United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-28920
Access Solutions International, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 05-0426298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Ten Rod Road
North Kingstown, RI 02852
(Address of principal executive offices)
(401) 295-2691
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
The number of shares of the issuer's Common Stock, $.0l par value, outstanding
as of February 15, 1997 was 3,963,940.
<PAGE>
Access Solutions International, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed balance sheets--December 31, 1996 (unaudited)
and June 30, 1996 3
Condensed (unaudited) statements of operations --Three
months and six months ended December 31, 1996 and 1995 5
Condensed (unaudited) statements of cash flows -- Six
months ended December 31, 1996 and 1995 6
Notes to unaudited condensed financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Access Solutions International, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
1996 1996
(Unaudited)
Assets
Current assets:
Cash $4,136,584 $537,831
Trade accounts receivable, net allowance for
doubtful accounts of $38,637 and $50,304, 351,930 426,005
respectively
Inventories 529,158 504,450
Prepaid expenses and other current assets 168,323 61,995
------------ -----------
Total current assets 5,185,995 1,530,281
Fixed assets, net 319,354 592,461
Other assets:
Deposits and other assets 14,335 90,940
Remote service inventory, net 57,878 79,549
Deferred financing costs - 581,065
------------ -----------
Total Other assets 72,213 751,554
------------ -----------
Total assets $5,577,562 $2,874,296
========== ==========
See notes to unaudited condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Balance Sheets
December 31, June 30,
1996 1996
(Unaudited)
Liabilities and stockholders' deficit Current liabilities:
<S> <C> <C>
Note payable-bank $ - $290,000
Notes payable-bridge - 1,363,973
Accounts payable 90,615 695,341
Current installments of capital lease obligations 24,033 72,562
Accrued expenses 169,294 163,769
Accrued salaries and wages 187,302 467,234
Deferred revenue-prepaid service contracts 418,433 448,492
------- -------
Total current liabilities 889,677 3,501,371
Capital lease obligations, excluding current installments 19,659 31,974
------ ------
Total liabilities 909,336 3,533,345
Stockholders' equity/(deficit):
Common Stock, $.01 par value, 13,000,000
shares authorized, 3,965,199 and 1,511,865 39,652 15,119
shares issued, respectively.
Additional paid-in capital 17,637,087 10,599,720
Accumulated deficit (12,990,457) (11,255,832)
------------ ------------
4,686,282 (640,993)
Treasury stock, at cost (1,259 shares) (18,056) (18,056)
-------- --------
Total stockholders' equity/(deficit) 4,668,226 ( 659,049)
---------- ----------
Total liabilities and stockholders'
equity/(deficit) $5,577,562 $2,874,296
========== ==========
Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
</TABLE>
See notes to unaudited condensed financial statements
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Statements of Operations (Unaudited)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
Net Sales:
<S> <C> <C> <C> <C>
Products $109,527 $144,624 $281,988 $237,032
Services 171,824 151,311 302,498 293,806
------- ------- ------- -------
Total net sales 281,351 295,935 584,486 530,838
------- ------- ------- -------
Cost of Sales:
Products 33,940 50,294 54,252 98,724
Services 59,907 70,858 115,265 122,914
------ ------ ------- -------
Total cost of sales 93,847 121,152 169,517 221,638
------ ------- ------- -------
Gross profit 187,504 174,783 414,969 309,200
------- ------- ------- -------
Operating Expenses:
General and administrative expense 460,308 789,751 816,482 1,260,389
Research and development expense 523,353 458,260 943,528 1,026,225
Selling expense 201,146 250,380 337,482 495,626
------- ------- ------- -------
Total operating expenses 1,184,807 1,498,391 2,097,492 2,782,240
--------- --------- --------- ---------
Loss from operations ( 997,303) (1,323,608) ( 1,682,523) (2,473,040)
---------- ----------- ------------ -----------
Other income and expenses:
Interest income 43,144 2,900 46,387 4,615
Interest expense (16,334) (77,363) (98,489) (111,150)
------- ------- ------- --------
Total other income/(expenses) 26,810 (74,463) (52,102) (106,535)
------ ------- ------- --------
Net loss ($970,493) ($1,398,071) ($1,734,625) ($2,579,575)
========== ============ ============ ============
Net loss applicable to common stock:
Net loss ($970,493) ($1,398,071) ($1,734,625) ($2,579,575)
Accrued dividends on preferred stock - (50,000) - (100,000)
------------- -------- --------------- ---------
($970,493) ($1,448,071) ($1,734,625) ($2,679,575)
========== ============ ============ ============
Net loss per common share ($.39) ($.96) ($.51) ($1.79)
====== ====== ======= =======
Weighted average number of
common shares 2,457,952 1,501,152 3,369,899 1,501,152
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
Access Solutions International, Inc.
Condensed Statements of Cash Flows
For the Six Months Ended December 31,
(Unaudited)
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss ($1,734,625) ($2,579,575)
----------- ------------
Adjustments to reconcile net loss to net cash used by operating activities:
Write-off of capital lease 230,297 -
Depreciation and amortization 53,178 120,354
Provision for doubtful accounts (11,667) (22,358)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 85,742 698,009
Inventories (3,037) (134,126)
Deposits 76,605 221
Prepaid expenses and other current assets (106,329) 17,315
Increase (decrease) in:
Accounts payable (604,726) 132,285
Accrued expenses (274,407) 91,680
Deferred revenue - Prepaid service contracts (30,059) (193,975)
-------- ---------
Total adjustments (584,403) 709,405
--------- -------
Cash used by operating activities (2,319,028) (1,870,170)
----------- -----------
Cash flows from investing activities:
Additions to fixed assets (10,367) (97,836)
Cash provided/(used) for investing activities (10,367) (97,836)
-------- --------
Cash flows from financing activities:
Proceeds from related party loans - 710,415
Proceeds from bridge loans 37,694 1,300,000
Repayments of Bridge Loans (1,500,000) -
Proceeds from Initial Public Offering 9,200,013 -
Costs relating to Initial Public Offering (2,039,780) -
Repayments on capital lease obligations (60,844) (68,562)
Net (payments) borrowings under note payable-bank (290,000) (90,000)
Deferred financing costs 581,065 -
-------- -------
Cash provided by financing activities 5,928,148 1,851,853
--------- ----------
Net increase/(decrease) in cash 3,598,753 (116,153)
Cash, beginning of period 537,831 148,842
-------- -------
Cash, end of period $4,136,584 $ 32,689
===========- ========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE>
Access Solutions International, Inc.
Notes to Unaudited Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10-01 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months and six months ended
December 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Access Solutions
International, Inc. prospectus (Form SB-2) dated October 16, 1996.
2. Initial Public Offering
On October 21, 1996, Access Solutions International, Inc. consummated an initial
public offering of 1,066,667 Units. Each Unit consisted of two shares of Common
Stock, $.01 par value per share ("Common Stock") and one redeemable common stock
purchase warrant ("Redeemable Warrant"). Each warrant entitles the holder to
purchase one share of Common Stock at an initial exercise price of $5.00 per
share, subject to adjustments, through October 15, 2001. The shares of Common
Stock and Redeemable Warrants comprising the Units are separately tradable
commencing upon issuance. An Over-Allotment Option to purchase an additional
160,000 Units upon the same terms and conditions set forth above was exercised
by the Underwriter on October 29, 1996. An aggregate of 2,453,334 shares of
Common Stock and 1,226,667 Redeemable Warrants were issued by the Company,
resulting in net proceeds of $7,949,048.
<PAGE>
Item 2. 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 December 31, 1996,
the Company had deferred revenue in the amount of $418,433.
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.
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 interim President and
Chief Executive Officer and the subsequent hiring in August 1996 of Robert H.
Stone as President and Chief Executive Officer; (ii) the recapitalization of the
Company in January 1996, consisting of a one-to-74 reverse stock split and the
conversion of certain debt and warrants into common stock; (iii) the November
l995 reduction in the Company's workforce from 52 to 28 full-time employees as
of December 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 the period from January through June 1996 to
approximately $317,000, exclusive of the cost associated with shares granted to
an officer in January 1996. During the first half of Fiscal 1996, average
operating expenses approximated $475,000 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. The Company does not
believe that these steps, particularly the reduction in the workforce, have to
date or will in the future materially adversely impact the Company's revenues
and earnings. Of the 24 employees terminated, five were salespersons, five were
field support personnel, nine were product development personnel and five were
administrative staff. Many of the sales and field support employees had been
hired early in 1995 in anticipation of increased sales which did not
materialize. The terminated product development personnel were working on new
products which the Company determined would not be completed. As a result of the
foregoing, the reduction in workforce has not materially adversely affected the
Company's operations. As of December 31, 1996, the Company had 28 employees.
Recent Development
On January 7, 1997, the Company and PaperClip Software, Inc. ("PaperClip")
entered into an agreement in principle for the Company to acquire substantially
all the assets of PaperClip. Consummation of these transactions is subject to
various conditions, including the execution of a definitive agreement and
requisite shareholder approval. Under the agreement, the Company will acquire
substantially all of the assets of PaperClip and will assume certain liabilities
for a total purchase price of approximately $5.79 million. The purchase price
will be paid by delivery of approximately 1,544,000 shares of the Company's
common stock plus an equivalent number of the Company's Class B Warrants. Each
Warrant will entitle the holder to purchase one share of the Company's common
stock at an exercise price of $6.00 per share. On January 29, 1997, the Company
provided a bridge loan of $300,000 to PaperClip for use as operating capital in
exchange for a convertible note from PaperClip. After these transactions, the
Company and PaperClip products and businesses will be strategically and
operationally combined under the name Access Solutions International, Inc. The
PaperClip product name will be retained. In addition, PaperClip will have the
right to designate one member to the Company's board of directors.
Results of Operations
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto of Access Solutions
International, Inc. contained elsewhere herein.
Three Months and Six Months Ended December 31, 1995 Compared to Three Months and
Six Months Ended December 31, 1996
Net Sales
Net sales for the three months ended December 31, 1995 were $295,935 compared
with $281,351 for the three months ended December 31, 1996, a decrease of
$14,584 or 5%, and $530,838 for the six months ended December 31, 1995, compared
with $584,486 for the six months ended December 31, 1996, an increase of $53,648
or 10%. Product sales were $144,624 for the second quarter of Fiscal 1996
compared with $109,527 for the second quarter of Fiscal 1997, a decrease of
$35,096 or 24%, and $237,032 for the six months ended December 31, 1995 compared
with $281,988 for the six months ended December 31, 1996, an increase of $44,956
or 19%. Product sales decreased for the second quarter because customers delayed
ordering hardware upgrades in anticipation of software enhancements which are
scheduled to be released in the third and fourth quarters. Product sales
consisted chiefly of media sales and upgrades to existing customer installations
that had exceeded present data storage capacities. Service revenues were
$151,311 for the second quarter of Fiscal 1996, compared with $171,824 for the
second quarter of Fiscal 1997, an increase of $20,512 or 14%, and $293,806 for
the six months ended December 31, 1995 compared with $302,498 for the six months
ended December 31, 1996, an increase of $8,692 or 3%. The increases in service
revenues were attributable to the sale of additional maintenance contracts on
upgrades to customer installations.
Cost of Sales
Cost of sales includes component costs, firmware license costs, labor, travel
and certain overhead costs. Costs of sales in the aggregate decreased 23% from
$121,152 for the three months ended December 31, 1995 to $93,847 for the three
months ended December 31, 1996 and decreased 24% from $221,638 for the six
months ended December 31, 1995 to $169,517 for the six months ended December 31,
1996 against higher sales. This was primarily due to higher margins on both
product and service sales. In addition, cost of sales as a percentage of sales
decreased from 47% for the three months ended December 31, 1995 to 35% for the
three months ended December 31, 1996 and decreased from 42% for the six months
ended December 31, 1995 to 29% for the six months ended December 31, 1996.
The cost of product sales decreased 33% from $50,294 for the three months ended
December 31, 1995 to $33,940 for the three months ended December 31, 1996 and
decreased 45% from $98,724 for the six months ended December 31, 1995 to $54,252
for the six months ended December 31, 1996 due to sales of higher margin
hardware and software. As a result, cost of product sales as a percentage of
product revenues decreased from 35% for the three months ended December 31, 1995
to 31% for the three months ended December 31, 1996, and from 42% for the six
months ended December 31, 1995 to 19% for the six months ended December 31,
1996. The cost of services decreased by 12% from $70,858 for the three months
ended December 31, 1995 to $59,907 for the three months ended December 31, 1996
and decreased by 6% from $122,914 for the six months ended December 31, 1995 to
$115,265 for the six months ended December 31, 1996 These decreases reflect
greater in-house coverage of contracts by Company personnel. As a result, cost
of services as a percentage of service revenues decreased from 47% for the three
months ended December 31, 1995 to 35% for the three months ended December 31,
1996, and 42% for the six months ended December 31, 1995 to 38% for the six
months ended December 31, 1996.
General and Administrative Expenses
General and administrative expenses consist of administrative expenses and
customer support expenses. General and administrative expenses decreased 42% or
$329,444 from $789,751 for the three months ended December 31, 1995 to $460,308
for the three months ended December 31, 1996 and decreased 35% or $443,907 from
$1,260,389 for the six months ended December 31, 1995 to $816,482 for the six
months ended December 31, 1996. The decreases were primarily due to higher legal
and accounting expenses from an abandoned IPO in the second quarter of Fiscal
1996, nonrecurring severance and accrued stock compensation expenses from the
same period, and reduced Customer Service personnel and commission expenses in
the second quarter of Fiscal 1997.
Research and Development Expenses
Research and development expenses increased by 14% or $65,093 from $458,260 for
the three months ended December 31, 1995 to $523,353 for the three months ended
December 31, 1996 and decreased by 8% or $82,697 from $1,026,225 for the six
months ended December 31, 1995 to $943,528 for the six months ended December 31,
1996. The increase during the second quarter of Fiscal 97 resulted primarily
from an increase in consulting expenses related to accelerating completion of
vertical market enhancements to the Company's COLD products.
Selling Expenses
Selling expenses decreased by $49,234 or 20% from $250,380 for the three months
ended December 31, 1995 to $201,146 for the three months ended December 31, 1996
and decreased by $158,144 or 32% from $495,626 for the six months ended December
31, 1995 to $337,482 for the six months ended December 31, 1996. The decreases
were primarily the result of reduced commission expense and lower trade show and
seminar expenses.
Other Income and Expenses
Other income and expenses consisted of interest expense which decreased 79% or
$61,030 from $77,363 for the three months ended December 31, 1995 to $16,334 for
the three months ended December 31, 1996 and 11% or $12,661 from $111,150 for
the six months ended December 31, 1995 to $98,489 for the six months ended
December 31, 1996. These expense reductions were the result of reduced loans
outstanding. A bank loan of approximately $220,000 and a bridge loan of
approximately $1,500,000 were repaid in October, 1996 from the proceeds of the
Company's initial public offering. Interest income increased by $40,243 from
$2,900 for the three months ended December 31, 1995 to $43,144 for the three
months ended December 31, 1996 and by $41,772 from $4,615 for the six months
ended December 31, 1995 to $46,387 for the six months ended December 31, 1996,
in each case as a result of investment earnings from the proceeds of the
Company's initial public offering.
Net Loss
As a result of the foregoing, the Company's net loss decreased from $1,448,071
($.96 per share on 1,501,152 weighted average shares outstanding) for the three
months ended December 31, 1995 to $970,493 ($.39 per share on 2,457,952 weighted
average shares outstanding) during the three months ended December 31, 1996 and
decreased from a loss of $2,679,575 ($1.79 per share on 1,501,152 weighted
average shares outstanding) for the six months ended December 31, 1995 to
$1,734,625 ($.51 per share on 3,369,899 weighted average shares outstanding) for
the six months ended December 31, 1996.
Liquidity and Capital Resources
The Company had a working capital surplus of $4,296,318 at December 31, 1996 as
compared to a working capital deficit of $1,971,090 at December 31, 1995.
Total cash used by operating activities during the six month periods ended
December 31, 1996 and 1995 was $2,319,028 and $1,870,170, respectively. The
Company's net losses for these periods were $1,734,625 and $2,579,575,
respectively. The major uses of capital for operating activities during the six
month period ended December 31, 1996 included accounts payable of approximately
$605,000 and accrued expenses of approximately $274,000.
Cash used by investing activities for the six month period ended December 31,
1996 and 1995 was $10,367 and $97,836, respectively, incurred in connection with
the Company's mainframe lease.
Cash provided by financing activities was $5,928,148 for the six month period
ended December 31, 1996 and $1,851,853 for the six month period ended December
31, 1995. The major source of cash for financing activities during the six month
period ended December 31, 1996 consisted of proceeds from the Company's $9.2
million initial public offering (see below), which was offset by IPO related
expenses totaling approximately $2 million. In addition, approximately
$1,500,000 of the remaining proceeds was used to repay bridge loan principal and
accrued interest thereon and $220,000 was used to repay an outstanding bank loan
and accrued interest thereon. Installment payments on this loan totaling
approximately $70,000 were made in Fiscal 97 prior to completion of the IPO.
During October 1996, the Company completed its initial public offering of
1,066,667 Units (the "Units"), each Unit consisting of two shares of Common
Stock and one redeemable common stock purchase warrant. An additional 160,000
Units were sold to cover over-allotments. The Company intends to utilize the
balance of the net proceeds for research and development, significantly
increased sales and marketing programs and for general corporate purposes. The
research and development expenditures primarily consist of product modifications
to support multiple platforms, provide device independence and increase
modularity to speed enhancement, and for external contracting of general and
vertical market-specific software and additional development of enhancements for
the expansion of the Company's products to address the client/server market.
The Company has suffered recurring losses from operations and has negative cash
flows from operating activities. As a result, the Company's independent
accountants in their report dated August 2, 1996 on the audited financial
statements for the year ended June 30, 1996 included an explanatory paragraph
that described factors raising substantial doubt about the Company's ability to
continue as a going concern.
The Company believes that the net proceeds of the initial public 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.
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.
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.
As discussed under Recent Developments, the Company entered into an agreement in
principle to acquire substantially all the assets of PaperClip Software, Inc.
("PaperClip"). If completed, the purchase would be executed solely by the
issuance of stock and warrants of the Company. In addition, pursuant to the
agreement, on January 29, 1997, the Company made a loan to PaperClip in the
amount of $300,000. The loan is secured by a first priority interest in all of
PaperClip's assets and is evidenced by a convertible promissory note due in one
year from the date of issuance and bears interest at the rate of 12% per annum,
payable quarterly, and permits conversion of all or a part of the outstanding
principal at any time at the Company's option at a conversion price of $.25 per
share of PaperClip's stock. While the acquisition will not require a cash
payment, it is anticipated that cash outlays in addition to the aforementioned
loan will be required to complete the acquisition as follows; (i) satisfaction
of PaperClip's liabilities, in excess of $400,000 over a period of approximately
six months (which is net of the potential collection of approximately $200,000
in receivables and does not include the undetermined cost of employee severances
and settlements which may be required to transfer employees to the new Company);
(ii) payment of professional fees of approximately $150,000 for legal and
accounting work; and (iii) consulting and printing fees of approximately
$145,000 and travel expenses of approximately $10,000.
Seasonality and Inflation
To date, seasonality and inflation have not had a material effect on the
Company's operations.
Forward Looking Statements
Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company cautions that a
number of important factors could cause actual results for Fiscal 1997 and
beyond to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company. Such statements contain a number
of risks and uncertainties, including, but not limited to, future capital needs,
uncertainty of additional funding, variable operating results, lengthy sales
cycles, dependence on the Company's COLD system product, rapid technological
change and product development, reliance on single or limited sources of supply,
intense competition, recent turnover in management, the Company's ability to
manage growth, dependence on significant customers, dependence on key personnel,
and the Company's ability to protect its intellectual property. See "Risk
Factors" in the Company's Prospectus dated October 16, 1996. The Company cannot
assure that it will be able to anticipate or respond timely to changes which
could adversely affect its operating results in one or more fiscal quarters.
Results of operations in any past period should not be considered indicative of
results to be expected in future periods. Fluctuations in operating results may
result in fluctuations in the price of the Company's securities. In addition,
the Company's proposed acquisition involves numerous risks and uncertainties
including the potential inability to integrate successfully the operations and
services of the acquired businesses and the diversion of management's attention
from other business concerns. There can be no assurances that the Company will
complete its proposed acquisition or that, if completed, it will be successfully
integrated into the Company's operations or provide an acceptable return on the
Company's investment.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter agreement dated January 28, 1997, amending the Employment
Agreement dated September 1995, between the Company and Matthias E.
Lukens, Jr.
10.2 Letter of intent dated January 2, 1997, between the Company and
PaperClip Software, Inc.
10.3 Letter agreement dated January 31, 1997, amending the letter of intent
between the Company and PaperClip Software, Inc. dated January 2,
1997.
10.4 $300,000 Convertible Promissory Note dated January 29, 1997, issued by
PaperClip Software, Inc. to the Company.
10.5 Registration Rights Agreement dated January 29, 1997, between the
Company and PaperClip Software, Inc.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
issuer caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Access Solutions International, Inc.
Date: February 14, 1997, /s/Robert H. Stone
____________________________________
Robert H. Stone
President and CEO
Date: February 14, 1997 /s/Denis L. Marchand
____________________________________
Denis L. Marchand
Corporate Controller and Chief
Accounting Officer
(Principal Accounting Officer)
January 31, 1997
Mr. Matthias E. Lukens, Jr.
204 Spencer Avenue
East Greenwich, RI 02818
RE: Employment Contract Dated September, 1995
Dear Matt:
This letter confirms that the time in which you must notify Access Solutions
International, Inc. of your election to terminate the above referenced
Employment Agreement, due to events that occurred on January 2, 1996, has been
extended through 5:00 pm February 28, 1997.
Sincerely,
/s/Robert H. Stone
____________________________________
Robert H. Stone
ACCESS SOLUTIONS INTERNATIONAL, INC.
650 Ten Rod Road - North Kingston, RI 02852
Phone 401-295-2691 Fax 401-295-1851
January 2, 1997
PaperClip Software, Inc.
Three University Plaza
Hackensack, NJ 07601
Attention: William Weiss, Chief Executive Officer
Re: Letter of Intent
Ladies and Gentlemen:
As you know, Access Solutions International, Inc. ("ASI") and
representatives of PaperClip Software, Inc. (the "Seller") have been discussing
a possible transaction in which ASI or a subsidiary would purchase from the
Seller substantially all of the Seller's assets used by the Seller in its
business, including, without limitation, the intellectual property rights used
by the Seller in its business (the "Seller's Assets"). This Letter of Intent is
intended to set forth the principal terms of the transaction which has been
discussed by ASI and the Seller. Except as otherwise set forth in Paragraph 9
below, this Letter of Intent is not intended to be a binding agreement between
the parties. A binding agreement will be in effect only at the time a definitive
purchase agreement is executed by the parties.
The principal terms of the transaction which have been discussed are as
follows:
1. ASI will purchase the Seller's Assets in a transaction structured as
an asset purchase. At the closing, the Seller's Assets will be
delivered to ASI free and clear of all liens, charges and encumbrances
of any nature whatsoever.
2. ASI will assume certain liabilities of Seller as stated in the binding
agreement, and no other liabilities.
3. The Purchase Price for Seller's Assets will be approximately $5.79
million, calculated by multiplying the Seller's 7,722,188 issued and
outstanding shares of common stock by seventy-five cents ($0.75) per
share, subject to adjustment as provided in Paragraph 4 below. The
Purchase Price will be paid at the closing by delivery of
approximately 1,544,000 shares of ASI's common stock (determined by
dividing the Purchase Price by $3.75 per share), plus an equivalent
number of ASI Class B Warrants. Each Class B Warrant will entitle the
holder to purchase one share of ASI common stock at an exercise price
of $6.00 per share. Neither the shares of ASI common stock nor the
Class B Warrants will be registered and neither will carry
registration rights. In the binding agreement, ASI will agree to use
its best efforts file a registration statement to register the common
stock and Class B Warrants within 90 days of the closing on terms and
conditions set forth therein.
4. The Purchase Price may be increased by a maximum of $322,500 in the
event that Seller is unable to cancel, repay or repurchase its issued
and outstanding convertible promissory notes prior to the closing. The
binding agreement will contain mutually satisfactory arrangements for
assumption, cancellation or conversion of Seller's existing warrants
and bridge warrants.
5. The binding agreement will provide that, from and after the closing,
ASI will nominate one person designated by Seller to ASI's Board of
Directors. Seller will also be able to designate one additional person
who will be permitted to attend all meetings of ASI's Board of
Directors as an "advisor" or "observer."
6. In order to fund Seller's operations until the closing, ASI agrees to
loan to Seller up to $300,000, $235,000 of which will be loaned within
3 business days, on terms and conditions as are customarily available
for commercial loans. Such loan will be secured by a first priority
security interest in all of Seller's Assets, and will be evidenced by
a convertible debenture or promissory note of Seller. Such loan will
also be guaranteed by the personal guarantees of William Weiss and
Steven Kornfeld for up to fourteen days, until ASI can satisfy itself
that there are no other liens or security interests as of the date of
this letter in Seller's Assets other than to an Israeli vendor to
Seller, which lien ASI may cause to be discharged at any time in ASI's
discretion by payment of the outstanding amount owed to such vendor
out of the loan proceeds. If outstanding lien(s) are discovered,
Seller can cure by evidence of waiver or satisfaction. Such
convertible debenture or promissory note will be due one year from the
date of issue, will bear interest at 12% per annum, payable quarterly,
and will permit conversion of all or part of the outstanding principal
at any time at ASI's option at a conversion price of twenty-five cents
($0.25) per share of Seller's common stock.
7. After execution of this Letter of Intent, ASI's counsel will prepare
and the parties will use their best efforts to negotiate the terms and
conditions of a mutually acceptable purchase agreement by January 31,
1997, in which ASI will agree to purchase Seller's Assets.
8. The obligation of the parties to negotiate the binding agreement and
consummate the purchase of Seller's Assets is subject to conditions
which will be stated in the binding agreement, which will include, but
will not be limited to, the following conditions:
a) Negotiation and execution of a mutually satisfactory binding
agreement, including appropriate representations, warranties,
covenants and indemnities by all parties.
b) That no events shall have occurred that individually or in the
aggregate have a material adverse effect on the business or
financial condition or prospects of Seller or ASI.
c) Receipt of all necessary governmental and regulatory approvals
and all consents from third parties necessary to consummate the
transaction.
d) In conducting its review and examination of the management,
business, technology, intellectual property, markets,
environmental compliance, assets, liabilities and financial
condition of Seller or ASI, neither party shall become aware of
any liability, condition, fact or event which, in such party's
discretion, would make the proposed acquisition inadvisable or
not in the best interests of such party.
e) The binding agreement and the final terms of the proposed
acquisition shall have been approved by the Board of Directors of
ASI and the Board of Directors and stockholders of Seller.
f) Seller will deliver a so-called "lockup letter", in form and
substance satisfactory to ASI and the underwriter of its initial
public offering, which letter will, among other things, require
Seller to refrain from selling any shares of ASI common stock
until such time as will be stated in the letter.
9. For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Seller hereby agrees that until January 31, 1997, the
Seller will not enter into any agreement or negotiation with any person with
respect to the sale or other disposition of any direct or indirect interest in
the Seller's Assets or the Seller. In addition, the Seller hereby agrees that
until January 31, 1997, it will take no action, directly or indirectly, to
solicit indications of interest in, or offers for the sale of any interest in
the Seller's Assets or the Seller. ASI and the Seller hereby agree that the
provisions of this paragraph 9 are intended to be binding on the parties hereto.
10. Miscellaneous.
a) Access. After the execution of this letter of intent by Seller
and pending the preparation of the binding agreement and
thereafter until the closing, each party will permit the other
party, its lenders and their respective legal, accounting and
financial representatives, full access during ordinary business
hours to its premises and to such of its management personnel as
may be designated by the other party, and to all its applicable
accounting, financial and other records, and shall furnish the
other party all information with respect to its business and
affairs as the other party or such representatives may request
from time to time.
b) Disclosure. The specific terms of this Letter of Intent shall not
be disclosed by any party to any person, except as may be
required by law or as may be necessary to receive requisite
regulatory or corporate approvals, in which case the parties
hereto hereby agree to disclose only those terms which are
necessary under the circumstances upon advice of counsel.
c) Confidentiality. Without the prior consent of both of the
parties, the parties shall not make any statement, or public
announcement, or any release to the trade publications or to the
press, or make any statement to any competitor, customer, or any
other third party, with respect to this transaction, except as
either party may reasonably determine to be necessary to comply
with the requirements of any law, governmental order or
regulation.
Please acknowledge your agreement with the terms of this Letter of Intent
by executing the enclosed copy of this Letter of Intent and returning it to my
attention at ASI. In the event this Letter of Intent is not signed by you and
returned to ASI prior to 5:00 p.m. on January 3, 1997, this Letter of Intent
will be deemed null and void and of no further force or effect.
Very truly yours,
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:/s/Robert H. Stone
__________________________________
Robert H. Stone
Title: President and CEO
AGREED AND ACCEPTED:
PAPERCLIP SOFTWARE, INC.
By:/s/William Weiss
___________________________
William Weiss
Title: CEO
Access Solutions International, Inc.
650 Ten Rod Road
North Kingstown, RI 02852
January 31, 1997
PaperClip Software, Inc.
Three University Plaza
Hackensack, NJ 07601
Attention: William Weiss, Chief Executive Officer
Re: Letter of Intent dated January 2, 1997 ("Letter of Intent")
Dear Bill:
This letter confirms our mutual agreement that each time the "January 31, 1997"
date appears in Paragraph 9 of the Letter of Intent, such date shall be replaced
with "February 28, 1997."
Please acknowledge your agreement by executing this letter where indicated
below.
Very truly yours,
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:/s/Robert H. Stone
________________________________________
Robert H. Stone, President and CEO
AGREED AND ACCEPTED:
PAPERCLIP SOFTWARE, INC.
By:/s/William Weiss
________________________________________
William Weiss, CEO
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES OR UNLESS SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT OR SUCH STATE LAWS.
CONVERTIBLE PROMISSORY NOTE
$300,000 January 29, 1997
I. PROMISE TO PAY
1. FOR VALUE RECEIVED, the undersigned PAPERCLIP SOFTWARE, INC., a Delaware
corporation (the "Maker"), hereby promises to pay to ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation at 650 Ten Rod Road, North
Kingstown, Rhode Island 02852 ("Access"), or its permitted assigns (collectively
with Access, the "Payee"), the principal sum of Three Hundred Thousand Dollars
($300,000) together with interest thereon at the rate of twelve percent (12%)
per annum based upon the actual number of days elapsed over a 360 day year.
2. This Note is the "Note" issued in accordance with that certain Letter of
Intent dated January 2, 1997 (the "Letter of Intent") between Maker and Payee.
Capitalized terms used herein and not defined are used with the same meaning as
set forth in the Letter of Intent.
3. Accrued and unpaid interest on this Note shall be payable quarterly in
arrears commencing April 1, 1997 and continuing quarterly thereafter on July 1,
1997, October 1, 1997, January 2, 1998 and until the Maturity Date (as
hereinafter defined).
4. Subject to the earlier conversion hereof pursuant to the conversion
rights set forth below, this Note shall be due and payable in full on January
27, 1998 (the "Maturity Date") or earlier, at the election of the Payee, upon
the happening of any of the following events:
(a) the Maker shall (i) discontinue its business (as evidenced by a
resolution of Maker's Board of Directors or stockholders), (ii) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its property, (iii) admit in writing its inability to pay its debts as
they mature, (iv) make a general assignment for the benefit of creditors, (v) be
adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code or (vi) 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 such proceeding under any such law;
(b) there shall be filed against the Maker an involuntary petition under
any bankruptcy, reorganization or insolvency law of any jurisdiction, whether
now or hereafter in effect if, within one hundred and eighty days (180)
following the service on the Maker of any such petition, the same shall not have
been discharged, released or vacated;
(c) The Maker shall sell or transfer substantially all of its assets or
business units to someone other than Access;
(d) The Maker shall fail to pay any interest payment obligation contained
in this Note within five (5) days of when due;
(e) The Maker shall be in default of any other material obligation
contained in this Note or in the Security Agreement or Registration Rights
Agreement of even date, which default, has not been cured within ten (10) days
after the receipt by Maker of notice thereof from Payee, or, if such default is
not capable of being cured within ten days, Maker has not begun efforts
satisfactory to Payee to cure such default within such ten-day period.
5. Maker may prepay this Note at any time after having given at least
thirty (30) days prior written notice to Payee.
6. Payment of principal and interest hereunder are payable in lawful money
of the United States of America at the office of the Payee at the address set
forth above or at such other address as Payee shall designate from time to time.
7. All agreements between the Maker and the Payee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness or otherwise, shall the amount paid
or agreed to be paid to the Payee for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the Payee is
permitted to receive under applicable law. If, for any circumstances whatsoever,
fulfillment of any provision hereof, or of the Letter of Intent, at the time
performance of such provision shall be due, shall involve exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such validity, and if from any circumstance the Payee should ever receive as
interest an amount which would exceed such maximum amount, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof,
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then this Note shall be governed by
such new law as of its effective date. This provision shall control every other
provision of all agreements between the Maker and the Payee.
8. This Note and all transactions hereunder and/or evidenced herein shall
be governed by, and construed and enforced in accordance with, the laws of the
State of New York (without giving effect to any conflicts or choice of laws
provisions which would cause the application of the domestic substantive laws of
any other jurisdiction). MAKER AND PAYEE EACH HEREBY WAIVES TRIAL BY JURY WITH
RESPECT TO ANY PROCEEDING INVOLVING THIS NOTE.
9. If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of any attorney for collection, through legal
proceedings or otherwise, the Maker will pay reasonable attorneys' fees to the
holder hereof together with reasonable costs and expenses of collection,
including, without limitation, any such attorneys' fees, costs and expenses
relating to any proceedings with respect to the bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation of the Maker or any
party to any agreement or instrument securing this Note.
10. The Maker hereby waives presentment, demand, notice of dishonor,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.
11. This Note is secured by and entitled to the benefits of a Security
Agreement of even date herewith.
12. Payee shall have the right to assign or negotiate all or any part of
this Note and all associated rights to interest, conversion, security and
registration to Joseph Stevens & Company, L.P. without the prior consent of
Maker only upon the consummation of the purchase of Maker's assets by Access
contemplated by the Letter of Intent and a merger between Maker and another
entity arranged by Joseph Stevens & Company, L.P.
13. To evidence the fact that it has executed this Note, Maker may send a
copy of the executed Note to Payee by facsimile transmission. Maker shall be
deemed to have executed this Note on the date it sent such facsimile
transmission. In such event, Maker shall deliver to Payee the executed Note for
receipt on the next business day.
II. CONVERSION RIGHTS
1. At the option of the Payee, all or part of the principal of this Note,
together with the interest accrued on such converted principal, may at any time
while this Note is outstanding, be converted into fully paid and non-assessable
shares of the common stock, $.01 par value, of the Maker (the "Converted
Shares"), at the Conversion Rate, determined as hereinafter provided, in effect
at the time of conversion for such principal and interest (hereinafter, all
"Conversion").
2. (a) The rate at which the principal amount of this Note and accrued
interest thereon shall be converted into Converted Shares shall initially be one
share of common stock for each twenty-five cents ($.25) of the principal and
interest amount hereof (the "Conversion Rate").
(b) In the event that, while this Note is outstanding, from time to
time, the Maker shall issue any shares of its common stock or any Convertible
Securities (as defined below) at a price of less than twenty-five cents ($.25)
per share (the "New Issue Share Price"), then the Conversion Rate shall be
adjusted to be equal to the lowest New Issue Share Price in any such transaction
after the date hereof.
3. (a) In order to exercise the Conversion privilege, the Payee of this
Note shall deliver such Note to the Maker at the principal office of the Maker,
accompanied by written notice to the Maker, duly signed by such Payee, of its
election to convert the same. Such notice shall also state the address or
addresses to which the certificate or certificates evidencing the Converted
Shares, and any other securities, and evidences of ownership of any other
property, issuable upon such conversion shall be transmitted after the issue
thereof upon such conversion. As promptly as practicable after the receipt of
such notice and surrender of this Note as aforesaid, the Maker shall issue in
the name of such Payee, and shall, after any such issue, transmit to such Payee
at such address or addresses, a certificate or certificates evidencing the
Converted Shares, and any other securities and evidences of ownership of any
other property, issuable upon the conversion of this Note (or such specified
portion hereof). If the Conversion is for less than the then outstanding
principal and interest of the Note, Maker agrees to execute and deliver to Payee
a promissory note for the balance due on the Note, which replacement note shall
be on the same terms and conditions as set forth herein.
(b) Such Conversion shall be deemed to have been effected at the close
of business on the date on which such notice and this Note shall have been
delivered to the Maker as aforesaid, and at such time the Payee shall become and
be deemed to be the owner of record of such Converted Shares, and of any such
other securities and other property, issuable upon such conversion, whether or
not the stock transfer books of the Maker shall then be open, and whether or not
the Maker shall fail, neglect or refuse to accept such delivery and/or to issue
and/or deliver the certificate or certificates for such Converted Shares or
securities, or other evidences or ownership of such other property.
4. The Maker covenants that it will at all times preserve its rights to
issue and keep available, free from preemptive rights, sufficient capital stock
to permit the conversion of this Note then outstanding in full at any time. The
Board of Directors of the Maker shall take appropriate action to reserve from
the Maker's authorized but unissued capital stock sufficient shares of common
stock to permit the conversion of the full amount of the principal of and
accrued interest on this Note, which reservation shall be noted in the books and
records and, if appropriate, the financial statements of the Maker.
5. The Maker covenants that all Converted Shares which may be issued upon
the conversion of this Note will, upon issuance, be validly issued, fully paid
and non-assessable, and free from all taxes, excluding income taxes, gross
receipts taxes or any similar tax based upon the earnings, receipts, income or
gain to the Payee.
6. The term "Convertible Securities" shall mean any class of securities of
the Maker which by its terms shall be convertible into or exchangeable for any
common stock of the Maker.
7. This Note is further entitled to the benefits of a Registration Rights
Agreement of even date herewith.
III. COVENANTS
1. So long as this Note is outstanding the Maker covenants and agrees as
follows:
(a) The Maker shall maintain in full force and effect its existence as a
Delaware corporation, its rights and franchises and all licenses, permits, and
other rights to use trademarks, trade names, copyrights, trade secrets, patents
or processes owned or possessed by it and deemed by it to be necessary to the
conduct of its business and shall comply with all applicable laws and
regulations, whether now in effect or hereinafter enacted or promulgated by any
governmental authority having jurisdiction.
(b) The Maker shall duly pay and discharge or cause to be duly paid and
discharged, before the same becomes delinquent, all taxes (including all
employment and payroll taxes), assessments and other governmental charges
imposed upon it or any of its properties or in respect of its franchise or
income; provided, however, that (unless and until foreclosure, distraint, sale
or any similar proceeding shall have been commenced) no such tax or charge need
be paid if being contested in good faith by proper proceedings diligently
conducted and if such reservation or other appropriate provisions, if any, as
shall be required by generally accepted accounting principles, shall have been
made therefor.
(c) The Maker will promptly notify the Payee in writing of any litigation
against it that has been instituted or is pending, or to the Maker's knowledge
threatened, the outcome of which might have a material adverse affect on the
Maker's financial conditions, business or operations.
(d) Upon request of the Payee, the Maker will provide the Payee with copies
of all filings made by the Maker with federal (including the Securities and
Exchange Commission), state or local governmental bodies or agencies.
2. The Maker covenants that, so long as this Note is outstanding, the Maker
shall not do any of the following:
(a) Create, incur, assume or permit to exist, any mortgage, pledge, lien or
other encumbrance on any of its properties or assets whether now owned or
hereafter acquired; provided, however, that the foregoing restrictions shall not
apply to:
(i) a security interest in favor of NCC Export Systems 1995 LTD
("NCC"), created pursuant to that certain Reschedule Agreement and
that certain Security Agreement, each dated as of the 21st day of
October, 1996, by and among Maker and NCC (the obligations being
secured by such lien shall be repaid from the proceeds of the loan
evidenced by this Note);
(ii) liens for taxes, assessments and other governmental charges and
levies not yet delinquent or thereafter payable without penalty or
interest or (if foreclosure, distraint, sale or other similar
proceeding shall not have been commenced) being contested in good
faith by appropriate proceedings diligently conducted, if such
reservation or other appropriate provision, if any, as shall be
required by generally accepted accounting principles shall have been
made therefor;
(iii) purchase money security interests;
(iv) liens of carriers, warehousemen, materialmen and mechanics
incurred in the ordinary course of business for sums not yet due or
being contested in good faith and by appropriate proceedings
diligently conducted, if such reservation or other appropriate
provision, if any, as shall be required by generally accepted
accounting principles shall have been made therefor;
(v) liens, encumbrances, pledges, or deposits of personal property
incurred in the ordinary course of business in connection with
workmen's compensation, unemployment insurance and other social
security programs or to secure performance of statutory obligations,
surety and appeal bonds, performance or return of money bonds and
other obligations of a like nature (exclusive of obligations for the
payment of money borrowed); or
(vi) liens arising from judgments, so long as the execution thereof
shall be stayed or other appropriate relief therefrom shall be
obtained pending appeal.
(b) Create, incur, assume or otherwise become or remain liable, directly or
indirectly, for any manner of indebtedness or liability for borrowed funds
(other than funds previously borrowed pursuant to that certain convertible note
dated on or about December 16, 1996), whether by loan, guaranty, mortgage, or
otherwise, provided that: (i) existing factoring or credit arrangements shall be
permitted to remain in effect and the Maker may obtain credit pursuant thereto,
and (ii) accounts payable and accrued expenses shall not be deemed to be
obligations for borrowed funds.
(c) Merge with or into any person other than Access;
(d) Directly or indirectly sell, lease or otherwise dispose of any material
part of its properties, assets, rights, permits, licenses and franchises to any
person other than Access, except in the ordinary course of business.
(e) Sell or otherwise dispose of any capital stock of any subsidiary or
permit any subsidiary to sell or otherwise dispose of any of its equity
interests or capital stock.
(f) Make any advance or loan to any person, firm or corporation, except
intercompany advances and reasonable travel or business expenses advanced to the
Maker's employees in the ordinary course of business, or invest in, acquire or
hold any securities of any other person or firm, except shares of its
subsidiaries and bank certificates of deposit, which are fully insured by an
agency of the United States, or direct obligations of the United States.
(g) Issue any additional capital stock (other than as may be required upon
the exercise of any currently outstanding options and warrants) or any options
or warrants to purchase such capital stock or securities convertible into such
capital stock.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its
duly authorized officer as of the date first above written.
PAPERCLIP SOFTWARE, INC.
By:/s/William Weiss
_________________________________
William Weiss
Title: CEO
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement dated as of January 29, 1997, is between
PaperClip Software, Inc., a Delaware corporation (the "Company"), and Access
Solutions International, Inc. (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Promissory Note of even date
("Note"), the parties hereto have agreed to provide for the registration rights
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings set forth below:
Commission means the United States Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
Common Stock means the Common Stock, $.01 par value per share of the
Company and any shares of any other class of capital stock of the Company
hereafter issued which: (i) are not preferred in the Company's charter as to
dividends or assets over any class of stock of the Company, (ii) are not subject
to redemption in the Company's charter, or (iii) are issued to the holders of
shares of Common Stock upon any reclassification thereof.
Demand Registration means the registration requested by the Stockholders
pursuant to Section 2(a)(i).
Indemnified party. As defined in Section 8(c).
Person means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated organization, or any
government, governmental department or agency or political subdivision thereof.
Piggyback Registration. As defined in Section 3(a)(i).
Public Sale means any sale of Restricted Securities to the public pursuant
to a public offering registered under the Securities Act or to the public
through a broker or market-maker pursuant to the provisions of Rule 144 (or any
successor rule) adopted under the Securities Act or any other public offering
not required to be registered under the Securities Act.
Registration Expenses. As defined in Section 7(a).
registered and registration refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act and
the declaration or ordering by the Commission of the effectiveness of such
registration statement.
Restricted Securities means at any particular time all shares of Stock
issued or issuable to Stockholder upon the exercise of the conversion rights
pursuant to the Note, which shares have not been sold in a Public Sale, or which
are not able to be sold in a Public Sale pursuant to the provisions of Rule 144
of the Securities Act.
Securities Act means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Stock means all shares of Common Stock or Preferred Stock now or hereafter
owned by the Stockholders.
Stockholders means initially, the Purchaser, and thereafter any Person who
becomes a party to this Agreement by executing an Instrument of Accession in
connection with the transfer to or acquisition by such Person of any Restricted
Securities from the Purchaser or any subsequent transferee of the Purchaser;
provided that a Person shall cease to be a Stockholder hereunder at such time as
such Person ceases to own Restricted Securities.
Underwriters Maximum Number means for any Piggyback Registration, Demand
Registration or other registration which is an underwritten registration, that
number of securities to which such registration should, in the opinion of the
managing underwriters of such registration in the light of marketing factors, be
limited.
2. Stockholder Demand Registration.
(a) Request for Demand Registration.
(i) Subject to the limitations contained in the following paragraphs
of this Section 2, the holders of fifty-one (51%) percent or more of the
Restricted Securities may at any time give to the Company, pursuant to this
clause (i), a written request for a Demand Registration of Restricted
Securities. Within 10 days after the receipt by the Company of any such
written request, the Company will give written notice of such registration
request to all Stockholders.
(ii) Subject to the limitations contained in the following paragraphs
of this Section 2, after the receipt of such written request for a Demand
Registration: (A) the Company will be obligated and required to include in
such Demand Registration all Restricted Securities with respect to which
the Company shall receive from Stockholders, within 30 days (the "Inclusion
Period") after the date on which the Company shall have given to all
Stockholders a written notice of registration request pursuant to Section
2(a)(i) hereof, the written requests of such Stockholders for inclusion of
their respective shares of Restricted Securities in such Demand
Registration, and (B) the Company will use its reasonable best efforts in
good faith to effect promptly (but in no event later than ninety-five (95)
days from the end of the Inclusion Period, provided, however, that such
ninety-five (95) day period shall be extended for up to sixty (60)
additional days in the event of a material development that shall hinder
the Company from effecting such registration) the registration of all such
Restricted Securities; provided, that, the Company shall not be obligated
to cause the effectiveness of a Demand Registration of any convertible
Restricted Securities unless and until such convertible Restricted
Securities included in a Demand Registration shall have been converted into
Common Stock of the Company prior to or simultaneously with the
effectiveness of a Demand Registration; and provided, further, that each
Stockholder shall be entitled to convert any Common Stock so converted back
into convertible Restricted Securities in the event such Demand
Registration is not declared effective. All written requests made by
Stockholders pursuant to this clause (ii) will specify the number of shares
of Restricted Securities to be registered and will also specify the
intended method of disposition thereof. Such method of disposition shall,
in any case, be an underwritten offering if an underwritten offering is
requested by holders of 51% or more of the Restricted Securities to be
included in such Demand Registration.
(iii) Any Stockholder shall be permitted to withdraw all or any part
of the Restricted Securities of such Stockholder from any Demand
Registration at any time prior to the effective date of such Demand
Registration, but in the case of an underwritten public offering, only if
such Stockholder is permitted to do so by the managing underwriters or
pursuant to any agreement therewith. Upon such withdrawal, subject to
Section 2(b)(ii), such Restricted Securities shall count as being part of a
Demand Registration for purposes of Section 7(a) hereof unless the
withdrawing Stockholder bears one-half of its pro rata share of the costs
associated with such Demand Registration.
(b) Limitations on Demand Registration.
(i) The Stockholders will not be entitled to require the Company to
effect any Demand Registration pursuant to Section 2(a) hereof more
frequently than once during the term hereof, or within six months after the
effective date of any Piggyback Registration pursuant to Sections 2 or 3
hereof. Registrations pursuant to this Section 2 shall be on Form S-1 or
S-2 or Form SB-1 or SB-2 or, if any Demand Registration would be eligible
for registration on Form S-3, the Company may effect such Demand
Registration pursuant to Form S-3.
(ii) Any registration initiated pursuant to Section 2(a) hereof shall
not count as a Demand Registration for purposes of Section 7(a) hereof
unless and until such registration shall have become effective and
seventy-five percent (75%) of the number of shares that count as part of
the Demand Registration shall have been actually sold.
(iii) The Company shall not be obligated or required to effect the
Demand Registration of any Restricted Securities pursuant to Section 2(a)
hereof during the period commencing on the date falling 60 days prior to
the Company's estimated date of filing of, and ending on the date 180 days
following the effective date of, any registration statement pertaining to
any underwritten registration initiated by the Company, for the account of
the Company, if the written request of Stockholders for such Demand
Registration pursuant to Section 2(a)(i) hereof shall have been received by
the Company after the Company shall have given to all Stockholders a
written notice stating that the Company is commencing an underwritten
registration initiated by the Company; provided, however, that the Company
will use its reasonable best efforts in good faith to cause any such
registration statement to be filed and to become effective as expeditiously
as shall be reasonably possible. The Company shall not be required to
maintain the effectiveness of any Demand Registration beyond the earlier to
occur of (i) the consummation of the distribution by Stockholders of the
Restricted Securities included therein or (ii) 120 days after the effective
date thereof.
(c) Priority on Demand Registrations. If the managing underwriters in any
Demand Registration pursuant to this Section 2 shall give written advice to the
Company and the Stockholders that, in their opinion, there is an Underwriters'
Maximum Number of shares of Restricted Securities that may successfully be
included in such registration, then: (i) if the Underwriters' Maximum Number is
less than the number of shares of Restricted Securities requested to be included
in such registration, the Company will be obligated and required to include in
such registration that number of shares of Restricted Securities which does not
exceed the Underwriters' Maximum Number, and such number of shares of Stock
shall be allocated pro rata among such Stockholders on the basis of the number
of shares of Restricted Securities requested to be included therein by each such
Stockholder; and (ii) if the Underwriters' Maximum Number exceeds the number of
shares of Restricted Securities requested to be included in such registration,
then the Company will be entitled to include in such registration that number of
securities which shall have been requested by the Company to be included in such
registration for the account of the Company and which shall not be greater than
such excess. Neither the Company nor any of its security holders (other than the
Stockholders) shall be entitled to include any securities in any underwritten
Demand Registration unless the Company or such security holders (as the case may
be) shall have agreed in writing to sell such securities on the same terms and
conditions as shall apply to the Restricted Securities to be included in such
Demand Registration.
(d) Selection of Underwriters. If any Demand Registration or any
registration effected pursuant to Section 2 hereof is an underwritten offering,
or a best efforts underwritten offering, the investment bankers and managing
underwriters in such registration will be selected by the Company, subject to
the approval of the holders of 51% or more of the Restricted Securities to be
included in such registration.
3. Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) the Company proposes to register
any of its equity securities or any other securities convertible into
equity securities under the Securities Act for its own account (other than
a registration statement on Form S-4 or S-8 or any substitute form that
may, from time to time, be adopted by the Commission) (each such
registration not withdrawn or abandoned prior to the effective date thereof
being herein called a "Piggyback Registration"), the Company will give
written notice to all Stockholders of such proposal not later than 20 days
prior to the anticipated filing date of such Piggyback Registration.
(ii) Subject to the provisions contained in paragraphs (b) and (c) of
this Section 3 and in the last sentence of this clause (ii): (A) the
Company will be obligated and required to include in each Piggyback
Registration all Restricted Securities with respect to which the Company
shall receive from holders of fifty-one (51%) percent or more of the
Restricted Securities, within 15 days (the "Piggyback Inclusion Period")
after the date on which the Company shall have given written notice of such
Piggyback Registration to all Stockholders pursuant to Section 3(a)(i)
hereof, the written requests of such Stockholders for inclusion in such
Piggyback Registration, and (B) the Company will use its reasonable best
efforts in good faith to effect promptly (but in no event later than
ninety-five (95) days from the end of the Piggyback Inclusion Period,
provided, however, that such ninety-five day period shall be extended for
up to sixty additional days in the event of a material development that
shall hinder the Company from effecting such registration) the registration
of all such Restricted Securities; provided, that the Company shall not be
obligated to cause the effectiveness of a Piggyback Registration of any
convertible Restricted Securities unless and until such convertible
Restricted Securities included in a Piggyback Registration shall have been
converted into Common Stock of the Company prior to or simultaneously with
the effectiveness of a Piggyback Registration; and provided, further, that
each Stockholder shall be entitled to convert any Common Stock so converted
back into convertible Restricted Securities in the event such Piggyback
Registration is not declared effective. Any Stockholder shall be permitted
to withdraw all or any part of the Restricted Securities of such
Stockholders from any Piggyback Registration at any time prior to the
effective date of such Piggyback Registration, but in the case of an
underwritten offering only if such Stockholder is permitted to do so by the
managing underwriters or pursuant to any agreement therewith. The Company
shall not be required to maintain the effectiveness of any Piggyback
Registration beyond the consummation of the distribution by holders of
Restricted Securities included in such Piggyback Registration.
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration initiated by the Company, and the managing
underwriters shall give written advice to the Company that, in their opinion,
there is an Underwriters' Maximum Number of securities that may successfully be
included in such registration, then: (i) the Company shall be entitled to
include in such registration that number of securities which the Company
proposes to offer and sell for its own account in such registration and which
does not exceed the Underwriters' Maximum Number; and (ii) the Company will be
obligated and required to include in such registration that number of shares of
Restricted Securities which shall have been requested by the holders thereof to
be included in such registration and which does not exceed the difference
between the Underwriters' Maximum Number and that number of securities which the
Company is entitled to include therein pursuant to clause (i) above and such
number of shares of Restricted Securities shall be allocated pro rata among such
Stockholders on the basis of the number of shares of Restricted Securities
requested to be included therein by each such Stockholder.
(c) Selection of Underwriters. In any Piggyback Registration, the
Company, in its sole discretion, shall (unless the Company shall otherwise
agree) have the right to select the investment bankers and managing underwriters
in such registration.
4. Lockup Agreements.
(a) Restrictions on Public Sale by Stockholders. Each Stockholder, if
the managing underwriters so request in connection with such registration, will
not, without the prior written consent of such underwriters, effect any public
sale or other distribution of any equity securities of the Company, including
any sale pursuant to Rule 144, during the seven days prior to, and during the
ninety-day period commencing on the effective date of such underwritten
registration, except in connection with such underwritten registration.
(b) Restrictions on Public Sale by the Company. The Company agrees,
unless it obtains the consent of the managing underwriter(s) of any underwritten
offering of Restricted Securities pursuant to Sections 2 or 3 hereof, not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such equity
securities, during the period commencing on the seventh day prior to, and ending
on the ninetieth day (or such longer period as shall be required by the managing
underwriters) following, the effective date of any underwritten Demand or
Piggyback Registration, except in connection with any such underwritten
registration, pursuant to any employee benefit plan or as part of a business
combination transaction.
5. Registration Procedures. If (and on each occasion that) the Company
shall become obligated to effect any registration of any Restricted Securities
hereunder, the Company will use its reasonable best efforts in good faith to
effect promptly the registration of such Restricted Securities under the
Securities Act and to permit the public offering and sale of such Restricted
Securities in accordance with the intended method of disposition thereof, and,
in connection therewith, the Company, as expeditiously as shall be reasonably
possible, will:
(a) prepare and file with the Commission a registration statement with
respect to such Restricted Securities, and use its reasonable best efforts in
good faith to cause such registration statement to become and remain effective
as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included in such
registration statement as may be necessary to comply in all material respects
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement or as may be necessary to keep
such registration statement effective and current as provided herein;
(c) as soon as reasonably practicable, furnish to each seller of
Restricted Securities such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus), and such other documents, all as any such seller may
reasonably request in order to facilitate the disposition of the Restricted
Securities held by such seller;
(d) enter into such customary agreements (provided they do not require
the issuance of securities at a discount to any underwriter) and take all such
other customary actions in connection therewith as the Stockholders holding 51%
or more of the Restricted Securities being registered reasonably request in
order to expedite or facilitate the disposition of such Restricted Securities;
(e) use its reasonable best efforts in good faith to register and
qualify the Restricted Securities covered by such registration statement under
such securities or blue sky laws of such jurisdictions as any seller (or the
managing underwriter, in the case of any underwritten offering) shall reasonably
request in light of the intended plan of disposition, and do any and all such
other acts and things as may be reasonably necessary or advisable to permit the
disposition in such jurisdictions of the Restricted Securities covered by such
registration statement; provided, however that the Company shall not be required
in connection therewith to qualify to do business or file a general consent to
service of process in any such jurisdiction or subject itself to taxation in any
jurisdiction where the Company is not already subject to taxation; and
(f) furnish to each prospective seller a signed counterpart, addressed
to the prospective sellers, (or to the underwriters, in the case of any
underwritten offering) of (i) an opinion of counsel for the Company, dated the
effective date of the registration statement, and (ii) a "comfort" letter signed
by the independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with respect to the registration statement (and the prospectus
included therein) and, in the case of the "comfort" letter, with respect to
events subsequent to the date of the financial statements, as are customarily
covered (at the time of such registration) in opinions of issuer's counsel and
in "comfort" letters delivered to the underwriters in underwritten public
offerings of securities.
6. Cooperation by Prospective Sellers, Etc.
(a) Each prospective seller of Restricted Securities will furnish to
the Company in writing such information as the Company may reasonably require
and which is customary in such transactions from such seller, and otherwise
reasonably cooperate with the Company in connection with any registration
statement with respect to such Restricted Securities and the Company may exclude
from such Registration Statement the Restricted Securities of any prospective
seller who fails to furnish such reasonably requested information within 30 days
after receiving such request.
(b) The failure of any prospective seller of Restricted Securities to
furnish any information or documents in accordance with any provision contained
in this Agreement shall not affect the obligations of the Company under this
Agreement to any remaining sellers who furnish such information and documents
unless in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the viability of the offering or the legality
of the registration statement or the underlying offering.
(c) The Stockholders included in any registration statement will not
(until receipt of a notice to the contrary) effect sales of Restricted
Securities included in any registration statement after receipt of written
notice from the Company to suspend sales to permit the Company to correct or
update such registration statement or prospectus; but the obligations of the
Company with respect to maintaining any registration statement current and
effective shall be extended by a period of days equal to the period such
suspension is in effect.
(d) At the end of any period during which the Company is obligated to
keep any registration statement current and effective as provided herein (and
any extensions thereof required by the preceding paragraph (c) of this Section
6), the Stockholders included in such registration statement shall discontinue
sales of shares pursuant to such registration statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Stockholders shall
notify the Company of the number of shares registered which remain unsold
promptly after receipt of such notice from the Company.
7. Registration Expenses.
(a) Except as otherwise provided herein, all out of pocket costs and
expenses incurred or sustained by the Company in connection with or arising out
of the Demand Registration pursuant to Section 2 hereof and each registration
pursuant to Section 3 hereof, including, without limitation, all registration
and filing fees, fees and expenses of compliance with federal and state
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with the blue sky qualification of
Restricted Securities), printing expenses, messenger, telephone and delivery
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements of one counsel representing any or all of the holders of
Restricted Securities (selected by the holders of fifty-one (51%) percent or
more of the Restricted Securities), reasonable fees and disbursements of all
independent certified public accountants of the Company (including the expenses
relating to the preparation and delivery of any special audit or "cold comfort"
letters required by or incident to such registration), and fees and
disbursements of underwriters (excluding discounts, commissions and expenses
representing disguised commissions), the reasonable fees and expenses of any
special experts retained by the Company of its own initiative or at the request
of the managing underwriters in connection with such registration, and fees and
expenses of all (if any) other persons retained by the Company (all such costs
and expenses being herein called, collectively, the "Registration Expenses"),
will be borne and paid by the Company; provided, however, that the Company shall
not pay nor otherwise be responsible for any legal fees or disbursements of
additional counsel other than as set forth above. The Company will, in any case,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, and the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which similar securities of the Company are then listed.
(b) The Company will not bear the cost of nor pay for any stock
transfer taxes imposed in respect of the transfer of any Restricted Securities
to any purchaser thereof by any Stockholder in connection with any registration
of Restricted Securities pursuant to this Agreement.
(c) To the extent that expenses reasonably incurred by the Company
incident to any registration are, under the terms of this Agreement, not
required to be paid by the Company, each Stockholder included in such
registration will pay all such expenses which are clearly solely attributable to
the registration of such Stockholder's Restricted Securities so included in such
registration, and all other such expenses not so attributable to one Stockholder
will be borne and paid by all sellers of securities included in such
registration in proportion to the number of securities so included by each such
seller.
8. Indemnification.
(a) Indemnification by the Company. To the full extent permitted by
law, the Company will indemnify each Stockholder requesting or joining in a
registration and each underwriter of the securities so registered, the officers,
directors, agents, employees and partners of each such Person and each Person,
if any, who controls any thereof (within the meaning of the Securities Act)
against any and all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of any material fact contained in any registration statement,
prospectus or any amendment or supplement thereto, or any document filed
pursuant to state securities laws (or in any related registration statement,
notification or the like) or any omission (or alleged omission) to state therein
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of any rule
or regulation promulgated under the Securities Act applicable to the Company and
relating to any action or inaction required of the Company in connection with
any such registration, qualification or compliance, and the Company will
reimburse each such Stockholder, underwriter, and each other Person indemnified
pursuant to this paragraph (a) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission (or alleged untrue statement or omission) made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by such Stockholder, underwriter, officer, director, partner or
controlling person and stated to be specifically for use therein. provided,
however, that the Company shall not be liable to any such Stockholder to the
extent that any such claim, loss, damage, liability or action arise out of or
are based upon any untrue statement or omission made in any preliminary
prospectus if: (i) having previously been furnished by or on behalf of the
Company with copies of such final prospectus, such Stockholder failed to send or
deliver a copy of the final prospectus with or prior to the delivery of written
confirmation of the sale by such Stockholder to the person asserting the claim
from which such claim, loss, damage, liability or action arise, and (ii) the
final prospectus would have corrected such untrue statement or such omission;
provided, further, that the Company shall not be liable to any Stockholder in
any such case to the extent that any such claim, loss, damage, liability or
action arise out of or are based upon any untrue statement or omission in any
prospectus if: (x) such untrue statement or omission is corrected in an
amendment or supplement to such prospectus, and (y) having previously been
furnished by or on behalf of the Company with copies of such prospectus as so
amended or supplemented, such Stockholder thereafter fails to deliver such
prospectus as so amended or supplemented prior to or concurrently with the sale
of a Restricted Security to the person asserting the claim from which such
claim, loss, damage, liability or action arise.
(b) Indemnification by Each Stockholder. Each Stockholder requesting
or joining in a registration will severally and not jointly indemnify each
underwriter of the securities so registered, the Company and the officers,
agents, employees and directors and partners of each such Person and each
Person, if any, who controls any thereof, together with the officers, agents,
employees, directors and partners of such controlling person (within the meaning
of the Securities Act) and their respective successors in title and assigns
against any and all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of any material fact contained in any registration statement,
prospectus, or any amendment or supplement thereto, or any document filed
pursuant to state securities laws (or in any related registration statement,
notification or the like) or any omission (or alleged omission) to state therein
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Stockholder of any
rule or regulation promulgated under the Securities Act applicable to such
Person and relating to any action or inaction required of such Person in
connection with any such registration, qualification or compliance, and such
Stockholder will reimburse each underwriter, the Company and each other Person
indemnified pursuant to this paragraph (b) for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that this paragraph
(b) shall apply only if (and only to the extent that) such statement or omission
(or alleged untrue statement or omission) was made in reliance upon and in
conformity with written information furnished to such underwriter or the Company
in an instrument duly executed by any such Stockholder or any officer, director,
partner or controlling person of such Stockholder and stated to be specifically
for use therein, and provided further that each Stockholder's liability
hereunder (including, without limitation, Section 9) with respect to any
particular registration shall be limited to an amount equal to the proceeds
received by such Stockholder from the Restricted Securities sold by such
Stockholder in such registration. The Company and the Stockholders shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities professionals, participating in any distribution
of Restricted Securities to the same extent as provided above with respect to
information so furnished in writing by such underwriters expressly for use in
any prospectus or registration statement.
(c) Indemnification Proceedings. Each party entitled to
indemnification pursuant to this Section 8 (the "indemnified party") shall give
notice to the party required to provide indemnification pursuant to this Section
8 (the "indemnifying party") promptly after such indemnified party acquires
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
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 reasonably acceptable to the indemnified party, and the indemnified
party may participate in such defense at the indemnified party's expense; and
provided, further, that the failure by any indemnified party to give notice as
provided in this paragraph (c) shall not relieve the indemnifying party of its
obligations under this Section 8 except to the extent that the failure results
in a failure of actual notice to the indemnifying party and such indemnifying
party is prejudiced solely as a result of the failure to give notice. 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 which 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 to such claim or litigation. The
reimbursement required by this Section 8 shall be made by periodic payments
during the course of the investigation or defense, as and when bills are
received or expenses incurred.
9. Contribution in Lieu of Indemnification. If the indemnification provided
for in Section 8 hereof is unavailable to a party that would have been an
indemnified party under any such section in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each party that would have been an indemnifying party thereunder shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and such
indemnified party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof). The 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 indemnifying party or such indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and each Stockholder
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation or by any other method of
allocation which does not take account the equitable considerations referred to
above in this Section 9. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 9 shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to indemnification or contribution from any
Person who was not guilty of such fraudulent misrepresentation.
10. Rule 144 Requirements; Form S-3. The Company will use its reasonable
best efforts in good faith to take all steps necessary to ensure that the
Company will be eligible to register securities on Form S-1, S-2, SB-1, SB-2 or
S-3 (or any comparable forms adopted by the Commission) and to file all reports
required to be filed by it under the Securities Exchange Act of 1934 in order
that there will be publicly available current public information concerning the
Company within the meaning of Rule 144(c) of the Commission under the Securities
Act. The Company will furnish to any Stockholder, upon request made by such
Stockholder, a written statement signed by the Company, addressed to such
Stockholder, describing briefly the action the Company has taken or proposes to
take to comply with the current public information requirements of Rule 144. The
Company will, at the request of any Stockholder, upon receipt from such
Stockholder of: (x) a certificate certifying: (i) that such Stockholder has held
such Restricted Securities for a period of not less than three (3) consecutive
years (or such shorter period as may be permitted by Rule 144 from time to time)
within the meaning of Rule 144, (ii) that such Stockholder has not been an
affiliate (as defined in Rule 144) of the Company for more than the ninety-two
(92) preceding days, (or such shorter period as may be permitted by Rule 144
from time to time) and (iii) as to such other matters as may be appropriate in
accordance with such Rule; and (y) if not waived in writing by the Company, an
unqualified written opinion of counsel knowledgeable in securities law matters
as to clauses (i) and (ii) above, addressed to the Company and reasonably
acceptable in form and substance to the Company, remove from the stock
certificates representing such Restricted Securities that portion of any
restrictive legend which relates to the registration provisions of the
Securities Act, and, thereupon, such Restricted Securities will cease to be
Restricted Securities for purposes of this Agreement.
11. Participation in Underwritten Registrations. No person may participate
in any underwritten registration pursuant to this Agreement unless such person:
(a) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled, under the provisions
hereof, to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required by the terms of such underwriting
arrangements. Any Stockholder to be included in any underwritten registration
shall be entitled at any time to withdraw such Restricted Securities from such
registration prior to the execution of the related underwriting agreement in the
event that such Stockholder shall disapprove of any of the terms of such
agreement.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company hereby represents and
warrants that it is not a party to or bound in any manner under, and covenants
that it will not enter into at any time after the date hereof, any agreement or
contract (whether written or oral) with respect to any of its securities which
grants to any securityholder (other than under this Agreement) any demand
registration rights or prevents the Company from complying in any respect with
the registration rights granted by the Company to the Stockholders hereunder.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this paragraph (b), may not be amended, modified or
supplemented, and any waiver or consent to or any departure from any of the
provisions of this Agreement may not be given and shall not become or be
effective, unless and until (in each case) the Company shall have received the
prior written consent of the holders of at least 66 2/3% of the Restricted
Securities then outstanding to any such amendment, modification, supplement,
waiver or consent; provided however, that any amendment, modification or waiver
of any provision of this Agreement that affects only one or more particular
parties hereto to this Agreement may become effective only with the written
approval of such party or parties.
(c) Restricted Securities Held by the Company. Whenever the consent or
approval of Stockholders is required pursuant to this Agreement, Restricted
Securities held by the Company shall not be counted in determining whether such
consent or approval was duly and properly given by such Stockholders.
(d) Term. The agreements of the Company contained in this Agreement
shall continue in full force and effect so long as any Stockholder holds any
Restricted Securities.
(e) Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telex or telecopy) addressed as provided below (a) when actually delivered, in
person, (b) when telexed or telecopied to said address, confirmed by registered
or certified mail, (c) when received if delivered by overnight courier, or (d)
in the case of delivery by mail, three business days shall have elapsed after
the same shall have been deposited in the United States mails, postage prepaid
and registered or certified:
(i) if to a Stockholder, at such Stockholder's address on the
stock transfer books of the Company (which the Company shall make
available for determining the address of any Stockholder for
notification purposes hereunder) with a copy to:
John E. Ottaviani, Esq.
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
(ii) if to the Company, at:
Three University Plaza
Hackensack, NJ 07601
Attention: William Weiss, CEO
with a copy to:
Richard A. Goldberg, Esq.
Shereff, Friedman, Hoffman & Goodman, L.L.P.
919 Third Avenue
New York, NY 10022
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 13(e).
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation, subsequent holders of Stock agreeing to be bound
by all of the terms and conditions of this Agreement by executing an Instrument
of Accession in the form set forth in attached Exhibit A.
(g) Counterparts. This Agreement may be executed in one or more
counterparts and by the 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 instrument.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect the meaning, construction or effect of any of the terms of this
Agreement.
(i) Governing Law. The validity, performance, construction and effect
of this Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to principles of
conflicts of law.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Facsimile Execution. To evidence the fact that it has executed
this Agreement, a party may send a copy of its executed counterpart to the other
party by facsimile transmission. That party shall be deemed to have executed
this Agreement on the date it sent such facsimile transmission. In such event,
such party shall deliver to the other party the counterpart of this Agreement
executed by such party for receipt on the next business day.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PAPERCLIP SOFTWARE, INC.
By/s/William Weiss
__________________________________
William Weiss
CEO
PURCHASER:
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:/s/Robert H. Stone
_________________________________
Robert H. Stone
President and CEO
