveyance of Borrower's interest in the whole or any
part of the collateral securing the Loan herein, without the prior written
consent of Lender, except to the extent permitted by this Loan Agreement or any
other agreement securing the Loan;
K. A judgment creditor shall obtain possession of any of Borrower's or
Guarantor's assets by any means including without limitations, levy, distraint,
replevin or self-help;
L. The merger or consolidation with any corporation or the
dissolution, liquidation or termination of existence of Borrower;
M. The death, incompetency or incapacity to act of Guarantor or the
occurrence of any event of default under any guaranty of the Obligations or any
of them or under any security therefor or the revocation or other termination of
any such guaranty;
N. Default in payment by Guarantor of any installment of principal or
interest, or default in the performance by Guarantor of any of the covenants,
agreements or conditions of any note held by any party, including Lender;
O. Any material change in the financial condition of or act or
omission of Borrower or of any other person, corporation or entity now or
hereafter liable, absolutely or contingently, for the payment of the whole or
any part of the Loan, or any act or omission of an officer, director, partner,
or trustee thereof which leads Lender reasonably to believe that performance of
any of the covenants, agreements, or conditions of this Loan Agreement or any
other document by Borrower is or may be seriously impaired;
P. If Borrower or Guarantor is permanently enjoined, restrained or in
any way prevented by court order from conducting all or any material part of
their business affairs;
Q. If at any time the Borrower or the Lender shall terminate this Loan
Agreement or cancel the Loan;
R. The occurrence of any one of the following events:
1) An admission in writing by or on behalf of Borrower or
Guarantor of the inability to pay their debts generally as they become due;
2) Commencement by Borrower or Guarantor of a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency, or other similar
law;
3) Commencement by Borrower or Guarantor of an involuntary case
under the federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency or other similar
law, which is not vacated or dismissed within thirty (30) days of the entry
thereof; or the entering of a decree or order appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar official) of
Borrower or Guarantor or for any substantial part of their property, or the
entering of a decree or order ordering the winding-up or liquidation of their
affairs;
4) An assignment for the benefit of creditors by Borrower or
Guarantor;
5) Consenting to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of Borrower or Guarantor or for any substantial part of their
property;
6) Adjudication of Borrower or Guarantor in bankruptcy;
7) The entry of a court order appointing a permanent receiver or
trustee for all or a substantial part of the property of Borrower or Guarantor
approving a petition filed against them for, or affecting an arrangement in,
bankruptcy, or for a reorganization pursuant to any provision under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency, or other similar law, or for
any other judicial modification or alteration of the rights of creditors and
such remaining undismissed for a period of thirty (30) days;
8) The assumption of custody or sequestration by a court of
competent jurisdiction of all or any substantial part of Borrower's or
Guarantor's property;
9) The entry of any judgment against Borrower or Guarantor in
excess of Ten Thousand and 00/100 ($10,000.00) Dollars provided there shall be
no default if a timely appeal is prosecuted and a stay of execution obtained,
unless said judgment remains unpaid for thirty (30) days;
10) The suspension of business by Borrower or Guarantor for
causes other than strike, Act of God, war, civil disorder, or casualty resulting
from a risk against which insurance is carried, provided that in the latter
case, operations are resumed upon the expiration of such reasonable time as may
be required to restore any damaged facilities.
THEN IN EACH AND EVERY CASE, on the occurrence of any of the above events of
default, and in addition to such other rights and remedies as may be set forth
in any promissory note, security instrument, or other documents executed by
Borrower or Guarantor, Lender may, at its election, accelerate any or all
indebtedness of Borrower to Lender irrespective of the term of any promissory
note or any other instrument evidencing or securing such indebtedness without
presentation, protest or notice of any kind, all of which are hereby waived; or
Lender may proceed to protect and enforce its rights by disposition of
collateral and/or action at law, suit in equity or other proceeding.
Further, on the occurrence of any of the above events of default, all
property credits, claims and balances of whatever nature of Borrower and
Guarantor at any time in the possession or control of or owing by Lender or its
agents (remittances and property to be deemed in possession of Lender as soon as
put in transit to Lender) including, without limitation, any balance on deposit
in any account of Borrower and Guarantor, may at any time be set off or
otherwise applied by Lender on the payment of all amounts owing in respect to
this Loan Agreement or of any other liabilities, obligations and indebtedness of
Borrower and Guarantor, or any part thereof, whether or not due, in such order
as Lender shall determine.
In addition to all other remedies set forth herein the Lender may look
to, utilize and realize upon any item or portion of any security instrument for
the Loan to Borrower set forth herein, or any other instrument securing the said
Loan to Borrower, or any other indebtedness, liabilities or obligations of
Borrower, whether now existing or hereafter contracted or acquired, in any order
it may elect without obligation to equalize the burden between or among the
owners thereof, or to marshal the same in any way, and Lender may apply any
proceeds of any security in such order as it shall determine, and after all
indebtedness, liabilities, and obligations now or hereafter of Borrower to
Lender have been paid in full, Lender shall account for any security then
remaining or any surplus proceeds of any security then remaining to the owner of
such property.
Borrower and Guarantor hereby appoint Lender and any officer or agent
thereof as their attorney in fact and grant to Lender, upon and after an
occurrence of an event of default as set forth in this Agreement or in any other
agreement, instrument or document to be executed or delivered by Borrower in
connection herewith, in their place and stead or in its own name, the full power
to do, in its sole discretion, all things and acts necessary to accomplish the
purpose of this Loan Agreement. Borrower and Guarantor release Lender from any
liability arising from any good faith acts hereunder or in furtherance hereof.
This power of attorney is coupled with an interest and shall be irrevocable
during the term of this Loan Agreement and so long as any Obligations of
Borrower shall remain outstanding.
Lender shall have the right to enter and/or remain upon the premises
of Borrower or Guarantor without any obligation to pay rent to Borrower and
Guarantor or others, or any other place or places where any of the collateral is
located and kept and: (i) remove collateral therefrom to the premises of Lender
or any agent of Lender, for such time as Lender may desire, in order to
maintain, collect, sell and/or liquidate the Collateral or (ii) use such
premises, together with materials, supplies, books and records of Borrower and
Guarantor, to maintain possession and/or condition of the collateral, and to
prepare the collateral for sale, liquidation, or collection; Lender may require
Borrower and Guarantor to assemble the collateral and make it available to
Lender at a place to be designated by Lender which is reasonably convenient to
all parties.
Borrower and Guarantor hereby covenant and agree that if an event of
default shall occur hereunder or under any note, any required security
instrument, and/or any other agreement executed and delivered in conjunction
herewith, neither Borrower and Guarantor nor anyone claiming through or under
Borrower shall or will set up, seek or claim to take advantage of any
appraisement, valuation, stay, extension, redemption, moratorium or marshalling
laws now or hereafter in force in the locality wherein the collateral may be
situated, in order to prevent or hinder the enforcement of this Loan Agreement,
any promissory note, any required security instrument, or any other agreement
executed and delivered in conjunction herewith, or the assertion by Lender of
its rights hereunder, or the absolute sale of the collateral, or the final or
absolute putting into possession thereof, immediately after such sale, of the
purchaser thereof, and Borrower and Guarantor, for themselves and their heirs,
executors, administrators, successors and assigns, hereby waive, to the full
extent that they lawfully may do so, the benefit of all such laws and any and
all rights to have the collateral marshalled upon any foreclosure of the
security interest created hereby or in any security agreement given in
conjunction herewith, and agree that the collateral may be sold as an entirety
or in parcels and further agree that Lender may proceed to exercise its rights
under and pursuant to the provisions of this Loan Agreement, any promissory
note, any required security instrument, or any other agreement, without
application to any court or judicial tribunal.
XI. The obligation of Lender to make the Loan to Borrower hereunder is
subject to the following conditions precedent:
A. The representations and warranties set forth herein shall be true
and correct on and as of the date hereof and as of the date the Loan to Borrower
is made.
B. All instruments and documents required hereunder shall have been
duly executed and delivered.
C. Lender shall hold a valid and perfected security interest in the
collateral subject to no other lien, charge, encumbrances or security interest
of any kind or nature except as permitted hereunder.
D. All other instruments and documents whose execution and delivery
are contemplated hereunder shall have been duly executed and delivered in the
form and in substance satisfactory to Lender and its counsel.
E. Lender shall have received a certificate from the Secretary or
other appropriate recording officer of Borrower in form and substance
satisfactory to Lender and its counsel, showing the authority of Borrower to
enter into this Agreement, to perform the obligations and the specific authority
of the persons executing this Agreement and all instruments and documents
pursuant hereto so to execute and deliver.
F. All policies of insurance described herein shall: have been
obtained; be in full force and effect; assigned and endorsed in form
satisfactory to Lender; and Lender shall have received the originals of each
such policy.
G. No event of default hereunder shall have occurred, nor will
Borrower be in default hereunder merely upon the giving of notice or the
expiration of any period of time, or both.
H. Lender shall have received such certificates from public officials
with respect to the corporate existence of Borrower and its qualification to do
business and its good standing, as Lender may reasonably require.
I. The Lender shall have received the favorable written opinion of
Edwards & Angell, counsel for Borrower and Guarantor dated as of the date of the
Loan to Borrower satisfactory to the Lender and its counsel in scope and
substance.
J. Lender shall have received from Borrower and Guarantor financial
statements which shall be satisfactory to Lender in form and substance.
K. Lender shall have received such other and further instruments and
documents as Lender or its counsel may reasonably require.
XII. This Loan Agreement and all covenants, representations and warranties
made herein shall survive the making by the Lender of the Loan to Borrower, the
execution and delivery to Lender of any promissory note and shall continue in
full force and effect so long as any indebtedness of Borrower to Lender is
outstanding and unpaid. Whenever in this Loan Agreement any of the parties
hereto is referred to, such reference and any pronouns referring thereto as used
herein shall be construed in the masculine, feminine, neuter, singular or
plural, as the context may require, and shall be deemed to include the
respective heirs, legal representatives, successors and assigns of each such
party; and all covenants, promises and agreements in this Loan Agreement
contained, by or on behalf of Borrower shall inure to the benefit of the
respective successors and assigns of Lender, provided that Borrower may not
transfer or assign any of its respective rights hereunder without the prior
written consent of Lender first had and received.
XIII. Borrower agrees to pay all expenses (including fees and expenses of
Lender's counsel and filing or recording fees) incurred by Lender in connection
with: the preparation; delivery; interpretation or amendment of this Loan
Agreement, any security instruments, promissory notes, affidavits and/or any
other documents used in consummating this transaction; the enforcement by Lender
of its rights against Borrower and Guarantor of the obligations described
herein; the protection of or any realization of any collateral held as security
for the obligations described herein or as security for any guaranty granted
pursuant hereto; and the defense of any action brought against Lender in
connection herewith;
XIV. The Borrower does hereby waive protest of all commercial paper at any
time held by Lender on which the Borrower is any way liable, and further does
hereby waive notice and opportunity to be heard, after acceleration, before
exercise by Lender of the remedies of self-help, set-off, or of other summary
procedures permitted by law or by any agreement with the Borrower, and except
those required hereby or by law, notice of any other action taken by Lender;
Borrower hereby releases Lender from all claims for loss or damage caused by any
act or omission on the part of Lender or its officers, attorneys, agents and
employees, except for willful misconduct; and Borrower grants to Lender the
right, but not the duty, to set off against liabilities sums which are at any
time credited by or due from Lender to Borrower. In addition to all the
liabilities hereunder, the Borrower agrees to hold Lender harmless from and to
indemnify Lender against, all losses, damages, fees, costs and expenses incurred
by Lender, whether direct, indirect or consequential, as a result of or arising
from or relating to any suit, investigation, action or proceeding, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
arising under any statute or regulation (other than suits or other actions by a
Borrower against Lender), including without limitation, any federal or state
securities, environmental, commercial or labor laws and regulations or under any
common law or equitable cause, or otherwise; provided, however, the Borrower
shall not be required to indemnify Lender against losses, damages, fees, costs
or expenses arising solely from Lender's bad faith or willful misconduct.
XV. This Agreement is and shall be deemed to be entered into and made
pursuant to the laws of the State of Rhode Island and shall in all respects be
governed, construed, applied and enforced in accordance with the laws of said
state. Borrower and Guarantor hereby expressly submit to the non-exclusive
jurisdiction of all Federal and State courts sitting in the State of Rhode
Island, and agree that any process or notice of motion or other application to
any of said courts or a judge thereof may be served upon Borrower and Guarantor
by registered mail or by personal service, at the address of Borrower and
Guarantor specified herein, or at such other address as the Borrower and
Guarantor shall specify by a prior notice in writing to Lender, provided a
reasonable time for appearance is allowed. Borrower and Guarantor hereby
irrevocably waive any objection which they may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or relating
to this Agreement or any other agreements relating to the Obligations, brought
in any Federal or State court sitting in the State of Rhode Island and hereby
further irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Notwithstanding the foregoing, Lender may sue Borrower and Guarantor in any
other jurisdiction where Borrower and Guarantor or any of their assets may be
found and may serve legal process upon them in any manner permitted by law.
XVI. No party to this Loan Agreement, including but not limited to any
assignee or successor of a party, shall seek a jury trial in any lawsuit,
proceeding, counterclaim, or any other litigation procedure based upon, or
arising out of, this Loan Agreement, any related instruments, any collateral or
the dealings or the relationship between or among the parties, or any of them.
No party will seek to consolidate any such action, in which a jury trial has
been waived, with any other action in which a jury trial cannot be or has not
been waived. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
XVII. No modification or waiver of any provision of this Loan Agreement,
any promissory note and any other instrument hereunder nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in writing signed by an officer of Lender, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given. No notice to, or demand on, Borrower, in any case, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstance. Neither any failure nor delay on the part of Lender in
exercising any right, power or privilege hereunder or under any other instrument
given as security therefor, shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
XVIII. Notwithstanding the enumeration of events of default or any other
term or provision contained in this Agreement, or in the note or any other
documents executed in connection herewith and delivered to the Lender, Borrower
expressly acknowledges that the note is a demand obligation and that upon demand
under the note the Lender may exercise any and all rights of a holder of a
demand promissory note as may be provided under Rhode Island law and judicial
precedent.
XVIII. All communication provided for hereunder shall be in writing, sent
by United States Mail, postage prepaid, to the respective parties as follows:
TO LENDER: FLEET NATIONAL BANK
4 Old Tower Hill Road
Wakefield, Rhode Island 02879
Attention: Mark J. Meiklejohn, Vice President
with a copy to: Gelfuso & Lachut, Incorporated
1193 Reservoir Avenue
Cranston, Rhode Island 02920
Attention: Joseph F. Lachut, Esquire
TO BORROWER: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Attention: Mario Briccetti, President
with a copy to: Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: John E. Ottaviani, Esquire
Each party by notice duly given in accordance herewith may specify a different
address for the purposes hereof.
XIX. In the event that any one or more of the provisions contained herein
shall for any reason be held invalid, illegal, or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, but each shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been included herein.
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have caused this Loan
Agreement to be duly executed all as of the day and year first above written.
Aquidneck Systems
International, Inc.
/s/ John E. Ottaviani
- ------------------------------ By: /s/Mario Bricetti
Witness ---------------------------------
Mario Briccetti, President
/s/ John E. Ottaviani
- ------------------------------ /s/Mario Briccetti
Witness ------------------------------------
Mario Briccetti, Guarantor
FLEET NATIONAL BANK
/s/
- ------------------------------ By: /s/ Mark J. Meiklejohn
Witness ---------------------------------
Its: Vice President
/s/
- ------------------------------ By: /s/ Donna S. Urso
Witness ---------------------------------
Its: Vice President
<PAGE>
U.S. SMALL BUSINESS ADMINISTRATION
Providence District Office
380 Westminster Street
Providence, RI 02903
REVOLVING LINE OF CREDIT AGREEMENT
In consideration of the terms contained in the Revolving Line of Credit
Authorization dated January 15, 1993 ("Authorization"); this Revolving Line of
Credit Agreement; and other good and valuable consideration, the legal
sufficiency and receipt of which are hereby acknowledged, Fleet National Bank,
111 Westminster St., Providence, RI 02903 and Aquidneck Systems International,
Inc. 650 Ten Rod Rd., North Kingstown, RI 02852 agrees as follows:
1. Revolving Line of Credit
Lender shall provide Borrower up to a principal amount of $500,000.00
under this revolving line, as evidence by a demand note ("Note"). Lender
may advance principal amounts to Borrower to the extent of the lesser of
(a) the face amount of the Note, or (b) the aggregate value of eighty
percent (80%) of the sum of Borrower's trade receivables arising within
ninety days prior to any advance and hypothecated to Lender as security
for this revolving line, plus fifty percent (50%) of the "lower of cost
or market" value of the inventory, up to a maximum of $200,000.00,
hypothecated to Lender as security for this revolving line and
considered by Lender to be readily salable.
The trade receivables included in the foregoing computation shall be,
solely, undisputed receivables arising out of the sale of goods actually
shipped or delivered, or the rendition of services actually performed,
by the Borrower in the ordinary course of its business to or for account
debtors which are not affiliated with Borrower or with any person or
enterprise affiliated with Borrower, and with respect to which
receivables no offsets or counterclaims exist. All trade allowances,
credits, or adjustments shall be netted against any such receivables in
determining the value of such receivables for the purpose of this
Agreement.
Inventory included in the foregoing computation shall be, solely,
inventory with respect to which Lender has a first lien in connection
with this revolving line; and all factors relevant under generally
accepted accounting principles shall be considered in determining the
"lower or cost or market" value of such inventory. Any determination by
Lender as to net trade receivable values or lower of cost or market
inventory values shall be final and binding upon the Borrower.
2. Terms and Interest Rate
The revolving line of credit ("revolving line") is granted under a one
year financial program of Lender and SBA. The revolving line shall
commence 02/15/93 and shall expire 364 days thereafter, subject,
however, to the provisions of this Agreement. Extensions of credit
beyond expiration are not assumed under this revolving line regardless
of Borrower's payment history, credit worthiness, or financial
condition.
The Note shall bear a variable rate of interest which shall be payable
at the rate of the lowest prime rate of interest published in the Wall
Street Journal or equivalent publication ("Prime Rate"), plus two
percent. Lender shall adjust the interest rate on a monthly basis
pursuant to fluctuations in the Prime Rate, unless and until Lender
establishes a fixed rate of interest for this borrowing.
3. Records of Account
Lender shall establish records of disbursements and receipts ("records
of account") under the revolving line, where advances by Lender and
payments by Borrower shall be recorded, together with all other charges,
debits and credits permitted by the Authorization, the Note, and this
Agreement.
Lender's records of account shall be conclusively presumed to be
complete, correct, and accurate with respect to the actual amount due
and owing under the Note, and in any proceeding for collection the
revolving line balance outstanding pursuant to Lender's records of
account shall be conclusive with respect to the amount due and owing
under the Note.
4. Payment of Account
NOTHING IN THIS PARAGRAPH OR IN ANY OTHER PARAGRAPH OF THIS AGREEMENT
SHALL AFFECT THE DEMAND NATURE OF THE NOTE. BORROWER ACKNOWLEDGES THAT
THE OCCURRENCE OF AN EVENT OF DEFAULT IS NOT A PREREQUISITE FOR THE
LENDER TO REQUIRE IMMEDIATE PAYMENT IN FULL OF THE NOTE.
Until Lender requires payment in full of the revolving line balance
outstanding, payments in whole or in part may be made at any time
without penalty. Lender shall apply any payments made as follows: first
to chargeable costs or expenses incurred by Lender in connection with
the revolving line or in connection with the security therefor; second,
to accrued but unpaid interest; third, to principal.
At least once each month Borrower shall render to Lender a
reconciliation report (RLC Pilot Form B). Based on Borrower's monthly
reconciliations, reports and financial statements, and on such further
evidential matter as Lender considers reasonable under the
circumstances, Lender shall establish an amount of credit available
under the revolving line. Whenever the revolving line balance
outstanding exceeds the amount of credit available under the borrowing
formula appearing at numbered provision 1 of this Agreement, Lender
shall inform Borrower in writing that the amount of revolving line of
credit available has been exceeded, and Borrower shall pay to Lender not
less than the dollar amount necessary to reduce the revolving line
balance outstanding to a figure equal to the maximum amount of credit
available under the borrowing formula. Borrower waives all requirements
of notice of demand and agrees, accepts, and understands that no demand
or notice is required before Lender may take such measures as it
considers prudent to ensure receipt to Lender of funds to effectuate the
payments required under this paragraph 4, including, without limitation,
immediate offset of any funds Borrower may have on deposit with Lender.
5. Collateral Security
Borrower hereby declares that the revolving line outstanding balance is
intended to be and shall be secured by security interests as set forth
in a security agreement or security agreements executed in connection
with this Agreement. Borrower warrants that it is the owner of
marketable title to all inventories and accounts given as security for
this revolving line; that such collateral is free and clear of every
charge, lien, encumbrance, claim, or adverse interest whatsoever; and
that each account receivable hypothecated as collateral for this
revolving line is a valid and subsisting account representing a bona
fide indebtedness arising out of a sale of goods actually delivered or a
rendition of services actually provided.
Borrower shall promptly notify Lender in writing of any addition to,
change in or discontinuance of its place(s) of business; the place(s) at
which inventory is located; and the location of its executive offices or
the office where it keeps its business records.
Borrower shall immediately notify Lender of the assertion by any account
debtor of any set-off or offset, defense or claim regarding an account
or any other matter adversely affecting an account. Borrower shall grant
the Lender the right to confirm account balances under reasonable
procedures including direct confirmation with account debtors.
Borrower shall immediately notify Lender of any catastrophic loss to,
unusual depreciation in value of, its inventory or other property
hypothecated to Lender in connection with this revolving line; and
Borrower shall forthwith report to Lender all returns of, rejections of,
repossessions of, attachments of, levies on, or damages occurring to,
such property to the extent such returns, rejections, repossessions,
attachments, levies, and damages are material under generally accepted
accounting principals.
Any claim against hypothecated property by any party other than Lender,
shall, except to the extent Borrower and Lender any specifically agree
otherwise in writing, have the effect of reducing the amount of credit
available under this revolving line regardless of whether such
transaction, event, occurrence, or claim is adverse to the security
interest of Lender.
Borrower shall, at the request of the Lender, notify account debtors of
the security interest of the Lender in any account and instruct such
account debtors that payment on account is to be made directly to the
Lender. Until and unless the Lender requests that debtors on accounts
receivable of Borrower be notified of the Lender's security interest,
the Borrower shall continue to collect them. The Borrower shall hold any
proceeds received from collection in trust for the Lender without
commingling the same with other funds of the Borrower and shall turn the
same over to Lender within 15 day(s) of receipt by Borrower.
Borrower agrees that Lender may, at any time and in its sole discretion,
surrender for payment and obtain payment of any portion of the accounts,
invoices, or other instruments hypothecated to Lender in connection with
this revolving line.
6. Change of Ownership
This revolving line shall be fully due and payable upon the incidence of
any change of ownership of the Borrower.
7. Waivers, Notices, Demands
Borrower waives presentment for payment; protest and notice of protest;
demand and notice of nonpayment or acceleration; notice of credit
extended or disbursements made, and every other demand, notice, or
advice of any description or purpose. Any demand upon or notice to the
Borrower that the Lender may elect to give shall be effective if
deposited in the mails prepaid addressed to the Borrower at the address
shown at the beginning of this agreement, or if the Borrower has
notified the Lender in writing of a change in address to the Borrower's
last address so notified. Demands or notices addressed to the Borrower's
address at which the Lender customarily communicates with the Borrower
shall also be effective.
8. Manner of Borrowing
Borrower may request advances on this revolving line by having its
authorized representative(s) make requests in such ways and at such
times as Lender by separate document shall set forth, provided, however,
that Borrower shall forthwith confirm in writing to Lender any
telephonic request.
9. Other Matters
Borrower agrees that its compliance with and performance of the
provisions of the Authorization or this Agreement shall not obligate
Lender to make any disbursements or advances under the Note. Borrower
understands that the revolving line may be canceled and the outstanding
balance pursuant to Lenders records of account may be declared
immediately due and payable without notice to Borrower and that Lender
may offset against such balance outstanding any and all funds of
Borrower in Lender's possession.
Borrower agrees that Lender may communicate directly at any time with
Borrower's accountants and with any independent public accountant
retained by Borrower on consideration that Lender shall keep
confidential any information obtained from such accounts.
Borrower agrees that all rights conferred on Lender by any paragraph
of this Agreement shall inure to the benefit of Lenders successors
and assignors.
Date: February 25, 1993 By: /s/ Authorized Officer
----------------- -------------------------------------
Fleet Financial Bank
Date: February 25, 1993 By: /s/ Mario Briccetti
----------------- -------------------------------------
Mario Briccetti, President
Aquidneck Systems International, Inc.
<PAGE>
MODIFICATION AGREEMENT
This Modification Agreement (the "Agreement") made this ____ day of
April, 1994, by and between Fleet National Bank, a national banking association,
with an office located at 4 Old Tower Hill Road, Wakefield, Rhode Island 02879
(the "Bank") and Aquidneck Systems International, Inc., a Delaware corporation,
with a place of business located at 650 Ten Rod Road, North Kingstown, Rhode
Island 02852 (the "Borrower").
WHEREAS, the Bank made a line of credit loan to the Borrower (the
"Loan") in the original principal amount of Five Hundred Thousand and 00/100
($500,000.00) Dollars (the "Loan Amount"); and
WHEREAS, the Loan is seventy-five percent (75%) guaranteed by the United
States small Business Administration (the "SBA") in accordance with provisions
of a guaranty agreement between the Bank and the SBA dated December 13, 1982;
and
WHEREAS, the Loan is evidenced by the Borrower's loan agreement and line
of credit agreement (collectively the "Loan Agreement") and the Borrower's
promissory note (the "Note"), the Note having a face amount equal to the Loan
Amount and bearing the date of February 25, 1993 and payable to the Bank; and
WHEREAS, the Loan is secured by a security agreement (the "Security
Agreement") of even date with the Loan Agreement and the Note as evidenced by
UCC-l's filed with the Secretary of State's office for the State of Rhode Island
and with the Recorder of Deeds for the Town of North Kingstown, Rhode Island,
securing to the Lender the Borrower's interest in all of its accounts
receivable, general intangibles, inventory, machinery, equipment, including
power driven machinery and equipment, furniture, fixtures, leasehold
improvements, accessions thereto and proceeds thereof; and
WHEREAS, Mario Briccetti of 84 Gateway Road, North Kingstown, Rhode
Island (the "Guarantor") has guaranteed the Loan to the Borrower by a guaranty
dated February 25, 1993 (the "Guaranty"); and
WHEREAS, the Borrower is seeking from Allen & Company ("Allen"), The
Brown Third Century Fund ("Brown") and Malcom G. Chace, III ("Chace") and/or
their related companies, an equity injection of at least One Million and 00/100
($l,000,000.00) Dollars; and
WHEREAS, as a condition precedent to the equity injection, Allen, Brown
and Chace are requiring that the Guarantor resign his position as President and
Chief Executive Officer of the Borrower and that Matthias E. Lukens of 204
Spencer Avenue, East Greenwich, Rhode Island ("Lukens") accept the position of
President and Chief Executive Officer of Borrower; and
WHEREAS, as a further condition precedent to the said equity injection,
Allen, Brown and Chace are requiring that the Bank waive its right to declare a
default under the Loan Agreement resulting from the change in the office of
President and/or Chief Executive Officer of the Borrower; and
WHEREAS, the Guarantor is willing to tender his resignation as President
and Chief Executive Officer of the Borrower upon the condition that the Bank
release him from his Guaranty.
NOW, THEREFORE, in consideration of the promises contained herein, in
the Loan Agreement, in the Note, in the Security Agreement, in the Guaranty, and
in various other loan documents executed in connection with the Loan, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby mutually acknowledged, it is hereby agreed by and between the Borrower,
the Guarantor and the Bank as follows:
1. The Bank does hereby release the Guarantor from and terminates his
Guaranty of the Loan.
2. That the Bank does hereby consent to the resignation of Guarantor
as President and Chief Executive Officer of the Borrower and to the election of
Lukens as President and Chief Executive Officer of the Borrower.
3. That the Borrower and/or Allen, Brown and Chace present to the Bank
no later than ninety (90) days from the execution of this Agreement a plan,
acceptable to the Bank, for repayment of the Borrower's Loan.
4. Except as modified herein, the Loan Agreement, the Note, the
Security Agreement and all other instruments securing or related to the Loan
shall remain in full force and effect and further, are hereby ratified and
confirmed in all respects, and no rights of the Bank, or its successors and
assigns, are or shall be waived, modified or diminished except as expressly
stated herein. From and after the date hereof, all references to the Loan
Agreement, the Note, the Security Agreement and all other instruments securing
or related to the Loan, whenever and however made, shall be deemed to refer to
the Loan Agreement, the Note, the Security Agreement and all other instruments
securing or related to the Loan, as modified by this Agreement. If the Loan has
previously been modified, all references to the Loan contained herein are deemed
to refer to the Loan as previously modified, and as modified by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be duly executed on the 29th day of April, 1994.
Aquidneck Systems
International, Inc.
/s/ John E. Ottaviani
- ----------------------------- By: /s/Mario Briccetti
Witness ---------------------------------
its: President/CEO
FLEET NATIONAL BANK
- ----------------------------- By:
Witness ---------------------------------
its:
- ----------------------------- By:
Witness ---------------------------------
its:
United States Small Business
Administration
- ----------------------------- By:
Witness ---------------------------------
its:
<PAGE>
RESTRUCTURE, REAFFIRMATION AND FORBEARANCE AGREEMENT
This Restructure, Reaffirmation and Forbearance Agreement (the
"Agreement") is executed as of the 21st day of October, 1994, by and between
Aquidneck Systems International, Inc., a Delaware corporation with a principal
place of business at 650 Ten Road, North Kingstown, Rhode Island (the
"Borrower") and Fleet National Bank, a national banking association organized
and existing under the laws of the United States of America having its principal
place of business at 111 Westminster Street, Providence, Rhode Island ("Fleet").
R E C I T A L S:
A. Fleet made a loan to Borrower in the original principal amount of
Five Hundred Thousand and 00/100 ($500,000.00) Dollars (the "Loan") which Loan
is evidenced by Borrower's Note dated February 25, 1995, as amended (the
"Note").
B. On February 25, 1993, Fleet and Borrower entered into a Loan
Agreement, as amended.
C. Borrower's obligations under the Note are secured by, inter
alia, all receivables, general intangibles, inventory, machinery, equipment and
fixtures as more fully described in the Security Agreement dated February 25,
1993, as amended, from Borrower to Fleet (the "Security Agreement").
D. The Note, the Loan Agreement, the Security Agreement and the other
loan documents executed in connection with the Note as modified by a
Modification Agreement dated April 29, 1994 between Fleet and Borrower, are
sometimes collectively referred to herein as the "Loan Documents".
E. The Borrower hereby acknowledges the following:
(1) The Borrower is in default under the terms of the Loan
Documents, and the Borrower does not contest the nature, amount or existence of
said defaults, any failures or breaches incident thereto, or the enforceability
of Fleet's rights under the Loan Documents;
(2) The Loan Documents executed in connection with the Note set
forth the legal, valid, binding and continuing obligations of the Borrower to
Fleet, enforceable in accordance with their terms and conditions;
(3) All actions taken by Fleet to the date of this Agreement
pursuant to its rights under the Loan Documents have been commercially
reasonable;
(4) The Borrower does not have any cause of action, claim,
defense, setoff or reduction against Fleet in any way regarding or relating to
the Note or the Loan Documents executed in connection therewith and the sums due
thereunder;
(5) Fleet has properly satisfied and performed in a timely and
reasonable manner all obligations to the Borrower under the Note and the Loan
Documents executed in connection therewith;
(6) The outstanding principal balance under the Note as of
October 11, 1994 is $500,000.00, plus interest accrued through October 11, 1994
in the amount of $3,520.84;
F. The Borrower acknowledges and agrees that Borrower has been and is
currently in default under the Note and waives all defenses in connection
therewith. Borrower also acknowledges and agrees that Fleet may, if it so
elects, exercise any and all of its rights and remedies under the terms of the
Loan Documents in order to collect the amount due under the Note.
Notwithstanding the foregoing, Borrower has now requested that Fleet forbear
from exercising such rights and remedies not already exercised for a period of
time, as hereinafter specified, subject to the terms and conditions herein
provided.
G. In consideration of the foregoing recitals and the promises,
conditions and covenants herein contained, Fleet is willing to grant the
requested period of forbearance, subject to and upon their conditions set forth
herein.
H. The Borrower has supplied Fleet with the financial and business
documents upon which Fleet has relied in reaching its decision to restructure
the obligations and to forbear from exercising its rights and remedies during
the requested period of forbearance which the Borrower have undertaken.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
l. Fleet shall forbear from exercising its rights and remedies under
the Loan Documents for the period through and including June 30, 1995 SUBJECT TO
the provisions of this Agreement.
The foregoing agreement by Fleet is not intended by the parties and shall not be
construed as a waiver of the aforesaid existing defaults, it being acknowledged
and agreed that no such waiver shall be effected hereby, but Fleet's agreement
as set forth in this paragraph is only an agreement temporarily to forbear from
exercising its rights under the Loan Documents.
2. Notwithstanding any provision herein to the contrary, Fleet shall
have no obligation to forbear from exercising, whether during the forbearance
period set forth in paragraph 1 of this Agreement or otherwise, any of its
rights and remedies under the Loan Documents, including (without limitation) the
rights to declare the outstanding amounts due on the Note (together with accrued
and unpaid interest and other charges payable thereon, including interest
charges at the default rate of interest) immediately due and payable and the
right to exercise Fleet's rights and remedies under the Loan Documents, and
Fleet shall be entitled to exercise such rights and remedies at its option and
without notice to Borrower or any other party to the Loan Documents, upon the
occurrence of any one or more of the following events:
(a) if there shall occur and continue (beyond any applicable
grace or cure periods) any default or violations under the Loan
Documents, as amended by this Agreement, after the execution of
this Agreement; or
(b) if the Borrower fails to comply with any of the terms or
conditions set forth in this Agreement.
3. The rate of interest on the Notes shall be Prime plus two (Prime +
2.0%). Prime Rate shall mean the lowest prime rate published in the Wall Street
Journal from time to time.
4. Contemporaneous with the execution of this Agreement, the Borrower
and Fleet shall execute the Amendment to Note, a copy of which is attached
hereto as Exhibit A.
5. Borrower hereby ratifies, affirms and reaffirms in all respect
their respective obligations under the Note, the Loan Agreement, the Security
Agreement and all other loan documents executed in connection with the Note and
with this Agreement, including, without limitation, all terms, conditions,
representations and covenants therein, and certify that there exists no
defenses, offsets or counterclaims thereto as of the date hereof.
6. Borrower does hereby forever DISCHARGE AND INDEMNIFY, FLEET
NATIONAL BANK, and its predecessors, successors, assigns, officers, managers,
directors, shareholders, employees, agents, attorney's, representatives, parent
corporations, subsidiaries, and affiliates (hereinafter all of the above
collectively referred to herein as "Bank"), jointly and severally from any and
all claims, counterclaims, demands, damages, debts, agreements, covenants,
suits, contracts, obligations, liabilities, accounts, offsets, rights, actions
and causes of action of any nature whatsoever, including, without limitation,
all claims, demands, and causes of action for contribution and indemnity,
whether arising at law or in equity including without limitation, claims of
fraud, duress, mistake, tortious interference, usury, negligence or fraud in
rates and methods used to compute interest, and violation of the Massachusetts
Consumer Protection Act, whether known or unknown, whether liability be direct
or indirect, liquidated or unliquidated, whether absolute or contingent,
foreseen or unforeseen, and whether or not heretofore asserted, for or because
of or as a result of any act, omission, communication, transaction, occurrence,
representation, promise, damage, breach of contract, fraud, violation of any
statute or law, commission of any tort, or any other matter whatsoever or thing
done, omitted or suffered to be done by the Bank (insofar and only insofar as
the same arise out of or relate to the Note, this Agreement and all documents
executed in connection with each), which has occurred in whole or in part, or
was initiated at any time from the beginning of time up to and including the
moment of execution of this Agreement.
7. Borrower represents and warrants to Fleet that all financial
statement(s) and/or Affidavits of Financial Condition furnished to Fleet in
connection with the Note and in contemplation of this Agreement are true and
correct. Borrower acknowledges that Fleet has relied upon the information set
forth in Paragraph H, above in reaching its decision to enter into this
Agreement. All financial statement(s) and/or Affidavits of Financial Condition
prepared by Borrower and furnished to Fleet were prepared in accordance with
GAAP.
8. There shall occur a Default by Borrower under this Agreement if (a)
any financial statements, affidavits of financial condition or other financial
information delivered by Borrower in connection with this Agreement prove to be
false or misleading in any material respect provided however, that a deviation
of up to Ten percent (l0%) minus from Borrower's profit and loss pretax
cumulative base line projections will not be considered a default under this
paragraph, or (b) Borrower fail to comply with any term or condition of this
Agreement, the Note and the Amendment thereto, or any of the Loan Documents
executed in connection with the Note and/or this Agreement. If a Default shall
occur under this Agreement, Fleet shall be entitled to exercise all rights and
remedies allowed by applicable law.
9. The Borrower agrees to pay upon default costs of collection
including reasonable fees of attorneys.
10. If the entire amount of any required principal and/or interest is
not paid in full within ten days (10) after the same is due, the Borrower shall
pay to the Lender a late fee equal to five percent (5%) of the required payment
provided that such late fee shall be reduced to three percent (3%) of any
required principal and interest payment that is not due if this Agreement is
secured by a mortgage on an owner-occupied residence, 1-4 units.
11. The Borrower shall maintain an aggregate eligible Accounts
Receivable balance of not less than Three Hundred Thousand and 00/100
($300,000.00) Dollars at all times. Eligible Accounts Receivable will be defined
as the total of Trade Receivables plus Contract Receivables plus Accounts
Receivables supported by Irrevocable Letters of Credit, which are deemed
acceptable by Fleet in Fleet's sole discretion, arising within 90 days. The
Borrower affirms that the advance of 50% of the lower of cost or market value of
Borrower's Inventory capped at Two Hundred Thousand and 00/100 ($200,000.00)
Dollars remains in full force and effect. The Borrower shall have a 45 day cure
period to restore the eligible collateral base to the required minimum Five
Hundred Thousand and 00/100 ($500,000.00) Dollars if the eligible Accounts
Receivable and Inventory amounts as defined herein fall below the established
minimum balances. If the collateral base is not restored to the minimum $500,000
balance, the Borrower shall make a principal payment to lower the outstanding
principal balance of the Note in an amount sufficient to maintain a minimum a
1:1 Loan to Value Margin.
12. Borrower shall submit to Fleet within 20 days of the interim
period monthly management prepared statements to include Accounts Receivable,
Accounts Receivable Agings and Inventory Listings certified by the Chief
Executive Officer of Borrower.
13. All expenses incurred by the Fleet in connection with this
Agreement, including but not limited to, appraisals internal/external Bank
examiner's, collection and administration expenses, and/or reasonable legal
fees, shall be paid by the Borrower.
14. Borrower and Fleet shall cooperate to obtain reaffirmation from
the United States Small Business Administration ("SBA") of their seventy five
(75%) guaranty (the "SBA Guaranty") of the Loan to the Borrower contemporaneous
with the execution of this Agreement. The Borrower shall pay the SBA .25 of 1%
of the outstanding commitment as reaffirmation of the SBA Guaranty.
15. Prior to or contemporaneous with the execution of this Agreement,
Borrower shall inject a minimum of Five Hundred Thousand and 00/100
($500,000.00) Dollars capital. Contemporaneous with the execution of this
Agreement, Borrower shall submit to Fleet written evidence of the required
$500,000.00 capital injection.
16. Borrower shall, in addition to any other financial reporting
obligations contained in the Note or any other documents executed in connection
therewith, furnish to Fleet, together with any additional information Fleet may
require.
(a) Borrower shall furnish Fleet no later than 90 days following
its fiscal year end, and otherwise within thirty (30) days of
written request of Fleet, financial statements prepared by an
independent Certified Public Accountant and all in scope, form
and substance satisfactory to Fleet.
(b) Borrower shall furnish Fleet annually and upon request of
Fleet from time to time, a true and complete copy of its tax
returns, as filed with the appropriate tax authorities.
17. All financial statements furnished to Fleet by Borrower shall be
signed by the submitting party or parties as the case may be. Failure of
Borrower to provide any of the foregoing shall be a default under the Loan
Documents.
l8. Fleet and Borrower acknowledge, represent, warrant, affirm and
confirm the following:
(a) They have carefully read and understand the effect of this
Agreement, they have had the assistance of separate counsel, or
have elected to waive counsel, in carefully reviewing, discussing
and considering all terms of this Agreement, and counsel, if any,
for each of them has read and considered this Agreement and
advised such party to execute the same.
(b) Neither Fleet's nor Borrower's execution of this Agreement is
based upon its or their reliance upon any representation,
understanding or agreement not expressly set forth herein, and no
party (or its agent) has made any representations to any other
party (or its agent) not expressly set forth herein; and further,
but not in limitation of the foregoing, the parties have made no
representations one to another which relate to or affect the
consideration, cause or any condition for which this Agreement is
granted and which representations have not been expressly
embodied herein.
(c) Each of the parties does execute this Agreement as its free
and voluntary act, without any duress, coercion or undue
influence exerted by or on behalf of the other party or any other
party.
(d) All terms and conditions of the Note as amended and the Loan
Documents are incorporated herein by reference.
(e) Each of the parties has full and complete authorization and
power to execute this Agreement in the capacity herein stated;
and this Agreement is a valid binding and enforceable obligation
of each of the parties and does not violate any law, rule,
regulation, contract or agreement otherwise enforceable by any of
the parties.
19. Separability. If any term, provision, covenant or condition of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
20. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Rhode Island unless preempted by
federal law.
21. Counterparts. This Agreement may be executed in multiple identical
counterparts, each of which when duly executed shall be deemed an original, and
all of which shall be construed together as one agreement.
22. Effective Date. This Agreement shall be effective as to each of
the parties once it has executed this Agreement.
23. Intention of the Parties. It is intended by all of the parties
hereto that this Agreement shall become a part of the loan documentation file.
24. Time is of the Essence. Time shall be of the essence with respect
to each and every of the various undertakings and obligations set forth in the
Agreement.
25. Waiver of Jury Trial. The Borrower hereby waives any right to a
trial by jury in connection with any claims arising hereunder or under any of
the documents executed in connection with the Note.
26. Successors and Assigns. The provisions of this Agreement shall be
binding upon, and shall inure to the benefit of, the respective successors,
assigns, and participants of Fleet, the respective heirs, successors and assigns
of the Borrower.
27. The Borrower acknowledges that some or all of the Borrower may
have other notes held by Fleet other than the Note. The Borrower agree that this
Agreement pertains only to the Note and shall not affect the rights of Fleet
against the Borrower as to claims or rights not arising out of, connected with
or related to the Note.
28. All other terms, conditions, and covenants of the Note, all other
terms, conditions, and covenants of the Loan Agreement, all other terms,
conditions and covenants of the Security Agreement and any and all related Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
29. THIS WRITTEN UNDERTAKING CONTAINS THE FINAL AGREEMENT BETWEEN THE
PARTIES ON THE SUBJECT MATTER HEREOF, AND IT SHALL NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Aquidneck Systems International Inc.
/s/
- ------------------------------ By: /s/ Matthias E. Lukens Jr.
Witness --------------------------------
Matthias E. Lukens Jr.
Its: President, Duly Authorized
Fleet National Bank
/s/
- ------------------------------ By: /s/ Thomas J. Flanagan II
Witness --------------------------------
Thomas J. Flanagan II
Its: Vice President, Duly
Authorized
Fleet National Bank
/s/
- ------------------------------ By: /s/ Thomas J. Lawlor
Witness ---------------------------------
Thomas J. Lawlor
Its: Loan Officer, Duly
Authorized
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In Providence, said county on the 21st day of October, 1994, before me
personally appeared the within named Matthias E. Lukens Jr. to me known and
known by me to be President of Aquidneck Systems International, Inc. the party
executing the foregoing instrument and he acknowledged said instrument by him so
executed to be his free act and deed as such President and the free act and deed
of said Aquidneck Systems International, Inc.
/s/ Judith Darwell
------------------------------------
Notary Public
My Commission Expires: 8/18/94
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In Providence in said county on the 21st day of October, 1994, before
me personally appeared the within named Thomas J. Flanagan II to me known and
known by me to be Vice President of Fleet National Bank, the party executing the
foregoing instrument and he acknowledges said instrument by him so executed to
be his free act and deed as such and the free act and deed of said Fleet
National Bank.
/s/ Judith Darwell
------------------------------------
Notary Public
My Commission Expires: 8/18/94
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In said county on the 21st day of October, 1994, before me personally
appeared the within named Thomas J. Lawlor to me known and known by me to be
Vice President of Fleet National Bank, the party executing the foregoing
instrument an he acknowledges said instrument by him so executed to be his free
act and deed as such and the free act and deed of said Fleet National Bank.
/s/ Judith Darwell
------------------------------------
Notary Public
My Commission Expires: 8/18/95
<PAGE>
June 15, 1995
Aquidneck Systems International, Inc.
c/o Dennis Marchand, Controller
650 Ten Rod Road
North Kingstown, RI 02852
Re: Fleet National Bank's loan to
Aquidneck Systems International, Inc. ("Borrower")
in the original principal balance of $500,000.00
dated February 23, 1993, as amended (the "Note").
Gentlemen:
As of today, the outstanding indebtedness totals $440,134.44 that is comprised
of a principal balance of $440,000 plus accrued interest of $134.44.
As you are aware, the above referenced Note pursuant to its terms, matures on
June 30, 1995. Fleet National Bank ("Fleet") with the US Small Business
Administration's concurrence, is willing to extend the maturity date and modify
the repayment terms of the referenced Note upon the following terms and
conditions:
(1) This letter agreement shall serve to extend the Note from June 30, 1995 to
November 30, 1995. (2) The Borrower will continue to make "Interest Only"
payments on the 30th day of each month from June 30, 1995 to August 31, 1995.
(3) Beginning on September 30,1995 and on October 31, 1995, you will make
principal repayments to Fleet of $146,667.00 plus accrued interest. (4) The
remaining indebtedness outstanding under the Note shall be due and payable in
full on November 30, 1995. (5) Except as modified herein, all other terms and
conditions that existing under the Forbearance Agreement and other loan
documents governing the loan remains in full and effect.
If you agree with the terms of the proposed extension and modification of the
above referenced Note, please acknowledge on Page 2 and return this letter to my
office by close of business on June 23, 1995.
Nothing contained herein shall be construed as a waiver, restriction, or
limitation of or upon any of the Fleet's rights or remedies, all of which are
expressly reserved. Unless this letter agreement is returned to Fleet by close
of business June 23, 1995, the terms and conditions of our existing loan
documents shall remain in full force and effect.
Very truly yours,
FLEET NATIONAL BANK
/s/ Thomas J. Flanagan II
- ------------------------------
Thomas J. Flanagan II
Banking Officer
/s/ Lawrence E. Jacobs
- ------------------------------
Lawrence E. Jacobs
Banking Officer
Agreed to and accepted by:
Aquidneck Systems International, Inc.
By: /s/ Matthias E. Lukens, Jr.
----------------------------------
Matthias E. Lukens, Jr., President
<PAGE>
September 25, 1995
Aquidneck Systems International, Inc.
c/o Charles Boisseau
650 Ten Rod Road
North Kingstown, RI 02852
Re: Fleet National Bank's loan to Aquidneck
Systems International, Inc. ("Borrower") in
the original principal balance of $500,000.00
dated February 23,1993, as amended (the "Note").
Gentlemen:
As of today, the outstanding indebtedness with respect to the above referenced
loan totals $443,284.72, which is comprised of a principal balance of $440,000
plus accrued interest of $3,284.72.
As you are aware, Fleet National Bank ("Fleet") is willing to amend the maturity
date and modify the repayment terms of the referenced Note upon the following
terms and conditions:
(1) This letter agreement shall serve to bend the maturity data of the Note to
demand; (2) Beginning on September 30, 1995, the Borrower shall make a principal
repayment in an amount not less than $70,000.00; (3) On the 30th of each month
thereafter, the Borrower shall make monthly principal repayment in an amount
not less than $10,000.00; (4) The Borrower herein authorizes Fleet to direct
debit any required monthly principal and accrued interest payments due under the
Note from the Borrower's primary operating account maintained with Fleet; (5)
Except as modified herein, all other terms and conditions that existing under
the Forbearance Agreement and other loan documents governing the loan remains in
full force and effect.
If you agree with the terms of this modification of the above referenced Note,
please acknowledge on Page 2 and return this letter to my office by close of
business on September 26, 1995.
Very truly yours,
Fleet National Bank
/s/ Thomas J. Flanagan II /s/ Thomas A. Dolan
- ---------------------------------- ------------------------------------
Thomas J. Flanagan II Thomas A. Dolan
Banking Officer Banking Officer
Agreed to and accepted on this 25th day of September, 1995:
Aquidneck Systems International, Inc.
By: /s/ Matthias E. Lukens, Jr.
----------------------------------
Matthias E. Lukens, Jr., President
<PAGE>
May 21, 1996
Aquidneck Systems International, Inc.
c/o Dennis Marchand, Controller
650 Ten Rod Road
North Kingstown, RI 02852
Re: Fleet National Bank's loan to
Aquidneck Systems International, Inc. ("Borrower")
in the original principal balance of $500,000.00
dated February 23, 1993, as amended (the "Note").
Gentlemen:
This letter shall serve as an amendment to the Letter Agreement dated September
25, 1995. As we have agreed, the maturity date of the referenced Note is June
30, 1996.
Except as modified herein, all other terms and conditions that exist under the
Forbearance Agreement and other loan documents governing the loan remain in full
force and effect.
If you agree with the terms of this modification of the above referenced Note,
please acknowledge below and return this letter to my office by close of
business on May 22, 1996.
Very truly yours,
Fleet National Bank
/s/ Thomas J. Flanagan, II /s/ Thomas H. Dolan
- ---------------------------------- ---------------------------------
Thomas J. Flanagan II Thomas H. Dolan
Vice President Assistant Vice President
Agreed to and accepted on this _____ day of May, 1996:
Aquidneck Systems International, Inc.
By:
------------------------------
Its President
Exhibit 10.a
L E A S E
THIS AGREEMENT, entered in the ____ day of ____________ 1993 between
BAKEFORD PROPERTIES, a Rhode Island Partnership, hereinafter called the lessor,
party of the first part, and AQUIDNECK SYSTEMS INTERNATIONAL, INC. of the County
of Washington, State of Rhode Island, hereinafter called the lessee or tenant,
party of the second part:
WITNESSETH, that said lessor does this day lease unto said lessee, and
said lessee does hereby hire and take as tenant that certain space in the
building known as the Rodman Building located in the Lafayette Mill Complex, Ten
Rod Road, North Kingstown, Rhode Island, more specifically shown on the plan
which is attached hereto and incorporated herein, said space containing a total
of 9,500 square feet, more or less, to be used and occupied by the lessee as a
Computer Development and Research Company and related ancillary uses, and for no
other purpose, or use whatsoever and 800 square feet in the small shed building
for storage. The term beginning the 1st day of January, 1994 and ending the 31st
day of December, 1996. The agreed rent shall be as follows:
Monthly Leasehold Total Mo.
*Base Rent Annual Rent Rent Amortization Rent
---------- ----------- ---- ------------ ----
Year 1 6.00 sq.ft. 57,500. 4,750. 500.00 $5,250.00
Year 2 6.25 sq.ft. 59,375. 4,948. 500.00 $5,448.00
Year 3 6.50 sq.ft. 61,750. 5,146. 500.00 $5,646.00
*Base Rent per square foot is calculated on 9,500 sq. ft. of space.
If the monthly rent is not received by the 10th of the month, a 1% late charge
will be added to the monthly amount due. The following express stipulations and
conditions are made a part of the Lease and are hereby assented to by the
lessee:
FIRST: The lessee shall not assign this lease, nor sublet the
premises, or any part thereof nor use the same, or any part thereof, or permit
the same, or any part thereof, to be used for any other purpose then as above
stipulated, nor make any alterations therein, and all additions thereon, without
the written consent of the lessor, which consent will not be unreasonably
withheld or delayed. Nothing contained in this section shall prohibit Lessee
from installing, using and removing personal property used in the conduct of
Lessee's business provided Lessee otherwise complies with its obligations
hereunder and provided that the installation, use and removal does not damage
the demised premises such that the demised premises are either materially
impaired or cannot be restored at the expiration of the term, however, the
Lessee shall be responsible for cost to repair any and all damage caused by the
Lessee as a result of this clause, reasonable wear and tear excepted.
SECOND: That the tenant shall promptly observe and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and Town Governments and of any and all their departments and
bureaus applicable to said premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
premises during said term. Additionally, the Lessor shall maintain the common
areas of the Mill Complex in compliance with all statutes, ordinances, rules,
orders, regulations and requirements of the Federal, State and Town Governments
and of any and all their departments and bureaus applicable to said premises, as
well as cure any violation in a manner which will not prevent the Lessee from
operating their business for the intended purpose.
THIRD: In the event the premises shall be destroyed or so damaged or
injured by fire or other casualty during the life of this agreement, whereby the
same shall be rendered untenantable, then the Lessor shall have the right to
render said premises tenantable by repairs within ninety (90) days therefrom. If
said premises are not rendered tenantable within said time, it shall be optional
with either party hereto to cancel this lease, and in the event of such
cancellation the rent shall be paid only to the date of such fire or casualty.
The cancellation herein mentioned shall be evidenced in writing. In any event no
rent shall be due the Lessor for the period the premises is untenantable.
FOURTH: The prompt payment of the rent for said premises upon the dates
named, and the faithful observance of the rules and regulations printed upon
this lease, and which are hereby made a part of this covenant, and of such other
and further reasonable rules and regulations as may be hereafter made by the
Lessor consistent with this Agreement, which shall not interfere with Lessee's
intended use of the premises, are the conditions upon which the lease is made
and accepted and any failure on the part of the lessee to comply with the terms
of said lease, or any of said rules and regulations now in existence, shall at
the option of the lessor, work a forfeiture of this contract, and all of the
rights of the lessee hereunder, and thereupon the lessor, his agents or
attorneys, shall have the right to enter said premises, and remove all persons
therefrom forcibly or otherwise, and the lessee thereby expressly waives any and
all notice required by law to terminate tenancy, and also waives any all legal
proceedings to recover possession of said premises, and expressly agrees that in
the event of a violation of any of the terms of this lease, or of said rules and
regulations, now in existence, or which may hereafter be made, said lessor, his
agent or attorneys, may immediately re enter said premises and dispossess lessee
without legal notice of the institution of any legal proceedings whatsoever. The
lessor agrees to give notice, by certified mail, to the lessee of any breach of
any covenants as described above, the lessee shall have 20 days from the date of
the mailing of said notice to cure any breach and if the lessee fails to do so
the lessor shall, at his option, exercise his rights as set forth in this
paragraph.
FIFTH: If the lessee shall abandon or vacate said premises before the end
of the term of this lease, or shall suffer the rent to be in arrears, the lessor
may, at his option, forthwith cancel this lease or he may enter said premises as
the agent of the lessee, by force or otherwise, without being liable in any way
therefore, and relet the premises with or without any furniture that may be
therein, as the agent of the lessee, at such price and upon such terms and for
such duration of time as the lessor may determine, and receive the rent
therefore, applying the same to the payment of the rent due by these presents,
and if the full rental herein provided shall not be realized by the lessor over
and above the expenses to lessor in such reletting, the said lessee shall pay
any deficiency.
SIXTH: Lessee agrees to pay the cost of collection and reasonable
attorney's fee on any part of said rental that may be collected by suit or by
attorney, after the same is past due.
SEVENTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other illumination, on said premises.
EIGHTH: The lessor, or any of his agents, shall have the right to enter
said premises during all reasonable hours, to examine the same to make such
repairs, additions or alterations as may be deemed necessary for the safety,
comfort, or preservation thereof, or of said building, or to exhibit said
premises, and to put or keep upon the doors or windows thereof a notice "FOR
RENT" at any time within thirty (30) days before the expiration of this lease,
provided that Lessor shall give Lessee not less than twenty-four (24) hours
notice of such entry, except in the case of emergency. The right of entry shall
likewise exist for the purpose of removing placards, signs, fixtures,
alterations or additions which do not conform to this agreement, or to the rules
and regulations of the building.
NINTH: Lessee hereby accepts the premises in the condition they are in at
the beginning of this lease and agrees to maintain said premises in the same
condition, order and repair as they are at the commencement of said term,
excepting only reasonable wear and tear arising from the use thereof under this
agreement, and to make good to said lessor immediately upon demand, any damage
to water apparatus, or electric lights or any fixture, appliances or
appurtenances or said premises, or of the building, caused by any act or neglect
of lessee, or of any person or persons in the employ or under the control of the
lessee.
TENTH: If the lessee shall become adjudicate insolvent or if bankruptcy
proceedings shall be begun by or against the lessee which shall continue
unstayed and in effect for a period of 60 consecutive days, before the end of
said term the lessor is hereby irrevocably authorized at its option, to
forthwith cancel this lease, as for a default. Lessor may elect to accept rent
from the receiver, trustee, or other judicial officer during the term of their
occupancy in their fiduciary capacity without affecting lessor's rights as
contained in this contract, but no receiver, trustee or other judicial officer
shall ever have any right, title or interest in or to the above described
property by virtue of this contract.
ELEVENTH: This contract shall bind the lessor and its assigns or
successors, and the heirs, assigns, administrators, legal representatives,
executors or successors as the case may be, of the lessee.
TWELFTH: It is understood and agreed between the parties hereto that time
is of the essence of this contract and this applies to all terms and conditions
contained herein.
THIRTEENTH: It is understood and agreed between the parties that written
notice mailed or delivered to the office of the Lessor shall constitute
sufficient notice to the Lessor, to comply with the terms of this contract.
FOURTEENTH: The rights of the lessor under the foregoing shall be
cumulative, and failure on the part of the lessor to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights.
FIFTEENTH: It is further understood and agreed between the parties hereto
that any charges against the lessee by the lessor for services or for work done
on the premises by order of the lessee or otherwise accruing under this contract
shall be considered as rent due and shall be included in any lien for rent due
and unpaid.
SIXTEENTH: It is hereby understood and agreed that any signs to be used in
connection with the premises leased hereunder shall be first submitted to the
lessor for approval before installation of same.
SEVENTEENTH: INSURANCE: INDEMNITY:
A) Liability Insurance. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Lessor and Lessee against any liability arising out
of use, occupancy or maintenance of the Premises and all areas appurtenant
thereof. Such insurance shall be in an amount of not less than $500,000.00 for
injury to or death of one person in any one accident or occurrence and in an
amount of not less than $1,000,000.00 for injury to or death of more than one
person in any one accident or occurrence. Such insurance shall further insure
Lessor and Lessee against liability for property damage of at least $100,000.00.
The limits of said insurance shall not, however, limit the liability of Lessee
hereunder. If Lessee shall fail to procure and maintain said insurance Lessor
may, but shall not be required to, procure and maintain the same, but at the
expense of Lessee.
B) Property Insurance. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage
to the Premises, in the amount of the full replacement value thereof, providing
protection against all perils included within the classifications of fire,
extended coverage, vandalism, malicious mischief and special extended perils
(all risk). Lessee agrees to maintain property insurance covering leasehold
improvements and personalty in the amount of $250,000.00.
C) Insurance Polices. Insurance required hereunder shall be in
companies mutually agreed upon by the Lessee and Lessor. Upon request, Lessee
shall deliver to Lessor copies of polices of liability insurance required under
paragraph A above, or certificates evidencing the existence and amounts of such
insurance with loss payable clauses satisfactory to Lessor. No such policy shall
be cancelable or subject to reduction of coverage or other modification except
after 10 days prior written notice to Lessor. Lessee shall, within 10 days prior
to the expiration of such policies, furnish Lessor with renewals or "binders"
thereof, or Lessor may order such insurance and charge the cost thereof to
Lessee, which amount shall be payable by Lessee upon demand. Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in paragraph B.
D) Waiver of Subrogation. Lessee and Lessor each hereby waives any
and all rights of recovery against the other, or against the officers,
employees, agents, and representatives of the other, for loss of or damage to
such waiving party or its property or the property of others under its control,
where such loss or damage is insured against under any insurance policy in force
at the time of such loss or damage. Lessee and Lessor shall upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
that the foregoing mutual waiver of subrogation is contained in this Lease.
E) Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims asserted against Lessor and arising from Lessee's use
of the Premises, or from the conduct of Lessee's business for from any activity,
work or things done, permitted or suffered by Lessee in or about the Premises or
elsewhere and shall further indemnify and hold harmless Lessor from and against
any and all claims assessed against Lessor arising from any breach or default in
the performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any negligence of the Lessee's agents,
contractors or employees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in the defense of any such claim or any action
or proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor. The Lessee shall not be liable for the negligent acts of other tenants
or the Lessor, except to the extent that the Lessee's actions contribute to any
damage or claim.
F) Exemption of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain or from
the breakage, leakage obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee, except in cases where said injury or damages are the direct result of
the Lessor's negligence or intentional actions. Lessor shall not be liable for
any damages arising from any act or neglect or any other tenant, if any, of the
building in which the premises is located.
EIGHTEENTH: Common Area Maintenance. Lessor grants to Lessee, in common
with other tenants of the Mill Complex and their agents and employees and
customers and invitees, the right to use the "common areas" consisting of the
parking area, roadways, pathways, sidewalks, entrances and exits and other areas
and facilities designated by Lessor for common use in the Mill Complex and/or in
the building containing the demised premises.
The common area shall be subject to the exclusive control and
management of Lessor and Lessor shall have the right to establish, modify,
change and enforce rules and regulations. The right of customers to use the
parking facilities shall apply only while they are using the Mill Complex.
Lessee agrees that it and its officers and employees will park their automobiles
only in such area as Lessor from time to time designates for employee parking
areas. Lessor shall have the right to close any part of the common areas for
such time as may, in the opinion of Lessor's counsel, be necessary to prevent a
dedication thereof, or the accrual of any rights in any person, and to close any
part of the parking area for such time as Lessor deems necessary in order to
discourage noncustomer parking and to do other things in the parking areas as
Lessor in its discretion deems necessary for the benefit of the Mill Complex.
NINETEENTH: Maintenance, Repairs and Alterations. Lessor's Obligations.
Lessor shall be responsible to keep all common landscaped areas in the Mill
Complex properly maintained, including but not limited to, regular weed control,
grass cutting, trimming shrubs and trees, and any other work necessary to keep
the premises in a condition that would be considered appropriate for a
Commercial Office Building. Lessor shall at Lessor's expense remove, when
conditions require snow and ice from the common areas. In the event the Lessor
fails to meet the above requirement the Lessee shall notify the Lessor in
writing, of the specific areas of deficiency and the Lessor shall have fifteen
(15) days to correct the deficiencies. In the event the Lessor fails to correct
the deficiencies in the time period provided, the Lessee may withhold $1,000.00
per month from the rent due, until the deficiencies are cured. Once the
deficiencies are cured, the Lessee shall immediately remit to the Lessor any
rents that have been withheld.
Except for damage caused by any negligent or intentional act or omission of
Lessee, Lessee's agents, employees, or invitees. Lessor at Lessor's expense
shall keep in good order, condition, and repair the foundations, structural
supports, exterior walls and the exterior roof of the Premises. Lessor shall
not, however, be obligated to paint such exterior, nor shall Lessor be required
to maintain the interior surface of exterior walls and the exterior roof of the
Premises. Lessor shall not, however, be obligated to paint such exterior, nor
shall Lessor be required to maintain the interior surface of exterior walls,
windows, doors or plate glass. Lessor shall have no obligation to make repairs
under this Paragraph until a reasonable time after oral communications are
received of the need for such repairs, and said oral communication shall be
immediately confirmed in writing. Lessee expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford Lessee the right
to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the premises in good order, condition and repair.
Lessee's Obligations.
a) Lessee, at Lessee's expense, shall keep in good order, condition
and repair the Premises and every part thereof (regardless of whether the
damaged portion of the Premises or the means of repairing the same are
accessible to Lessee), including without limiting the generality of the
foregoing, all plumbing, heating, air conditioning, ventilation, electrical and
lighting facilities and equipment within the Premises, fixtures, interior walls
and interior surface of exterior walls, ceilings, windows, doors, plate glass
and skylights, located within the premises.
b) If Lessee fails to perform Lessee's obligations under this
paragraph, Lessor may Lessor's option enter upon the Premises after 10 days
prior written notice to the Lessor with a copy of said contract. Further, the
Lessee shall be responsible for the cost to repair any breakdown up to $300.00
per incident. The Lessor shall be liable for costs of repairs in excess of
$300.00, provided that they are not caused by the negligence of the Lessee.
d) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
broom clean, ordinary wear and tear excepted. Lessee shall repair any damage to
the Premises occasioned by the removal of its trade fixtures, furnishings and
equipment pursuant to this paragraph, which repair includes the patching and
filling of holes and repair of structural damage.
TWENTIETH: Loading Lift. The Lessee shall have the right to the use and
maintenance of a loading lift to be installed in the elevator shaft.
TWENTY-FIRST: Covenant of Quiet Enjoyment. The Lessor covenants that the
Lessee, on paying the said rental and performing the covenants and conditions in
this Lease shall peaceably and quietly have, hold, and enjoy the designated
premises during the Lessee's normal business hours, those being Monday through
Friday 7:00 a.m. to 7:00 p.m., and Saturday and Sunday until 1:00 p.m., for the
term aforesaid.
TWENTY-THIRD: Improvements to the Premises. The Lessor shall be required
before commencement of this lease to make improvements to the premises at
Lessor's expense as outlined on the attached Schedule "A", which is attached
hereto and incorporated herein.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
instrument for the purpose herein expressed, the day and year first above
written.
WITNESS: BAKEFORD PROPERTIES
/s/ /s/ Michael L. Baker
- --------------------------------- ----------------------------------
Michael L. Baker, General Partner
ACQUIDNECK SYSTEMS INTERNATIONAL
/s/Robert J. Persen /s/Mario Bricetti
- --------------------------------- ----------------------------------
Mario Bricetti, President
<PAGE>
SCHEDULE "A"
WORK TO BE
DONE BY LESSOR: 1. Install all new walls, floors, ceilings in
new area and modifications to existing area
as per plan approved by ASI.
2. Provide necessary power to area, and lights
and plugs to code including wiring of
Computer Room, for equipment on Schedule
"A-1".
3. Install new power lift that will accommodate
shipping boxes up to 6' wide X 6' long, 80"
high and weighing up to 3,200 pounds.
4. Landscaping New Entrance.
5. Install 1 HVAC unit for Computer Room and 1
HVAC unit for balance of new space.
6. Allowance for antistatic carpeting to new and
old space of $5,500.00. Carpet to be approved
by ASI.
7. Extend Air-Conditioning ducts in existing
space.
<PAGE>
SCHEDULE "A-1"
COMPUTER ROOM POWER
CIRCUITS
--------
Item Volts Amps Phase Plug Type
- ---- ----- ---- ----- ---------
DASD 208 30 1 HH330R6W
CPU 208 30 1 L6-30R
TAPE 208 30 3 RS3754
JukeA 208 30 3 WYE L21-20P
JukeB 208 20A 1 L14-20P
JukeC 110 15 1 5-15R
2 Spare Circuits 110 15 1 Standard
MB
9/16/93
<PAGE>
BAKEFORD PROPERTIES
POST OFFICE BOX 297
NORTH KINGSTOWN, RHODE ISLAND 02852
884-5906
December 6, 1995
Mr. Matthias E. Lukens, Jr., President
AQUIDNECK SYSTEMS INTERNATIONAL
650 Ten Rod Road
North Kingstown, RI 02852
Re: Rent Deferral Lease Amendment
Dear Matt:
Based on your representations of Aquidneck Systems, Inc. (ASI) current financial
conditions, the Company is unable to meet its obligations as required under the
terms of the lease dated December 23, 1993 with Bakeford Properties (Bakeford).
Because of this, you have requested that Bakeford defer 50% of the rent due
during the period November 1, 1995 to April 1, 1996, at which point you would
resume full rental payments. You did not offer a proposal regarding the
repayment time table for the deferred rent.
Based on the above, Bakeford Properties would propose to amend the Lease to the
following extent:
1. Rent Payments as setforth on page one of the Lease shall be amended
as follows:
Rent to be:
Rent (-) Deferred Total Rent
Due (+) Repaid to be Paid
--- ---------- ----------
November 1, 1995 5,448.00 -2,724.00 2,724.00
December 1, 1995 5,448.00 -2,724.00 2,724.00
January 1, 1996 5,646.00 -2,823.00 2,823.00
February 1, 1996 5,646.00 -2,823.00 2,823.00
March 1, 1996 5,646.00 -2,823.00 2,823.00
April 1, 1996 5,646.00 +4,639.00 10,285.00
May 1, 1996 5,646.00 +4,639.00 10,285.00
June 1, 1996 5,646.00 +4,639.00 10,285.00
2. Rent for April 1, 1996 through December 31, 1996 would be due at a
rate of $5,646.00 per month as setforth in the Lease.
3. As outlined above the Deferred Rent total of $13,917.00 shall be
paid in installments of $4,639.00 on April, May and June 1, 1996. In the event
that these payments are not paid in full on or before June 10, 1996, then
interest shall be charged on deferred rent at an annual rate of 12%
retroactively to November 1, 1995 until the deferred rent is paid in full.
4. The 1% late charge for rents not received by the 10th of the month
shall remain in effect for all payment due under this Agreement.
5. As consideration to Bakeford Properties for agreeing to this Rent
Deferral Lease Amendment, ASI agrees to extend the ending date of the Lease from
December 31, 1996 to December 31, 1997. Monthly rent during the extended terms
shall be as follows:
January 1, 1997 to December 31, 1997 $5,650.00
6. Either Bakeford Properties or ASI shall have the right to terminate
this Lease during the One (1) Year extension period by giving the other party a
sixty (60) day written notice by Certified Mail prior to said termination date.
The monthly rent payments will be due and owing during the sixty day notice
period.
If you are in agreement with the Amendments as setforth please indicate your
acceptance by signing this letter in the space provided below; and attach your
copy of this letter to you lease as an Amendment to the original Lease. Would
you please execute a duplicate original and return it to us with a check in the
amount of $5,448.00 representing rent due for November 1st and December 1st,
1995.
I hope that this accommodation can assist you in restoring the Company to a
sound financial position.
If you have any questions, or need additional information please give me a call.
Thank you.
Sincerely yours, AGREED AND ACCEPTED:
/s/ Michael L. Baker
/s/ Matthias E. Lukens, Jr.
Michael L. Baker --------------------------------------
General Partner Matthias E. Lukens, Jr., President
BAKEFORD PROPERTIES AQUIDNECK SYSTEMS INTERNATIONAL, INC.
MLB/II
enclosure
<PAGE>
BAKEFORD PROPERTIES
POST OFFICE BOX 297
NORTH KINGSTOWN, RHODE ISLAND 02852
884-5906
February 8, 1996
Mr. Dennis Marchand, Controller
AQUIDNECK SYSTEMS INTERNATIONAL
650 Ten Road Road
North Kingstown, RI 02852
Re: Rent Deferral Lease Amendment
Dear Dennis:
Based on our telephone conversation of February 7th, the rent deferred for
November and December, 1995 and January, 1996 will be repaid over the next
eleven (11) months at a rate of $751.91.
Based on the above, Bakeford Properties would propose to amend the Lease to the
following extent:
1. Rent Payments as set forth on page one of the Lease shall be
amended as follows:
Nov/Dec/Jan Deferral $8,271.00
/ 11 months
------------
$ 751.91 per month
Base Rent Due 5,646.00
---------
Monthly Rent February - December, 1996 $6,397.91
========
2. The 1% late charge for rents not received by the 10th of the month
shall remain in effect for all payments due under this Agreement.
3. As consideration to Bakeford Properties for agreeing to this Rent
Deferral Lease Amendment, ASI agrees to extend the ending date of the Lease from
December 31, 1996 to December 31, 1997. Monthly rent during the extended terms
shall be as follows:
January 1, 1997 to December 31, 1997 $5,650.00
4. Either Bakeford Properties or ASI shall have the right to terminate
this Lease during the One (1) Year extension period by giving the other party a
sixty (60) day written notice by Certified Mail prior to said termination date.
The monthly rent payments will be due and owing during the sixty day notice
period.
If you are in agreement with the Amendments as set forth please indicate your
acceptance by signing this letter in the space provided below; and attach your
copy of this letter to you lease as an Amendment to the original Lease. Would
you please execute a duplicate original and return it to us.
If you have any questions, or need additional information please give me a call.
Thank you.
Sincerely yours, AGREED and ACCEPTED:
/s/Michael L. Baker
/s/Denis Marchand
Michael L. Baker -------------------------------------
General Partner Dennis Marchand, Controller
BAKEFORD PROPERTIES AQUIDNECK SYSTEMS INTERNATIONAL, INC.
MLB/II
enclosure
Exhibit 10.b
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
1987 STOCK OPTION AND STOCK PURCHASE PLAN
Effective July l, 1987
1. Purpose. The purpose of the Aquidneck Systems International, Inc. 1987
Stock Option and Stock Purchase Plan (the "Plan") is to advance the interests of
Aquidneck Systems International, Inc. (the "Company") by providing an
opportunity to selected key employees and directors of the Company, its parent,
if any, and its subsidiaries to purchase stock of the Company. By encouraging
such stock ownership, the Company seeks to attract, retain and motivate
employees and directors of training, experience and ability. It is intended that
this purpose will be effected by granting stock purchase authorizations,
"incentive stock options" which will qualify under the provisions of Section
422A of the Internal Revenue Code of 1986, as it may be amended (the "Code"),
and nonstatutory stock options.
2. Effective Date. The Plan was adopted by the Board of Directors of the
Company (the "Board") at its meeting on July 10, 1987. The Plan is effective as
of July 1, 1987, provided that the Plan is approved by the shareholders of the
Company within one (1) year of this date. Although options and purchase
authorizations with respect to shares made available for grant or sale under
this Plan may be granted or made before such approval no such options may be
exercised and no shares may be purchased until such approval is obtained. In the
event that shareholder approval of the Plan is not obtained, however, the
provisions of the Plan, other than those for which shareholder approval was
required but not obtained, will remain in effect.
3. Stock Subject to the Plan. The shares that may be made subject to
options or purchase authorizations under this Plan shall not exceed in the
aggregate 104,378 shares ("Shares") of the $.Ol par value common stock ("Common
Stock") of the Company. Any Shares subject to an option or purchase
authorization which for any reason expires or is terminated unexercised as to
such Shares and any Shares reacquired by the Company pursuant to a repurchase
right may again be the subject of an option or purchased under the Plan. The
Shares purchased or delivered upon exercise of options under this Plan may, in
whole or in part, be either authorized but unissued Shares or issued Shares
reacquired by the Company.
4. Administration. This Plan shall be administered by the Board or, to the
extent delegated by the Board, a compensation or stock option committee
consisting of not fewer than three (3) members (the "Committee"); provided, that
if the Common Stock of the Company is effectively registered under the
Securities Act of 1933, as amended, the Plan shall be administered only by
members of the Committee who are not also employees of the Company ("Nonemployee
Directors"). Subject to the provisions of this Plan, the Board or Committee
shall have full power to construe and interpret the Plan and to establish, amend
and rescind rules and regulations for its administration.
5. Eligible Participants. Options may be granted to and Shares may be
purchased by such key employees and directors of the Company, its parent, if
any, or of any of its subsidiaries as are selected by the Board or the
Committee, as applicable; provided, that: (a) incentive stock options may be
granted only to employees of the Company, its parent, if any, or of any of its
subsidiaries; and (b) options or purchase authorizations may not be granted to a
member of the Committee while he is a member of the Committee. A member of the
Committee may, however, purchase Shares pursuant to an option or a purchase
authorization granted prior to the date that the individual became a member of
the Committee.
6. Duration of the Plan. This Plan shall terminate ten (10) years from the
original effective date hereof, unless terminated earlier pursuant to Paragraph
13 hereafter, and no options or purchase authorizations may be granted
thereafter.
7. Restrictions on incentive Stock Options. Incentive stock options granted
under this Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. The aggregate fair market
value, determined as of the date the incentive stock option is granted,
of the Shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year
shall not exceed $100,000. In the event that such employee is eligible
to participate in any other stock incentive plans of the Company, its
parent, if any, or a subsidiary which are also intended to comply with
the provisions of Section 422A of the Code, such annual limitation shall
apply to the aggregate number of Shares for which options may be granted
under all such plans.
(b) l0% Stockholder. If any employee to whom an incentive stock
option is granted pursuant to the provisions of the Plan is on the date
of grant the owner of stock (as determined under Section 425(d) of the
Code) possessing more than l0% of the total combined voting power of all
classes of stock of the company, its parent, if any, or subsidiaries,
then the following special provisions shall be applicable to the
incentive stock option granted to such employee:
(i) The option price per Share subject to such incentive stock
option shall not be less than 110% of the fair market value
of one Share on the date of grant; and
(ii) The incentive stock option shall not have a term in excess
of five (5) years from the date of grant.
8. Options Granted to and Stock Purchased by Nonemployee Directors. The
provisions of this Paragraph 8 govern the granting and terms of options for and
purchase of stock by Nonemployee Directors. These provisions supersede all other
provisions of the Plan to the extent the other provisions are inconsistent with
this Paragraph 8. For purposes of this Paragraph 8, "Shares" shall mean the
total number of Shares available under the Plan as such number may be affected
by stock splits or combinations, stock dividends, and similar recapitalizations.
(a) The maximum number of Shares for which any one Nonemployee
Director may be granted options and purchase, authorizations under this
Plan shall not exceed 8,000 Shares.
(b) The maximum number of Shares for which any one Nonemployee
Director may be granted options and purchase authorizations in any
calendar year shall not exceed 4,000 Shares.
(c) Any option granted to a Nonemploye Director shall have a term
not to exceed 10 years.
(d) Any purchase authorization granted to a Nonemployee Director
shall have a term not to exceed sixty (60) days.
(e) Vesting shall be imposed upon any Shares purchased by a
Nonemployee Director upon exercise of an option granted under the Plan;
such provisions shall not have terms more favorable than the following.
The option to purchase Shares shall not be exercisable for twelve months
following the date that the option was granted. On the first anniversary
of the date the option was granted, the Nonemployee Director may
exercise the option for 20% of the Shares covered by the option.
Thereafter, the Nonemployee Director may exercise the option for 5% of
the Shares covered by the option at the end of each three month period
following the first anniversary of the date that the option was granted.
Only whole Shares may be purchased pursuant to the exercise of an
option; if the percentage limits specified in the preceding sentences
would result in the exercisability of the option for a fractional Share,
the number of Shares for which the option may be exercised shall be
rounded up to the nearest whole number of Shares. To the extent that an
option may be exercised for a specified number of Shares, the option may
be exercisable for the full number of such Shares or a portion of whole
number of such Shares and shall remain exercisable until the option
expires, unless the option is sooner terminated pursuant to the terms of
this Plan. A Nonemployee Director may elect to purchase a number of
Shares less than the number which he is eligible to purchase pursuant to
the option.
(f) Vesting shall be imposed upon any Shares purchased by a
Nonemployee Director through a purchase authorization granted under the
Plan; such provisions shall not have terms more favorable than the
following:
(i) Exercise. The purchase authorization shall be immediately
exercisable in full or in part and shall remain exercisable
until it expires, unless the purchase authorization is
sooner terminated pursuant to the terms of this Plan. A
purchase authorization may only be exercised within a period
that is no longer than sixty (60) days of the date that the
purchase authorization is granted. A Nonemployee Director
may elect to purchase a number of Shares less than the
number which he is eligible to purchase pursuant to the
purchase authorization.
(ii) Repurchase of Shares by Company. If the Nonemployee Director
either (A) ceases to perform services for the Company, its
parent, if any, or subsidiary for any reason whatsoever
(including, without limitation, death, disability, or
voluntary termination), or (B) proposes to sell or otherwise
transfer such Shares, then the Company shall have the right,
but not the obligation, to repurchase or to designate one or
more purchasers for all or any portion of' the Shares
purchased (other than the number, if any, of Shares which
have theretofore become "nonforfeitable" as defined in
subparagraph (iii) below) held by the Nonemployee Director
(or upon his death by the executor, administrator, legatees
or heirs of his estate) at a purchase price per Share
(appropriately adjusted for stock dividends, stock splits or
combinations, or similar recapitalizations) equal to the
purchase price paid. All Shares purchased under this Plan
will bear an appropriate legend which describes this
restriction.
(iii)The Shares which are "nonforfeitable" for the purposes of
subparagraph (ii) shall be equal in number to the product of
(A) the total number of Shares purchased, multiplied by (B)
the respective percentage indicated below, depend ing on how
long after the date of the purchase authorization the
Nonemployee Director continues to perform services for the
Company, its parent. if any, or a subsidiary:
Period of Service
as a Nonemployee Director Nonforfeitable percentage
Less than 12 months 0%
After 12 months 20%
After 15 months 25%
After 18 months 30%
After 21 months 35%
After 24 months 40%
After 27 months 45%
After 30 months 50%
After 33 months 55%
After 36 months 60%
After 39 months 65%
After 42 months 70%
After 45 months 75%
After 48 months 80%
After 51 months 85%
After 54 months 90%
After 57 months 95%
After 60 months 100%
(iv) Within 30 days of the date of notice from the Company of
exercise of its repurchase rights, the Shares to be repurchased shall be
transferred by the Nonemployee Director (or upon his death by the
executor, administrator, legatees or heirs of his estate) to the Company
against payment by the Company of the purchase price as specified above.
If the Company shall fail to exercise its rights under this paragraph
within 120 days of the date of the Nonemployee Director's cessation of
services, the repurchase rights with respect to the Shares imposed by
this paragraph shall terminate and the Nonemployee Director or his legal
representatives may thereafter transfer the Shares, subject, however, to
such other restrictions on transfer as may then exist thereon.
(v) If the Nonemployee Director fails to comply with any of the
provisions of this paragraph 8, the Company, at its option and in
addition to its other remedies, may suspend the rights of the
Nonemployee Director to vote or to receive dividends on the Shares or
may refuse to register on its books any transfer of the Shares or
otherwise to recognize any transfer or change in the ownership of the
Shares or in the right to vote thereon, until the provisions of this
Paragraph 8 are complied with to the satisfaction of the Company.
9. Terms and Conditions of Options and Purchase Authorizations. Options
and purchase authorizations granted under this Plan shall be evidenced by
agreements in such form and containing such terms and conditions as the Board or
Committee shall determine; provided, however, that such agreements shall
evidence among their terms and conditions the following:
(a) Price. Subject to the condition of Paragraph 7(b), if
applicable, the purchase price per Share payable upon the exercise of
each incentive stock option granted hereunder shall be not less than
100% of the fair market value of the Common Stock on the day the option
is granted. The purchase price per share of Common Stock payable on
exercise of each non-statutory stock option or purchase authorization
shall be determined by the Board or the Committee; provided that the
purchase price per Share shall not be less than 50% of the fair market
value on the date the option or purchase authorization is granted. The
Board or the Committee may, however, specify that the purchase price per
Share payable on exercise of a purchase authorization be less than 50%
of the fair market value on the date that the purchase authorization is
granted; provided that: (i) the price per Share payable upon exercise of
the purchase authorization shall not exceed that amount required by the
laws of the State of Delaware, or the applicable laws of any other
State, for such acquisition of Common Stock; (2) the purchase price for
a Share may in no event exceed 10% of the fair market value of such
Share at the time of exercise of the purchase authorization; and (3) the
purchase authorization may only be exercised within a period that is no
longer than sixty (60) days of the date that the purchase authorization
is granted. Fair market value shall be determined in accordance with
procedures to be established in good faith by the Board or the Committee
and, with regard to incentive stock options, in conformity with
regulations issued by the Internal Revenue Service with regard to such
incentive stock options.
(b) Number of Shares. Each option agreement or purchase
authorization shall specify the number of Shares to which it pertains.
(c) Exercisability. Subject to paragraph 8, if applicable, each
option shall be exercisable for the full amount or for any part thereof
and at such intervals or in such installments as the Board or the
Committee may determine at the time it grants such option; provided,
however, that no option shall be exercisable with respect to any Shares
later than ten (10) years after the date of the grant of such option.
Each purchase authorization shall be immediately exercisable in full or
in part for such period and may be subject to such repurchase provisions
as the Board or Committee may determine at the time it grants such
purchase authorization; provided, however, that no purchase
authorization shall be exercisable with respect to any Shares later than
sixty (60) days after the date of grant of such purchase authorization.
(d) Notice of Exercise and Payment. An option or purchase
authorization shall be exercisable only by delivery of a written notice
to the Company's Treasurer or any other officer of the Company
designated by the Board or the Committee to accept such notices on its
behalf, specifying the number of Shares for which it is exercised. If
such Shares are not at that time effectively registered under the
Securities Act of 1933, as amended, the participant shall include with
such notice a letter, in form and substance satisfactory to the Company,
confirming that the shares are being purchased for the participant's own
account for investment and not with a view to distribution. Payment
shall be made in full at the time of delivery to the participant of a
certificate or certificates covering the number of Shares for which the
option or purchase authorization was exercised. For the purchase of
stock pursuant to an option or a purchase authorization for the purchase
of Shares at a price that is at least 50% of the fair market value of
the Shares at the date the purchase authorization was granted, payment
shall be made either by (i) cashier's or certified check, (ii) if
permitted by vote of the Board or the Committee, by delivery and
assignment to the Company of shares of Company Stock, or (iii) by a
combination of (i) and (ii). The value of the Company Stock for such
purpose shall be its fair market value as of the date the option is
exercised as determined in accordance with procedures to be established
by the Board or the Committee. For the purchase of Shares pursuant to a
purchase authorization for the purchase of shares at a price that is
less than 50% of the fair market value of the Shares at the date of
exercise of the purchase authorization payment shall only be made by
cashier's or certified check.
(e) Withholding taxes; Delivery of Shares. The company's obligation
to deliver shares of Common Stock upon exercise of an option or purchase
authorization; in whole or in part, shall be subject to the
participant's satisfaction of all applicable federal, state and local
income and employment tax withholding obligations. The participant may
satisfy the obligation; in whole or in part, by electing (l) to have the
Company withhold Shares of Common Stock or (2) to deliver to the Company
already-owned shares of Common Stock, having a value most closely
approximating, but not exceeding, the amount required to be withheld.
Any balance remaining to be withheld aft withholding or delivery of
Shares of Common Stock shall be paid to the Company by a cashier's or
certified check. The value of shares to be withheld or delivered shall
be based on the fair market value of the Shares on the date the amount
of tax to be withheld is to be determined (the "Tax Date"). The
participant's election to have Shares withheld for this purpose will be
subject to the following restrictions: (l) the election must be made
prior to the Tax Date, (2) the election must be irrevocable, (3) the
election will be subject to the disapproval of the Board or the
Committee, as applicable, and (4) if a participant is a person whose
transactions in Common Stock of the Company are subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended, such election may
not be made within six months of the date the option or purchase
authorization is granted (except in the event of the participant's death
or disability) and must be made either six months prior to the Tax Date
or in the ten day "window period" beginning on the third day following
the release of the Company's quarterly or annual summary statement of
sales and earnings; provided, if the Tax Date of such participant is
deferred until six months after exercise and the participant elects to
have Shares withheld, the full number of option Shares will be issued on
exercise but the participant will be unconditionally obligated to tender
back to the Company the proper number of Shares of Common Stock.
(f) NonTransferability. No option or purchase authorization shall
be transferable by a participant otherwise than by will of the laws of
descent or distribution, and each option or purchase authorization shall
be exercisable during a participant's lifetime only by him.
(g) Termination. Each option or purchase authorization shall
terminate and may no longer be exercised after the participant ceases
for any reason to perform services for the Company, its parent, if any,
or a subsidiary, except that, with respect to options (but not purchase
authorizations):
(i) if the participant ceases to perform services for any reason
other than cause, disability or death, he may at any time
within a period of three (3) months after such cessation of
services exercise his option to the extent that the option
was exercisable by him on the date he ceased to perform
services;
(ii) if the participant ceases to perform services because of
disability within the meaning of Section 22(e) (3) of the
Code, he may at any time within a period of one (l) year and
one (l) day (one (l) year in the case of incentive stock
options) after such cessation of services exercise his
option to the extent that the option was exercisable by him
on the date he ceased to perform services; and
(iii)if the participant ceases to perform services because of
death, the option, to the extent that the participant was
entitled to exercise it on the date of his death or would
have been able to exercise it as of the next anniversary of
the date that the option was granted had he not died and
remained in the employ of the Company, may be exercised
within a period of one (l) year and one (l) day (one (l)
year in the case of incentive stock options) after the
participant's death by the person or persons to whom the
participant's rights under the option shall pass by will or
by the laws of descent and distribution;
provided, however, that no option or purchase authorization may be
exercised to any extent by anyone after the date of its expiration.
(h) Rights as Shareholder. The participant shall have no rights as
a shareholder with respect to any Shares covered by his option or
purchase authorization until the date of issuance of a stock certificate
to him for such Shares.
10. Stock Dividends; Stock Splits; Stock Combinations; Recapitalizations.
Appropriate adjustment shall be made in the maximum number of Shares of Common
Stock subject to the Plan and in the number, kind, and option price of Shares
covered by outstanding options and purchase authorizations granted hereunder to
give effect to any stock dividends, stock splits, stock combinations,
recapitalizations and other similar changes in the capital structure of the
Company after the effective date of the plan.
11. Merger; Sale of Assets; Dissolution. In the event of a change of the
Common Stock resulting from a merger or similar reorganization as to which the
Company is the surviving corporation, the number and kind of Shares which
thereafter may be optioned and sold under the Plan and the number and kind of
Shares then subject to options or purchase authorizations granted hereunder and
the price per Share thereof shall be appropriately adjusted in such manner as
the Board may deem equitable to prevent substantial dilution or enlargement of
the rights available or granted hereunder. Except as otherwise determined by the
Board, a merger or a similar reorganization which the Company does not survive
or a sale of all or substantially all of the assets of the Company shall cause
every option and purchase authorization outstanding hereunder to terminate, to
the extent not then exercised, unless any surviving entity agrees to assume the
obligations hereunder.
12. Definitions.
(a) The term "employee" shall have, for purposes of this Plan, the
meaning ascribed to it under section 3401(c) of the Code and the
regulations promulgated thereunder; the term "key employees" means those
executive, administrative or managerial employees who are determined by
the Committee to be eligible for options under this Plan.
(b) The term "participant" means a key employee or director to whom
an option or purchase authorization is granted under this plan.
(c) The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 425(e) of the Code and the
regulations promulgated thereunder.
(d) The term "subsidiary" shall have, for purposes of this Plan,
the meaning ascribed to it under Section 425(f) of the Code and the
regulations promulgated thereunder.
13. Termination or Amendment of Plan. The Board may at any time
terminate the Plan or make such changes in or additions to the Plan as it
deems advisable without further action on the part of the shareholders of
the Company, provided:
(a) that no such termination or amendment shall adversely affect or
impair any then outstanding option or purchase authorization without the
consent of the participant holding such option or purchase
authorization;
(b) that no such amendment which (i) increases the maximum number
of Shares subject to this plan, (ii) changes the class of individuals
eligible to participate in the Plan, or (iii) materially increases the
benefits accruing to participants participating in the Plan may be made
without first obtaining shareholder approval, provided, that this clause
(b) shall only apply at any time when any employee or director of the
Company would be subject to Section 16 of the Securities Exchange Act of
1934, as amended, in connection with his acquisition or disposition of
Common Stock of the Company; and
(c) that no such amendment shall be made that would cause the
incentive stock options granted hereunder to fail to qualify as
incentive stock options under the Code.
Exhibit 10.c
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
Adopted: November 23, 1994
Effective Date: ___________, 1994
Approved by Stockholders: December 13, 1994
<PAGE>
TABLE OF CONTENTS
Section Subject Page
- ------- ------- ----
1. Title...................................................................1
2. Purpose.................................................................1
3. Definitions............................................................ 1
4. Stock Reserved for Options............................................. 2
5. Eligibility............................................................ 3
6. Grants of Options...................................................... 3
7. Purchase Price......................................................... 4
8. Term of Options........................................................ 5
9. Exercise of Options.................................................... 5
10. Payment for Option Shares.............................................. 7
11. Administration of Plan................................................. 7
12. Transferability of Options............................................. 8
13. No Rights as Shareholder............................................... 9
14. Adjustment Upon Changes in Capitalization and the Like................. 9
15. Amendment and Termination.............................................. 10
16. Effectiveness of the Plan.............................................. 11
17. Governing Law.......................................................... 11
<PAGE>
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
-------------------------------------
1994 STOCK OPTION PLAN
----------------------
Section 1.
Title
-----
This plan shall be known as the "Aquidneck Systems International, Inc.
1994 Stock Option Plan."
Section 2.
Purpose
-------
The Aquidneck Systems International, Inc. 1994 Stock Option Plan
establishes a method of granting options to purchase the Common Stock of the
Corporation in order to encourage stock ownership by officers and key management
employees of the Corporation, to provide an incentive for such persons to expand
and improve the profits and prosperity of the Corporation, and to assist the
Corporation in attracting key personnel.
Section 3.
Definitions
-----------
3.1 "Board" means the Board of Directors of the Corporation.
3.2 "Committee" means the committee appointed by the Board pursuant to
Section 11.1 of the Plan.
3.3 "Common Stock" means shares of the capital common stock of the
Corporation, $.01 par value.
3.4 "Corporation" means Aquidneck Systems International, Inc., a
Delaware corporation.
3.5 "Disability" means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or that has lasted or can be expected to
last for a continuous period of not less than twelve months, as determined
pursuant to Section 22(e)(3) of the Internal Revenue Code.
3.6 "Employee" means a full time, salaried employee of any
Participating Corporation, including an officer of any Participating
Corporation.
3.7 "Incentive Stock Option" means an Option that is an "incentive
stock option" as defined in Section 422(b) of the Internal Revenue Code.
3.8 "Internal Revenue Code" means the United States Internal Revenue
Code of 1986, or any of its successors, and applicable rules and regulations
promulgated thereunder, each as amended through the date of adoption of the
Plan, or as each may in the future be amended and applicable to the Plan.
3.9 "1987 Option Plan" means the Corporation's 1987 Stock Option Plan,
as amended.
3.10 "Non-qualified Stock Option" means an Option that is not an
Incentive Stock Option.
3.11 "Option" means any option granted under the Plan, including both
Incentive Stock Options and Non-qualified Stock Options.
3.12 "Option Agreement" means any agreement pursuant to the Plan
between the Corporation and an Employee regarding any Option.
3.13 "Optionee" means an Employee to whom an Option has been granted
and who has delivered to the Corporation or a Participating Corporation a signed
Option Agreement pursuant to Section 6.6 of the Plan.
3.14 "Option Shares" means shares of stock of the Corporation that are
issued or may be required to be issued upon exercise of an Option and shares
that are issued thereafter with respect to such shares, including shares issued
by reason of a stock split, consolidation, dividend, stock exchange,
recapitalization, reclassification or the like.
3.15 "Participating Corporation" means the Corporation and any present
or future parent or subsidiary of the Corporation that: (a) the Board elects to
treat as a Participating Corporation and (b) agrees to be a Participating
Corporation.
3.16 "Plan" means this Aquidneck Systems International, Inc. 1994
Stock Option Plan.
Section 4.
Stock Reserved for Options
--------------------------
4.1 Subject to adjustment in accordance with the provisions of section
14.1 of the Plan, 647,544 shares of Common Stock, plus any shares of Common
Stock that may become available from the cancellation or non-exercise of
existing grants or the failure to grant the entire number of available options
under the 1987 Option Plan, shall be reserved for issuance upon the exercise of
Options granted under the Plan, to the extent that there will be a maximum of
900,000 shares of Common Stock in the aggregate reserved for issuance of options
under the 1987 Option Plan and this Plan.
4.2 Any or all of the shares subject to Options under the Plan may be
authorized but unissued shares of Common Stock, or issued shares of Common Stock
that have been or shall have been reacquired by the Corporation, as the Board
shall from time to time determine.
4.3 If any Option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares of Common Stock previously
subject to the Option shall again be available for the purposes of the Plan.
Section 5.
Eligibility
-----------
5.1 The Committee may grant Incentive Stock Options under the
following rules of eligibility:
(a) Incentive Stock Options may be granted only to individuals
determined by the Board to be Employees who are key personnel of a
Participating Corporation and who are in a position to contribute
materially to the a Participating Corporation's continued growth and
development and to its future financial success.
(b) A director of any Participating Corporation who is not
also a Employee of that or any other Participating Corporation shall
not be eligible to receive an Incentive Stock Option.
5.2 The Committee may grant Non-qualified Stock Options to such
employees, and officers of any Participating Corporation, or to such other
persons, as the Committee deems appropriate in its sole and exclusive
discretion, without regard to the provisions of sections 5.1(a) and (b).
Section 6.
Grants of Options
-----------------
6.1 The Committee shall clearly designate and identify each Option at
the time it is granted as either an Incentive Stock Option or a Non-qualified
Stock Option, as the case may be.
6.2 The Committee may grant both Incentive Stock Options and
Non-qualified Stock Options to the same Employee, provided that the exercise of
one such Option does not in any way affect the Employee's right to exercise the
other.
6.3 Nothing contained in the Plan shall be construed to limit the
right of a Participating Corporation to grant options otherwise than under the
Plan for any corporate purpose, including the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business or assets of any corporation
or other entity.
6.4 The date of granting of an Option shall be the date that the
Committee shall have granted the Option or such other date as the Committee, in
its discretion, may specify at the time that it grants such Option.
6.5 Upon granting an Option, the Committee shall notify the Employee
to whom the Option shall have been granted and shall deliver to such Employee a
written Option Agreement.
6.6 An Option shall expire thirty (30) days after delivery to the
Employee of the Option Agreement unless an Option Agreement shall have been
signed by the Employee to whom the Option is granted and returned to the
Corporation within such period.
Section 7.
Purchase Price
--------------
7.1 Subject to section 7.2 of the Plan, the purchase price of Option
Shares granted under an Incentive Stock Option shall be one hundred (100%)
percent of the fair market value of the Option Shares at the time of granting of
the Incentive Stock Option, or such greater amount as the Board, in its
discretion, may fix. If shares of Common Stock shall then be traded on a
national securities exchange or "over the counter", such fair market value shall
not be less than the mean of the highest and lowest sales prices or of the
Common Stock upon such exchange or quoted by a recognized specialist of the
Common Stock on the day on which the Incentive Stock Option shall have been
granted, or if no sale shall have been made on such day, upon the next preceding
day upon which such a sale shall have been made. If no sale shall have been made
within one month prior or after the day on which the Incentive Stock Option
shall have been granted, such fair market value shall not be less than the mean
between the dealer "bid" and "ask" prices quoted by a recognized specialist of
the Common Stock on the date upon which the Incentive Stock Option shall have
been granted, or if no such quotation shall have been made on such day, on the
next preceding day on which such a quotation shall have been made. If the shares
of Common Stock are not traded either over-the-counter or on a national
securities exchange at the time that an Incentive Stock Option is granted, the
Board shall determine such fair market value. In so determining the fair market
value of Common Stock, the Board shall disregard any restrictions other than a
restriction that, by its terms, will never lapse.
7.2 The purchase price of Option Shares granted under an Incentive
Stock Option granted to an Employee who owns, immediately prior to the grant to
such Employee of an Incentive Stock Option, stock possessing more than ten (10%)
percent of the total combined voting power of all classes of stock of the
Participating Corporation by which he is employed, or any parent or subsidiary
or corporation, shall be at least one hundred ten (110%) percent of the fair
market value of the Common Stock (determined in accordance with the provisions
of section 7.1) at the time that such Incentive Stock Option is granted. The
provisions of section 424(d) of the Internal Revenue Code shall control
determination of the percentage of stock ownership for the purpose of this
section 7.2.
7.3 The purchase price of Option Shares granted under a Non-qualified
Stock Option shall be determined by the Board, operating in its sole and
exclusive discretion, without regard to the provisions of sections 7.1 and 7.2.
7.4 No variable price Options shall be permitted.
Section 8.
Term of Options
---------------
8.1 The Committee, in its discretion, may prescribe in the Option
Agreement the period during which Options may be exercised, provided, that an
Option shall not be exercisable more than ten years from the date upon which it
is granted, and, provided further, that an Incentive Stock Option granted to an
Employee described in section 7.2 above shall not be exercisable more than five
years from the date upon which it is granted.
8.2 In the Option Agreement, the Committee, in its discretion, may
prescribe any conditions or events upon which the period during which an Option
may be exercised may be shortened or terminated.
Section 9.
Exercise of Options
-------------------
9.1 Subject to the provisions of section 9.3, the , in its discretion,
may prescribe in the Option Agreement the manner in which, the number and size
of the installments (which need not be equal) for which, and the contingencies
upon which an Option may be exercised during its term.
9.2 No Option or installment thereof shall be exercisable except in
respect of whole shares. Fractional share interests shall be disregarded, except
that they may be accumulated. If an Optionee does not purchase all the shares
that the Optionee shall be entitled to purchase in any given installment period,
or if a fractional share interest shall remain, then the Optionee's right to
purchase the remaining shares or fractional shares shall continue until
expiration of such Option. No less than one thousand (1000) shares may be
purchased at one time unless the number purchased is the total number that may
then be purchased under the Option.
9.3 During any calendar year, to the extent that the aggregate fair
market value of the Common Stock (determined in accordance with the provisions
of section 7.1 of the Plan as of the time of the grant of the incentive stock
option plan) with respect to which incentive stock options are exercisable for
the first time by the Optionee during such calendar year (under this Plan and
all similar plans of the Participating Corporation by which the Optionee is
employed and its parent or subsidiary corporations) exceeds One Hundred Thousand
($100,000) Dollars, then such option shall be treated as Non-Qualified Options.
In making such determination, options shall be taken into account in the order
in which they are granted.
9.4 Except as otherwise provided in sections 9.5, 9.6 and 9.7, no
Incentive Stock Option may be exercised unless the Optionee is an Employee at
the time of exercise or the Optionee ceased to be an Employee within three (3)
months prior to the time of exercise. Incentive Stock Options granted under the
Plan shall not be affected by any change of nature of the Optionee's employment
so long as the Optionee continues to be an Employee. Option Agreements may
contain such provisions as the Committee may approve with reference to the
effect of approved leaves of absence. Nothing in the Plan, or in any Option
Agreement, or any Option, shall confer upon any individual any right to continue
in the employ of any Participating Corporation, or shall interfere in any way
with the right of any Participating Corporation to terminate the employment of
any person at any time.
9.5 If the holder of an Incentive Stock Option retires at the normal
retirement date as prescribed from time to time under any policy of the
Participating Corporation by which he is employed then in force, or at any other
date with the consent of such Participating Corporation or under any policy of
such Participating Corporation then in force, he may exercise his Incentive
Stock Option at any time within three months after such retirement, to the
extent of the number of shares that shall have been purchasable by him on the
date of his retirement.
9.6 If the holder of an Incentive Stock Option ceases to be employed
by a Participating Corporation because of Disability, he may exercise his
Incentive Stock Option within twelve months from the date of such termination of
his employment, to the extent of the number of shares that shall have been
purchasable by him on the date his employment terminated.
9.7 If the holder of an Incentive Stock Option dies (a) while he is an
Employee, (b) within three months after termination of his employment on account
of his retirement (other than by death), or (c) within twelve months after
termination of his employment on account of Disability, his legatee or legatees
or his personal representatives or distributees (collectively, "legal
representatives") may exercise his Incentive Stock Option to the extent of the
number of shares that shall have been purchasable by the Optionee on the date of
death.
9.8 The Committee, in its discretion, shall determine the extent, if
any, to which the holder of a Non-qualified Stock Option may exercise said
Option upon his retirement or Disability, or to which a legal representative of
a deceased holder of a Non-qualified Stock Option may exercise said Option after
the death of the holder.
Section 10.
Payment for Option Shares
-------------------------
10.1. Upon exercise of an Incentive Stock Option, the purchase price
of the Common Stock subject to such Incentive Stock Option shall be paid in full
in cash or by certified or bank cashier's check, or by transfer to the
Corporation by the Optionee of stock of the Corporation owned by the Optionee
having a fair market value, on the date of such a transfer, equal to the
purchase price of the Common Stock subject to the Incentive Stock Option.
10.2 The means of payment for Option Shares purchased under a
Non-qualified Stock Option shall be determined by the Committee, operating in
its sole discretion.
10.3 The proceeds received from a sale of Option Shares pursuant to
exercise of Options shall be added to the general funds of the Corporation and
used for such of its corporate purposes as the Committee shall determine.
Section 11.
Administration of the Plan
--------------------------
11.1 The Plan shall be administered by a committee appointed by the
Board, which shall consist of two or more members of the Board who are not
officers or employees of the Corporation.
11.2 Subject to the express provisions of the Plan, the Committee
shall have the plenary authority in its discretion to: (a) grant or refrain from
granting Options; (b) determine the individuals to whom, and the time or times
at which, Options shall be granted; the type of Option to be granted; the number
of shares of Common Stock to be subject to each Option; the class of shares of
Common Stock to be subject to each Option; and the purchase price of the Common
Stock subject to each Option; (c) interpret the Plan; (d) prescribe, amend and
rescind rules and regulations relating to the Plan; (e) determine the terms,
conditions and provisions of all Option Agreements entered into pursuant to the
Plan (which need not be identical); and (f) make all other determinations
necessary or advisable for administration of the Plan.
11.3 The Committee's determinations of all matters referred to the
Committee's discretion shall be final and conclusive. In making such
determinations, the Committee may take into account such factors as the
Committee, in its discretion, may deem relevant, including the nature of the
services rendered by the individuals involved and the present and potential
contributions of such individuals to the success of the Corporation.
11.4 No member of the Committee shall be entitled to participate in
the Plan.
11.5 Except as the Board may otherwise determine, the Employee Stock
Option Committee may make rules for the conduct of its business, but, unless
otherwise provided by the Board or in such rules, its business shall, to the
greatest extent possible, be conducted in the same manner as is provided by the
By-Laws of the Corporation for the Board.
11.6 No member of the Board or the Committee, nor of the board of
directors of any Participating Corporation, nor any officer, director, employee
or agent of the Corporation or any Participating Corporation, shall be liable
for any action or determination made, or other action taken, in good faith with
respect to the Plan or any Option.
Section 12.
Transferability of Options
--------------------------
12.1 No Incentive Stock Option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
an Incentive Stock Option may be exercised, during the lifetime of the Optionee,
only by him.
12.2 The Committee, operating in its sole and exclusive discretion,
shall determine the restrictions, if any, on transferability of Non-qualified
Stock Options without regard to the provisions of section 12.1.
12.3 Each Option Agreement shall contain a warranty and representation
by the Optionee that the Optionee is taking the Option for his own account and
not with a view to its resale, distribution or division among others.
12.4 Each Option Agreement may contain such provisions consistent with
this Plan as the Committee, in its discretion, may determine to be appropriate
for redemption by the Corporation, or other disposition, of all Option Shares
received by the Optionee (or his legal representatives), notwithstanding any tax
consequences to the Optionee of such redemption or other disposition.
Section 13.
No Rights as Shareholder
------------------------
The holder of an Option shall have none of the rights of a shareholder
with respect to the Option Shares until such shares shall have been issued to
him upon exercise of his Option in accordance with the terms of the Plan.
Section 14.
Adjustments Upon Changes in Capitalization and the Like
-------------------------------------------------------
14.1 If any change in the outstanding Common Stock of the Corporation
by reason of stock dividends, stock splits, subdivisions, exchanges of shares,
or recapitalizations, is effected after the effective date of the Plan without
receipt of consideration by the Corporation, then the aggregate number of shares
reserved for issuance upon the exercise of Options granted under the Plan shall
be appropriately adjusted by the Board, whose determination shall be conclusive.
Each Option Agreement may contain such provisions as the Committee, in its
discretion, shall determine to be appropriate for adjustment of the number of
Option Shares and of the purchase price provided for in such Option. Any such
adjustments may provide for elimination of any fractional shares that might
otherwise become subject to any Option.
14.2 Each Option Agreement may contain such provisions as the
Committee, in its discretion, shall determine to be appropriate for the
termination of, adjustment in or vesting or repurchase of shares and Options, in
the event of the dissolution or liquidation of the Corporation, or upon any
consolidation or merger involving the Corporation, or upon sale or transfer of
all or substantially all of the assets of the Corporation, or upon exchange by
the stockholders of the Corporation of 80% or more of the shares of the
Corporation for securities of another entity.
14.3 Existence of any Option shall not in any way prevent any
Participating Corporation from engaging in any of the transactions described in
this section 14, nor shall it confer any rights upon the holder of any such
Option to participate in any such transaction, except those expressly conferred
by the Plan and the Option Agreement pursuant to which such Option shall have
been granted.
14.4 Nothing contained in this Plan shall prevent the assumption of an
Option, or the substitution of a new option for an Option, by any corporation,
or the parent or subsidiary of any corporation, that becomes the employer of an
Optionee by reason of a merger, consolidation, acquisition, reorganization or
liquidation; provided, however, that with respect to an Incentive Stock Option,
the following additional conditions are applicable:
(a) the excess of the aggregate fair market value of the
shares subject to the option immediately after the substitution or
assumption over the aggregate option price of such shares is not more
than the excess of the aggregate fair market value of the Option
Shares immediately before such substitution or assumption over the
aggregate purchase price of the Option Shares; and
(b) the new option or the assumption of the old Option does
not give the Optionee additional benefits that the Optionee did not
have under the old Option.
Section 15.
Amendment and Termination
-------------------------
15.1 Unless the Plan shall have been terminated sooner, the Plan shall
terminate on, and no Option shall be granted after the earlier of the tenth
(10th) anniversary of: (a) the date upon or as of which the Plan is adopted, or
(b) the date upon which the Plan is approved by the shareholders of the
Corporation.
15.2 The shareholders of the Corporation may terminate, modify or
amend the Plan at any time.
15.3 The Board also may terminate, modify or amend the Plan at any
time, provided that, without the approval of the shareholders of the
Corporation, the Board shall not change (a) the maximum number of shares as to
which Options may be granted under the Plan (except as the number provided in
section 4.1 may be adjusted from time to time in accordance with section 14.1),
or (b) the class of Employees eligible to receive Incentive Stock Options.
15.4 Except as may be set forth in a Plan Agreement, no termination,
modification or amendment of the Plan shall adversely affect the rights of any
Optionee under an Option Agreement without such Optionee's consent.
Section 16.
Effectiveness of the Plan
-------------------------
The Plan shall become effective only upon adoption by the Board and
approval by the shareholders of the Corporation within twelve (12) months before
or after the date of such adoption by the Board.
Section 17.
Governing Law
-------------
This Plan shall be governed by and construed under the laws of the
State of Rhode Island.
Exhibit 10.e
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted: November 23, 1994
Effective Date: ____________, 1994
Approved by Stockholders: December 13, 1994
<PAGE>
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of the Aquidneck Systems International, Inc.
Non-Employee Directors' Stock Option Plan ("the Plan") is to secure for the
Company and its stockholders the benefits of the incentive inherent in increased
common stock ownership by the members of the Board of Directors (the "Board") of
the Company who are not employees of the Company or any of its subsidiaries (a
"Non-Employee Director").
2. Administration. The Plan shall be administered by the Non-Employee
Compensation and Stock Option Committee ("Committee") of the Board. The
Committee shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of stock options made under
the Plan ("Options"). The Committee shall, subject to the provisions of the
Plan, grant Options under the Plan and shall have the power to construe the
Plan, to determine all questions arising thereunder and to adopt and amend such
rules and regulations for the administration of the Plan as it may deem
desirable. Any decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or the Secretary or any other officer of the
Company to execute and deliver documents on behalf of the Committee. No member
of the Committee shall be liable for anything done or omitted to be done by such
member or by any other member of the Committee in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.
3. Amount of Stock. The stock which may be issued and sold under the
Plan will be the Common Stock (par value $.01 per share) of the Company, of a
total number not exceeding 150,000 shares, subject to adjustment as provided in
Paragraph 6 below. The stock to be issued may be either authorized and unissued
shares or issued shares acquired by the Company or its subsidiaries. In the
event that Options granted under the Plan shall terminate or expire without
being exercised in whole or in part, new Options may be granted covering the
shares not purchased under such lapsed Options.
4. Eligibility. Each member of the Board who is a Non-Employee Director
shall be eligible to receive an Option in accordance with Paragraph 5 below. The
adoption of this Plan shall be not deemed to give any director any right to be
granted an option to purchase Common Stock of the Company, except to the extent
and upon such terms and conditions as may be determined by the Committee.
5. Terms and Conditions of Options. Each Option granted under the Plan
shall be evidenced by an agreement in such form as the Committee shall prescribe
from time to time in accordance with the Plan and shall comply with the
following terms and conditions:
(a) The Option exercise price shall be the fair market value of
the Common Stock shares subject to such Option on the date the Option is
granted, or such greater amount as the Committee, in its discretion, may fix. If
shares of Common Stock shall then be traded on a national securities exchange or
"over the counter", such fair market value shall not be less than the mean of
the highest and lowest sales prices or of the Common Stock upon such exchange or
quoted by a recognized specialist of the Common Stock on the day on which the
Option shall have been granted, or if no sale shall have been made on such day,
upon the next preceding day upon which such a sale shall have been made. If no
sale shall have been made within one month prior or after the day on which the
Option shall have been granted, such fair market value shall not be less than
the mean between the dealer "bid" and "ask" prices quoted by a recognized
specialist of the Common Stock on the date upon which the Option shall have been
granted, or if no such quotation shall have been made on such day, on the next
preceding day on which such a quotation shall have been made. If the shares of
Common Stock are not traded either over-the-counter or on a national securities
exchange at the time that an Option is granted, the Committee shall determine
such fair market value. In so determining the fair market value of Common Stock,
the Committee shall disregard any restrictions other than a restriction that, by
its terms, will never lapse.
(b) As of the date of the Annual Meeting of Stockholders of the
Company at which this Plan is approved, and thereafter upon election to the
Board, each Non-Employee Director who has been elected as a member of the Board
as of the adjournment of the Annual Meeting shall automatically receive an
Option for 25,000 shares of Common Stock.
(c) The Option shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
(d) No option or any part of an Option shall be exercisable:
(i) before the Non-Employee Director has served one
term-year as a member of the Board since the date the option was
granted (as used herein, the term "term-year" means that period from
one Annual Meeting to the subsequent Annual Meeting),
(ii) after the expiration of ten years from the date the
Option was granted,
(iii) unless written notice of the exercise is delivered to
the Company specifying the number of shares to be purchased and
payment in full is made for the shares of Common Stock being acquired
thereunder at the time of exercise; such payment shall be made
(A) in United States dollars by certified check,
or bank draft or
(B) by tendering to the Company Common Stock
shares owned by the person exercising the Option and having
a fair market value equal to the cash exercise price
applicable to such Option, or
(C) by a combination of United States dollars and
Common Stock shares as aforesaid; and
(iv) unless the person exercising the Option has been, at
all times during the period beginning with the date of grant of the
Option and ending on the date of such exercise, a Non-Employee
Director or the Company, except that
(A) if such a person shall cease to be such a
Non-Employee Director for any reason (including, without
limitation retirement or death) while holding an Option that
has not expired and has not been fully exercised, such
person, at any time within one year after the date he ceases
to be such a Non-Employee Director (but in no event after
the Option has expired under the provisions of subparagraph
5(d)(ii)above), may exercise the Option with respect to any
shares of Common Stock as to which such person could have
exercised the Option on the date the person ceased to be
such a Non-Employee Director; or
(B) if any person who has ceased to be such a
Non-Employee Director for reasons other than death, shall
die holding an Option that has not been fully exercised,
such person's executors, administrators, heirs or
distributees, as the case may be, may, at any time within
the greater of (1) one (1) year after the date of death or
(2) the remainder of the period in which such person could
have exercised the Option had the person not died, (but in
no event under either (1) or (2) after the Option has
expired under the provisions of subparagraph 5(d)(ii)
above), exercise the Option with respect to any shares as to
which the decedent could have exercised the Option at the
time of death.
In the event any Option is exercised by the executors, administrators, legatees
or distributees of the estate of a deceased optionee, the Company shall be under
no obligation to issue stock thereunder unless and until the Company is
satisfied that the person or persons exercising the option are the duly
appointed legal representatives of the deceased optionee's estate or the proper
legatees or distributees thereof.
(e) Subject to subparagraph 5(d)(i) above, one-quarter (25%)
of the total number of shares of Common Stock covered by the Option shall become
exercisable beginning with the first anniversary date of the grant of the
Option; thereafter an additional one-quarter (25%) of the total number of shares
of Common Stock covered by the Option shall become exercisable on each
subsequent anniversary date of the grant of the Option until on the fourth
anniversary date of the grant of the Option the total number of shares of Common
Stock covered by the Option shall become exercisable. In the event the
Non-Employee Director ceases to be a Non-Employee Director by reason of
retirement or death, the total number of shares of Common Stock covered by the
Option shall become exercisable subject to subparagraph 5(d)(i) above.
6. Adjustment in the Event of Change in Stock. In the event of changes
in the outstanding Common Stock of the Company by reason of stock dividends,
recapitalizations, mergers, consolidations, split-ups, combinations or exchanges
of shares and the like, the aggregate number and class of shares available under
the Plan, and the number, class and the price of shares of Common Stock subject
to outstanding Options shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
7. Miscellaneous Provisions.
(a) Except as expressly provided for in the Plan, no
Non-Employee Director or other person shall have any claim or right to be
granted an Option under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
(b) An optionee's rights and interest under the Plan may not
be assigned or transferred in whole or in part either directly or by operation
of law or otherwise (except in the event of a optionee's death, by will or the
laws of descent and distribution), including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy or in any other
manner, and no such right or interest of any participant in the Plan shall be
subject to any obligation or liability of such participant.
(c) No Common Stock shares shall be issued hereunder unless
counsel for the company shall be satisfied that such issuance will be in
compliance with applicable federal, state and other securities laws and
regulations.
(d) It shall be a condition to the obligation of the Company
to issue Common Stock shares upon exercise of an Option, that the optionee (or
any beneficiary or person entitled to act under subparagraph 5(d)(iv) above) pay
to the Company, upon its demand, such amount as may be requested by the Company
for the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the Company
may refuse to issue Common Stock shares.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares upon exercise of any
Option under the Plan and issuance of shares upon exercise of Options shall be
subordinate to the claims of the Company's general creditors.
(g) By accepting any Option or other benefit under the Plan,
each optionee and each person claiming under or through such person shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company or the Committee.
8. Amendment or Discontinuance. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable including, but
not limited to amendments necessary to qualify for any exemption or to comply
with applicable law or regulation, provided, however, that except as provided in
Paragraph 6 above, the Board may not, without further approval by the
shareholders of the Company in accordance with Paragraph 10 below, increase the
maximum number of shares of Common Stock as to which Options may be granted
under the Plan, increase the number of shares subject to an Option, reduce the
minimum Option exercise price described in subparagraph 5(a) above, or change
the class of persons eligible to receive Options under the Plan. No amendment of
the Plan shall materially and adversely affect any right of any optionee with
respect to any Option theretofore granted without such optionee's written
consent.
9. Termination. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board
terminating the Plan; or
(b) ten years from the date the Plan is initially approved
and adopted by the shareholders of the Company in accordance with
Paragraph 10 below.
10. Effective Date of Plan. The Plan shall become effective as of
___________, 1994 or such later date as the Board may determine, provided that
the Company's stockholders shall have adopted the Plan at the Company's 1994
Annual Meeting of Stockholders.
11. Governing Law. This Plan shall be governed by and construed under
the laws of the State of Rhode Island.
Exhibit 10.f
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the __th day of
September, 1995 by and between Matthias E. Lukens, Jr., residing at 204 Spencer
Avenue, East Greenwich, RI 02818 ("you") and Aquidneck Systems International,
Inc., a Delaware corporation with offices at 650 Ten Rod Road, North Kingstown,
RI 02852 (the "Company").
W I T N E S S E T H:
WHEREAS the Company desires to employ you, and you desire to accept
such employment, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and promises hereinafter set forth, the parties hereto agree as
follows:
1. Term. Unless earlier terminated pursuant to the provisions of
Section 9 hereof, your employment hereunder will be for the period (the "Term")
commencing on September 1, 1995 and ending August 31, 1997, provided that, the
Term shall automatically renew in successive one year extensions unless the
Company shall have given you not less than 90 days prior written notice of its
intention to terminate this Agreement as of the last day of the term or any
succeeding extension. Non-renewal of the Term hereunder shall be deemed a
termination by the Company at will for purposes of Section 10(b).
2. Position, Title, Duties, etc.. (a) You shall be the President and
Chief Executive Officer, reporting directly to the Board of Directors of the
Company. Your duties shall include supervision of other executive officers of
the Company, reporting to the Board of Directors and shareholders on all
material matters concerning the Company, acting as primary spokesperson for the
Company to its customers and vendors and to the public, primary responsibility
for all operations of the Company, and such other executive and administrative
duties as the Board of Directors and you shall agree upon from time to time,
consistent with the By-Laws of the Company.
(b) You will, to the best of your abilities, in good faith and with
integrity, devote your time, attention, energy and skill (vacations and
reasonable absences because of sickness and other personal necessity excepted)
during business hours to your duties to the Company and to the promotion of the
Company's interests, as such duties and interests are determined from time to
time by the Board of Directors. You will be subject to such policies and
procedures as are from time to time established for executive level senior
employees and, as applicable, for employees of the Company generally, except to
the extent that such policies or procedures are contrary to the terms of this
Agreement.
(c) Subject to Board approval, you shall be eligible to attend all
meetings of the Board and its committees and subgroups other than Audit
Committee meetings and those portions of meetings during which your duties,
performance or compensation are established or evaluated.
3. Salary. During the Term the Company will pay you, twice monthly, a
salary which initially shall be at an annualized rate of One Hundred Forty
Thousand ($140,000) Dollars; provided, however, that such salary shall
automatically be increased to an annualized rate of One Hundred Seventy-Five
Thousand ($175,000) Dollars effective on the first day of the calendar month
following the Company's achievement of either: (a) two consecutive profitable
financial quarters and the closing of an initial public offering, or (b) three
consecutive profitable financial quarters. Your performance and salary will be
reviewed August 31, 1996 and thereafter from time to time, but at least yearly,
by the Compensation Committee of the Board and, in their discretion, your salary
may be increased in accordance with such review.
4. Incentive Compensation, Bonuses and Stock Options. During the Term,
you will be entitled to participate in any incentive compensation, bonus and
stock option plan established by the Company for the benefit of executive level
employees of the Company, in an amount, if any, determined not less than
annually by the Board of Directors.
5. Expenses. (a) Subject to Company policies regarding the
pre-approval of reimbursable expenses as they may vary from time to time, the
Company will reimburse you for all reasonable out-of pocket expenses incurred by
you for the purpose of and in connection with performing your duties to the
Company hereunder.
(b) Reimbursement of expenses under this Section 5 shall be subject to
proper submission of substantiating documentation requested by the Company, and
shall be paid to you, in accordance with the Company's policies respecting
expense reimbursement, as the same may vary from time to time.
6. Vacation. You shall accrue two days paid vacation for each of the
first ten months of each calendar year during the Term. The timing of vacations
shall be mutually agreed, taking into consideration factors important to you and
the Company. If any vacation time which you have accrued for any given calendar
year is for any reason unused during said year or the following year, you will
be allowed to accrue such unused vacation into the subsequent calendar year
provided that, unless otherwise mutually agreed, no more than ten unused
vacation days shall be so accrued in the aggregate at any given point in time.
7. Other Benefits. The Company will make available to you such health,
life and other insurance coverage, sick day policies, pension plans and other
employee benefits as may generally be made available to executive level senior
employees of the Company subject to and in accordance with the Company policy,
as the same may vary from time to time, and subject to any specific provision of
this Agreement
8. Confidentiality. (a) Except as required by your duties to the
Company as an employee, you shall not (during or after any period of employment)
directly or indirectly use, publish, disseminate or otherwise disclose any
Confidential Information without the express prior written consent of the
Company. For purposes of this Agreement, "Confidential Information" shall mean
all written and oral confidential or proprietary information of the Company and
its affiliates, whether or not discovered or developed by you, and of third
parties (such as suppliers, customers and consultants) who may have imparted
information in confidence to the Company or its affiliates, known by you as a
result of your employment with the Company at any time (including prior to
execution of this Agreement), provided that Confidential Information shall not
include any such information which is now or hereafter becomes generally known
in the industries in which the Company is conducting business without your
fault. You understand that the restriction of this Section shall continue to
apply after your employment is terminated, regardless of the reason for such
termination.
(b) Upon termination of employment with the Company for any reason,
you shall forthwith deliver to the Company all property of the Company,
including without limitation, all copies of all procedural manuals, guides,
customer lists, records and other documents and materials containing
Confidential Information then in your possession or control, whether prepared by
you or others.
(c) You further agree to sign a copy of the each of the Company's
standard Confidentiality Agreement, Non-Competition Agreement and Assignment of
Inventions.
9. Termination. Your employment hereunder may be terminated as set
forth in this Section 9, in which event you will be paid your reimbursable
expenses (if submitted, before or after such termination, in accordance with
Section 5(b) hereof), unpaid salary and benefits, and unused vacation time
accrued to date of termination, and the Company and you will have no further
obligation to each other under this Agreement except as set forth below in this
Section 9.
(a) Termination by the Company For Cause. The Company may terminate
your employment without advance notice at any time for "Cause", defined for
purposes of this Agreement as conduct by you constituting (i) gross negligence,
willful misconduct or breach of fiduciary duty to the Company, or material
violation of the provisions of Section 8 hereof or any future agreement between
you and the Company respecting noncompetition or the ownership or protection of
confidential information, inventions, patents, trademarks, copyrights or other
intellectual property, in each case not cured within 30 days after written
notice thereof is given to you, (ii) alcoholism, drug addiction, or habitual
absenteeism or (iii) heinous, illegal or dishonest conduct including theft or
misappropriation of Company funds.
(b) Termination by the Company at Will. At any time, the Company may
without notice terminate your employment other than for Cause, in which event:
(i) you will receive a severance payment equal to six months of
your then current salary,
(ii) you will receive, at the time normally payable, your bonus
(if any) for the fiscal year in which the termination occurs, and
(iii) you will continue to receive the benefits described in
Section 4 hereof for six months from the date of termination.
(c) Termination by You with Reason. Unless the Company has Cause to
terminate your employment, you may terminate your employment at any time with
"Reason", defined for purposes of this Agreement as the Company effecting,
without your written consent, a material adverse change in any of the following
parameters of your employment as the same are described and set forth herein, to
wit: your position, title, duties, responsibilities, authority, compensation or,
a change of more than seventy-five miles in the locus of your employment. Any
such termination shall be upon 90 days written notice given within 90 days of
the occurrence of the event(s) constituting Reason. In such event, the
provisions of Section 9(b) shall apply.
(d) Termination by You without Reason. You may terminate your
employment upon 60 days written notice at any time without Reason. If you
terminate your employment under Section 9(c) or 9(d), you will work
cooperatively with the Company and use your best efforts to effect a smooth
transition.
(e) Any payments due you under this Section 9 shall, upon your death,
be made to your surviving spouse, or if there is no surviving spouse, to your
surviving children in equal shares, or if there are no surviving children, to
your estate.
(f) No termination of this Agreement by either party, regardless of the
circumstances or reasons, shall terminate, amend or in any way affect the
validity of the provisions of Section 8 hereof or any other agreement executed
by you relating to Confidential Information of the Company.
10. Notices. Any notice to be given under this Agreement by either
party shall be in writing, hand delivered, or mailed by certified mail or
registered mail with return receipt requested, and addressed to the other party
at its address at the head of this Agreement or at such other address as such
other party shall have provided notice to the first party in accordance with the
provisions of this Section. Any notice shall be effective upon receipt by the
intended recipient thereof.
11. Non-Waiver of Rights. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement. Any waiver of
any provision of this Agreement shall be valid only if in writing signed by the
party so waiving, and no waiver of a provision hereof in any given instance
shall operate as a waiver of such provision in any other instance or the waiver
of any other provision of this Agreement.
12. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
13. Assignment. This Agreement shall be binding upon and shall inure to
the benefit of you and the Company and their respective executors,
administrators, heirs, successors and permitted assigns and shall not be
assignable in whole or in part by either party without the written consent of
the other party hereto except assignment by the Company to any person or entity
which at any time, whether by merger, purchase (of stock or assets),
liquidation, reorganization or otherwise, shall acquire all or substantially all
of the assets or business of the Corporation.
14. Arbitration. Any controversy, dispute or claim arising out of or
relating to the application, interpretation or breach of this Agreement (other
than Section 8 hereof) shall be settled by arbitration in Providence, Rhode
Island in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The decision of the Arbitrator shall be final and
binding and any judgment upon the award rendered by the Arbitrator may be
entered in any Court having jurisdiction thereof. Each party hereto shall
endeavor to keep any such arbitration proceedings, and the results thereof,
confidential.
15. Miscellaneous. This Agreement embodies the entire agreement of the
parties with respect to the matters within its scope and supersedes any prior
agreements and understandings of the parties respecting the same. This Agreement
shall not be modifiable except in writing signed by both parties hereto, and the
provisions hereof shall override any contrary or conflicting provisions in any
acknowledgment, invoice or other document unilaterally issued by either party.
The headings contained in this Agreement have been inserted solely for
convenience of reference and shall be of no force or effect in the construction
or interpretation of the provisions of this Agreement. This Agreement may be
executed in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the day and year first above written.
THE "COMPANY": AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/ Malcolm G. Chace III
------------------------------------
Malcolm G. Chace III
Chairman of the Board
"YOU": /s/ Matthias E. Lukens, Jr.
---------------------------------------
Matthias E. Lukens, Jr.
<PAGE>
ACQUIDNECK SYSTEMS INTERNATIONAL, INC.
650 Ten Rod Road
North Kingstown, RI 02852
April 5, 1996
Matthias E. Lukens, Jr.
204 Spencer Avenue
East Greenwich, RI 02818
Re: Employment Agreement dated September, 1995
Dear Matt:
This letter confirms that the time in which you must notify Aquidneck
of your election to terminate the above-referenced Employment Agreement due to
events that occurred on January 2, 1996, has been extended through 4:00 p.m. on
July 31, 1996.
Sincerely,
/s/ Hector D. Wiltshire
- --------------------------------------
Hector D. Wiltshire, President and CEO
Exhibit 10.g
Employment Agreement
This Agreement is made and entered into as of the 16th day of August, 1993,
by and between Aquidneck Systems International, Inc., a Delaware corporation,
having its principal office at 650 Ten Rod Road, N. Kingstown, RI (hereinafter
called "ASI") and John Bonevich (hereinafter called "BONEVICH"), residing at 75
Glen Rock Road, West Kingston, RI.
WHEREAS, ASI desires to employ BONEVICH and BONEVICH desires to be employed
by ASI, upon the terms and conditions following:
1. EMPLOYMENT AND TERM. ASI hereby employs BONEVICH and BONEVICH accepts
employment by ASI for a period of one (1) year commencing on August 16, 1993.
The term of the employment shall be subject to the provisions of paragraph 8,
hereinafter contained. Upon the expiration of the initial term, this contract
shall be automatically renewed for successive one (1) year periods, unless
either party terminates on 90 days notice.
2. DUTIES OF BONEVICH. BONEVICH shall be employed by ASI as Vice President
of Sales/National Sales Manager and shall have such authority and shall perform
such duties as normally associated with such employment. BONEVICH shall serve
ASI faithfully and diligently, shall devote his full working time and attention
exclusively to the business and the affairs of ASI.
3. COMPENSATION. During the term of this Agreement ASI agrees to compensate
BONEVICH as follows:
a A salary of $75,000 per year paid bi-weekly, and
b. commissions as detailed in Appendix A, and,
c. a nonrecoverable draw against commissions of $25,000 per year
paid bi-weekly.
After execution of this Agreement ASI will promptly pay accrued back pay and
expenses.
4. OTHER COMPENSATION. In addition to the compensation provided in
paragraph 3 herein, ASI agrees BONEVICH shall receive up to 100,000 stock
options as follows:
a. Simultaneously with the execution of this Agreement, BONEVICH
will receive 35,000 options with an exercise price of $4.50/share
(these options are vested immediately, must be exercised in
blocks of 5,000 or more and will expire August 15, 1995 or 60
days after BONEVICH's termination of employment whichever is
sooner) and,
b. 65,000 options, with an exercise price of $4.50/share, provided
however that ASI exceeds $7.3 million in sales in its fiscal year
1994 (ending June 30, 1994). If sales in fiscal year 1994 are
less than $2.7 million no options shall be earned. If sales are
between $2.7 and 7.3 million the number of options shall be
pro-rated. These are standard ASI employee options, they have a
five (5) year vesting period.
These two option agreements are contained in Appendix B and Appendix C. As of
this date, ASI has 1,393,358 issued and outstanding shares of common stock.
5. EXPENSES. ASI shall pay BONEVICH $12,000/year (paid bi-weekly) for
living and traveling expenses related to travel to and from New York City and
living expenses in New York City without provision of any documentation. ASI
shall promptly reimburse BONEVICH for other expenses incurred in connection with
his employment (such as, but not limited to, client entertainment and air
travel), provided such expenses conform to ASI policy.
6. OTHER COMPANY BENEFITS. ASI shall include BONEVICH in its medical, life
and disability insurance plan, and any other benefits made available to other
executive employees of ASI. ASI has provided BONEVICH with summaries of all such
plans and benefits.
7. NON-COMPETE. BONEVICH shall execute the non-compete agreement as
detailed in Appendix D.
8. TERMINATION. ASI may terminate BONEVICH's employment for just cause upon
written notice to BONEVICH. For purposes of this agreement, just cause shall
mean the following: willful, material negligent or material misconduct by the
employee, such as fraud, theft, dishonesty, insubordination (after notice and an
opportunity to cure), intoxication on the job, conviction of any felony, any
violation of any business ethics policy of ASI, any violation of the trade
secrets policy of ASI, any material violation of any term of this agreement or
other misconduct of comparable magnitude and kind; or any act or failure to act
(after notice and an opportunity to cure) which has a material adverse effect on
the business activities, financial condition or reputation of ASI.
9. WARRANTY. BONEVICH represents and warrants to ASI that he is not bound
by any agreement which would interfere with or prevent his entering into and
carrying out this agreement.
10. ENTIRE AGREEMENT. It is agreed that no representation, condition,
provision or term related to or connected with this agreement exists except as
specifically set forth herein and in Appendices A, B, C and D.
11. LAW GOVERNING. This agreement shall be governed and enforced in
accordance with the laws of the State of Rhode Island.
12. BINDING AGREEMENT This Agreement shall bind and inure to the benefit
of the parties and their respective legal successors and assigns, except that
neither party may delegate any obligation under this Agreement nor assign this
Agreement without the prior written consent of the other party; provided that
ASI may assign this agreement in connection with a sale or merger of ASI's
business.
13. ARBITRATION. All claims or disputes between the parties arising out of
or relating to the terms of this Agreement shall be submitted to arbitration in
Providence, RI in accordance with the commercial rules of the American
Arbitration Association then obtaining before a single arbitrator selected from
the Association's panel. The award rendered by the arbitrator shall be final and
judgement may be entered upon it in accordance with the applicable law of any
court having jurisdiction thereon. The parties agree that the arbitrator may
enter any preliminary order to the extent necessary to prevent or enjoin the
disclosure of any trade secrets of the ASI.
IN WITNESS WHEREOF, the parties hereto have agreed to and accepted these
terms.
ATTEST: Aquidneck Systems Int'l, Inc.
/s/ Louise R. Henry /s/ Mario Briccetti
- ---------------------------------- ----------------------------------------
Mario Briccetti, President/CEO
/s/ Louise R. Henry /s/ John Bonevich
- ---------------------------------- ----------------------------------------
John Bonevich
<PAGE>
Commission plan - Appendix A
The following details BONEVICH's commission plan.
1. 8% of all new customer net sales in personal sales territory.
2. 5% of all present customer net sales in personal sales territory.
Present customer sales are defined in the attached list.
3. 2% override on all new customer net sales, without regard to who makes
sales, except sales covered by paragraphs 1 and 2.
4. 1% override on all present customer net sales, without regard to who
makes sales, except sales covered by paragraphs 1 and 2. Present
customer sales are defined in the attached list.
5. The above commissions are earned for products (except optical disk
media) shipped at end user list price. Commissions are reduced if ASI
has to reduce prices as follows:
a. Full commission rate if gross margin is 50% or greater or if
the product is sold at end user list price.
b. Full commission rate reduced by 75% (8% rate reduced to 2%)
if gross margins are below 25%. In no event will the
commission amount be reduced by more than 75%.
c. Prorated commissions for margins between 25 and 50%; however
if an end user list price sale would produce a gross margin
lower than 50%, such 50% is lowered to such lower margin.
6. The above commissions are earned for optical disk media shipped with a
gross margin of at least 50%. For gross margins less than 25% the
commission amount is reduced by 75% (8% is reduced to 2%). For sales
with gross margins between 25% and 50% the commission rate would be
pro-rated. In no event will the commission amount be reduced by more
than 75%.
For purposes of this Agreement Gross Margin is defined as:
(Net Sale) - (Cost of Goods)
---------------------------- X 100%
(Net Sale)
Net Sale is the actual sale price of ASI equipment and related
software or services, excluded is freight, taxes, late charges or
restocking fees. Cost of Goods includes cost of materials and freight
but not ASI labor.
6. Sales which are off ASI standard pricing must be approved by the
President of ASI.
7. Payment of commissions will be made by ASI within two weeks of
customer payment less any draw amount already paid.
8. If a customer chooses to lease ASI equipment BONEVICH may purchase
such equipment from ASI at the same price as the customer would have
purchased and lease such equipment to the customer. BONEVICH's
commission, as defined above, will be paid on such a purchase. Any
profits from the lease will belong to BONEVICH.
<PAGE>
BONEVICH STOCK OPTION AGREEMENT
Appendix B.
THIS AGREEMENT is entered into by and between Aquidneck Systems International,
Inc., a Delaware corporation with its principal office at 650 Ten Rod Road,
North Kingstown, RI 02852 (hereinafter the "COMPANY"), and John Bonevich,
(hereinafter the "OPTIONEE") residing at 73 Glen Rock Road, West Kingston, RI
02892.
WHEREAS, the OPTIONEE desires to be employed by the COMPANY and the COMPANY
desires to employee the OPTIONEE, the COMPANY hereby grants a non-qualified
stock option to the OPTIONEE;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. The COMPANY hereby grants to the OPTIONEE the option
to purchase from the COMPANY upon the terms and conditions hereinafter set forth
an aggregate of 35,000 shares of the common stock, $.01 par value, of the
COMPANY at a purchase price of $4.50 per share. (The date of grant of this
option is August 16, 1993 hereinafter referred to as the "Option Date").
2. Exercisability of the Option; Term of the Option. The Option is
exercisable immediately after the Option Date. When this option is exercised, a
minimum of 5000 shares or the entire option amount, whichever is less, may be
purchased pursuant to the exercise of the option. Any unexercised portion of
this option shall remain exercisable until it expires on the second anniversary
of the Option Date unless the option is sooner terminated as hereinafter
provided.
3. Other Conditions and Limitations.
(a) The option is granted on the condition that the purchase of common
stock hereunder shall be for investment purposes and not with a view to resale
or distribution, except that such condition shall be inoperative if the offering
of stock subject to the option is registered under the Securities Act of 1933,
as amended, or if in the opinion of counsel for the COMPANY such stock may be
resold without registration. At the time of the exercise of the option or any
installment thereof, the OPTIONEE will execute such further agreements as the
COMPANY may require to implement the foregoing condition and to acknowledge the
OPTIONEE's familiarity with restrictions on the resale of the shares under
applicable securities laws.
(b) The COMPANY will furnish upon request of the OPTIONEE copies of the
certificate of incorporation of the COMPANY, as amended, and such publicly
available financial and other information concerning the COMPANY and its
business and prospects as may be reasonably requested by the OPTIONEE in
connection with exercise of this option.
(c) The option shall not be transferable otherwise than by will or by
the laws of descent and distribution, and except as provided in Section 7 the
option shall be exercisable during the lifetime of the OPTIONEE by OPTIONEE
only.
4. Exercise of Option. Written notice of the exercise of the option or
any installment thereof shall be given to the COMPANY at its principal office
accompanied by the option price (a) by cashier's or certified check, (b) if
permitted by the Board of Directors of the COMPANY (or a committee or an officer
of the COMPANY to which it has delegated such authority), by delivery and
assignment to the COMPANY of shares of COMPANY stock having a fair market value
(as determined by the Board of Directors of the COMPANY (or a committee or an
officer of the COMPANY to which it has delegated such authority)) equal to the
exercise price, or (c) by a combination of (a) and (b). If payment is made by
shares of COMPANY stock, the OPTIONEE shall furnish to the COMPANY evidence
satisfactory to it that the acquisition of such stock and its transfer in
payment of the option price satisfies the requirements of Section 422A of the
Internal Revenue Code of 1986 (the "Code") or other applicable law.
5. Stock Dividends; Stock Splits; Stock Combination; Recapitalization.
Appropriate adjustment shall be made in the maximum number of shares of common
stock subject to this option and in the number, kind, and option price of shares
covered by this option to the extent it is outstanding to give effect to any
stock dividends, stock splits, stock combinations, recapitalizations and other
similar changes in the capital structure of the COMPANY after the Option Date.
6. Merger; Sale of Assets; Dissolution. In the event of a change of the
common stock resulting from a merger or similar reorganization as to which the
COMPANY is the surviving corporation, the number and kind of shares then subject
to this option and the price per share thereof shall be appropriately adjusted
in such manner as the Board of Directors of the COMPANY may deem equitable to
prevent substantial dilution or enlargement of the rights available or granted
hereunder.
7. Termination of Option. In the event of the OPTIONEE's employment
shall have been terminated at any time prior to the exercise of this option in
full, this option shall terminate and may no longer be exercised after the
OPTIONEE ceases for any reason to perform services for the COMPANY, its parent,
if any, or a subsidiary except that, with respect to options:
(i) if the OPTIONEE ceased to perform services for any reason
other than disability or death he may at any time within a
period of 60 days after such cessation exercise his
option;
(ii) if the OPTIONEE ceases to perform services because of
disability (within the meaning of Section 22 (e)(3) of the
Code), the option may be exercised within a period of one
(1) year after such cessation of services;
(iii) if the OPTIONEE ceases to perform services because of
death, the option may be exercised within a period of one
(1) year after the OPTIONEE's death by the person or
persons to whom the OPTIONEE's rights under the option
shall pass by will or by the laws of decent and
distribution;
provided, however, that this option may not be exercised to any extent by anyone
after the date of expiration of the option as described in paragraph 2 hereof.
8. Miscellaneous. The OPTIONEE shall have no rights as a stockholder
with respect to the shares subject to the option until the exercise of the
option and the issuance of a stock certificate for the shares with respect to
which the option shall have been exercised. Nothing herein contained shall
impose any obligation upon the OPTIONEE to exercise the option.
9. Governing Law. This Agreement shall be subject to and construed in
accordance with the law of the State of Rhode Island.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have executed this Agreement in
duplicate on this 16th day of August, 1993.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/ Mario Briccetti /s/ John Bonevich
---------------------------------- ---------------------------------------
OPTIONEE
Title: President/CEO
-------------------------------
<PAGE>
Non-Compete Agreement
Appendix D.
This non-compete agreement is made as of August 16, 1993, by and between John
Bonevich ("BONEVICH") and Aquidneck Systems International, Inc. ("ASI"). This
agreement is being made as an inducement for ASI to offer BONEVICH employment.
BONEVICH acknowledges that the services he is to render are of a special and
unusual character with unique value to ASI. In view of the unique value to ASI
of the services of BONEVICH and as a material inducement to ASI to employment
offer to BONEVICH, BONEVICH covenants and agrees as follows:
BONEVICH will not without the prior written consent of ASI, for a period of one
(1) year after BONEVICH's employment with ASI ceases:
(i) enter the employ of or render services to any person, firm,
partnership or corporation (or become interested therein (other than a
passive owner of up to 1% of the stock of a publicly traded company) as
a director, principal, representative or any other relationship or
capacity) of which at least 25% of such entity's revenue are from the
sale of archival optical disk products, including related software or
services.
(ii) engage in the business of selling or leasing competitive archival
optical disk products including related software or services.
(iii) induce or attempt to induce directly or indirectly any customer of
ASI to cease doing business in whole or in part with ASI or solicit the
business of any such customer for archival optical disk products,
including related software or services.
(iv) induce or attempt to induce directly or indirectly any employee of
ASI to:
(a) enter the employ of or render services to any person, firm,
partnership or corporation (or become interested therein as a
director, principal, representative or any other relationship or
capacity) dealing in equipment or services which compete with any
of the equipment or services ASI now offers, or
(b) engage in any business which is in competition with the
business now conducted by ASI.
Agreed to:
/s/ John Bonevich /s/ Mario Briccetti
- ---------------------------------- ---------------------------------------
John Bonevich Mario Briccetti
Aquidneck Systems Int'l, Inc.
Exhibit 10.h
AGREEMENT
This Agreement ("Agreement") is made as of the 15th day of December, 1994
by and between Charles H. Boisseau residing at 76 Alfred Drowne Road,
Barrington, RI 02806 ("you") and Aquidneck Systems International, Inc., a
Delaware corporation with offices at 650 Ten Rod Road, North Kingstown, RI 02852
(the "Company").
WITNESSETH:
WHEREAS you have been working for the Company as a consultant since May 15,
1994, during which time you rendered various services to the Company, including
business and financial planning and fundraising;
WHEREAS during the period that you worked as a consultant to the company,
you have contacted venture capital firms, investment banks and other financial
sources, some of which have expressed various levels of interest in investing in
the Company;
WHEREAS although you have entered into an Employment Agreement with the
Company as of the date hereof, the company desires to establish the terms by
which you will be paid contingent compensation in consideration of the
consulting services you have rendered through December 31, 1994.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and promises hereinafter set forth, the parties hereto agree as
follows:
1. Definitions. For purposes hereof: (a) "equity financing" means the sale
of common or preferred stock or any other security convertible into, or pursuant
to which the holder of such security may obtain, common or preferred stock of
the Company; and (b) "new investor" means any investor (whether first introduced
to the Company by you or anyone else) that is both not an investor (or affiliate
of an investor) in the company as of the date hereof and was contacted by you in
writing by May 31, 1995.
2. Commission. Upon the closing of an equity financing with a new investor
on or before November 30, 1995, you will receive compensation equal to 5% of the
first $1,000,000, 4% of the next $1,000,000, 3% of the next $1,000,000, 2% of
the next $1,000,000, and 1% of anything over $4,000,000. If the company rejects
an offer of equity financing from a new investor, other than Investor
Associates, that has been offered at an effective price per share of at least
$3.00 (a "qualified offer"), you will be paid on or before October 31, 1995 the
sum of $32,885.00, provided, however, that if the Company rejects a qualified
offer from Barington Capital, the Company will pay you a lesser sum to be agreed
upon by the Chairman of the Company and you. If the Company subsequently accepts
equity financing from a new investor, the $32,885 or such lesser amount paid
will be deducted from the commission payable to you with respect to such equity
financing. It is acknowledged and agreed that Barington has made a qualified
offer to the Company as evidenced by a copy of the term sheet from Barington
attached hereto.
3. Options. The Company has previously granted to you 50,000 non-qualified
options to purchase common stock of the Company at $3.50 per share. 11,111 of
such options are now fully vested, and contingent upon the closing of an equity
financing from a new investor of not less than $1,000,000, an additional 19,446
of such options shall be vested. The remaining 19,443 options are hereby
forfeited. The vested options shall be evidenced by an option agreement
substantially in the form attached hereto as Exhibit A.
4. Notices. Any notice to be given under this Agreement by either party
shall be in writing, hand delivered, or mailed by certified mail or registered
mail with return receipt requested, and addressed to the other party at its
address at the head of this Agreement or at such other address as such other
party shall have noticed to the first party in accordance with the provisions of
this Section. Any notice shall be effective upon receipt by the intended
recipient thereof.
5. Non-Waiver of Rights. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement. Any waiver of
any provision of this Agreement shall be valid only if in writing signed by the
party so waiving, and no waiver of a provision hereof in any given instance
shall operate as a waiver of such provision in any other instance or the waiver
of any other provision of this Agreement.
6. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
7. Assignment. This Agreement shall be binding upon and shall inure to the
benefit of you and the Company and their respective executors, administrators,
heirs, successors and permitted assigns and shall not be assignable in whole or
in part by either party without the written consent of the other party hereto,
except assignment by the Company to any person or entity which at any time,
whether by merger, purchase (of stock or assets), liquidation, reorganization or
otherwise, shall acquire all or substantially all of the assets or business of
the Corporation.
8. Arbitration. Any controversy, dispute or claim arising out of or
relating to the application, interpretation or breach of this Agreement shall be
settled by arbitration in Providence, Rhode Island in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. There
shall be a single arbitrator who shall have not less than ten (10) years
experience in contract and corporate finance matters. The decision of the
arbitrator shall be final and binding and any judgment upon the award rendered
by the arbitrator may be entered in any Court having jurisdiction thereof. Each
party hereto shall endeavor to keep any such arbitration proceeds and the
results thereof, confidential.
9. Miscellaneous. This Agreement embodies the entire agreement of the
parties with respect to the matters within its scope (including, without
limitation, all matters within the scope of any consulting arrangements between
you and the Company since May 15, 1994) and supersedes any prior agreements and
understandings of the parties respecting the same. This Agreement shall not be
modifiable except in writing signed by both parties hereto, and the provisions
hereof shall override any contrary or conflicting provisions in any
acknowledgment, invoice or other document unilaterally issued by either party.
The headings contained in this Agreement have been inserted solely for
convenience of reference and shall be of no force or effect in the construction
or interpretation of the provisions of this Agreement. This Agreement may be
executed in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement
as of the day and year first above written.
THE "COMPANY": Aquidneck Systems International, Inc.
By /s/Matthias E. Lukens, Jr.
-----------------------------------
Matthias E. Lukens, Jr.
President & CEO
"YOU": /s/Charles H. Boisseau
-----------------------------------
Charles H. Boisseau
Exhibit 10.i
AGREEMENT
AGREEMENT dated this 20th day of December, 1994, between MARIO BRICCETTI,
an individual residing at 16242 Marina Del Ray, Grover, Missouri 63040
("Briccetti") and AQUIDNECK SYSTEMS INTERNATIONAL, INC., a Delaware corporation
having a place of business at 650 Ten Rod Road, North Kingstown, Rhode Island
02852 ("Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Company's 1987 Stock Option and Stock Purchase
Plan ("1987 Plan"), Briccetti has been granted options from time to time to
acquire an aggregate of 92,725 shares of common stock of the Company at various
prices per share ("Existing Options), of which 84,655 shares have vested; and
WHEREAS, pursuant to the terms of the 1987 Plan, the Existing Options
terminate and cannot be exercised following the expiration of three months after
Briccetti ceases to perform services for the Company; and
WHEREAS, Briccetti ceased to perform services for the Company on September
15, 1994; and
WHEREAS, the Company and Briccetti wish to set forth their understandings
with respect to his right to exercise the Existing Options.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Briccetti acknowledges and agrees that Existing Options to acquire 8070
shares of Common Stock were not vested as of September 15, 1994, and, pursuant
to the 1987 Plan, such Existing Options have been forfeited and cannot be
exercised.
2. Briccetti hereby exercises Existing Options to purchase 16,931 shares at
$1.00 per share ("Acquired Shares"). Such exercise will be effected by delivery
to the Company on or before January 15, 1995, of one or more stock certificates
of the Company's common stock (currently valued by the Company's Board of
Directors at $3.00 per share) issued to Briccetti totalling 5,643 shares, and
Briccetti's check in the amount of $2.00, for an aggregate exercise price of
$16,931.
3. Briccetti agrees to exchange Existing Options to acquire 67,724 shares
for new options, and the Company hereby agrees to grant Briccetti new options,
to acquire 67,724 shares of the Company's common stock at an exercise price of
$1.25, on or before January 15, 2000 ("New Options"). The New Options shall not
be exercisable until the first to occur of: (a) January 1, 2000, (b) an initial
public offering of the Company's common stock; or (c) such other event that
would permit the Company's employees to exercise options pursuant to the 1987
Plan or the 1994 Plan (as defined below). Subject to approval at the Company's
1994 Annual Meeting of Stockholders, such options will be "non-qualified"
options granted pursuant to the Company's 1994 Stock Option Plan ("1994 Plan"),
a copy of which has been provided to Briccetti. Briccetti hereby agrees to
exercise the Company's standard form of non-qualified stock option agreement, a
copy of which has been provided to Briccetti.
4. Briccetti agrees that the Acquired Shares, and any shares issued upon
exercise of the New Options, will carry a legend referencing the restrictions on
transfer contained in the 1994 Plan, this Agreement and any agreement being
entered into by Briccetti and the Company relating to the New Options.
5. In consideration of the Company's agreement to permit Briccetti to
exchange 67,724 of the Existing Options for the New Options, Briccetti hereby
agrees to fully cooperate with the Company and provide the Company with his
assistance in matters in which Briccetti was involved on behalf of the Company
prior to his termination, including, assistance in the prosecution and/or
defense by the Company of any patent infringement claims; provided, however,
that without his consent, Briccetti shall not be required to devote more than 8
hours per month for the Company on matters that do not require him to travel.
Such assistance shall be rendered by Briccetti from time to time upon the
Company' s request without additional compensation to Briccetti (other than
reimbursement of out-of-pocket expenses); provided, however, that if Briccetti
is required to travel he shall also be compensated at the rate of $650 per day.
6. Briccetti acknowledges that there may be tax consequences to him arising
from the transactions contemplated by this Agreement, and agrees that he is
responsible for payment of any federal, state or local income taxes imposed on
him as a result of such transactions.
7. (a) Waiver of any provision of this Agreement, in whole or in part, in
any one instance shall not constitute a waiver of any other provision in the
same instance, nor any waiver of the same provision in another instance, but
each provision shall continue in full force and effect with respect to any other
then-existing or subsequent breach.
(b) Any notice required or permitted under this Agreement shall be given
in writing by delivery in hand or by postage prepaid, United States certified
mail, return receipt requested, as follows: to the Corporation (Attention:
President), at 650 Ten Rod Road, North Kingstown, Rhode Island 02852, or at such
other address as the Corporation, by notice to the Optionee, may designate in
writing from time to time; and to the Optionee, at the address specified above,
or at such other address as the Optionee, by notice to the Corporation, may
designate in writing from time to time. Notice shall be effective upon receipt.
(c) This Agreement: (i) may be executed in any number of counterparts,
each of which, when executed by both parties to this Agreement shall be deemed
to be an original, and all of which counterparts together shall constitute one
and the same instrument; (ii) shall be governed by and construed under the laws
of the State of Rhode Island applicable to contracts made, accepted, and
performed wholly within Rhode Island, without application of principles of
conflicts of laws; (iii) constitutes the entire agreement of the parties with
respect to its subject matter, except as set forth in Section 1 of this
Agreement, superseding all prior oral and written communications, proposals,
negotiations, representations, understandings, courses of dealing, agreements,
contracts, and the like between the parties in such respect; (iv) may be
amended, modified, or terminated, and any right under this Agreement may be
waived in whole or in part, only by a writing signed by both parties; (v)
contains headings only for convenience, which headings do not form part, and
shall not be used in construction, of this Agreement; and (vi) shall bind and
inure to the benefit of the parties and their respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have executed, or have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first written above.
/s/Mario Bricetti
--------------------------------------
Mario Briccetti
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/Malcolm G. Chace, III
------------------------------------
Title Chairman of the Board
Exhibit 10.j
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
by and between Aquidneck Systems International, Inc., a Delaware corporation
(the "Company") and Elizabeth Z. Chace and Christian Nolen, as Trustees U/A/D
August 30, 1938 F/B/O Malcolm G. Chace, III Trust (the "Investor").
WHEREAS, the Company desires to sell shares of its Series A Preferred Stock
$.01 par value per share, ("Preferred Stock") to the Investor, and the Investor
desires to purchase such shares, on the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the promises herein made and on the
terms and subject to the conditions herein contained, the Company and the
Investor hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1 Sale and Issuance. Subject to all of the terms and conditions of this
Agreement and in reliance on the representations and warranties set forth or
referred to in this Agreement, the Company agrees to issue and sell to the
Investor and the Investor agrees to purchase 50,000 shares of Preferred Stock
(the "Shares").
1.2 Purchase Price. The aggregate purchase price for the Shares is
$2,000,000 (the "Purchase Price").
1.3 Closing. The closing of the purchase and sale of the Shares will take
place at 10:00 a.m. on January 23, 1995 at the offices of Hinckley, Allen &
Snyder, 1500 Fleet Center, Providence, Rhode Island, or such other time and
place as the Company and the Investor mutually agree (the "Closing"). At the
Closing, the Company will deliver to the Investor a certificate representing the
Shares, and the Investor will deliver to the Company the Purchase Price, by bank
check, wire transfer or other immediately available funds.
1.4 Certificate of Designation. The Company shall adopt and file with the
Secretary of State of the State of Delaware at or before the Closing a
Certificate of Designation in the form attached hereto as Exhibit A which, among
other matters, will establish the rights, preferences and privileges of the
Shares.
1.5 Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company for working capital and general corporate purposes.
2. Representations and Warranties of the Company.
In order to induce the Investor to enter into this Agreement and to
purchase the Shares, the Company hereby represents and warrants that:
2.1 Organization and Good Standing. The Company is duly organized and
existing in good standing as a corporation in the State of Delaware and is duly
qualified as a foreign corporation and authorized to do business in all other
jurisdictions in which the nature of its business or property makes such
qualification necessary except (i) where failure to qualify would not have a
material adverse effect on the business assets or financial condition of the
Company and (ii) New York, where the Company is in the process of qualifying.
The Company has the corporate power to own its properties and to carry on its
business as now conducted and as proposed to be conducted.
2.2 Authorization; Valid Issuance of Shares. The execution, delivery and
performance of this Agreement by the Company and the issuance and sale by the
Company of the Shares (i) has been duly authorized by all necessary corporate
proceedings, and (ii) does not conflict with or result in any breach of any
provision of or the creation of any lien upon any of the property of the Company
pursuant to the Certificate of Incorporation or bylaws of the Company or any
law, regulation, order, judgment, writ, injunction, license, permit, agreement
or instrument, the non-compliance with which would materially adversely affect
the business, operations and financial condition of the Company. The Shares
being purchased hereunder by the Investors, when issued, sold and delivered in
accordance with the terms of this Agreement for the Purchase Price, will be duly
and validly issued, fully paid and non-assessable and will be free of
restrictions on transfer other than restrictions under this Agreement and under
applicable state and federal securities laws.
2.3 Enforceability. The execution and delivery of this Agreement by the
Company and the issuance and sale by the Company of the Shares will result in
legally binding obligations of the Company enforceable against it in accordance
with the respective terms and provisions hereof, except to the extent (a) such
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights, and (b) that the availability of the remedy of specific performance or
injunctive or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
2.4 Governmental Approvals. Except as set forth in Schedule 2.4 hereto, the
execution, delivery and performance of this Agreement by the Company and, based
upon the representations and warranties of the Investor contained in Section 3,
the purchase and sale of the Shares do not require the approval or consent of,
or any filing with, any governmental authority or agency having jurisdiction
over the Company.
2.5 Capitalization.
(a) Authorized. The authorized capital stock of the Company consists
solely of (or at the Closing will consist solely of) 8,000,000 shares of common
stock, $.01 par value per share ("Common Stock"), and 1,000,000 shares of
Preferred Stock. The rights, preferences and privileges of the Common Stock and
the Preferred Stock are as stated in the Certificate of Incorporation of the
Corporation, as amended, attached as Exhibit B hereto.
(b) Outstanding. The Company has no outstanding capital stock other
than 2,499,542 shares of Common Stock, all of which are duly authorized, fully
paid and non-assessable. Immediately following the Closing, only (i) 2,499,542
shares of Common Stock and (ii) the Shares being purchased by the Investor
hereunder will be outstanding.
(c) Options, etc. Other than as created pursuant to this Agreement or
as disclosed in Schedule 2.5(c) hereto, there are no outstanding rights or
options to subscribe for or purchase from the Company any capital stock or any
securities convertible into or exchangeable for its capital stock.
(d) Reservation, etc. Sufficient shares of authorized but unissued
Common Stock have been reserved by appropriate corporate action in connection
with the prospective conversion of the Shares to Common Stock. The issuance of
Common Stock acquirable upon conversion of the Shares will not require any
further corporate action by the directors or stockholders of the Company, will
not be subject to pre-emptive rights in any present or future stockholders of
the Company and will not conflict with any provision of any agreement to which
the Company is a party or by which it is bound, and such Common Stock, when
issued upon conversion of the Shares in accordance with this Agreement, will be
duly authorized, fully paid and non-assessable and will be free of restrictions
on transfer other than restrictions under this Agreement and under applicable
state and federal securities laws.
(e) Voting Agreements. The Company is not a party or subject to any
agreement or understanding, and, to the best of the Company's knowledge, there
is no agreement or understanding between any persons that affects or relates to
the voting or giving of written consents with respect to any security of the
Company or the voting by a director of the Company.
2.6 Subsidiaries. The Company does not have any subsidiaries, does not own
or hold of record and/or beneficially any shares of any class of the equity
capital of any corporations, and does not own any legal and/or beneficial
interests in any partnerships, business trusts or joint ventures or in any other
unincorporated trade or business enterprises.
2.7 Reports and Financial Statements.
(a) The Investor has heretofore been furnished with complete and
correct copies of the audited balance sheets of the Company as at June 30, 1994
(the "Balance Sheet Date") and June 30, 1993 and the related statements of cash
flows for the fiscal years then ended, and the statements of income for the
fiscal years then ended, each of such balance sheets and income statements being
attached hereto as Schedule 2.7(a)(i).
(b) Each of the statements delivered under Section 2.7(a)(i) hereof
was prepared in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods except as otherwise stated therein;
each of the balance sheets included in such financial statements fairly presents
the financial condition of the Company as at the close of business on the date
thereof; and each of the statements of income included in such financial
statements fairly presents the results of operations of the Company for the
fiscal period then ended.
2.8 Material Adverse Change. There has been no material adverse change in
the business, assets, operations, prospects, properties or financial condition
of the Company since the Balance Sheet Date.
2.9 Indebtedness and Liens. Except as disclosed on Schedule 2.9 hereto, the
Company has no indebtedness or liens on any of its properties.
2.10 Licenses, Etc. The Company has all franchises, patents, patent
applications, patent licenses, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyrights, licenses, permits, authorizations,
certificates of convenience and necessity, operating rights and other rights as
are necessary for the conduct of its business as currently conducted or
currently proposed to be conducted, except to the extent that the failure to
have any of them would not have a material adverse effect on the business,
assets or financial condition of the Company taken as a whole. All of the
foregoing are in full force and effect, and the Company is in compliance with
the foregoing without any known conflict with the valid rights of others which
could affect or impair in a material manner the business, assets or financial
condition of the Company.
2.11 Title to Assets; Leases. Except as disclosed on Schedule 2.11 attached
hereto, the Company owns all of the assets reflected in the pro forma balance
sheet of the Company as at the Closing Date, subject to no liens other than as
disclosed in Schedule 2.9 hereto. Except as disclosed on Schedule 2.11 attached
hereto, the Company enjoys peaceful and undisturbed possession, and is in
compliance with the terms of all leases of real property on which facilities
operated by it are situated and of all leases of personal property, except where
failure to enjoy such possession or such noncompliance would not have a material
adverse effect upon the business, assets or financial condition of the Company,
and all such leases are valid and in full force and effect.
2.12 Litigation. Except as disclosed on Schedule 2.12 attached hereto,
there is no litigation, at law or in equity, or any proceeding before any court,
board or other governmental or administrative agency or any arbitrator pending
or, to the knowledge of the Company after due inquiry, threatened which,
individually or in the aggregate, is reasonably likely to result in any final
judgment or liability which, after giving effect to any applicable insurance,
could result in any material adverse change in the business, assets or financial
condition of the Company or which seeks to enjoin the consummation of, or which
questions the validity of, any of the transactions contemplated by this
Agreement. No judgment, decree or order of any court, board or other
governmental or administrative agency or arbitrator has been issued against or
binds the Company or its respective assets which has or may have any material
adverse effect on the business, assets or financial condition of the Company.
2.13 Tax Returns. The Company has filed all tax returns and reports which
are required to be filed with any foreign, federal, state or local governmental
authority or agency and has paid, or made adequate provision for the payment of
all assessments received and all taxes which have or may become due under
applicable foreign, federal, state or local governmental law or regulations with
respect to the periods in respect of which such returns and reports were filed.
The Company knows of no additional assessments since the date of such returns
and reports, and, there will be no additional material assessments for which
adequate reserves appearing on the balance sheet referred to in Section
2.7(a)(i) have not been established. The Company has established adequate
reserves for all current taxes.
2.14 Defaults. Except as set forth on Schedule 2.14, the Company is not in
default under any provisions of its Certificate of Incorporation or by-laws or
under any provisions of any franchise, contract, agreement, lease or other
instrument to which it is a party or by which it or its property is bound or in
violation of any law, judgment, decree or governmental order, rule or
regulation, which default or violation could materially affect adversely the
business, assets or financial condition of the Company.
2.15 Burdensome Obligations. The Company is not a party to or bound by any
agreement, deed, lease or other instrument which is so unusual or burdensome as
to affect or impair materially and adversely the business, assets or financial
condition of the Company.
2.16 Employee Benefit Plans. The Company does not maintain or contribute to
any employee benefit plan ("Plan"), except as set forth on Schedule 2.16.
(a) In General. Each Plan has been maintained and operated in
compliance in all material respects with the provisions of the federal Employees
Retirement Income Security Act, as amended ("ERISA") and, to the extent
applicable, the Internal Revenue Code of 1986 as amended (the "Code"), including
but not limited to the provisions thereunder respecting prohibited transactions.
The Company has not breached any fiduciary duty imposed on it under Title I,
Part 4 of ERISA with respect to any Plan. The Company has heretofore delivered
to the Purchaser the most recently completed annual report, Form 5500, with all
required attachments, and actuarial statement required to be submitted under
Section 103(d) of ERISA, with respect to each Plan.
(b) Welfare Plans. The Company has no Plan which is an employee
welfare benefit plan within the meaning of Section 3(1)or Section 3(2)(B)of
ERISA.
(c) Guaranteed Pension Plans. The Company has no Plan which is a
guaranteed pension plan within the meaning of ERISA.
(d) Claims. There are no claims (other than claims for benefits in the
normal course), actions or lawsuits asserted or instituted with respect to, and
the Company has no knowledge or any threatened claims or litigation with respect
to, any Plan or any fiduciary thereof.
2.17 Product, Environmental and Toxic Liability.
(a) There is no liability, obligation or pending or to the Company's
knowledge threatened claim relating to or based in whole or in part on
circumstances, events or conditions occurring or existing in connection with or
arising out of services rendered or goods or products manufactured or sold by
the Company, including product warranty and product liability claims, and claims
for refunds, returns, personal injury and property damage.
(b) (i) The Company has not caused or permitted its businesses or the
properties it owns or occupies to be used (or has knowledge that such were used)
to generate, manufacture, refine, transport, treat, handle, transfer, produce,
process or release (as defined below) toxic or hazardous wastes or substances,
except in compliance with all applicable federal, state and local laws or
regulations; (ii) the Company has not caused or permitted (or has knowledge of)
the Release (as defined below) of any toxic or hazardous substances or wastes at
any locations other than the properties owned or occupied by the Company; (iii)
there are no actual or alleged violations of any permit, license, agreement or
approval held by the Company; (iv) there are no liabilities, obligations or
pending or to the Company's knowledge threatened claims relating to or based in
whole or in part upon circumstances, events or conditions occurring or existing
in connection with or arising out of any of the foregoing; and (v) all materials
have been handled, stored and disposed of by the Company, and to the Company's
knowledge by any agents of the Company in accordance with applicable law. (For
purposes hereof, "Release" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing,
dumping or storage.)
(c) The Company has not caused or permitted its employees or agents to
be exposed to toxic or hazardous substances or other serious health risks, and
there are no pending or to the Company's knowledge threatened claims, nor is the
Company aware of any facts that would form the basis for any claims with respect
to employee/agent exposure to toxic or hazardous substances or other serious
health risks.
2.18 Employment Relations. (a) The Company has no employment contracts
or arrangements that may not be terminated on not more 90 days' notice without
material liability, except as set forth at Schedule 2.18; (b) the Company is in
compliance in all material respects with all laws, respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice or the subject to
any unfair labor practice charge; (c) there is no labor strike, dispute,
slowdown, stoppage or other labor action actually pending or to the Company's
knowledge threatened against or involving the Company; (d) no question of
representation exists respecting the employees of the Company and to the
Company's knowledge there are no petitions for an election involving the
Company's employees pending before the Federal National Labor Relations Board;
(e) no collective bargaining agreement is currently being negotiated by the
Company; (f) the Company has not experienced any material labor difficulty
during the last three years; and (g) there exist no claims, charges or
complaints, or events or conditions that have occurred or existed or are
occurring and existing, which would give rise to such claims, charges or
complaints, with respect to or under any discrimination laws or for wrongful
discharge. There has not been, and to the Company's knowledge, information and
belief, there will not be, any material adverse change in relations with
employees of the Company as a result of the transactions contemplated by this
Agreement.
2.19 Location of Office. The Company's chief executive office and the
location where its books and records are kept is 650 Ten Rod Road, North
Kingstown, Rhode Island 02852.
2.20 Registration Rights. Except as provided in the Investor's Registration
Rights Agreement a form of which is attached hereto as Exhibit C, and except as
set forth in Schedule 2.20 the Company is not obligated to register under the
Securities Act of 1933, as amended, any of its presently outstanding securities
or any of its securities that may subsequently be issued.
2.21 Disclosure. No representation, warranty or statement made in this
Agreement or any agreement, certificate, statement or document furnished by or
on behalf of the Company in connection with the transaction contemplated hereby
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading.
3. Representations and Warranties of the Investor.
3.1 Authorization. The Investor represents and warrants that it is a trust
organized under the laws of the State of Rhode Island, and that the undersigned
Trustees have full power and authority to enter into this Agreement and perform
their obligations on behalf of the Investor and that the execution and
performance of this Agreement does not conflict with the Investor's governing
indenture.
3.2 Accreditation. The Investor represents and warrants that it is an
"accredited investor" as defined in Regulation D under the Securities Act of
1993, as amended, and that it is purchasing the Shares for investment purposes
only and not with a view to selling or otherwise distributing the Shares.
3.3 Enforceability. The execution and delivery of this Agreement by the
Investor will result in legally binding obligations of the Investor enforceable
against it in accordance with the respective terms and provisions hereof, except
to the extent (a) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights, and (b) that the availability of the remedy of
specific performance or injunctive or other equitable relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
4. Conditions to Purchase.
The obligation of the Investor to purchase the Shares at the Closing is
subject to compliance by the Company with its agreements herein contained, and
to the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions.
4.1 Certificate of Incorporation: Good Standing. The Investor shall have
received (i) a certificate of the Delaware Secretary of State, dated as of a
current date, attaching a certified copy of a Certificate of Incorporation of
the Company and all amendments thereto and (ii) from the Company a copy,
certified by a duly authorized officer of the Company to be true and complete as
of the Closing Date, as to the by-laws of the Company, and a certificate, dated
as of a current date, of the Secretary of State of each state in which the
Company is incorporated or qualified to do business, as to the Company's good
standing in such state or qualification to do business, as the case may be.
4.2 Proof of Corporate Action. The Investor shall have received from the
Company copies, certified by a duly authorized officer thereof to be true and
complete as of the Closing Date, of the records of all corporate action taken to
authorize the execution, delivery and performance of this Agreement and any
related agreements.
4.3 Incumbency Certificate. The Investor shall have received from the
Company an incumbency certificate, dated the Closing Date, signed by a duly
authorized officer thereof and giving the name and bearing a specimen signature
of each individual who shall be authorized to sign this Agreement, and to give
notices and to take other action on behalf of the Company under this Agreement.
4.4 Legal Opinion. The Investor shall have received from counsel to the
Company their favorable opinion in such form as shall be reasonably satisfactory
to the Investor, and covering such matters with respect to the transactions
contemplated by this Agreement as the Investor may reasonably request.
4.5 Representations and Warranties; Officers' Certificates. The
representations and warranties contained or incorporated by reference herein
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date
except for those representations and warranties which relate specifically to a
particular date provided that such representations and warranties were true and
correct in all material respects as of such date, and the Company shall have
performed and complied with all conditions and agreements required to be
performed or complied with by it prior to the Closing; and the Investor shall
have received on the Closing Date a certificate to these effects signed by an
authorized officer of the Company.
4.6 Legality; Governmental Authorization. The purchase of the Shares shall
not be prohibited by any law or governmental order or regulation, and shall not
subject the Investor to any penalty, special tax, or other onerous condition.
All necessary consents, approvals, licenses, permits, orders and authorizations
of or registrations, declarations and filings with, any governmental or
administrative agency or of or with any other person, with respect to any of the
transactions contemplated by this Agreement shall have been duly obtained or
made and shall be in full force and effect.
4.7 Audited Financial Statements. [Intentionally omitted]
4.8 Filing of Certificate of Designation. The Company shall have filed, at
or before the Closing, the Certificate of Designation substantially in the form
attached hereto as Exhibit A and the Investor shall have received a copy thereof
certified by the Secretary of State of Delaware.
4.9 Investor's Registration Rights Agreement. The Company and the Investor
shall have entered into the Investor's Registration Rights Agreement
substantially in the form attached as Exhibit C.
4.10 General. All instruments and legal, governmental, administrative
and corporate proceedings in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in form and substance to the
Investor, and the Investor shall have received copies of all documents,
including, without limitation, records of corporate or other proceedings,
opinions of counsel, consents, licenses, approvals, permits and orders which the
Investor may have requested in connection therewith.
5. Conditions to Sale. The obligations of the Company to sell the Shares to
the Investor at the Closing is subject to compliance by the Investor of its
agreements herein contained, and to the satisfaction on or prior to the Closing
Date or waiver, of the following conditions.
5.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
5.2 Representations and Warranties; Trustee's Certificate. The
representations and warranties contained or incorporated by reference herein
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date
except for those representations and warranties which relate specifically to a
particular date provided that such representations and warranties were true and
correct in all material respects as of such date, and the Investor shall have
performed and complied with all conditions and agreements required to be
performed or complied with by it prior to the Closing; and the Company shall
have received on the Closing Date a certificate to these effects signed by the
Trustees.
5.3 Payment of Purchase Price. Investor shall have tendered the Purchase
Price to the Company as provided in Section 1.3 hereof.
6. Additional Covenants of the Company.
6.1 Legal Fees, Accounting Fees and Related Expenses. The Company agrees to
reimburse the Investor for all its legal, accounting and professional fees
charged and all costs and expenses reasonably incurred by such professionals in
connection with the transactions contemplated by this Agreement within 10 days
of presentation of appropriate billing invoices by the Investor to the Company.
In addition, the Company agrees to reimburse the Investor for all of its
out-of-pocket expenses in connection with the transactions contemplated by this
Agreement, if any, at the Closing.
6.2 Financial Reports. The Company shall submit (i) annual financial
statements audited by Kahn Litwin & Co., Ltd. or such other major accounting
firm reasonably acceptable to Investor and (ii) monthly unaudited financial
statements which shall include comparative income statements and balance sheets.
In addition, as soon as reasonably practical after the start of each fiscal
year, the Company shall provide a forecast for the next 12 months, including
quarterly income statements, balance sheets and cash flow statements. In the
event of material changes from the forecast, the Company shall revise the
forecast accordingly, and inform the Investor of the revisions as soon as
practicable.
6.3 Inspection Rights. Investor, or its designees, will have the right
upon reasonable advance notice during regular business hours to inspect the
books and properties of the Company, examine records (subject to confidentiality
restrictions), and discuss the Company's affairs with officers, directors, key
employees and accountants.
7. Indemnity.
7.1 Indemnification by the Company. To the fullest extent permitted by
applicable law, the Company shall indemnify, exonerate and hold the Investor and
its trustees and beneficiaries and agents free and harmless from and against any
and all actions, causes of action, suits, losses, liabilities, damages and
expenses, including without limitation reasonable attorney's fees and
disbursements, incurred by any of the indemnities as a result of or relating to
(i) any transaction to which the Company is a party that is financed or to be
financed in whole or in part, directly or indirectly with the proceeds from the
sale of any of the Shares or (ii) the execution, delivery, performance or
enforcement of this Agreement (including, without limitation, any failure by the
Company to comply with any of its covenants hereunder) or any instrument
contemplated hereby or thereby.
7.2 Indemnification by Investor. The Investor shall indemnify the Company
from and against any and all actions, suits, losses, liabilities, damages and
expenses, including without limitation, reasonable attorney's fees and
disbursements incurred as a result of the breach or the non-fulfillment by the
Investor of any of its warranties or agreements hereunder.
7.3 Broker's Fees. The parties shall indemnify each other against and agree
that each will hold the others harmless form any claim, demand or liability for
any broker's or finder's or placement fees or lender's incentive fees alleged to
have been incurred by it in connection with the transactions contemplated by
this Agreement.
7.4 Survival of Obligations. The obligations of the parties under this
Section 7 shall survive the payment and transfer of the Shares and the
termination of this Agreement.
8. Legends.
All certificates for the Shares will bear the following legend:
"The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
The shares represented by this Certificate have not been registered under
the Securities Act of 1933, as amended, or the securities laws of any state.
Such shares may not be offered for sale, sold, delivered after sale,
transferred, pledged or hypothecated, in the absence of an effective
registration statement covering such shares under the Act and any applicable
state securities laws, unless the holder shall have obtained an opinion of
counsel satisfactory to the Corporation that such registration is not required.
The shares represented by this Certificate are entitled to the benefits of
a Registration Rights Agreement dated as of January 23, 1995, between the
Corporation and Elizabeth Z. Chace and Christian Nolen, Trustees u/a/d August
30, 1938 f/b/o Malcolm G. Chace, III."
9. Notices. Any notice or other communication required or permitted to be
given hereunder shall be given in writing and shall be delivered by registered
mail, postage pre-paid, return receipt requested, or by telefacsimile addressed
as follows:
To the Investor: Malcolm G. Chace, III Trust
c/o Point Gammon Corporation
731 Hospital Trust Building
Providence, RI 02903
Attn: Thomas Gardner
With a copy to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Attention: Michael F. Sweeney
Telefacsimile: 401-277-9600
To the Company:
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
Attention: President
With a copy to:
John E. Ottaviani, Esq.
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
or to such other address as the party shall designate by written notice as
provided in this Section 9.
10. Survival of Covenants.
All covenants, agreements, representations and warranties made herein or in
any other document referred to herein or delivered to the Investor pursuant
hereto shall be deemed to have been relied on by the Investor, notwithstanding
any investigation made by the Investor, and shall survive the execution and
delivery to the Investor hereof and of the Shares.
11. Amendments and Waivers.
Except as otherwise expressly provided herein, any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Investor.
12. Consent to Jurisdiction.
THE COMPANY HEREBY AGREES TO SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF
THE COURTS IN AND OF THE STATE OF RHODE ISLAND, AND CONSENTS THAT SERVICE OF
PROCESS WITH RESPECT TO ALL COURTS IN AND OF THE STATE OF RHODE ISLAND MAY BE
MADE BY REGISTERED MAIL TO IT AT THE COMPANY'S ADDRESS SET FORTH HEREIN.
13. Waiver of Jury Trial.
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL
IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS AGREEMENT,
THE SECURITIES OR ANY OF THE OTHER FINANCING AGREEMENTS.
14. Miscellaneous.
This Agreement sets forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby and supersedes any prior
written or oral understandings with respect thereto. The invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of any other term or provision hereof. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE LAWS OF
THE STATE OF RHODE ISLAND WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE DOMESTIC SUBSTANTIVE
LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE BENEFIT OF THE PARTIES
HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 23rd day of January, 1995.
/s/ Elizabeth Z. Chace, Trustee
-----------------------------------------
Elizabeth Z. Chace, Trustee as aforesaid
and not individually
/s/ Christian Nolen, Trustee
-----------------------------------------
Christian Nolen, Trustee as aforesaid
and not individually
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Matthias E. Lukens, Jr.
--------------------------------------
Title: President
Exhibit 10.k
November 7, 1994
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby MOSSBERG
INDUSTRIES, INC. ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC.,
a Delaware corporation ("Borrower"), the maximum principal sum of Three Hundred
Thousand Dollars ($300,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note
(the "Note"). Such Loan will bear interest at the annual rate of nine and
seventy-five one hundredths (9.75%) percent. The Loan shall be due and payable
forty-five (45) days from the date of this Letter Agreement, unless repaid in
full prior to such time. Borrower shall be required to make mandatory repayments
upon the partial or complete collection of any of the accounts receivable that
constitute the Collateral (as defined in the Security Agreement), and shall
deliver to Lender said collected amount as and when received by it which Lender
shall apply to the outstanding balance of the Loan.
The initial advance shall be made in an amount equal to $90,939.56.
Any subsequent advances shall be made upon evidence satisfactory to Lender of a
corresponding invoice.
The proceeds of the Loan will be used solely for working capital
purposes.
The Note shall be secured by a security agreement of even date
herewith granting Lender a security interest in certain accounts receivable of
Borrower (the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet
National Bank ("FNB") the principal sum of $500,000 and Borrower will obtain the
consent of FNB to this loan before Lender is obligated to make any advances
under the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB), or of the occurrence
of any event which upon notice or lapse of time or both would constitute such an
event of default.
In each case of happening of any of the following events (each of
which is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in any
report, certificate, financial statement or other instrument furnished in
connection with this Agreement, or the borrowing hereunder, shall prove to be
false or misleading in any material respect;
(b) default in the payment of any installment of the principal of, or
interest on, the Note or any other indebtedness of Borrower to Lender when the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the Security
Agreement; or
(d) default with respect to any evidence of indebtedness of Borrower
(other than to Lender), if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof, or if any
indebtedness of Borrower (other than to Lender) is not paid, when due and
payable, whether at the due date thereof or a date fixed for prepayment or
otherwise; or
(e) the occurrence of an "Event of Default" as defined in the Security
Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian or liquidator of it or any of its property, (ii)
admit in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code or (v) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or if corporate action shall be taken for the purpose of effecting any of the
foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or of all or
a substantial part of the assets of Borrower, and such order, judgment or decree
shall continue unstayed and in effect for any period of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other property
of Borrower in the hands or possession of Lender, or the occurrence of any
attachment of any other property of Borrower in an amount exceeding Ten Thousand
Dollars ($10,000) which shall not be discharged within thirty (30) days of the
date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related
to the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
MOSSBERG INDUSTRIES, INC.
By /s/ Malcolm G. Chace, III
-------------------------------------
Title: Chairman
Accepted and agreed to this 7th day of November, 1994.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Louis A. Unger, III
-------------------------------------
Title: V.P. Marketing Nov. 7, 1994
<PAGE>
FIRST AMENDMENT TO
REVOLVING CREDIT LOAN AGREEMENT
THIS FIRST AMENDMENT is made as of the 1st day of December, 1994, by
and among MOSSBERG INDUSTRIES, INC. ("Lender") and AQUIDNECK SYSTEMS
INTERNATIONAL, INC., a Delaware corporation ("Borrower").
W I T N E S S E T H T H A T:
WHEREAS, Lender and Borrower are parties to a certain letter agreement
dated November 7, 1994, ("Loan Agreement"); and
WHEREAS, the parties desire to further amend the Loan Agreement to
reflect the current understanding of the parties;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Increase in Availability. The first sentence of the Loan Agreement
is amended to read as follows:
"This letter is written to set forth our agreement whereby
MOSSBERG INDUSTRIES, INC. ("Lender"), will lend to AQUIDNECK
SYSTEMS INTERNATIONAL, INC., a Delaware corporation
("Borrower"J), the maximum principal sum of Five Hundred Thousand
Dollars ($500,000) (the "Loan")."
2. Adjustment of Interest Rate. The second sentence of the second
paragraph of the Loan Agreement is amended to read as follows:
"Such Loan will bear interest at the annual rate of nine and
seventy-five one-hundredths (9.75%) percent; provided, however,
that any amounts advanced on or after December l, 1994 will bear
interest at an annual fixed rate equivalent to the sum of the
"Prime Rate" of Fleet National Bank in effect on the date of such
advance, plus two (2%) percent."
3. Extension of Term. The third sentence of the second paragraph of
the Loan Agreement is amended to read as follows:
"The Loan shall be due and payable on January 31, 1994, unless
repaid in full prior to such time.
4. Consent of Fleet. Borrower acknowledges that it has previously
borrowed from Fleet the principal sum of $500,000 and Borrower will obtain the
consent of Fleet to this First Amendment before Lender is obligated to make any
advances hereunder.
5 Miscellaneous. Except as modified and amended hereby, the Loan
Agreement shall remain in full force and effect and is in all other respects
ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed as of the day and year first above written.
MOSSBERG INDUSTRIES, INC.
By /s/ Malcolm G. Chace, III
--------------------------------------
Title Chairman
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Mattias E. Lukens, Jr.
-------------------------------------
Title President and CEO
Countersigned and agreed to:
FLEET NATIONAL BANK
By: /s/ Thomas J. Flanagan
----------------------------
Title: Vice President
By: /s/ Thomas J. Lawlor
----------------------------
Title: Loan Officer
Exhibit 10.l
December 21, 1994
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby MALCOLM G.
CHACE III ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC., a
Delaware corporation ("Borrower"), the maximum principal sum of Two Hundred
Thousand Dollars ($200,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note
(the "Note"). Each advance will bear interest at the annual fixed rate
equivalent to the sum of the "Prime Rate" of Fleet National Bank on the date of
such advance, plus two (2%) percent. The Loan shall be due and payable on
January 31, 1995, unless repaid in full prior to such time. Borrower shall be
required to make mandatory repayments upon the partial or complete collection of
any of the accounts receivable that constitute the Collateral (as defined in the
Security Agreement), and shall deliver to Lender said collected amount as and
when received by it which Lender shall apply to the outstanding balance of the
Loan.
The initial advance shall be made in an amount equal to $[]. Any
subsequent advances shall be made upon evidence satisfactory to Lender of a
corresponding invoice.
The proceeds of the Loan will be used solely for working capital
purposes.
The Note shall be secured by a security agreement of even date herewith
granting Lender a security interest in certain accounts receivable of Borrower
(the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet
National Bank ("FNB") the principal sum of $500,000, and from Mossberg
Industries, Inc. ("Mossberg") the principal sum of $500,000, and that Borrower
will obtain the consent of FNB and Mossberg to this loan before Lender is
obligated to make any advances under the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB or Mossberg), or of the
occurrence of any event which upon notice or lapse of time or both would
constitute such an event of default.
In each case of happening of any of the following events (each of which
is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in
any report, certificate, financial statement or other instrument furnished in
connection with this Agreement, or the borrowing hereunder, shall prove to be
false or misleading in any material respect;
(b) default in the payment of any installment of the principal
of, or interest on, the Note or any other indebtedness of Borrower to Lender
when the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment or by acceleration or otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the Security
Agreement; or
(d) default with respect to any evidence of indebtedness of
Borrower (other than to Lender), if the effect of such default is to accelerate
the maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof, or if any
indebtedness of Borrower (other than to Lender) is not paid, when due and
payable, whether at the due date thereof or a date fixed for prepayment or
otherwise; or
(e) the occurrence of an "Event of Default" as defined in the
Security Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of it or any of its property, (ii)
admit in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code or (v) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or if corporate action shall be taken for the purpose of effecting any of the
foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or of all or
a substantial part of the assets of Borrower, and such order, judgment or decree
shall continue unstayed and in effect for any period of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the occurrence of
any attachment of any other property of Borrower in an amount exceeding Ten
Thousand Dollars ($10,000) which shall not be discharged within thirty (30) days
of the date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to
the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
/s/ Malcolm G. Chace III
-------------------------------------
Malcolm G. Chace III
Accepted and agreed to this ____ day of December, 1994.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Mattias E. Lukens, Jr.
------------------------------------
Title: President
Exhibit 10.m
May 9, 1995
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby ELIZABETH Z.
CHASE and CHRISTEN NOLEN, TRUSTEES U/A/D AUGUST 30, 1938 F/B/O MALCOLM G. CHASE
III ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC., a Delaware
corporation ("Borrower"), the maximum principal sum of Two Hundred Fifty
Thousand Dollars ($250,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note (the
"Note"). Each advance will bear interest at the annual fixed rate equivalent to
the sum of the "Prime Rate" of Fleet National Bank on the date of such advance,
plus two (2%) percent. The Loan shall be due and payable on September 30, 1995,
unless repaid in full prior to such time. Borrower shall be required to make
mandatory repayments upon the partial or complete collection of any of the
accounts receivable that constitute the Collateral (as defined in the Security
Agreement), and shall deliver to Lender said collected amount as and when
received by it which Lender shall apply to the outstanding balance of the Loan.
The initial advance shall be made in an amount equal to $185,000. Any
subsequent advances shall be made upon evidence satisfactory to Lender of a
corresponding invoice.
The proceeds of the Loan will be used solely for working capital purposes.
The Note shall be secured by a security agreement of even date herewith
granting Lender a security interest in certain accounts receivable of Borrower
(the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet National
Bank ("FNB") the principal sum of $500,000, and that Borrower will obtain the
consent of FNB to this loan before Lender is obligated to make any advances
under the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower' s condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB), or of the occurrence
of any event which upon notice or lapse of time or both would constitute such an
event of default.
In each case of happening of any of the following events (each of which
is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in
any report, certificate, financial statement or other instrument furnished
in connection with this Agreement, or the borrowing hereunder, shall prove
to be false or misleading in any material respect;
(b) default in the payment of any installment of the principal of,
or interest on, the Note or any other indebtedness of Borrower to Lender
when the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment or by acceleration or otherwise;
or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the Security
Agreement; or
(d) default with respect to any evidence of indebtedness of
Borrower (other than to Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of Borrower (other than to
Lender) is not paid, when due and payable, whether at the due date thereof
or a date fixed for prepayment or otherwise; or
(e) the occurrence of an "Event of Default" as defined in the
Security Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of it or any of its property,
(ii) admit in writing its inability to pay its debts as they mature, (iii)
make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title II of the United States Code or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization
or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law or if corporate action shall be taken for the purpose of
effecting any of the foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or of
all or a substantial part of the assets of Borrower, and such order,
judgment or decree shall continue unstayed and in effect for any period of
thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the
occurrence of any attachment of any other property of Borrower in an
amount exceeding Ten Thousand Dollars ($10,000) which shall not be
discharged within thirty (30) days of the date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to
the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
/s/ Elizabeth Z. Chace
---------------------------------------
Elizabeth Z. Chace, Trustee as
aforesaid and not individually
/s/ Christian Nolen
---------------------------------------
Christian Nolen, Trustee as
aforesaid and not individually
Accepted and agreed to this 9th day of May, 1995.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/ Charles A. Boisseau
------------------------------------
Title: Senior Vice President
Business Operations
---------------------------------
Exhibit 10.n
May 18, 1995
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby MOSSBERG
INDUSTRIES, INC. ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC.,
a Delaware corporation ("Borrower"), the maximum principal sum of Two Hundred
Thousand Dollars ($200,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note
(the "Note"). Such Loan will bear interest at an annual fixed rate equivalent to
the sum of the "Prime Rate" of Fleet National Bank in effect on the date of such
advance, plus two (2%) percent. The Loan shall be due and payable on September
30, 1995, unless repaid in full prior to such time. Borrower shall be required
to make mandatory repayments upon the partial or complete collection of any of
the accounts receivable that constitute the Collateral (as defined in the
Security Agreement), and shall deliver to Lender said collected amount as and
when received by it which Lender shall apply to the outstanding balance of the
Loan.
The initial advance and any subsequent advances shall be made upon
evidence satisfactory to Lender of a corresponding invoice.
The proceeds of the Loan will be used solely for working capital
purposes.
The Note shall be secured by a security agreement of even date herewith
granting Lender a security interest in certain accounts receivable of Borrower
(the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet
National Bank ("FNB") the principal sum of $500,000 and from Elizabeth Z. Chace
and Christian Nolen, Trustees u/a/d August 30, 1938, f/b/o Malcolm G. Chace III
("Chace") the principal sum of $250,000 and Borrower will obtain the consent of
FNB and Chace to this loan before Lender is obligated to make any advances under
the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB and Chace), or of the
occurrence of any event which upon notice or lapse of time or both would
constitute such an event of default.
In each case of happening of any of the following events (each of which
is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in
any report, certificate, financial statement or other instrument
furnished in connection with this Agreement, or the borrowing
hereunder, shall prove to be false or misleading in any material
respect;
(b) default in the payment of any installment of the principal
of, or interest on, the Note or any other indebtedness of Borrower to
Lender when the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment or by acceleration or
otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the
Security Agreement; or
(d) default with respect to any evidence of indebtedness of
Borrower (other than to Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of Borrower (other than to
Lender) is not paid, when due and payable, whether at the due date
thereof or a date fixed for prepayment or otherwise; or
(e) the occurrence of an "Event of Default" as defined in the
Security Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code or (v) file
a voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding
under any such law or if corporate action shall be taken for the
purpose of effecting any of the foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower
or appointing a receiver, trustee, custodian or liquidator of Borrower
or of all or a substantial part of the assets of Borrower, and such
order, judgment or decree shall continue unstayed and in effect for
any period of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the
occurrence of any attachment of any other property of Borrower in an
amount exceeding Ten Thousand Dollars ($10,000) which shall not be
discharged within thirty (30) days of the date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to
the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
MOSSBERG INDUSTRIES, INC.
By /s/ Malcolm G. Chace, III
----------------------------------
Malcolm G. Chace III
Chairman
Accepted and agreed to this 18th day of May, 1995.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Charles A. Boisseau
----------------------------------
Title: Senior Vice President
Business Operations
Exhibit 10.o
August 15, 1995
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby MALCOLM G. CHACE,
III ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC., a Delaware
corporation ("Borrower"), the maximum principal sum of Five Hundred Thousand
Dollars ($500,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note (the
"Note"). Each advance will bear interest at the annual fixed rate of ten percent
(10%). The Loan shall be due and payable on September 30, 1995, unless repaid in
full prior to such time. Borrower shall be required to make mandatory repayments
upon the partial or complete collection of any of the accounts receivable that
constitute the Collateral (as defined in the Security Agreement), and shall
deliver to Lender said collected amount as and when received by it which Lender
shall apply to the outstanding balance of the Loan.
The initial advance shall be made in an amount equal to $350,000. Any
subsequent advances shall be made upon evidence satisfactory to Lender of a
corresponding invoice.
As additional consideration for the Loan, Borrower shall issue to Lender a
warrant for the purchase of 10,000 shares of common stock of the Borrower on
terms set forth in the Warrant attached hereto.
The proceeds of the Loan will be used solely for working capital purposes.
The Note shall be secured by a security agreement of even date herewith
granting Lender a security interest in certain accounts receivable of Borrower
(the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet National
Bank ("FNB") the principal sum of $440,000, and $348,000 from other lenders
(collectively, "Other Lenders"). Borrower will obtain the consent of FNB to this
loan before Lender is obligated to make any advances under the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB or any Other Lenders),
or of the occurrence of any event which upon notice or lapse of time or both
would constitute such an event of default.
In each case of happening of any of the following events (each of which is
herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in
any report, certificate, financial statement or other instrument
furnished in connection with this Agreement, or the borrowing hereunder,
shall prove to be false or misleading in any material respect;
(b) default in the payment of any installment of the principal
of, or interest on, the Note or any other indebtedness of Borrower to
Lender when the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment or by acceleration or
otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the Security
Agreement; or
(d) default with respect to any evidence of indebtedness of
Borrower (other than to Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of Borrower (other than to
Lender) is not paid, when due and payable, whether at the due date
thereof or a date fixed for prepayment or otherwise; or
(e) the occurrence of an "Event of Default" as defined in the
Security Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code or (v) file a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding
under any such law or if corporate action shall be taken for the purpose
of effecting any of the foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or
of all or a substantial part of the assets of Borrower, and such order,
judgment or decree shall continue unstayed and in effect for any period
of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the
occurrence of any attachment of any other property of Borrower in an
amount exceeding Ten Thousand Dollars ($10,000) which shall not be
discharged within thirty (30) days of the date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers, privileges
and other remedies available to Lender under this Agreement or at law or in
equity may be exercised by Lender at any time and from time to time, whether or
not the indebtedness evidenced and secured by the Note shall be due and payable,
and whether or not the Lender shall have any foreclosure proceedings or other
action for the enforcement of its rights and remedies under the Note or the
Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to the
negotiation, making or collection of the line of credit, are the responsibility
of Borrower. This Agreement shall be governed by the laws of the State of Rhode
Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
/s/ Malcolm G. Chace, III
----------------------------------------
Malcolm Chace
Accepted and agreed to this 15th day of August, 1995.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Charles A. Boisseau
----------------------------------------
Title: Senior Vice President
<PAGE>
January 22, 1996
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
On August 15,1995, MALCOLM G. CHACE III ("Lender") entered into an
agreement to lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC., a Delaware
corporation ("Borrower"), the maximum principal sum of Five Hundred Thousand
($500,000) Dollars ("Loan Agreement"). Subsequently, Lender has made a number of
additional advances to Borrower, resulting in the outstanding principal balance
as of the date of this letter of One Million Three Hundred Thirty-Five Thousand
Four Hundred Fifteen ($1,335,415) Dollars (the "Loan").
This letter is written to amend and restate the August 15, 1995
agreement between Borrower and Lender so as to reflect such additional advances
and to evidence other understandings they have reached.
The Loan will be evidenced by Borrower's Secured Line of Credit Note
(the "Note"). Each advance will bear interest at the annual fixed rate
equivalent to the sum of the "Prime Rate" of Fleet National Bank on the date of
such advance, plus two (2%) percent. The Loan shall be due and payable on
February 29, 1996, unless repaid in full prior to such time. Borrower shall be
required to make mandatory repayments upon the partial or complete collection of
any of the accounts receivable that constitute the Collateral (as defined in the
Security Agreement) or the receipt by the Borrower of funding in excess of
$500,000, and shall deliver to Lender said collected amount as and when received
by it which Lender shall apply to the outstanding balance of the Loan.
The proceeds of the Loan will be used solely for working capital
purposes.
The Note shall be secured by an amended and restated security agreement
of even date herewith granting Lender a security interest in certain accounts
receivable of Borrower (the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet
National Bank ("FNB") the principal sum of $500,000, and that Borrower will
obtain the consent of FNB to this loan before Lender is obligated to make any
advances under the Loan.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB), or of the occurrence
of any event which upon notice or lapse of time or both would constitute such an
event of default.
In each case of happening of any of the following events (each of
which is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in
any report, certificate, financial statement or other instrument
furnished in connection with this Agreement, or the borrowing hereunder,
shall prove to be false or misleading in any material respect;
(b) default in the payment of any installment of the principal
of, or interest on, the Note or any other indebtedness of Borrower to
Lender when the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment or by acceleration or
otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the
Security Agreement; or
(d) default with respect to any evidence of indebtedness of
Borrower (other than to Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of Borrower (other than to
Lender) is not paid, when due and payable, whether at the due date
thereof or a date fixed for prepayment or otherwise; or
(e) the occurrence of an "Event of Default" as defined in the
Security Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code or (v) file a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding
under any such law or if corporate action shall be taken for the purpose
of effecting any of the foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or
of all or a substantial part of the assets of Borrower, and such order,
judgment or decree shall continue unstayed and in effect for any period
of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Lender, or the
occurrence of any attachment of any other property of Borrower in an
amount exceeding Ten Thousand Dollars ($10,000) which shall not be
discharged within thirty (30) days of the date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to
the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Except as modified by this letter agreement, the Loan Agreement, as
amended and restated hereby, remains in full force and effect.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
/s/ Malcolm G. Chace
-----------------------------------------
Malcom G. Chace III
Accepted and agreed to this 22nd day of January, 1996.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Thomas E. Gardner
---------------------------------------
Title: Treasurer
Exhibit 10.p
January 22, 1996
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
Ladies and Gentlemen:
This letter is written to set forth our agreement whereby HECTOR
WILTSHIRE ("Lender"), will lend to AQUIDNECK SYSTEMS INTERNATIONAL, INC., a
Delaware corporation ("Borrower"), the maximum principal sum of Two Hundred
Fifty Thousand Dollars ($250,000) (the "Loan").
The Loan will be evidenced by Borrower's Secured Line of Credit Note
(the "Note"). Each advance will bear interest at the annual fixed rate
equivalent to the sum of the "Prime Rate" of Fleet National Bank on the date of
such advance, plus two (2%) percent. The Loan shall be due and payable on
February 29, 1996, unless repaid in full prior to such time. Borrower shall be
required to make mandatory repayments upon the partial or complete collection of
any of the accounts receivable that constitute the Collateral (as defined in the
Security Agreement), or the receipt by the Borrower of funding in excess of
$500,000 and shall deliver to Lender said collected amount as and when received
by it which Lender shall apply to the outstanding balance of the Loan.
The initial advance shall be made in an amount equal to $250,000.
The proceeds of the Loan will be used solely for working capital
purposes.
The Note shall be secured by a security agreement of even date herewith
granting Lender a security interest in certain accounts receivable of Borrower
(the "Security Agreement").
Borrower acknowledges that it has previously borrowed from Fleet
National Bank ("FNB") the principal sum of $500,000, and from Malcolm G. Chace,
III, the principal sum of $1,335,415.
To induce Lender to enter into this Agreement, Borrower does hereby
covenant and agree to and with Lender that, until payment in full of any and all
indebtedness of Borrower to Lender, whether now existing or hereafter arising,
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any event
of default by Borrower under any agreement between Borrower and Lender
(including, without limitation, any agreements with FNB), or of the occurrence
of any event which upon notice or lapse of time or both would constitute such an
event of default.
In each case of happening of any of the following events (each of which
is herein and in the Note sometimes called an "Event of Default"):
(a) any representation or warranty of Borrower made herein, or in any
report, certificate, financial statement or other instrument furnished in
connection with this Agreement, or the borrowing hereunder, shall prove to be
false or misleading in any material respect;
(b) default in the payment of any installment of the principal of, or
interest on, the Note or any other indebtedness of Borrower to Lender when the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise; or
(c) default in the due observance or performance of any covenant,
condition or agreement contained herein, in the Note or in the Security
Agreement; or
(d) default with respect to any evidence of indebtedness of Borrower
(other than to Lender), if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof, or if any
indebtedness of Borrower (other than to Lender) is not paid, when due and
payable, whether at the due date thereof or a date fixed for prepayment or
otherwise; or
(e) the occurrence of an "Event of Default" as defined in the Security
Agreement; or
(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian or liquidator of it or any of its property, (ii)
admit in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code or (v) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or if corporate action shall be taken for the purpose of effecting any of the
foregoing; or
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee, custodian or liquidator of Borrower or of all or
a substantial part of the assets of Borrower, and such order, judgment or decree
shall continue unstayed and in effect for any period of thirty (30) days; or
(h) the occurrence of any attachment of any deposits or other property
of Borrower in the hands or possession of Lender, or the occurrence of any
attachment of any other property of Borrower in an amount exceeding Ten Thousand
Dollars ($10,000) which shall not be discharged within thirty (30) days of the
date of such attachment; or
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other indebtedness of
Borrower to Lender shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note or other evidence of such indebtedness to the contrary notwithstanding.
In case any one or more Events of Default shall occur and be continuing, the
Lender may proceed to protect and enforce its rights by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained in this Agreement, the Security Agreement or the
Note, or for an injunction against a violation of any of the terms hereof or
thereof or in and of the exercise of any power granted hereby or thereby or by
law.
Upon the occurrence of any Event of Default, the rights, powers,
privileges and other remedies available to Lender under this Agreement or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not the indebtedness evidenced and secured by the Note shall be due
and payable, and whether or not the Lender shall have any foreclosure
proceedings or other action for the enforcement of its rights and remedies under
the Note or the Security Agreement.
All costs and expenses, including reasonable attorneys' fees related to
the negotiation, making or collection of the line of credit, are the
responsibility of Borrower. This Agreement shall be governed by the laws of the
State of Rhode Island.
Please indicate your acceptance of this Agreement by signing below and
returning to us a copy of this letter.
Very truly yours,
/s/ Hector Wiltshire
-------------------------------------
Hector Wiltshire
Accepted and agreed to this ___ day of January, 1996.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By /s/ Thomas E. Gardner
-----------------------------------
Title: Treasurer
Exhibit 10.q
PROMISSORY NOTE
$250,000 March 26, 1996
FOR VALUE RECEIVED, the undersigned, (hereinafter referred to as "Maker"),
hereby promises to pay to the order of Malcolm G. Chace III ("Lender"), c/o
Point Gammon Corporation, 731 Hospital Trust Building, Providence, Rhode Island
02903, the principal sum of Two Hundred Fifty Thpusand Dollars ($250,000) in
lawful money of the United States of America, payable at said address or at such
other place as the holder hereof may in writing direct, ON DEMAND, together with
interest on the unpaid principal balance of this Note at any time outstanding,
whether before or after demand, payable monthly in arrears on the first business
day of each month, commencing May 1, 1996, at the place heretofore designated
for the payment of principal, in like money, at the rate of ten percent (l0%)
per annum.
This Note may be prepaid in whole or in part at any time without prior
notice. All prepayments or other payments made with respect to this Note shall
be applied first to any costs and expenses due hereunder, second to any interest
accrued but not paid hereunder and third to principal then outstanding.
In the event that Lender, or any subsequent holder of this Note shall
exercise or endeavor to exercise any of his or its remedies hereunder, the Maker
shall pay on demand all reasonable costs and expenses incurred in connection
therewith, including, without limitation, attorneys' fees and the holder may
take judgment for all such amounts in addition to all other sums due hereunder.
The Maker shall also pay on demand all reasonable costs and expenses incurred in
connection with the preparation and execution of this Note, including, without
limitation, attorneys' fees.
No modification or waiver or any provision of this Note or consent to any
departure by the Maker therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given.
Neither any failure nor delay on the part of the holder hereof in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
future exercise, or the exercise of any other right, power or privilege.
In the event this Note is placed in the hands of an attorney or attorneys
for the enforcement of any obligation set forth herein, the Maker agrees to pay,
in addition to principal and interest, reasonable costs of collection,
including, without limitation, reasonable attorneys' fees.
This Note shall be construed and interpreted according to the laws of the
State of Rhode Island as a Rhode Island contract.
All notices, requests, demands, consents or other communications given
hereunder or in connection herewith shall be in writing and sent by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
Maker at his address set forth below. The Maker or the holder hereof may, by
notice given as aforesaid, change its address for all subsequent notices.
Notices shall be deemed given when mailed as aforesaid.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
BY:/s/ Hector D. Wiltshire
--------------------------------------
Hector D. Wiltshire
President and Chief Executive Officer
Exhibit 10.r
PROMISSORY NOTE
$85,000 April 10, 1996
FOR VALUE RECEIVED, the undersigned, (hereinafter referred to as "Maker"),
hereby promises to pay to the order of Malcolm G. Chace III ("Lender"), c/o
Point Gammon Corporation, 731 Hospital Trust Building , Providence, Rhode Island
02903, the principal sum of Eighty-Five Thousand Dollars ($85,000) in lawful
money of the United States of America, payable at said address or at such other
place as the holder hereof may in writing direct, ON DEMAND, together with
interest on the unpaid principal balance of this Note at any time outstanding,
whether before or after demand, payable monthly in arrears on the first business
day of each month, commencing June 1, 1996, at the place heretofore designated
for the payment of principal, in like money, at the rate of ten percent (l0%)
per annum.
This Note may be prepaid in whole or in part at any time without prior
notice. All prepayments or other payments made with respect to this Note shall
be applied first to any costs and expenses due hereunder, second to any interest
accrued but not paid hereunder and third to principal then outstanding.
In the event that Lender, or any subsequent holder of this Note shall
exercise or endeavor to exercise any of his or its remedies hereunder, the Maker
shall pay on demand all reasonable costs and expenses incurred in connection
therewith, including, without limitation, attorneys' fees and the holder may
take judgment for all such amounts in addition to all other sums due hereunder.
The Maker shall also pay on demand all reasonable costs and expenses incurred in
connection with the preparation and execution of this Note, including, without
limitation, attorneys' fees.
No modification or waiver or any provision of this Note or consent to any
departure by the Maker therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given.
Neither any failure nor delay on the part of the holder hereof in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
future exercise, or the exercise of any other right, power or privilege.
In the event this Note is placed in the hands of an attorney or attorneys
for the enforcement of any obligation set forth herein, the Maker agrees to pay,
in addition to principal and interest, reasonable costs of collection,
including, without limitation, reasonable attorneys' fees.
This Note shall be construed and interpreted according to the laws of the
State of Rhode Island as a Rhode Island contract.
All notices, requests, demands, consents or other communications given
hereunder or in connection herewith shall be in writing and sent by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
Maker at his address set forth below. The Maker or the holder hereof may, by
notice given as aforesaid, change its address for all subsequent notices.
Notices shall be deemed given when mailed as aforesaid.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
BY: /s/ Thomas E. Gardner
----------------------------------
Thomas E. Gardner
Treasurer and CFO
Exhibit 10.s
Aquidneck Systems International, Inc.
SUBSCRIPTION AGREEMENT
TO: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
The undersigned understands that Aquidneck Systems International,
Inc., a Delaware corporation (the "Corporation"), is offering to sell at least
105,263, but no more than 450,000, shares of Common Stock, par value $.01 per
share (the "Shares") of the Corporation at a price of $4.75 per share (the
"Subscription"). The minimum Subscription for any subscriber is $100,000.
The undersigned hereby agrees as follows:
1. Subscription. Subject to the terms and conditions contained herein, the
undersigned hereby irrevocably agrees to purchase such number of Shares set
forth on the signature page hereto (the "Subscribed Shares") at a purchase price
of $4.75 per share. Payment for the Subscribed Shares shall be made by check
payable to the order of "Aquidneck Systems International, Inc." which is
enclosed herewith or by wire transfer on or before the Closing Date (hereinafter
defined) in accordance with instructions provided by the Corporation. A closing
for the purchase of the Shares in this Subscription (the "Closing") shall be
held on the date designated upon five (5) days notice by the Corporation, but no
later than August 31, 1992, at which time all of the conditions of Section 7
hereof have been satisfied (the "Closing Date").
2. Representation and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Corporation that the undersigned:
(a) has adequate means of providing for his current needs and possible
personal contingencies, and has no need for liquidity of his
investment in the Corporation;
(b) is able to bear the substantial economic risks of an investment in
the Corporation for an indefinite period and, at the present time,
could afford a complete loss of such investment;
(c) has, either alone or together with his special advisors
("Purchaser Representatives"), such knowledge and experience in
financial matters that he is capable of evaluating the risks of this
investment;
(d) has received and read or reviewed with his Purchaser
Representative and is familiar with, this Subscription Agreement;
(e) he and/or his Purchaser Representative has had an opportunity to
ask questions of and receive answers from the Corporation concerning
the terms and conditions of this investment;
(f) understands that the Shares have not been registered under the
Securities Act of 1933 (the "Securities Act") in reliance upon an
exemption thereunder and, in connection therewith, represents that the
Shares for which he hereby subscribes are being acquired solely for
his own account, for investment and are not being purchased with a
view to or for the resale, distribution or transfer thereof;
(g) acknowledges and is aware of the following:
(i) the Shares represent a speculative investment which involves
a high degree of risk of loss and there is no guarantee that the
undersigned will realize any gain from such investment or that
the undersigned will not lose his entire investment in the
Corporation;
(ii) there are substantial restrictions on the transferability of
the Shares; the Shares will not be, and investors in the
Corporation have no right to require that the Shares be,
registered under the Securities Act;
(iii) there will be no public market for the Shares; and the
undersigned will not immediately be able to avail himself of the
provisions of Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act with respect to the resale of
the Shares; and
(iv) all certificates for the Shares to be issued upon completion
of this private placement will bear the following legend:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933 (the "Act") or the securities laws of any state. Such
shares may not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated, in the absence of an effective registration statement
covering such shares under the Act and any applicable state securities laws,
unless the holder shall have obtained an opinion of counsel satisfactory to the
corporation that such registration is not required."
(h) acknowledges that he has received and reviewed the Business Plan
Overview of the Corporation dated June, 1992 (the "Business Plan");
that he is purchasing the Shares without being furnished any offering
literature or prospectus other than the Business Plan and this
Subscription Agreement; that all documents, records and books
pertaining to this investment have been made available to the
Purchaser Representative, attorney and/or accountant for the
undersigned;
(i) acknowledges that he is not relying on any information concerning
estimated future results of the Corporation contained in the Business
Plan Overview, that the forecasts do not constitute any representation
as to what actual results of the Corporation's operations will be, and
are based on many factors that are not within, or are only partially
within, the control of the Corporation;
(j) represents that the foregoing representations and warranties are
true and accurate as of the date hereof and shall be true and accurate
as of the date this Subscription Agreement is accepted by the
Corporation.
3. Indemnification. The undersigned acknowledges and understands the meaning and
legal consequences of the representations and warranties herein and hereby
agrees to indemnify and hold harmless the Corporation and its respective
officers, directors, controlling persons, agents, employees, attorneys and
accountants from and against any and all loss, damage or liability, together
with all costs and expenses (including attorney's fees and disbursements) which
any of them may incur by reason of any breach of any representation, warranty or
agreement of the undersigned contained in this Subscription Agreement. Not
withstanding the foregoing, no representation, warranty, acknowledgment or
agreement made herein by the undersigned shall in any manner be deemed to
constitute a waiver of any rights granted to the undersigned under Federal or
state securities laws or of any breach of representation, warranty or covenant
under this Subscription Agreement. All representations and warranties contained
in this Subscription Agreement, and the indemnification contained in this
paragraph 3, shall survive the acceptance of this subscription.
4. Price Protection. The Corporation agrees to protect the price paid for the
Subscribed Shares by the undersigned as follows:
(a) If the Corporation raises $2,000,000 (or more) at the Closing from
this Subscription then there will be no price protection.
(b) If the Corporation raises less than $2,000,000 at the Closing from
this Subscription then any additional funds raised by the Corporation
from the sale of equity before January 1, 1993 must be priced at least
25% higher ($5.94/share) than the price paid for the Subscribed Shares
($4.75/share). If additional capital is raised at less than such
higher price, the Corporation will issue to the undersigned an
additional number of shares of the Corporation's Common Stock that,
when combined with the Subscribed Shares, results in an effective per
share purchase price to the undersigned equal to 80% of the per share
purchase price with respect to such additional funds.
(c) If the Corporation does not raise $2,000,000 at the Closing of
this subscription or by February 1, 1993 then the Corporation will
issue to the undersigned an additional number of shares of the
Corporation's Common Stock that, when combined with the Subscribed
Shares, results in an effective per share purchase price to the
undersigned of $3.25.
5. Revocation. The undersigned agrees that he is not entitled to cancel or
revoke this Subscription Agreement, except upon breach by the Corporation of any
of the representations, warranties or covenants hereof, and that the same shall
be binding upon and inure to the benefit of his heirs, executors, administrators
and successors except if the Corporation does not raise at least $500,000. at
the closing of this subscription.
6. Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants to the undersigned that:
(a) the Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
full power and authority (corporate and otherwise) to conduct its
business as presently conducted and proposed to be conducted by it and
to effect the Subscription or to carry out the transactions
contemplated hereby;
(b) the authorized capital stock of the Corporation immediately prior
to the Closing will consist of 2,000,000 shares of Common Stock, par
value $.0l per share, of which 925,279 will be issued and outstanding
and except as set forth in the Business Plan, (1) there are no
outstanding securities, options or other rights to acquire any capital
stock or securities of the Corporation and (2) no agreements made by
or known to the Corporation respecting the ownership, voting or other
aspects of any shares of the Corporation's capital stock;
(c) no consent, authorization or other approval from, nor any
registration, qualification or filing with, any person or governmental
authority is required in connection with the Subscription or the
transactions contemplated hereby, which consent, authorization or
approval has not heretofore been obtained or which registration,
qualification or filing has not heretofore been made;
(d) the Corporation has taken all corporate action as the part of the
Corporation to authorize and approve the Subscription and the
transactions contemplated hereby and the Subscribed Shares, when paid
for and delivered pursuant to the terms hereof, will be validly
issued, fully paid and non-assessable; and
(e) the Business Plan fairly presents the business and financial
condition, results of operations, business and prospects of the
Corporation and neither the Business Plan nor this Subscription
Agreement, when read together, contains any untrue statement at a
material fact or omits to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances
under which they were made, not misleading, and each projection
contained in the Business Plan was prepared with due care based on
reasonable assumptions and represents the Company's best estimate of
future results based on information available as of the date of the
Business Plan.
7. Conditions to the Undersigned's Obligations. The obligations of the
undersigned to purchase the Subscribed Shares shall be subject to the following
conditions:
(a) The representations and warranties of the Corporation contained
herein shall be true and accurate in all material respects on and as
of the Closing Date with the same effect as if such representations
and warranties had been made on such date.
(b) The Corporation shall have performed all of the covenants made
hereunder to be performed by it on or prior to the Closing Date.
(c) The Corporation shall have issued to the undersigned certificates,
registered in the name of the undersigned, representing the Subscribed
Shares.
(d) The Corporation shall have received payment for, and irrevocably
accepted subscriptions for, an aggregate at least 105,263 Shares in
connection with the Subscription.
(e) The Corporation shall have delivered to the undersigned a
certificate, executed by the President of the Corporation, dated the
Closing Date, certifying to the fulfillment of the above conditions
and other matters reasonably requested by the undersigned.
8. Covenants of the Corporation. The Corporation hereby agrees as follows:
(a) Until such time that the Corporation has registered its Common
Stock pursuant to Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") to deliver to the undersigned:
(i) within ninety (90) days after the end of each fiscal year of
the Corporation, an audited balance sheet of the Corporation as
at the end of such year and audited statements of income and of
cash flows of the Corporation for such year, certified by
certified public accountants of established national reputation
selected by the Corporation, and prepared in accordance with
generally accepted accounting principles;
(ii) within thirty (30) days after the end of each fiscal quarter
of the Corporation, an unaudited balance sheet of the Corporation
as at the end of such quarter, and unaudited statements of income
and of cash flows of the Corporation for such fiscal quarter and
for the current fiscal year to the end of such fiscal quarter;
and
(iii) within ten (10) days of delivery, such other notices,
information, and data with respect to the Corporation as the
Corporation delivers to the holders of its Common Stock, the
Securities and Exchange Commission, or any securities exchange on
which capital stock of the Corporation may be listed, and such
other information and data as the undersigned may from time to
time reasonably request.
(b) Once the Corporation has registered its Common Stock pursuant to
Section 12 of the Exchange Act, to file such reports and take such
other action necessary to allow the undersigned to sell the Shares
pursuant to Rule 144 under the Securities Act of 1933.
9. Registration Rights.
(a) Certain Definitions. As used in this Section 9 and elsewhere in
this Subscription Agreement, the following terms shall have the
following respective meanings:
(i) "Commission" means the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities
Act.
(ii) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
(iii) "Registration Statement" means a registration statement
filed by the Corporation with the Commission for a public
offering and sale of securities of the Corporation (other than a
registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be
issued in exchange for securities or assets of another
corporation).
(iv) "Registration Expenses" means the expenses described in
subsection 9(f).
(v) "Registrable Shares" means (1) the Shares, (2) any shares of
Common Stock acquired pursuant to Section 4 hereof (including
such provision in other subscription agreements included in the
Subscription), and (3) any other shares of Common Stock of the
Corporation issued in respect of the Shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, however, that shares of Common Stock
that are Registrable Shares shall cease to be Registrable Shares
(i) upon any sale pursuant to a Registration Statement, Section
4(1) of the Securities Act, or Rule 144 under the Securities Act
or (ii) at such time as they are eligible for sale pursuant to
Rule 144(k) under the Securities Act.
(vi) "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
(vii) "Stockholders" means the purchasers of Shares in connection
with the Subscription and any persons or entities to whom the
rights granted under this Section 9 are transferred by any
purchasers, their successors or assigns pursuant to the terms
hereof.
(b) Sale or Transfer of Shares; Legend.
(i) The Shares and the Registrable Shares and shares issued in
respect of the Shares or the Registrable Shares shall not be sold
or transferred unless either (1) they first shall have been
registered under the Securities Act, or (2) the Corporation first
shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Corporation, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(ii) Each certificate representing the Shares and the Registrable
Shares and shares issued in respect of the Shares or the
Registrable Shares shall bear the legend set forth in Section 2
hereof. Such legend shall be removed from the certificates
representing any Registrable Shares, at the request of the holder
thereof, at such time as they become eligible for resale pursuant
to Rule 144(k) under the Securities Act.
(iii) The Corporation agrees, upon the request of the undersigned
to make available to the undersigned and to any prospective
transferee of any Shares or Registrable Shares of the undersigned
the information concerning the Corporation described in Rule
144A(d)(4) under the Securities Act.
(c) Required Registrations.
(i) At any time after the earlier of the third anniversary of the
date hereof or the closing of the Corporation's first
underwritten public offering of shares of Common Stock pursuant
to a Registration Statement, a Stockholder or Stockholders
holding in the aggregate at least 70,000 Registrable Shares (as
adjusted for stock splits, stock dividends, recapitalizations and
the like) may request, in writing, that the Corporation effect
the registration on Form S-1 or Form S-2 (or any successor form)
of Registrable Shares owned by such Stockholder or Stockholders
having an aggregate offering price of at least $300,000 (based on
the then current market price or fair value) in accordance with
the intended methods of distribution as specified by the
Stockholders in such notice. If the holders initiating the
registration intend to distribute the Registrable Shares by means
of an underwriting, they shall so advise the Corporation in their
request. In the event such registration is underwritten, the
right of other Stockholders to participate shall be conditioned
on such Stockholders' participation in such underwriting. Upon
receipt of any such request, the Corporation shall promptly give
written notice of such proposed registration to all Stockholders.
Such Stockholders shall have the right, by giving written notice
to the Corporation within thirty (30) days after the Corporation
provides its notice, to elect to have included in such
registration such of their Registrable Shares as such
Stockholders may request in such notice of election; provided
that if the underwriter (if any) managing the offering determines
that, because of marketing factors, all of the Registrable Shares
requested to be registered by all Stockholders may not be
included in the offering, then all Stockholders who have
requested registration shall participate in the offering pro rata
based upon the number of Registrable Shares that they have
requested to be so registered. Thereupon, the Corporation shall,
as expeditiously as possible, use its best efforts to effect the
registration, on Form S-1 or Form S-2 (or any successor form), of
all Registrable Shares that the Corporation has been requested to
so register.
(ii) At any time after the Corporation becomes eligible to file a
Registration Statement on Form S-3 (or any successor form
relating to secondary offerings), a Stockholder or Stockholders
holding in the aggregate at least 70,000 Registrable Shares (as
adjusted for stock splits, stock dividends, recapitalizations and
the like) may request the Corporation, in writing, to effect the
registration on Form S-3 (or such successor form), of Registrable
Shares having an aggregate offering price of at least $100,000
(based on the current public market price) in accordance with the
intended methods of distribution as specified by the Stockholders
in such notice. Upon receipt of any such request, the Corporation
shall promptly give written notice of such proposed registration
to all Stockholders. Such Stockholders shall have the right, by
giving written notice to the Corporation within thirty (30) days
after the Corporation provides its notice, to elect to have
included in such registration such of their Registrable Shares as
such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the offering
determines that, because of marketing factors, all of the
Registrable Shares requested to be registered by all Stockholders
may not be included in the offering, then all Stockholders who
have requested registration shall participate in the offering pro
rata based upon the number of Registrable Shares that they have
requested to be so registered. Thereupon, the Corporation shall,
as expeditiously as possible, use its best efforts to effect the
registration on Form S-3, or such successor form, of all
Registrable Shares that the Corporation has been requested to
register.
(iii) The Corporation shall not be required to effect more than
two registrations pursuant to paragraph 9(c)(i) and paragraph
9(c)(ii) above. In addition, the Corporation shall not be
required to effect any registration (other than on Form S-3 or
any successor form relating to secondary offerings) within six
(6) months after the effective date of any other Registration
Statement of the Corporation.
(iv) If at the time of any request to register Registrable Shares
pursuant to this subsection 9(c), the Corporation is engaged or
has fixed plans to engage within thirty (30) days of the time of
the request in a registered public offering as to which the
Stockholders may include Registrable Shares pursuant to
subsection 9(d) or is engaged in any other activity that, in the
good faith determination of the Corporation's Board of Directors,
would be adversely affected by the requested registration to the
material detriment of the Corporation, then the Corporation may
at its option direct that such request be delayed for a period
not in excess of six months from the effective date of such
offering or the date of commencement of such other material
activity, as the case may be, such right to delay a request to be
exercised by the Corporation not more than once in any two year
period.
(d) Incidental Registration.
(i) Whenever the Corporation proposes to file a Registration
Statement (other than pursuant to subsection 9(c) at any time and
from time to time, it will, prior to such filing, give written
notice to all Stockholders of its intention to do so and, upon
the written request of a Stockholder or Stockholders given within
twenty (20) days after the Corporation provides such notice
(which request shall state the intended method of disposition of
such Registration Shares), the Corporation shall use its best
efforts to cause all Registrable Shares that the Corporation has
been requested by such Stockholder or Stockholders to register to
be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such
Stockholder or Stockholders; provided that the Corporation shall
have the right to postpone or withdraw any registration effected
pursuant to this subsection 9(d) without obligation to any
Stockholder.
(ii) In connection with any offering under this subsection 9(d)
involving an underwriting, the Corporation shall not be required
to include any Registrable Shares in such offering unless the
holders thereof accept the terms of the underwriting as agreed
upon between the Corporation and the underwriters selected by it
(provided that such terms must be consistent with this
Agreement), and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the
offering by the Corporation. If in the opinion of the managing
underwriter the registration of all, or part of, the Registrable
Shares that the holders have requested to be included would
materially and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting only
that number of Registrable Shares, if any, that the managing
underwriter believes may be sold without causing such adverse
effect; provided that no persons or entities other than the
Corporation, the Stockholders and persons or entities holding
registration rights granted in accordance with Section 9(k)
hereof shall be permitted to include securities in the offering.
If the number of Registrable Shares to be included in the
underwriting in accordance with the foregoing is less than the
total number of shares that the holders of Registrable Shares
have requested to be included, then the holders of Registrable
Shares who have requested registration and other holders of
shares of Common Stock entitled to include shares of Common Stock
in such registration shall participate in the underwriting pro
rata based upon their total ownership of shares of Common Stock
of the Corporation (giving effect to the conversion into Common
Stock of all securities convertible thereinto). If any holder
would thus be entitled to include more shares than such holder
requested to be registered, the excess shall be allocated among
other requesting holders pro rata based upon their total
ownership of Registrable Shares.
(e) Registration Procedures. If and whenever the Corporation is
required by the provisions of this Agreement to use its best efforts
to effect the registration of any of the Registrable Shares under the
Securities Act, the Corporation shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective;
(ii) as expeditiously a possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of a firm commitment underwritten public
offering, until each underwriter has completed the distribution
of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares
covered thereby or one hundred twenty (120) days after the
effective date thereof;
(iii) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the
Registrable Shares owned by the selling Stockholder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of
such states as the selling Stockholders shall reasonably request,
and do any and all other acts and things that may be necessary or
desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the
Registrable Shares owned by the selling Stockholder; provided,
however, that the Corporation shall not be required in connection
with this paragraph 9(e)(iv) to qualify as a foreign corporation
or execute a general consent to service of process in any
jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the selling Stockholders shall immediately cease
making offers of Registrable Shares and return all prospectuses
to the Corporation. The Corporation shall promptly provide the
selling Stockholders with revised prospectuses and, following
receipt of the revised prospectuses, the selling Stockholders
shall be free to resume making offers of the Registrable Shares.
(f) Allocation of Expenses. The Corporation will pay all Registration
Expenses of all registrations under this Agreement; provided, however,
that if a registration under Section 9(c) is withdrawn at the request
of the Stockholders requesting such registration (other than as a
result of information concerning the business or financial condition
of the Corporation that is made known to the Stockholders after the
date on which such registration was requested) and if the requesting
Stockholders elect not to have such registration counted as a
registration requested under subsection 9(c), the requesting
Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares
included in such registration. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the
Corporation in complying with this Section 9, including, without
limitation, all registration and filing fees, exchange listing fees,
printing expenses, fees, and expenses of counsel for the Corporation
and the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders, state Blue Sky
fees and expenses, and the expense of any special audits incident to
or required by any such registration, but excluding underwriting
discounts, selling commission, and the fees and expenses of selling
Stockholders' own counsel (other than the counsel selected to
represent all selling Stockholders).
(g) Indemnification and Contribution. In the event of any registration
of any of the Registrable Shares under the Securities Act pursuant to
this Agreement, the Corporation will indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages, or liabilities,
joint or several, to which such seller, underwriter, or controlling
person may become subject under the Securities Act, the Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus, or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Corporation will reimburse
such seller, underwriter, and each such controlling person in
connection with investigation or defending any such loss, claim,
damage, liability, or action; provided, however, that the Corporation
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Corporation, in writing, by or on behalf of such seller, underwriter,
or controlling person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Corporation, each of its directors and officers and each
underwriters (if any) and each person, if any, who controls the
Corporation or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Corporation,
such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based
upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such
seller furnished in writing to the Corporation by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement;
provided, however, that the obligations of such Stockholders hereunder
shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such
Registration.
Each party entitled to indemnification under this subsection 9(g) (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified party has actually knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section
9. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigations, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (1) any
holder of Registrable Shares exercising rights under this Agreement,
or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 9(g) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
9(g) provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances
for which indemnification is provided under this Section 9(g); then,
in each such case, the Corporation and such Stockholder will
contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from others) in such
proportions so that such holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Shares offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration
Statement, and the Corporation is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess pursuant to such
Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person
or entity who is not guilty of such fraudulent misrepresentation.
(h) Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration
Statement in an underwritten offering pursuant to subsection 9(c)(i),
the Corporation agrees to enter into an underwriting agreement
containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by
such issuer, including without limitation customary provisions with
respect to indemnification by the Corporation of the underwriters of
such offering.
(i) Information by Holder. Each holder of Registrable Shares included
in any registration shall furnish to the Corporation such information
regarding such holder and the distribution proposed by such holder as
the Corporation may request in writing and as shall be required in
connection with any registration, qualification or compliance referred
to in this Section 9.
(j) "Stand-Off" Agreement. Each Stockholder, if requested by the
Corporation and an underwriter of Common Stock or other securities of
the Corporation, shall agree not to sell or otherwise transfer or
dispose of any Registrable Shares or other securities of the
Corporation held by such Stockholder for a specified period of time
(not to exceed 120 days) following the effective date of a
Registration Statement; provided, that:
(i) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the Corporation
to be sold on its behalf to the public in an underwritten
offering; and
(ii) all Stockholders holding not less than the number of shares
of Common Stock held by such Stockholder (including shares of
Common stock issuable upon the conversion of Shares, or other
convertible securities, or upon the exercise of options, warrants
or rights) and all officers and directors of the Corporation
enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the Registrable Shares or
other securities subject to the foregoing restriction until the end of
the standoff period.
(k) Limitation on Subsequent Registration Rights. The Corporation
shall not, without the prior written consent of Stockholders holding
at least 50% of the Registrable Shares, enter into any agreement with
any holder or prospective holder of any securities of the Corporation
that would allow such holder or prospective holder (a) to include
securities of the Corporation in any registration filed under
subsection 9(c) or 9(d), unless under the terms of such agreement,
such holder or prospective holder may include such securities in any
such registration only on terms substantially similar to the terms on
which holders of Registrable Shares may include shares in such
registration, or (b) to make a demand registration that could result
in such registration statement being declared effective prior to a
demand registration under this Section 9.
10. Miscellaneous.
(a) All notices or other communications hereunder shall be in writing
and shall either be personally delivered or transmitted by registered
or certified mail, return receipt requested, to the undersigned at his
address set forth below and to the Corporation at its address set
forth above.
(b) Any term of this Subscription Agreement may be amended and the
observance of any term of this agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Corporation and
the holders of a majority-in-interest of the Shares issued in
connection with this Subscription. Any amendment or waiver effected in
accordance with this paragraph 10(b) shall be binding upon each holder
of any Shares then outstanding, each future holder of all such Shares,
and the Corporation.
(c) This Subscription Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving
effect to the conflict of laws provisions of that state.
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 28th day of August, 1992.
Number of Shares Subscribed for: 31,579
Dollar Amount Tendered: $150,000.25
/s/ Paul A. Gould
----------------------------------------
Authorized Signature of Subscriber
Paul A. Gould
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
711 Fifth Avenue
----------------------------------------
Address
New York, NY 10022
----------------------------------------
City/State/Zip
###-##-####
----------------------------------------
Social Security Number of Subscriber
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
----------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 28th day of August, 1992, before me, a notary public of the State of New
York, personally came Paul A. Gould, to me known and known to me to be the
individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Maksymowicz
----------------------------------------
Notary Public
My commission expires: October 31, 1993
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 28th day of August, 1992.
Number of Shares Subscribed for: 42,106
Dollar Amount Tendered: $200,003.50
/s/ Steven J. Greenfield, Vice President
----------------------------------------
Authorized Signature of Subscriber
Allen & Company Incorporated
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
711 Fifth Avenue
----------------------------------------
Address
New York, NY 10022
----------------------------------------
City/State/Zip
013-6176976
----------------------------------------
Taxpayer I.D. Number of Subscriber
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
----------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 28th day of August, 1992, before me, a notary public of the State of New
York, personally came Steven J. Greenfield, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Maksymowicz
----------------------------------------
Notary Public
My commission expires: October 31, 1993
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 24th day of August, 1992.
Number of Shares Subscribed for: 31,579
Dollar Amount Tendered: $150,000.25
/s/ Manold Company -
/s/ Malcolm G. Chace, III G.P.
----------------------------------------
Authorized Signature of Subscriber
Manold Company
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
731 Hospital Trust Building
----------------------------------------
Address
Providence, RI 02906
----------------------------------------
City/State/Zip
05-6008843
----------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
---------------------------------
STATE OF RHODE ISLAND )
) SS.:
COUNTY OF PROVIDENCE )
On this 24th day of August, 1992, before me, a notary public of the State of
Rhode Island, personally came Malcolm G. Chace, III, to me known and known to me
to be the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Robert A. Carale
----------------------------------------
Notary Public
My commission expires: June 19, 1993
<PAGE>
AGREEMENT
AGREEMENT dated as of February 29, 1996 between Aquidneck Systems
International, Inc., a Delaware corporation (the "Company"), and Thomas Gardner
("Stockholder").
RECITALS
WHEREAS, the Company and Manold Company have entered into Subscription
Agreements dated August ___, 1992, May ____, 1993, May 1994 and September 1994,
pursuant to which Manold Company purchased ___ shares of common stock of the
Company, and was granted certain rights with respect to price protection and
registration of shares ("Subscription Agreement"); and
WHEREAS, Stockholder has acquired from Manold Company all of such
shares of Common Stock; and
WHEREAS, Stockholder and the Company deem it advisable to effect the
transactions provided for in this Agreement in contemplation of a reverse stock
split, a financing and an initial public offering of the common stock of the
Company to the public.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
TERMINOLOGY
Section 1.1 Definitions. As used herein the following terms have the
meanings assigned to them below:
"Agreement" means this Agreement as amended from time to time.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company filed in the office of the Secretary of
State of Delaware on December 17, 1986, as amended to date.
"Closing" means the execution and delivery of the Underwriting
Agreement.
"Common Stock" means the common stock of the Company authorized
to be issued pursuant to Article FOURTH of the Certificate of
Incorporation.
"Company" means Aquidneck Systems International, Inc., a Delaware
corporation.
"Offering" means the proposed public offering by the Company of
the Company's Common Stock to the public as described in the
Registration Statement.
"Registration Statement" means the Company's Registration
Statement to be filed with the United States Securities and Exchange
Commission covering the registration of the shares of Common Stock to
be sold by the Company in the Offering, as amended through the
Closing.
"Shares" shall mean the shares of Common Stock issued to
Stockholder pursuant to the Subscription Agreement after giving effect
to the reverse stock split described in Section 2.1.
"Subscription Agreements" shall have the meaning set forth in the
preamble to this Agreement.
"Stockholder" and "Stockholders" shall have the meaning set forth
in the introductory paragraph of this Agreement.
"Underwriter" means Joseph Stevens & Company, or such other
underwriter as may be designated by the Company to underwrite the
Offering.
"Underwriting Agreement" means the Underwriting Agreement to be
executed between the Company and the Underwriter with respect to the
sale of the Company's Common Stock to be made in connection with the
Offering.
Section 1.2 Rules of Construction. Unless the context otherwise
requires: (a) "or" shall not be exclusive; (b) "includes" and "including" shall
not be limiting; (c) words in the singular shall include plural, and vice versa;
and (d) words in the masculine gender shall include the feminine and neuter and
vice versa.
Section 1.3 Conflicts with Certain Agreements. To the extent that the
transactions contemplated by this Agreement conflict with any applicable
provisions of the Subscription Agreement, such provisions are waived and the
provisions of this Agreement shall prevail.
ARTICLE II
CONSENT TO RECAPITALIZATION AND RELATED TRANSACTIONS
Section 2.1 Restated Certificate and Amended Restated Certificate. The
stockholders and Directors of the Company have heretofore approved the amendment
of the Certificate of Incorporation of the Company to effect an approximately 1
to 74 reverse split in stock. Stockholder hereby consents to such stock split.
ARTICLE III
CONSENT TO TERMS OF UNDERWRITING AGREEMENT
Section 3.1 Underwriting Agreement. The Directors of the Company have
heretofore approved the execution of the Letter of Intent, which contains the
terms of the proposed Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Underwriter will require that Stockholders of the Company (as of
the Closing) holding at least 98% of the issued and outstanding Shares execute
an agreement to indicate their agreement: (a) to refrain from selling any Shares
for a period of eighteen (18) months following the Offering, (b) to permit all
certificates evidencing such Stockholder's Shares to be endorsed with the
appropriate restrictive legend and consent to the placement of stop transfer
orders with the Company's transfer agent; (c) to grant to the Underwriter a
twenty-four month right to sell for such Stockholder's account any Shares sold
by such Stockholder; and (d) to be bound by certain other provisions, including,
without limitation, provisions relating to market practices, certain
representations and warranties and the survival of representations, warranties
and agreements. Stockholder hereby agrees to execute such an agreement in form
satisfactory to the Underwriter.
ARTICLE IV
MODIFICATIONS TO SUBSCRIPTION AGREEMENT
Section 4.1 Deletion of Price Protection Rights. Section 4 (Price
Protection) of the May 1992 and May 1993 Subscription Agreements provides that
if additional capital is raised by the Company from the sale of its common stock
on or before the closing of an initial public offering at less than a certain
price per share, the Corporation will issue to the Stockholder a certain number
of additional shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that the May 1992 and May 1993 Subscription Agreements are
hereby amended by deleting Section 4 thereof.
Section 4.2 Modification of Registration Rights. Each of the
Subscription Agreements grants certain rights to the Stockholder with respect to
registration of the Shares. In consideration of the mutual promises set forth
herein, Stockholder agrees that the Subscription Agreement is hereby amended by
deleting the provisions concerning registration rights.
ARTICLE V
POWER OF ATTORNEY
Section 5.1 Power of Attorney. Stockholder irrevocably makes,
constitutes and appoints any officer or director of the Company, acting
individually, the true and lawful agent and attorney-in-fact for Stockholder and
in Stockholder's name to execute, acknowledge and deliver any documents relating
to the Offering or the Underwriting Agreement as may reasonably requested by the
Underwriter to further effect the intentions of the parties under this
Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Execution in Counterparts. This Agreement may be executed
in two or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 6.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. No person other than the parties hereto shall have any rights under or
by reason of this Agreement.
Section 6.3 Headings. The Articles and Section headings contained in
this Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 6.4 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 6.5 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 6.6 Amendments. No amendment or waiver of any provision of
this Agreement shall be effective unless in writing and signed by each of the
parties hereto, and any waiver shall be effective only in the instance and for
the purpose for which given.
Section 6.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, this Agreement has been duly executed by this
undersigned as of the date first written above.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/Malcolm G. Chace, III
-------------------------------------
/s/Thomas E. Gardner
-------------------------------------
<PAGE>
AGREEMENT
AGREEMENT dated as of February ____, 1996 between Aquidneck Systems
International, Inc., a Delaware corporation (the "Company"), and Allen &
Company, Incorporated ("Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder have entered into Subscription
Agreements dated August 1992, May 1993, May 1994 and October 1994 (collectively,
the "Subscription Agreements") pursuant to which Stockholder purchased ___
shares of common stock of the Company, and was granted certain rights with
respect to price protection and registration of shares ("Subscription
Agreements"); and
WHEREAS, Stockholder and the Company deem it advisable to effect the
transactions provided for in this Agreement in contemplation of a reverse stock
split, a financing and an initial public offering of the common stock of the
Company to the public.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
TERMINOLOGY
Section 1.1 Definitions. As used herein the following terms have the
meanings assigned to them below:
"Agreement" means this Agreement as amended from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company filed in the office of the Secretary of State of Delaware on
December 17, 1986, as amended to date.
"Closing" means the execution and delivery of the Underwriting
Agreement.
"Common Stock" means the common stock of the Company authorized to be
issued pursuant to Article FOURTH of the Certificate of Incorporation.
"Company" means Aquidneck Systems International, Inc., a Delaware
corporation.
"Offering" means the proposed public offering by the Company of the
Company's Common Stock to the public as described in the Registration
Statement.
"Registration Statement" means the Company's Registration Statement to
be filed with the United States Securities and Exchange Commission covering
the registration of the shares of Common Stock to be sold by the Company in
the Offering, as amended through the Closing.
"Shares" shall mean the shares of Common Stock issued to Stockholder
pursuant to the Subscription Agreements after giving effect to the reverse
stock split described in Section 2.1.
"Subscription Agreements" shall have the meaning set forth in the
preamble to this Agreement.
"Stockholder" and "Stockholders" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Underwriter" means Joseph Stevens & Company, or such other
underwriter as may be designated by the Company to underwrite the Offering.
"Underwriting Agreement" means the Underwriting Agreement to be
executed between the Company and the Underwriter with respect to the sale
of the Company's Common Stock to be made in connection with the Offering.
Section 1.2 Rules of Construction. Unless the context otherwise requires:
(a) "or" shall not be exclusive; (b) "includes" and "including" shall not be
limiting; (c) words in the singular shall include plural, and vice versa; and
(d) words in the masculine gender shall include the feminine and neuter and vice
versa.
Section 1.3 Conflicts with Certain Agreements. To the extent that the
transactions contemplated by this Agreement conflict with any applicable
provisions of any Subscription Agreement, such provisions are waived and the
provisions of this Agreement shall prevail.
ARTICLE II
CONSENT TO RECAPITALIZATION AND RELATED TRANSACTIONS
Section 2.1 Restated Certificate and Amended Restated Certificate. The
stockholders and Directors of the Company have heretofore approved the amendment
of the Certificate of Incorporation of the Company to effect a 1 to 74 reverse
split in stock. Stockholder hereby consents to such stock split.
ARTICLE III
CONSENT TO TERMS OF UNDERWRITING AGREEMENT
Section 3.1 Underwriting Agreement. The Directors of the Company have
heretofore approved the execution of the Letter of Intent, which contains the
terms of the proposed Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Underwriter will require that Stockholders of the Company (as of
the Closing) holding at least 98% of the issued and outstanding Shares execute
an agreement to indicate their agreement: (a) to refrain from selling any Shares
for a period of eighteen (18) months following the Offering, (b) to permit all
certificates evidencing such Stockholder's Shares to be endorsed with the
appropriate restrictive legend and consent to the placement of stop transfer
orders with the Company's transfer agent; (c) to grant to the Underwriter a
twenty-four month right to sell for such Stockholder's account any Shares sold
by such Stockholder; and (d) to be bound by certain other provisions, including,
without limitation, provisions relating to market practices, certain
representations and warranties and the survival of representations, warranties
and agreements. Stockholder hereby agrees to execute such an agreement in form
satisfactory to the Underwriter.
ARTICLE IV
MODIFICATIONS TO SUBSCRIPTION AGREEMENT
Section 4.1 Deletion of Price Protection Rights. Section 4 (Price
Protection) of the May 1993 Subscription Agreement provides that if additional
capital is raised by the Company from the sale of its common stock on or before
the closing of an initial public offering at less than a certain price per
share, the Corporation will issue to the Stockholder a certain number of
additional shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that the May 1993 Subscription Agreement is hereby amended by
deleting the Section 4 thereof.
Section 4.2 Modification of Registration Rights. Each of the Subscription
Agreements grants certain rights to the Stockholder with respect to registration
of the Shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that each of the Subscription Agreements is hereby amended by
deleting the provisions concerning registration rights.
ARTICLE V
POWER OF ATTORNEY
Section 5.1 Power of Attorney. Stockholder irrevocably makes, constitutes
and appoints any officer or director of the Company, acting individually, the
true and lawful agent and attorney-in-fact for Stockholder and in Stockholder's
name to execute, acknowledge and deliver any documents relating to the Offering
or the Underwriting Agreement as may reasonably requested by the Underwriter to
further effect the intentions of the parties under this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Execution in Counterparts. This Agreement may be executed in
two or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 6.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. No person other than the parties hereto shall have any rights under or
by reason of this Agreement.
Section 6.3 Headings. The Articles and Section headings contained in this
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 6.4 Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 6.5 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 6.6 Amendments. No amendment or waiver of any provision of this
Agreement shall be effective unless in writing and signed by each of the parties
hereto, and any waiver shall be effective only in the instance and for the
purpose for which given.
Section 6.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, this Agreement has been duly executed by this
undersigned as of the date first written above.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
----------------------------------
ALLEN & COMPANY, INCORPORATED
By: /s/
----------------------------------
<PAGE>
AGREEMENT
AGREEMENT dated as of February ____, 1996 between Aquidneck Systems
International, Inc., a Delaware corporation (the "Company"), and Paul A. Gould
("Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder have entered into Subscription
Agreements dated August 1992, May 1993, May 1994 and October 1994 (collectively,
the "Subscription Agreements") pursuant to which Stockholder purchased ___
shares of common stock of the Company, and was granted certain rights with
respect to price protection and registration of shares ("Subscription
Agreements"); and
WHEREAS, Stockholder and the Company deem it advisable to effect the
transactions provided for in this Agreement in contemplation of a reverse stock
split, a financing and an initial public offering of the common stock of the
Company to the public.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
TERMINOLOGY
Section 1.1 Definitions. As used herein the following terms have the
meanings assigned to them below:
"Agreement" means this Agreement as amended from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company filed in the office of the Secretary of State of Delaware on
December 17, 1986, as amended to date.
"Closing" means the execution and delivery of the Underwriting
Agreement.
"Common Stock" means the common stock of the Company authorized to be
issued pursuant to Article FOURTH of the Certificate of Incorporation.
"Company" means Aquidneck Systems International, Inc., a Delaware
corporation.
"Offering" means the proposed public offering by the Company of the
Company's Common Stock to the public as described in the Registration
Statement.
"Registration Statement" means the Company's Registration Statement to
be filed with the United States Securities and Exchange Commission covering
the registration of the shares of Common Stock to be sold by the Company in
the Offering, as amended through the Closing.
"Shares" shall mean the shares of Common Stock issued to Stockholder
pursuant to the Subscription Agreement after giving effect to the reverse
stock split described in Section 2.1.
"Subscription Agreements" shall have the meaning set forth in the
preamble to this Agreement.
"Stockholder" and "Stockholders" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Underwriter" means Joseph Stevens & Company, or such other
underwriter as may be designated by the Company to underwrite the
Offering.
"Underwriting Agreement" means the Underwriting Agreement to be
executed between the Company and the Underwriter with respect to the sale
of the Company's Common Stock to be made in connection with the Offering.
Section 1.2 Rules of Construction. Unless the context otherwise requires:
(a) "or" shall not be exclusive; (b) "includes" and "including" shall not be
limiting; (c) words in the singular shall include plural, and vice versa; and
(d) words in the masculine gender shall include the feminine and neuter and vice
versa.
Section 1.3 Conflicts with Certain Agreements. To the extent that the
transactions contemplated by this Agreement conflict with any applicable
provisions of any Subscription Agreement, such provisions are waived and the
provisions of this Agreement shall prevail.
ARTICLE II
CONSENT TO RECAPITALIZATION AND RELATED TRANSACTIONS
Section 2.1 Restated Certificate and Amended Restated Certificate. The
stockholders and Directors of the Company have heretofore approved the amendment
of the Certificate of Incorporation of the Company to effect a 1 to 74 reverse
split in stock. Stockholder hereby consents to such stock split.
ARTICLE III
CONSENT TO TERMS OF UNDERWRITING AGREEMENT
Section 3.1 Underwriting Agreement. The Directors of the Company have
heretofore approved the execution of the Letter of Intent, which contains the
terms of the proposed Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Underwriter will require that all Stockholders of the Company (as
of the Closing) holding at least 98% of the issued and outstanding shares of
common stock of the Company execute an agreement to indicate their agreement:
(a) to refrain from selling any Shares for a period of eighteen (18) months
following the Offering, (b) to permit all certificates evidencing such
Stockholder's Shares to be endorsed with the appropriate restrictive legend and
consent to the placement of stop transfer orders with the Company's transfer
agent; (c) to grant to the Underwriter a twenty-four month right to sell for
such Stockholder's account any Shares sold by such Stockholder; and (d) to be
bound by certain other provisions, including, without limitation, provisions
relating to market practices, certain representations and warranties and the
survival of representations, warranties and agreements. Stockholder hereby
agrees to execute such an agreement in form satisfactory to the Underwriter.
ARTICLE IV
MODIFICATIONS TO SUBSCRIPTION AGREEMENT
Section 4.1 Deletion of Price Protection Rights. Section 4 (Price
Protection) of the May 1993 Subscription Agreement provides that if additional
capital is raised by the Company from the sale of its common stock on or before
the closing of an initial public offering at less than a certain price per
share, the Corporation will issue to the Stockholder a certain number of
additional shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that the May 1993 Subscription Agreement is hereby amended by
deleting Section 4 thereof.
Section 4.2 Modification of Registration Rights. Each of the Subscription
Agreements grants certain rights to the Stockholder with respect to registration
of the Shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that the Subscription Agreements are hereby amended by
deleting the provisions concerning registration rights.
ARTICLE V
POWER OF ATTORNEY
Section 5.1 Power of Attorney. Stockholder irrevocably makes, constitutes
and appoints any officer or director of the Company, acting individually, the
true and lawful agent and attorney-in-fact for Stockholder and in Stockholder's
name to execute, acknowledge and deliver any documents relating to the Offering
or the Underwriting Agreement as may reasonably requested by the Underwriter to
further effect the intentions of the parties under this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Execution in Counterparts. This Agreement may be executed in
two or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 6.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. No person other than the parties hereto shall have any rights under or
by reason of this Agreement.
Section 6.3 Headings. The Articles and Section headings contained in this
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 6.4 Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 6.5 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 6.6 Amendments. No amendment or waiver of any provision of this
Agreement shall be effective unless in writing and signed by each of the parties
hereto, and any waiver shall be effective only in the instance and for the
purpose for which given.
Section 6.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, this Agreement has been duly executed by this
undersigned as of the date first written above.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
----------------------------------
PAUL A. GOULD
-------------------------------------
Paul A. Gould
Exhibit 10.t
Aquidneck Systems International, Inc.
SUBSCRIPTION AGREEMENT
TO: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
The undersigned understands that Aquidneck Systems International, Inc.,
a Delaware corporation (the "Corporation"), is offering to sell at least 333,334
shares of Common Stock, par value $.01 per share (the "Shares") of the
Corporation at a price of $4.50 per share (the "Subscription").
The undersigned hereby agrees as follows:
1. Subscription. Subject to the terms and conditions contained herein, the
undersigned hereby irrevocably agrees to purchase such number of Shares set
forth on the signature page hereto (the "Subscribed Shares") at a purchase price
of $4.50 per share. Payment for the Subscribed Shares shall be made by check
payable to the order of "Aquidneck Systems International, Inc." which is
enclosed herewith or by wire transfer on or before the Closing Date (hereinafter
defined) in accordance with instructions provided by the Corporation. A closing
for the purchase of the Shares in this Subscription (the "Closing") shall be
held on the date designated upon five (5) days notice by the Corporation, but no
later than May 31, 1993, at which time all of the conditions of Section 7 hereof
have been satisfied (the "Closing Date").
2. Representation and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Corporation that the undersigned:
(a) has adequate means of providing for his current needs and possible
personal contingencies, and has no need for liquidity of his
investment in the Corporation;
(b) is able to bear the substantial economic risks of an investment in
the Corporation for an indefinite period and, at the present time,
could afford a complete loss of such investment;
(c) has, either alone or together with his special advisors
("Purchaser Representatives"), such knowledge and experience in
financial matters that he is capable of evaluating the risks of this
investment;
(d) has received and read or reviewed with his Purchaser
Representative and is familiar with, this Subscription Agreement;
(e) he and/or his Purchaser Representative has had an opportunity to
ask questions of and receive answers from the Corporation concerning
the terms and conditions of this investment;
(f) understands that the Shares have not been registered under the
Securities Act of 1933 (the "Securities Act") in reliance upon an
exemption thereunder and, in connection therewith, represents that the
Shares for which he hereby subscribes are being acquired solely for
his own account, for investment and are not being purchased with a
view to or for the resale, distribution or transfer thereof;
(g) acknowledges and is aware of the following:
(i) the Shares represent a speculative investment which
involves a high degree of risk of loss and there is no
guarantee that the undersigned will realize any gain from
such investment or that the undersigned will not lose his
entire investment in the Corporation;
(ii) there are substantial restrictions on the
transferability of the Shares; the Shares will not be, and
investors in the Corporation have no right to require that
the Shares be, registered under the Securities Act;
(iii) there will be no public market for the Shares; and the
undersigned will not immediately be able to avail himself of
the provisions of Rule 144 adopted by the Securities and
Exchange Commission under the Securities Act with respect to
the resale of the Shares; and
(iv) all certificates for the Shares to be issued upon
completion of this private placement will bear the following
legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or the securities laws of
any state. Such shares may not be offered for sale, sold, delivered
after sale, transferred, pledged or hypothecated, in the absence of an
effective registration statement covering such shares under the Act
and any applicable state securities laws, unless the holder shall have
obtained an opinion of counsel satisfactory to the corporation that
such registration is not required."
(h) acknowledges that he has received and reviewed the Offering
Memorandum dated May 13, 1993, (the "Memorandum"); that he is
purchasing the Shares without being furnished any offering literature
or prospectus other than the Memorandum and this Subscription
Agreement; that all documents, records and books pertaining to this
investment have been made available to the Purchaser Representative,
attorney and/or accountant for the undersigned as well as to the
undersigned;
(i) acknowledges that he is not relying on any information concerning
estimated future results of the Corporation contained in the
Memorandum, that the forecasts do not constitute any representation as
to what actual results of the Corporation's operations will be, and
are based on many factors that are not within, or are only partially
within, the control of the Corporation; and
(j) represents that the foregoing representations and warranties are
true and accurate as of the date hereof and shall be true and accurate
as of the date this Subscription Agreement is accepted by the
Corporation.
3. Indemnification. The undersigned acknowledges and understands the meaning and
legal consequences of the representations and warranties herein and hereby
agrees to indemnify and hold harmless the Corporation and its respective
officers, directors, controlling persons, agents, employees, attorneys and
accountants from and against any and all loss, damage or liability, together
with all costs and expenses (including attorney's fees and disbursements) which
any of them may incur by reason of any breach of any representation, warranty or
agreement of the undersigned contained in this Subscription Agreement. Not
withstanding the foregoing, no representation, warranty, acknowledgment or
agreement made herein by the undersigned shall in any manner be deemed to
constitute a waiver of any rights granted to the undersigned under Federal or
state securities laws or of any breach of representation, warranty or covenant
under this Subscription Agreement. All representations and warranties contained
in this Subscription Agreement, and the indemnification contained in this
paragraph 3, shall survive the acceptance of this subscription.
4. Price Protection. The Corporation agrees to protect the price paid for the
Subscribed Shares by the undersigned as follows:
Any additional funds raised by the Corporation from the sale of Common
Stock on or before the closing of an initial public offering must be
priced at least equal to the price paid for the Subscribed Shares
($4.50/share). If additional capital is raised at less than such
price, the Corporation will issue to the undersigned an additional
number of shares of the Corporation's Common Stock that, when combined
with the Subscribed Shares, results in an effective per share purchase
price to the undersigned equal to the per share purchase price with
respect to such additional funds. Such price will be equitably
adjusted in the event the Corporation effects a recapitalization,
stock split, stock dividend or other adjustment in its capital stock.
5. Revocation. The undersigned agrees that he is not entitled to cancel or
revoke this Subscription Agreement, except upon breach by the Corporation of any
of the representations, warranties or covenants hereof, and that the same shall
be binding upon and inure to the benefit of his heirs, executors, administrators
and successors except if the Corporation does not raise at least $1,300,000 at
the closing of this subscription.
6. Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants to the undersigned that:
(a) the Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
full power and authority (corporate and otherwise) to conduct its
business as presently conducted and proposed to be conducted by it and
to effect the Subscription or to carry out the transactions
contemplated hereby;
(b) the authorized capital stock of the Corporation immediately prior
to the Closing will consist of 2,000,000 shares of Common Stock, par
value $.01 per share, of which 1,079,217 will be issued and
outstanding and except as set forth in the Memorandum, (1) there are
no outstanding securities, options or other rights to acquire any
capital stock or securities of the Corporation and (2) no agreements
made by or known to the Corporation respecting the ownership, voting
or other aspects of any shares of the Corporation's capital stock;
(c) no consent, authorization or other approval from, nor any
registration, qualification or filing with, any person or governmental
authority is required in connection with the Subscription or the
transactions contemplated hereby, which consent, authorization or
approval has not heretofore been obtained or which registration,
qualification or filing has not heretofore been made;
(d) the Corporation has taken all corporate action on the part of the
Corporation to authorize and approve the Subscription and the
transactions contemplated hereby and the Subscribed Shares, when paid
for and delivered pursuant to the terms hereof, will be validly
issued, fully paid and non-assessable; and
(e) the Memorandum fairly presents the business and financial
condition, results of operations, business and prospects of the
Corporation and neither the Memorandum nor this Subscription
Agreement, when read together, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances
under which they were made, not misleading, and each projection
contained in the Memorandum was prepared with due care based on
reasonable assumptions and represents the Company's best estimate of
future results based on information available as of the date of the
Memorandum.
7. Conditions to the Undersigned's Obligations. The obligations of the
undersigned to purchase the Subscribed Shares shall be subject to the following
conditions:
(a) The representations and warranties of the Corporation contained
herein shall be true and accurate in all material respects on and as
of the Closing Date with the same effect as if such representations
and warranties had been made on such date.
(b) The Corporation shall have performed all of the covenants made
hereunder to be performed by it on or prior to the Closing Date.
(c) The Corporation shall have issued to the undersigned certificates,
registered in the name of the undersigned, representing the Subscribed
Shares.
(d) The Corporation shall have received payment for, and irrevocably
accepted subscriptions for, an aggregate at least 288,889 Shares in
connection with the Subscription.
(e) The Corporation shall have delivered to the undersigned a
certificate, executed by the President of the Corporation, dated the
Closing Date, certifying to the fulfillment of the above conditions
and other matters reasonably requested by the undersigned.
8. Covenants of the Corporation. The Corporation hereby agrees as follows:
(a) Until such time that the Corporation has registered its Common
Stock pursuant to Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") to deliver to the undersigned:
(i) within ninety (90) days after the end of each fiscal
year of the Corporation, an audited balance sheet of the
Corporation as at the end of such year and audited
statements of income and of cash flows of the Corporation
for such year, certified by certified public accountants of
established national reputation selected by the Corporation,
and prepared in accordance with generally accepted
accounting principles;
(ii) within thirty (30) days after the end of each fiscal
quarter of the Corporation, an unaudited balance sheet of
the Corporation as at the end of such quarter, and unaudited
statements of income and of cash flows of the Corporation
for such fiscal quarter and for the current fiscal year to
the end of such fiscal quarter; and
(iii) within ten (10) days of delivery, such other notices,
information, and data with respect to the Corporation as the
Corporation delivers to the holders of its Common Stock, the
Securities and Exchange Commission, or any securities
exchange on which capital stock of the Corporation may be
listed, and such other information and data as the
undersigned may from time to time reasonably request.
(b) Once the Corporation has registered its Common Stock pursuant to
Section 12 of the Exchange Act, to file such reports and take such
other action necessary to allow the undersigned to sell the Shares
pursuant to Rule 144 under the Securities Act of 1933.
9. Registration Rights.
(a) Certain Definitions. As used in this Section 9 and elsewhere in
this Subscription Agreement, the following terms shall have the
following respective meanings:
(i) "Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time
administering the Securities Act.
(ii) "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the
rules and regulations of the Commission issued under such
Act, as they each may, from time to time, be in effect.
(iii) "Registration Statement" means a registration
statement filed by the Corporation with the Commission for a
public offering and sale of securities of the Corporation
(other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a limited
purpose, or any registration statement covering only
securities proposed to be issued in exchange for securities
or assets of another corporation).
(iv) "Registration Expenses" means the expenses described in
subsection 9(f).
(v) "Registrable Shares" means (1) the Shares, (2) any
shares of Common Stock acquired pursuant to Section 4 hereof
(including such provision in other subscription agreements
included in the Subscription), and (3) any other shares of
Common Stock of the Corporation issued in respect of any
shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events);
provided, however, that shares of Common Stock that are
Registrable Shares shall cease to be Registrable Shares (I)
upon any sale pursuant to a Registration Statement, Section
4(1) of the Securities Act, or Rule 144 under the Securities
Act or (ii) at such time as they are eligible for sale
pursuant to Rule 144(k) under the Securities Act.
(vi) "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they
each may, from time to time, be in effect.
(vii) "Stockholders" means the purchasers of Shares in
connection with the Subscription and any persons or entities
to whom the rights granted under this Section 9 are
transferred by any purchasers, their successors or assigns
pursuant to the terms hereof.
(b) Sale or Transfer of Shares; Legend.
(i) The Shares and the Registrable Shares and shares issued
in respect of the Shares or the Registrable Shares shall not
be sold or transferred unless either (1) they first shall
have been registered under the Securities Act, or (2) the
Corporation first shall have been furnished with an opinion
of legal counsel, reasonably satisfactory to the
Corporation, to the effect that such sale or transfer is
exempt from the registration requirements of the Securities
Act.
(ii) Each certificate representing the Shares and the
Registrable Shares and shares issued in respect of the
Shares or the Registrable Shares shall bear the legend set
forth in Section 2 hereof. Such legend shall be removed from
the certificates representing any Registrable Shares, at the
request of the holder thereof, at such time as they become
eligible for resale pursuant to Rule 144(k) under the
Securities Act.
(iii) The Corporation agrees, upon the request of the
undersigned to make available to the undersigned and to any
prospective transferee of any Shares or Registrable Shares
of the undersigned the information concerning the
Corporation described in Rule l 44A(d)(4) under the
Securities Act.
(c) Required Registrations.
(i) At any time after the earlier of the third anniversary
of the date hereof or the closing of the Corporation's first
underwritten public offering of shares of Common Stock
pursuant to a Registration Statement, a Stockholder or
Stockholders holding in the aggregate at least 166,667
Registrable Shares (as adjusted for stock splits, stock
dividends, recapitalizations and the like) may request, in
writing, that the Corporation effect the registration on
Form S-1 or Form S-2 (or any successor form) of Registrable
Shares owned by such Stockholder or stockholders having an
aggregate offering price of at least $300,000 (based on the
then current market price or fair value) in accordance with
the intended methods of distribution as specified by the
Stockholders in such notice. If the holders initiating the
registration intend to distribute the Registrable Shares by
means of an underwriting, they shall so advise the
Corporation in their request. In the event such registration
is underwritten, the right of other Stockholders to
participate shall be conditioned on such Stockholders'
participation in such underwriting. Upon receipt of any such
request, the Corporation shall promptly give written notice
of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice
to the Corporation within thirty (30) days after the
Corporation provides its notice, to elect to have included
in such registration such of their Registrable Shares as
such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the
offering determines that, because of marketing factors, all
of the Registrable Shares requested to be registered by all
Stockholders may not be included in the offering, then all
Stockholders who have requested registration shall
participate in the offering pro rata based upon the number
of Registrable Shares that they have requested to be so
registered. Thereupon, the Corporation shall, as
expeditiously as possible, use its best efforts to effect
the registration, on Form S-1 or Form S-2 (or any successor
form), of all Registrable Shares that the Corporation has
been requested to so register.
(ii) At any time after the Corporation becomes eligible to
file a Registration Statement on Form S-3 (or any successor
form relating to secondary offerings), a Stockholder or
Stockholders holding in the aggregate at least 166,667
Registrable Shares (as adjusted for stock splits, stock
dividends, recapitalizations and the like) may request the
Corporation, in writing, to effect the registration on Form
S-3 (or such successor form), of Registrable Shares having
an aggregate offering price of at least $ 100,000 (based on
the current public market price) in accordance with the
intended methods of distribution as specified by the
Stockholders in such notice. Upon receipt of any such
request, the Corporation shall promptly give written notice
of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice
to the Corporation within thirty (30) days after the
Corporation provides its notice, to elect to have included
in such registration such of their Registrable Shares as
such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the
offering determines that, because of marketing factors, all
of the Registrable Shares requested to be registered by all
Stockholders may not be included in the offering, then all
Stockholders who have requested registration shall
participate in the offering pro rata based upon the number
of Registrable Shares that they have requested to be so
registered. Thereupon, the Corporation shall, as
expeditiously as possible, use its best efforts to effect
the registration on Form S-3, or such successor form, of all
Registrable Shares that the Corporation has been requested
to register.
(iii) The Corporation shall not be required to effect more
than two registrations pursuant to paragraph 9(c)(i) and
paragraph 9(c)(ii) above. In addition, the Corporation shall
not be required to effect any registration (other than on
Form S-3 or any successor form relating to secondary
offerings) within six (6) months after the effective date of
any other Registration Statement of the Corporation.
(iv) If at the time of any request to register Registrable
Shares pursuant to this subsection 9(c), the Corporation is
engaged or has fixed plans to engage within thirty (30) days
of the time of the request in a registered public offering
as to which the Stockholders may include Registrable Shares
pursuant to subsection 9(d) or is engaged in any other
activity that, in the good faith determination of the
Corporation's Board of Directors, would be adversely
affected by the requested registration to the material
detriment of the Corporation, then the Corporation may at
its option direct that such request be delayed for a period
not in excess of six months from the effective date of such
offering or the date of commencement of such other material
activity, as the case may be, such right to delay a request
to be exercised by the Corporation not more than once in any
two year period.
(d) Incidental Registration.
(i) Whenever the Corporation proposes to file a Registration
Statement (other than pursuant to subsection 9(c)) at any
time and from time to time, it will, prior to such filing,
give written notice to all Stockholders of its intention to
do so and, upon the written request of a Stockholder or
Stockholders given within twenty (20) days after the
Corporation provides such notice (which request shall state
the intended method of disposition of such Registration
Shares), the Corporation shall use its best efforts to cause
all Registrable Shares that the Corporation has been
requested by such Stockholder or Stockholders to register to
be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in
accordance with the intended methods of distribution
specified in the request of such Stockholder or
Stockholders; provided that the Corporation shall have the
right to postpone or withdraw any registration effected
pursuant to this subsection 9(d) without obligation to any
Stockholder.
(ii) In connection with any offering under this subsection
9(d) involving an underwriting, the Corporation shall not be
required to include any Registrable Shares in such offering
unless the holders thereof accept the terms of the
underwriting as agreed upon between the Corporation and the
underwriters selected by it (provided that such terms must
be consistent with this Agreement), and then only in such
quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Corporation.
If in the opinion of the managing underwriter the
registration of all, or part of, the Registrable Shares that
the holders have requested to be included would materially
and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting
only that number of Registrable Shares, if any, that the
managing underwriter believes may be sold without causing
such adverse effect; provided that no persons or entities
other than the Corporation, the Stockholders and persons or
entities holding registration rights granted in accordance
with Section 9(k) hereof shall be permitted to include
securities in the offering. If the number of Registrable
Shares to be included in the underwriting in accordance with
the foregoing is less than the total number of shares that
the holders of Registrable Shares have requested to be
included, then the holders of Registrable Shares who have
requested registration and other holders of shares of Common
Stock entitled to include shares of Common Stock in such
registration shall participate in the underwriting pro rata
based upon their total ownership of shares of Common Stock
of the Corporation (giving effect to the conversion into
Common Stock of all securities convertible thereinto). If
any holder would thus be entitled to include more shares
than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata
based upon their total ownership of Registrable Shares.
(e) Registration Procedures. If and whenever the Corporation is
required by the provisions of this Agreement to use its best efforts
to effect the registration of any of the Registrable Shares under the
Securities Act, the Corporation shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts
to cause that Registration Statement to become and remain
effective;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the
Registration Statement and the prospectus included in the
Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm
commitment underwritten public offering, until each
underwriter has completed the distribution of all securities
purchased by it and, in the case of any other offering,
until the earlier of the sale of all Registrable Shares
covered thereby or one hundred twenty (120) days after the
effective date thereof;
(iii) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as the selling Stockholder may
reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the
selling Stockholder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws
of such states as the selling Stockholders shall reasonably
request, and do any and all other acts and things that may
be necessary or desirable to enable the selling Stockholders
to consummate the public sale or other disposition in such
states of the Registrable Shares owned by the selling
Stockholder; provided, however, that the Corporation shall
not be required in connection with this paragraph 9(e)(iv)
to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the selling Stockholders and after having
done so the prospectus is amended to comply with the
requirements of the Securities Act, the Corporation shall
promptly notify the selling Stockholders and, if requested,
the selling Stockholders shall immediately cease making
offers of Registrable Shares and return all prospectuses to
the Corporation. The Corporation shall promptly provide the
selling Stockholders with revised prospectuses and,
following receipt of the revised prospectuses, the selling
Stockholders shall be free to resume making offers of the
Registrable Shares.
(f) Allocation of Expenses. The Corporation will pay all Registration
Expenses of all registrations under this Agreement; provided, however,
that if a registration under Section 9(c) is withdrawn at the request
of the Stockholders requesting such registration (other than as a
result of information concerning the business or financial condition
of the Corporation that is made known to the Stockholders after the
date on which such registration was requested) and if the requesting
Stockholders elect not to have such registration counted as a
registration requested under subsection 9(c), the requesting
Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares
included in such registration. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the
Corporation in complying with this Section 9, including, without
limitation, all registration and filing fees, exchange listing fees,
printing expenses, fees, and expenses of counsel for the Corporation
and the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders, state Blue Sky
fees and expenses, and the expense of any special audits incident to
or required by any such registration, but excluding underwriting
discounts, selling commission, and the fees and expenses of selling
Stockholders' own counsel (other than the counsel selected to
represent all selling Stockholders).
(g) Indemnification and Contribution. In the event of any registration
of any of the Registrable Shares under the Securities Act pursuant to
this Agreement, the Corporation will indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages, or liabilities,
joint or several, to which such seller, underwriter, or controlling
person may become subject under the Securities Act, the Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus, or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Corporation will reimburse
such seller, underwriter, and each such controlling person in
connection with investigation or defending any such loss, claim,
damage, liability, or action; provided, however, that the Corporation
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Corporation, in writing, by or on behalf of such seller, underwriter,
or controlling person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Corporation, each of its directors and officers and each
underwriters (if any) and each person, if any, who controls the
Corporation or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Corporation,
such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based
upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such
seller furnished in writing to the Corporation by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement;
provided, however, that the obligations of such Stockholders hereunder
shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such
Registration.
Each party entitled to indemnification under this subsection 9(g) (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified party has actually knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section
9. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigations, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (1) any
holder of Registrable Shares exercising rights under this Agreement,
or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 9(g) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
9(g) provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances
for which indemnification is provided under this Section 9(g); then,
in each such case, the Corporation and such Stockholder will
contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from others) in such
proportions so that such holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Shares offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration
Statement, and the Corporation is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess pursuant to such
Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person
or entity who is not guilty of such fraudulent misrepresentation.
(h) Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration
Statement in an underwritten offering pursuant to subsection 9(c)(i),
the Corporation agrees to enter into an underwriting agreement
containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by
such issuer, including without limitation customary provisions with
respect to indemnification by the Corporation of the underwriters of
such offering.
(i) Information by Holder. Each holder of Registrable Shares included
in any registration shall furnish to the Corporation such information
regarding such holder and the distribution proposed by such holder as
the Corporation may request in writing and as shall be required in
connection with any registration, qualification or compliance referred
to in this Section 9.
(j) "Stand-Off" Agreement. Each Stockholder, if requested by the
Corporation and an underwriter of Common Stock or other securities of
the Corporation, shall agree not to sell or otherwise transfer or
dispose of any Registrable Shares or other securities of the
Corporation held by such Stockholder for a specified period of time
(not to exceed 120 days) following the effective date of a
Registration Statement; provided, that:
(i) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the
Corporation to be sold on its behalf to the public in an
underwritten offering; and
(ii) all Stockholders holding not less than the number of
shares of Common Stock held by such Stockholder (including
shares of Common stock issuable upon the conversion of
Shares, or other convertible securities, or upon the
exercise of options, warrants or rights) and all officers
and directors of the Corporation enter into similar
agreements.
Such agreement shall be in writing in a form satisfactory to the
Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the Registrable Shares or
other securities subject to the foregoing restriction until the end of
the standoff period.
(k) Limitation on Subsequent Registration Rights. The Corporation
shall not, without the prior written consent of Stockholders holding
at least 50% of the Registrable Shares, enter into any agreement with
any holder or prospective holder of any securities of the Corporation
that would allow such holder or prospective holder (a) to include
securities of the Corporation in any registration filed under
subsection 9(c) or 9(d), unless under the terms of such agreement,
such holder or prospective holder may include such securities in any
such registration only on terms substantially similar to the terms on
which holders of Registrable Shares may include shares in such
registration, or (b) to make a demand registration that could result
in such registration statement being declared effective prior to a
demand registration under this Section 9.
10. Miscellaneous.
(a) All notices or other communications hereunder shall be in writing
and shall either be personally delivered or transmitted by registered
or certified mail, return receipt requested, to the undersigned at his
address set forth below and to the Corporation at its address set
forth above.
(b) Any term of this Subscription Agreement may be amended and the
observance of any term of this agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Corporation and
the holders of a majority-in-interest of the Shares issued in
connection with this Subscription. Any amendment or waiver effected in
accordance with this paragraph 10(b) shall be binding upon each holder
of any Shares then outstanding, each future holder of all such Shares,
and the Corporation.
(c) This Subscription Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving
effect to the conflict of laws provisions of that state.
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 28 day of May, 1993.
Number of Shares Subscribed for: 2,750
-----
Dollar Amount Tendered$
$12,375 (amount of enclosed check)
- -------
/s/ Stephen Ruvolo
---------------------------------------
Authorized Signature of Subscriber
Stephen Ruvolo
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
One Hospital Trust Plaza T-04-05
---------------------------------------
Address
Providence, RI 02903
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF KANSAS )
)SS.:
COUNTY OF JOHNSON )
On this 9 day of June, 1993, before me, a notary public of the State of
, personally came Stephen Ruvolo, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Jacqueline A. Mahnken
---------------------------------------
Notary Public
My commission expires: 7/6/94
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 28 day of May, 1993.
Number of Shares Subscribed for: 5,555
-----
Dollar Amount Tendered$
$24,997.50 (amount of enclosed check)
- ----------
/s/ Barbara Kenerson
---------------------------------------
Authorized Signature of Subscriber
Barbara Kenerson
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
225 Meshanticut Valley Pky.
---------------------------------------
Address
Cranston, RI 02920
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF )
)SS.:
COUNTY OF )
On this 28th day of May, 1993, before me, a notary public of the State of
RI, personally came Barbara Kenerson, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise A. Mahr
---------------------------------------
Notary Public
My commission expires: 7/11/93
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 31st day of May, 1993.
Number of Shares Subscribed for: 53,350
------
Dollar Amount Tendered$
$240,675 (amount of enclosed check)
- --------
/s/ James Quinn
---------------------------------------
Authorized Signature of Subscriber
Allen & Company, Incorporated
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
711 Fifth Avenue
---------------------------------------
Address
New York, NY 10022
---------------------------------------
City/State/Zip Attn: John W. Quinn
13-6176976
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF NY )
)SS.:
COUNTY OF NY )
On this 1st day of June, 1993, before me, a notary public of the State
of NY, personally came James Quinn, to me known and known to me to be the
individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Maksymowicz
---------------------------------------
Notary Public
My commission expires: October 31, 1993
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 27th day of May, 1993.
Number of Shares Subscribed for: 160,000
-------
Dollar Amount Tendered$
$720,000 (amount being wired to Acct. #936-4946762 at Fleet Bank Acct. of
- -------- Aquidneck Systems Int'l. Inc.)
BROWN UNIVERSITY THIRD CENTURY FUND
By /s/ Robert Kolyer, Jr.
-------------------------------------
Authorized Signature of Subscriber
BROWN UNIVERSITY THIRD CENTURY FUND
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
164 ANGELL STREET - BOX C
---------------------------------------
Address
PROVIDENCE, RI 02912
---------------------------------------
City/State/Zip
22-2867085
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF RHODE ISLAND )
)SS.:
COUNTY OF PROVIDENCE )
On this 27th day of May, 1993, before me, a notary public of the State of
Rhode Island, personally came Robert J. Kolyer, Jr., to me known and known to
me to be the individual described in and who executed the foregoing instrument,
and acknowledged to me that he executed the same.
/s/ Pamela A. Mullaney
---------------------------------------
Notary Public
My commission expires: 7/30/93
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 28 day of May, 1993.
Number of Shares Subscribed for: 2,750
-----
Dollar Amount Tendered:
$12,375 (amount of enclosed check)
- -------
/s/ William J. Weiland
---------------------------------------
Authorized Signature of Subscriber
William J. Weiland
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
8 Cady St.
---------------------------------------
Address
Providence, RI 02902
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF RHODE ISLAND )
)SS.:
COUNTY OF WASHINGTON )
On this 31st day of May, 1993, before me, a notary public of the State of
RI, personally came William J. Weiland, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Henry
---------------------------------------
Notary Public
My commission expires: 5/4/95
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 31st day of May, 1993.
Number of Shares Subscribed for: 44,450
------
Dollar Amount Tendered$
$200,025 (amount of enclosed check)
- --------
/s/ Paul A. Gould
---------------------------------------
Authorized Signature of Subscriber
Paul A. Gould
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
c/o Allen & Company Incorporated
711 Fifth Avenue
---------------------------------------
Address
New York, NY 10022
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF NY )
)SS.:
COUNTY OF NY )
On this 1st day of June, 1993, before me, a notary public of the State
of NY, personally came Paul Gould, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Maksymowicz
---------------------------------------
Notary Public
My commission expires: October 31, 1993
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 31 day of May, 1993.
Number of Shares Subscribed for: 1,112
-----
Dollar Amount Tendered$
$5,004.00 (amount of enclosed check)
- ---------
/s/ Christopher C. Ingraham
---------------------------------------
Authorized Signature of Subscriber
Christopher C. Ingraham
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
99 F Sakonnet Pt. Rd.
---------------------------------------
Address
Little Compton, RI 02837
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF RHODE ISLAND )
)SS.:
COUNTY OF WASHINGTON )
On this 7th day of June, 1993, before me, a notary public of the State of
RI, personally came Christopher C. Ingraham, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Henry
---------------------------------------
Notary Public
My commission expires: 5/4/95
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 31 day of May, 1993.
Number of Shares Subscribed for: 2,223
-----
Dollar Amount Tendered$
$10,003.50 (amount of enclosed check)
- ----------
/s/ Mario Briccetti
---------------------------------------
Authorized Signature of Subscriber
Mario Briccetti
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
84 Gateway Rd.
---------------------------------------
Address
N. Kingstown, RI 02852
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Christopher C. Ingraham
------------------------------------
STATE OF RHODE ISLAND )
)SS.:
COUNTY OF WASHINGTON )
On this 7th day of June, 1993, before me, a notary public of the State of
RI, personally came Mario Briccetti, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Louise Henry
---------------------------------------
Notary Public
My commission expires: 5/4/95
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 31 day of May, 1993.
Number of Shares Subscribed for: 38,889
------
Dollar Amount Tendered$
$175,000.50 (amount of enclosed check)
- -----------
/s/ Malcolm G. Chace, III /G.P. Manold Co.
------------------------------------------
Authorized Signature of Subscriber
Manold Company
------------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
731 Hospital Trust Bldg.
------------------------------------------
Address
Providence, RI 02906
------------------------------------------
City/State/Zip
05-6008843
------------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Mario Briccetti
------------------------------------
STATE OF RHODE ISLAND )
)SS.:
COUNTY OF PROVIDENCE )
On this 29th day of June, 1993, before me, a notary public of the State of Rhode
Island, personally came Malcolm G. Chace, III, to me known and known to me to be
the individual described in and who executed the foregoing instrument, and
acknowledged to me that he executed the same.
/s/ Robert A. Caoale
---------------------------------------
Notary Public
My commission expires: June 19, 1995
<PAGE>
AGREEMENT
AGREEMENT dated as of February 29, 1996 between Aquidneck Systems
International, Inc., a Delaware corporation (the "Company"), and Brown
University Third Century Fund ("Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder have entered into Subscription
Agreements dated May ____, 1993, May 1994 and September 1994, pursuant to which
Stockholder purchased ___ shares of common stock of the Company, and was granted
certain rights with respect to price protection and registration of shares
("Subscription Agreements"); and
WHEREAS, Stockholder and the Company deem it advisable to effect the
transactions provided for in this Agreement in contemplation of a reverse stock
split, a financing and an initial public offering of the common stock of the
Company to the public.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
TERMINOLOGY
Section 1.1 Definitions. As used herein the following terms have the
meanings assigned to them below:
"Agreement" means this Agreement as amended from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company filed in the office of the Secretary of State of Delaware on
December 17, 1986, as amended to date.
"Closing" means the execution and delivery of the Underwriting
Agreement.
"Common Stock" means the common stock of the Company authorized to be
issued pursuant to Article FOURTH of the Certificate of Incorporation.
"Company" means Aquidneck Systems International, Inc., a Delaware
corporation.
"Offering" means the proposed public offering by the Company of the
Company's Common Stock to the public as described in the Registration
Statement.
"Registration Statement" means the Company's Registration Statement to
be filed with the United States Securities and Exchange Commission covering
the registration of the shares of Common Stock to be sold by the Company in
the Offering, as amended through the Closing.
"Shares" shall mean the shares of Common Stock issued to Stockholder
pursuant to the Subscription Agreements after giving effect to the reverse
stock split described in Section 2.1.
"Subscription Agreements" shall have the meaning set forth in the
preamble to this Agreement.
"Stockholder" and "Stockholders" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Underwriter" means Joseph Stevens & Company, or such other
underwriter as may be designated by the Company to underwrite the Offering.
"Underwriting Agreement" means the Underwriting Agreement to be
executed between the Company and the Underwriter with respect to the sale
of the Company's Common Stock to be made in connection with the Offering.
Section 1.2 Rules of Construction. Unless the context otherwise requires:
(a) "or" shall not be exclusive; (b) "includes" and "including" shall not be
limiting; (c) words in the singular shall include plural, and vice versa; and
(d) words in the masculine gender shall include the feminine and neuter and vice
versa.
Section 1.3 Conflicts with Certain Agreements. To the extent that the
transactions contemplated by this Agreement conflict with any applicable
provisions of the Subscription Agreement, such provisions are waived and the
provisions of this Agreement shall prevail.
ARTICLE II
CONSENT TO RECAPITALIZATION AND RELATED TRANSACTIONS
Section 2.1 Restated Certificate and Amended Restated Certificate. The
stockholders and Directors of the Company have heretofore approved the amendment
of the Certificate of Incorporation of the Company to effect in approximately 1
to 74 reverse split in stock. Stockholder hereby consents to such stock split.
ARTICLE III
CONSENT TO TERMS OF UNDERWRITING AGREEMENT
Section 3.1 Underwriting Agreement. The Directors of the Company have
heretofore approved the execution of the Letter of Intent, which contains the
terms of the proposed Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Underwriter will require that Stockholders of the Company (as of
the Closing) holding at least 98% of the issued and outstanding shares of common
stock execute an agreement to indicate their agreement: (a) to refrain from
selling any Shares for a period of eighteen (18) months following the Offering,
(b) to permit all certificates evidencing such Stockholder's Shares to be
endorsed with the appropriate restrictive legend and consent to the placement of
stop transfer orders with the Company's transfer agent; (c) to grant to the
Underwriter a twenty-four month right to sell for such Stockholder's account any
Shares sold by such Stockholder; and (d) to be bound by certain other
provisions, including, without limitation, provisions relating to market
practices, certain representations and warranties and the survival of
representations, warranties and agreements. Stockholder hereby agrees to execute
such an agreement in form satisfactory to the Underwriter.
ARTICLE IV
MODIFICATIONS TO SUBSCRIPTION AGREEMENTS
Section 4.1 Deletion of Price Protection Rights. Section 4 (Price
Protection) of the May 1993 Subscription Agreement provides that if additional
capital is raised by the Company from the sale of its common stock on or before
the closing of an initial public offering at less than a certain price per
share, the Corporation will issue to the Stockholder a certain number of
additional shares. In consideration of the mutual promises set forth herein,
Stockholder agrees that the May 1993 Subscription Agreement is hereby amended by
deleting Section 4 thereof.
Section 4.2 Modification of Registration Rights. Each of the Subscription
Agreements grants certain rights to the Stockholder with respect to registration
of the Shares. In consideration of the mutual promises set forth herein.
Stockholder agrees that the Subscription Agreement is hereby amended by deleting
the provisions concerning registration rights.
ARTICLE V
POWER OF ATTORNEY
Section 5.1 Power of Attorney. Stockholder irrevocably makes, constitutes
and appoints any officer or director of the Company, acting individually, the
true and lawful agent and attorney-in-fact for Stockholder and in Stockholder's
name to execute, acknowledge and deliver any documents relating to the Offering
or the Underwriting Agreement as may reasonably requested by the Underwriter to
further effect the intentions of the parties under this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Execution in Counterparts. This Agreement may be executed in
two or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 6.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. No person other than the parties hereto shall have any rights under or
by reason of this Agreement.
Section 6.3 Headings. The Articles and Section headings contained in this
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 6.4 Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 6.5 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 6.6 Amendments. No amendment or waiver of any provision of this
Agreement shall be effective unless in writing and signed by each of the parties
hereto, and any waiver shall be effective only in the instance and for the
purpose for which given.
Section 6.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, this Agreement has been duly executed by this
undersigned as of the date first written above.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By:
------------------------------------
BROWN UNIVERSITY THIRD CENTURY FUND
By: /s/ Robert J. Kolyer, Jr.
------------------------------------
Robert J. Kolyer, Jr., Treasurer
<PAGE>
AGREEMENT
AGREEMENT dated as of February 29, 1996 between Aquidneck Systems
International, Inc., a Delaware corporation (the "Company"), and Christopher C.
Ingraham ("Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder have entered into a Subscription
Agreement dated May 31, 1993 and October ____, 1994, pursuant to which
Stockholder purchased 7602 shares of common stock of the Company, and was
granted certain rights with respect to price protection and registration of
shares ("Subscription Agreement"); and
WHEREAS, Stockholder and the Company deem it advisable to effect the
transactions provided for in this Agreement in contemplation of a reverse stock
split, a financing and an initial public offering of the common stock of the
Company to the public.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
TERMINOLOGY
Section 1.1 Definitions. As used herein the following terms have the
meanings assigned to them below:
"Agreement" means this Agreement as amended from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company filed in the office of the Secretary of State of Delaware on
December 17, 1986, as amended to date.
"Closing" means the execution and delivery of the Underwriting
Agreement.
"Common Stock" means the common stock of the Company authorized to be
issued pursuant to Article FOURTH of the Certificate of Incorporation.
"Company" means Aquidneck Systems International, Inc., a Delaware
corporation.
"Offering" means the proposed public offering by the Company of the
Company's Common Stock to the public as described in the Registration
Statement.
"Registration Statement" means the Company's Registration Statement to
be filed with the United States Securities and Exchange Commission covering
the registration of the shares of Common Stock to be sold by the Company in
the Offering, as amended through the Closing.
"Shares" shall mean the shares of Common Stock issued to Stockholder
pursuant to the Subscription Agreement after giving effect to the reverse
stock split described in Section 2.1.
"Subscription Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Stockholder" and "Stockholders" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Underwriter" means Joseph Stevens & Company, or such other
underwriter as may be designated by the Company to underwrite the Offering.
"Underwriting Agreement" means the Underwriting Agreement to be
executed between the Company and the Underwriter with respect to the sale
of the Company's Common Stock to be made in connection with the Offering.
Section 1.2 Rules of Construction. Unless the context otherwise requires:
(a) "or" shall not be exclusive; (b) "includes" and "including" shall not be
limiting; (c) words in the singular shall include plural, and vice versa; and
(d) words in the masculine gender shall include the feminine and neuter and vice
versa.
Section 1.3 Conflicts with Certain Agreements. To the extent that the
transactions contemplated by this Agreement conflict with any applicable
provisions of the Subscription Agreement, such provisions are waived and the
provisions of this Agreement shall prevail.
ARTICLE II
CONSENT TO RECAPITALIZATION AND RELATED TRANSACTIONS
Section 2.1 Restated Certificate and Amended Restated Certificate. The
stockholders and Directors of the Company have heretofore approved the amendment
of the Certificate of Incorporation of the Company to effect an approximately 1
to 74 reverse split in stock. Stockholder hereby consents to such stock split.
ARTICLE III
CONSENT TO TERMS OF UNDERWRITING AGREEMENT
Section 3.1 Underwriting Agreement. The Directors of the Company have
heretofore approved the execution of the Letter of Intent, which contains the
terms of the proposed Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Underwriter will require that Stockholders of the Company (as of
the Closing) holding at least 98% of the issued and outstanding Shares execute
an agreement to indicate their agreement: (a) to refrain from selling any Shares
for a period of eighteen (18) months following the Offering, (b) to permit all
certificates evidencing such Stockholder's Shares to be endorsed with the
appropriate restrictive legend and consent to the placement of stop transfer
orders with the Company's transfer agent; (c) to grant to the Underwriter a
twenty-four month right to sell for such Stockholder's account any Shares sold
by such Stockholder; and (d) to be bound by certain other provisions, including,
without limitation, provisions relating to market practices, certain
representations and warranties and the survival of representations, warranties
and agreements. Stockholder hereby agrees to execute such an agreement in form
satisfactory to the Underwriter.
ARTICLE IV
MODIFICATIONS TO SUBSCRIPTION AGREEMENT
Section 4.1 Deletion of Price Protection Rights. Section 4 (Price
Protection) of the Subscription Agreement provides that if additional capital is
raised by the Company from the sale of its common stock on or before the closing
of an initial public offering at less than a certain price per share, the
Corporation will issue to the Stockholder a certain number of additional shares.
In consideration of the mutual promises set forth herein, Stockholder agrees
that the Subscription Agreement is hereby amended by deleting Section 4 thereof.
Section 4.2 Modification of Registration Rights. Section 9 of the
Subscription Agreement grants certain rights to the Stockholder with respect to
registration of the Shares. In consideration of the mutual promises set forth
therein, Stockholder agrees that the Subscription Agreement is hereby amended by
deleting Section 9 (Registration Rights) thereof.
ARTICLE V
POWER OF ATTORNEY
Section 5.1 Power of Attorney. Stockholder irrevocably makes, constitutes
and appoints any officer or director of the Company, acting individually, the
true and lawful agent and attorney-in-fact for Stockholder and in Stockholder's
name to execute, acknowledge and deliver any documents relating to the Offering
or the Underwriting Agreement as may reasonably requested by the Underwriter to
further effect the intentions of the parties under this Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Execution in Counterparts. This Agreement may be executed in
two or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 6.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. No person other than the parties hereto shall have any rights under or
by reason of this Agreement.
Section 6.3 Headings. The Articles and Section headings contained in this
Agreement are inserted for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 6.4 Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 6.5 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 6.6 Amendments. No amendment or waiver of any provision of this
Agreement shall be effective unless in writing and signed by each of the parties
hereto, and any waiver shall be effective only in the instance and for the
purpose for which given.
Section 6.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, this Agreement has been duly executed by this
undersigned as of the date first written above.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
------------------------------------
/s/ Christophen C. Ingraham
---------------------------------------
Christopher C. Ingraham
April 12, 1996
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated March 30, 1996, between AQUIDNECK SYSTEMS INTERNATIONAL,
INC., a Delaware corporation having an address at 650 Ten Rod Road, North
Kingstown, RI 02852 ("Buyer"), and STEPHEN RUVOLO, an individual having an
address at One Hospital Trust Plaza, T-04-05, Providence, RI 02903 ("Seller").
1. Purchase and Sale of Stock. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to convey, sell and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, at the "Closing" (as
defined in Section 8 below) 6,187 shares (before giving effect to Buyer's 1 for
74 reverse stock split) ("Sale Shares") of the common stock of Buyer. In
addition, Seller agrees that all of Seller's rights and obligations under a
certain Subscription Agreement dated May 1993 between Seller and the Corporation
shall terminate effective at the Closing. The aggregate consideration paid to
Seller for the purchase of the Sale Shares and the termination of Seller's
rights under the Subscription Agreement is $3,093.75 Dollars, payable at the
Closing as provided in Section 8 below.
2. Restricted Securities. Buyer acknowledges that the Sale Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"), but
have been issued and are being transferred to Buyer pursuant to exemptions from
registration under the Act.
3. Access to Information. Seller has been a stockholder of the Corporation
since 1993. As a result, he is familiar with the Corporation and its operations.
All data requested by Seller from the Corporation or Buyer concerning the
business and financial condition of the Corporation and the terms and conditions
of the Corporation's proposed reverse stock split, recapitalization, financing
and public offering has been furnished. Seller has had the opportunity to ask
questions of and receive answers to and to obtain additional information from
the Corporation concerning the Corporation and its proposed plans, and has no
unanswered questions.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to the Seller that Buyer has full power, authority and capacity to execute this
Agreement and perform the transactions required of it under this Agreement.
5. Representations and Warranties of Seller. Seller represents and warrants
to the Buyer that:
(a) Seller has full power, authority and capacity to execute this
agreement and perform the transactions required of him under this
Agreement;
(b) The Sales Shares are being transferred to Buyer free and clear of
all liens, encumbrances, security interests, and claims of third parties;
(c) Seller has not utilized any finder or broker in connection with
this Agreement; and
(d) Seller acknowledges that the purchase price for the Sale Shares
has been negotiated by the parties and has not been established with
reference to, nor does it necessarily reflect, the market value of the Sale
Shares, which may or may not be greater than or less than the purchase
price.
6. Confidentiality. This Agreement and its terms are confidential and shall
not be disclosed to any party other than the Company and its attorneys and
accountants except as required by law or as necessary to enforce this Agreement.
7. Survival of Representations and Warranties. The representations,
warranties and covenants of each party shall survive the Closing.
8. Closing. Upon the receipt by the Company of at least Seven Hundred Fifty
Thousand Dollars ($750,000) in financing ("Financing"), Buyer and Seller will
effect the following transactions ("Closing"):
(a) Seller will deliver to Buyer one or more certificates representing
the Sales Shares and will execute and deliver to Buyer a duly executed
stock assignment separate from the certificate transferring the Sale Shares
to Buyer; and
(b) Buyer will deliver to Seller Buyer's check in the amount of
$----------- .
9. Releases. Seller hereby releases and forever discharges Buyer, its
present and former officers, directors, employees, agents, subsidiaries,
successors and assigns from and against any and all liabilities, causes of
action, debts, claims and demands both in law and in equity known or unknown,
fixed or contingent, which he may have or claim to have based upon or in any way
related to the Subscription Agreement, and his purchase and ownership of the
Sale Shares and their sale pursuant to this agreement, and he hereby covenants
not to assert any such claim by instituting litigation or otherwise.
10. Cooperation. Buyer and Seller agree to cooperate so as to execute any
and all documents necessary to waive any restrictions on transfer of, and to
further evidence the transfer of, the Sale Shares to Buyer and to further
evidence the surrender of the Option.
11. Notices. Any notices required or permitted to be given hereunder shall
be given in writing and delivered in person or sent by postage prepaid, United
States certified or registered mail, return receipt requested, to the respective
parties at such address as may hereafter be designated by such party in writing
to the other party.
12. Termination. This Agreement is effective as of the date in the
introductory paragraph to this Agreement, but the obligations of the parties
shall terminate if the Corporation does not receive the Financing on or before
April 19, 1996.
13. Miscellaneous. This Agreement: (a) may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts together shall constitute one of the same instruments;
(b) shall be governed by and construed under the laws of the State of Rhode
Island applicable to contracts made, accepted, and performed wholly within Rhode
Island, without application of principles of conflicts of laws; (c) constitutes
the entire agreement of the parties with respect to the subject matter,
superseding all prior oral and written communications, proposals, negotiations,
representations, understandings, courses of dealing, agreements, contracts or
the like between the parties in such respects; (d) may be amended, modified, and
terminated, in any right under this Agreement may be waived in whole or part,
only by a writing signed by both parties; (e) contains headings only for
convenience, which headings do not form part, and shall not be used in
construction, of this agreement; and (f) shall bind and inure to the benefit of
the parties and their respective legal representatives, heirs, successors,
beneficiaries and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BUYER:
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/ Thomas E. Gardner
------------------------------------
SELLER:
/s/ Stephen Ruvolo
---------------------------------------
Stephen Ruvolo
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated March 19, 1996, between AQUIDNECK SYSTEMS
INTERNATIONAL, INC., a Delaware corporation having an address at 650 Ten
Rod Road, North Kingstown, RI 02852 ("Buyer"), and MARIO F. BRICCETTI, an
individual residing at 16242 Marina Del Rey, Grover, MO 63040 ("Seller").
1. Purchase and Sale of Stock. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to convey, sell and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, at the "Closing" (as
defined in Section 8 below) 39,489 shares (before giving effect to Buyer's 1 for
74 reverse stock split) ("Sale Shares") of the common stock of Buyer. In
addition, Seller agrees that all of Seller's rights and ob9ligations under a
certain Subscription Agreement dated May 1993 between Seller and the Corporation
shall terminate effective at the Closing. The aggregate consideration paid to
Seller for the purchase of the Sale Shares and the termination of Seller's
rights under the Subscription Agreement is $47,589.50 Dollars, payable at the
Closing as provided in Section 8 below.
2. Restricted Securities. Buyer acknowledges that the Sale Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"), but
have been issued and are being transferred to Buyer pursuant to exemptions from
registration under the Act.
3. Access to Information. Seller has been a stockholder of the Corporation
since 1986. As a result, he is familiar with the Corporation and its operations.
All data requested by Seller from the Corporation or Buyer concerning the
business and financial condition of the Corporation and the terms and conditions
of the Corporation's proposed reverse stock split, recapitalization, financing
and public offering has been furnished. Seller has had the opportunity to ask
questions of and receive answers to and to obtain additional information from
the Corporation concerning the Corporation and its proposed plans, and has no
unanswered questions.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to the Seller that Buyer has full power, authority and capacity to execute this
Agreement and perform the transactions required of it under this Agreement.
5. Representations and Warranties of Seller. Seller represents and warrants
to the Buyer that:
(a) Seller has full power, authority and capacity to execute this
agreement and perform the transactions required of him under this
Agreement;
(b) The Sales Shares are being transferred to Buyer free and clear of
all liens, encumbrances, security interests, and claims of third parties;
(c) Seller has not utilized any finder or broker in connection with
this Agreement; and (d) Seller acknowledges that the purchase price for the
Sale Shares has been negotiated by the parties and has not been established
with reference to, nor does it necessarily reflect, the market value of the
Sale Shares, which may or may not be greater than or less than the purchase
price.
6. Confidentiality. This Agreement and its terms are confidential and shall
not be disclosed to any party other than the Company and its attorneys and
accountants except as required by law or as necessary to enforce this Agreement.
7. Survival of Representations and Warranties. The representations,
warranties and covenants of each
party shall survive the Closing.
8. Closing. Upon the receipt by the Company of at least Seven Hundred Fifty
Thousand Dollars ($750,000) in financing ("Financing"), Buyer and Seller will
effect the following transactions ("Closing"):
(a) Seller will deliver to Buyer one or more certificates representing
the Sales Shares and will execute and deliver to Buyer a duly executed
stock assignment separate from the certificate transferring the Sale Shares
to Buyer; and
(b) Buyer will deliver to Seller Buyer's check in the amount of
$47,589.50.
9. Releases. (a) Seller hereby releases and forever discharges Buyer, its
present and former officers, directors, employees, agents, subsidiaries,
successors and assigns from and against any and all liabilities, causes of
action, debts, claims and demands both in law and in equity known or unknown,
fixed or contingent, which he may have or claim to have based upon or in any way
related to the Subscription Agreement, and his purchase and ownership of the
Sale Shares and their sale pursuant to this agreement, and he hereby covenants
not to assert any such claim by instituting litigation or otherwise.
(b) Buyer hereby releases and forever discharges Seller, and his heirs,
successors and assigns, from and against any and all liabilities, causes of
action, debts, claims and demands both in law and in equity known or unknown,
fixed or contingent, which Buyer may have or claim to have based upon or in any
way related to the Subscription Agreement, and Seller's purchase and ownership
of the Sale Shares and their sale pursuant to this agreement, and Buyer hereby
covenants not to assert any such claim by instituting litigation or otherwise.
10. Cooperation. Buyer and Seller agree to cooperate so as to execute any
and all documents necessary to waive any restrictions on transfer of, and to
further evidence the transfer of, the Sale Shares to Buyer and to further
evidence the surrender of the Option.
11. Notices. Any notices required or permitted to be given hereunder shall
be given in writing and delivered in person or sent by postage prepaid, United
States certified or registered mail, return receipt requested, to the respective
parties at such address as may hereafter be designated by such party in writing
to the other party.
12. Termination. This Agreement is effective as of the date in the
introductory paragraph to this Agreement, but the obligations of the parties
shall terminate if the Corporation does not receive the Financing on or before
April 1, 1996.
13. Miscellaneous. This Agreement: (a) may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts together shall constitute one of the same instruments;
(b) shall be governed by and construed under the laws of the State of Rhode
Island applicable to contracts made, accepted, and performed wholly within Rhode
Island, without application of principles of conflicts of laws; (c) constitutes
the entire agreement of the parties with respect to the subject matter,
superseding all prior oral and written communications, proposals, negotiations,
representations, understandings, courses of dealing, agreements, contracts or
the like between the parties in such respects; (d) may be amended, modified, and
terminated, in any right under this Agreement may be waived in whole or part,
only by a writing signed by both parties; (e) contains headings only for
convenience, which headings do not form part, and shall not be used in
construction, of this agreement; and (f) shall bind and inure to the benefit of
the parties and their respective legal representatives, heirs, successors,
beneficiaries and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BUYER:
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/ John E. Ottaviani 3/29/96
------------------------------------
Secretary
SELLER:
/s/ Mario F. Briccetti 3/19/96
---------------------------------------
Mario F. Briccetti
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated March 28, 1996, between AQUIDNECK SYSTEMS INTERNATIONAL,
INC., a Delaware corporation having an address at 650 Ten Rod Road, North
Kingstown, RI 02852 ("Buyer"), and BARBARA KENERSON, an individual having an
address at Paine Webber, One Citizens Plaza, Suite 900, Providence, RI 02903
("Seller").
1. Purchase and Sale of Stock. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to convey, sell and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, at the "Closing" (as
defined in Section 8 below) 14,498 shares ("Sale Shares") of the common stock of
Buyer. In addition, Seller agrees that all of Seller's rights and obligations
under a certain Subscription Agreement dated May 1993 between Seller and the
Corporation shall terminate effective at the Closing. The aggregate
consideration paid to Seller for the purchase of the Sale Shares and the
termination of Seller's rights under the Subscription Agreement is $31,497.50,
payable at the Closing as provided in Section 8 below.
2. Restricted Securities. Buyer acknowledges that the Sale Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"), but
have been issued and are being transferred to Buyer pursuant to exemptions from
registration under the Act.
3. Access to Information. Seller has been a stockholder of the Corporation
since 1993. As a result, she is familiar with the Corporation and its
operations. All data requested by Seller from the Corporation or Buyer
concerning the business and financial condition of the Corporation and the terms
and conditions of the Corporation's proposed reverse stock split,
recapitalization, financing and public offering has been furnished. Seller has
had the opportunity to ask questions of and receive answers to and to obtain
additional information from the Corporation concerning the Corporation and its
proposed plans, and has no unanswered questions.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that Buyer has full power, authority and capacity to execute this
Agreement and perform the transactions required of it under this Agreement.
5. Representations and Warranties of Seller. Seller represents and warrants
to the Buyer that:
(a) Seller has full power, authority and capacity to execute this
agreement and perform the transactions required of her under this
Agreement;
(b) The Sales Shares are being transferred to Buyer free and clear of
all liens, encumbrances, security interests, and claims of third parties;
(c) Seller has not utilized any finder or broker in connection with
this Agreement; and
(d) Seller acknowledges that the purchase price for the Sale Shares
has been negotiated by the parties and has not been established with
reference to, nor does it necessarily reflect, the market value of the Sale
Shares, which may or may not be greater than or less than the purchase
price.
6. Confidentiality. This Agreement and its terms are confidential and shall
not be disclosed to any party other than the Company and its attorneys and
accountants except as required by law or as necessary to enforce this Agreement.
7. Survival of Representations and Warranties. The representations,
warranties and covenants of each party shall survive the Closing.
8. Closing. Upon the receipt by the Company of at least Seven Hundred Fifty
Thousand Dollars ($750,000) in financing ("Financing"), Buyer and Seller will
effect the following transactions ("Closing"):
(a) Seller will deliver to Buyer one or more certificates representing
the Sales Shares and will execute and deliver to Buyer a duly executed
stock assignment separate from the certificate transferring the Sale Shares
to Buyer; and
(b) Buyer will deliver to Seller Buyer's check in the amount of
$31,497.50 .
9. Release. Stockholder hereby releases and forever discharges the
Corporation, its present and former officers, directors, employees, agents,
subsidiaries, successors and assigns from and against any and all liabilities,
causes of action, debts, claims and demands both in law and in equity known or
unknown, fixed or contingent, which she may have or claim to have based upon or
in any way related to the Subscription Agreement, and her purchase and ownership
of the Sale Shares and their sale pursuant to this agreement; and she hereby
covenants not to assert any such claim by instituting litigation or otherwise.
10. Cooperation. Buyer and Seller agree to cooperate so as to execute any
and all documents necessary to waive any restrictions on transfer of, and to
further evidence the transfer of, the Sale Shares to Buyer.
11. Notices. Any notices required or permitted to be given hereunder shall
be given in writing and delivered in person or sent by postage prepaid, United
States certified or registered mail, return receipt requested, to the respective
parties at such address as may hereafter be designated by such party in writing
to the other party.
12. Termination. This Agreement is effective as of the date in the
introductory paragraph to this Agreement, but the obligations of the parties
shall terminate if the Corporation does not receive the Financing on or before
April 19, 1996.
13. Miscellaneous. This Agreement: (a) may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts together shall constitute one of the same instruments;
(b) shall be governed by and construed under the laws of the State of Rhode
Island applicable to contracts made, accepted, and performed wholly within Rhode
Island, without application of principles of conflicts of laws; (c) constitutes
the entire agreement of the parties with respect to the subject matter,
superseding all prior oral and written communications, proposals, negotiations,
representations, understandings, courses of dealing, agreements, contracts or
the like between the parties in such respects; (d) may be amended, modified, and
terminated, in any right under this Agreement may be waived in whole or part,
only by a writing signed by both parties; (e) contains headings only for
convenience, which headings do not form part, and shall not be used in
construction, of this agreement; and (f) shall bind and inure to the benefit of
the parties and their respective legal representatives, heirs, successors,
beneficiaries and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BUYER:
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
-------------------------------------
SELLER:
/s/ Barbara Kenerson
-----------------------------------
Barbara Kenerson
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated March 29th, 1996, between AQUIDNECK SYSTEMS
INTERNATIONAL, INC., a Delaware corporation having an address at 650 Ten Rod
Road, North Kingstown, RI 02852 ("Buyer"), and WILLIAM J. WEILAND, an individual
having an address at 15 Westminster Street, Suite 724, Providence, RI 02903
("Seller").
1. Purchase and Sale of Stock. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to convey, sell and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, at the "Closing" (as
defined in Section 8 below) 6,187 shares (before giving effect to Buyer's 1 for
74 reverse stock split) ("Sale Shares") of the common stock of Buyer. In
addition, Seller agrees that all of Seller's rights and obligations under a
certain Subscription Agreement dated May 1993 between Seller and the Corporation
shall terminate effective at the Closing. The aggregate consideration paid to
Seller for the purchase of the Sale Shares and the termination of Seller's
rights under the Subscription Agreement is $3,093.75 Dollars, payable at the
Closing as provided in Section 8 below.
2. Restricted Securities. Buyer acknowledges that the Sale Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"), but
have been issued and are being transferred to Buyer pursuant to exemptions from
registration under the Act.
3. Access to Information. Seller has been a stockholder of the Corporation
since 1993. As a result, he is familiar with the Corporation and its operations.
All data requested by Seller from the Corporation or Buyer concerning the
business and financial condition of the Corporation and the terms and conditions
of the Corporation's proposed reverse stock split, recapitalization, financing
and public offering has been furnished. Seller has had the opportunity to ask
questions of and receive answers to and to obtain additional information from
the Corporation concerning the Corporation and its proposed plans, and has no
unanswered questions.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to the Seller that Buyer has full power, authority and capacity to execute this
Agreement and perform the transactions required of it under this Agreement.
5. Representations and Warranties of Seller. Seller represents and warrants
to the Buyer that:
(a) Seller has full power, authority and capacity to execute this
agreement and perform the transactions required of him under this
Agreement;
(b) The Sales Shares are being transferred to Buyer free and clear of
all liens, encumbrances, security interests, and claims of third parties;
(c) Seller has not utilized any finder or broker in connection with
this Agreement; and
(d) Seller acknowledges that the purchase price for the Sale Shares
has been negotiated by the parties and has not been established with
reference to, nor does it necessarily reflect, the market value of the Sale
Shares, which may or may not be greater than or less than the purchase
price.
6. Confidentiality. This Agreement and its terms are confidential and shall
not be disclosed to any party other than the Company and its attorneys and
accountants except as required by law or as necessary to enforce this Agreement.
7. Survival of Representations and Warranties. The representations,
warranties and covenants of each party shall survive the Closing.
8. Closing. Upon the receipt by the Company of at least Seven Hundred Fifty
Thousand Dollars ($750,000) in financing ("Financing"), Buyer and Seller will
effect the following transactions ("Closing"):
(a) Seller will deliver to Buyer one or more certificates representing
the Sales Shares and will execute and deliver to Buyer a duly executed
stock assignment separate from the certificate transferring the Sale Shares
to Buyer; and
(b) Buyer will deliver to Seller Buyer's check in the amount of
$____________ .
9. Releases. Seller hereby releases and forever discharges Buyer, its
present and former officers, directors, employees, agents, subsidiaries,
successors and assigns from and against any and all liabilities, causes of
action, debts, claims and demands both in law and in equity known or unknown,
fixed or contingent, which he may have or claim to have based upon or in any way
related to the Subscription Agreement, and his purchase and ownership of the
Sale Shares and their sale pursuant to this agreement, and he hereby covenants
not to assert any such claim by instituting litigation or otherwise.
10. Cooperation. Buyer and Seller agree to cooperate so as to execute any
and all documents necessary to waive any restrictions on transfer of, and to
further evidence the transfer of, the Sale Shares to Buyer and to further
evidence the surrender of the Option.
11. Notices. Any notices required or permitted to be given hereunder shall
be given in writing and delivered in person or sent by postage prepaid, United
States certified or registered mail, return receipt requested, to the respective
parties at such address as may hereafter be designated by such party in writing
to the other party.
12. Termination. This Agreement is effective as of the date in the
introductory paragraph to this Agreement, but the obligations of the parties
shall terminate if the Corporation does not receive the Financing on or before
April 19, 1996.
13. Miscellaneous. This Agreement: (a) may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts together shall constitute one of the same instruments;
(b) shall be governed by and construed under the laws of the State of Rhode
Island applicable to contracts made, accepted, and performed wholly within Rhode
Island, without application of principles of conflicts of laws; (c) constitutes
the entire agreement of the parties with respect to the subject matter,
superseding all prior oral and written communications, proposals, negotiations,
representations, understandings, courses of dealing, agreements, contracts or
the like between the parties in such respects; (d) may be amended, modified, and
terminated, in any right under this Agreement may be waived in whole or part,
only by a writing signed by both parties; (e) contains headings only for
convenience, which headings do not form part, and shall not be used in
construction, of this agreement; and (f) shall bind and inure to the benefit of
the parties and their respective legal representatives, heirs, successors,
beneficiaries and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BUYER:
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
------------------------------------
SELLER:
/s/ William J. Weiland
-----------------------------------
William J. Weiland
Exhibit 10.u
Aquidneck Systems International, Inc.
SUBSCRIPTION AGREEMENT
TO: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
The undersigned understands that Aquidneck Systems International,
Inc., a Delaware corporation (the "Corporation"), is offering to sell at least
500,001 shares of Common Stock, par value $.01 per share (the "Shares") of the
Corporation at a price of $2.00 per share (the "Subscription").
The undersigned hereby agrees as follows:
1. Subscription. Subject to the terms and conditions contained herein, the
undersigned hereby irrevocably agrees to purchase such number of Shares set
forth on the signature page hereto (the "Subscribed Shares") at a purchase price
of $2.00 per share. Payment for the Subscribed Shares shall be made by check
payable to the order of "Aquidneck Systems International, Inc." which is
enclosed herewith or by wire transfer on or before the Closing Date (hereinafter
defined) in accordance with instructions provided by the Corporation. A closing
for the purchase of the Shares in this Subscription (the "Closing") shall be
held on the date designated upon five (5) days notice by the Corporation, but no
later than May 31, 1994, at which time all of the conditions of Section 7 hereof
have been satisfied (the "Closing Date").
2. Representation and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Corporation that the undersigned:
(a) has adequate means of providing for his current needs and
possible personal contingencies, and has no need for liquidity of his
investment in the Corporation;
(b) is able to bear the substantial economic risks of an
investment in the Corporation for an indefinite period and, at the
present time, could afford a complete loss of such investment;
(c) has, either alone or together with his special advisors
("Purchaser Representatives"), such knowledge and experience in
financial matters that he is capable of evaluating the risks of this
investment;
(d) has received and read or reviewed with his Purchaser
Representative and is familiar with, this Subscription Agreement;
(e) he and/or his Purchaser Representative has had an opportunity
to ask questions of and receive answers from the Corporation
concerning the terms and conditions of this investment;
(f) understands that the Shares have not been registered under
the Securities Act of 1933 (the "Securities Act") in reliance upon an
exemption thereunder and, in connection therewith, represents that the
Shares for which he hereby subscribes are being acquired solely for
his own account, for investment and are not being purchased with a
view to or for the resale, distribution or transfer thereof;
(g) acknowledges and is aware of the following:
(i) the Shares represent a speculative investment which
involves a high degree of risk of loss and there is no guarantee
that the undersigned will realize any gain from such investment
or that the undersigned will not lose his entire investment in
the Corporation;
(ii) there are substantial restrictions on the
transferability of the Shares; the Shares will not be, and
investors in the Corporation have no right to require that the
Shares be, registered under the Securities Act;
(iii) there will be no public market for the Shares; and the
undersigned will not immediately be able to avail himself of the
provisions of Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act with respect to the resale of
the Shares; and
(iv) all certificates for the Shares to be issued upon
completion of this private placement will bear the following
legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or the securities laws of
any state. Such shares may not be offered for sale, sold, delivered
after sale, transferred, pledged or hypothecated, in the absence of an
effective registration statement covering such shares under the Act
and any applicable state securities laws, unless the holder shall have
obtained an opinion of counsel satisfactory to the corporation that
such registration is not required."
(h) acknowledges that he has received and reviewed the
Confidential Memorandum dated March 18, 1994, (the "Memorandum"); that
he is purchasing the Shares without being furnished any offering
literature or prospectus other than the Memorandum and this
Subscription Agreement; that all documents, records and books
pertaining to this investment have been made available to the
Purchaser Representative, attorney and/or accountant for the
undersigned, as well as to the undersigned, and that all questions of
the undersigned pertaining to this investment have been answered by
the Corporation;
(i) acknowledges that he is not relying on any information
concerning estimated future results of the Corporation contained in
the Memorandum, that the forecasts do not constitute any
representation as to what actual results of the Corporation's
operations will be, and are based on many factors that are not within,
or are only partially within, the control of the Corporation; and
(j) represents that the foregoing representations and warranties
are true and accurate as of the date hereof and shall be true and
accurate as of the date this Subscription Agreement is accepted by the
Corporation.
3. Indemnification. The undersigned acknowledges and understands the meaning and
legal consequences of the representations and warranties herein and hereby
agrees to indemnify and hold harmless the Corporation and its respective
officers, directors, controlling persons, agents, employees, attorneys and
accountants from and against any and all loss, damage or liability, together
with all costs and expenses (including attorney's fees and disbursements) which
any of them may incur by reason of any breach of any representation, warranty or
agreement of the undersigned contained in this Subscription Agreement. Not
withstanding the foregoing, no representation, warranty, acknowledgment or
agreement made herein by the undersigned shall in any manner be deemed to
constitute a waiver of any rights granted to the undersigned under Federal or
state securities laws or of any breach of representation, warranty or covenant
under this Subscription Agreement. All representations and warranties contained
in this Subscription Agreement, and the indemnification contained in this
paragraph 3, shall survive the acceptance of this subscription.
4. Arrangements Respecting Management and Board Representation. The Corporation
agrees with the undersigned as follows:
(a) The Corporation will hire Matthias E. Lukens (the
"Executive") with a corporate title to be determined on terms
reasonably satisfactory to the Corporation and the undersigned.
(b) Brown University Third Century Fund ("Brown"), following
consultation with Allen & Company Incorporated, will have the right to
designate one nominee to the Company's Board of Directors. The
undersigned, the Corporation and its management will take all action
necessary (including the voting of all shares of Common Stock held by
the undersigned from time to time) to cause such designee (or any
substitute therefor) to be appointed to the Board and, thereafter, to
be elected to the Board upon the resignation, removal or expiration of
the term of such designee (or any substitute therefor). Until it is
feasible for such designee to join the Board, from and after the
Closing Date, a person designated by Brown will have the right to be
present at all meetings of the Board and its committees and to receive
any and all materials provided to members of the Board.
5. Revocation. The undersigned agrees that he is not entitled to cancel or
revoke this Subscription Agreement, except upon breach by the Corporation of any
of the representations, warranties or covenants hereof or failure of the
Corporation to satisfy any of the conditions set forth in Section 7, and that
the same shall be binding upon and inure to the benefit of his heirs, executors,
administrators and successors except if the Corporation does not raise at least
$1,000,000 at the closing of this subscription.
6. Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants to the undersigned that:
(a) the Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has full power and authority (corporate and otherwise) to conduct
its business as presently conducted and proposed to be conducted by it
and to effect the Subscription or to carry out the transactions
contemplated hereby;
(b) (1) the authorized capital stock of the Corporation consists
of 2,000,000 shares of Common Stock, par value $.0l per share, of
which l,396,415 are issued and outstanding, (2) except for (i) the
Shares issuable pursuant to this Agreement and the other Subscription
Agreements entered into in connection with the Subscription, (ii)
shares of common stock of the Corporation issuable pursuant to Section
4 of the Subscription Agreements dated June 1, 1993 between the
Corporation and the investors party thereto, and (iii) currently
outstanding options and warrants to purchase up to an aggregate of
300,544 shares of Common Stock at prices ranging from $1.00 to $5.40
per share (detailed information relating to which has previously been
delivered to the undersigned), at the time of the Closing there will
be no outstanding securities, options or other rights to acquire any
capital stock or securities of the Corporation and (3) there are no
agreements made by or known to the Corporation, other than those
referred to in clause (2) above, respecting the ownership, voting or
other aspects of any shares of the Corporation's capital stock;
(c) except for the approval of the Corporation's stockholders of
an increase in the authorized capitalization of the Corporation
contemplated in Section 7(e) below, no consent, authorization or other
approval from, nor any registration, qualification or filing with, any
person or governmental authority is required in connection with the
Subscription or the transactions contemplated hereby, which consent,
authorization or approval has not heretofore been obtained or which
registration, qualification or filing has not heretofore been made;
(d) except for the approval of the Corporation's stockholders of
an increase in the authorized capitalization of the Corporation
contemplated in Section 7(e) below, the Corporation has taken all
corporate action on the part of the Corporation to authorize and
approve the Subscription and the transactions contemplated hereby and
the Subscribed Shares, when paid for and delivered pursuant to the
terms hereof, will be validly issued, fully paid and nonassessable;
and
(e) the information provided by the Corporation to the
undersigned in connection with this Subscription Agreement does not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made not
misleading.
7. Conditions to the Undersigned's Obligations. The obligations of the
undersigned to purchase the Subscribed Shares shall be subject to the following
conditions:
(a) The representations and warranties of the Corporation
contained herein shall be true and accurate in all material respects
on and as of the Closing Date with the same effect as if such
representations and warranties had been made on such date.
(b) The Corporation shall have performed all of the covenants
made hereunder to be performed by it on or prior to the Closing Date.
(c) The Corporation shall have issued to the undersigned
certificates, registered in the name of the undersigned, representing
the Subscribed Shares.
(d) The Corporation shall have received payment for, and
irrevocably accepted subscriptions for, an aggregate at least 500,001
Shares in connection with the Subscription.
(e) The stockholders of the Corporation shall have approved an
amendment to the Corporation's Certificate of Incorporation increasing
the authorized capital stock to a number of shares sufficient to
consummate the transactions contemplated hereby.
(f) The Corporation shall have delivered to the undersigned a
certificate, executed by the President of the Corporation, dated the
Closing Date, certifying to the fulfillment of the above conditions
and other matters reasonably requested by the undersigned.
(g) The Corporation shall have retained the Executive on terms
reasonably satisfactory to the undersigned.
(h) There shall have been no material adverse change in the
business, operations, properties or prospects of the Corporation from
the date of the Memorandum through the Closing Date.
8. Covenants of the Corporation. The Corporation hereby agrees as follows:
(a) Until such time that the Corporation has registered its
Common Stock pursuant to Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act") to deliver to the undersigned:
(i) within ninety (90) days after the end of each fiscal
year of the Corporation, an audited balance sheet of the
Corporation as at the end of such year and audited statements of
income and of cash flows of the Corporation for such year,
certified by certified public accountants of established national
reputation selected by the Corporation, and prepared in
accordance with generally accepted accounting principles;
(ii) within thirty (30) days after the end of each fiscal
quarter of the Corporation, an unaudited balance sheet of the
Corporation as at the end of such quarter, and unaudited
statements of income and of cash flows of the Corporation for
such fiscal quarter and for the current fiscal year to the end of
such fiscal quarter; and
(iii) within ten (10) days of delivery, such other notices,
information, and data with respect to the Corporation as the
Corporation delivers to the holders of its Common Stock, the
Securities and Exchange Commission, or any securities exchange on
which capital stock of the Corporation may be listed, and such
other information and data as the undersigned may from time to
time reasonably request.
(b) Once the Corporation has registered its Common Stock pursuant
to Section 12 of the Exchange Act, to file such reports and take such
other action necessary to allow the undersigned to sell the Shares
pursuant to Rule 144 under the Securities Act of 1933.
9. Registration Rights.
(a) Certain Definitions. As used in this Section 9 and elsewhere
in this Subscription Agreement, the following terms shall have the
following respective meanings:
(i) "Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time administering
the Securities Act.
(ii) "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Commission issued under such Act, as they
each may, from time to time, be in effect.
(iii) "Registration Statement" means a registration
statement filed by the Corporation with the Commission for a
public offering and sale of securities of the Corporation (other
than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be
issued in exchange for securities or assets of another
corporation).
(iv) "Registration Expenses" means the expenses described in
subsection 9(f).
(v) "Registrable Shares" means (1) the Shares and (2) any
other shares of Common Stock of the Corporation issued in respect
of the Shares (because of stock splits, stock dividends,
reclassifications, or similar events); provided, however, that
shares of Common Stock that are Registrable Shares shall cease to
be Registrable Shares (i) upon any sale pursuant to a
Registration Statement, Section 4(1) of the Securities Act, or
Rule 144 under the Securities Act or (ii) at such time as they
are eligible for sale pursuant to Rule 144(k) under the
Securities Act.
(vi) "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
(vii) "Stockholders" means the purchasers of Shares in
connection with the Subscription and any persons or entities to
whom the rights granted under this Section 9 are transferred by
any purchasers, their successors or assigns pursuant to the terms
hereof.
(b) Sale or Transfer of Shares; Legend.
(i) The Shares and the Registrable Shares and shares issued
in respect of the Shares or the Registrable Shares shall not be
sold or transferred unless either (1) they first shall have been
registered under the Securities Act, or (2) the Corporation first
shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Corporation, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(ii) Each certificate representing the Shares and the
Registrable Shares and shares issued in respect of the Shares or
the Registrable Shares shall bear the legend set forth in Section
2 hereof. Such legend shall be removed from the certificates
representing any Registrable Shares, at the request of the holder
thereof, at such time as they become eligible for resale pursuant
to Rule 144(k) under the Securities Act.
(iii) The Corporation agrees, upon the request of the
undersigned to make available to the undersigned and to any
prospective transferee of any Shares or Registrable Shares of the
undersigned the information concerning the Corporation described
in Rule l 44A(d)(4) under the Securities Act.
(c) Required Registrations.
(i) At any time after the earlier of the third anniversary
of the date hereof or the closing of the Corporation's first
underwritten public offering of shares of Common Stock pursuant
to a Registration Statement, a Stockholder or Stockholders
holding in the aggregate at least 250,000 Registrable Shares (as
adjusted for stock splits, stock dividends, recapitalizations and
the like) may request, in writing, that the Corporation effect
the registration on Form S-1, Form S-2 or Form SB-2 (or any
successor form) of Registrable Shares owned by such Stockholder
or stockholders having an aggregate offering price of at least
$300,000 (based on the then current market price or fair value)
in accordance with the intended methods of distribution as
specified by the Stockholders in such notice. If the holders
initiating the registration intend to distribute the Registrable
Shares by means of an underwriting, they shall so advise the
Corporation in their request. In the event such registration is
underwritten, the right of other Stockholders to participate
shall be conditioned on such Stockholders' participation in such
underwriting. Upon receipt of any such request, the Corporation
shall promptly give written notice of such proposed registration
to all Stockholders. Such Stockholders shall have the right, by
giving written notice to the Corporation within thirty (30) days
after the Corporation provides its notice, to elect to have
included in such registration such of their Registrable Shares as
such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the offering
determines that, because of marketing factors, all of the
Registrable Shares requested to be registered by all Stockholders
may not be included in the offering, then all Stockholders who
have requested registration shall participate in the offering pro
rata based upon the number of Registrable Shares that they have
requested to be so registered. Thereupon, the Corporation shall,
as expeditiously as possible, use its best efforts to effect the
registration, on Form S-1, Form S-2 or Form SB-2 (or any
successor form), of all Registrable Shares that the Corporation
has been requested to so register.
(ii) At any time after the Corporation becomes eligible to
file a Registration Statement on Form S-3 (or any successor form
relating to secondary offerings), a Stockholder or Stockholders
holding in the aggregate at least 250,000 Registrable Shares (as
adjusted for stock splits, stock dividends, recapitalizations and
the like) may request the Corporation, in writing, to effect the
registration on Form S-3 (or such successor form), of Registrable
Shares having an aggregate offering price of at least $ 100,000
(based on the current public market price) in accordance with the
intended methods of distribution as specified by the Stockholders
in such notice. Upon receipt of any such request, the Corporation
shall promptly give written notice of such proposed registration
to all Stockholders. Such Stockholders shall have the right, by
giving written notice to the Corporation within thirty (30) days
after the Corporation provides its notice, to elect to have
included in such registration such of their Registrable Shares as
such Stockholders may request in such notice of election;
provided that if the underwriter (if any) managing the offering
determines that, because of marketing factors, all of the
Registrable Shares requested to be registered by all Stockholders
may not be included in the offering, then all Stockholders who
have requested registration shall participate in the offering pro
rata based upon the number of Registrable Shares that they have
requested to be so registered. Thereupon, the Corporation shall,
as expeditiously as possible, use its best efforts to effect the
registration on Form S-3, or such successor form, of all
Registrable Shares that the Corporation has been requested to
register.
(iii) The Corporation shall not be required to effect more
than two registrations pursuant to paragraph 9(c)(i) and
paragraph 9(c)(ii) above and, furthermore, the Corporation shall
not be required to include the Registrable Shares of any
Stockholder in a registration pursuant to paragraph 9(c)(i) or
paragraph 9(c)(ii) above if the Corporation provides evidence
that it offered to include all Registrable Shares held by such
Stockholder in two previous registrations (A) pursuant to
paragraph 9(c)(i) or 9(c)(ii) above or (B) along with shares
included in required registrations pursuant to paragraph 9(c)(i)
or 9(c)(ii) of the Subscription Agreement dated on or about June
1, 1993, between the Corporation and such Stockholder. In
addition, the Corporation shall not be required to effect any
registration (other than on Form S-3 or any successor form
relating to secondary offerings) within six (6) months after the
effective date of any other Registration Statement of the
Corporation.
(iv) If at the time of any request to register Registrable
Shares pursuant to this subsection 9(c), the Corporation is
engaged or has fixed plans to engage within thirty (30) days of
the time of the request in a registered public offering as to
which the Stockholders may include Registrable Shares pursuant to
subsection 9(d) or is engaged in any other activity that, in the
good faith determination of the Corporation's Board of Directors,
would be adversely affected by the requested registration to the
material detriment of the Corporation, then the Corporation may
at its option direct that such request be delayed for a period
not in excess of six months from the effective date of such
offering or the date of commencement of such other material
activity, as the case may be, such right to delay a request to be
exercised by the Corporation not more than once in any two year
period.
(d) Incidental Registration.
(i) Whenever the Corporation proposes to file a Registration
Statement (other than pursuant to subsection 9(c)) at any time
and from time to time, it will, prior to such filing, give
written notice to all Stockholders of its intention to do so and,
upon the written request of a Stockholder or Stockholders given
within twenty (20) days after the Corporation provides such
notice (which request shall state the intended method of
disposition of such Registration Shares), the Corporation shall
use its best efforts to cause all Registrable Shares that the
Corporation has been requested by such Stockholder or
Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of
distribution specified in the request of such Stockholder or
Stockholders; provided that the Corporation shall have the right
to postpone or withdraw any registration effected pursuant to
this subsection 9(d) without obligation to any Stockholder.
(ii) In connection with any offering under this subsection
9(d) involving an underwriting, the Corporation shall not be
required to include any Registrable Shares in such offering
unless the holders thereof accept the terms of the underwriting
as agreed upon between the Corporation and the underwriters
selected by it (provided that such terms must be consistent with
this Agreement), and then only in such quantity as will not, in
the opinion of the underwriters, jeopardize the success of the
offering by the Corporation. If in the opinion of the managing
underwriter the registration of all, or part of, the Registrable
Shares that the holders have requested to be included would
materially and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting only
that number of Registrable Shares, if any, that the managing
underwriter believes may be sold without causing such adverse
effect; provided that no persons or entities other than the
Corporation, the Stockholders and persons or entities holding
registration rights granted in accordance with Section 9(k)
hereof shall be permitted to include securities in the offering.
If the number of Registrable Shares to be included in the
underwriting in accordance with the foregoing is less than the
total number of shares that the holders of Registrable Shares
have requested to be included, then the holders of Registrable
Shares who have requested registration and other holders of
shares of Common Stock entitled to include shares of Common Stock
in such registration shall participate in the underwriting pro
rata based upon their total ownership of shares of Common Stock
of the Corporation (giving effect to the conversion into Common
Stock of all securities convertible thereinto). If any holder
would thus be entitled to include more shares than such holder
requested to be registered, the excess shall be allocated among
other requesting holders pro rata based upon their total
ownership of Registrable Shares.
(e) Registration Procedures. If and whenever the Corporation is
required by the provisions of this Agreement to use its best
efforts to effect the registration of any of the Registrable
Shares under the Securities Act, the Corporation shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of a firm commitment underwritten public
offering, until each underwriter has completed the distribution
of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares
covered thereby or one hundred twenty (120) days after the
effective date thereof;
(iii) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the
Registrable Shares owned by the selling Stockholder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of
such states as the selling Stockholders shall reasonably request,
and do any and all other acts and things that may be necessary or
desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the
Registrable Shares owned by the selling Stockholder; provided,
however, that the Corporation shall not be required in connection
with this paragraph 9(e)(iv) to qualify as a foreign corporation
or execute a general consent to service of process in any
jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the selling Stockholders and after having done so
the prospectus is amended to comply with the requirements of the
Securities Act, the Corporation shall promptly notify the selling
Stockholders and, if requested, the selling Stockholders shall
immediately cease making offers of Registrable Shares and return
all prospectuses to the Corporation. The Corporation shall
promptly provide the selling Stockholders with revised
prospectuses and, following receipt of the revised prospectuses,
the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
(f) Allocation of Expenses. The Corporation will pay all
Registration Expenses of all registrations under this Agreement;
provided, however that if a registration under Section 9(c) is
withdrawn at the request of the Stockholders requesting such
registration (other than as a result of information concerning the
business or financial condition of the Corporation that is made known
to the Stockholders after the date on which such registration was
requested) and if the requesting Stockholders elect not to have such
registration counted as a registration requested under subsection
9(c), the requesting Stockholders shall pay the Registration Expenses
of such registration pro rata in accordance with the number of their
Registrable Shares included in such registration. For purposes of this
Section, the term "Registration Expenses" shall mean all expenses
incurred by the Corporation in complying with this Section 9,
including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees, and expenses of
counsel for the Corporation and the fees and expenses of one counsel
selected by the selling Stockholders to represent the selling
Stockholders, state Blue Sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but
excluding underwriting discounts, selling commission, and the fees and
expenses of selling Stockholders' own counsel (other than the counsel
selected to represent all selling Stockholders).
(g) Indemnification and Contribution. In the event of any
registration of any of the Registrable Shares under the Securities Act
pursuant to this Agreement, the Corporation will indemnify and hold
harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages, or liabilities,
joint or several, to which such seller, underwriter, or controlling
person may become subject under the Securities Act, the Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus, or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Corporation will reimburse
such seller, underwriter, and each such controlling person in
connection with investigation or defending any such loss, claim,
damage, liability, or action; provided, however, that the Corporation
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Corporation, in writing, by or on behalf of such seller, underwriter,
or controlling person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Corporation, each of its directors and officers and each
underwriters (if any) and each person. if any, who controls the
Corporation or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims.
damages, or liabilities, joint or several, to which the Corporation,
such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based
upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such
seller furnished in writing to the Corporation by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement;
provided, however, that the obligations of such Stockholders hereunder
shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such
Registration.
Each party entitled to indemnification under this subsection 9(g) (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified party has actually knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section
9. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigations, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (1) any
holder of Registrable Shares exercising rights under this Agreement,
or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 9(g) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
9(g) provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances
for which indemnification is provided under this Section 9(g); then,
in each such case, the Corporation and such Stockholder will
contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from others) in such
proportions so that such holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Shares offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration
Statement, and the Corporation is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess pursuant to such
Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person
or entity who is not guilty of such fraudulent misrepresentation.
(h) Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration
Statement in an underwritten offering pursuant to subsection 9(c)(i),
the Corporation agrees to enter into an underwriting agreement
containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by
such issuer, including without limitation customary provisions with
respect to indemnification by the Corporation of the underwriters of
such offering.
(i) Information by Holder. Each holder of Registrable Shares
included in any registration shall furnish to the Corporation such
information regarding such holder and the distribution proposed by
such holder as the Corporation may request in writing and as shall be
required in connection with any registration, qualification or
compliance referred to in this Section 9.
(j) "Stand-Off" Agreement. Each Stockholder, if requested by the
Corporation and an underwriter of Common Stock or other securities of
the Corporation, shall agree not to sell or otherwise transfer or
dispose of any Registrable Shares or other securities of the
Corporation held by such Stockholder for a specified period of time
(not to exceed 120 days) following the effective date of a
Registration Statement; provided, that:
(i) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the Corporation
to be sold on its behalf to the public in an underwritten
offering; and
(ii) all Stockholders holding not less than the number of
shares of Common Stock held by such Stockholder (including shares
of Common stock issuable upon the conversion of Shares, or other
convertible securities, or upon the exercise of options, warrants
or rights) and all officers and directors of the Corporation
enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the Registrable Shares or
other securities subject to the foregoing restriction until the end of
the standoff period.
(k) Limitation on Subsequent Registration Rights. The Corporation
shall not, without the prior written consent of Stockholders holding
at least 50% of the Registrable Shares, enter into any agreement with
any holder or prospective holder of any securities of the Corporation
that would allow such holder or prospective holder (a) to include
securities of the Corporation in any registration filed under
subsection 9(c) or 9(d), unless under the terms of such agreement,
such holder or prospective holder may include such securities in any
such registration only on terms substantially similar to the terms on
which holders of Registrable Shares may include shares in such
registration, or (b) to make a demand registration that could result
in such registration statement being declared effective prior to a
demand registration under this Section 9.
10. Miscellaneous.
(a) All notices or other communications hereunder shall be in
writing and shall either be personally delivered or transmitted by
registered or certified mail, return receipt requested, to the
undersigned at his address set forth below and to the Corporation at
its address set forth above.
(b) Any term of this Subscription Agreement may be amended and
the observance of any term of this agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Corporation and
the holders of a majority-in-interest of the Shares issued in
connection with this Subscription. Any amendment or waiver effected in
accordance with this paragraph 10(b) shall be binding upon each holder
of any Shares then outstanding, each future holder of all such Shares,
and the Corporation.
(c) This Subscription Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws provisions of that state.
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 2nd day of May, 1994.
Number of Shares Subscribed for: 166,667
Dollar Amount of Subscription: $333,334
Manold Company
/s/Manold Company
----------------------------------------
Authorized Signature of Subscriber
Malcolm G. Chace III G.P.
Manold Company
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
731 Hospital Trust Bldg
----------------------------------------
Address
Providence, RI 02903
----------------------------------------
City/State/Zip
05-60008843
----------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED
AND AGREED TO:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukes, Jr.
------------------------------------
Name: Matthias E. Lukens, Jr.
Title: President/CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 29th day of April, 1994.
Number of Shares Subscribed for: 166,667
Dollar Amount of Subscription: $333,334
BROWN UNIVERSITY THIRD CENTURY FUND
By: /s/Robert J. Kolyer, Jr.
----------------------------------------
Authorized Signature of Subscriber
BROWN UNIVERSITY THIRD CENTURY FUND
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
164 ANGELL STREET - BOX C
----------------------------------------
Address
Providence, RI 02912
----------------------------------------
City/State/Zip
22-2867085
----------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED
AND AGREED TO:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
----------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the ----- day of ---------, 1994.
Number of Shares Subscribed for: 90,917
Dollar Amount of Subscription: $181,834
/s/ James W. Quinn
----------------------------------------
Authorized Signature of Subscriber
ALLEN & COMPANY INCORPORATED
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
711 Fifth Avenue
----------------------------------------
Address
New York, NY 10022
----------------------------------------
City/State/Zip
13-6176976
----------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED
AND AGREED TO:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
----------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the ____ day of ______, 1994.
Number of Shares Subscribed for: 75,749
Dollar Amount of Subscription: $151,500
/s/Paul A. Gould
----------------------------------------
Authorized Signature of Subscriber
Paul A. Gould
----------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
c/o ALLEN & COMPANY INCORPORATED
711 Fifth Avenue
----------------------------------------
Address
New York, NY 10022
----------------------------------------
City/State/Zip
###-##-####
----------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED
AND AGREED TO:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
----------------------------------
Name:
Title:
Exhibit 10.v
Aquidneck Systems International, Inc.
SUBSCRIPTION AGREEMENT
TO: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
The undersigned understands that Aquidneck Systems International, Inc.,
a Delaware corporation (the "Corporation"), is offering to sell up to 250,000
shares of Common Stock, par value $.01 per share (the "Shares") of the
Corporation at a price of $3.00 per share (the "Subscription"). The minimum
Subscription for any subscriber is $30,000.
The undersigned hereby agrees as follows:
l. Subscription. Subject to the terms and conditions contained herein, the
undersigned hereby irrevocably agrees to purchase such number of Shares set
forth on the signature page hereto (the "Subscribed Shares") at a purchase price
of $3.00 per share. Payment for the Subscribed Shares shall be made by check
payable to the order of "Aquidneck Systems International, Inc." which is
enclosed herewith or by wire transfer on or before the Closing Date (hereinafter
defined) in accordance with instructions provided by the Corporation. A closing
for the purchase of the Shares in this Subscription (the "Closing") shall be
held on October 14, 1994 (the "Closing Date").
2. Representation and Warranties of the Undersigned. The undersigned hereby
represents and warrants to the Corporation that the undersigned:
(a) has adequate means of providing for his current needs and possible
personal contingencies, and has no need for liquidity of his
investment in the Corporation;
(b) is able to bear the substantial economic risks of an investment in
the Corporation for an indefinite period and, at the present time,
could afford a complete loss of such investment;
(c) has, either alone or together with his special advisors
("Purchaser Representatives"), such knowledge and experience in
financial matters that he is capable of evaluating the risks of this
investment;
(d) has received and read or reviewed with his Purchaser
Representative and is familiar with, this Subscription Agreement;
(e) he and/or his Purchaser Representative has had an opportunity to
ask questions of and receive answers from the Corporation concerning
the terms and conditions of this investment;
(f) understands that the Shares have not been registered under the
Securities Act of 1933 (the "Securities Act") in reliance upon an
exemption thereunder and, in connection therewith, represents that the
Shares for which he hereby subscribes are being acquired solely for
his own account, for investment and are not being purchased with a
view to or for the resale, distribution or transfer thereof;
(g) acknowledges and is aware of the following:
(i) the Shares represent a speculative investment which involves
a high degree of risk of loss and there is no guarantee that the
undersigned will realize any gain from such investment or that
the undersigned will not lose his entire investment in the
Corporation;
(ii) there are substantial restrictions on the transferability of
the Shares; the Shares will not be, and investors in the
Corporation have no right to require that the Shares be,
registered under the Securities Act;
(iii) there will be no public market for the Shares; and the
undersigned will not immediately be able to avail himself of the
provisions of Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act with respect to the resale of
the Shares; and
(iv) all certificates for the Shares to be issued upon completion
of this private placement will bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or the securities laws of
any state. Such shares may not be offered for sale, sold, delivered
after sale, transferred, pledged or hypothecated, in the absence of an
effective registration statement covering such shares under the Act
and any applicable state securities laws, unless the holder shall have
obtained an opinion of counsel satisfactory to the corporation that
such registration is not required."
(h) acknowledges that he has received and reviewed the Offering
Memorandum dated September 30, 1994, (the "Memorandum"); that he is
purchasing the Shares without being furnished any offering literature
or prospectus other than the Memorandum and this Subscription
Agreement; that all documents, records and books, pertaining to this
investment have been made available to the Purchaser Representative,
attorney and/or accountant for the undersigned as well as to the
undersigned;
(i) acknowledges that he is not relying on any information concerning
estimated future results of the Corporation contained in the
Memorandum, that the forecasts do not constitute any representation as
to what actual results of the Corporation's operations will be, and
are based on many factors that are not within, or are only partially
within, the control of the Corporation;
(j) represents that the foregoing representations and warranties are
true and accurate as of the date hereof and shall be true and accurate
as of the date this Subscription Agreement is accepted by the
Corporation; and
(k) represents that the information in the Purchaser Questionnaire
provided by the undersigned to the Corporation is true and accurate of
the date hereof and shall be true and accurate as of the date this
Subscription Agreement is accepted by the Corporation.
3. Indemnification. The undersigned acknowledges and understands the meaning and
legal consequences of the representations and warranties herein and hereby
agrees to indemnify and hold harmless the Corporation and its respective
officers, directors, controlling persons, agents, employees, attorneys and
accountants from and against any and all loss, damage or liability, together
with all costs and expenses (including attorney's fees and disbursements) which
any of them may incur by reason of any breach of any representation, warranty or
agreement of the undersigned contained in this Subscription Agreement.
Notwithstanding the foregoing, no representation, warranty, acknowledgment or
agreement made herein by the undersigned shall in any manner be deemed to
constitute a waiver of any rights granted to the undersigned under Federal or
state securities laws or of any breach of representation, warranty or covenant
under this Subscription Agreement. All representations and warranties contained
in this Subscription Agreement, and the indemnification contained in this
paragraph 3, shall survive the acceptance of this subscription.
4. Revocation. The undersigned agrees that he is not entitled to cancel or
revoke this Subscription Agreement, except upon breach by the Corporation of any
of the representations, warranties or covenants hereof, and that the same shall
be binding upon and inure to the benefit of his heirs, executors, administrators
and successors.
5. Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants to the undersigned that:
(a) the Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
full power and authority (corporate and otherwise) to conduct its
business as presently conducted and proposed to be conducted by it and
to effect the Subscription or to carry out the transactions
contemplated hereby;
(b) (1) the authorized capital stock of the Corporation consists of
4,000,000 shares of Common Stock, par value $.01 per share, of which
2,290,588 are issued and outstanding, (2) except for currently
outstanding options and warrant to purchase up to 708,103 shares of
Common Stock at prices ranging from $1.00 to $5.40 per share, there
are no outstanding securities, options or other rights to acquire any
capital stock or securities of the Corporation and (3) there are no
agreements made by or known to the Corporation respecting the
ownership, voting or other aspects of any shares of the Corporation's
capital stock;
(c) except for filings required by federal or state securities laws,
no consent,
(c) except for filings required by federal or state securities laws,
no consent, authorization or other approval from, nor any
registration, qualification or filing with, any person or governmental
authority is required in connection with the Subscription or the
transactions contemplated hereby, which consent, authorization or
approval has not heretofore been obtained or which registration,
qualification or filing has not heretofore been made; and
(d) the Corporation has taken all corporate action on the part of the
Corporation to authorize and approve the Subscription and the
transactions contemplated hereby and the Subscribed Shares, when paid
for and delivered pursuant to the terms hereof, will be validly
issued, fully paid and non-assessable.
6. Registration Rights.
(a) Certain Definitions. As used in this Section 6 and elsewhere in
this Subscription Agreement, the following terms shall have the
following respective meanings:
(i) "Commission" means the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities
Act.
(ii) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
(iii) "Registration Statement" means a registration statement
filed by the Corporation with the Commission for a public
offering and sale of securities of the Corporation (other than a
registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be
issued in exchange for securities or assets of another
corporation).
(iv) "Registration Expenses" means the expenses described in
subsection 6(f).
(v) "Registrable Shares" means (1) the Shares and (2) any other
shares of Common Stock of the Corporation issued in respect of
any such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events);
provided, however, that shares of Common Stock that are
Registrable Shares shall cease to be Registrable Shares (i) upon
any sale pursuant to a Registration Statement, Section 4(1) of
the Securities Act, or Rule 144 under the Securities Act or (ii)
at such time as they are eligible for sale pursuant to Rule
144(k) under the Securities Act.
(vi) "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
(vii) "Stockholders" means the purchasers of Shares in connection
with the Subscription and any persons or entities to whom the
rights granted under this Section 6 are transferred by any
purchasers, their successors or assigns pursuant to the terms
hereof.
(b) Sale or Transfer of Shares; Legend.
(i) The Shares and the Registrable Shares and shares issued in
respect of the Shares or the Registrable Shares shall not be sold
or transferred unless either (1) they first shall have been
registered under the Securities Act, or (2) the Corporation first
shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Corporation, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(ii) Each certificate representing the Shares and the Registrable
Shares and shares issued in respect of the Shares or the
Registrable Shares shall bear the legend set forth in Section 2
hereof. Such legend shall be removed from the certificates
representing any Registrable Shares, at the request of the holder
thereof, at such time as they become eligible for resale pursuant
to Rule 144(k) under the Securities Act.
(iii) The Corporation agrees, upon the request of the undersigned
to make available to the undersigned and to any prospective
transferee of any Shares or Registrable Shares of the undersigned
the information concerning the Corporation described in Rule
144A(d)(4) under the Securities Act.
(c) Incidental Registration.
(i) Whenever the Corporation proposes to file a Registration
Statement at any time and from time to time, it will, prior to
such filing, give written notice to all Stockholders of its
intention to do so and, upon the written request of a Stockholder
or Stockholders given within twenty (20) days after the
Corporation provides such notice (which request shall state the
intended method of disposition of such Registration Shares), the
Corporation shall use its best efforts to cause all Registrable
Shares that the Corporation has been requested by such
Stockholder or Stockholders to register to be registered under
the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of
distribution specified in the request of such Stockholder or
Stockholders; provided that the Corporation shall have the right
to postpone or withdraw any registration effected pursuant to
this subsection 6(c) without obligation to any Stockholder.
(ii) In connection with any offering under this subsection 6(c)
involving an underwriting, the Corporation shall not be required
to include any Registrable Shares in such offering unless the
holders thereof accept the terms of the underwriting as agreed
upon between the Corporation and the underwriters selected by it
(provided that such terms must be consistent with this
Agreement), and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the
offering by the Corporation. If in the opinion of the managing
underwriter the registration of all, or part of, the Registrable
Shares that the holders have requested to be included would
materially and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting only
that number of Registrable Shares, if any, that the managing
underwriter believes may be sold without causing such adverse
effect. If the number of Registrable Shares to be included in the
underwriting in accordance with the foregoing is less than the
total number of shares that the holders of Registrable Shares
have requested to be included, then the holders of Registrable
Shares who have requested registration and other holders of
shares of Common Stock entitled to include shares of Common Stock
in such registration shall participate in the underwriting pro
rata based upon their total ownership of shares of Common Stock
of the Corporation (giving effect to the conversion into Common
Stock of all securities convertible thereinto). If any holder
would thus be entitled to include more shares than such holder
requested to be registered, the excess shall be allocated among
other requesting holders pro rata based upon their total
ownership of Registrable Shares.
(d) Registration Procedures. If and whenever the Corporation is
required by the provisions of this Agreement to use its best efforts
to effect the registration of any of the Registrable Shares under the
Securities Act, the Corporation shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of a firm commitment underwritten public
offering, until each underwriter has completed the distribution
of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares
covered thereby or one hundred twenty (120) days after the
effective date thereof;
(iii) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the
Registrable Shares owned by the selling Stockholder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of
such states as the selling Stockholders shall reasonably request,
and do any and all other acts and things that may be necessary or
desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the
Registrable Shares owned by the selling Stockholder; provided,
however, that the Corporation shall not be required in connection
with this paragraph 6(d)(iv) to qualify as a foreign corporation
or execute a general consent to service of process in any
jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the selling Stockholders and after having done so
the prospectus is amended to comply with the requirements of the
Securities Act, the Corporation shall promptly notify the selling
Stockholders and, if requested, the selling Stockholders shall
immediately cease making offers of Registrable Shares and return
all prospectuses to the Corporation. The Corporation shall
promptly provide the selling Stockholders with revised
prospectuses and following receipt of the revised prospectuses,
the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
(e) Allocation of Expenses. The Corporation will pay all Registration
Expenses of all registrations under this Agreement For purposes of
this Section, the term "Registration Expenses" shall mean all expenses
incurred by the Corporation in complying with this Section 6,
including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees, and expenses of
counsel for the Corporation and the fees and expenses of one counsel
selected by the selling Stockholders to represent the selling
Stockholders, state Blue Sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but
excluding underwriting discounts, selling commission, and the fees and
expenses of selling Stockholders' own counsel (other than the counsel
selected to represent all selling Stockholders).
(f) Indemnification and Contribution. In the event of any registration
of any of the Registrable Shares under the Securities Act pursuant to
this Agreement, the Corporation will indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages, or liabilities,
joint or several, to which such seller, underwriter, or controlling
person may become subject under the Securities Act, the Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus, or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Corporation will reimburse
such seller, underwriter, and each such controlling person in
connection with investigation or defending any such loss, claim,
damage, liability, or action; provided, however, that the Corporation
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Corporation, in writing, by or on behalf of such seller, underwriter,
or controlling person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registerable Shares, severally and not jointly, will indemnify and
hold harmless the Corporation, each of its directors and officers and
each underwriters (if any) and each person, if any, who controls the
Corporation or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Corporation,
such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
under which such Registerable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based
upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such
seller furnished in writing to the Corporation by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement;
provided, however, that the obligations of such Stockholders hereunder
shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such
Registration.
Each party entitled to indemnification under this subsection 6(f) (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified party has actually knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section
6. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (1) any
holder of Registrable Shares exercising rights under this Agreement,
or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 6(f) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
6(f) provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Stockholder or any such controlling person in circumstances
for which indemnification is provided under this Section 6(f); then,
in each such case, the Corporation and such Stockholder will
contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from others) in such
proportions so that such holder is responsible for the portion
represented by the percentage that the public offering price of its
Registerable Shares offered by the Registration Statement bears to the
public offering price of all securities offered by such Registration
Statement, and the Corporation is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess pursuant to such
Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person
or entity who is not guilty of such fraudulent misrepresentation.
(g) Information by Holder. Each holder of Registerable Shares included
in any registration shall furnish to the Corporation such information
regarding such holder and the distribution proposed by such holder as
the Corporation may request in writing and as shall be required in
connection with any registration, qualification or compliance referred
to in this Section 6.
(h) "Stand-Off" Agreement. Each Stockholder, if requested by the
Corporation and an underwriter of Common Stock or other securities of
the Corporation, shall agree not to sell or otherwise transfer or
dispose of any Registerable Shares or other securities of the
Corporation held by such Stockholder for a specified period of time
(not to exceed 270 days) following the effective date of a
Registration Statement; provided, that:
(i) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the Corporation
to be sold on its behalf to the public in an underwritten
offering; and
(ii) all Stockholders holding not less than the number of shares
of Common Stock held by such Stockholder (including shares of
Common stock issuable upon the conversion of Shares, or other
convertible securities, or upon the exercise of options, warrants
or rights) and all officers and directors of the Corporation
enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the Registerable Shares or
other securities subject to the foregoing restriction until the end of
the standoff period.
7. Miscellaneous.
(a) All notices or other communications hereunder shall be in writing
and shall either be personally delivered or transmitted by registered
or certified mail, return receipt requested, to the undersigned at his
address set forth below and to the Corporation at its address set
forth above.
(b) Any term of this Subscription Agreement may be amended and the
observance of any term of this agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Corporation and
the holders of a majority-in-interest of the Shares issued in
connection with this Subscription. Any amendment or waiver effected in
accordance with this paragraph 8(b) shall be binding upon each holder
of any Shares then outstanding, each future holder of all such Shares,
and the Corporation.
(c) This Subscription Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving
effect to the conflict of laws provisions of that state.
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the ______ day of _______________, 1994.
Number of Shares Subscribed for: _____________
Dollar Amount Tendered:
$_______________ (amount of enclosed check)
/s/Christopher C. Ingraham
---------------------------------------
Authorized Signature of Subscriber
CHRISTOPHER C. INGRAHAM
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
99F Sakonnet Pt. Road
---------------------------------------
Address
Little Compton, RI 02837-1049
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By
-----------------------------------
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 6 day of Oct, 1994.
Number of Shares Subscribed for: _____________
Dollar Amount Tendered:
$75,000.00 (amount of enclosed check)
/s/Marvyn Carton
---------------------------------------
Authorized Signature of Subscriber
MARVYN CARTON
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
675 Sanctuary Drive
---------------------------------------
Address
Boca Raton, FL 33431
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
------------------------------
<PAGE>
________IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the _____ day of _______________, 1994.
Number of Shares Subscribed for: 55,555
Dollar Amount Tendered:
$166,665 (amount of enclosed check)
BROWN UNIVERSITY THIRD CENTURY FUND
By: /s/ Robert J. Kolyer, Jr.
---------------------------------------
Authorized Signature of Subscriber
BROWN UNIVERSITY THIRD CENTURY FUND
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
164 Angell Street - Box C
---------------------------------------
Address
Providence, RI 02912
---------------------------------------
City/State/Zip
22-2867085
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
----------------------------------
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the _____ day of _______________, 1994.
Number of Shares Subscribed for: 16,666
Dollar Amount Tendered:
$50,000 (amount of enclosed check)
/s/Paul A. Gould
---------------------------------------
Authorized Signature of Subscriber
PAUL A. GOULD
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
c/o Allen & Company Incorporated
711 Fifth Avenue
---------------------------------------
Address
New York, NY 10022
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
------------------------------
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 6 day of Oct, 1994.
Number of Shares Subscribed for: 5,000.00
Dollar Amount Tendered:
$15,000 (amount of enclosed check)
/s/Thomas E. Gardner
---------------------------------------
Authorized Signature of Subscriber
THOMAS E. GARDNER/LESLIE A. GARDNER
By /s/ Matthias E. Lukens, Jr.
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
93 Power Street
---------------------------------------
Address
Providence, RI 02906
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By
------------------------------------
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 5th day of August, 1994.
Number of Shares Subscribed for: 55,556
Dollar Amount Tendered:
$166,668 (amount of enclosed check)
/s/ Malcolm G. Chace, III
---------------------------------------
Authorized Signature of Subscriber
MALCOLM G. CHACE
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
---------------------------------------
Address
---------------------------------------
City/State/Zip
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
------------------------------
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the _____ day of _____________, 1994.
Number of Shares Subscribed for: 38,889
Dollar Amount Tendered:
$116,666 (amount of enclosed check)
/s/James W. Quinn, VP
---------------------------------------
Authorized Signature of Subscriber
ALLEN & COMPANY INCORPORATED
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
711 Fifth Avenue
---------------------------------------
Address
New York, NY 10022
----------------------------------------
City/State/Zip
13-6176976
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
SUBSCRIPTION ACCEPTED:
Aquidneck Systems International, Inc.
By /s/ Matthias E. Lukens, Jr.
------------------------------
President and CEO
<PAGE>
Marvyn Carton
675 Sanctuary Drive
Boca Raton, FL 33431
May ___, 1996
Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
Ladies/Gentlemen:
This letter confirms my prior oral agreement with Aquidneck Systems
International, Inc. (the "Company") to amend the Subscription Agreement between
myself and the Company dated September, 1994 by deleting the provisions
concerning registration rights.
If you should have any questions concerning this confirmation, please feel
free to contact me.
Sincerely
Marvyn Carton
Exhibit 10.w
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT
TO: Aquidneck Systems International, Inc.
650 Ten Rod Road
North Kingstown, Rhode Island 02852
The undersigned understands that Aquidneck Systems International,
Inc., a Delaware corporation (the "Corporation"), is offering to sell up to 30
Units, each consisting of a 10% Subordinated Note in the principal amount of
$50,000 and a warrant to purchase 19,608 shares of the common stock, $.01 par
value per share (the "Common Stock"), of the Corporation, at a price per share
of $2.975 ("Warrant"), at a price per Unit of $50,000 (the "Subscription"). The
minimum Subscription for any subscriber is one Unit.
The undersigned hereby agrees as follows:
1. Subscription. Subject to the terms and conditions contained herein,
the undersigned hereby irrevocably agrees to purchase such number of Units set
forth on the signature page hereto (the "Subscribed Units") at a purchase price
of $50,000 per Unit. Payment for the Subscribed Units shall be made by check
payable to the order of "Fechtor, Detwiler & Co., Inc., Escrow Agent for
Aquidneck Systems International, Inc." which is enclosed herewith or by wire
transfer on or before the Closing Date (hereinafter defined) in accordance with
instructions provided by the Corporation. The purchase of the Subscribed Units
in this Subscription is contingent upon the Corporation selling a minimum of 16
Units (the "Minimum Offering") prior to the termination of this Offering. One or
more closings for the purchase of the Units in this Subscription (the
"Closings") shall be held after the Corporation has sold the Minimum Offering,
but in no case later than October 6, 1995 (unless such period is extended by the
written agreement of the Corporation and each subscriber for Units) (the
"Termination Date"). If the Minimum Offering is not sold on or prior to the
Termination Date, then this Subscription shall be void and all funds paid
hereunder by the undersigned, without interest, shall be returned to the
undersigned.
2. Representation and Warrants of the Undersigned. The undersigned
hereby represents and warrants to the Corporation that the undersigned:
(a) has adequate means of providing for his current needs and
possible personal contingencies, and has no need for liquidity of
his investment in the Corporation;
(b) is able to bear the substantial economic risks of an
investment in the Corporation for an indefinite period and, at
the present time, could afford a complete loss of such
investment, and has a net worth (not including home, home
furnishings and automobiles) of at least five times the
investment;
(c) has such knowledge and experience in financial matters that
the undersigned is capable of evaluating the risks and merits of
this investment;
(d) has received and read and is familiar with, this Subscription
Agreement;
(e) has had an opportunity to ask questions of and receive
answers from the Corporation concerning the terms and conditions
of this investment and has had access to such information as
necessary to make a determination as to this investment;
(f) understands that none of the Units, the Warrants or the
Common Stock issuable upon conversion of the Warrants (the
"Warrant Shares") have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), in reliance upon an
exemption thereunder and, in connection therewith, represents
that the Subscribed Units are being acquired solely for the
undersigned's own account, for investment and are not being
purchased with a view to or for the resale, distribution or
transfer thereof;
(g) acknowledges and is aware of the following:
(i) the Units and the Warrant Shares represent a
speculative investment which involves a high degree of
risk of loss and there is no guarantee that the
undersigned will realize any gain from such investment or
that the undersigned will not lose his [her/its] entire
investment in the Corporation;
(ii) there are substantial restrictions on the
transferability of the Units, the Notes, the Warrants and
the Warrant Shares; none of the Units, the Notes, the
Warrants or the Warrant Shares will be, and investors in
the Corporation have no right to require that any of the
Units, the Notes or the Warrants (except as provided in
Section 6 hereof) be, registered under the Securities Act;
(iii) there is no public market for the Units, the Notes,
the Warrants or the Warrant Shares; and the undersigned
will not immediately be able to avail himself
[herself/itself] of the provisions of Rule 144 adopted by
the Securities and Exchange Commission under the
Securities Act with respect to the resale of the Units,
the Notes or the Warrants; and
(iv) all certificates for the Notes and the Warrants to be
issued upon completion of this private placement will bear
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS [NOTE OR WARRANT] HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY STATE SECURITIES STATUTE. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
THE HOLDER SHALL HAVE OBTAINED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
(h) acknowledges that the undersigned has received and reviewed
the offering materials dated September 13, 1995, (the "Offering
Materials"); that the undersigned is purchasing the Units without
being furnished any offering literature or prospectus other than
the Offering Materials and this Subscription Agreement; and that
such documents, records and books, pertaining to this investment
as have been requested by the undersigned have been made
available to the attorney and/or accountant for the undersigned
as well as to the undersigned;
(i) understands that the Note will be subordinated to all
indebtedness of the Company to banks and other financial
institutions, to other secured indebtedness and to trade
creditors in the manner provided in the Note;
(j) represents that the foregoing representations and warranties
are true and accurate as of the date hereof and shall be true and
accurate as of the date this Subscription Agreement is accepted
by the Corporation; and
(k) represents that the information in the Purchaser
Questionnaire provided by the undersigned to the Corporation is
true and accurate of the date hereof and shall be true and
accurate as of the date this Subscription Agreement is accepted
by the Corporation.
3. Indemnification. The undersigned acknowledges and understands the
meaning and legal consequences of the representations and warranties herein and
hereby agrees to indemnify and hold harmless the Corporation and its respective
officers, directors, controlling persons, agents, employees, attorneys and
accountants from and against any and all loss, damage or liability, together
with all costs and expenses (including attorney's fees and disbursements) which
any of them may incur by reason of any breach of any representation, warranty or
agreement of the undersigned contained in this Subscription Agreement.
Notwithstanding the foregoing, no representation, warranty, acknowledgment or
agreement made herein by the undersigned shall in any manner be deemed to
constitute a waiver of any rights granted to the undersigned under federal or
state securities laws or of any breach of representation, warranty or covenant
under this Subscription Agreement. All representations and warranties contained
in this Subscription Agreement, and the indemnification contained in this
paragraph 3, shall survive the acceptance of this subscription.
4. Revocation. The undersigned agrees that the undersigned is not
entitled to cancel or revoke this Subscription Agreement, except upon breach by
the Corporation of any of the representations, warranties or covenants hereof,
and that the same shall be binding upon and inure to the benefit of his heirs,
executors, administrators and successors.
5. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to the undersigned that:
(a) the Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has full power and authority (corporate and
otherwise) to conduct its business as presently conducted and
proposed to be conducted by it and to issue and deliver the
Subscribed Units;
(b) (i) the authorized capital stock of the Corporation consists
of 8,000,000 shares of Common Stock, par value $.01 per share, of
which 2,499,542 are issued and outstanding, and 1,000,000 shares
of Preferred Stock, par value $.01 per share, of which 50,000 are
issued and outstanding, (ii) except for currently outstanding
options and warrants to purchase up to l,239,775 shares of Common
Stock at prices ranging from $1.00 to $5.40 per share and the
right of the holders of the Preferred Stock to convert accrued
dividends into additional shares of Preferred Stock and to
convert the shares of Preferred Stock into shares of Common
Stock, there are no outstanding securities, options or other
rights to acquire any capital stock or securities of the
Corporation and (iii) there are no agreements made by or known to
the Corporation respecting the ownership or voting of any shares
of the Corporation's capital stock;
(c) except for filings required by federal or state securities
laws, no consent, authorization or other approval from, nor any
registration, qualification or filing with, any person or
governmental authority is required in connection with the
Subscription or the transactions contemplated hereby, which
consent, authorization or approval has not heretofore been, or
prior to the first Closing will not be, obtained or which
registration, qualification or filing has not heretofore been, or
prior to the first Closing will not be, made; and
(d) the Corporation has taken all corporate action on the part of
the Corporation to authorize and approve the Subscription and the
transactions contemplated hereby and the Subscribed Units, when
paid for and delivered pursuant to the terms hereof, will be
validly issued, fully paid and non-assessable.
6. Registration of Warrant Shares.
6.1 Company Registration. If the Corporation, at any time prior
to the expiration of the Warrants, registers its Common Stock or other
securities in an initial public offering (an "IPO"), the Corporation shall cause
the Warrant Shares to be registered under the Securities Act prior to the time
such Warrant becomes exercisable and shall maintain the effectiveness of the
registration statement effecting such registration until the earlier of the date
on which the Warrant Shares covered by such registration statement have been
sold pursuant thereto and the date two years from the date of the Closing.
6.2 Expenses. The Corporation shall bear and pay all expenses in
connection with the registration, filing and qualification of the Warrant Shares
pursuant to this Section 6, including (without limitation) all registration,
filing and qualification of fees, printers and accounting fees relating or
apportionable thereto.
6.3 Indemnification. In the event any Warrant Shares are included
in a registration statement:
(a) To the extent permitted by law, the Corporation will
indemnify and hold harmless each holder of the Warrant Shares, its officers and
directors, any underwriter (as defined in the Act) for such holder and each
person, if any, who controls such holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Corporation of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Corporation will reimburse such holder, any
of its officers or directors, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
6.3(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Corporation (which consent shall not be unreasonably withheld), nor shall
the Corporation be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such holder, officer, director, underwriter or controlling person.
(b) To the extent permitted by law, the holder of the Warrant
Shares will indemnify and hold harmless the Corporation, each of its directors
and officers (including any person who, with such person's consent, is named in
the registration statement as about to become a director), each of its officer
who have signed the registration statement, each person, if any, who controls
the Corporation within the meaning of the Act, any underwriter and any other
stockholder selling securities in such registration statement or any of its
directors or officers or any person who controls such stockholder, against any
losses, claims, damages, or liabilities (joint or several) to which the
Corporation or any such director, officer, controlling person, or underwriter or
controlling person, or other such stockholder or director, officer or
controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
holder expressly for use in connection with such registration; and such holder
will reimburse any legal or other expenses reasonably incurred by the
Corporation or such director, officer, controlling person, or underwriter or
controlling person or other such stockholder or director, officer or controlling
person, as incurred, in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
obligations of such holder hereunder shall be limited to an amount equal to the
net proceeds (equal to the offering price less the exercise price, expenses and
underwriting commissions and discounts) to such holder of Warrant Shares sold as
contemplated herein; Notwithstanding the foregoing, the indemnify agreement
contained in this Section 6.3(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the holder, which consent shall not be
unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if in the judgment of counsel for the indemnifying
party representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 6.
7. Lock-Up. In connection with an IPO of the Corporation's securities,
the undersigned hereby agrees to be subject to a lock-up for 180 days from the
effective date of such IPO. During such period, the undersigned agrees not to
sell, dispose of or otherwise transfer any securities of the Corporation without
the prior written consent of the underwriter(s). The undersigned further agrees
to execute and deliver to the Corporation any agreement concerning such lock-up
requested by the underwriter(s).
8. Placement Agent. Placement of the Units will be made by Fechtor,
Detwiler & Co., Inc. (the "Agent") which will receive a placement fee equal to
(i) eight percent (8%) of the total amount raised in this offering from sources
not currently investors in the Company and (ii) five year warrants to purchase
that number of shares equal to ten percent of the Warrants issued to subscribers
not currently investors in the Corporation, exercisable starting one year after
issuance at 120% of the price per share to the public of the Company's Common
Stock in the IPO or, if the Corporation has effected no such public issuance on
or before April 30, 1996, $5.10 per share.
9. Agent as Representative. The undersigned hereby authorizes and
empowers the Agent to act as the undersigned's representative for the purposes
of receiving the Units and executing any documents in connection therewith,
including without limitation a cross-receipt, and hereby instructs the
Corporation to deliver the Units subscribed for by the undersigned to the Agent.
10. Miscellaneous.
(a) All notices or other communications hereunder shall be in
writing and shall either be personally delivered or transmitted
by registered or certified mail, return receipt requested, to the
undersigned at his address set forth below and to the Corporation
at its address set forth above.
(b) Any term of this Subscription Agreement may be amended and
the observance of any term of this agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Corporation and the holders of a majority-in-interest of the
Units issued in connection with this Subscription. Any amendment
or waiver effected in accordance with this paragraph 9(b) shall
be binding upon each holder of any Units then outstanding, each
future holder of all such Units, and the Corporation.
(c) This Subscription Agreement shall be construed and enforced
in accordance with the laws of the State of Rhode Island without
giving effect to the conflict of laws provisions of that state.
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 18th day of September, 1995.
Number of Units Subscribed for: Co-owned with Louis & Pauline Bakos Family Trust
Dollar Amount Tendered:
$ 20,000.00 (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ John L. Bakos
---------------------------------------
Authorized Signature of Subscriber*
John L. Bakos
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
1501 Lewis Gray Dr.
---------------------------------------
Address
Saugus, MA 01906
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASD member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
---------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 18th day of September, 1995.
Number of Units Subscribed for: _______________
Dollar Amount Tendered:
$30,000.00 (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ Louis Bakos, Trustee
---------------------------------------
Authorized Signature of Subscriber*
of the Louis and Pauline Bakos Family
Trust U/D/T 9-28-70
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
32 E. Highland Avenue
---------------------------------------
Address
Melrose, MA 02176
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASDo member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 19th day of September, 1995.
Number of Units Subscribed for: 10 (ten)
Dollar Amount Tendered:
$500,000 (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ S. Allen
---------------------------------------
Authorized Signature of Subscriber*
A.I.M. Overseas NV
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
62 de Ruyter Kade
---------------------------------------
Address
Curacao, Netherlands Antilles
---------------------------------------
City/State/Zip
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASD member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 19th day of September, 1995.
Number of Units Subscribed for: Ten (10)
Dollar Amount Tendered:
$500,000 (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ H. Wiltshire C. Wiltshire
---------------------------------------
Authorized Signature of Subscriber*
H. Wiltshire C. Wiltshire
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
4200 Coral Hills Drive
---------------------------------------
Address
Coral Springs, FL 33065
---------------------------------------
City/State/Zip
###-##-#### ###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASD member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
---------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 19th day of September, 1995.
Number of Units Subscribed for: 1
Dollar Amount Tendered:
$50,000.00 (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ Richard C. Close
---------------------------------------
Authorized Signature of Subscriber*
Richard C. Close
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
7 Wainwright Rd #29
---------------------------------------
Address
Winchester MA 01890
---------------------------------------
City/State/Zip
###-##-####
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASD member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
---------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement has been executed and
delivered on the 19th day of September, 1995.
Number of Units Subscribed for: ____________
Dollar Amount Tendered:
$____________ (amount of enclosed check)
PLEASE MAKE CHECK PAYABLE TO
FECHTOR, DETWILER & CO., INC.,
ESCROW AGENT FOR AQUIDNECK SYSTEMS
INTERNATIONAL, INC.
/s/ Malcolm G. Chace, III
---------------------------------------
Authorized Signature of Subscriber*
Malcolm G. Chace, III
---------------------------------------
(Name of Subscriber, as it shall appear
on certificate(s); type or print)
---------------------------------------
Address
---------------------------------------
City/State/Zip
---------------------------------------
Social Security Number of Subscriber or
Federal Tax ID Number
*If the Subscriber is a Registered
Representative with an NASD member
firm, please have the following
acknowledgment signed by the appropriate
party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Section 28(a) and
(b) of the Rules of Fair Practice
- ---------------------------------------
Name of NASD Member Firm
SUBSCRIPTION ACCEPTED BY:
Aquidneck Systems International, Inc.
By:
---------------------------------------
Matthias E. Lukens, Jr.
President and CEO
<PAGE>
RECAPITALIZATION AGREEMENT
AGREEMENT among AQUIDNECK SYSTEMS INTERNATIONAL, INC. ("Company"), MALCOLM
G. CHACE III ("Chace"), RICHARD C. CLOSE ("Close"), LOUIS BAKOS, TRUSTEE OF THE
LOUIS BAKOS AND PAULINE BAKOS FAMILY TRUST u/d/t 9/28/70 AND JOHN BAKOS,
CO-OWNERS (collectively, "Bakos"), and ID AIM OVERSEAS NV C/O LISSA ("AIM").
RECITALS
A. Chace, Close, Bakos, and AIM (collectively, the "Investors") are the
holders of all of the 10 % Subordinated Notes due September 27, l996 issued by
the Company in the aggregate principal amount of $1,300,000 (collectively, the
"Old Bridge Notes"), and warrants (the "Old Bridge Warrants") to purchase an
aggregate of 509,808 shares of the common stock of the Company (the "Old Common
Stock"), pursuant to certain Subscription Agreements dated as of September 19,
1996 between the Company and each of the Investors,.
B. The present ownership of the Old Bridge Notes and the Old Bridge
Warrants is set forth on Exhibit A attached hereto.
C. In addition, the Company is indebted to Chace in the principal amount of
$1,335,415, as evidenced by the Company's Amended and Restated Secured Line of
Credit Note dated January 22, 1996 (the "Chace Note').
D. The Company intends to recapitalize its principal indebtedness evidenced
by the Old Bridge Notes $21,370 of accrued and unpaid interest under the Old
Bridge Notes, and all of the principal indebtedness evidenced by the Chace Note.
E. The parties intend to: (a) to effect a 1 to 74 reverse stock split; (b)
exchange all of the principal indebtedness evidenced by the Old Bridge Notes and
accrued interest of approximately $21,370 due under the Old Bridge Notes and the
Old Bridge Warrants for new shares of common stock of the Company; and (c)
exchange all of the principal indebtedness evidenced by the Chace Note for new
shares of common stock of the Company.
F. The Investors other than Chace are unwilling to effect and consent to
such exchange unless Chace agrees to exchange the Chace Note on the terms set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, there receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
RECAPITALIZATION
1.1 Reverse Stock Split.
As of the Effective Date (as defined in Section 2.4 below), pursuant
to authorization by the Company's Board of Directors and Section 242 of the
Delaware General Corporation Law, each 74 issued and outstanding shares of
Common Stock will be converted into 1 share of issued and outstanding common
stock of the Company, $.01 par value ("New Common Stock"). To the extent
required under the Company's Certificate of Incorporation, By-laws or any
existing agreement, the Company and the Investors hereby consent to and approve,
and agree to take any and all of the actions (whether as a lender, a shareholder
and/or director or otherwise) necessary to effect the reverse stock split.
1.2 Exchange of Old Bridge Notes and Old Bridge Warrants By Investors.
(a) On the Effective Date, each of the Investors will exchange its Old
Bridge Notes, all interest accrued on the Old Bridge Notes from January 1, 1996
to the Effective Date and Old Bridge Warrants, for the number of shares of New
Common Stock (after giving effect to the 1 to 74 reverse stock split) set forth
on Exhibit B.
(b) Each of the Investors will deliver to the Company on or before the
Effective Date its Old Bridge Notes and Old Bridge Warrant, all properly
endorsed over to the Company. In exchange therefore, on the Effective Date, the
Company shall deliver to the Investors certificates evidencing the shares
described in Section 1.2(a).
1.3 Exchange of Chace Note by Chace.
(a) On the Effective Date, Chace will exchange all of of the principal
amount of the Chace Note for the number of shares of New Common Stock (after
giving effect to the 1 to 74 reverse stock split) set forth in Exhibit B, and
forgive all interest accrued on the Chace Note from __________, 1995 to the
Effective Date.
(b) Chace will deliver to the Company on or before the Effective Date
the Chace Note, properly endorsed to the Company. In exchange therefor, on the
Effective Date, the Company shall deliver to Chace certificates evidencing the
Shares described in Section 1.3 (a).
ARTICLE II
MISCELLANEOUS
2.1 Conditions to Objections.
Notwithstanding anything in this Agreement to the contrary, no party
hereto shall have any obligation to consummate any of the transactions
contemplated herein unless: (a) each of the other transactions contemplated
herein is consummated contemporaneously; (b) all obligations under all Old
Bridge Subscription Agreements shall have terminated without liability to any
party.
2.2 Cancellation of Warrants.
All of the Old Bridge Warrants exchanged pursuant to Section 1.2 of
this Agreement shall be cancelled on the books of the Company.
2.3 Termination of Obligations under Old Bridge Subscription Agreement.
All obligations of the Company pursuant to the Old Bridge Subscription
Agreements, are terminated effective as of the Effective Date. In consideration
of the Company's agreement to issue the New Common Stock, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Investors hereby releases and discharges the Company,
and its past, present and future Shareholders, officers, directors, employees
and agents, from and against all liability, claims, and causes of action that
the Investor has or may have arising out of or relating to the Subscription
Agreement, and the offer and sale of the Old Bridge Notes and Old Bridge
Warrants.
2.4 Closing Date.
The effective date of the transactions contemplated herein shall be
deemed to be February 29, 1996 for all purposes ("Effective Date").
2.5 Governing Law.
This Agreement shall be construed as a sealed instrument in accordance
with and governed by the laws of the State of Rhode Island.
2.6 Amendment; Modification.
No modification or waiver of any provision of this Agreement nor
consent to any departure by any party therefrom, shall in any event be effective
unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
2.7 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
2.8 Severability.
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
2.9 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any signatory hereto may
indicate acceptance of this Agreement with a facsimile signature, provided that
an original signature is provided to the Company thereafter.
2.10 Further Assurances.
Each of the parties hereto agrees from time to time hereafter to
execute and deliver or cause to be executed and delivered such additional
instruments, certificates and documents, and take all such actions, as any party
hereto shall reasonably request for the purpose of implementing or effectuating
the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AQUIDNECK SYSTEMS INTERNATIONAL, INC.
By: /s/
------------------------------------
/s/ Malcolm G. Chace, III
---------------------------------------
MALCOLM G. CHACE, III
/s/ Richard C. Close
---------------------------------------
RICHARD C. CLOSE
/s/ Louis Bakos, Trustee
---------------------------------------
LOUIS BAKOS, TRUSTEE
/s/ John Bakos 3/30/96
---------------------------------------
JOHN BAKOS
ID AIM OVERSEAS NV
By: /s/ S. Allen
-------------------------------------
<PAGE>
EXHIBIT A
Present Ownership of Old Bridge Notes and Old Bridge Warrants
-------------------------------------------------------------
Principal Amount of Old
Bridge
Investor Notes Plus Accrued Interest No. of Old Bridge Warrants
-------- --------------------------- --------------------------
Malcolm G. Chace, III 711,507 274,512
ID Aim Overseas NV 508,219 196,080
Richard C. Close 50,822 19,608
Louis Bakos, Trustee 50,822 19,608
and John L. Bakos
<PAGE>
EXHIBIT B
Ownership of New Common Stock By Investors
------------------------------------------
Investor No. of Shares of New Common Stock
-------- ---------------------------------
Malcolm G. Chace 330,933
ID AIM OVERSEAS NV 236,500
Richard C. Close 23,650
------
Louis Bakos, Trustee 23,650
and John L. Bakos
614,733
Conversion of Chace Note
------------------------
Amount No. of Shares of New
Noteholder Converted Common Stock
---------- --------- --------------------
Malcolm G. Chace, III $1,335,415 426,279
Exhibit 10.x
ACCESS SOLUTIONS INTERNATIONAL, INC.
AND
JOSEPH STEVENS & COMPANY L.P.
-----------------
REPRESENTATIVE'S
WARRANT AGREEMENT
MAY ____, 1996
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of May ____, 1996 by and
between ACCESS SOLUTIONS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and JOSEPH STEVENS & COMPANY, L.P. ("Joseph Stevens") (Joseph
Stevens is hereinafter referred to variously as the "Holder" or the
"Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative or its
designee(s) warrants ("Warrants") to purchase up to 106,667 Units (as defined in
Section 1 hereof, each Unit consisting of two (2) shares of common stock, $.01
par value, of the Company ("Common Stock") and one (1) redeemable Common Stock
purchase warrant, each to purchase one additional share of Common Stock
("Redeemable Warrants")); and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof by and
among the several Underwriters listed therein and the Company to act as the
underwriter in connection with the proposed public offering of 1,066,667 Units
at a public offering price of $7.50 per Unit; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with, Joseph Stevens
acting as the Representative pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of ten dollars and sixty-seven cents ($10.67), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Representative (or its designee(s)) is hereby granted
the right to purchase, at any time from __________, 1997 [one year from the date
hereof] until 5:00 p.m., New York time, on __________, 2001, [5 years from the
date hereof] up to 106,667 Units at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $__________ [120% of the IPO
price per Unit] per Unit subject to the terms and conditions of this Agreement.
A "Unit" consists of two (2) shares of Common Stock and one (1) Redeemable
Warrant. Each Redeemable Warrant is exercisable to purchase one additional share
of Common Stock at an initial exercise price of $__________ [66 2/3% of the IPO
price per Unit] per share, commencing on the date of issuance (the "Initial
Exercise Date") and ending, at 5:00 p.m. New York time on __________, 2001 [60
months from the date hereof] (the "Redeemable Warrant Expiration Date") at which
time the Redeemable Warrants shall expire. Except as set forth herein, the Units
issuable upon exercise of the Warrants are in all respects identical to the
Units being purchased by the Underwriters for resale to the public pursuant to
the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants are initially exercisable at an
initial exercise price per Unit set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate, together with the annexed Form of Election to Purchase duly
executed and payment of the Exercise Price (as hereinafter defined) for the
Units purchased at the Company's principal offices in Rhode Island (presently
located at 650 Ten Rod Road, North Kingstown, Rhode Island 02852) the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased and a certificate or certificates for the Redeemable Warrants so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock and Redeemable Warrants underlying the
Warrants). In the event the Company redeems all of the outstanding Redeemable
Warrants, the Redeemable Warrants underlying the Warrants may only be exercised
if such exercise is simultaneous with the exercise of the Warrants. Warrants may
be exercised to purchase all or part of the Units represented thereby. In the
case of the purchase of less than all the Units purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Units purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the method of
payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 in exchange for
the number of Units equal to the product of (x) the number of Units as to which
the Warrants are being exercised, multiplied by (y) a fraction, the numerator of
which is the Market Price (as defined in Section 3.3 hereof) of the Units minus
the Exercise Price of the Units and the denominator of which is the Market Price
per Unit. Solely for the purposes of this Section 3.2, Market Price shall be
calculated either (i) on the date on which the form of election attached hereto
is deemed to have been sent to the Company pursuant to Section 14 hereof
("Notice Date") or (ii) as the average of the Market Price for each of the five
trading days immediately preceding the Notice Date, whichever of (i) or (ii)
results in a greater Market Price.
3.3 Definition of Market Price. As used herein, the phrase "Market
Price" at any date shall be deemed to be (i) when referring to the Units, the
last reported sale price, or, in case no such reported sale takes place on such
day, the average of the last reported sale prices for the last three (3) trading
days, in either case as officially reported by the principal securities exchange
on which the Units are listed or admitted to trading or by the Nasdaq National
Market ("Nasdaq/NM") or the Nasdaq Small Cap Market ("Nasdaq Small Cap"), or, if
the Units are not listed or admitted to trading on any national securities
exchange or quoted by the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), the average closing bid price as furnished by the
National Association of Securities Dealers, Inc. ("NASD") through Nasdaq or
similar organization if Nasdaq is no longer reporting such information
(collectively, the "Appropriate Market Price"), or if the Units are not quoted
on Nasdaq, as determined by the sum of the Market Price with respect to the
Common Stock and the Market Price with respect to the Redeemable Warrants; (ii)
when referring to the Common Stock, the Appropriate Market Price of the Common
Stock, or if the Common Stock is not quoted on Nasdaq, as determined in good
faith (using customary valuation methods) by resolution of the members of the
Board of Directors of the Company, based on the best information available to
it; or (iii) when referring to a Redeemable Warrant, the Appropriate Market
Price of the Redeemable Warrants, or if the Redeemable Warrants are not quoted
on Nasdaq or are no longer outstanding, the Market Price of a Redeemable Warrant
shall equal the difference between the Market Price of the Common Stock and the
Exercise Price of the Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and Redeemable Warrants or
other securities, properties or rights underlying such Warrants, and upon the
exercise of the Redeemable Warrants, the issuance of certificates for shares of
Common Stock or other securities, properties or rights underlying such
Redeemable Warrants shall be made forthwith (and in any event such issuance
shall be made within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof.
The Warrant Certificates and the certificates representing the shares
of Common Stock and the Redeemable Warrants underlying the Warrants and the
shares of Common Stock underlying each Redeemable Warrant or other securities,
property or rights shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of the
then present Secretary or Assistant Secretary or Treasurer or Assistant
Treasurer of the Company. Warrant Certificates shall be dated the date of
execution by the Company upon initial issuance, division, exchange, substitution
or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers or partners of the Representative.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise provided
in Section 8 hereof, the initial exercise price of each Warrant shall be $____
per Unit [120% of the IPO price per Unit]. The adjusted exercise price shall be
the price which shall result from time to time from any and all adjustments of
the initial exercise price in accordance with the provisions of Section 8
hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The Warrants, the
shares of Common Stock and the Redeemable Warrants underlying the Warrants and
the shares of Common Stock issuable upon exercise of the Redeemable Warrants
underlying the Warrants and the other securities issuable upon exercise of the
Warrants (collectively, the "Warrant Securities") have been registered under the
Securities Act of 1933, as amended (the "Act") pursuant to the Company's
Registration Statement on Form SB-2 (Registration No. __________) (the
"Registration Statement"). All the representations and warranties of the Company
contained in the Underwriting Agreement relating to the Registration Statement,
the Preliminary Prospectus and Prospectus (as such terms are defined in the
Underwriting Agreement) and made as of the dates provided therein, are hereby
incorporated by reference. The Company agrees and covenants promptly to file
post effective amendments to such Registration Statement as may be necessary to
maintain the effectiveness of the Registration Statement as long as any Warrants
are outstanding. In the event that, for any reason, whatsoever, the Company
shall fail to maintain the effectiveness of the Registration Statement, upon
exercise, in part or in whole, of the Warrants, certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants, and
upon exercise, in whole or in part of the Redeemable Warrants, certificates
representing the shares of Common Stock underlying the Redeemable Warrants and
the other securities issuable upon exercise of the Warrants shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"),
and may not be offered, sold, pledged, hypothecated, assigned or
transferred except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent applicable, Rule 144
under the Act (or any similar rule under such Act relating to the
disposition of securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is
available.
7.2 Piggyback Registration. If, at any time commencing after the date
hereof and expiring seven (7) years thereafter, the Company proposes to register
any of its securities under the Act (other than pursuant to Form S-8, S-4 or a
comparable registration statement) the Company will give written notice by
registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Representative and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Representative or other Holders of the Warrants and/or Warrant Securities
notifies the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford the Representative and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
five (5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants and the Redeemable Warrants underlying the
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Securities and Exchange Commission
(the "Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Representative and Holders, in order
to comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Warrant Securities for nine (9) consecutive months by
such Holders and any other Holders of the Warrants and/or Warrant Securities who
notify the Company within ten (10) days after receiving notice from the Company
of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if
the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company shall have the option, upon
the written notice of election of a Majority of the Holders of the Warrants
and/or Warrant Securities to repurchase (i) any and all Warrant Securities at
the higher of the Market Price per share of Common Stock on (x) the date of the
notice sent pursuant to Section 7.3(a) or (y) the expiration of the period
specified in Section 7.4(a) and (ii) any and all Warrants at such Market Price
less the Exercise Price of such Warrant. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 7.4(a) or (ii) the delivery of the
written notice of election specified in this Section 7.3(c).
(d) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing after the date hereof
and expiring five (5) years thereafter, any Holder of Warrants and/or Warrant
Securities shall have the right, exercisable by written request to the Company,
to have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder of its Warrant Securities provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall use
its best efforts to have any registration statement declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(d). If the Company shall
fail to comply with the provisions of Section 7.4(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental or special damages sustained by the Holder(s)
requesting registration of their Warrant Securities, excluding consequential
damages.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriters contained in Section 7 of the
Underwriting Agreement. The Company further agree(s) that upon demand by an
indemnified person, at any time or from time to time, it will promptly reimburse
such indemnified person for any loss, claim, damage, liability, cost or expense
actually and reasonably paid by the indemnified person as to which the Company
has indemnified such person pursuant hereto. Notwithstanding the foregoing
provisions of this Section 7.4(d) any such payment or reimbursement by the
Company of fees, expenses or disbursements incurred by an indemnified person in
any proceeding in which a final judgment by a court of competent jurisdiction
(after all appeals or the expiration of time to appeal) is entered against the
Company or such indemnified person as a direct result of the Holder(s) or such
person's gross negligence or willful misfeasance will be promptly repaid to the
Company.
(e) The Holder(s) of the Warrant Securities to be sold pursuant
to a registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company. The Holder(s) further agree(s) that upon demand by an
indemnified person, at any time or from time to time, they will promptly
reimburse such indemnified person for any loss, claim, damage, liability, cost
or expense actually and reasonably paid by the indemnified person as to which
the Holder(s) have indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 7.4(e) any such payment or reimbursement by
the Holder(s) of fees, expenses or disbursements incurred by an indemnified
person in any proceeding in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time to appeal) is entered
against the Company or such indemnified person as a direct result of the Company
or such person's gross negligence or willful misfeasance will be promptly repaid
to the Holder(s).
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof, or permit any other registration statement
to be or remain effective during the effectiveness of a registration statement
filed pursuant to Section 7.3 hereof, without the prior written consent of the
Holders of the Warrants and Warrant Securities representing a Majority of such
securities (assuming the exercise of all of the Warrants and the Redeemable
Warrants underlying the Warrants).
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
NASD. Such investigation shall include access to books, records and properties
and opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder or underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with
the managing underwriter selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriter, and shall contain such representations, warranties and covenants by
the Company and such other terms as are customarily contained in agreements of
that type used by the managing underwriter. The Holders shall be parties to any
underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation,
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities shall mean in excess
of fifty percent (50%) of the then outstanding Warrants or Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor, employee
or agent thereof or any of their respective affiliates, members of their family,
persons acting as nominees or in conjunction therewith and (ii) have not been
resold to the public pursuant to a registration statement filed with the
Commission under the Act.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 Stock Dividends and Distributions. In case the Company shall pay
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately decreased. An adjustment made pursuant to this
Section 8.2 shall be made as of the record date for the subject stock dividend
or distribution.
8.3 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted Exercise Price of
each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as may be amended or restated
as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
8.5 Merger or Consolidation or Sale.
(a) In case of any consolidation of the Company with, or merger
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the holder of each Warrant then outstanding or
to be outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(b) In the event of (i) the sale by the Company of all or
substantially all of its assets, or (ii) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or (iii) a distribution to the Company's stockholders
of any cash, assets, property, rights, evidences of indebtedness, securities or
any other thing of value, or any combination thereof, the Holders of the
unexercised Warrants shall receive notice of such sale, transaction or
distribution twenty (20) days prior to the date of such sale or the record date
for such transaction or distribution, as applicable, and, if they exercise such
Warrants prior to such date, they shall be entitled, in addition to the shares
of Common Stock issuable upon the exercise thereof, to receive such property,
cash, assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
8.6 No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made if the amount of said adjustment shall be less
than ten cents (10(cent)) per Warrant Security, provided, however, that in such
case any adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall amount to at least ten cents (10(cent)) per Warrant Security.
8.7 Adjustment of Redeemable Warrants' Exercise Price. With respect to
any of the Redeemable Warrants whether or not the Redeemable Warrants have been
exercised (or are exercisable) and whether or not the Redeemable Warrants are
issued and outstanding, the Redeemable Warrant exercise price and the number of
shares of Common Stock underlying such Redeemable Warrants shall be
automatically adjusted in accordance with Section 8 of the Warrant Agreement
between the Company and Continental Stock Transfer & Trust Company dated
__________, 1996 (the "Redeemable Warrant Agreement"), upon the occurrence of
any of the events described therein. Thereafter, the underlying Redeemable
Warrants shall be exercisable at such adjusted Redeemable Warrant exercise price
for such adjusted number of underlying shares of Common Stock or other
securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Units in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Redeemable Warrants upon the exercise of the Warrants, or fractions of shares
of Common Stock upon the exercise of the Redeemable Warrants underlying the
Warrants, it being the intent of the parties that all fractional interests shall
be eliminated by rounding any fraction up to the nearest whole number of shares
of Common Stock or Redeemable Warrants, as the case may be, or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants and the
Redeemable Warrants, such number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. The
Company further covenants and agrees that upon exercise of the Redeemable
Warrants underlying the Warrants and payment of the respective Redeemable
Warrant exercise price therefor, all shares of Common Stock and other securities
issuable upon such exercises shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants and the Redeemable Warrants and all Redeemable Warrants underlying the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock or the Redeemable Warrants issued to the
public in connection herewith may then be listed and/or quoted on Nasdaq
National Market or Nasdaq SmallCap Market.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written
notice of such event at least twenty (20) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Redeemable Warrants. The form of the certificate representing
Redeemable Warrants (and the form of election to purchase shares of Common Stock
upon the exercise of Redeemable Warrants and the form of assignment printed on
the reverse thereof) shall be substantially as set forth in Exhibit "A" to the
Redeemable Warrant Agreement. Each Redeemable Warrant issuable upon exercise of
the Warrants shall evidence the right to initially purchase one fully paid and
non-assessable share of Common Stock at an initial purchase price of $__________
[66 2/3% of the IPO price per Unit] per share commencing on the Initial Exercise
Date and ending at 5:00 p.m. New York time on the Redeemable Warrant Expiration
Date at which time the Redeemable Warrants shall expire. The exercise price of
the Redeemable Warrants and the number of shares of Common Stock issuable upon
the exercise of the Redeemable Warrants are subject to adjustment, whether or
not the Warrants have been exercised and the Redeemable Warrants have been
issued, in the manner and upon the occurrence of the events set forth in Section
8 of the Redeemable Warrant Agreement, which is hereby incorporated herein by
reference and made a part hereof as if set forth in its entirety herein. Subject
to the provisions of this Agreement and upon issuance of the Redeemable Warrants
underlying the Warrants, each registered holder of such Redeemable Warrants
shall have the right to purchase from the Company (and the Company shall issue
to such registered holders) up to the number of fully paid and non-assessable
shares of Common Stock (subject to adjustment as provided herein and in the
Redeemable Warrant Agreement), free and clear of all preemptive rights of
stockholders, provided that such registered holder complies with the terms
governing exercise of the Redeemable Warrants set forth in the Redeemable
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Redeemable Warrant Agreement. Upon exercise of
the Redeemable Warrants, the Company shall forthwith issue to the registered
holder of any such Redeemable Warrant in his name or in such name as may be
directed by him, certificates for the number of shares of Common Stock so
purchased. Except as otherwise provided herein, the Redeemable Warrants
underlying the Warrants shall be governed in all respects by the terms of the
Redeemable Warrant Agreement. The Redeemable Warrants shall be transferable in
the manner provided in the Redeemable Warrant Agreement, and upon any such
transfer, a new Redeemable Warrant Certificate shall be issued promptly to the
transferee. The Company covenants to, and agrees with, the Holder(s) that
without the prior written consent of the Holder(s), the Redeemable Warrant
Agreement will not be modified, amended, cancelled, altered or superseded, and
that the Company will send to each Holder, irrespective of whether or not the
Warrants have been exercised, any and all notices required by the Redeemable
Warrant Agreement to be sent to holders of Redeemable Warrants.
14. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address
of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
15. Supplements and Amendments. The Company and the Representative may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates (other than the Representative) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Representative may deem necessary or desirable and which the Company and
the Representative deem shall not adversely affect the interests of the Holders
of Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of
business on __________, 2003 [7 years from the date hereof]. Notwithstanding the
foregoing, the indemnification provisions of Section 7 shall survive such
termination until the close of business on __________, 2008 [12 years from the
date hereof.]
18. Governing Law, Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Representative
and the Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
as set forth in Section 14 hereof. Such mailing shall be deemed personal service
and shall be legal and binding upon the party so served in any action,
proceeding or claim. The Company, the Representative and the Holders agree that
the prevailing party(ies) in any such action or proceeding shall be entitled to
recover from the other party(ies) all of its/their reasonable legal costs and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
and the Redeemable Warrant Agreement contain the entire understanding between
the parties hereto with respect to the subject matter hereof and may not be
modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Representative and any other Holder(s) of the Warrant
Certificates or Warrant Securities.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall to either constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:
--------------------------------------
Hector D. Wiltshire
President and Chief Executive Officer
Attest:
- -------------------------
Secretary
JOSEPH STEVENS & COMPANY, L.P.
By:
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ________, 2001
No. W- ____ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or registered
assigns, is the registered holder of __________ Warrants to purchase initially,
at any time from ____________, 1997 [one year from the effective date of the
Registration Statement] until 5:00 p.m. New York time on ____________, 2001
[five years from the effective date of the Registration Statement] ("Expiration
Date"), up to ______________ Units, each Unit consisting of two (2) fully-paid
and non-assessable shares of common stock, $.01 par value ("Common Stock") of
ACCESS SOLUTIONS INTERNATIONAL, INC., a Delaware corporation (the "Company"),
and one (1) redeemable warrant ("Redeemable Warrants") (each Redeemable Warrant
entitling the holder to purchase one fully-paid and non-assessable share of
Common Stock), at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $_____________ [120% of the public offering
price per Unit] per Unit upon surrender of this Warrant Certificate and payment
of the Exercise Price at an office or agency of the Company, or by surrender of
this Warrant Certificate in lieu of cash payment, but subject to the conditions
set forth herein and in the warrant agreement dated as of _________________,
1996 between the Company and Joseph Stevens & Company, L.P. (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House finds payable to the order of the
Company or by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ___________, 1996
ACCESS SOLUTIONS INTERNATIONAL, INC.
[SEAL] By:
-------------------------------------
Hector D. Wiltshire
President and Chief Executive Officer
Attest:
- -----------------------------
Secretary
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ Units and
herewith tenders in payment for such Securities a certified or official bank
check payable in New York Clearing House Funds to the order of Access Solutions
International, Inc. in the amount of $__________, all in accordance with the
terms of Section 3.1 of the Representative's Warrant Agreement dated as of
___________, 1996 between Access Solutions International, Inc. and Joseph
Stevens & Company, L.P. The undersigned requests that certificates for such
securities be registered in the name of _______________ whose address is
__________________________ and that such certificates be delivered to
______________________________ whose address is ____________________________.
Dated:
Signature
--------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
-----------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Units all in
accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of ______________, 1996 between Access Solutions
International, Inc. and Joseph Stevens & Company, L.P. The undersigned requests
that certificates for such securities be registered in the name of
__________________ whose address is _______________________ and that such
certificates be delivered to ___________________ whose address is
____________________________________.
Dated:
Signature
-----------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______ hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
--------------------- ----------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
Exhibit 10.y
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this __ day of _______, 1996,
by and between Access Solutions International, Inc., a Delaware corporation (the
"Company"), an Joseph Stevens & Company, L.P. (the "Consultant").
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Purpose. The Company hereby retains the Consultant during the term
specified in Section 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters, upon the terms and
conditions as set forth herein.
2. Term. Subject to the provisions of Sections 8, 9 and 10
hereof, this Agreement shall be effective for a period of twenty-four (24)
months commencing May __, 1996.
3. Duties of Consultant. During the term of this Agreement, the Consultant
will provide the Company with such regular and customary consulting advice as is
reasonably requested by the Company, provided that the Consultant shall not be
required to undertake duties not reasonably within the scope of the consulting
advisory service contemplated by this Agreement. In performance of these duties,
the Consultant shall provide the Company with the benefits of its best judgment
and efforts. It is understood and acknowledged by the parties that the value of
the Consultant's advice is not measurable in any quantitative manner, and that
the Consultant shall be obligated to render advice, upon the request of the
Company, in good faith, but shall not be obligated to spend any specific amount
of time in doing so. The Consultant's duties may include, but will not
necessarily be limited to:
A. Providing sponsorship and exposure in connection with the dissemination
of corporate information regarding the Company to the investment community at
large under a systematic planned approach.
B. Rendering advice and assistance in connection with the preparation of
annual and interim reports and press releases.
C. Arranging, on behalf of the Company and its representatives, at
appropriate times, meetings with securities analysts of major regional
investment banking firms.
D. Assisting in the Company's financial public relations, including
discussions between the Company and the financial community.
E. Rendering advice with regard to internal operations, including:
(1) advice regarding formation of corporate goals and their
implementation;
(2) advice regarding the financial structure of the Company and
its divisions or subsidiaries or any programs and projects of
such entities;
(3) advice concerning the securing, when necessary and if
possible, of additional financing through banks, insurance
companies and/or other institutions; and
(4) advice regarding corporate organization and personnel.
F. Rendering advice with respect to any acquisition program of the
Company.
G. Rendering advice regarding a future public or private offering of
securities of the Company or of any subsidiary.
4. Relationships with Others. The Company acknowledges that the
Consultant and its affiliates are in the business of providing financial
services and consulting advice (of all types contemplated by this Agreement) to
others. Nothing herein contained shall be construed to limit or restrict the
Consultant or its affiliates from rendering such services or advice to others.
5. Consultant's Liability. In the absence of gross negligence or
willful misconduct on the part of the Consultant, or the Consultant's breach of
this Agreement, the Consultant shall not be liable to the Company, or to any
officer, director, employee, shareholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
advice hereunder. Except in those cases where the gross negligence or willful
misconduct of the Consultant or the breach by the Consultant of this Agreement
is alleged and proven, the Company agrees to defend, indemnify and hold the
Consultant harmless from and against any and all reasonable costs, expenses and
liability (including, but not limited to, attorneys' fees paid in the defense of
the Consultant) which may in any way result from services rendered by the
Consultant pursuant to or in any connection with this Agreement.
6. Expenses. The Company, upon receipt of appropriate supporting
documentation, shall reimburse the Consultant for any and all reasonable
out-of-pocket expenses incurred by the Consultant in connection with services
rendered by the Consultant to Company pursuant to this Agreement, including, but
not limited to, hotel, food and associated expenses, all charges for travel and
long-distance telephone calls and all other expenses incurred by the Consultant
in connection with services rendered by the Consultant to the Company pursuant
to this Agreement. Expenses payable under this Section 6 shall not include
allocable overhead expenses of the Consultant, including, but not limited to,
attorneys' fees, secretarial charges and rent.
7. Compensation. As compensation for the services to be rendered by
the Consultant to the Company pursuant to Section 3 hereof, the Company shall
pay the Consultant a financial consulting fee of two thousand dollars ($2,000)
per month for twenty-four (24) months commencing on ________ __, 1996.
Forty-Eight Thousand Dollars ($48,000), representing payment in full of all
amounts due the Consultant pursuant to this Section 7, shall be paid by the
Company on ________ __, 1996.
8. Other Advice. In addition to the duties set out in Section 3
hereof, the Consultant agrees to furnish advice to the Company in connection
with the acquisition of and/or merger with other companies, joint ventures with
any third parties, license and royalty agreements and any other financing (other
than the private or public sale of the Company's securities for cash),
including, but not limited to, the sale of the Company itself (or any
significant percentage, subsidiaries or affiliates thereof).
In the event that any such transactions are directly or indirectly
originated by the Consultant for a period of five (5) years from the date
hereof, the Company shall pay fees to the Consultant as follows:
Legal Consideration Fee
------------------- ---
1. $ -0- - $3,000,000 5% of legal consideration
2. $ 3,000,001 - $4,000,000 Amount calculated pursuant to line
1 of this computation, plus 4% of
excess over $3,000,000
3. $ 4,000,001 - 5,000,000 Amount calculated pursuant to lines
1 and 2 of this computation, plus
3% of excess over $4,000,000
4. above $ 5,000,000 Amount calculated pursuant to lines
1, 2 and 3 of this computation,
plus 2% of excess over $5,000,000.
Legal consideration is defined, for purposes of this Agreement, as the
total of stock (valued at market on the day of closing, or if there is no public
market, valued as set forth herein for other property), cash and assets and
property or other benefits exchanged by the Company or received by the Company
or its shareholders (all valued at fair market value as agreed or, if not, by
any independent appraiser), irrespective of period of payment or terms.
9. Sales or Distributions of Securities. If the Consultant assists the
Company in the sale or distribution of securities to the public or in a private
transaction, the Consultant shall receive fees in the amount and form to be
arranged separately at the time of such transaction.
10. Form of Payment. All fees due to the Consultant pursuant to
Section 8 hereof are due and payable to the Consultant, in cash or by certified
check, at the closing or closings of a transaction specified in such Section 8
or as otherwise agreed between the parties hereto; provided, however, that in
the case of license and royalty agreements specified in Section 8 hereof, the
fees due the Consultant in receipt of such license and royalty agreements shall
be paid as and when license and/or royalty payments are received by the Company.
In the event that this Agreement shall not be renewed for a period of at least
twelve (12) months at the end of the five (5) year period referred to in Section
8 hereof or if terminated for any reason prior to the end of such five (5) year
period then, notwithstanding any such non-renewal or termination, the Consultant
shall be entitled to the full fee for any transaction contemplated under Section
8 hereof which closes within twelve (12) months after such non-renewal or
termination.
11. Limitation Upon the Use of Advice and Services.
(a) No person or entity, other than the Company or any of its
subsidiaries, shall be entitled to make use of or rely upon the advice of the
Consultant to be given hereunder, and the Company shall not transmit such advice
to others, or encourage or facilitate the use of or reliance upon such advice by
others, without the prior written consent of the Consultant.
(b) It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever as to making a
market in the securities of the Company or to recommend or advise its clients to
purchase the securities of the Company. Research reports or corporate finance
reports that may be prepared by the Consultant will, when and if prepared, be
done solely on the merits or judgment of analysts of the Consultant or senior
corporate finance personnel of the Consultant.
(c) The use of the Consultant's name in any annual report or other
report of the Company, or any release or similar document prepared by or on
behalf of the Company, must have the prior written approval of the Consultant
unless the Company is required by law to include the Consultant's name in such
annual report, other report or release, in which event the Consultant will be
furnished with a copy of such annual report, other report or release using
Consultant's name in advance of publication by or on behalf of the Company.
(d) Should any purchases of securities be requested to be effected
through the Consultant by the Company, its officers, directors, employees or
other affiliates, or by any person on behalf of any profit sharing, pension or
similar plan of the Company, for the account of the Company or the individuals
or entities involved, such orders shall be taken by a registered account
executive of the Consultant, shall not be subject to the terms of this
Agreement, and the normal brokerage commission as charged by the Consultant will
apply in conformity with all rules and regulations of the New York Stock
Exchange, the National Association of Securities Dealers, Inc. or other
regulatory bodies. Where no regulatory body sets the fee, the normal established
fee as used by the Consultant shall apply.
(e) The Consultant shall not disclose confidential information which
it learns about the Company as a result of its engagement hereunder, except as
such disclosure as may be required for Consultant to perform its duties
hereunder.
12. Indemnification. Since the Consultant will be acting on behalf of
the Company in connection with its engagement hereunder, the Company and
Consultant have entered into a separate indemnification agreement substantially
in the form attached hereto as Exhibit A and dated the date hereof, providing
for the indemnification of Consultant by the Company. The Consultant has entered
into this Agreement in reliance on the indemnities set forth in such
indemnification agreement.
13. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason whatsoever, such unlawfulness or invalidity shall not affect the validity
of the remainder of this Agreement.
14. Miscellaneous.
(a) Any notice or other communication between the parties hereto shall
be sent by certified or registered mail, postage prepaid, if to the Company,
addressed to it at 650 Ten Rod Road, North Kingstown, RI 02852, Attention:
Hector D. Wiltshire, President and Chief Executive Officer with a copy to
Edwards & Angell, 2700 Hospital Trust Tower, Providence, RI 02903, Attention:
John E. Ottavionni, Esq. or, if to the Consultant, addressed to it at 33 Maiden
Lane, 8th Floor, New York, New York 10038, Attention: Joseph Sorbara, Chief
Executive Officer, with a copy to Orrick, Herrington & Sutcliffe, 666 5th
Avenue, New York, New York 10103, Attention: Rubi Finkelstein, Esq., or to such
address as may hereafter be designated in writing by one party to the other.
Such notice or other communication shall be deemed to be given on the date of
receipt.
(b) If, during the term hereof, the Consultant shall cease to do
business, the provisions hereof relating to the duties of the Consultant and
compensation by the Company as it applies to the Consultant shall thereupon
cease to be in effect, except for the Company's obligation of payment for
services rendered prior thereto. This Agreement shall survive any merger of,
acquisition of, or acquisition by the Consultant and, after any such merger or
acquisition, shall be binding upon the Company and the corporation surviving
such merger or acquisition.
(c) This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the central subject matter hereof.
(d) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and the Consultant.
(e) This Agreement shall be construed and interpreted in accordance
with laws of the State of New York, without giving effect to conflicts of laws.
(f) This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure to
the benefit of the parties and their respective successors, assigns and legal
representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
JOSEPH STEVENS & COMPANY, L.P.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
_________________, 1996
JOSEPH STEVENS & COMPANY, L.P
33 Maiden Lane
8th Floor New York, New York 10038
Ladies and Gentlemen:
In connection with our engagement of JOSEPH STEVENS & COMPANY, L.P.
(the "Consultant") as our financial advisor and investment banker, we hereby
agree to indemnify and hold the Consultant and its affiliates, and the
directors, officers, partners, shareholders, agents and employees of the
Consultant (collectively the "Indemnified Persons"), harmless from and against
any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses incurred by any of them
(including, but not limited to, fees and expenses of counsel) which are (A)
related to or arise out of (i) any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
us, or (ii) any actions taken or omitted to be taken by any Indemnified Person
in connection with our engagement of the Consultant pursuant to the Financial
Advisory and Consulting Agreement, of even date herewith, between the Consultant
and us (the "Consulting Agreement"), or (B) otherwise related to or arising out
of the Consultant's activities on our behalf pursuant to the Consultant's
engagement under the Consulting Agreement, and we shall reimburse any
Indemnified Person for all expenses (including, but not limited to, fees and
expenses of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding
(collectively a "Claim"), whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party. We will not,
however, be responsible for any Claim which is finally judicially determined to
have resulted exclusively from the gross negligence or willful misconduct of any
person seeking indemnification hereunder. We further agree that no Indemnified
Person shall have any liability to us for or in connection with the Consultant's
engagement under the Consulting Agreement except for any Claim incurred by us
solely as a direct result of any Indemnified Person's gross negligence or
willful misconduct.
We further agree that we will not, without the prior written consent
of the Consultant settle, compromise or consent to the entry of any judgment in
any pending or threatened Claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim), unless such settlement, compromise or consent
includes a legally binding, unconditional, and irrevocable release of each
Indemnified Person hereunder from any and all liability arising out of such
Claim.
Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution, but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless, and only to the extent that, such failure results in the forfeiture by
us of substantial rights and defenses, and such failure to so notify us will not
in any event relieve us from any other obligation or liability we may have to
any Indemnified Person otherwise than under this Agreement. If we so elect or
are requested by such Indemnified Person, we will assume the defense of such
Claim, including the employment of counsel reasonably satisfactory to such
Indemnified Person and the payment of the fees and expenses of such counsel. In
the event, however, that such Indemnified Person reasonably determines in its
sole judgment that having common counsel would present such counsel with a
conflict of interest or such Indemnified Person concludes that there may be
legal defenses available to it or other Indemnified Persons different from or in
addition to those available to us, then such Indemnified Person may employ its
own separate counsel to represent or defend it in any such Claim and we shall
pay the reasonable fees and expenses of such counsel. Notwithstanding anything
herein to the contrary, if we fail timely or diligently to defend, contest, or
otherwise protect against any Claim, the relevant Indemnified Party shall have
the right, but not the obligation, to defend, contest, compromise, settle,
assert crossclaims or counterclaims, or otherwise protect against the same, and
shall be fully indemnified by us therefor, including, but not limited to, for
the fees and expenses of its counsel and all amounts paid as a result of such
Claim or the compromise or settlement thereof. In any Claim in which we assume
the defense, the Indemnified Person shall have the right to participate in such
defense and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not the Consultant is the Indemnified Person) we and the Consultant shall
contribute to the Claim for which such indemnity is held unavailable in such
proportion as is appropriate to reflect the relative benefits to us, on the one
hand, and the Consultant, on the other, in connection with the Consultant's
engagement by us under the Consulting Agreement, subject to the limitation that
in no event shall the amount of the Consultant's contribution to such Claim
exceed the amount of fees actually received by the Consultant from us pursuant
to the Consultant's engagement under the Consulting Agreement. We hereby agree
that the relative benefits to us, on the one hand, and the Consultant, on the
other hand, with respect to the Consultant's engagement under the Consulting
Agreement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our stockholders as the case
may be, pursuant to the transaction (whether or not consummated) for which the
Consultant is engaged to render services bears to (b) the fee paid or proposed
to be paid to the Consultant in connection with such engagement.
Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that an Indemnified Part may have at law or at
equity.
Should the Consultant, or any of its directors, officers, partners,
shareholders, agents or employees, be required or be requested by us to provide
documentary evidence or testimony in connection with any proceeding arising from
or relating to the Consultant's engagement under the Consulting Agreement, we
agree to pay all reasonable expenses (including but not limited to fees and
expenses of counsel) in complying therewith and one thousand dollars ($1,000)
per day for any sworn testimony or preparation therefor, payable in advance.
We hereby consent to personal jurisdiction and service of process and
venue in any court in which any claim for indemnity is brought by any
Indemnified Person.
It is understood that, in connection with the Consultant's engagement
under the Consulting Agreement, the Consultant may be engaged to act in one or
more additional capacities and that the terms of the original engagement or any
such additional engagement may be embodied in one or more separate written
agreements. The provisions of this Agreement shall apply to the original
engagement and any such additional engagement and shall remain in full force and
effect following the completion or termination of the Consultant's
engagement(s).
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
CONFIRMED AND AGREED TO:
JOSEPH STEVENS & COMPANY, L.P.
By:
------------------------------------
Name:
Title:
Exhibit 10.z
ACCESS SOLUTIONS INTERNATIONAL, INC.
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
----------------
WARRANT AGREEMENT
DATED AS OF ______________, 1996
<PAGE>
WARRANT AGREEMENT, dated this ___ day of ________ 1996 [the effective
date of the Registration Statement], by and between ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY.
WITNESSETH:
WHEREAS, in connection with (i) the offering (the "Offering") to the
public of 1,066,667 units (the "Units"), each Unit consisting of two shares of
the Company's common stock, $.01 par value per share (the "Common Stock"), and
one redeemable warrant (the "Warrants"), such redeemable warrant entitling the
holder thereof to purchase one share of Common Stock, (ii) the over-allotment
option granted to Joseph Stevens & Company, L.P. the representative of the
several underwriters (the "Representative") in the public offering referred to
above, to purchase up to an additional 160,000 Units (the "Over-Allotment
Option"), (iii) the sale to the Representative of warrants (the
"Representative's Warrants") to purchase up to 106,667 Units and (iv) 750,000
Warrants to be issued upon consummation of the Offering and registered for the
account of the certain security holders of the Company in exchange for certain
warrants issued in connection with the Company's bridge financing consummated in
May 1996 (the "Bridge Financing"), the Company will issue up to 2,083,334
Warrants (subject to increase as provided herein);
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent (as defined in Section
1(u) hereof) to act on behalf of the Company, and the Warrant Agent is willing
to so act, in connection with the issuance, registration, transfer and exchange
of certificates representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the
Representative, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Commission" shall mean the Securities and Exchange Commission.
(c) "Common Stock" shall have the meaning set forth in Section 8(d)
hereof.
(d) "Company" shall have the meaning assigned to such term in the
first (1st) paragraph of this Agreement.
(e) "Corporate Office" shall mean the office of the Warrant Agent at
which at any particular time its principal business in New York, New York shall
be administered, which office is located on the date hereof at 2 Broadway, New
York, New York 10004.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Exercise Date" shall mean, subject to the provisions of Section
5(b) hereof, as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder (as defined in
Section 1(m) hereof) thereof or his attorney duly authorized in writing, and
(ii) payment in cash or by check made payable to the Warrant Agent for the
account of the Company of an amount in lawful money of the United States of
America equal to the applicable Purchase Price (as defined in Section 1(k)
hereof).
(h) "Initial Warrant Exercise Date" shall mean __________, 1996 [the
effective date of the Registration Statement].
(i) "Initial Warrant Redemption Date" shall mean __________, 1997 [the
date twelve (12) months after the effective date of the Registration Statement].
(j) "NASD" shall mean the National Association of Securities Dealers,
Inc.
(k) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8 hereof, $__________ per Share [66 2/3% of
the IPO price per Unit].
(l) "Redemption Date" shall mean the date (which may not occur before
the Initial Warrant Redemption Date) fixed for the redemption of the Warrants in
accordance with the terms hereof.
(m) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6(b) hereof.
(n) "Representative's Warrant Agreement" shall mean the agreement
dated as of __________, 1996 between the Company and the Representative relating
to and governing the terms and provisions of the Representative's Warrants.
(o) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the board of directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(p) "Transfer Agent" shall mean Continental Stock Transfer & Trust
Company, of New York, New York or its authorized successor.
(q) "Underwriting Agreement" shall mean the underwriting agreement
dated _______________, 1996 [the effective date of the Registration Statement]
between the Company and the Representative relating to the purchase for resale
to the public of 1,066,667 Units (without giving effect to the Over-Allotment
Option).
(r) "Warrant Agent" shall mean Continental Stock Transfer & Trust
Company of New York, New York or its authorized successor.
(s) "Warrant Certificate" shall mean a certificate representing each
of the Warrants substantially in the form annexed hereto as Exhibit A.
(t) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (New York
time) on __________, 2001 [the day before the 5th (60 month) anniversary of
issuance] or, if such date shall in the State of New York be a holiday or a day
on which banks are authorized to close, then 5:00 p.m. (New York time) on the
next following day which in the State of New York is not a holiday or a day on
which banks are authorized to close, subject to the Company's right, prior to
the Warrant Expiration Date, with the consent of the Representative, to extend
such Warrant Expiration Date on five (5) business days prior written notice to
the Registered Holders.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) One Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase at the Purchase Price
therefor from the Initial Warrant Exercise Date until the Warrant Expiration
Date one (1) share of Common Stock upon the exercise thereof, subject to
modification and adjustment as provided in Section 8 hereof.
(b) Upon execution of this Agreement, Warrant Certificates
representing 1,066,667 Warrants to purchase up to an aggregate of 1,066,667
shares of Common Stock (subject to modification and adjustment as provided in
Section 8 hereof), shall be executed by the Company and delivered to the Warrant
Agent.
(c) Upon exercise of the Over-Allotment Option, in whole or in part,
Warrant Certificates representing up to 160,000 Warrants to purchase up to an
aggregate of 160,000 shares of Common Stock (subject to modification and
adjustment as provided in Section 8 hereof) shall be executed by the Company and
delivered to the Warrant Agent.
(d) Upon exercise of the Representative's Warrants as provided
therein, Warrant Certificates representing 106,667 Warrants to purchase up to an
aggregate of 106,667 shares of Common Stock (subject to modification and
adjustment as provided in Section 8 hereof and in the Representative's Warrant
Agreement), shall be countersigned, issued and delivered by the Warrant Agent
upon written order of the Company signed by its Chairman of the Board, President
or a Vice President and by its Treasurer or an Assistant Treasurer or its
Secretary or an Assistant Secretary.
(e) Upon consummation of the Offering, Warrant Certificates
representing 750,000 Warrants, issued to certain security holders of the Company
in exchange for certain warrants issued in connection with the Bridge Financing,
entitling the holders thereof to purchase up to an aggregate of 750,000 shares
of Common Stock (subject to modification and adjustment as provided in Section
8) shall be executed by the Company and delivered to the Warrant Agent.
(f) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required
denominations of one or whole number multiples thereof to the person entitled
thereto in connection with any transfer or exchange permitted under this
Agreement. No Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates issued upon
any transfer or exchange of Warrants, (iii) Warrant Certificates issued in
replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 hereof, and (iv) Warrant Certificates issued pursuant to
the Representative's Warrant Agreement (including Warrants in excess of the
106,667 Representative's Warrants issued as a result of the antidilution
provisions contained in the Representative's Warrant Agreement) and (v) at the
option of the Company, Warrant Certificates in such form as may be approved by
its Board of Directors, to reflect any adjustment or change in the Purchase
Price, the number of shares of Common Stock purchasable upon the exercise of a
Warrant or the redemption price therefor.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Treasurer
or an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though the officer of
the Company who signed such Warrant Certificates had not ceased to hold such
office.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples thereof
may be exercised commencing at any time on or after the Initial Warrant Exercise
Date, but not after the Warrant Expiration Date, upon the terms and subject to
the conditions set forth herein (including the provisions set forth in Sections
5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date, provided that the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder thereof or
his attorney duly authorized in writing, together with payment in cash or by
check made payable to the Warrant Agent for the account of the Company of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price, have been received by the Warrant Agent. The person entitled to
receive the securities deliverable upon such exercise shall be treated for all
purposes as the holder of such securities as of the close of business on the
Exercise Date. As soon as practicable on or after the Exercise Date and in any
event within five (5) business days after such date, the Warrant Agent, on
behalf of the Company, shall cause to be issued to the person or persons
entitled to receive the same a Common Stock certificate or certificates for the
shares of Common Stock deliverable upon such exercise, and the Warrant Agent
shall deliver the same to the person or persons entitled thereto. Upon the
exercise of any Warrants, the Warrant Agent shall promptly notify the Company in
writing of such fact and of the number of securities delivered upon such
exercise and, subject to Section 4(b) hereof, shall cause all payments in cash
or by check made payable to the order of the Company in respect of the Purchase
Price to be deposited promptly in the Company's bank account or delivered to the
Company.
(b) At any time upon the exercise of any Warrants after one year and
one day from the date hereof, the Warrant Agent shall, on a daily basis, within
two business days after such exercise, notify the Representative, its successors
or assigns of the exercise of any such Warrants and shall, on a weekly basis
(subject to collection of funds constituting the tendered Purchase Price, but in
no event later than five business days after the last day of the calendar week
in which such funds were tendered), for services rendered by the Representative
to the Registered Holders of the Warrants then being exercised, remit to the
Representative an amount equal to five percent (5%) of the Purchase Price of
such Warrants then being exercised unless the Representative shall have notified
the Warrant Agent that the payment of such amount with respect to such Warrant
is violative of the General Rules and Regulations promulgated under the Exchange
Act, or the rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD") or applicable state securities or "blue sky" laws, or the
Warrants are those underlying the Representative's Warrants in which event, the
Warrant Agent shall have to pay such amount to the Company; provided, that, the
Warrant Agent shall not be obligated to pay any amounts pursuant to this Section
4(b) during any week that such amounts payable are less than $1,000 and the
Warrant Agent's obligation to make such payments shall be suspended until the
amount payable aggregates $1,000, and provided further, that, in any event, any
such payment (regardless of amount) shall be made not less frequently than
monthly.
(c) The Company shall not be obligated to issue any fractional share
interests or fractional warrant interests upon the exercise of any Warrant or
Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fractional interest shall be eliminated by rounding
any fraction up to the next full share or Warrant, as the case may be, or other
securities, properties or rights.
SECTION 5. Reservation of Shares, Listing, Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon the exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that, upon exercise of the Warrants and payment of the Purchase Price
for the shares of Common Stock underlying the Warrants, all shares of Common
Stock which shall be issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable, free from all preemptive or similar rights,
and free from all taxes, liens and charges with respect to the issuance thereof,
and that upon issuance such shares shall be listed or quoted on each securities
exchange, if any, on which the other shares of outstanding Common Stock are then
listed or quoted, or if not then so listed or quoted on each place (whether the
Nasdaq Stock Market, Inc., the NASD Over-the-Counter Electronic Bulletin Board,
the National Quotation Bulletin Board "Pink Sheets" or otherwise) on which the
other shares of outstanding Common Stock are listed or quoted.
(b) The Company covenants that if any securities reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post-effective amendment to a registration statement, use its best efforts to
cause the same to become effective, keep such registration statement current
while any of the Warrants are outstanding and deliver a prospectus which
complies with Section 10(a)(3) of the Act, to the Registered Holder exercising
the Warrant (except, if in the opinion of counsel to the Company, such
registration is not required under the federal securities law or if the Company
receives a letter from the staff of the Commission stating that it would not
take any enforcement action if such registration is not effected). The Company
will use its best efforts to obtain appropriate approvals or registrations under
the state "blue sky" securities laws of all states in which Registered Holders
reside. Warrants may not be exercised by, nor may shares of Common Stock be
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; provided, however, that if shares of Common Stock are
to be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the Transfer
Agent to requisition from time to time certificates representing shares of
Common Stock or other securities required upon exercise of the Warrants, and the
Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may be, on the reverse thereof shall be duly
endorsed or be accompanied by a written instrument or instruments of
subscription or assignment, in form satisfactory to the Company and the Warrant
Agent, duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any exchange or registration
of transfer of Warrant Certificates. However, the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange
shall be promptly cancelled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof of each Warrant represented
thereby (notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes and shall
not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Adjustments to Purchase Price and Number of Securities.
(a) Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Purchase Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
(b) Stock Dividends and Distributions. In case the Company shall pay
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Purchase Price shall
forthwith be proportionately decreased. An adjustment made pursuant to this
Section 8(b) shall be made as of the record date for the subject stock dividend
or distribution.
(c) Adjustment in Number of Securities. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted Purchase Price of
each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Purchase Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Purchase Price.
(d) Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Certificate of Incorporation of the Company as may be amended or restated
as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event the Company shall after the date hereof issue Common
Stock with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, each Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
(e) Merger or Consolidation or Sale.
(i) In case of any consolidation of the Company with, or merger of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or surviving such merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the holder of each Warrant then outstanding or
to be outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale or transfer by a Holder of the number of shares of
Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(ii) In the event of (A) the sale by the Company of all or
substantially all of its assets, or (B) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Exchange Act or (C) a
distribution to the Company's stockholders of any cash, assets, property,
rights, evidences of indebtedness, securities or any other thing of value, or
any combination thereof, the Holders of the unexercised Warrants shall receive
notice of such sale, transaction or distribution twenty (20) days prior to the
date of such sale or the record date for such transaction or distribution, as
applicable, and, if they exercise such Warrants prior to such date, they shall
be entitled, in addition to the shares of Common Stock issuable upon the
exercise thereof, to receive such property, cash, assets, rights, evidence of
indebtedness, securities or any other thing of value, or any combination
thereof, on the payment date of such sale, transaction or distribution.
(f) No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made if the amount of said adjustment shall be less
than ten cents (10(cent)) per share of Common Stock, provided, however, that in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall amount to at least ten cents (10(cent)) per share of Common Stock.
SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the Company may
(but only with the prior written consent of the Representative), on thirty (30)
days' prior written notice, redeem all of the Warrants, in whole and not in
part, at a redemption price of five cents ($.05) per Warrant; provided, however,
that before any such call for redemption of Warrants can take place, the (i)
average closing bid price for the Common Stock, as reported by the National
Association of Securities Dealers Automated Quotation System, or (ii) if not so
quoted, as reported by any other recognized quotation system on which the Common
Stock is quoted, shall have for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth (5th) trading day prior
to the date on which the notice contemplated by Sections 9(b) and 9(c) hereof is
given, equalled or exceeded 150% of the then exercise price per share of Common
Stock (subject to adjustment in the event of any stock splits or other similar
events as provided in Section 8 hereof).
(b) In case the Company shall exercise its right to redeem all of the
Warrants, it shall give or cause to be given notice to the Registered Holders of
the Warrants, by mailing to such Registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Warrant Agent. Any notice mailed in the manner provided herein
shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to the
Representative or its successors or assigns a similar notice telephonically and
confirmed in writing, together with a list of the Registered Holders (including
their respective addresses and number of Warrants beneficially owned by them) to
whom such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificates shall be delivered and the redemption price shall be paid,
and (iv) that the Representative is the Company's exclusive warrant solicitation
agent and shall receive the commission contemplated by Section 4(b) hereof and
(v) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New
York time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
"Redemption Date" for purposes of this Agreement. No failure to mail such notice
nor any defect therein or in the mailing thereof shall affect the validity of
the proceedings for such redemption except as to a holder (A) to whom notice was
not mailed or (B) whose notice was defective. An affidavit of the Warrant Agent
or the Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New
York time) on the business day immediately preceding the Redemption Date. The
redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the Representative and each person, if
any, who controls the Representative within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from the
registration statement or prospectus referred to in Section 5(b) hereof to the
same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant to which the company has agreed to
indemnify the Representative contained in Section 7 of the Underwriting
Agreement.
(f) Five business days prior to the Redemption Date, the Company shall
furnish to the Representative (i) opinions of counsel to the Company, dated such
date and addressed to the Representative, and (ii) a "cold comfort" letter dated
such date addressed to the Representative, signed by the independent public
accountants who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities, including, without
limitation, those matters covered in Sections 6(d), 6(e) and 6(k) of the
Underwriting Agreement.
(g) The Company shall as soon as practicable after the Redemption
Date, and in any event within 15 months thereafter, make "generally available to
its security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least 12 consecutive months beginning after the
Redemption Date.
(h) The Company shall deliver within five business days prior to the
Redemption Date copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to such registration statement and
permit the Representative to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as the
Representative shall reasonably request.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company and the Representative, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Representative)
and shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board of Directors, President or any Vice President (unless
other evidence in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in accordance with such notice, statement, instruction, request, direction,
order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own gross negligence or willful misconduct), after giving
thirty (30) days' prior written notice to the Company. At least fifteen (15)
days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation the Company shall appoint in writing a new warrant agent. If
the Company shall fail to make such appointment within a period of thirty (30)
days after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having a capital and surplus, as shown
by its last published report to its stockholders, of not less than ten million
dollars ($10,000,000) or a stock transfer company doing business in New York,
New York. After acceptance in writing of such appointment by the new warrant
agent is received by the Company, such new warrant agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the warrant agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later than
the effective date of any such appointment, the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two (2) years from
the date of exercise any Warrant Certificate received by it upon such exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (a) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained, or (b) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders holding not less than
sixty-six and two-thirds percent (66-2/3%) of the Warrants then outstanding;
provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, and no change that increases the
Purchase Price of any Warrant, other than such changes as are specifically set
forth in this Agreement as originally executed, shall be made without the
consent in writing of each Registered Holders affected by such change. In
addition, this Agreement may not be modified, amended or supplemented without
the prior written consent of the Representative or its successors or assigns,
other than to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained or to make any such
change that the Warrant Agent and the Company deem necessary or desirable and
which shall not adversely affect the interests of the Representative or its
successors or assigns.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission, if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at Access Solutions International, Inc., 650 Ten Rod
Road, North Kingstown, RI 02852, Attention: Hector D. Wiltshire, President and
Chief Executive Officer, or at such other address as may have been furnished to
the Warrant Agent in writing by the Company; and if to the Warrant Agent, at its
Corporate Office. Copies of any notice delivered pursuant to this Agreement
shall be delivered to Joseph Stevens & Company, L.P., 33 Maiden Lane, 8th Floor,
New York, NY 10038, Attention: Joseph Sorbara, Chief Executive Officer or at
such other address as may have been furnished to the Company and the Warrant
Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws
rules or principals.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. The Representative is, and shall
at all times irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the rights granted
to it hereunder.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ACCESS SOLUTIONS INTERNATIONAL, INC. CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, INC.
As Warrant Agent
By: By:
--------------------------------- -----------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT A
No. W VOID AFTER
------------- ------------, 2001
WARRANTS
---------
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
ACCESS SOLUTIONS INTERNATIONAL, INC.
CUSIP
--------
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. One Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, $.01 par
value per share, of Access Solutions International, Inc., a Delaware corporation
(the "Company"), at any time from _____________, 1996 [the effective date of the
Registration Statement] and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004 as Warrant Agent, or its successor (the "Warrant Agent"), accompanied
by payment of $_______ [66 2/3 of the initial public offering price per Unit]
subject to adjustment (the "Purchase Price"), in lawful money of the United
States of America in cash or by check made payable to the Warrant Agent for the
account of the Company.
This Warrant Certificate is, and each Warrant represented hereby are,
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated __________,
1996 [the effective date of the Registration Statement], by and between the
Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all of the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 2001 [the day before the 5th (60 month) anniversary of the issuance
of the Warrant]. If such date shall in the State of New York be a holiday or a
day on which banks are authorized to close, then the Expiration Date shall mean
5:00 p.m. (New York time) on the next day which in the State of New York is not
a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
This Warrant shall not be exercisable by a Registered Holder in any state where
such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may
be redeemed at the option of the Company, in whole and not in part, at a
redemption price of $.05 per Warrant, at any time commencing __________, 1997
[twelve (12) months from issuance] provided that the average closing bid price
for the Company's Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System (or, if not so quoted, as reported
by any other recognized quotation system on which the price of the Common Stock
is quoted), shall have, for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth (5th) trading day prior
to the date on which the Notice of Redemption (as defined below) is given,
equalled or exceeded 150% of the then exercise price per share (subject to
adjustment in the event of any stock splits or other similar events). Notice of
redemption (the "Notice of Redemption") shall be given not later than the
thirtieth (30th) day before the date fixed for redemption, all as provided in
the Warrant Agreement. On and after the date fixed for redemption, the
Registered Holder shall have no rights with respect to this Warrant except to
receive the $.05 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ___________, 1996
ACCESS SOLUTIONS INTERNATIONAL, INC.
[SEAL]
By:
--------------------------------
Name:
Title:
ATTEST:
By:
--------------------------------
Name:
Title:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent
By:
----------------------------------
Authorized Officer
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise _____ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
---------------------------------
---------------------------------
---------------------------------
---------------------------------
(please print or type name and address)
and be delivered to
---------------------------------
---------------------------------
---------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was solicited by Joseph Stevens &
Company, L.P., please check the following box []
2. The exercise of this Warrant was solicited by ________. []
3. If the exercise of this Warrant was not solicited, please check the
following box. []
Dated:
------------------------ X
---------------------------------
---------------------------------
---------------------------------
Address
---------------------------------
Social Security or Taxpayer
Identification Number
---------------------------------
Signature Guaranteed
---------------------------------
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________, hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
---------------------------------
---------------------------------
---------------------------------
---------------------------------
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated:
------------------------ X
---------------------------------
---------------------------------
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
Exhibit 23.a
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated May 10, 1996 relating to
the financial statements of Access Solutions International, Inc. (formerly
Aquidneck Systems International, Inc.) which appears in such Prospectus. We also
consent to the references to us under the heading "Experts" in such Prospectus.
Prince Waterhouse LLP
Boston, Massachusetts
June 3, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1996 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000875385
<NAME> ACCESS SOLUTIONS INTERNATIONAL, INC.
<MULTIPLIER> 1
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 0
<CASH> 140,649
<SECURITIES> 0
<RECEIVABLES> 457,724
<ALLOWANCES> (37,142)
<INVENTORY> 501,581
<CURRENT-ASSETS> 1,112,051
<PP&E> 1,552,684
<DEPRECIATION> (908,444)
<TOTAL-ASSETS> 1,979,350
<CURRENT-LIABILITIES> 2,123,843
<BONDS> 0
0
0
<COMMON> 15,119
<OTHER-SE> (197,518)
<TOTAL-LIABILITY-AND-EQUITY> 1,979,350
<SALES> 1,617,927
<TOTAL-REVENUES> 1,617,927
<CGS> 514,795
<TOTAL-COSTS> 4,462,348
<OTHER-EXPENSES> (7,056)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,018
<INCOME-PRETAX> (3,515,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,515,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 320,387
<CHANGES> 0
<NET-INCOME> (3,194,791)
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
</TABLE>
