<PAGE>
As filed with the Securities and Exchange Commission on January 19, 2000
Registration No. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
INSCI-STATEMENTS.COM, CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 7373 06-1302773
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
Two Westborough Business Park, Westborough, Massachusetts 01581
(508) 870-4000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------
Dr. E. Ted Prince
Chairman of the Board and Chief Executive Officer
insci-statements.com, corp.
Two Westborough Business Park, Westborough, Massachusetts 01581
(508) 870-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies of Communications to:
Joseph A. Baratta, Esq.
Baratta & Goldstein
597 Fifth Avenue, New York, New York 10017
(212) 750-9700
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest investment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
each class of Offering Aggregate Amount of
Securities To Amount to be Price Per Offering registration
be Registered registered Share (1) Price fee
Common Stock,
par value $.01
per share 1,283,612 shares $6.125 $7,862,123.50 $2,319.33
1. Based on the average high and low trading price on the Nasdaq SmallCap
Market on January 18, 2000. Estimated pursuant to Rule 457 under the
Securities Act of 1933, as amended, solely for the purpose of calculating
the registration fee.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and
Exchange Commission (SEC), acting pursuant to said Section 8(a), may
determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
SEC. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
<PAGE>
INSCI-STATEMENTS.COM, CORP.
1,283,612 SHARES
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
The Prospectus relates to the offering for resale of the shares of common
stock par value $0.01 per share, of insci-statements.com, corp., a Delaware
corporation. On December 17, 1999, insci-statements.com, corp. issued 802,676
shares of common stock and a warrant to purchase 280,936 shares of its common
stock to The Tail Wind Fund Ltd., a Bahamian corporation in a transaction exempt
from the registration requirements of the Securities Act of 1933.
insci-statements.com has agreed to register the shares pursuant to a
registration rights agreement dated December 17, 1999 between
insci-statements.com and Tail Wind. Additionally included in this Prospectus are
a total of 200,000 shares of insci-statements.com common stock underlying two
warrants issued to Auerbach, Pollak & Richardson, Inc. on April 22, 1999 in
consideration for general investment banking and financial advisor services.
The selling stockholders may offer and sell the shares from time to time
pursuant to this prospectus. The term selling stockholders refers to Tail Wind
and Auerbach, Pollak & Richardson, together with transferees, pledgees, donees,
successors or assigns, and any other person who becomes a party to or agrees to
be bound by the agreements with insci-statements.com. The offered shares may be
offered and sold by the selling stockholders from time to time directly to
purchasers or through underwriters, broker/dealers or agents at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. See "Plan of Distribution" and
"Selling Stockholders." If required, the names of any underwriters,
broker/dealers or agents, any discounts, commissions and other items
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers will
be set forth in an accompanying supplement to this prospectus. If The Tail Wind
warrant to purchase 280,936 shares of common stock is exercised or converted, we
will receive the exercise price of $4.30 for each warrant share exercised or
converted. The two warrants issued to Auerbach, Pollak & Richardson each are
exercisable or convertible for 100,000 shares of common stock. If the first
Auerbach, Pollak & Richardson warrant is exercised, we will receive an exercise
price of $3.00 for each warrant share. If the second Auerbach, Pollak &
Richardson warrant is exercised, we will receive $4.00 for each warrant share.
The selling stockholders will receive all of the net proceeds from the sale of
the offered shares and will pay all underwriting discounts and selling
commissions, if any, applicable to any sale. We are responsible for payment of
all other expenses incident to the offer and sale of the offered shares. The
selling stockholders and any underwriters, broker/dealers or agents that
participate in the distribution of offered shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profits on the
sale of offered shares by any selling stockholder and any discounts,
commissions, concessions or other compensation received by any underwriter,
broker/dealer or agent may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" for a description of
indemnification arrangements.
Prospective investors should carefully consider the matters discussed
under the caption "Risk Factors" commencing on Page 5.
insci-statements.com, corp.'s common stock is listed on the Nasdaq
SmallCap Market under the symbol "INSI" and on The Boston Stock Exchange under
the symbol "INSCI".
Neither the SEC nor any state securities commission has approved or
disapproved of these shares or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 19, 2000.
<PAGE>
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION ....................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 1
FORWARD-LOOKING STATEMENTS ................................................ 2
PROSPECTUS SUMMARY ........................................................ 2
RISK FACTORS .............................................................. 5
USE OF PROCEEDS ........................................................... 9
DIVIDEND POLICY ........................................................... 9
DESCRIPTION OF CAPITAL STOCK .............................................. 10
SELLING STOCKHOLDERS ...................................................... 12
PLAN OF DISTRIBUTION ...................................................... 13
LEGAL MATTERS ............................................................. 14
EXPERTS ................................................................... 14
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This prospectus includes or incorporates by reference various trademarks
and service marks owned or licensed by insci-statments.com, corp.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
insci-statments.com, corp. is subject to the informational requirements of
the Securities Exchange Act of 1934, and files annual, quarterly and current
reports and other information with the Securities and Exchange Commission. You
may read and copy any reports, statement or other information on file at the
SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of those documents upon payment of a duplicating
fee by writing to the SEC. In addition, you can inspect reports, proxy
statements and other information concerning insci-statements.com at the offices
of NASDAQ, 1735 "K" Street, N.W., Washington, D.C. 20006-1500.
insci-statements.com has filed with the SEC a registration statement on
Form S-3. This prospectus, which forms a part of that registration statement,
does not contain all of the information included in the registration statement.
Certain information is omitted and you should refer to the registration
statement and its exhibits. With respect to references made in this prospectus
to any of our contracts or other documents, these references are not necessarily
complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contracts or documents. You may review a copy
of the registration statement and the exhibits at the SEC's public reference
room in Washington, D.C. at the above location and at the SEC's regional offices
in Chicago, Illinois and New York, New York. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. insci-statements.com's SEC filings and the registration statement can
also be reviewed by accessing the SEC's Internet site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings that
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the offering of securities under this
prospectus is terminated.
The following documents are incorporated by reference into this
prospectus:
(1) Our Annual Report on Form 10-KSB for the fiscal year ended March 31,
1999.
(2) Our Quarterly Report on Form 10-QSB for the fiscal quarter ended June
30, 1999.
(3) Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
September 30, 1999.
(4) Our Current Report on Form 8-K filed with the SEC on December 6, 1999.
(5) Our Current Report on Form 8-K filed with the SEC on December 27,
1999.
(6) Our Current Report on Form 8-K filed with the SEC on January 4, 2000.
(7) Our Current Report on Form 8-K filed with the SEC on January 4, 2000.
(8) Our Current Report on Form 8-K/A (No.1) filed with the SEC on January
12, 2000.
(9) Our Proxy Statements in connection with our 1999 Annual Meeting of
Shareowners held on November 9, 1999.
(10) The description of the common stock set forth in our registration
statement on Form S-1 which became effective on October 6, 1997.
(11) All other reports filed by us pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act since January 19, 2000 and prior to the termination
of this offering of the shares offered by this prospectus.
Information incorporated by reference is considered to be part of this
prospectus. Any statement contained in a document incorporated by reference in
this prospectus will be modified or superseded to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, in its
unmodified from, to constitute a part of this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
insci-statements. com, corp.
Two Westborough Business Park
Westborough, Massachusetts 01581
Attention: Roger Kuhn, Chief Financial Officer
Telephone number: (508) 870-4000
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Words such as
"anticipates", "plans", "estimates", "expects", "believes", and similar
expressions as used in this prospectus in connection with insci-statements.com
or our management, are intended to identify forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. However, our actual results, performance, or
achievements may materially differ from those expressed in the forward-looking
statements. Please see "Risk Factors" for a more detailed description of those
conditions and events that could cause our results to differ.
We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed financial and other information appearing elsewhere in this prospectus
and in the documents incorporated by reference in this prospectus.
OUR COMPANY
We develop enterprise level software for Internet access and viewing as
well as the digital archiving and distribution of production print documents. We
participate in the high growth electronic bill presentment and payment market,
and are moving to an Internet based portal model of doing business in the area
of e-commerce and integration of electronic printing over the Internet. We
currently market a family of integrated document management software products
designed to meet the enterprise-wide needs of organizations, which rely on a
large quantity of computer-generated documents in their business. We provide our
customers with the ability to electronically capture and store computer output
and source documents and to enable access and delivery of these documents
electronically or via reprints in a way that lowers cost, improves quality, and
service and provides greater competitive advantage. We market our products in
more than 40 countries through a combination of direct sales and reseller
channels.
We have recently focused our attention in four areas:
o expansion of the functionality and performance of our existing Unix based
products,
o development of our core technology products to operate on the Windows NT
platform,
o expansion of indirect sales channels, and
o expansion of our services infrastructure.
In the past two years, we have added six new software products:
o WebCOINS, an Internet product;
o COINSflow, a workflow product;
o Advanced COINSCAN, an imaging product;
o Advanced COINSERV, a document archive and retrieval product;
o COINS Demander, a database interface; and
o Setup Expert, an application set up interface.
We also released COINSERV for Windows NT, an electronic digital document
repository with Internet access and integrated imaging and workflow. This
software product can archive and retrieve high volumes of documents operating on
the NT platform. The market for our products is organizations that require the
electronic availability of customer-facing documents, source documents and
reports.
Customer-facing documents vary from industry to industry but generally
include invoices, statements, purchase orders, bills, policies, and transaction
confirmation documents which are produced in high volume on high-speed printers.
They require electronic indexing and storage to allow retrieval and viewing for
customer support functions and to satisfy regulatory archiving requirements.
Source documents include new account applications, signature cards,
purchase orders, signed bills of lading, insurance claim forms, and other
paper-based documents which, through the use of our products can be
electronically captured, indexed, stored, routed and displayed in support of the
process. The result of putting these document types in electronic form is
improved efficiency, cost reduction, and ability of an organization to more
effectively serve its internal and external customers.
Electronic commerce is rapidly becoming a market requirement. New
capabilities such as electronic bill presentment, customer access to statements
and bills and integrated invoicing and marketing extend the value of
conventional printing and distribution of customer-facing documents. Our
products deliver the capability for document-enabled electronic commerce.
We offer numerous services including software installation, training,
software maintenance, support and systems integration. Our advanced systems
integration services division works with our customers to integrate these
various technologies into existing technical environments to leverage
investments in technology.
Our current business strategy is to develop and provide document
management solutions in a fully integrated and customized manner that enables
customers to improve their business process and competitive position.
<PAGE>
THE OFFERING
The following is a brief summary of the terms of this offering.
Common Stock Offered ........... 1,283,612 (1) shares of common stock $.01 par
value per share
Use of Proceeds ................ insci-statements.com, corp. will not receive
any proceeds from the sale by the selling
stockholders of the offered shares.
Registration Agreement ......... insci-statements.com, corp. has agreed to use
its best efforts to keep effective a
registration statement of which this
prospectus forms a part covering resales of
the offered shares for a period commencing on
the date on which this registration statement
becomes effective and ending on December 17,
2004, or an earlier date on which all of the
offered shares have been sold or cease to be
registerable.
(1) Assumes the exercise of warrant shares issued to Tail Wind on December 17,
1999 and the exercise of the warrant shares issued to Auerbach, Pollak &
Richardson on April 22, 1999.
The Remainder of This Page Intentionally Left Blank
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RISK FACTORS
The statements in this prospectus that are not descriptions of historical
facts may be forward-looking statements that are subject to risks and
uncertainties. In particular, statements in this prospectus, that state our
intention, beliefs, expectations, strategies, predictions or any other
statements relating to our future activities or other future events or
conditions are "forward-looking statements". Forward-looking statements are
subject to risks, uncertainties and other factors, including, but not limited
to, those identified under "Risk Factors", those described in our Annual and
Quarterly Reports incorporated by reference in this prospectus as well as
general economic conditions, any one or more of which could cause actual results
to differ materially from those stated in such statements.
An investment in our common stock involves a high degree of risk. You
should consider carefully, along with other factors, the following risks and
consult with your own legal, tax and financial advisors.
WE HAVE A HISTORY OF LOSSES.
We have had losses since our organization in 1989. For the fiscal year
ended March 31, 1999, we had a net loss of approximately $451,000 or $0.16 per
share. For the fiscal years ended March 31, 1998 and 1997, we had net losses of
approximately $2,543,000 or $0.73 per share, and approximately $936,000 or $0.62
per share, respectively. Our revenues and results of operations fluctuate as a
result of a variety of factors some of which include the amount of revenue
generated from our alliances with other companies selling our products; the
length of the sales cycle for our products; demand for our products; the
introduction of new products and product enhancements by us or our competitors,
among other factors.
WE ARE EMPLOYING A NEW BUSINESS STRATEGY WHICH CARRIES A SUBSTANTIAL DEGREE OF
RISK.
We have recently changed our company name to reflect our new web-based
business model. We have elected to pursue a new business model which focuses on
the Electronic Commerce Market. Specifically, a focal point of our new business
model includes the implementation and setup of a web portal to provide web-based
storage and management for commercial documents. We believe that our new
business strategy will allow for us to take advantage of the growing market for
digital documents and commercial transactions over the Internet. However, there
can be no assurances that our new business strategy will be successful or result
in any profits.
OUR ACQUISITION OF INTERNET BROADCASTING COMPANY, INC. WHICH HAS SUSTAINED
ONGOING LOSSES WILL RESULT IN CASH LOSSES TO US.
We acquired all of the shares of stock of Internet Broadcasting on
December 10, 1999 in exchange for 1,000,000 shares of our Common Stock. Internet
Broadcasting has not achieved any profit and has continued to experience losses
from operations of approximately $100,000 a month, as it is a development stage
company. We cannot be sure that the technology used by Internet Broadcasting
will be successful in achieving future profits, as Internet Broadcasting may
continue to experience losses from its operations. Additionally, as a part of
our acquiring the shares of Internet Broadcasting, we agreed to file a
registration statement for the 1,000,000 shares of our common stock prior to
June 10, 2000.
WE HAVE GIVEN CERTAIN RIGHTS TO THE TAIL WIND FUND LTD. WHICH MAY ADVERSELY
AFFECT FUTURE EQUITY FINANCING.
We believe that we will be required to raise additional capital to meet
the cash requirements of the Internet Broadcasting business. Tail
Wind (see "Selling Stockholders") for 33 months through September 17,
2002 has a right of first refusal to any equity financing on the same terms
prior to our accepting the financing. Additionally, if we sell shares of our
common stock at less than the amount paid by Tail Wind of $2.99 per share and
$4.30 for each warrant share, then Tail Wind will receive added shares of common
stock or warrants or a cash payment for the difference in what Tail Wind paid
for its shares and warrants under our private placement offering.
WE HAVE A PREFERRED STOCK DIVIDEND OBLIGATION WHICH WILL HAVE A NEGATIVE EFFECT
ON ANY PROFITS.
In the past four years, we have completed three private placement
offerings for shares convertible into our Common Stock. In two of the three
placements, all the preferred shares have been converted into our Common Stock.
The remaining placement still has outstanding preferred shares which are
convertible into shares of our Common Stock. The placement with outstanding
convertible securities was for Units that are made up of shares of our 8%
Convertible Redeemable Preferred Stock and three-year warrants which expired
December 31, 1999. Currently, we are obligated until October 1, 2001, or the
conversion of the 8% Convertible Redeemable Preferred Shares, whichever happens
first, to pay dividends in the amount of 11% a year in the form of our Preferred
Stock or in cash. We can choose the form of dividend payment. The requirement
for us to pay dividends will have negative effect on any profits we earn and
will result in a reduction in any future earnings per share.
THERE CAN BE A POTENTIAL NEGATIVE EFFECT TO TRADING PRICE OF OUR COMMON STOCK
WITH THE CONVERSION OF PREFERRED SHARES AND EXERCISE OF OPTIONS AND WARRANTS.
Our continued issuance on dividends of Preferred Stock, which is
convertible to our Common Stock, on our 8% Convertible Redeemable Preferred
Stock, and outstanding Options and Warrants may have a depressive effect on the
price of our Common Stock in the open market. In addition, the existence of such
warrants and options and the registration for the underlying shares and/or
possible qualification under Rule 144 of the Securities Act of 1933, which would
provide an exemption from registration, may adversely affect the terms at which
we can obtain additional equity financing. The holders of options and warrants
are likely to exercise them at a time when we would otherwise be able to obtain
capital on better terms than those provided by the options and warrants.
WE HAVE A NEED FOR ADDITIONAL WORKING CAPITAL.
We believe that we will require substantial additional funds for working
capital and additional future product development. We have established a bank
line for working capital and equipment financing totaling $1,500,000 with
Silicon Valley Bank. The credit line contains restrictions related to financial
ratios and profitability that we must obtain in order to utilize the bank line.
We have also provided a general pledge of all our assets to guarantee payment to
Silicon Valley Bank. To date, we have utilized $1,000,000 of the credit
facility. As we have drawn down on the credit line, should we wish to pay cash
dividends, a provision of the credit facility requires us to obtain Silicon
Valley Bank's permission.
BOARD OF DIRECTOR OWNERSHIP OF OUR COMMON STOCK.
On December 31, 1999, our directors and officers and certain principal
stockholders and their affiliates beneficially owned (as defined by the SEC) in
the aggregate approximately 3,659,555 shares of Common Stock, representing 32%
of the outstanding shares of Common Stock. Accordingly, they have the ability to
influence significantly our affairs and matters requiring a stockholder vote,
including the election of the directors, the amendment of charter documents, the
merger or dissolution of us and the sale of all or substantially all of our
assets. The voting power of these holders may also discourage or prevent any
proposed takeover of us pursuant to a tender offer.
DIVIDENDS ON OUR COMMON STOCK NOT LIKELY.
We do not anticipate paying dividends on Common Stock. We presently intend
to retain future earnings, if any, in order to provide funds for use in the
operation and expansion of our business, and accordingly, we do not anticipate
paying cash dividends on our Common Stock in the foreseeable future.
TECHNOLOGY CHANGES MAY HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
Our business is subject to the effect of technological advances and
possible product obsolescence. The market for our products and related systems
integration and consulting services are characterized by rapidly changing
technology, extensive competition, technological complexity and evolving
industry standards. We must continue to insure that our computer software and
products which service electronic information and document management systems
are compatible with products offered by third party vendors, including server
platforms for our software and optical disk storage devices. We have no material
contractual commitments with third party vendors and there can be no assurances
that we will be able to modify our software products to be compatible with new
products that are introduced by others. Our ability to provide products and
technology at a competitive price will be subject to potential technological
alternative solutions that may be provided by competitors. In addition, there
can be no assurances that products or technologies developed by others will not
render our products or technologies noncompetitive or obsolete.
WE FACE INTENSE COMPETITION.
Competition among companies that provide document archival, indexing and
retrieval solutions is intense. Several companies market products that compete
directly with our products. Other companies offer products that potential
customers may consider to be acceptable alternatives to our products and
services. Several larger competitors with substantially more resources market
computer document storage and retrieval systems utilizing optical disk drive
technology. Other competitors offer alternative methods for storing and
retrieving computer generated documents in competition with our services and
products. Newly developed products could be more effective and cost efficient
than our current products or those we may develop in the future. Many of our
current and potential future competitors have substantially more engineering,
sales and marketing capabilities; substantially greater financial, technological
and personnel resources; and broader product lines than we do. Additionally,
alliances between major suppliers of data stream software may be formed to
create new standards that may cause our products to become obsolete.
WE HAVE DEPENDENCE ON PROPRIETARY TECHNOLOGY.
Our business depends upon proprietary software technology. We have no
patent protection for our proprietary software. Although we require our
employees and others to whom we disclose proprietary information to sign
non-disclosure agreements, such protection may not be sufficient. Our business
will be adversely affected if anyone improperly uses or discloses our
proprietary software and other proprietary information.
WE MAY HAVE DIFFICULTY WITH THE ATTRACTION AND RETENTION OF KEY PERSONNEL.
Our future success depends in significant part on the continued service of
key technical, sales and senior management personnel. The loss of the services
of any of our executive officers or other key employees could have a materially
adverse effect on our business, results of operations and financial condition.
We currently have employment agreements with certain key executive officers and
personnel. Our continued success also depends upon our continued ability to
attract and retain highly qualified technical, sales and managerial personnel.
While we have a recruiting program to attract qualified personnel, competition
for such personnel is intense, and there can be no assurances that we can retain
our key technical, sales and managerial employees. Additionally, there can be no
assurances that we can attract, assimilate or retain other highly qualified
technical, sales and managerial personnel in the future.
WE HAVE DEPENDENCE UPON KEY SUPPLIERS.
Optical disk storage devices which are necessary for the use of our
software systems are currently available from a number of third party vendors.
We do not intend to manufacture optical disk drive systems or optical disks. An
extended interruption of the supply of optical disk drive systems or optical
disks or extended performance problems could have an adverse effect on us. We
also rely on third party vendors to provide certain industry standard
communication protocols. We currently do not have any fixed commitments from
suppliers to provide equipment.
OUR BUSINESS HAS A SUBSTANTIAL DEPENDENCE ON OUTSIDE SALES LEADS.
We depend upon introductions to potential customers provided by companies
with which we maintain strategic alliances for a significant percentage of our
sales. Although we have written agreements with UNISYS, Xerox Corporation,
Storage Technology Corporation, Moore Corporation and OCE; and our principal
Value Added Resellers, which generally provide for discounts, commissions or
referral fees for sales of our software generated by them or by referral to
their customers, such agreements do not require customer introductions or
provide for minimum required purchases of our products. If any of the companies
with which we maintain strategic alliances at any time decide not to refer
potential customers to us, we may suffer reduced sales and increased operating
losses. In addition, there can be no assurance that we will be able to maintain
our strategic alliances on current terms, or at all.
YEAR 2000 COMPLIANCE RELATED PROBLEMS.
Many computer systems will experience problems handling dates beyond the
year 1999. Potential problems may be embedded and may not be experienced until
well beyond January 1, 2000 by computer systems. Therefore, some computer
hardware and software may need to be modified in order to remain functional. We
have assessed both internal readiness of our computer systems and the compliance
of our computer software sold to customers for its ability to process the year
2000 date. We believe that we are materially ready to process year 2000
requirements. The majority of the costs associated with implementing the Year
2000 compliance have already been recognized and have not been material in terms
of our financial operating results. We believe there is little risk associated
with year 2000 issues relative to our internal operations or computer software
sold. There can be no assurance, however, that there will not be a delay in, or
increased costs associated with the implementation of such changes. Our
inability to implement such changes could have an adverse effect on our future
results of operations.
POSSIBILITY OF DELISTING OF OUR COMMON STOCK.
We face the possibility of delisting from The Nasdaq System. Our Common
Stock is presently listed on The Nasdaq SmallCap Market. The Nasdaq SmallCap
Market requires us to either maintain net tangible assets (i.e. total assets
less liabilities and goodwill) of $2 million, or a market capitalization of $35
million or net income of $500,000 for two of the last three years in order to
maintain our listing. We are also required to meet certain corporate governance
requirements. Additionally, our stock must maintain an average bid price in
excess of $1.00. If the average bid price is less than $1.00 for 30 consecutive
trading days, we may be deemed not to satisfy The Nasdaq SmallCap listing
requirements. If we are unable to satisfy Nasdaq's requirements for continued
listing, our stock may be delisted from The Nasdaq SmallCap Market. In such
event, trading, if any, in our Common Stock would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board." If the Common Stock is delisted by Nasdaq, the liquidity of our
Common Stock could be impaired, not only in the number of securities which could
be bought and sold, but also through delays in the timing of transactions,
reduction in security analysts' and the news media's coverage, and low prices
for our Common Stock that might otherwise be attained.
If our Common Stock were to be delisted from the Nasdaq SmallCap Market,
it may become subject to additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and institutional accredited investors. If the broker-dealer is
subject to such restrictions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to the sale. Consequently, the rule may affect
the price of our Common Stock and your ability to sell our Common Stock.
The SEC's regulations define a "penny stock" to be any equity security
that has a market price which is less than $5.00 per share, subject to certain
exceptions. The penny stock restrictions will not apply to our Common Stock as
long as it is listed on The Nasdaq SmallCap Market.
POTENTIAL ISSUANCE OF ADDITIONAL SHARES OF PREFERRED STOCK COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
The rights of the holders of our Common Stock may be affected by the
potential issuance of Preferred Stock. Our certificate of incorporation gives
the board of directors the right to determine the designations, rights,
preferences and privileges of the holders of one or more series of Preferred
Stock. Accordingly, the board of directors is empowered, without stockholder
approval, to issue Preferred Stock with voting, dividend, conversion,
liquidation or other rights which could adversely affect the voting power and
equity interest of the holders of Common Stock. Although we have no present
intention to issue any additional shares of Preferred Stock or to create any
additional series of Preferred Stock, we may issue such shares in the future.
Furthermore, if we issue Preferred Stock in a manner which dilutes the voting
rights of the holders of Common Stock, our listing on The Nasdaq SmallCap Market
may be impaired.
CHANGE IN CONTROL PROVISIONS.
Our Bylaws and the Delaware General Corporation Law contain provisions
that may have the effect of making more difficult or delaying attempts by others
to obtain control of us, even when these attempts may be in the interests of
stockholders. The Delaware General Corporation Law also imposes conditions on
certain business combinations with "interested stockholders" (as defined by
Delaware law). We also have provided in certain agreements with key personnel
that in the event of a change of control and a termination of those employment
agreements without cause that each key employee will be entitled to stock
options. Additionally, we have provided that if a change of control occurs,
certain directors will receive immediate vesting of stock options granted under
our 1992 Directors Option Plan.
LACK OF PRODUCT LIABILITY INSURANCE.
We develop, market, install and service electronic information and
document management systems. Any failure of our products may result in a claim
against us. Due to the high cost of product liability insurance, we do not
maintain insurance to protect against claims associated with the use of our
products. Any claim against us whether or not successful may result in our
expenditure of substantial funds in litigation. Further, any claim may require
management's time and the use of our resources and may have a materially adverse
impact on us.
USE OF PROCEEDS
We will not receive any proceeds from the sale by selling stockholders of
the offered shares.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our Common Stock and
we do not expect to pay cash dividends in the foreseeable future. We are
restricted in paying cash dividends by the terms of our line of credit with
Silicon Valley Bank (see "Risk Factors"). Under certain circumstances, we are
required to pay cash dividends on our Preferred Stock. Please see "Dividends"
and "Description of Common Stock" below for further discussion concerning
dividend payments on our Preferred Stock. We have paid cumulative stock
dividends through December 31, 1999 on our 8% Convertible Redeemable Preferred
Stock as follows:
Stock Dividend Paid Shares Issued
------------------- -------------
8% Convertible Redeemable Preferred Stock $1,273,000 865,153
COMMON STOCK
We have never paid any cash dividends on our Common Stock and do not
anticipate declaring and paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings, if any, to fund development and
growth in our business.
8% CONVERTIBLE REDEEMABLE PREFERRED STOCK
Our 8% Convertible Redeemable Preferred Stock (8% Preferred Stock") issued
in our Unit Private Placement were originally scheduled to pay dividends of 8%
per annum on a quarterly basis and are cumulative. Dividends can be paid in cash
or 8% Preferred Stock at our option. The 8% Preferred Stock payable as dividends
is to be valued at the lesser of $3.75 (three dollars seventy-five cents) or the
average bid price for Common Stock for twenty (20) consecutive trading days
prior to the end of the quarter. Because the average bid price of our Common
Stock fell below $2.75 (two dollars seventy-five cents) subsequent to August 1,
1998, holders of a majority of outstanding 8% Preferred Stock have the right to
elect to have dividends paid in cash for the balance of the life of the 8%
Preferred Stock (the "Cash Election"). If we fail to honor the Cash Election, we
must pay dividends in shares of 8% Preferred Stock (valued at the lesser of
$3.75 or the average bid price for Common Stock for twenty (20) consecutive
trading days prior to the end of the quarter) and a majority of holders of 8%
Preferred Stock shall have the right to designate one (1) Board Member and we
must use our best efforts to cause the election of the designee for so long as
twenty-five (25%) percent of the 8% Preferred Stock remains outstanding. Under
the terms of our Unit Private Placement, as the average bid price for our Common
Stock during the last thirty (30) days of any quarter beginning with the quarter
ending December 31, 1998 was less than $3.75, the annual dividends on the
Preferred Shares were readjusted to eleven (11%) percent per annum for the
balance of the period our 8% Preferred Stock is outstanding. Our 8% Preferred
Stock will remain outstanding until October 1, 2001 or until all is converted by
holders, whichever occurs first.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are authorized to issue 40,000,000 shares of Common Stock, $.01 par
value, of which 11,785,884 shares are outstanding as of December 31, 1999. The
following summary description of our capital stock is qualified in its entirety
by reference to the Certificate of Incorporation, and the By-Laws, copies of
which are incorporated by reference to the Registration Statement of which this
Prospectus is a part.
The holders of our Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefore, subject to any dividends
preferences of the Company's Preferred Stock then outstanding. See "Dividend
Policy". Holders of Common Stock are not entitled to cumulative voting rights.
Therefore, the holders of a majority of the shares eligible to vote in any
election of Directors can elect all of the Directors then standing for election.
The holders of Common Stock have no pre-emptive or other subscriptive rights,
and there are no conversion rights or redemption or sinking fund provisions with
respect to Common Stock. All shares of Common Stock currently issued and
outstanding, and the Common Stock to be issued upon conversion or exercise of
Preferred Stock or warrants will be fully paid and non-assessable. No cash
dividends have been paid to holders of the Common Stock since the inception of
the Company and no dividends are anticipated to be declared or paid in the
foreseeable future. See "Dividend Policy".
PREFERRED STOCK
GENERAL
We are authorized to issue up to 10,000,000 share of Preferred Stock
having a par value of $.01 per share, of which 1,211,668 shares are outstanding
as of December 31, 1999.
The Board of Directors is authorized subject to limitations prescribed by
law and the provisions of the Certificate of Incorporation to provide for the
issuance of shares of Preferred Stock in series, and by filing a Certificate
pursuant to the applicable State law of the State of Delaware, to establish from
time to time, the number of shares to be included in each such series and affix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, the right to determine and
designate any and all of the following:
o the number of shares constituting that series and distinctive designation of
that series;
o the dividend rate of the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and the relative right or
priority, if any, of payment of dividends on shares of that series;
o whether that series shall have voting rights, in addition to the voting
rights provided by law, and if so, the terms of such voting rights;
o whether that series shall have conversion privileges, and if so, the terms
and conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors shall determine;
o whether or not the shares of that series shall be redeemable, and if so, the
terms and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, in the amount per share payable in the
case of redemption, which amount may vary under different conditions and at
different redemption dates;
o whether that series shall have a sinking fund for the redemption or purchase
of the shares of that series, and, if so, the term and amount of such
sinking fund;
o the rights of the shares of that series in the event of our voluntary or
involuntary liquidation, dissolution or winding up of our business and the
relative rights of priority, if any, of payment of shares in that series;
and
o any other relative rights, preferences and limitations of that series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividend shall be paid or declared
set apart for payment on the Common Stock with respect to the same dividend.
If upon any voluntary or involuntary liquidation, dissolution or winding
up of insci-statements.com, the assets available for distribution to holders of
shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
8% CONVERTIBLE REDEEMABLE PREFERRED STOCK
As of December 31, 1999, we have 1,211,668 shares outstanding of our 8%
Convertible Redeemable Preferred Stock ("8% Preferred Stock").
Each share of 8% Preferred Stock converts into one share of Common Stock
at the option of the holder.
Except as expressly provided by the General Corporation Business Law
("GCL") of the State of Delaware, and our amended Certificate of Incorporation,
the 8% Preferred Stock shall have no voting rights or pre-emptive rights.
If we shall be voluntarily or involuntarily liquidated, dissolved or wound
up, at any time when any 8% Preferred Stock shall be outstanding, the Eligible
Holders of the then outstanding 8% Preferred Stock shall receive a preference on
liquidation at least pari passu with any existing and future issues of preferred
stock that has the highest preference regarding distributions. The preference
shall be $3.75 per share of 8% Preferred Stock. Eligible Holders of the 8%
Preferred Stock shall have a preference in distribution of property available
for distribution to the holders of our Common Stock $.01 par value per share
(the "Common Stock") equal to a pro-rata amount of said distribution in
proportion to the Eligible Holder's ownership of 8% Preferred Stock, together
with an amount equal to all unpaid dividends accrued thereon, if any, to the
date of payment of such distribution, whether or not declared by the Board,
provided however, that our amalgamation with any corporation or corporations,
the sale or transfer by us of all or subsequently all of our property, or any
reduction of our authorized or issued capital of any class, whether now or
hereafter authorized, shall be deemed to be a liquidation by us.
Subject to the provisions hereof, all amounts to be paid as preferential
distributions to the Eligible Holders of 8% Preferred Stock shall be paid or set
apart for payment before the payment or setting apart for payment of any amount
for, or the distribution of any of our property to the holders of Common Stock
or to the holders of any preferred stock inferior in preference to the 8%
Preferred Stock, whether now or hereafter authorized, in connection with such
liquidation, dissolution or winding up.
At any time after October 1, 1999, any shares of 8% Preferred Stock that
have not otherwise converted can be redeemed at our option, upon thirty days
prior written notice to all then holders of record of the 8% Preferred Stock,
for cash at $3.75 per share of 8% Preferred Stock. On October 1, 2001, any
outstanding 8% Preferred Stock shall automatically convert into shares of Common
Stock at the lesser of $3.75 per share or the average bid price for the Common
Stock for twenty (20) consecutive trading days ending five (5) business days
prior to October 1, 2001.
For so long as an Investor owns 8% Preferred Stock the Investor shall
have anti-dilution protection and adjustment right with respect to:
o any subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock;
o any declaration of a dividend or any other distribution upon our Common
Stock payable in shares of Common Stock;
o any capital reorganization or reclassification of our capital stock; or
o any consolidation or merger of another entity with us.
There will be no adjustment in the event that we pay a dividend in cash to
our holders of Common Stock; provided, however, that we give all holders of the
8% Preferred Stock written notice that we intend to declare a cash dividend at
least (30) days prior to the record date for the cash dividend.
Neither the 8% Preferred Stock, nor the Common Stock issuable upon the
conversion of the 8% Preferred Stock, may be offered, sold or resold unless the
shares are registered under the 1933 Act or an exemption from the registration
requirements of the 1933 Act is available.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the sale by
the selling stockholders of 1,283,612 shares of common stock in this offering.
None of the selling stockholders has held a position or office or had a
material relationship with insci-statements.com or any of our affiliates within
the past three years other than a result of the ownership of our common stock
and other than as holders of our warrants exercisable through October 22, 2003,
April 22, 2004 and December 17, 2004. The address of The Tail Wind Fund Ltd. is
Windermere House, 404 East Bay Street, P.O. Box SS-5539, Nassau, Bahamas. The
address of Auerbach, Pollak & Richardson, Inc. is 450 Park Avenue, New York, NY
10022.
Shares Shares
Beneficially Number of Beneficially
Owned Prior Shares Owned After
Selling Stockholders to Offering %(1) Offered Offering %
- --------------------------------------------------------------------------------
The Tail Wind Fund Ltd.(2) 1,083,612 9.36% 1,083,612 0 *
Auerbach, Pollak &
Richardson, Inc.(3) 100,000 * 200,000 0 *
- ----------------
* Represents less than 1% of the outstanding shares of common stock.
(1) Applicable percentages of ownership are based on approximately 11,785,884
shares of common stock outstanding on December 31,1999 adjusted as required
by the rules promulgated by the SEC. Any security that any person named
above has the right to acquire within 60 days is deemed to be outstanding
for purposes of calculating the percentage ownership of such person, but is
not deemed to be outstanding for purposes of calculating the percentage of
any other person.
(2) Represents 802,676 shares of common stock and 280,936 shares of common stock
issuable upon exercise of a warrant which expires December 17, 2004. The
warrant has an exercise price of $4.30 for each warrant share. The common
stock and warrant were issued to Tail Wind in a transaction exempt from the
registration requirements of the Securities Act of 1933.
(3) Represents 200,000 shares of common stock issuable upon exercise of warrants
issued to Auerbach, Pollak & Richardson. The first warrant which is
exercisable for 100,000 warrant shares has an exercise price of $3.00 per
share and can presently be exercised and expires October 22, 2003. The
second warrant which is exercisable for 100,000 warrant shares has an
exercise price of $4.00 per share and can be exercised as of April 22, 2000
and expires April 22, 2004.
The selling stockholders are offering and selling a total of 1,283,612
shares on insci-statements.com common stock under this prospectus.
o An indeterminate number of additional shares as may from time to time become
issuable to the selling stockholders in accordance with the terms of
agreements which are annexed as exhibits to the registration statement to
which this prospectus is made apart thereof; and
o An indeterminate number of additional shares as may from time to time become
issuable to selling stockholders resulting from stock splits, stock
dividends or similar transactions with respect to the registerable common
stock
The selling stockholders may from time to time offer and sell pursuant to
this prospectus any or all of the offered shares. The cover page of this
prospectus sets forth the name and number of shares of common stock to be
offered.
PLAN OF DISTRIBUTION
insci-statements.com, corp. will not receive any of the proceeds of the
sale of the offered shares. The offered shares may be offered and sold by the
selling stockholders from time to time to purchasers directly. Alternatively,
the selling stockholders may from time to time offer and sell the offered shares
to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling stockholders and/or the purchasers of the offered shares for
whom they may act as agents. The selling stockholders and any underwriters,
broker/dealers or agents that participate in the distribution of the offered
shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any profits on the sale of offered shares by any selling stockholders
and any discounts, commissions, concessions or other compensation received by
any of these underwriters, broker/dealers or agents may be deemed to be
underwriting discounts or commissions under the Securities Act. To the extent
the selling stockholders may be deemed to be underwriters, the selling
stockholders may be subject to certain statutory liabilities, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Exchange Act.
The offered shares may be offered and sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The sale of the offered shares may be effected in transactions, which may
involve crosses or block transactions:
o on any national securities exchange or quotation service on which the
offered shares may be listed or quoted at the time of sale,
o in the over-the-counter market,
o in transactions otherwise than on these exchanges or services or in the
over-the-counter market, or
o pursuant to Rule 144, assuming the availability of an exemption from
registration.
At the time a particular offering of the offered shares is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount and type of offered shares being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other items constituting compensation
from the selling stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker/dealers. This prospectus supplement and,
if necessary, a post-effective amendment to the registration statement of which
this prospectus is a part, will be filed with the SEC to reflect the disclosure
of additional information with respect to the distribution of the offered
shares. In addition, the offered shares covered by this prospectus may be sold
in private transactions or under Rule 144 rather than pursuant to this
prospectus.
To the best knowledge of insci-statement.com, corp., there are currently
no plans, arrangements or understandings between any selling stockholders and
any broker/dealer, agent or underwriter regarding the sale of the offered shares
by the selling stockholders. There is no assurance that any selling stockholder
will sell any or all of the offered shares or that any selling stockholder will
not transfer the offered shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, if
applicable, the offered shares will be offered or sold in jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the offered shares may not be offered or sold unless they have
been registered or qualified for sale in these jurisdictions or any exemption
from registration or qualification is available and is complied with.
The selling stockholders and any other person participating in this
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitations, Regulation
M of the Exchange Act which may limit the timing of purchases and sales of any
of the offered shares by the selling stockholders or any other person.
Furthermore, Regulation M may restrict the ability of any person engaged in the
distribution of the offered shares to engage in market-making activities with
respect to the particular offered shares being distributed for a period of up to
five business days prior to the commencement of that distribution. All of the
foregoing may affect the marketability of the offered shares and the ability of
any person or entity to engage in market-making activities with respect to the
offered shares.
Pursuant to the registration rights agreement entered into in connection
with the registration of the shares by insci-statements.com, corp., and the
selling stockholder, each will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
The selling stockholders will not pay any expenses incidental to the
registration, offering and sale of the offered and sale of the offered shares to
the public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
Pursuant to the registration agreement, the selling stockholders will not
pay any expenses of the registration of the offered shares, including all
registration and filing fees, including, without limitation:
o with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and
o of compliance with federal and state securities or blue sky laws.
LEGAL MATTERS
The validity of the securities being offered hereby is being passed upon by
Baratta & Goldstein, 597 Fifth Avenue, New York, New York 10017.
EXPERTS
The supplemental financial statements of insci-statements.com, corp. as of
March 31, 1999 and for each of the two years ended March 31, 1999 which are
included in insci-statements.com, corp. 8-K/A filed on January 12, 2000 which is
incorporated by reference herein, except as to the supplemental financial
statements as they relate to The Internet Broadcasting Company, Inc. as of June
30, 1999 and 1998 and for each of the two years ended June 30, 1999, have been
audited by Pannell Kerr Forster, PC, independent accountants, whose reports have
been incorporated by reference herein upon the authority of said firms as
experts in auditing and accounting.
The financial statements of insci-statements.com, corp. as of March 31, 1999
and 1998, and for each of the two years ended March 31, 1999 which are included
in the insci-statements.com, corp. Annual Report on Form 10-K SB for the year
ended March 31, 1999, which is incorporated by reference herein, have been
audited by Pannell Kerr Forster PC, independent accountants, whose report
thereon has been incorporated by reference herein upon the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of The Internet Broadcasting Company, Inc.
as of June 30, 1999 and 1998 and for each of the two years ended June 30, 1999
which are included in insci-statements.com, corp's 8-K/A filed on January 12,
2000, which is incorporated by reference herein, have been audited by Goldstein
Lewin and Co. independent accountants, whose report has been incorporated by
reference herein upon the authority of said firm as experts in auditing and
accounting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
An itemized statement of the estimated amount of the expenses, other than
underwriting discounts and commissions, incurred and to be incurred in
connection with the distribution of the shares registered pursuant to this
registration statement follows. Except for the Securities and Exchange
Commission registration fee, all amounts are estimates.
Securities and Exchange Commission registration fee ... $ 2,319.33
Printing and engraving expenses ....................... $ 1,000
Accounting fees and expenses .......................... $25,000
Legal fees and expenses ............................... $15,000
Miscellaneous ......................................... $12,500
Total ........................................... $55,819.33
Item 15. Indemnification of Directors and Officers
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's fiduciary duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant's Restated Certificate of Incorporation, as amended,
contains provisions permitted by Section 102 (b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such director, officer, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal actions or
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify directors and/or officers in an action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the director
or officer is adjudged to be liable to the corporation. Where a director or
officer is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such director or officer actually and reasonably incurred.
The Registrant's Restated Certificate of Incorporation, as amended,
provides indemnification of directors and officers of the Registrant to the
fullest extent permitted by the DGCL.
Pursuant to the registration rights agreement entered into with the
Registrant, the selling stockholders have agreed to indemnify directors and
officers of the Registrant against certain liabilities, including liabilities
under the Securities Act.
The Registrant maintains liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.
Item 16. Exhibits
(a) List of Exhibits.
4.01 -- Purchase Agreement dated as of December 17, 1999 between
insci-statements.com, corp. and The Tail Wind Fund, Ltd.
4.02 -- Registration Rights Agreement dated as of December 17, 1999 between
insci-statements.com, corp. and The Tail Wind Fund, Ltd.
4.03 -- Warrant Agreement dated as of December 17, 1999 between
insci-statements.com, corp. and The Tail Wind Fund, Ltd.
4.04 Advisor Warrant Agreement, Warrant Certificate and Registration
Rights Agreement between Auerbach, Pollak & Richardson, Inc. and
INSCI Corp. now known as insci-statements.com, corp.
5.01 -- Opinion of Baratta & Goldstein.
23.01 -- Consent of Pannell Kerr Forster PC.
23.02 -- Consent of Goldstein, Lewin & Co.
23.03 -- Consent of Baratta & Goldstein (included in Exhibit 5.01)
24.01 -- Powers of Attorney of certain officers and directors of
insci-statements.com, corp. (included on the signature pages
hereof).
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of shares offered (if the total
dollar value of shares offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that if the information required to be included in a
post-effective amendment by paragraphs (1)(i) and (ii) above is contained in
periodic reports filed with or furnished to the SEC by the registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, paragraphs (1)(i)
and (ii) shall not apply.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the shares offered therein,
and the offering of such shares at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the shares being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement relating to shares offered therein, and the
offering of such shares at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
insci-statements.com, corp. pursuant to the foregoing provisions, or
otherwise, insci-statements.com, corp. has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by insci-statement.com,
corp. of expenses incurred or paid by a director, officer or controlling
person of insci-statements.com, corp. in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the shares being registered,
insci-statements.com, corp. will, unless in opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
insci-statements.com, corp. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Westborough, Commonwealth of
Massachusetts, on this 18 day of January, 2000.
insci-statements.com, corp.
By: /s/ E. Ted. Prince
-----------------------
Name: E. Ted. Prince
Title: Chief Executive Officer and Chairman
of the Board
POWER OF ATTORNEY
The registrant and each person whose signature appears below constitutes
and appoints E. Ted Prince, Roger Kuhn and any agent for service named in this
Registration Statement and each of them, his, true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and his
place and stead, in any and all capacities, to sign and file (i) any and all
amendments (including post-effective amendments) to this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ E. Ted. Prince
- ---------------------- Chief Executive Officer January 19, 2000
E. Ted Prince (Principal Executive
Officer); Chairman of the
Board.
/s/ Roger Kuhn
- ---------------------- Vice President and Chief January 19, 2000
Roger Kuhn Financial Officer (Principal
Financial Officer and
Principal Accounting Officer)
/s/ Thomas Farkas
- ---------------------- Director January 19, 2000
Thomas Farkas
/s/ Robert Little
- ---------------------- Director January 19, 2000
Robert Little
/s/ John A. Lopiano
- ---------------------- Director January 19, 2000
John A. Lopiano
/s/ Francis X. Murphy
- ---------------------- Director January 19, 2000
Francis X. Murphy
/s/ Leonard Simon
- ---------------------- Director January 19, 2000
Leonard Simon
<PAGE>
Exhibit 4.01
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 17th day of
December, 1999 by and between insci-statements.com, corp., a Delaware
corporation (the "Company"), and the Investor set forth on the signature page
affixed hereto (the "Investor").
RECITALS
A. The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended;
B. The Investor wishes to purchase, and the Company wishes to sell and
issue to the Investor, upon the terms and conditions stated in this Agreement,
such number of shares of the common stock of the Company, $0.01 par value per
share (the "Common Stock") and that number of warrants to purchase Common Stock
in the form attached hereto as EXHIBIT A (the "Warrants"), for an aggregate
purchase price of $2,400,000.12 as are set forth on the signature page attached
hereto and executed by the Investor; and
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT B (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder, and applicable state securities laws;
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
1.1 "Affiliate" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by, or is under common
control with, such Person.
1.2 "Agreements" means this Agreement the Registration Rights
Agreement and the Warrants.
1.3 "Closing" means the consummation of the transactions
contemplated by this Agreement, and "Closing Date" means the date of such
Closing.
1.4 "Control" means the possession , direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
1.5 "Market Price" means the average of the lowest ten consecutive
closing bid prices of the Company's Common Stock over the fifty (50) trading
days immediately preceding the applicable date.
1.6 "Material Adverse Effect" means an effect which, either alone or
in conjunction with other effects, constitutes a material adverse effect on the
(i) condition (financial or otherwise), business, assets, or results of
operations of the Company and its subsidiaries, taken as a whole; (ii) ability
of the Company to perform any of its material obligations under the terms of
this Agreement; or (iii) rights and remedies of an Investor under the terms of
this Agreement.
1.7 "Person" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.8 "SEC Filings" has the meaning set forth in Section 4.6.
1.9 "Securities" means the Shares, the Warrants and the Warrant
Shares (defined below).
1.10 "Shares" means the shares of Common Stock being purchased by
the Investor hereunder.
1.11 "Warrant Shares" means the shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants.
1.12 "1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.13 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and Warrants. Subject to the terms
and conditions of this Agreement, the Investor hereby agrees to purchase and the
Company hereby agrees to sell and issue to the Investor, the number of Shares
and Warrants to purchase the number of shares of Common Stock set forth on the
Investor's signature page attached hereto. The number of Shares to be purchased
by the Investor shall be determined by dividing the Investor's aggregate
purchase price (as such aggregate purchase price is set forth on the Investor's
signature page attached hereto), by an amount equal to 80% of the Market Price
on the date hereof (the "Purchase Price"). The number of shares of Common Stock
purchasable by the Investor pursuant to the Warrants shall be equal to 35% of
the number of Shares purchased by the Investor, and the exercise price of the
Warrants will be 115% of the Market Price.
3. Closing. On the date of this Agreement, the Purchase Price shall be
determined. The Company shall promptly deliver to the Investor's counsel, in
trust, a certificate or certificates, registered in such name or names as the
Investor may designate, representing all of the Shares and all of the Warrants,
with instructions that such certificates are to be held for release to the
Investor only upon payment of the Purchase Price to the Company. Upon receipt by
counsel to the Investor of the certificates, the Investor shall promptly cause a
wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in amounts representing the Investor's
aggregate Purchase Price. On the date the Company receives such funds, the
certificates evidencing the Shares and the Warrants shall be released to the
Investor (and such date shall be deemed the "Closing Date").
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that:
4.1 Organization, Good Standing and Qualification. The Company and
each of its subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its organization and has all requisite
power and authority to carry on its business and own its properties as now
conducted and owned. The Company and each of its subsidiaries is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or licensing necessary unless the
failure to so qualify or be licensed would not have a Material Adverse Effect.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) the performance of all obligations of the Company hereunder
or thereunder, and (iii) the authorization, issuance (or reservation for
issuance) and delivery of the Securities. The Agreements constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. Set forth on Schedule 4.3 hereto is (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights. Except as set forth on Schedule 4.3, no Person is entitled
to pre-emptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as set forth on Schedule 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company is or may be
obligated to issue any equity securities of any kind, or to transfer any equity
securities of any kind. Except as set forth on Schedule 4.3, the Company does
not know of any voting agreements, buy-sell agreements, option or right of first
purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities held by them. Except
as set forth on Schedule 4.3, the Company has not granted any Person the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person, except that the Company has completed the acquisition of all of the
shares of a company known as Internet Broadcasting Company, Inc. ("IBC") and has
issued shares of stock pursuant to the terms of the IBC transaction which have
registration rights in accordance with the terms of the IBC agreements.
4.4 Valid Issuance. The Company has reserved a sufficient number of
shares of Common Stock for issuance pursuant to this Agreement and upon exercise
of the Warrants. The Company will take such steps as may be necessary to reserve
sufficient shares for issuance pursuant to Section 7 below when such issuance is
determinable. The Shares and Warrants are duly authorized, and such Securities,
along with the Warrant Shares when issued in accordance herewith and with the
terms of the Warrants, will be duly authorized, validly issued, fully paid,
non-assessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
4.5 Consents. The execution, delivery and performance by the Company
of the Agreements and the offer, issuance and sale of the Securities require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws and the requirements of the Nasdaq Stock
Market, which the Company undertakes to file within the applicable time periods.
4.6 Delivery of SEC Filings; Business. The Company has provided the
Investor with copies of the Company's most recent Annual Report on Form 10-KSB
for the fiscal year ended March 31, 1999, and all other reports filed by the
Company pursuant to the 1934 Act since the filing of the Annual Report on Form
10-KSB (collectively, the "SEC Filings"). The Company and its subsidiaries are
engaged only in the business described in the SEC Filings and the SEC Filings
contain a complete and accurate description of the business of the Company and
its subsidiaries as presently conducted. The Company has provided the Investor
with a copy of the report issued by Dominick & Dominick, as well as the Private
Placement Memorandum in connection with this transaction.
4.7 Use of Proceeds. The proceeds of the sale of the Securities
hereunder shall be used by the Company for working capital and general corporate
purposes.
4.8 No Material Adverse Change. Since the filing of the Company's
most recent Annual Report on Form 10-KSB or as otherwise identified and
described in subsequent reports filed by the Company pursuant to the 1934 Act,
there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the Company's most recent Quarterly Report
on Form 10-QSB, except changes in the ordinary course of business which have not
had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company except
quarterly dividends paid on Preferred Stock of the Company as described
generally in the Company's Form 10-KSB;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or any of its
subsidiaries;
(iv) any waiver by the Company or any of its subsidiaries of a
valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results or
business of the Company and its subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(vi) any material change or amendment to a material contract or
arrangement by which the Company or any of their subsidiaries or any of its
assets or properties is bound or subject;
(vii) any labor difficulties or labor union organizing
activities with respect to employees of the Company or any of its subsidiaries;
(viii) any transaction entered into by the Company or any of its
subsidiaries other than in the ordinary course of business; or
(ix) any other event or condition of any character that might
have a Material Adverse Effect.
4.9 SEC Filings; Material Contracts.
(a) As of its filing date, each report filed by the Company with
the SEC pursuant to the 1934 Act, complied as to form in all material respects
with the requirements of the 1934 Act and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each registration statement and any amendment thereto filed
by the Company pursuant to the 1933 Act, as of the date such statement or
amendment became effective, complied as to form in all material respects with
the 1933 Act and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and each prospectus filed pursuant to
Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of
any sale of securities pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) Except as set forth on Schedule 4.3 hereto, there are no
agreements or instruments currently in force and effect that constitute a
warrant, option, convertible security or other right, agreement or arrangement
of any character under which the Company is or may be obligated to issue any
material amounts of any equity security of any kind, or to transfer any material
amounts of any equity security of any kind.
4.10 Form S-3 Eligibility. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the 1933 Act.
4.11 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, orconstitute a default under (i) the
Company's Certificate of Incorporation as in effect on the date hereof
("Articles") or Bylaws as in effect on the date hereof, or (ii) except where it
would not have a Material Adverse Effect, (a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company or any of
their properties, or (b) any agreement or instrument to which the Company or any
such subsidiary is a party or by which the Company or any such subsidiary is
bound or to which any of the properties of the Company or any such subsidiary is
subject.
4.12 Tax Matters. The Company and its subsidiaries have correctly
and timely prepared and filed all tax returns required to have been filed by it
with all appropriate governmental agencies and timely paid all taxes owed by
them. The charges, accruals and reserves on the books of the Company and its
subsidiaries in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments of the Company
or any subsidiary nor, to the knowledge of the Company, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except such as which
are not material. All material taxes and other assessments and levies that the
Company or any subsidiary is required to withhold or to collect for payment have
been duly withheld and collected and paid to the proper governmental entity or
third party. There are no tax liens or claims pending or threatened against the
Company or any subsidiary or any of their respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements between the
Company or any subsidiary and any other corporation or entity. The Company has
the right, at its discretion, to file for an extension of time to file any tax
returns required to be filed by the Company.
4.13 Title to Properties. Except as disclosed in the SEC Filings,
the Company and its subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.14 Certificates, Authorities and Permits. The Company and its
subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
4.15 No Labor Disputes. No labor dispute with the employees of the
Company or any subsidiary exists or, to the knowledge of the Company, is
imminent.
4.16 Intellectual Property. The Company and its subsidiaries own or
possess adequate trademarks and trade names and have all other rights to
inventions, know-how, patents, copyrights, trademarks, trade names, confidential
information and other intellectual property (collectively, "Intellectual
Property Rights"), free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims (except the security interest of
Silicon Valley Bank granted by the Company in connection with the working
capital credit line extended to the Company by Silicon Valley Bank), necessary
to conduct the business now operated by them, or presently employed by them, and
presently contemplated to be operated by them, and have not received any notice
of infringement of or conflict with asserted rights of others with respect to
any Intellectual Property Rights. Schedule 4.16 sets forth a list by serial
number and title of the patents and/or patent applications owned or possessed by
the Company or any of its subsidiaries. No proprietary technology of any Person
was used in the design or development by the Company of (or otherwise with
respect to) any of the Intellectual Property Rights, which technology was not
properly acquired by the Company from such Person.
4.17 Environmental Matters. Neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.
4.18 Litigation. Except as disclosed in the SEC Filings, there are
no pending actions, suits or proceedings against or affecting the Company, any
of its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.19 Financial Statements. The financial statements included in each
SEC Filing present fairly and accurately the consolidated financial position of
the Company and its subsidiaries as of the dates shown and their consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. Except as set forth on Schedule 4.19
or in the financial statements of the Company included in the SEC Filings filed
prior to the date hereof, the Company has no liabilities, contingent or
otherwise, except those which individually or in the aggregate are not material
to the financial condition or operating results of the Company.
4.20 Insurance Coverage. The Company and its subsidiaries maintain
in full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted, and properties owned or
leased, by the Company and its subsidiaries, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.21 Compliance with Nasdaq Continued Listing Requirements. The
shares of Common Stock are duly listed for trading on the Nasdaq SmallCap
Market. The Company is in compliance with all applicable Nasdaq SmallCap Market
continued listing requirements. There are no proceedings pending or to the
Company's knowledge threatened against the Company relating to the continued
listing of the Company's Common Stock on the Nasdaq SmallCap Market and the
Company has not received any notice of, nor to the knowledge of the Company is
there any basis for, the delisting of the Common Stock from the Nasdaq SmallCap
Market.
4.22 Acknowledgment of Dilution. The number of shares of Common
Stock issuable pursuant to this Agreement may increase substantially. The
Company's executive officers and directors have studied and fully understand the
nature of the transactions being contemplated hereunder and recognize that they
have a potential dilutive effect.
4.23 Brokers and Finders. The Investor shall have no liability or
responsibility for the payment of any commission or finder's fee to any third
party in connection with or resulting from this agreement or the transactions
contemplated by this Agreement.
4.24 No Directed Selling Efforts or General Solicitation. Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.25 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would adversely affect reliance by
the Company on Section 4(2) for the exemption from registration for the
transactions contemplated hereby, or would require registration of the
Securities under the 1933 Act, or would require a Shareholder vote under
applicable Nasdaq rules.
4.26 Disclosures. No representation or warranty made under any
Section hereof and no information furnished by the Company pursuant hereto, or
in any other document, certificate or statement furnished by the Company to the
Investor or any authorized representative of the Investor, pursuant to the
Agreements or in connection therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the respective
statements contained herein or therein, in light of the circumstances under
which the statements were made, not misleading.
5. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly existing
corporation or limited liability company and has all requisite corporate or
limited liability company power and authority to invest in the Securities
pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by the
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 Purchase Entirely for Own Account. The Securities to be received
by the Investor hereunder will be acquired for the Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of securities laws, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
5.4 Investment Experience. The Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Securities and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an opportunity
to receive documents related to the Company and to ask questions of and receive
answers from the Company regarding the Company, its business and the terms and
conditions of the offering of the Securities. Neither such inquiries nor any
other due diligence investigation conducted by the Investor shall modify, amend
or affect the Investor's right to rely on the Company's representations and
warranties contained in this Agreement or made pursuant to this Agreement. The
Investor acknowledges receipt of the Company's Private Placement Memorandum
dated December 1999.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for resale
pursuant to the Registration Rights Agreement, or until resale under Rule 144(k)
is available, certificates evidencing the Securities may bear one or all of the
following legends or legends substantially similar thereto:
"These securities have not been registered under the Securities Act
of 1933, as amended (the "Act"), and may not be offered, sold,
pledged, hypothecated, assigned or transferred except (i) pursuant
to a registration statement under the Act which has become effective
and is current with respect to these securities, or (ii) pursuant to
a specific exemption from registration under the Act but only upon a
holder hereof first having obtained the written opinion of counsel
to the Corporation, or other counsel reasonably acceptable to the
Corporation, that the proposed disposition is consistent with all
applicable provisions of the Act as well as any applicable "blue
sky" or similar securities laws, or (iii) pursuant to Rule 144,
provided the Investor shall provide reasonable assurances that such
Rule is available."
If required by the authorities of any state in connection with the
issuance of sale of the Securities, the certificates shall bear the legend
required by such state authority.
Upon registration for resale pursuant to the Registration Rights
Agreement, or upon Rule 144(k) becoming available, the Company shall promptly
cause certificates evidencing the Shares previously issued hereunder to be
replaced with certificates which do not bear such restrictive legends.
5.8 Accredited Investor. The Investor is an "accredited investor" as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. The Investor represents and warrants to
the Company that it has made no commitment for payment of any commissions or
finders' fees to any third party in connection with the transactions
contemplated by this Agreement.
6. Registration Rights Agreement. The parties acknowledge and agree
that part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
7.1 Subsequent Sale at Lower Price.
(a) Required Adjustments. Subject to the exclusions contained in
Section 7.1(e) below, if during the period ending on the later of thirty (30)
months following the effective date of the Registration Statement referred to in
Section 7.2 below and thirty three (33) months following the date of this
agreement (the "MFN Period"), the Company issues or sells any shares of its
Common Stock at a Per Share Selling Price (as defined below) lower than the
Purchase Price per share set forth in Section 2 hereof, the Purchase Price per
share of the Shares sold to the Investor hereunder shall be adjusted downward to
equal such lower Per Share Selling Price and Investor shall be entitled to
receive the additional shares as provided by Section 7.1(c); provided, however,
that in the event the Investor then owns less than 51% of the Shares acquired by
it hereunder, the Investor shall be entitled to additional shares only with
respect to the number of Shares then owned by the Investor as provided in
Section 7.1(c). The Company shall give to the Investor written notice of any
such sale within 24 hours of the closing of any such issuance or sale. For so
long as the Investor owns 51% or more of the Shares originally acquired by the
Investor hereunder, the Investor shall be entitled to the full benefit of the
Purchase Price adjustment required by this Section 7.1.
(b) Definitions.
(i) For the purposes of this Section 7.1, the term "Per
Share Selling Price" as used in this Section 7.1 shall include the amount
actually paid by third parties for each share of Common Stock. In the event a
fee in excess of 6% is paid by the Company in connection with such transaction,
any such excess amount shall be deducted from the selling price pro rata to all
shares sold in the transaction to arrive at the Per Share Selling Price. A sale
in a capital raising transaction of shares of Common Stock shall include the
sale or issuance of rights, options, warrants or convertible securities under
which the Company is or may become obligated to issue shares of Common Stock,
and in such circumstances the Per Share Selling Price of the Common Stock
covered thereby shall also include the exercise or conversion price thereof (in
addition to the consideration received by the Company upon such sale or issuance
less the excess fee amount as provided above). In case of any such security
issued within the MFN Period in a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised or might have been converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction, each within the MFN Period plus eighteen (18) months. If shares
are issued for a consideration other than cash, the Per Share Selling Price
shall be the fair value of such consideration as determined in good faith by
independent certified public accountants mutually acceptable to the Company and
the Investor.
(ii) The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (x) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock (but
excluding standard stock split anti-dilution provisions), or (b) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean a transaction in
which the Company issues or sells any equity securities in a capital raising
transaction or series of related transactions (the "New Offering") which grants
to the investor (the "New Investor") the right to receive additional shares
based upon future equity raising transactions of the Company on terms more
favorable than those granted to the New Investor in the New Offering.
(iv) The term "MFN Period" shall have the meaning set forth
in Section 7.1(a), above.
(c) Adjustment Mechanism. If an adjustment of the Purchase Price
is required pursuant to Section 7.1(a), the Company shall deliver to the
Investor within eight calendar days of the closing of the transaction giving
rise to the adjustment ("Delivery Date") the Investor's pro-rata share of (A)
such number of additional shares of Common Stock equal to (i) the aggregate
Purchase Price paid by the Investor divided by the adjusted per share purchase
price as required under Section 7.1(a), minus (ii) the total number of shares of
Common Stock previously delivered to that Investor hereunder and (B) additional
Warrants to purchase shares of Common Stock equal to 35% of the number of shares
of Common Stock to which the Investor is entitled by reason of the adjustment of
the Purchase Price; provided however, that the Company shall effect such
adjustment in cash, in whole or in part, to the extent required by Section
7.1(d). In the event the Company fails to deliver the additional shares (or
cash, as the case may be) by the Delivery Date, the Company shall be liable to
the Investor for a penalty equal to 2% of the aggregate Purchase Price
adjustment per month (in each instance to the Investor pro rata in accordance
with its participation in this offering), payable in Common Stock or cash, at
the Investor's election. The additional shares referred to herein shall be
considered "Shares" for purposes of this Agreement.
(d) Limitation on Number of Shares.
(i) If by way of any adjustment required by this Section
7.1, thewould receive a number of shares of Common Stock such that the total
number of such shares held by the Investor as of the date of such adjustment
would be greater than 9.90% but less than 13.0% of the total outstanding Common
Stock of the Company, then the Company shall not effect the adjustment required
by this Section to the extent necessary to avoid causing the aforesaid
limitation to be exceeded until 120 days following the date such adjustment
would have otherwise been made.
(ii) If by way of any adjustment required by this Section
7.1, the Investor would receive a number of shares of Common Stock such that the
total number of such shares held by the Investor as of the date of such
adjustment would equal or exceed 13.0% of the total outstanding Common Stock of
the Company, then the Company shall not effect the adjustment required by this
Section to the extent necessary to avoid causing the aforesaid limitation to be
exceeded until 180 days following the date such adjustment would have otherwise
been made.
(iii) In no event shall the Company issue to the Investor
additional shares pursuant to an adjustment required by this Section 7.1 such
that the total number of shares issued to the Investor (when added to the
Warrant Shares) would exceed 19.9% of the Company's issued and outstanding
shares of Common Stock on the date hereof. Instead, the Company shall redeem
such excess shares at 110% of the Per Share Purchase Price, as adjusted. Only
shares acquired pursuant to this Agreement will be included in determining
whether the limitations would be exceeded for purposes of this Section
7.1(d)(iii).
(iv) In no event will the Company be required to issue
shares in violation of applicable Securities and Exchange Commission and Nasdaq
rules and regulations requiring shareholder approval. Instead, the provisions of
the foregoing Section 7.1(d)(iii) shall apply.
(e) Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of Section 7.1 shall be applied
in a fair, equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof.
(f) Exclusions. Section 7.1(a) shall not apply to:
(i) sales of shares of Common Stock by the Company pursuant
to the provisions of any shareholder-approved option or similar plan heretofore
or hereafter adopted by the Company; or
(ii) sales of up to $1,000,000 of shares of Common Stock by
the Company upon the exercise of options or warrants issued subsequent to the
date hereof in payment for professional services rendered to the Company; or
(iii) except as limited in (iv) below, sales of shares of
Common Stock by the Company upon conversion or exercise of any convertible
securities, options or warrants outstanding prior to the date hereof
(iv) with respect to options of directors and other
affiliates of the Company which are currently outstanding and priced at $3.80
per share or below, the exclusion shall relate only to the first 1,000,000 of
such options exercised after the date hereof and with respect to any such
options in excess of 1,000,000, Section 7.1(a) shall apply and the purchase
price shall be adjusted by a fraction, the numerator of which is the then
outstanding shares of Common Stock times the then per share Market Price of the
Common Stock plus the number of all such options exercised times the exercise
price of such options and the denominator being the number of shares of Common
Stock then outstanding plus the number of all such options exercised times the
then per share Market Price of the Common Stock; provided, however, that if
there has been an agreement executed by the Company and a third party for the
acquisition of the Company by that third party, and the Market Price of the
Common Stock is greater than 130% of the per share Purchase Price paid by the
Investor hereunder, and the Shares are then the subject of an effective
registration statement, then there shall be no such limitations on the exercise
of such options and the provisions of Section 7.1(a) shall not apply to such
exercises.
7.2 Limitation on Transactions.
(a) Until the date of effectiveness of the Registration
Statement covering the Shares as contemplated by the Registration Rights
Agreement, without the prior written consent of the Investor (which consent may
be withheld in the Investor's discretion), the Company shall not issue or sell
or agree to issue or sell for cash in a non-public offering any equity
securities in a capital raising transaction.
(b) Until the expiration of the MFN Period, without the prior
written consent of the Investor (which consent may be withheld in the Investor's
discretion), the Company shall not (i) issue or sell or agree to issue or sell
for cash in a non-public offering any securities in a MFN Transaction; or (ii)
issue or sell, or agree to issue or sell, for cash in a non-public offering any
securities in a Variable Rate Transaction, provided, however, that the foregoing
limitation on Variable Rate Transactions shall not apply to any such securities
with an aggregate face value outstanding at any time equal to or less than seven
percent (7%) of the Company's primary market capitalization.
(c) Subject to any consent or approval rights of the Investor
hereunder, in the event the Company contemplates a non-public offering of its
equity or debt securities within six months of the date hereof, the Company
agrees that, upon the request of the Investor, the Company shall first disclose
the terms and conditions and other relevant facts of such proposed transaction
to Nasdaq and obtain from Nasdaq its assurance that such transaction will not be
integrated with the offering which is the subject of this Agreement for purposes
of the Nasdaq rules requiring shareholder approval of the issuance of 20% or
more of an issuer's outstanding common stock. In the event the Company fails to
seek or obtain such assurances, then, at the election of the Investor, the
Company shall redeem the Common Stock purchased by the Investor at 120% of the
original per share Purchase Price paid by the Investor for all Common Stock then
held by such the Investor.
7.3 Right of the Investor to Participate in Future Transactions.
Until the expiration of the MFN Period, the Investor will have a right to
participate in future non-public capital raising transaction on the terms and
conditions set forth in this Section 7.3. During such period, the Company shall
give ten (10) business days advance written notice to the Investor prior to any
non-public offer or sale of any of the Company's equity securities or any
securities convertible into or exchangeable or exercisable for such securities
by providing to the Investor a comprehensive term sheet containing all
significant business terms of such a proposed transaction. The Investor shall
have the right (pro rata in accordance with the Investor's participation in this
offering, or together with other investors selected by the Investor and
reasonably acceptable to the Company) to purchase all (but not less than all) of
such securities which are the subject of such a proposed transaction for the
same consideration and on the same terms and conditions as contemplated for such
third-party sale. The Investor's rights hereunder must be exercised in writing
by the Investor within five (5) business days following receipt of the notice
from the Company. If, subsequent to the Company giving notice to the Investor
hereunder but prior to the Investor exercising its right to participate (or the
expiration of the seven-day period without response from the Investor), the
terms and conditions of the proposed third-party sale are changed from that
disclosed in the comprehensive term sheet provided to the Investor, the Company
shall be required to provide a new notice to the Investor hereunder and the
Investor shall have the right, which must be exercised within five (5) business
days of such new notice, to exercise its rights to purchase the securities on
such changed terms and conditions as provided hereunder. In the event the
Investor does not exercise its rights hereunder, or affirmatively decline to
engage in the proposed transaction with the Company, then the Company may
proceed with such proposed transaction on the same terms and conditions as
noticed to the Investor (assuming the Investor has consented to the transaction,
if required, pursuant to Section 7.2 of this Agreement). The rights and
obligations of this Section 7.3 shall in no way diminish the other rights of the
Investor pursuant to this Section 7.
7.4 Opinion of Counsel. On or prior to the Closing Date, the Company
will deliver to the Investor the opinion of legal counsel to the Company, in
form and substance reasonably acceptable to the Investor, addressing those legal
matters set forth in Schedule 7.4 hereto.
7.5 Reservation of Common Stock Pursuant to Section 7.1 and Exercise
of Warrants. The Company hereby agrees, at all times with respect to shares
issuable upon exercise of the Warrants, and at all appropriate times with
respect to shares issuable pursuant to Section 7.1, to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the additional issuance(s) of Common Stock pursuant
to Section 7.1 and exercise of the Warrants, such number of shares of Common
Stock as shall from time to time equal the number of shares sufficient to permit
the issuance, if any, required pursuant to Section 7.1 plus the number of shares
of Common Stock as shall be necessary to permit the exercise of the Warrants in
accordance with the terms of the Warrants.
7.6 Reports. The Company will furnish to the Investor the following
reports, each of which shall be provided to the Investor by air mail:
(a) Quarterly Reports. As soon as available and in any event
within 45 days after the end of each fiscal quarter of the Company, the
Company's quarterly report on Form 10-Q or 10-QSB or, in the absence of such
report, consolidated balance sheets of the Company and its subsidiaries as at
the end of such period and the related consolidated statements of operations,
stockholders' equity and cash flows for such period and for the portion of the
Company's fiscal year ended on the last day of such quarter, all in reasonable
detail and certified by a principal financial officer of the Company to have
been prepared in accordance with generally accepted accounting principles,
subject to year-end and audit adjustments.
(b) Annual Reports. As soon as available and in any event within
90 days after the end of each fiscal year of the Company, the Company's Form
10-K or, in the absence of a Form 10-K or Form 10-KSB, consolidated balance
sheets of the Company and its subsidiaries as at the end of such year and the
related consolidated statements of earnings, stockholders' equity and cash flows
for such year, all in reasonable detail and accompanied by the report on such
consolidated financial statements of an independent certified public accountant
selected by the Company and reasonably satisfactory to the Investor.
(c) Securities Filings. As promptly as practicable and in any
event within five days after the same are issued or filed, copies of (i) all
notices, proxy statements, financial statements, reports and documents as the
Company or any subsidiary shall send or make available generally to its
stockholders or to financial analysts, and (ii) all periodic and special
reports, documents and registration statements (other than on Form S-8) which
the Company or any subsidiary furnishes or files, or any officer or director of
the Company or any of its subsidiaries (in such person's capacity as such)
furnishes or files with the SEC.
(d) Other Information. Such other information relating to the
Company or its subsidiaries as from time to time may reasonably be requested by
the Investor provided the Company produces such information in its ordinary
course of business, and further provided that the Company, solely in its own
discretion, determines that such information is not confidential in nature and
disclosure to the Investor would not be harmful to the Company.
7.7 Press Releases. Any press release or other publicity concerning
this Agreement or the transactions contemplated by this Agreement shall be
submitted to the Investor for comment at least two (2) business days prior to
issuance, unless the release is required to be issued within a shorter period of
time by law or pursuant to the rules of a national securities exchange. The
Company shall issue a press release concerning the fact and material terms of
this Agreement within one business day of the Closing.
7.8 No Conflicting Agreements. The Company will not, and will not
permit its subsidiaries to, take any action, enter into any agreement or make
any commitment that would conflict or interfere in any material respect with the
obligations to the Investor under the Agreements.
7.9 Insurance. For so long as the Investor beneficially owns any of
the Securities, the Company shall, and shall cause each subsidiary to, have in
full force and effect (a) insurance reasonably believed to be adequate on all
assets and activities of a type customarily insured, covering property damage
and loss of income by fire or other casualty, and (b) insurance reasonably
believed to be adequate protection against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Company
and the subsidiaries to insure.
7.10 Compliance with Laws. For so long as the Investor beneficially
owns any of the Securities, the Company will use reasonable efforts, and will
cause each of its subsidiaries to use reasonable efforts, to comply with all
applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance (in one instance or in the
aggregate) would not have a Material Adverse Effect.
7.11 Listing of Underlying Shares and Related Matters. The Company
hereby agrees, promptly following the Closing of the transactions contemplated
by this Agreement, to take such action to cause the Shares and the Warrant
Shares to be listed on the Nasdaq SmallCap Market as promptly as possible but no
later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Common Stock underlying the Warrants, and will take such other action as is
necessary to cause such Common Stock to be so listed. The Company will take all
action necessary to continue the listing and trading of its Common Stock on the
Nasdaq SmallCap Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
exchange, as applicable, to ensure the continued eligibility for trading of the
Shares and the Warrant Shares thereon.
In the event it is determined that the issuance of the Shares would
or does constitute an issuance which, pursuant to the rules or regulations of
the Nasdaq SmallCap Market (or any other national securities exchange upon which
the Common Stock is or becomes traded), renders the Shares ineligible for
inclusion on the Nasdaq (or any other national securities exchange upon which
the Common Stock is then traded), then the Company shall promptly redeem such
number of Shares held by the Investor (pro rata in accordance with its
participation in this offering) which are so ineligible at a per share
redemption price equal to 110% of the per share Purchase Price for those Shares
as set forth in Section 2 hereof. It is understood and agreed that any
redemption by the Company will be subject to the requirements of Delaware law.
7.12 Corporate Existence. So long as the Investor beneficially own
any of the Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (a) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith,
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to fulfill
its obligations hereunder and effect the exercise in full of all Warrants
outstanding as of the date of such transaction; (b) has no legal, contractual or
other restrictions on its ability to perform the obligations of the Company
hereunder and under the agreements and instruments entered into in connection
herewith; and (c) is a publicly traded corporation whose common stock and the
shares of capital stock issuable upon exercise of the Warrants are (or would be
upon issuance thereof) listed for trading on the Nasdaq SmallCap Market, New
York Stock Exchange or American Stock Exchange or, if it is not such a public
company, then the Company shall redeem any of the Shares and Warrant Shares then
held by the Investor, at the election of the Investor, at a per share redemption
price equal to 120% of the original per share Purchase Price.
7.13 Remedies. The Investor shall be entitled to a decree of
specific performance to enforce its rights hereunder. The Company shall
indemnify and hold harmless the Investor from and against any loss, liability,
costs, expenses or fees (including reasonable attorneys fees) arising out of (i)
the entry into and performance of the Agreements by the Investor, (ii) any
breach by the Company of any representation, warranty, covenant or agreement in
any of the Agreements, and/or (iii) the enforcement of this Section
8. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of three years from the date of this
Agreement; provided, however, that the provisions contained in Section 7 hereof
shall survive in accordance therewith.
9. Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law or choice of law. The Company and the Investor hereby agree
that all actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated only in the Supreme Court of
the State of New York or the United States District Court for the Southern
District of New York located in New York County, New York. To the extent
permitted by applicable law, the Company and the Investor consent to the
jurisdiction and venue of the foregoing courts and consent that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
such party at its address set forth in this Agreement (and service so made shall
be deemed complete five (5) days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said courts.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the other party hereto, except
that without the prior written consent of the Company, but after notice duly
given, the Investor may assign its rights and delegate its duties hereunder in
whole or in part to an Affiliate, or to a third party acquiring some portion or
all of its Shares in a private transaction and without the prior written consent
of the Investor, but after notice duly given and in compliance with this
Agreement, the Company may assign its rights and delegate its duties hereunder
to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company that results
directly or indirectly in an aggregate change in the ownership or control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company's assets. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
10.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of the correct answer
back, or (iii) an internationally recognized overnight air courier, addressed to
the party to be notified at the address as follows, or at such other address as
such party may designate by ten days' advance written notice to the other party:
If to the Company:
insci-statements.com, corp.
Two Westborough Business Park
Westborough, MA 01581
Attn: Roger Kuhn, Chief Financial Officer
508/870-4000
Facsimile: 508/870-5585
If to the Investor, to the address set forth on the signature
page hereto.
10.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay to Tail Wind,
Inc. the sum of .75% of the gross proceeds of this offering by the Company as
and for legal and due diligence expenses in connection herewith and such amount
shall be paid at Closing from gross proceeds of the offering.
10.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.
10.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
10.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, and the Registration Rights Agreement constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
10.9 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
The Company: insci-statements.com, corp.
By:_________________________
Name:
Title:
<PAGE>
The Investor: The Tail Wind Fund, Ltd.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Aggregate Purchase Price: $2,400,000.12
Number of Shares of Common Stock: 802,676
Number of Warrants: 280,936
Effective per share Purchase Price of Shares: $2.99
Exercise price of Warrants: $4.30
Address for Notice:
The Tail Wind Fund Ltd.
MeesPierson (Bahamas) Ltd.
Attn: Jason McCarroll
Windermere House, 404 East Bay Street
P.O. Box SS 5539, Nassau, Bahamas
Tel: 242/393-8777 Fax: 242/393-9021
with a copy to:
David Crook Esq.
The Tail Wind Fund Ltd.
c/o EASI
4th Floor, No. 1 Regent Street
London, SW1Y 4NS UK
Tel: 44-171-468-7660 Fax: 44-171-468-7657
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Tel: 202/508-6046 Fax: 202/508-6200
<PAGE>
Exhibit 4.02
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of this 17th day of December, 1999 by and between
insci-statements.com, corp., a Delaware corporation (the "Company"), and the
"Investors" named in that Purchase Agreement of even date herewith by and
between the Company and the Investors (the "Purchase Agreement").
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Additional Registrable Securities" shall mean the shares of Common
Stock, if any, issued to the Investors pursuant to Section 7.1 of the Purchase
Agreement and, the shares of Common Stock ("Warrant Shares") issuable pursuant
to the additional Warrants, if any, issued to the Investors pursuant to Section
7.1 of the Purchase Agreement.
"Common Stock" shall mean the Company's Common Stock, par value
$0.01 per share.
"Investors" shall mean the purchasers identified in the Purchase
Agreement and any affiliate or permitted transferee of any Investor who is a
subsequent holder of any Warrants, Registrable Securities or Additional
Registrable Securities.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities or
Additional Registrable Securities covered by such Registration Statement and by
all other amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a registration
made by preparing and filing a registration statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such registration statement or document.
"Registrable Securities" shall mean the shares of Common Stock and
other securities issued and issuable to the Investors pursuant to the Purchase
Agreement (other than Warrant Shares and additional shares of Common Stock
issuable pursuant to Section 7.1 of the Purchase Agreement) and issuable upon
the exercise of the Warrants, and any other securities issued or issuable with
respect to or in exchange for Registrable Securities.
"Registration Statement" shall mean any registration statement filed
under the 1933 Act of the Company that covers the resale of any of the
Registrable Securities or Additional Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Warrants" mean the warrants to purchase shares of Common Stock
issued to the Investors pursuant to the Purchase Agreement, the form of which is
attached to the Purchase Agreement as Exhibit A.
2. Registration.
(a) Registration Statements.
(i) Registrable Securities. Promptly following the closing of
the purchase and sale of Common Stock and Warrants contemplated by the Purchase
Agreement (the "Closing Date") (but no later than thirty (30) days after the
Closing Date), the Company shall prepare and file with the SEC one Registration
Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on
such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the Investors'
consent, which shall not be unreasonably withheld) covering the resale of the
Registrable Securities in an amount equal to the number of shares of Common
Stock issued to the Investors on the Closing Date plus the number of shares of
Common Stock necessary to permit the exercise in full of the Warrants. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the Rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities. No securities other than the Registrable Securities shall be
included in the Registration Statement without the consent of each Investor,
which with respect to securities subject to currently outstanding piggyback
registration rights, shall not be unreasonably withheld. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Investors and their counsel prior to its filing or other
submission.
(ii) Additional Registrable Securities. Upon the written demand
of any Investor and following the issuance of any additional shares of Common
Stock to such Investor pursuant to Section 7.1, of the Purchase Agreement, the
Company shall prepare and file with the SEC one Registration Statement on Form
S-3 (or, if Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of the Additional Registrable Securities, subject to the Investor's consent,
which shall not be unreasonably withheld) covering the resale of the Additional
Registrable Securities in an amount equal to the number of shares of Common
Stock issued to such Investor. Such Registration Statement also shall cover, to
the extent allowable under the 1933 Act and the Rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Registrable Securities. No securities other than the
Registrable Securities and the Additional Registrable Securities shall be
included in the Registration Statement without the consent of the Investor,
which with respect to securities subject to currently outstanding piggyback
registration rights, shall not be unreasonably withheld. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Investor and its counsel prior to its filing or other
submission.
(b) Expenses. The Company will pay all expenses associated with
each registration, including the Investors' reasonable expenses in connection
with the registration but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals.
(c) Effectiveness.
(i) The Company shall use its best efforts to have each
Registration Statement declared effective as soon as practicable. If (A) the
Registration Statement covering Registrable Securities is not declared effective
by the SEC within three (3) months following the Closing Date, or the
Registration Statement covering Additional Registrable Securities is not
declared effective by the SEC within three (3) months following the demand of an
Investor relating to the Additional Registrable Securities covered thereby, or
with respect to either a Registration Statement which is subject to full review
(other than an exclusively "plain English review," for which an additional
fifteen (15) days shall be given) by the SEC staff, within four (4) months
following the Closing Date or demand, as the case may be (each, a "Registration
Date"), (B) after a Registration Statement has been declared effective by the
SEC, sales cannot be made pursuant to such Registration Statement for any reason
(including without limitation by reason of a stop order, or the Company's
failure to update the Registration Statement) but except as excused pursuant to
subparagraph (ii) below, or (C) the Common Stock generally or the Registrable
Securities specifically are not listed or included for quotation on the Nasdaq
National Market System, the Nasdaq Small Cap Market, the New York Stock Exchange
or the American Stock Exchange, then the Company will make pro-rata payments to
each Investor, in an amount equal to 2% of the aggregate amount paid by such
Investor on the Closing Date to the Company for shares of Common Stock still
held by such Investor for any month or pro rata for any portion thereof
following the Registration Date during which any of the events described in (A)
or (B) or (C) above occurs and is continuing (the "Blackout Period"), provided,
however, that in the case of the events described in (A) or (B) above with
respect only to the Additional Registrable Securities, such penalty shall equal
2% of the aggregate market value of such Additional Registrable Securities for
the duration of the Blackout Period. Each such payment shall be due and payable
within five (5) days of the end of each month (or ending portion thereof) of the
Blackout Period. In the event the Company fails to make a payment required
hereunder within thirty (30) days of its due date, the rate of such penalty
shall be increased to 3% for the remainder of the Blackout Period. Such payments
shall be in partial compensation to the Investors, and shall not constitute the
Investors' exclusive remedy for such events. The Blackout Period shall terminate
upon (x) the effectiveness of the applicable Registration Statement in the case
of (A) and (B) above; (y) listing or inclusion of the Common Stock on the Nasdaq
National Market System, the Nasdaq Small Cap Market, the New York Stock Exchange
or the American Stock Exchange in the case of (C) above; and (z) in the case of
the events described in (A) or (B) above, the earlier termination of the
Registration Period (as defined in Section 3(a) below). The amounts payable
pursuant to this paragraph shall be payable, at the option of the Investors, in
lawful money of the United States or in shares of Common Stock at the Market
Price (as defined in the Purchase Agreement), and amounts payable shall be paid
monthly on the last day of each month following the commencement of the Blackout
Period until the termination of the Blackout Period. Amounts payable hereunder
shall cease when an Investor no longer holds Warrants or Registrable Securities,
or Additional Registrable Securities, as applicable.
(ii) For not more than ten (10) consecutive trading days or for
a total of not more than twenty (20) trading days in any twelve (12) month
period, the Company may delay the disclosure of material non-public information
concerning the Company, by terminating or suspending effectiveness of any
registration contemplated by this Section containing such information, the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company (an "Allowed Delay"); provided,
that the Company shall promptly (a) notify the Investors in writing of the
existence of (but in no event, without the prior written consent of an Investor,
shall the Company disclose to such Investor any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay, and
(b) advise the Investors in writing to cease all sales under the Registration
Statement until the end of the Allowed Delay. The duration of the Restricted
Period provided for in the Purchase Agreement will be extended by the number of
days of any and all Allowed Delays.
(d) Underwritten Offering. If any offering by the Investors
pursuant to a Registration Statement pursuant to Section 2(a) hereof involves a
firm commitment underwritten offering, the Company shall have the right to
select an investment banker and manager to administer the offering, which
investment banker or manager shall be reasonably satisfactory to the Investors.
3. Company Obligations. The Company will use its best efforts to effect
the registration of the Registrable Securities and Additional Registrable
Securities in accordance with the terms hereof, and pursuant thereto the Company
will, as expeditiously as possible:
(a) use its best efforts to cause such Registration Statement to
become effective and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities
or Additional Registrable Securities, as the case may be, covered by such
Registration Statement, as amended from time to time, have been sold, and (ii)
the date on which all Registrable Securities or Additional Registrable
Securities, as the case may be, may be sold pursuant to Rule 144(k) (the
"Registration Period");
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the 1933 Act and
the 1934 Act with respect to the distribution of all Registrable Securities and
Additional Registrable Securities; provided that, at least five (5) business
days prior to the filing of a Registration Statement or Prospectus, or any
amendments or supplements thereto, the Company will furnish to the Investors
copies of all documents proposed to be filed, which documents will be subject to
the comments of the Investors, which must be received within such five (5)
business day period;
(c) permit of counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer than
seven (7) days prior to their filing with the SEC and not file any document to
which such counsel reasonably objects;
(d) furnish to the Investors and their legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of any Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and each amendment
or supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as each Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities and
Additional Registrable Securities owned by such Investor;
(e) in the event the Company selects an underwriter for the
offering, the Company shall enter into and perform its reasonable obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter of such offering;
(f) if required by the underwriter, or if any Investor is
described in the Registration Statement as an underwriter, the Company shall
furnish, on the effective date of the Registration Statement, on the date that
Registrable Securities or Additional Registrable Securities, as applicable, are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement and at periodic intervals thereafter from time to time on
request, (i) an opinion, dated as of such date, from independent legal counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriter and the Investors and (ii) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriter
and the Investors;
(g) make effort to prevent the issuance of any stop order or
other suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
(h) furnish to each Investor at least five copies of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules by courier pursuant to the notice
requirements of Section 10.4 of the Purchase Agreement;
(i) prior to any public offering of Registrable Securities or
Additional Registrable Securities, use its reasonable best efforts to register
or qualify or cooperate with the Investors and their counsel in connection with
the registration or qualification of such Registrable Securities or Additional
Registrable Securities, as applicable, for offer and sale under the securities
or blue sky laws of the United States jurisdictions requested by the Investor
and do any and all other reasonable acts or things necessary or advisable to
enable the distribution in such jurisdictions of the Registrable Securities or
Additional Registrable Securities covered by the Registration Statement;
(j) cause all Registrable Securities or Additional Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
(k) immediately notify the Investors, at any time when a
Prospectus relating to the Registrable Securities or Additional Registrable
Securities is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the Prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such holder,
promptly prepare and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities or
Additional Registrable Securities, as applicable, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(l) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such
other actions as may be reasonably necessary to facilitate the registration of
the Registrable Securities and Additional Registrable Securities, if applicable,
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve months, beginning after
the effective date of each Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the 1933 Act (for the purpose
of this subsection 3(l), "Availability Date" means the 45th day following the
end of the fourth fiscal quarter that includes the effective date of such
Registration Statement, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter).
4. Due Diligence Review. The Company shall make available, during
normal business hours, for inspection and review by the Investors, advisors to
and representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investors
pursuant to the Registration Statement or amendments or supplements thereto or
any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees, within a
reasonable time period, to supply all such information reasonably requested by
the Investors or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
The Company shall not disclose nonpublic information to the
Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
nonpublic information for review. The Company may, as a condition to disclosing
any nonpublic information hereunder, require the Investors' advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from trading
in Common Stock during such period of time as they are in possession of
nonpublic information) in form reasonably satisfactory to the Company and the
Investors.
Nothing herein shall require the Company to disclose nonpublic
information to the Investors or their advisors or representatives, and the
Company represents that it does not disseminate nonpublic information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investors and, if
any, underwriters, of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstance) of which it
becomes aware, constituting nonpublic information (whether or not requested of
the Company specifically or generally during the course of due diligence by and
such persons or entities), which, if not disclosed in the Prospectus included in
the Registration Statement, would cause such Prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section 4 shall be construed to
mean that such persons or entities other than the Investors (without the written
consent of the Investors prior to disclosure of such information) may not obtain
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement and the Purchase Agreement; provided, however,
that in no event shall the Investor's advisors or representatives disclose to
the Investors the nature of the specific event or circumstances constituting any
nonpublic information discovered by such advisors or representatives in the
course of their due diligence without the written consent of the Investors prior
to disclosure of such information. The Investors' advisors or representatives
shall make complete disclosure to the Investors' independent counsel of all
events or circumstances constituting nonpublic information discovered by such
advisors or representatives in the course of their due diligence upon which such
advisors or representatives form the opinion that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in the light of the circumstances in which they
were made, not misleading. Upon receipt of such disclosure, the Investor's
independent counsel shall consult with the Company's independent counsel in
order to address the concern raised as to the existence of a material
misstatement or omission and to discuss appropriate disclosure with respect
thereto; provided, however, that such consultation shall not constitute the
advice of the Company's independent counsel to the Investors as to the accuracy
of the Registration Statement and related Prospectus. In the event after such
consultation the Investors' independent counsel reasonably believes that the
Registration Statement contains an untrue statement or a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, (a) the Company shall file with the SEC an
amendment to the Registration Statement responsive to such alleged untrue
statement or omission and provide the Investors, as promptly as practicable,
with copies of the Registration Statement and related Prospectus, as so amended,
or (b) if the Company disputes the existence of any such material misstatement
or omission, (i) the Company's independent counsel shall provide the Investor's
independent counsel with an opinion stating that nothing has come to their
attention that would lead them to believe that the Registration Statement or the
related Prospectus, as of the date of such opinion, contains an untrue statement
of a material fact or omits a material fact required to be stated in the
Registration Statement or the related Prospectus or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading and (ii) in the event the dispute relates to the adequacy
of financial disclosure and the Investors shall reasonably request, the
Company's independent auditors shall provide to the Company a letter outlining
the performance of such "agreed upon procedures" as shall be reasonably
requested by the Investors and the Company shall provide the Investors with a
copy of such letter.
5. Obligations of the Investors.
(a) Each Investor shall furnish in writing to the Company such
information regarding itself, the Registrable Securities or Additional
Registrable Securities, as applicable, held by it and the intended method of
disposition of the Registrable Securities or Additional Registrable Securities,
as applicable, held by it, as shall be reasonably required to effect the
registration of such Registrable Securities or Additional Registrable
Securities, as applicable, and shall execute such documents in connection with
such registration as the Company may reasonably request. At least fifteen (15)
business days prior to the first anticipated filing date of any Registration
Statement, the Company shall notify each Investor of the information the Company
requires from such Investor if such Investor elects to have any of the
Registrable Securities or Additional Registrable Securities included in the
Registration Statement. An Investor shall provide such information to the
Company at least five (5) business days prior to the first anticipated filing
date of such Registration Statement if such Investor elects to have any of the
Registrable Securities or Additional Registrable Securities included in the
Registration Statement.
(b) Each Investor, by its acceptance of the Registrable
Securities and Additional Registrable Securities, if any, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities or Additional Registrable Securities, as applicable,
from the Registration Statement, in which case the Investor shall be deemed to
have waived its rights to have Registrable Securities or Additional Registrable
Securities, as the case may be, registered under this Agreement, unless the
Investor has good cause for such an election.
(c) In the event the Company at an Investor's request,
determines to engage the services of an underwriter, such Investor agrees to
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the dispositions of the Registrable Securities or Additional
Registrable Securities, as applicable.
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event rendering a Registration Statement no
longer effective, such Investor will immediately discontinue disposition of
Registrable Securities or Additional Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities or Additional
Registrable Securities, until the Investor's receipt of the copies of the
supplemented or amended prospectus filed with the SEC and declared effective
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities or Additional Registrable
Securities, as applicable, current at the time of receipt of such notice.
(e) No Investor may participate in any third party underwritten
registration hereunder unless it (i) agrees to sell the Registrable Securities
or Additional Registrable Securities, as applicable, on the basis provided in
any underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to the terms of this Agreement.
6. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify
and hold harmless, to the fullest extent permitted by law the Investors, each of
their officers, directors, partners and employees and each person who controls
the Investors (within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses imposed on such person caused by (i) any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or any preliminary prospectus or any amendment or
supplement thereto or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based upon any
information furnished in writing to the Company by such Investors, expressly for
use therein, or (ii) any violation by the Company of any federal, state or
common law, rule or regulation applicable to the Company in connection with any
Registration Statement, Prospectus or any preliminary prospectus, or any
amendment or supplement thereto, and shall reimburse in accordance with
subparagraph (c) below, each of the foregoing persons for any legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claims. The foregoing is subject to the condition that, insofar as the
foregoing indemnities relate to any untrue statement, alleged untrue statement,
omission or alleged omission made in any preliminary prospectus or Prospectus
that is eliminated or remedied in any Prospectus or amendment or supplement
thereto, the above indemnity obligations of the Company shall not inure to the
benefit of any indemnified party if a copy of such corrected Prospectus or
amendment or supplement thereto had been made available to such indemnified
party and was not sent or given by such indemnified party at or prior to the
time such action was required of such indemnified party by the 1933 Act and if
delivery of such Prospectus or amendment or supplement thereto would have
eliminated (or been a sufficient defense to) any liability of such indemnified
party with respect to such statement or omission. Indemnity under this Section
5(a) shall remain in full force and effect regardless of any investigation made
by or on behalf of any indemnified party and shall survive the permitted
transfer of the Registrable Securities and Additional Registrable Securities.
(b) Indemnification by Holder. In connection with any
registration pursuant to the terms of this Agreement, each Investor will furnish
to the Company in writing such information as the Company reasonably requests
concerning the holders of Registrable Securities and Additional Registrable
Securities or the proposed manner of distribution for use in connection with any
Registration Statement or Prospectus and agrees, severally but not jointly, to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expense (including reasonable attorney's fees)
resulting from any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus or amendment or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto
and that such information was substantially relied upon by the Company in
preparation of the Registration Statement or Prospectus or any amendment or
supplement thereto. In no event shall the liability of an Investor be greater in
amount than the dollar amount of the proceeds (net of all expense paid by such
Investor and the amount of any damages such holder has otherwise been required
to pay by reason of such untrue statement or omission) received by such Investor
upon the sale of the Registrable Securities or Additional Registrable Securities
included in the Registration Statement giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled
to indemnification hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If for any reason the indemnification provided
for in the preceding paragraphs (a) and (b) is unavailable to an indemnified
party or insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
or Additional Registrable Securities be greater in amount than the dollar amount
of the proceeds (net of all expenses paid by such holder and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission) received by it upon
the sale of the Registrable Securities or Additional Registrable Securities
giving rise to such contribution obligation.
7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended only
by a writing signed by the parties hereto. The Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of each Investor.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made as set forth in Section 10.4 of the
Purchase Agreement.
(c) Assignments and Transfers by Investors. This Agreement and
all the rights and obligations of the Investors hereunder may not be assigned or
transferred to any transferee or assignee except to an affiliate or transferee
of an Investor who is a subsequent holder of any Warrants, Registrable
Securities or Additional Registrable Securities.
(d) Assignments and Transfers by the Company. This Agreement may
not be assigned by the Company without the prior written consent of each
Investor, except that without the prior written consent of the Investors, but
after notice duly given, the Company shall assign its rights and delegate its
duties hereunder to any successor-in-interest corporation, and such
successor-in-interest shall assume such rights and duties, in the event of a
merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets.
(e) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(i) Further Assurances. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
(j) 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. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(k) Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
The Company: insci-statements.com, corp.
By:_________________________
Name:
Title:
The Investors:
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
<PAGE>
Exhibit 4.03
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS.
VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 17, 2004 ("EXPIRATION
DATE").
INSCI-STATEMENTS.COM, CORP.
WARRANT TO PURCHASE 280,936 SHARES OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE ("COMMON STOCK")
For VALUE RECEIVED, The Tail Wind Fund, Ltd. ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from
insci-statements.com, corp., a Delaware corporation ("Company"), at any time not
later than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price
per share equal to $4.30 (the exercise price in effect being herein called the
"Warrant Price"), 280,936 shares ("Warrant Shares") of Common Stock. The number
of Warrant Shares purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of the
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. Transfers. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended ("Securities Act") or an exemption from such
registration; provivded, however, this Warrant may only be transferred to an
affiliate of the Warrantholder. Subject to such restrictions, the Company shall
transfer this Warrant from time to time upon the books to be maintained by the
Company for that purpose, upon surrender thereof for transfer properly endorsed
or accompanied by appropriate instructions for transfer and such other documents
as may be reasonably required by the Company to establish that such transfer is
being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement") and payment by cash,
certified check or wire transfer of funds for the Warrant Price for that number
of Warrant Shares then being purchased, to the Company during normal business
hours on any business day at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof). The Warrant Shares so purchased shall be deemed to be issued to
the holder hereof or such holder's designee, as the record owner of such shares,
as of the close of business on the date on which this Warrant shall have been
surrendered (or evidence of loss, theft or destruction thereof and security or
indemnity satisfactory to the Company), the Warrant Price shall have been paid
and the completed Exercise Agreement shall have been delivered. Certificates for
the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding seven (7) business days, after this
Warrant shall have been so exercised. The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be designated
by such holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
Each exercise hereof shall constitute the representation and warranty
of the Warrantholder to the Company that the representations and warranties
contained in Article 5 of the Purchase Agreement (as defined below) are true and
correct in all material respects with respect to the Warrantholder as of the
time of such exercise.
Section 4. Compliance with the Securities Act of 1933. Neither this
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered, sold or
transferred except as provided in this agreement and in conformity with the
Securities Act, and then only against receipt of an agreement of such person to
whom such offer of sale is made to comply with the provisions of this Section 4
with respect to any resale or other disposition of such security. The Company
may cause the legend set forth on the first page of this Warrant to be set forth
on each Warrant or similar legend on any security issued or issuable upon
exercise of this Warrant, unless counsel for the Company is of the opinion as to
any such security that such legend is unnecessary.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's satisfaction that such tax has been
paid. The holder shall be responsible for income taxes due under federal, state
or other law, if any such tax is due.
Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued Common Stock, sufficient
shares to provide for the exercise of the rights of purchase represented by the
Warrant. The Company agrees that all Warrant Shares issued upon exercise of the
Warrant shall be, at the time of delivery of the certificates for such Warrant
Shares, duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock of the Company.
Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event upon payment of a Warrant
Price that has been adjusted to reflect a fair allocation of the economics of
such event to the Warrantholder. Such adjustments shall be made successively
whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale, transfer or other
disposition of all or substantially all of the Company's assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of each Warrantholder to the end
that the provisions hereof (including, without limitations, provision for
adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or properties thereafter deliverable upon the exercise thereof. The Company
shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall assume the
obligation to deliver to the holder of the Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase and the other obligations under this Warrant.
The provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.
(c) In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as defined below), less the fair
market value (as determined by the Company's Board of Directors in good faith)
of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such Market Price per
share of Common Stock. "Market Price" shall have the meaning set forth in the
Purchase Agreement. Such adjustment shall be made successively whenever such a
payment date is fixed.
(d) If the Company shall at any time or from time to time after the
date of issuance hereof issue or sell in a financing transaction (which shall
not include any sales or issuances of Common Stock after the date hereof
pursuant to contractual obligations in effect on the date hereof), (A) any
shares of Common Stock for a Per Share Selling Price (as defined in the Purchase
Agreement) less than the Warrant Price (as defined above) on the date of such
issuance or (B) any securities convertible into shares of Common Stock
("Convertible Securities") for which the Per Share Selling Price of the Common
Stock is less than the Warrant Price on the date of such issuance, then the
Warrant Price shall be reset (if it would result in a reduction of such price)
to a price equal to 115% of such per share consideration, or conversion or
exercise price. The number of Warrant Shares shall be proportionally increased.
Such adjustments shall be made successively whenever required.
(e) An adjustment shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.
(f) In the event that, as a result of an adjustment made pursuant to
Section 8(a), the holder of this Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
Section 9. Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
fractional share shall be disregarded and the number of shares to be issued upon
exercise shall be the number of whole shares only.
Section 10. Benefits. Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder.
Section 11. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. In the event of a dispute with respect to any such
calculation, the certificate of the Company's independent certified public
accountants shall be conclusive evidence of the correctness of any computation
made, absent manifest error. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject
adjustment.
Section 12. Identity of Transfer Agent. The Transfer Agent for the
Common Stock is First Union National Bank, 1525 West W.T. Harris Boulevard,
Charlotte, North Carolina 28288. Upon the appointment of any subsequent transfer
agent for the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the Warrant,
the Company will mail to the Warrantholder a statement setting forth the name
and address of such transfer agent.
Section 13. Notices. Any notice pursuant hereto to be given or made by
the Warrantholder to or on the Company shall be sufficiently given or made if
sent by certified mail, return receipt requested, postage prepaid, addressed as
follows:
insci-statements.com, corp.
Two Westborough Business Park
Westborough, MA 01581
Attn: Roger Kuhn
508/870-4000
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 13.
Any notice pursuant hereto to be given or made by the Company to or on
the Warrantholder shall be sufficiently given or made if personally delivered or
if sent by an internationally recognized courier services by overnight or
two-day service, to the address set forth on the books of the Company or, as to
each of the Company and the Warrantholder, at such other address as shall be
designated by such party by written notice to the other party complying as to
delivery with the terms of this Section 13. All such notices, requests, demands,
directions and other communications shall, when sent by courier be effective two
(2) days after delivery to such courier as provided and addressed as aforesaid.
Section 14. Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Registration Rights Agreement dated as of as of
December __, 1999.
Section 15. Successors. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 16. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware, without giving effect to
its conflict of law priciples, and for all purposes shall be construed in
accordance with the laws of said State.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed, as of the day and year first above written.
insci-statements.com, corp.
By:___________________________
Name:
Title:
<PAGE>
insci-statements.com, corp.
WARRANT EXERCISE FORM
To: insci-statements.com, corp.
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
_______________ shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
================================
Federal Tax ID or Social Security No.
and delivered by certified mail to the above address, or
electronically (provide DWAC
Instructions:___________________), or
other (specify: __________________________________).
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
By exercising the rights represented by this Warrant, the undersigned
hereby certifies that, as of the date of exercise of this Warrant, the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the undersigned.
Dated:___________________, ____
Note: The signature must Signature:
correspond with the name of ---------------------
the registered holder as
written on the first page of -------------------------------
the Warrant in every Name (please print)
particular, without alteration
or enlargement or any change ------------------------------
whatever, unless the Warrant
has been assigned. ------------------------------
Address
------------------------------
Federal Identification or
Social Security No.
Assignee:
------------------------------
------------------------------
<PAGE>
Exhibit 4.04
INSCI CORP.
AND
AUERBACH, POLLAK & RICHARDSON, INC.
ADVISOR'S WARRANT AGREEMENT
ADVISOR'S WARRANT CERTIFICATES
ADVISOR'S WARRANT REGISTRATION RIGHTS
<PAGE>
ADVISOR'S WARRANT AGREEMENT dated as of April 22, 1999 by and between
INSCI CORP. (the "Company") and AUERBACH, POLLAK & RICHARDSON, INC. (hereinafter
referred to as either "APR", the "Holder" or the "Advisor").
W I T N E S S E T H:
WHEREAS, the Advisor has agreed, pursuant to an engagement letter (the
"Engagement") dated April 22, 1999 by and between APR and the Company, to act as
Financial Advisor in connection with the Company's business activities and
strategic planning; and
WHEREAS, the Company proposes to issue to APR, in lieu of cash payments of
$4,000 per month for a period of six months, for services to be provided by the
Advisor, warrants (the "Advisor Warrants") to purchase an aggregate amount of
shares of Common Stock (the "Warrant Shares"); and
NOW, THEREFORE, in consideration of the premises, the payment by the
Advisor to the Company of $0.0001 per Advisor's Warrant, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Advisor is hereby granted 200,000 Advisor's Warrants to
purchase 200,000 Warrant Shares; 100,000 shall be to purchase 100,000 Warrant
Shares at any time from October 22, 1999 until 5:00 pm, New York time on October
22, 2003 at an initial purchase price (subject to adjustment as provided in
Section 8 hereof) of $3.00 per Warrant Share; and 100,000 warrants shall be to
purchase 100,000 Warrant Shares at any time from April 22, 2000 until 5:00 pm,
New York time on April 22, 2004 at an initial purchase price (subject to
adjustment as provided in Section 8 hereof) of $4.00 per Warrant Share subject
to the terms and conditions of this Agreement. The expiration date (the
"Expiration Date") is the last date that each Advisor's Warrant can be
exercised. The Exercise Price (the "Exercise Price") is the price at which each
Adivsor's Warrant can be exercised.
2. Warrant Certificates. The Warrant Certificates (the "Advisor's Warrant
Certificates") to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Advisor's Warrants.
3.1 Exercise Form. In order to exercise this Advisor's Warrant, the
exercise form attached hereto must be duly executed and completed and
delivered to the Company, together with this Advisor's Warrant and payment
of the Exercise Price in cash or by certified or official bank check for
the securities being purchased. If the subscription rights represented
hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the
Expiration Date this Advisor's Warrant shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
3.2 Legend. Each certificate for the securities purchased under this
Advisor's Warrant shall bear a legend as follows unless such Securities
have been registered under the Securities Act of 1933, as amended (the
"Act"):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable
state law. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement under
the Act, or pursuant to an exemption from registration under the Act and
applicable state law."
3.3 Cashless Exercise.
3.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price in the manner required by Section 3.1, the Holder shall
have the right (but not the obligation) to pay the Exercise Price for the
shares of Common Stock being purchased with this Advisor's Warrant upon
exercise by the surrender to the Company of any exerciseable but
unexercised portion of this Advisor's Warrant having a "Value" (as defined
below), at the close of trading on the last trading immediately preceding
the exercise of this Advisor's Warrant, equal to the Exercise Price
multiplied by the number of shares being purchased upon exercise (Cashless
Exercise Right). The sum of (a) the number of shares being purchased upon
exercise of the non-surrendered portion of this Advisor's Warrant pursuant
to this Cashless Exercise Right and (b) the number of shares underlying
the portion of this Advisor's Warrant being surrendered, shall not in any
event be greater than the total number of shares of Common Stock
purchasable upon the complete exercise of this Advisor's Warrant if the
Exercise Price were paid in cash. The "Value" of the portion of the
Advisor's Warrant being surrendered shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of shares
underlying the portion of this Advisor's Warrant being surrendered from
(b) the Market Price of the shares multiplied by the number of shares
underlying the portion of this Advisor's Warrant being surrendered. As
used herein, the term "Market Price" at any date shall be deemed to be the
last reported sale price of the Common Stock on such date, or, in case no
such reported sale takes place on such day, the average of the last
reported sale prices for the immediately preceding three trading days, in
either case as officially reported by the principal securities exchange on
which the Common Stock is listed or admitted to trading, or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange or if any such exchange on which the Common Stock is listed is
not its principal trading market, the last reported sale price as
furnished by the NASD through the Nasdaq National Market or SmallCap
Market, or, if applicable, the OTC Bulletin Board or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
3.3.2 Mechanics of Cashless Exercise. The Cashless Exercise Right
for the respective warrants may be exercised during the periods specified
in paragraph 1 hereof by delivering the Advisor's Warrant with a duly
executed exercise form attached hereto with the cashless exercise section
completed to the Company, exercising the Cashless Exercise Right and
specifying the total number of shares of Common Stock the Holder will
purchase pursuant to such Cashless Exercise Right.
3.3.3 Validity. The foregoing provisions of this Section 3.3 shall
not apply if the securities to be issued upon exercise of the Cashless
Exercise Right may not be validly issued under the laws of the
jurisdiction of incorporation of the Company.
4. Issuance of Certificates. Upon the exercise of any Advisor's Warrants
and payment of the Exercise Price therefor, the issuance of one or more
certificates for the Warrant Shares or other securities, properties or rights
underlying such Advisor's Warrants shall be made forthwith (and in any event
within three (3) business days thereafter) without further charge to the Holder
thereof, and such certificates shall (subject to the provisions of Sections 5
and 7 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Advisor's Warrant Certificates and the certificates representing the Warrant
Shares or other securities, property or rights (if such property or rights are
represented by certificates) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary or Treasurer or
Assistant Treasurer of the Company. Advisor's Warrant Certificates shall be
dated the date of issuance thereof by the Company upon initial issuance,
transfer or exchange, or in lieu of mutilated, lost, stolen or destroyed
Advisor's Warrant Certificates.
5. Restriction On Transfer of Advisor's Warrants. The Holder of an
Advisor's Warrant Certificates (and its Permitted Transferees, as defined
below), by its acceptance thereof, covenants and agrees that the Advisor's
Warrants are being acquired for investment and not with a view to the
distribution thereof; that the Advisor's Warrants may be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, to any
person (a "Permitted Transferee"), provided such transfer, assignment,
hypothecation or other disposition is made in accordance with the provisions of
the Act, and applicable state securities laws.
6. Initial and Adjusted Exercise Price. The Exercise Price of each
Advisor's Warrant initially shall be the prices listed in paragraph 1, subject
to adjustment from time to time in accordance with the provisions of Section 8
hereof.
7. Registration Rights.
a. Registration Under the Securities Act of 1933. The Advisor's
Warrants have not been registered under the Act. The Advisor's Warrant
Certificates and the certificates representing the Warrant Shares shall
bear the following legend:
"This Warrant and the securities issuable upon exercise of this warrant
have not been registered under the Securities Act of 1933, as amended (the
"Act") or any state securities laws, and may not be sold, offered for
sale, assigned, transferred or otherwise disposed of, unless registered
pursuant to the provisions of the Act and applicable state laws or an
opinion of counsel is obtained stating that such disposition is in
compliance with an available exemption from such registration."
b. Registration. The Warrant Shares shall be included in the
registration statements described in the Registration Rights Agreement to
be executed by the Company and the Holders, a form of which is attached as
Exhibit B hereto, the terms of which are incorporated herein and made a
part hereof.
c. Exercise of Warrants. Nothing contained in this Agreement shall
be construed as requiring the Holders to exercise their Advisor's Warrants
prior to the initial filing of any registration statement or the
effectiveness thereof, or at any time thereafter.
8. Adjustments to Purchase Price and Number of Securities.
a. Adjustment for Recapitalization. If the Company shall at any time
combine or subdivide its outstanding shares of Common Stock (or other
securities at the time receivable upon the exercise of the Advisor's
Warrant) by recapitalization, reclassification, split-up, combination or
reverse split thereof, the Exercise Price per share of the Advisor's
Warrant subject to the Advisor's Warrant immediately prior to such
combination or subdivision shall be proportionately increased or
decreased, as the case may be. Any such adjustment and adjustment to the
Exercise Price pursuant to this Section 8(a) shall be effective at the
close of business on the effective date of such subdivision or combination
or if any adjustment is the result of a stock dividend or distribution,
then the effective date for such adjustment based thereon shall be the
record date therefor.
Whenever the number of shares of Common Stock purchasable upon the
exercise of the Advisor's Warrant is adjusted as provided in this Section
8(a), the Exercise Price shall be adjusted to the nearest cent by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of
Common Stock purchasable upon the exercise immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares
of Common Stock so purchasable immediately thereafter.
b. Adjustment for Reorganization, Consolidation, Merger, Etc. In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of the
Warrant Share) after the date of the Warrant Share or in case after such
date the Company (or any such other corporation) shall consolidate with or
merge into another corporation or convey all or substantially all of its
assets to another corporation, then, and in each such case, the Holder of
the Warrant Share upon the exercise thereof as provided in Section 3 at
any time after the consummation of such reorganization, consolidation,
merger or conveyance, shall be entitled to receive, in lieu of the
securities and property receivable upon the exercise of the Warrant Share
prior to such consummation, the securities or property to which such
Holder would have been entitled upon such consummation if such Holder had
exercised the Warrant Share immediately prior thereto; in each such case,
the terms of the Warrant Share shall be applicable to the securities or
property receivable upon the exercise of the Warrant Share after such
consummation.
c. Adjustment for Stock Dividends. Except as hereinafter provided,
in the event the Company shall, at any time or from time to time after the
date hereof, issue any shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, as a stock
dividend to holders of the Company's securities, (any such issuance being
herein called a "Change of Shares"), then, and thereafter immediately
before the record date for each Change of Shares, the Exercise Price for
the Warrant Share (whether or not the same shall be issued and
outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the
nearest cent) determined by dividing (1) the product of (a) the Exercise
Price in effect immediately before such Change of Shares and (b) the total
number of shares of Common Stock outstanding immediately prior to such
Change of Shares, by (2) the total number of shares of Common Stock
outstanding immediately after such Change of Shares.
For the purposes of any adjustment to be made in accordance with
this Section 8 the following provisions shall be applicable:
i. Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have
been issued immediately after the opening of business on the day
following the record date for the determination of stockholders
entitled to receive such dividend or other distribution and shall be
deemed to have been issued without consideration.
ii. The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number
of shares issuable (subject to readjustment upon the actual issuance
thereof) upon the exercise of options, rights or warrants and upon
the conversion or exchange of convertible or exchangeable
securities.
iii. Upon each adjustment of the Exercise Price pursuant to
this Section 8, the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall be the number derived by
multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment by the Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the
applicable adjusted Exercise Price.
iv. In case the Company shall at any time after the date
hereof issue any securities convertible into or exchangeable for
shares of Common Stock, as a dividend, the Exercise Price for the
Warrants (whether or not the same shall be issued and outstanding)
in effect immediately prior to such issuance, shall be reduced to a
price determined by making the computation in accordance with the
provisions of this Section 8, provided that:
B. The aggregate maximum number of shares of Common
Stock issuable or that may become issuable upon conversion or
exchange of any convertible or exchangeable securities
(assuming conversion or exchange in full even if not then
currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such
securities, for a consideration equal to the minimum
consideration, if any, receivable by the Company upon the
conversion or exchange thereof; provided, however, that upon
the expiration or other termination of the right to convert or
exchange such convertible or exchangeable securities (whether
by reason of redemption or otherwise), the number of shares of
Common Stock deemed to be issued and outstanding pursuant to
this subsection (B) (and for the purposes of subsection (E) of
Section 8 iv. hereof) shall be reduced by the number of shares
as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares
shall no longer be deemed to be issued and outstanding for
purposes of any subsequent adjustment in the Exercise Price,
which adjustment shall be made on the basis of the issuance
only of the shares actually issued plus the shares remaining
issuable upon conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
C. If any change shall occur in the exercise price per
share provided for in the price per share or ratio at which
the securities referred to in subsection (B) of this Section 8
iv. are convertible or exchangeable, such conversion or
exchange rights, to the extent not theretofore exercised,
shall be deemed to have expired or terminated on the date when
such price change became effective in respect of shares not
theretofore issued pursuant to the conversion or exchange
thereof, and the Company shall be deemed to have issued upon
such date new convertible or exchangeable securities.
D. In case of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of
the Advisor's Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par
value or as a result of subdivision or combination), or in
case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a
Subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification
or change of the then outstanding shares of Common Stock or
other capital stock issuable upon exercise of the Advisor's
Warrant other than a change in par value, or from par value to
no par value, or from no par value to par value or as a result
of subdivision or combination) or in case of any sale or
conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, then,
as a condition of such reclassification, change,
consolidation, merger, sale or conveyance, the Company, or
such successor or purchasing corporation, as the case may be,
shall make lawful and adequate provision whereby the Holder of
each Advisor's Warrant then outstanding shall have the right
thereafter to receive on exercise of such Advisor's Warrant
the kind and amount of securities and property receivable upon
such reclassification, change, consolidation, merger, sale or
conveyance by a Holder of the number of securities issuable
upon exercise of such Advisor's Warrant immediately prior to
such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of
the stock transfer agent, if any, a statement signed by its
President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary
evidencing such provision.
E. Irrespective of any adjustments or changes in the
Exercise Price or the number of shares of Common Stock
purchasable upon exercise of the Advisor's Warrant, the
Warrant Certificate theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new
Warrant Certificates pursuant to Section 9 hereof, continue to
express the Exercise Price per share and the number of shares
purchasable thereunder as the Exercise Price per share and the
number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
F. After each adjustment of the Exercise Price pursuant
to this Section 8, the Company will promptly prepare a
certificate signed by the Chairman or President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the
Exercise Price as so adjusted, (ii) the number of shares of
Common Stock purchasable upon exercise of each Advisor's
Warrant, after such adjustment, and (iii) a brief statement of
the facts accounting for such adjustment. The Company will
promptly cause a brief summary thereof to be sent by ordinary
first class mail to each Holder at his last address as it
shall appear on the registry books of the Company. No failure
to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity thereof except as to the
Holder to whom the Company failed to mail such notice, or
except as to the Holder whose notice was defective. The
affidavit of the Secretary or an Assistant Secretary of the
Company that such notice has been mailed shall, in the absence
of fraud, be prima facie evidence of the facts stated therein.
G. No adjustment of the Exercise Price shall be made as
a result of or in connection with (i) the issuance or sale of
shares of Common Stock pursuant to options, warrants, stock
purchase agreements and convertible or exchangeable securities
outstanding or in effect on the date hereof, (ii) the issuance
or sale of shares of Common Stock upon the exercise of any
"incentive stock options" or "nonqualified stock options" (as
such terms are defined in the Internal Revenue Code of 1986,
as amended), whether or not such options were outstanding on
the date hereof, (iii) the issuance of, or grants of options
or warrants to purchase, up to a total of 5,000,000 shares of
Common Stock to officers, brokerage officers or directors of
the Company or otherwise pursuant to the Company's stock
option plans, (iv) the issuance or sale of shares of Common
Stock if the amount of said adjustment shall be less than
$.05, provided, however, that in such case, any adjustment
that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together
with the next subsequent adjustment that shall amount,
together with any adjustment so carried forward, to at least
$.05. In addition, Registered Holders shall not be entitled to
cash dividends paid by the Company prior to the exercise of
any Warrant Share held by them.
9. Exchange and Replacement of Warrant Certificates. Each Advisor's
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holders at the principal executive office of the Company, for
a new Advisor's Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holders thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Advisor's Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Advisor's Warrant
Certificates, if mutilated, the Company will make and deliver a new Advisor's
Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of Warrant Shares upon the exercise
of the Advisor's Warrants, nor shall it be required to issue scrip or pay cash
in lieu of fractional interests; provided, however, that if a Holders exercises
all Advisor's Warrants (as the case may be) held of record by such Holders the
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Warrant Shares or other securities, properties or
rights.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Advisor's Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Advisor's Warrants and payment of the Exercise Price
therefor, all the Warrant Shares and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the Advisor's
Warrants shall be outstanding, the Company shall use its best efforts to cause
its Common Stock to be listed (subject to official notice of issuance) on all
securities exchanges on which the Warrant Shares issuable to the Advisor in
connection with this Agreement may then be listed.
12. Notices to Advisor's Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Advisor's Warrants and their exercise, any of the
following events shall occur:
a. the Company shall take a record of the Holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings,
as indicated by the accounting treatment of such dividend or distribution
on the books of the Company; or
b. the Company shall offer to all the Holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
c. a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company
shall give written notice of such event at least fifteen (15) days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the date
of closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action
taken in connection with the declaration or payment of any such dividend,
or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
a. If to the registered Holders of the Advisor's Warrants, to the
address of such Holders as shown on the books of the Company, as well as
to the office of the Advisor, 450 PARK AVENUE, NEW YORK, NY 10022,
Attention: Michael Considine; or
b. If to the Company, to TWO WESTBOROUGH BUSINESS PARK, WESTBOROUGH,
MA 01581, Attention: Mr. E. Ted Prince, Ph.D.; or to such other address as
the Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Advisor may from time
to time supplement or amend this Agreement without the approval of any Holders
of Advisor's Warrant Certificates (other than the Advisor) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Advisor may deem necessary or desirable and which the Company and the
Advisor deem shall not adversely affect the interests of the Holders of
Advisor's Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement shall
be binding upon and inure to the benefit of the Company, the Advisor, the
Holders and their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate on the Expiration Date.
Notwithstanding the foregoing, the indemnification provisions shall survive such
termination until the close of business on the later of the expiration of any
applicable statute of limitations or the Expiration Date.
17. Change of Control. The Advisor's Warrants covered under this Agreement
shall be exercisable immediately in the event of a change of control in the
Company.
18. Governing Law. This Agreement and each Advisor's Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of said State without giving effect to the rules of said State governing
the conflicts of laws.
19. Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and thereof. Subject to Section 14, this Agreement may not be modified or
amended except by written notice duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Advisor and any other Holders of the Advisor's Warrant Certificates or Advisor's
Shares any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Advisor and any other Holders of the Advisor Warrant Certificates or
Advisor's Shares.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
24. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Company, the Advisor and their respective successors and assigns
and the Holders from time to time of the Advisor's Warrant Certificates or any
of them.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
AUERBACH, POLLAK & RICHARDSON, INC. INSCI CORP.
By: /s/ Michael P. Considine By: /s/ E. Ted Prince
------------------------- ------------------------
Michael P. Considine E. Ted Prince, Ph.D.
Executive Vice President Chairman & CEO
<PAGE>
EXHIBIT A
INSCI CORP.
WARRANT CERTIFICATE
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING October 22, 1999 THROUGH
5:00 P.M., NEW YORK TIME ON October 22, 2003
No. W-I-1 100,000 Warrants
This Warrant Certificate certifies that Auerbach, Pollak & Richardson,
Inc. is the registered holder of 100,000 warrants to purchase, at any time from
October 22, 1999 until 5:00 p.m., New York time on October 22, 2003 (the
"Expiration Date"), up to 100,000 shares of Common Stock (the "Warrant Shares"),
$.01 par value, of INSCI Corp., a DELAWARE corporation (the "Company"), at an
exercise price of $3.00 per Share (the "Exercise Price"), upon the surrender of
this Warrant Certificate and payment of the applicable Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Advisor's Warrant Agreement dated as of April 1, 1999 by and between
the Company and Auerbach, Pollak & Richardson, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or cashier's check or
money order payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the Holders (the words "Holders" or
"Holder" meaning the registered Holders or registered Holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable upon the exercise of this Warrant, may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the Holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise Price
and the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the Holder as set forth in the Warrant Agreement.
Upon request for registration of transfer of this Warrant Certificate at
an office or agency of the Company or of Company's counsel, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Advisor's Warrants shall be issued to the
transferee(s) in exchange as provided herein as soon as possible, but in no
event more than thirty (30) days, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall issue as soon as possible, but in no event more
than thirty (30) days, to the Holder hereof a new Warrant Certificate
representing such number of unexercised Warrants.
The Company may deem and treat the registered Holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the Holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this 22
nd day of April 1999.
INSCI Corp.
By: /s/ E. Ted Prince
------------------------
Mr. E. Ted Prince, Ph.D.
Chairman & CEO
ATTEST:
By: /s/ Roger C. Kuhn
------------------
Secretary
<PAGE>
EXHIBIT A contd.
INSCI CORP.
WARRANT CERTIFICATE (2)
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE TRANSFER OR EXCHANGE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING April 22, 2000 THROUGH
5:00 P.M., NEW YORK TIME ON April 22, 2004
No. W-I-1 100,000 Warrants
This Warrant Certificate certifies that Auerbach, Pollak & Richardson,
Inc. is the registered holder of 100,000 warrants to purchase, at any time from
April 22, 2000 until 5:00 p.m., New York time on April 22, 2004 (the "Expiration
Date"), up to 100,000 shares of Common Stock (the "Warrant Shares"), $.01 par
value, of INSCI Corp., a DELAWARE corporation (the "Company"), at an exercise
price of $4.00 per Share (the "Exercise Price"), upon the surrender of this
Warrant Certificate and payment of the applicable Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
Advisor's Warrant Agreement dated as of April 22, 1999 by and between the
Company and Auerbach, Pollak & Richardson, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or cashier's check or
money order payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the Holders (the words "Holders" or
"Holder" meaning the registered Holders or registered Holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable upon the exercise of this Warrant, may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the Holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise Price
and the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the Holder as set forth in the Warrant Agreement.
Upon request for registration of transfer of this Warrant Certificate at
an office or agency of the Company or of Company's counsel, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Advisor's Warrants shall be issued to the
transferee(s) in exchange as provided herein as soon as possible, but in no
event more than thirty (30) days, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall issue as soon as possible, but in no event more
than thirty (30) days, to the Holder hereof a new Warrant Certificate
representing such number of unexercised Warrants.
The Company may deem and treat the registered Holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the Holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this 22
nd day of April 1999.
INSCI Corp.
By: /s/ E. Ted Prince
------------------------
Mr. E. Ted Prince, Ph.D.
Chairman & CEO
ATTEST:
By: /s/ Roger C. Kuhn
------------------
Secretary
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 22, 1999 by and
between INSCI Corp., a DELAWARE corporation (the "Company"), and the person
whose name appears on the signature page attached hereto (individually a
"Holder" or collectively the "Holders", meaning the registered holder or
registered holders);
WHEREAS, pursuant to the terms of the Advisor's Warrant Agreement dated
APRIL 22, 1999 between the Company and the Holder to purchase an aggregate
amount of 200,000 shares of Common Stock (the "Warrant Shares"), the Company and
the Holder have agreed to enter into this Agreement;
WHEREAS, it is intended by the Company and the Holder that this Agreement
shall become effective immediately upon the signing of the Advisor's Warrant
Agreement by the parties thereto.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company hereby agrees as follows:
1 Registration Rights
(a) Right to Unlimited Piggyback. Whenever the Company proposes to
register any of its Registrable Securities under the Act (a "Piggyback
Registration"), either for the Company's own account or for the account of
any of its security holders (other than holders of Registrable Securities
in their capacity of Holders), the Company will give prompt written notice
to all Holders, of its intention to effect such a registration and will
include in such Piggyback Registration all Registrable Securities of
Holders with respect to which the Company has received written requests
for inclusion therein within twenty (20) days after receipt of the
Company's notice. Except as may otherwise be provided in this Agreement,
Registrable Securities with respect to which such request for registration
has been received will be registered by the Company and offered to the
public pursuant to this Section 1 on the same terms and conditions as any
similar securities of the Company included in the proposed registration.
(b) Registration Procedures. With respect to any Piggyback
Registration, the Company will, as expeditiously as practicable:
(1) prepare and file with the Securities and Exchange
Commission (the "Commission") a Registration Statement which
includes the Registrable Securities and use its best efforts to
cause such Registration Statement to become and remain effective as
provided herein; provided that before filing any amendments or
supplements to a Registration Statement or Prospectus, including
documents incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish to the Holders and
the underwriters, if any, copies of all such documents proposed to
be filed at least three Business Days prior thereto, which documents
will be subject to the reasonable review of such Holders and
underwriters, and the Company will not file an amendment to a
Registration Statement or Prospectus or any supplement thereto
(including such documents incorporated by reference) to which
Holders holding a majority of the Registrable Securities covered by
such Registration Statement or the underwriters, if any, shall
reasonably object.
(2) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for a period
of not less than 90 days, or such shorter period which will
terminate when all Registrable Securities covered by such
Registration Statement have been sold or withdrawn (but not prior to
the expiration of the 90-day period referred to in Section 4(3) of
the Act and Rule 174 thereunder, if applicable); cause the
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Act; and comply with the provisions of the Act applicable to it with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance
with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement or supplement to the
Prospectus; the Company shall be deemed to have used its best
efforts to keep a Registration Statement effective during the
applicable period if it complies with all rules and regulations
under the Act relating to it and the noncompliance with which would
result in Holders not being able to sell their Registrable
Securities covered by such Registration Statement during that
period;
(3) furnish to any Selling Holder and the underwriter or
underwriters, if any, without charge, at least one signed copy of
the Registration Statement and any post-effective amendment thereto,
upon request, and such number of conformed copies thereof and such
number of copies of the Prospectus (including each preliminary
Prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as such Selling Holder
or underwriter may reasonable request in order to facilitate the
disposition of the Registrable Securities being sold by such Selling
Holder (it being understood that the Company consents to the use of
the Prospectus and any amendment or supplement thereto by each
selling Holder and the underwriter or underwriters, if any, in
connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto);
(4) notify each Selling Holder at any time when a Prospectus
relating to Registrable Securities of any Selling Holder included in
a Registration Statement is required to be delivered under the Act,
when the Company becomes aware of the happening of any event as a
result of which the Prospectus included in such Registration
Statement (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein (in the case of the Prospectus or any
preliminary Prospectus, in light of the circumstances under which
they were made) not misleading and, as promptly as practicable
thereafter, prepare and file with the Securities and Exchange
Commission (the "Commission") and furnish to Holders a supplement or
amendment to such Prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(5) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(6) make reasonably available for inspection by any Selling
Holder, any underwriter participating in any disposition pursuant to
the Registration Statement, if any, and any attorney, accountant or
other agent retained by any such Selling Holder or underwriter
(collectively, the "Inspectors"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection
with such Registration Statement. Records and other information
which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless the release of such records is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. The Selling Holder agrees that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expenses, to undertake appropriate action
to prevent disclosure of the Records deemed confidential;
(7) use its best efforts to obtain an opinion or opinions from
counsel for the Company in customary form;
(8) use its best efforts to cause all Registrable Securities
included in such Registration Statement to be listed, by the date of
the first sale of Registrable Securities pursuant to such
Registration Statement, on each securities exchange on which the
Company's securities of the same class are then listed or proposed
to be listed, if any;
(9) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement
at the earliest possible moment;
(10) if requested by the managing underwriter or underwriters
or any Selling Holder promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriter or underwriters or such Selling Holder
reasonably requests to be included therein regarding Selling Holder,
including, without limitation, information with respect to the
number of Registrable Securities being sold by such Selling Holder
to such underwriter or underwriters, the Exercise Price being paid
therefor by such underwriter or underwriters and information with
respect to any other terms of the underwritten offering of the
Registrable Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as possible after being notified of the matters to
be incorporated in such Prospectus supplement or post-effective
amendment;
(11) as promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
Registration Statement, deliver a copy of such document to each
Selling Holder;
(12) on or prior to the date on which the Registration
Statement is declared effective, use its best efforts to register or
qualify, and cooperate with the Holders, the underwriter or
underwriters, if any, and their counsel, in connection with the
registration or qualification of, the Registrable Securities covered
by the Registration Statement for offer and sale under the
securities or blue sky laws of each state and other jurisdiction of
the United States that any Selling Holder or underwriter reasonably
requests in writing, to use its best efforts to keep each such
registration or qualification effective, including through new
filings, or amendments or renewals, during the period such
Registration Statement is required to be kept effective and to do
any and all other acts or things necessary or advisable to enable
the disposition in all such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided that the
Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (c)(14), (ii) consent to general
service of process in any such jurisdiction or (iii) subject itself
to general taxation in any such jurisdiction;
(13) cooperate with the Holders and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing securities to be sold under the Registration Statement,
and enable such securities to be in such denominations and
registered in such names as the managing underwriter or
underwriters, if any, or such Holders may request; and
(14) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or
approved by such other governmental agencies or enable the Holders
or the underwriter or underwriters, if any, to consummate the
disposition of such securities.
(d) Registration Expenses.
(1) All of the costs and expenses of each registration
hereunder will be borne by the Company, including the fees and
expenses of the counsel and accountants for the Company and all
other costs and expenses of the Company incident to the preparation,
printing and filing under the Act of the Registration Statement (and
all amendments and supplements thereto) and furnishing copies
thereof and of the Prospectus included therein, and the costs and
expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state
securities or blue sky laws of various jurisdictions.
(e) Indemnification.
(1) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Selling Holder,
its officers and directors and each Person who controls such Selling
Holder (within the meaning of the Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), against any losses,
claims, damages, liabilities and expenses (including attorneys'
fees) caused by any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or
preliminary Prospectus or any omission or alleged omission to state
therein a material fact necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light
of the circumstances under which they were made) not misleading,
except insofar as the same are caused by or contained in any
information furnished to the Company by such Selling Holder
expressly for use in the preparation thereof or by such Selling
Holder's failure to deliver a copy of the Registration Statement or
Prospectus or any amendments or supplements thereto after the
Company has furnished such Selling Holder with a sufficient number
of copies thereof.
(2) Indemnification by Holders. Each Selling Holder agrees to
indemnify, to the full extent permitted by law, the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the Act and the Exchange Act) against any
losses, claims, damages, liabilities and expenses (including
attorneys fees) resulting from any untrue or alleged omission to
state a material fact necessary to make the statements in the
Registration Statement or Prospectus or preliminary Prospectus ( in
the case of the Prospectus or any preliminary Prospectus, in light
of the circumstances under which they were made) not misleading, to
the extent, but only to the extent, that such untrue statement or
omission was made in reliance upon information furnished by such
Selling Holder specifically for use in the preparation thereof.
(3) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt written
notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will 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 of such claim or litigation. An indemnifying party who is
not entitled to, or elects not to assume the defense of a claim will
not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel
(4) Contribution. If for any reasons the indemnification
provided for in the preceding clauses (1) and (2) is unavailable to
an indemnified party as contemplated by the preceding clauses (1)
and (2), then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified
party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other
relevant equitable considerations.
(f) Definitions.
"Act" means the Securities Act of 1933, as amended.
"Business Day" means any day of the week other than a Saturday,
Sunday or legal holiday in New York City.
"Common Stock" means the Warrant Shares of Common Stock, $.01 par
value, of the Company.
"Prospectus" means the prospectus which is part of the Registration
Statement.
"Registrable Securities" means any share of Common Stock, only so
long as such share continues to be a "Restricted Security." A share of
Common Stock shall be deemed to be a Restricted Security until such time
as such share (i) has been effectively registered under the Act and
disposed of in accordance with the registration statement covering it, or
(ii) has been sold pursuant to Rule 144 (or any similar provision then in
force) under the Act.
"Registration Statement" means a registration statement filed with
the Commission under the Act which includes the Registrable Securities
being registered in a Piggyback Registration or a Demand Registration.
"Selling Holder" means a Holder whose Registrable Securities are
included in a Registration Statement.
(g) Amendment and Waivers. The provisions of this Section 1,
including the provisions of this paragraph (g), may not be amended,
modified or supplemented, and waivers of or consents to departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of the Holders of the outstanding Registrable Securities.
(h) Termination. This Section 1 shall continue in full force and
effect until this Agreement is terminated in accordance with Section 16 of
this Agreement, except that paragraph (e) shall survive any termination of
this Section 1.
(i) Cooperation with Company. Holders will cooperate with the
Company in all respects in connection with this Agreement, including,
timely supplying all information reasonably requested by the Company and
executing and returning all documents reasonably requested in connection
with the registration and sale of the Registerable Securities.
(j) Survival of Indemnity. The indemnification provided by this
Agreement shall be a continuing right to indemnification and shall survive
the registration and sale of any Registerable Securities by any person
entitled to indemnification hereunder and the expiration or termination of
this Agreement.
2. Assignment of Registration Rights. The rights of the Holders under this
Agreement, including the rights to cause the Company to register Registerable
Securities may not be assigned without the written prior consent of the Company.
3. Remedies.
(a) Time is of Essence. The Company agrees that time is of the
essence of each of the covenants contained herein and that, in the event
of a dispute hereunder, this Agreement is to be interpreted and construed
in a manner that will enable the Holders to have the ability to sell their
Registerable Securities as quickly as possible after the registration
statement covering the Registerable Securities is to be filed in
accordance with the terms of this Agreement. Any delay on the part of the
Company not expressly permitted under this Agreement which exceeds five
(5) days, whether otherwise material or not, shall be deemed a material
breach of this Agreement.
(b) Remedies Upon Default or Delay. The Company acknowledges the
breach of any part of this Agreement may cause irreparable harm to a
Holder and that monetary damages alone may be inadequate. The Company
therefore agrees that the Holder shall be entitled to injunctive relief or
such other applicable remedy as a court of competent jurisdiction may
provide. Nothing contained herein will be construed to limit a Holder's
right to any remedies at law, including recovery of damages for breach of
any part of this Agreement.
4. Notices.
(a) All communications under this Agreement shall be in writing and
shall be mailed by first class mail, postage prepaid, or telegraphed or
telexed with confirmation of receipt or delivered by hand or by overnight
delivery service, (i) if to the Company at INSCI CORP., TWO WESTBOROUGH
BUSINESS PARK, WESTBOROUGH, MA 01581, Attention: MR. E. TED PRINCE, PH.D.,
CHAIRMAN & CEO or at such other address as it may have furnished in
writing to the Holders of Registerable Securities at the time outstanding,
or (ii) if to any Holder of any Registerable Securities, to the address of
such Holder as it appears in the stock or warrant ledger of the Company.
(b) Any notice so addressed, when mailed by registered or certified
mail shall be deemed to be given three days after so mailed, when
telegraphed or telexed shall be deemed to be given when transmitted, or
when delivered by hand or overnight shall be deemed to be given when
delivered.
5. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Company and each of the Holders.
6. Amendment and Waiver. This Agreement may be amended, and the observance
of any term of this Agreement may be waived, but only with the written consent
of the Company and the Holders of securities representing a majority of the
Registerable Securities; provided, however, that no such amendment or waiver
shall take away any registration right of any Holder of Registerable Securities
or reduce the amount of reimbursable costs to any Holder of Registerable
Securities in connection with any registration hereunder without the consent of
such Holder; further provided, however, that without the consent of any other
Holder of Registerable Securities, any Holder may from time to time enter into
one or more agreements amending, modifying or waiving the provisions of this
Agreement if such action does not adversely affect the rights or interest of any
other Holder of Registerable Securities. No delay on the part of any party in
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any party of any right, power or
remedy preclude any other or further exercise thereof, or the exercise of any
other right, power or remedy.
7. Counterparts. One or more counterparts of this Agreement may be signed
by the parties, each of which shall be an original but all of which together
shall constitute one and the same instrument.
8. Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York, without giving effect to
conflicts of law principles.
9. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
10. Pronouns; Headings. Unless the context otherwise requires, all
personal pronouns used in this Agreement, whether in the masculine, feminine or
neuter gender, shall include all other genders, and if in the singular shall
include the plural, and in the plural, the singular. The headings in this
Agreement are for convenience of reference only and shall not be deemed to alter
or affect the meaning or interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
22nd day of April, 1999.
INSCI CORP.
/s/ Michael T. Considine
------------------------
Signature of Holder
By: /s/ E. Ted Prince
------------------------ ------------------------
Mr. E. Ted Prince, Ph.D. Name of Holder
Chairman & CEO
------------------------
------------------------
Address of Holder
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto _____________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of INSCI
CORP., with full power of substitution.
Dated:
----------------------
---------------------------------
Signature
---------------------------------
Print Name
(Name and Signature must conform in
all respects to the name of holder as
specified on the face of the Warrant
Certificate.)
----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase:
______________ Shares
and herewith tenders in payment for such securities a certified or cashier's
check or money order payable to the order of INSCI CORP., in the amount of
$_______________, all in accordance with the terms hereof. The undersigned
requests that certificates for such securities be registered in the name of
____________________________ whose address is ________________________________
_________________ and that such certificates be delivered to . whose address
is ______________________________________________________________.
Dated:
-----------------------
---------------------------------
Signature
---------------------------------
Print Name
(Signature must conform in all
respects to the name of holder as
specified on the face of the Warrant
Certificate.)
---------------------------------
(Insert Social Security or Other
Identifying Number of Holders)
<PAGE>
Exhibit 5.01
BARATTA & GOLDSTEIN
597 Fifth Avenue
New York, NY 10017
January 19, 2000
insci-statements.com, corp.
Two Westborough Business Park
Westborough, MA 01581
Re: insci-statements.com, corp. - Registration Statement on Form S-3
1,283,612 shares of Common Stock
Ladies and Gentlemen:
We are acting as counsel to insci-statements.com, corp. (the "Company") in
connection with the Company's Registration Statement on Form S-3 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, relating to the registration of an aggregate
of 1,283,612 shares of Common Stock, par value $0.01 per share (the "Shares"),
of the Company. The Shares included in the Registration Statement include:
underlying Shares issuable pursuant to two 100,000 share Warrants dated April
22, 1999, to purchase a total of 200,000 shares of Common Stock as authorized by
INSCI Corp. now known as insci-statements.com. corp. which were issued to
Auerbach, Pollak & Richardson, Inc. (the "Auerbach Warrants"). Additionally, a
Warrant to purchase 280,936 shares of Common Stock dated December 17, 1999, was
authorized by insci-statements.com, corp. and issued to The Tail Wind Fund, Ltd.
(the "Tail Wind Warrant"); as well as 802,676 Shares that have been issued to
The Tail Wind Fund, Ltd. We understand that the Shares are to be sold from time
to time as described in the section entitled "Plan of Distribution" in the
Registration Statement.
As counsel to the Company, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of such documents, corporate
records, certificates of public officials and other instruments as we have
deemed necessary for the purposes of rendering this opinion. On the basis of the
foregoing and assuming the due execution and delivery of certificates
representing the Shares of Common Stock, and upon valid exercise of the Auerbach
Warrants and The Tail Wind Warrant in accordance with their terms, we are of the
opinion that the Shares of Common Stock have been duly authorized and the
underlying shares for the Warrants stated herein, will be validly issued, fully
paid and non-assessable Shares of Common Stock.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, and the federal laws of
the United States of America. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also consent to the reference to
our name under the caption "Legal Matters" in the prospectus contained in the
Registration Statement.
Very truly yours,
BARATTA & GOLDSTEIN
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of insci-statements.com, corp. of (1) our report dated December 10,
1999 relating to the supplemental financial statements of
insci-statements.com, corp as of March 31, 1999 and for each of the two years in
the period ended March 31, 1999 which report appears in Form 8-K of
insci-statements.com, corp. filed on January 12, 2000 and (2) our report dated
May 18, 1999, relating to the financial statements of insci-statements.com,
corp. (formerly INSCI Corp.) as of March 31, 1999 and for each of the two years
ended March 31, 1999 which appears in the Company's fiscal 1999 Form 10KSB
filing.
We also consent to the reference made to our firm under the caption Experts in
the prospectus.
Pannell Kerr Forster PC
New York, NY
January 19, 2000
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated October 24, 1999, relating to the consolidated
statements of The Internet Broadcasting Company, Inc., which appears on page F3
of Form 8K of insci-statements.com, corp. dated January 12, 2000, and to the
reference to our Firm under the caption "Experts" in the Prospectus.
GOLDSTEIN LEWIN & CO.
Boca Raton, Florida
January 19, 2000
