SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1997
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
PRECISION SYSTEMS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-20068 41-1425909
--------------------- --------------------- ---------------------
(STATE OR OTHER JURIS. (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
11800 30TH COURT NORTH
ST. PETERSBURG, FLORIDA 33716
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES
(813) 572-9300
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(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS.
On September 30, 1997, Precision Systems, Inc. (the "Company") issued
promissory notes ("Notes") and warrants to purchase an aggregate of 825,000
shares of common stock ("Warrants") to RMS Limited Partnership, a Nevada limited
partnership ("RMS"), Vulcan Ventures Incorporated, a Washington corporation
("Vulcan") and Mr. Didier Primat ("Primat") for an aggregate purchase price of
$6,000,000.
The Notes will mature on January 1, 1999 and will bear interest from the
issuance date on the unpaid principal amount until such amount is paid at a rate
per annum equal to 8%. Interest will be paid on September 30, 1998 and on the
maturity date.
The foregoing is a description of certain of the features of the Notes
which description is qualified in its entirety by reference to the Loan
Agreement and Promissory Note attached hereto as Exhibit 4.1 and 4.2,
respectively.
Each warrant will have an exercise price equal to $4 per share which
represents: (i) the average of the last reported sales price of the Company's
Common Stock on the Nasdaq Stock Market for the ten trading days prior to the
date of closing plus (ii) a 25% premium. Each Warrant will be exercisable at any
time during the five-year period commencing twelve (12) months after the date of
issuance. The exercise price and number of shares issuable upon exercise of
Warrants will be subject to adjustment in certain circumstances. The Company has
granted RMS, Vulcan and Primat with certain registration rights with respect to
the shares of common stock underlying the Warrants.
The foregoing is a description of certain of the features of the Warrants
which description is qualified in its entirety by reference to the Warrant
Certificate attached hereto as Exhibit 4.3.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
NUMBER DESCRIPTION
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4.1 Form of Loan Agreement
4.2 Form of Promissory Note
4.3 Form of Warrant Certificate
4.4 Form of Subscription Agreement
20.1 Press Release of Precision Systems, Inc. dated
October 1, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRECISION SYSTEMS, INC.
Date: October 31, 1997 By: /s/ Kenneth M. Clinebell
-------------------------
By: Kenneth M. Clinebell
Its: Chief Financial Officer
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EXHIBIT INDEX
NUMBER DESCRIPTION
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4.1 Form of Loan Agreement
4.2 Form of Promissory Note
4.3 Form of Warrant Certificate
4.4 Form of Subscription Agreement
20.1 Press Release of Precision Systems, Inc. dated October 1, 1997
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EXHIBIT 4.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), dated as of September ___, 1997,
is made and entered into by and between Precision Systems, Inc., a Delaware
corporation ("Borrower"), and _____________________, a _______________________.
WITNESSETH:
WHEREAS, __________________________ (each a "Lender" and collectively the
"Lenders") have each agreed to loan $2,000,000 to Borrower pursuant to the terms
and conditions of a Subscription Agreement dated as of September ___, 1997 (the
"Subscription Agreement");
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
In addition to any terms defined elsewhere in this Agreement, the
following terms have the meanings indicated for purposes of this Agreement (such
definitions being equally applicable to the singular and plural forms of the
defined term):
"Acceleration" means that the Loans (i) shall not have been paid at the
Maturity Date, or (ii) shall have become due and payable prior to the Maturity
Date pursuant to Section 5.2.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person;
provided, however, that neither party to this Agreement shall be deemed to be an
Affiliate of the other party.
"Agreement" or "Loan Agreement" means this Loan Agreement, as amended from
time to time.
"Borrower" shall have the meaning set forth in the heading of this
Agreement.
"Business Day" means a day when national banks located in New York City
are open for business.
"Closing Date" means September ___, 1997.
"Event of Default" shall have the meaning set forth in Article 5 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indebtedness" of any Person means all liabilities, obligations and
reserves, contingent or otherwise of such Person.
"Loan" and "Loans" shall have the meanings set forth in Section 2.1
hereof.
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"Material Adverse Effect" means a material adverse effect on the business,
assets, operations or financial condition of Borrower or on the ability of
Borrower to pay the Loans in accordance with the terms of this Agreement.
"Maturity" means any date on which the Loans become due and payable,
whether as stated on the Maturity Date or by virtue of mandatory prepayment, by
Acceleration or otherwise.
"Maturity Date" means January 1, 1999.
"Maximum Rate" shall have the meaning set forth in Section 2.2 hereof.
"Note" means the promissory notes executed by Borrower in the form of
Exhibit A hereto and evidencing the Loans.
"Obligations" means all loans, advances, debts, liabilities, obligations,
covenants and duties owing to Lenders by Borrower, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under this Agreement, the Note and all extensions,
amendments, modifications, restructurings and refinancings of any of the above.
"Person" means any individual, corporation, partnership, trust,
association or other entity or organization, including any government, political
subdivision, agency or instrumentality thereof.
Any accounting term not defined herein shall have the meaning given to it
under GAAP.
ARTICLE 2
The Loans
2.1 Unsecured Loans. Subject to the terms and conditions of this
Agreement and in reliance on the representations and warranties of Borrower set
forth in this Agreement and the Subscription Agreement, each of the Lenders
agrees to loan (each a "Loan" and collectively the "Loans") to Borrower on the
Closing Date $2,000,000. Borrower's obligation to repay the Loans shallbe
evidenced by promissory notes of Borrower to each of the Lenders in the form
attached hereto as Exhibit A.
2.2 Interest.
(a) Interest. Each Loan shall bear interest from the Closing Date
on the unpaid principal amount thereof until such amount is paid (whether upon
Maturity, by Acceleration or otherwise) at a rate per annum equal to 8%.
Interest will be compounded quarterly at the end of each calendar quarter.
(b) Computation of Interest. Interest shall accrue daily and shall
be computed for the actual number of days elapsed on the basis of a year
consisting of 360 days.
(c) Post-Maturity Interest. After Maturity (whether by
acceleration or otherwise) of the Loans, the Loans shall bear interest, payable
on demand, at a rate per annum equal to 12%.
(d) Maximum Interest Rate. Nothing in this Agreement shall require
Borrower to pay interest at a rate exceeding the maximum amount permitted by
applicable law to be charged by Lenders (the "Maximum Rate"). If the amount of
interest payable for the account of Lenders on any day in respect of the
immediately preceding interest computation period, computed pursuant to this
Article 2, would exceed the Maximum Rate, the amount of interest payable for its
account on such interest payment date shall automatically be reduced to the
Maximum Rate.
2.3 Payments.
(a) Payments of Loans. On the Maturity Date, Borrower shall pay to
Lenders the unpaid principal on the Loans.
(b) Payments of Interest. On September 30, 1998 and on the
Maturity Date, Borrower shall pay to Lenders all interest accrued and unpaid by
Borrower with respect to the Loans through and including the date of payment.
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(c) Optional Prepayment. Borrower may at any time, and from time
to time, prepay the Loans in whole or in part, without penalty or premium;
provided that any such prepayment (if less than the prepayment of all unpaid
principal and interest on the Loans) shall be made in equal amounts to each of
the Lenders. Any prepayment shall be applied first to accrued and unpaid
interest and thereafter to the outstanding principal balance of the Loans.
(d) Payments. All payments of interest and principal shall be in
United States dollars and immediately available funds to Lenders at the
addresses for notices set forth in this Agreement and shall be made prior to
1:00 P.M. Eastern Time on the date of the scheduled payment. All payments
received after such time shall be credited the next succeeding Business Day, and
interest shall continue to accrue.
ARTICLE 3
[Intentionally Omitted]
ARTICLE 4
Covenants
Unless each Lender shall agree to waive compliance with the following
covenants, Borrower shall comply with the following provisions so long as the
Loans are outstanding:
4.1 Accounting Records. Borrower shall maintain adequate books and
accounts in accordance with GAAP consistently applied. Borrower shall deliver to
a Lender any information regarding the business or the finances of Borrower as
such Lender may reasonably request.
4.2 Corporate Existence. Borrower shall preserve and maintain its
corporate existence in good standing in the jurisdiction of its formation and
all of its licenses, privileges and franchises and other rights necessary or
desirable in the ordinary course of its businesses, except to the extent that
the failure to do so would not have a Material Adverse Effect.
4.3 Qualification to Do Business. Borrower shall qualify to do business
and shall be and remain in good standing in each jurisdiction in which the
nature of its business requires it to be so qualified, except to the extent that
the failure to be so qualified and in good standing would not have a Material
Adverse Effect.
4.4 Compliance with Laws. Borrower will observe and comply in all
material respects with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time may be
applicable to Borrower, a violation of which could be reasonably expected to
have a Material Adverse Effect.
4.5 Taxes and Other Liabilities. Borrower will pay and discharge prior
to the date on which penalties attach thereto all taxes, assessments and
governmental charges, license fees and levies upon or with respect to Borrower,
and upon the income, profits and property of Borrower, unless and to the extent
that such taxes, assessments, charges, license fees and levies are being
contested in good faith and by appropriate proceedings diligently conducted by
Borrower, and provided that such reserve or other appropriate provisions as are
required in accordance with GAAP will have been made therefor except to the
extent that the failure to do so would not have a Material Adverse Effect.
4.6 Maintenance of Property. Borrower shall (i) maintain, keep and
preserve all of its material properties in good repair, working order and
condition and from time to time make all necessary and proper repairs, renewals,
replacement and improvements thereto, and (ii) maintain, preserve and protect
all franchises, licenses, copyrights, patents and trademarks material to its
Business.
4.7 Notification of Events of Default and Adverse Developments. Borrower
shall promptly notify Lenders of the occurrence of (i) any Event of Default or
any event which, upon the lapse of time or the giving of notice or both, would
constitute an Event of Default hereunder; (ii) any event, development or
circumstance whereby any financial statements most recently furnished to Lenders
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operating results of Borrower as of the date of such
financial statements; and (iii) each and every event which would be an Event of
Default (or an event which with the giving of notice or lapse of time or both
would be an Event of Default) under any Indebtedness of Borrower, such notice to
include the names and addresses of the holders of such indebtedness and the
amount thereof.
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ARTICLE 5
Events of Default
5.1 Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:
(a) Borrower shall fail to pay when due any payment of principal
or interest or any other sum payable hereunder;
(b) Borrower shall default in the performance of any of its
material agreements under any provision of this Agreement;
(c) Any warranty or representation made by Borrower in the
Subscription Agreement shall be untrue in any material respect as of the Closing
Date;
(d) Borrower shall institute a voluntary case seeking liquidation
or reorganization under Chapter 7 or Chapter 11, respectively, of the United
States Bankruptcy Code, or shall consent to the institution of an involuntary
case thereunder against it; or Borrower shall file a petition initiating or
shall otherwise institute any similar proceeding under any other applicable
federal or state law, or shall consent thereto; or Borrower shall apply for, or
by consent or acquiescence there shall be an appointment of a receiver,
liquidator, sequestrator, trustee or other officer with similar powers; or
Borrower shall make an assignment for the benefit of creditors; or Borrower
shall admit in writing its inability to pay its debts generally as they become
due; or, if an involuntary case shall be commenced seeking the liquidation or
reorganization of Borrower under Chapter 7 or Chapter 11, respectively, of the
United States Bankruptcy Code, or any similar proceeding shall be commenced
against Borrower under any other applicable federal or state law, and (i) the
petition commencing the involuntary case is not timely controverted; or (ii) the
petition commencing the involuntary case is not dismissed within 30 days of its
filing; or (iii) an interim trustee is appointed to take possession of all or a
portion of the property, to operate all or any part of the business of Borrower,
or both; or (iv) an order for relief shall have been issued or entered therein;
or a decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or other officer;
5.2 Acceleration. If any Event of Default described in Section 5.l(a) or
(d) shall occur, all Loans shall become immediately due and payable, all without
notice of any kind. If any other Event of Default described in Section 5.1
(other than an Event of Default described in Section 5.1(a) or (d)) shall occur,
upon ten (10) days notice, any Lender may declare all Loans to be due and
payable, whereupon all Loans shall immediately become due and payable provided
that Borrower shall not have cured such Event of Default prior to the expiration
of such period. Any such declaration made pursuant to this Section 5.2 may be
rescinded by the Lender or Lenders making such declaration.
ARTICLE 6
Miscellaneous
6.1 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon, and the benefits thereof shall inure to, the parties
hereto and their respective permitted successors and assigns.
6.2 Sale of Interests. Lenders agree that they shall not be entitled to
sell, assign, transfer, negotiate or grant participations in all or any part of
or any interest in, its rights and obligations under this Agreement without the
prior written consent of Borrower.
6.3 Lost Promissory Note. Upon receipt of evidence reasonably
satisfactory to Borrower of the ownership of and the loss, theft, destruction or
mutilation of a Note and indemnification reasonably satisfactory to Borrower or,
in the case of any mutilation, upon the surrender of such Note for cancellation
to Borrower at its principal office, Borrower at its expense (except as provided
below) will execute and deliver to a Lender, in lieu thereof a new Note of like
tenor, dated so that there will be no loss of interest on such lost, stolen,
destroyed or mutilated Note. Borrower may require payment by Lender of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such replacement. Any Note in lieu of which any such new Note has been so
executed and delivered by Borrower shall not be deemed to be an outstanding Note
for any purpose of this Agreement.
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6.4 No Implied Waiver. No delay or omission to exercise any right, power
or remedy accruing to Lenders upon any breach or default of Borrower under this
Agreement shall impair any such right, power or remedy of Lenders, nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default occurring thereafter, nor
shall any waiver of any single breach or default be deemed a wavier of any other
breach or default occurring theretofore or thereafter.
6.5 Amendments; Waivers. No amendments, modification or waiver of or
consent with respect to, any provision of this Agreement, shall be effective
unless the same shall be in writing and signed and delivered by Lenders and
Borrower. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
6.6 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall be, only as to such jurisdiction,
ineffective to the extent of such prohibition or unenforceability, but all the
remaining provisions of this Agreement shall remain valid.
6.7 Notices. Any notice which a Lender or Borrower may be required or
may desire to give to the other parties under any provision of this Agreement
shall be in writing by overnight delivery service, certified mail, telex or
electronic facsimile transmission and shall be deemed to have been given or made
when received and addressed as follows:
To Lenders:
If to Borrower, at:
Precision Systems, Inc.
11800 30th Court North St.
Petersburg, Florida 33716
With a copy similarly addressed to:
Thomas J. Egan, Jr., Esquire
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the otherparties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
6.8 Interpretation. This Agreement, together with the Exhibit to this
Agreement and the Subscription Agreement, is intended by Lender and Borrower as
a final expression of their agreement with respect to the subject matter hereof
and is intended as a complete statement of the terms and conditions of such
agreement.
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6.9 No Right of Set Off. Borrower will not be entitled to offset against
any of its financial obligations to Lenders under this Agreement, any obligation
owed to it or any of its Affiliates by or for Lender or any Affiliates of
Lender.
6.10 Governing Law. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS
AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. AT THE OPTION OF LENDER, AN ACTION MAY BE
BROUGHT TO ENFORCE THE OBLIGATIONS AND THIS AGREEMENT IN ANY COURT LOCATED IN
THE STATE OF DELAWARE, U.S.A. OR IN ANY OTHER COURT IN WHICH VENUE AND
JURISDICTION ARE PROPER.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
6.12 Headings and Sections. Captions, headings and the table of contents
in this Agreement are for convenience only, and are not to be deemed part of
this Agreement. Unless otherwise specified, references in this Agreement to
Sections, Articles, Exhibits or Schedules are references to sections and
articles of and Exhibits and Schedules to, this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
LENDERS: __________________________
a ________________________
By: ______________________
Its: _____________________
BORROWER: Precision Systems, Inc.,
a Delaware corporation
By:_________________________________
Its:________________________________
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EXHIBIT 4.2
PROMISSORY NOTE
Precision Systems, Inc.
11800 30th Court North
St. Petersburg, Florida 33716
U.S. $2,000,000 Dated: September ___, 1997
Principal Amount
1. Amount and Rate. Precision Systems, Inc., a Delaware corporation
whose principal office is at 11800 30th Court North, St. Petersburg, Florida
33716 ("Borrower"), for value received, hereby promises to pay to the order of
____________________, a ___________________________ ("Lender"), whose principal
place of business is ___________________________, the principal amount of Two
Million United States Dollars (U.S. $2,000,000), in lawful money of the United
States of America in immediately available funds, in accordance with the terms
of the Loan Agreement (as hereinafter defined), and to pay interest on the
unpaid principal amount of the Loan, in the manner, at the rate and at the times
specified in the Loan Agreement.
2. Loan Agreement. This Promissory Note is one of the Notes referred to
in the Loan Agreement dated as of September ___, 1997 between Lender, Borrower
and certain other parties acting as Lenders (as such term is defined in the Loan
Agreement), and as such agreement may be amended, modified and supplemented from
time to time (the "Loan Agreement"), and it evidences a Loan made by Lender to
Borrower thereunder. This Promissory Note is subject to all of the terms and
conditions contained in the Loan Agreement, which are incorporated herein by
reference. Capitalized terms used in this Promissory Note shall, unless
otherwise stated herein, have the respective meanings assigned to them in the
Loan Agreement.
3. Event of Default. Upon the occurrence and continuation of an Event
of Default, the principal hereof and accrued interest hereon may be declared to
be, or may become, forthwith due and payable in the manner, upon the conditions
and with the effect provided in the Loan Agreement.
4. No Registration. THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND
THEREFORE CANNOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED UNLESS
IT IS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER ALL
APPLICABLE STATE SECURITIES LAWS, OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
5. Waivers. Any failure of the Lender to exercise any right hereunder
shall not be construed as a waiver of the right to exercise the same or any
other right at any other time.
6. Assignment. This Promissory Note shall not be assigned or
transferred by the Lender without the prior written consent of the Borrower.
7. Controlling Law. This Promissory Note shall be construed and
enforced in accordance with, and governed by the laws of the United States of
America and the State of Delaware (without regard to the principles of conflict
of laws).
8. Severability of Provisions. In case any term or provision of this
Promissory Note shall be invalid, illegal or unenforceable, such provision shall
be severable from the remainder, and the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
9. Headings. The headings of this Promissory Note are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
10. Sealed Instrument. The Borrower intends this to be a sealed
instrument and to be legally bound hereby.
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IN WITNESS WHEREOF, the Borrower has executed this Promissory Note in St.
Petersburg, Florida, effective as of the date first written above.
Precision Systems, Inc.,
a Delaware corporation
By: _______________________________
Its: _____________________________
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EXHIBIT 4.3
WARRANT TO PURCHASE
COMMON STOCK
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. These securities have been
acquired for the account of the holders and not with a view to distribution, and
may not be sold, transferred, pledged or hypothecated in the absence of an
effective registration statement for such securities under the Securities Act of
1933, as amended, or an opinion of counsel delivered to the Company that
registration is not required under such Act.
Precision Systems, Inc.,
a Delaware Corporation
WARRANT CERTIFICATE
Dated as of September ___, 1997 (the "Issue Date")
Warrant to Purchase Common Stock
Precision Systems, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received and pursuant to the terms and conditions of
that certain subscription agreement dated as of September ___, 1997 between the
Company and _______________________, a _____________________________ (the
"Subscription Agreement"), __________________________ or its permitted assigns
(the "Holder") is the registered owner of a warrant to purchase common stock of
the Company (the "Warrant"). The Warrant will entitle the Holder to purchase two
hundred seventy-five thousand (275,000) shares, as adjusted from time to time as
provided in Section 8 hereof, of the common stock, $.01 par value per share, of
the Company (the "Common Stock"). Shares of Common Stock issuable upon exercise
of the Warrant shall be referred to as Warrant Shares and each such share shall
be a Warrant Share. The Warrant may be exercised during the period of time set
forth in Section 3(a) and on or before the sixth anniversary of the date hereof
(the "Expiration Date"), all subject to the following terms and conditions. The
Warrant shall have an exercise price of $4.00 per share (the "Exercise Price").
The Exercise Price for the Warrant shall be subject to adjustment from time to
time as provided in Section 8 hereof.
Section 1. Registration. The Company shall register the Warrant, upon
records to be maintained by the Company for that purpose, in the name of the
Holder. The Company may deem and treat the Holder as the absolute owner thereof
for the purpose of any exercise thereof or any distribution to the holder
thereof, and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
THE WARRANT MAY NOT BE ASSIGNED, TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED
OR OTHERWISE ENCUMBERED BY THE HOLDER THEREOF WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMPANY; PROVIDED, HOWEVER, THAT THE WARRANT MAY BE TRANSFERRED TO AN
AFFILIATE OF THE REGISTERED HOLDER WITHOUT THE WRITTEN CONSENT OF THE COMPANY.
AN "AFFILIATE" OF ANY PERSON OR ENTITY MEANS ANY OTHER PERSON OR ENTITY DIRECTLY
OR INDIRECTLY CONTROLLING, CONTROLLED BY OR UNDER DIRECT OR INDIRECT COMMON
CONTROL WITH SUCH PERSON OR ENTITY.
Section 2. Registration of Transfers and Exchanges.
(a) Transfer of Warrant. The Company shall register a transfer of
the Warrant permitted pursuant to Section 1 hereof upon records to be maintained
by the Company for that purpose, upon surrender of this Warrant Certificate,
with a form of assignment approved by the Company, to the Company at the office
specified in or pursuant to Section 11. Upon any such registration of transfer,
a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the Warrant so transferred shall be issued to the
transferee and a new Warrant Certificate, in similar form, evidencing the
remaining Warrants not so transferred, if any, shall be issued to the then
registered holder thereof.
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(b) Warrant Exchangeable for Different Denominations. This Warrant
Certificate is exchangeable, upon the surrender hereof by the holder hereof at
the office of the Company specified in or pursuant to Section 3(c) hereof, for
new Warrant Certificates, in substantially the form of this Warrant Certificate,
evidencing in the aggregate the right to purchase the number of Warrant Shares
which may then be purchased hereunder, each of such new Warrant Certificates to
be dated the date of such exchange and to represent the right to purchase such
number of Warrant Shares as shall be designated by said holder hereof at the
time of such surrender.
Section 3. Duration and Exercise of Warrant.
(a) The Warrant shall be exercisable by the Holder thereof on any
business day during the five (5) year period commencing on the first anniversary
of the Issue Date through and including the sixth anniversary of the Issue Date
(the "Expiration Date"). At 5:00 P.M., St. Petersburg, Florida time, on the
Expiration Date, the Warrant shall be and become void and of no value to the
extent not exercised prior to such time.
(b) Subject to the provisions of this Warrant Certificate,
including adjustments to the number of Warrant Shares issuable on the exercise
of the Warrant and to the Exercise Price pursuant to Section 8 hereof, the
Holder on or prior to the Expiration Date shall have the right to purchase from
the Company (and the Company shall be obligated to issue and sell to such
Holder) upon payment of the applicable Exercise Price for each Warrant Share to
be so purchased, fully paid Warrant Shares which shall be non-assessable;
provided, however, that the Exercise Price for Warrant Shares issuable upon
exercise of such Warrant shall have been paid by the Holder of such Warrant.
(c) Subject to Sections 5, 10, and 11 hereof, upon surrender of
this Warrant Certificate, with the Form of Election to Purchase attached hereto
duly filled in and signed, to the Company at its office at 11800 30th Court
North, St. Petersburg, Florida 33716, or at such other address as the Company
may specify in writing to the Holder and upon payment of the applicable Exercise
Price multiplied by the number of Warrant Shares then issuable upon exercise of
the Warrant being exercised in lawful money of the United States of America, all
as specified by the holder of the Warrant Certificate in the form of Election to
Purchase, the Company shall promptly, but in no event later than 20 days after
the date of exercise, issue and cause to be delivered to the Holder, and in the
name of the Holder, a certificate for the Warrant Shares issued upon such
exercise of such Warrant. The "Date of Exercise" of the Warrant means the date
on which the Company shall have received (i) the Warrant Certificate, with the
Form of Election to Purchase attached hereto appropriately filled in and duly
signed, and (ii) payment of the applicable Exercise Price for such Warrant.
(d) The Warrant evidenced by this Warrant Certificate shall be
exercisable, either as an entirety or, from time to time, in accordance with the
terms hereof for part only of the number of Warrant Shares the Holder is
entitled to purchase pursuant to this Warrant Certificate. If less than all of
the Warrant Shares evidenced by this Warrant Certificate are exercised at any
time, the Company shall issue, at its expense, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, for the remaining number of
Warrant Shares evidenced by this Warrant Certificate.
Section 4. [Intentionally Omitted]
Section 5. Payment of Taxes. The Company will pay all taxes attributable
to the issuance of the Warrant and the Warrant Shares; provided, however, that
the Company shall not be required to pay any tax in respect of the issuance or
delivery of certificates for Warrant Shares or other securities in respect of
the Warrant Shares upon the exercise of the Warrant.
Section 6. Mutilated or Missing Warrant Certificate. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
Holder the Company will issue, in exchange for and upon cancellation of the
mutilated Warrant Certificate, or in substitution for the lost, stolen or
destroyed Warrant Certificate, a new Warrant Certificate, in substantially the
form of this Warrant Certificate, of like tenor and representing the equivalent
number of Warrant Shares but, in the case of loss, theft or destruction, only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of this Warrant Certificate and, if requested by the
Company, indemnity also reasonably satisfactory to it.
Section 7. Reservation, Listing and Issuance of Warrant Shares. (a) The
Company will at all times have authorized, and reserve and keep available, free
from preemptive rights, for the purpose of enabling it to satisfy any obligation
to issue shares of Common Stock upon the exercise of the Warrant, the number of
shares of Common Stock deliverable upon exercise of the Warrant. The Company
will, at its expense, use its best efforts to cause such shares of Common Stock
issuable upon exercise of the Warrant to be listed (subject to issuance or
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notice of issuance of Warrant Shares) on all stock exchanges on which the Common
Stock is listed not later than September 30, 1998 (the "Lapse Date") or the date
on which the Common Stock is first listed on any such exchange, whichever is
later.
(b) Before taking any action which could cause an adjustment
pursuant to Section 8 hereof reducing the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may be necessary in order that the Company may validly and legally issue
at the Exercise Price as so adjusted Warrant Shares that are fully paid and
non-assessable.
(c) The Company covenants that all shares of Common Stock issuable
upon exercise of the Warrant will, upon issuance in accordance with the terms of
this Warrant Certificate, be (i) duly authorized, fully paid and non-assessable
and (ii) free from all taxes with respect to the issuance thereof and from all
liens, charges and security interests created by the Company.
Section 8. Adjustments of Price and Number of Warrant Shares.
(a) The Exercise Price of the Warrant shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
such Exercise Price pursuant to subsection (b), (c), (d) or (e) of this Section
8, the Holder shall thereafter, prior to the Expiration Date and subject to the
limitations on exercise set forth in this Warrant Certificate, be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the applicable Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise ofsuch Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.
(b) Adjustment of Price upon Issuance of Common Stock. If and
whenever after the Lapse Date and prior to the Expiration Date the Company shall
issue or sell any shares of Common Stock for a consideration per share less than
the Exercise Price of the Warrant in effect immediately prior to the time of
such issue or sale, the Exercise Price for each such Warrant shall be reduced to
the price (calculated to the nearest cent) determined by dividing (A) an amount
equal to the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing Exercise
Price for such Warrant, and (2) the consideration, if any, received by the
Company upon such issue or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issue or sale. No adjustment of any
Exercise Price, however, shall be made in an amount less than $.01 per share,
but any such lesser adjustment shall be carried forward and shall be made at the
time of, and together with, the next subsequent adjustment which together with
any adjustment so carried forward shall amount to $.01 per share or more.
(c) For the purposes of subsection (b) of this Section, the
following clauses shall also be applicable:
(i) Issuance of Rights or Options. In case at any time
following the Lapse Date the Company shall grant any rights (other than
the Warrant) to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "Convertible Securities") whether or not
such rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock issuable upon the exchange of such right or
options or upon conversion or exchange of such Convertible Securities
(determined as provided below) shall be less than the then applicable
Exercise Price of the Warrant in effect immediately prior to the time of
the granting of such rights or options then the total maximum number of
shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to be outstanding and to have issued for such price per share.
Except as provided in clause (iii) of this subsection, no further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities. For the purposes of
this clause (i), the price per share for which Common Stock issuable upon
the exercise of any such rights or options or upon conversion or exchange
of any such Convertible Securities shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon
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the exercise of all such rights or options, plus, in the case of such
rights or options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options.
(ii) Issuance of Convertible Securities. In case the Company
shall issue or sell any Convertible Securities after the Lapse Date,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) shall be less than the Exercise Price for
the Warrant in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of the
date of the issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share, provided
that (1) except as provided in clause (iii) of this subsection, no further
adjustments of any Exercise Price shall be made upon the actual issue of
such Common Stock or upon conversion or exchange of such Convertible
Securities, and (2) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible Securities for
which adjustments of any Exercise Price have been or are to be made
pursuant to the provisions of this subsection (c), no further adjustment
of any Exercise Price shall be made by reason of such issue or sale. For
the purposes of this clause (ii), the price per share for which Common
Stock is issuable upon conversion or exchange of Convertible Securities
shall be determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any rights or options referred to in clause
(i) above, or the additional consideration, if any, payable upon the
conversion or exchange of Convertible Securities referred to in clause (i)
or (ii) above, or the rate at which any Convertible Securities referred to
in clause (i) or (ii) above are convertible into or exchangeable for
Common Stock, shall change at any time following the Lapse Date (other
than under or by reason of provisions designed to protect against
dilution), then the Exercise Price for the Warrant in effect at the time
of such event shall forthwith be readjusted to the Exercise Price which
would have been in effect at such time had such rights, options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold; and on the
expiration of any such option or right or the termination of any such
right to convert or exchange such Convertible Securities, the Exercise
Price then in effect hereunder shall forthwith be increased to the
Exercise Price which would have been in effect at the time of such
expiration or termination had such right, option or Convertible
Securities, to the extent outstanding, immediately prior to such
expiration or termination never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the purchase
price provided for in any such right or option referred to in clause (i)
above or the rate at which any Convertible Securities referred to in
clause (i) or (ii) above are convertible into or exchangeable for Common
Stock, shall decrease at any time under or by reasons of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Security, the Exercise
Price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such right, option or
Convertible Security never been issued as to such Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of such adjustment the
Exercise Price then in effect hereunder is thereby decreased.
(iv) Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in Common Stock or Convertible Securities, any Common Stock or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
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(v) Consideration for Stock. In case any share of Common
Stock or Convertible Securities or any rights or options to purchase any
such Common Stock or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to
be the fair value of such consideration as determined, in good faith and
in the exercise of reasonable business judgment, by the board of directors
of the Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase such shares of Common
Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation
(other than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another corporation), the
amount of consideration therefor shall be deemed to be the fair value as
determined reasonably and in good faith by the board of directors of the
Company of such portion of the assets and business of the non-surviving
corporation as such board may determine to be attributable to such shares
of Common Stock, Convertible Securities, rights or options, as the case
may be.
(vi) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(vii) Treasury Shares and Option or Conversion Shares. The
number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this subsection (c). For the purposes of
subsection (b), the number of shares of Common Stock outstanding at any
given time shall include all shares of Common Stock issuable upon the
exercise of any right or option to purchase Common Stock exercisable as of
the date of such determination and shares of Common Stock issuable upon
the exercise of conversion or exchange rights of any Convertible
Securities the holders of which have the right to exercise such conversion
or exchange rights as of the date of such determination.
(x) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment
of the Exercise Price of the Warrant in case of the issuance of shares of
Common Stock upon the exercise of options or rights granted or provided or
to be granted or provided under employee benefit plans or stock option
plans established for the benefit of employees, consultants or members of
the board of directors of the Company currently in effect or adopted by
the Company after the Issue Date with the approval of the board of
directors of the Company, and shall not be required to make any such
adjustment upon the granting of any options or rights referred to above if
and to the extent that issuance of the shares covered thereby is excepted
by this clause. The Company shall not be required to make any adjustment
of any Exercise Price in the case of the issuance of shares of Common
Stock upon the exercise of any conversion rights by holders of any
Convertible Securities outstanding on the Issue Date including any Series
A Preferred Stock or Series B Preferred Stock of the Company. The Company
shall not be required to make any adjustment of any Exercise Price in the
case of the issuance of any securities of the Company on or prior to the
Lapse Date or upon the issuance of shares of Common Stock upon the
exercise of any conversion rights by holders of any Convertible Securities
issued on or prior to the Lapse Date. The Company shall not be required to
make any adjustment of any Exercise Price in the case of the sale and
issuance of Common Stock upon the exercise of the Warrant or upon
conversion of any share of the Company's Series A Preferred Stock, Series
B Preferred Stock or any security of the Company into which the Series B
Preferred Stock may be converted.
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(d) Adjustment for Certain Special Dividends. In case the Company
shall declare a dividend upon the Common Stock payable otherwise than out of
earnings or earned surplus, determined in accordance with generally accepted
accounting principles, and otherwise than in Common Stock or Convertible
Securities, the Exercise Price in effect immediately prior to the declaration of
such dividend shall be reduced by an amount equal, in the case of a dividend in
cash, to the amount per share of the Common Stock so declared as payable
otherwise than out of earnings or earned surplus, as determined, reasonably and
in good faith, by the board of directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus (other than reevaluation of paid-in-surplus) only to
the extent that such earnings or earned surplus are charged an amount equal to
the fair value of such dividend as determined, reasonably and in good faith, by
the board of directors of the Company. Such reductions shall take effect as of
the date on which a record is taken for the purpose of such dividend, or, if a
record is not taken, the date as of which the holders of Common Stock of record
entitled to such dividend are determined.
(e) Subdivisions or Combination of Stock. In case the Company
shall at any time subdivide the outstanding shares of Common Stock into a
greater number of shares, the numbers of shares of Common Stock purchasable
shall be proportionately increased and the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased, and the number of shares of
Common Stock purchasable shall be proportionately reduced.
(f) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company (i) consolidates with or merges into
any other corporation and is not the continuing or surviving corporation of such
consolidation or merger, or (ii) permits any other corporation to consolidate
with or merge into the Company and the Company is the continuing or surviving
corporation but, in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or substantially
all of its properties and assets to any other corporation, or (iv) effects a
capital reorganization or reclassification of the capital stock of the Company
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash or assets with respect to or in exchange for Common Stock,
then, and in each such case, proper provision shall be made so that, upon the
basis and upon the terms and in the manner provided in this subsection (f), the
holder of this Warrant Certificate, upon the exercise of the Warrant at any time
after the consummation of such consolidation, merger, transfer, reorganization
or reclassification, shall be entitled to receive (at the aggregate Exercise
Price in effect for all shares of Common Stock issuable upon such exercise of
such Warrant immediately prior to such consummation as adjusted to the time of
such transaction), in lieu of shares of Common Stock issuable upon such exercise
prior to such consummation, the stock and other securities, cash and assets to
which such holder would have been entitled upon such consummation if such holder
had so exercised such Warrant immediately prior thereto (subject to adjustments
subsequent to such corporate action as nearly equivalent as possible to the
adjustments provided for in this Section 8).
(g) Notice of Adjustment. Upon any adjustment of any Exercise
Price, then and in each such case the Company shall promptly deliver a notice to
the registered holder of the Warrant, which notice shall state the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares purchasable at such price upon the exercise of each
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based and evidence of the approval of the
Company's independent public accountants.
(h) Other Notices. In case at any time:
(i) The Company shall declare any cash dividend on its
Common Stock;
(ii) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(iii) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights;
(iv) The Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of earnings
or earned surplus or dividends payable in Common Stock);
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(v) There shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with another corporation (other than a subsidiary of
the Company in which the Company is the surviving or continuing
corporation and no change occurs in the Company's Common Stock), or sale
of all or substantially all of its assets to, another corporation;
(vi) There shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or
winding up of the Company; or
(vii) The Company proposes to take any other action or an
event occurs which would require an adjustment of the Exercise Price
pursuant to subsection (i) of this Section 8;
then, in any one or more of said cases, the Company shall give written notice,
addressed to the Holder at the address of such Holder as shown on the books of
the Company, or (1) the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights, or
(2) the date (or, if not then known, a reasonable approximation thereof by the
Company) on which such reorganization reclassification, consolidation, merger,
sale, dissolution, liquidation, bankruptcy, assignment for the benefit of
creditors, winding up or other action, as the case may be, shall take place.
Such notice shall also specify (or if not then known, reasonably approximate)
the date as of which the Holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or
other action, as the case may be. Such written notice shall be given at least
twenty days prior to the action in question and not less than twenty days prior
to the record date or the date on which the Company's transfer books are closed
in respect thereto.
Section 9. No Stock Rights. The Holder as such, shall not be entitled to
vote or be deemed the holder of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise hereof, nor shall
anything contained herein be construed to confer upon the Holder the rights of a
stockholder of the Company or the right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (except as provided herein), or the right
to receive dividends or subscription rights or otherwise, until the Date of
Exercise of Warrant shall have occurred.
Section 10. Fractional Warrant and Fractional Warrant Shares.
(a) The Company shall be required to issue fractions of Warrants
and to distribute Warrant Certificates which evidence fractional Warrants.
(b) The Company shall not be required to issue fractions of
Warrant Shares upon exercise of the Warrant or to distribute certificates which
evidence fractional Warrant Shares. If any fraction of a Warrant Share would,
except for the provisions of this Section 10(b), be issuable on the exercise of
the Warrant (or specified portion thereof), the Company shall pay to the holder
an amount in cash equal to the Current Market Price for one share of Common
Stock on the trading day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction. The Current Market Price of a share
of Common Stock on any day means that the last reported sale price (or, if no
sale price is reported, the average of the high and low bid prices) of the
Common Stock of the Company on such day on the National Association of
Securities Dealers, Inc. automated quotation system or as quoted by the National
Quotation Bureau Incorporated, or if the Common Stock is listed on an exchange,
on the principal exchange on which the Common Stock is listed. In the event no
such quotation is available for any such day, the board of Directors of the
Company shall, acting in good faith, determine the Current Market Price on the
basis of such quotations as it considers appropriate.
Section 11. Notices. All notices, request, demands and other
communications relating to this Warrant Certificate shall (a) be in writing
which shall include communications by facsimile, (b) be (i) sent by registered
or certified mail, postage prepaid, return receipt requested, (ii) by facsimile
or (iii) delivered by hand, and (c) be given at the following respective
addresses and facsimile and the telephone number and to the attention of the
following persons:
(i) If to the registered owner hereof, to it at the address,
facsimile or telephone number furnished by the registered holder to the Company.
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(ii) If to the Company, to it at:
11800 30th Court North
St. Petersburg, Florida 33716
(813) 572-9300 - telephone
(813) 572-7637 - facsimile
Attention: President
or at such other address or facsimile or telephone number or to the attention of
such other person as the party to who such information pertains may hereafter
specify in a notice to the others specifically captioned "Notice of Change of
Address," and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the third business day aftersuch communication is deposited in the mail
addressed as above provided, (ii) if given by facsimile when such communication
is transmitted to the appropriate number determined as above provided in this
Section 11, and (iii) if given by hand delivery, when left at the address of the
addressee addressed as above provided.
Section 12. Binding Effect. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns, and the registered holder or holders from time to time of the Warrant
and Warrant Shares.
Section 13. Survival of Rights and Duties. This Warrant Certificate shall
terminate and be of no further force and effect on the earlier of 5:00 P.M.,
Eastern Standard Time, on the Expiration Date or the date on which the Warrant
have been exercised, except that the provisions of Sections 4, 5, 7(c) and 11
hereof shall continue in full force and effect after such termination date.
Section 14. Governing Law. This Warrant Certificate shall be construed in
accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, The Company has caused this Warrant Certificate to be
executed under its corporate seal by its officers thereunto duly authorized as
of the Issue Date.
Precision Systems, Inc.
By: ____________________________
Its: Vice President
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FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To Precision Systems, Inc.
The undersigned hereby irrevocably elects to purchase _______ Warrant
Shares pursuant to an exercise of the Warrant evidenced by the foregoing Warrant
Certificate for, and to purchase thereunder, _________________ full shares of
Common Stock issuable upon exercise of said Warrants and delivery of $__________
(in cash as provided for in the foregoing Warrant Certificate) and any
applicable taxes payable by the undersigned pursuant to such Warrant
Certificate.
The undersigned requests that certificates for such shares be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
_________________________________
________________________________________
(Print Name)
________________________________________
(Print Address)
________________________________________
If said number of Warrants shall not be all of the Warrants evidenced by the
foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
________________________________________
(Please print name and address)
________________________________________
________________________________________
Name of Holder
Date: _______________, 19____ (Please Print):_______________________
By:_________________________
9
EXHIBIT 4.4
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered into as
of the 30th day of September, 1997 by and among Precision Systems, Inc., a
Delaware corporation (the "Company"), with its principal office at 11800 30th
Court North, St. Petersburg, Florida 33716 and __________________________, a
_______________________ ("Subscriber"), with its principal office at
__________________________________________.
WITNESSETH
WHEREAS the Company desires to issue units (the "Units") each consisting
of a $2,000,000 principal amount 8% unsecured promissory note of the Company due
and payable on January 1, 1999 (each a "Note" and collectively the "Notes") and
a warrant (the "Warrant") to purchase up to 275,000 shares of Common Stock, $.01
par value per share ("Common Stock"), all on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and in further
consideration of the mutual covenants, promises and agreements hereinafter set
forth, it has been and IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE I
Purchase of Securities
1.1 Subscription. The Subscriber, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase one Unit consisting of a Note
and a Warrant. The Note shall be evidenced by a promissory note in the form of
Exhibit A attached hereto and the Subscriber shall have the rights of a Lender
as such term is defined in the Loan Agreement attached hereto as Exhibit B-1.
The Warrant shall entitle the holder thereof to the rights set forth in that
certain Warrant Certificate attached hereto as Exhibit B. For the purpose of
this Agreement, shares of Common Stock issuable upon the exercise of the Warrant
shall hereinafter be referred to as the "Warrant Shares" and the Notes, the
Warrant and the Warrant Shares shall hereinafter be referred to as the
"Securities."
1.2 Purchase Price. The Company agrees to issue and sell to the Subscriber
the Unit for a purchase price of two million dollars ($2,000,000) (the
"Subscription Price"). Payment of the Subscription Price shall be made by wire
transfer or check payable to and delivered to the Company or, if by wire
transfer in accordance with the instructions of the Company, together with an
executed copy of this Agreement and any other documents required to be executed
under this Agreement.
ARTICLE II
Closing
2.1 Closing of Subscription. The closing of the purchase and sale of the
Unit (the "Closing") shall take place at the offices of the Company on such date
as is mutually agreed to by the Company and the Subscriber. At the Closing, the
Company shall deliver to the Subscriber the Note and the Warrant, duly
registered in the Subscriber's name against payment in full by the Subscriber of
the Subscription Price against execution by the Subscriber of this Agreement and
the Loan Agreement.
ARTICLE III
Representations and Warranties
3.1 Investor Representations and Warranties. The Subscriber hereby
acknowledges, represents and warrants to the Company as follows:
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(a) The Subscriber is acquiring the Securities for its own account
as principal, not as a nominee or agent, for investment purposes only, and not
with a view to, or for, resale, distribution or fractionalization thereof in
whole or in part and no other person has a direct or indirect beneficial
interest in the Securities. Further, the Subscriber does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person with respect to any of the
Securities for which it is subscribing.
(b) The Subscriber has full power and authority to enter into this
Agreement, the execution and delivery of this Agreement has been duly
authorized, if applicable, and this Agreement constitutes a valid and legally
binding obligation of the Subscriber.
(c) The Subscriber acknowledges its understanding that the
offering and sale of the Securities is intended to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), by virtue
of Section 4(2) of the Securities Act and the provisions of Regulation D
promulgated thereunder ("Regulation D"). In furtherance thereof, the Subscriber
represents and warrants to, and agrees with, the Company and its affiliates as
follows:
(i) The Subscriber realizes that the basis for the exemption
may not be present if, notwithstanding any representations and/or
warranties to the contrary herein contained, the Subscriber has in mind
merely acquiring the Securities for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise;
(ii) The Subscriber has the financial ability to bear the
economic risk of its investment, has adequate means for providing for its
current needs and personal contingencies and has no need for liquidity
with respect to its investment in the Company; and
(iii) The Subscriber has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Securities. If other than an individual,
the Subscriber also represents it has not been organized for the purpose
of acquiring the Securities.
(d) The Subscriber is an "accredited investor," as that term is
defined in Rule 501 of Regulation D.
(e) The Subscriber:
(i) Has been furnished with those documents identified on
Exhibit C which have been filed by the Company with the Securities and
Exchange Commission (the "SEC Filings") and any and all documents which
may have been made available upon request for a reasonable time prior to
the date hereof, and the Subscriber has carefully read and understands and
has evaluated the risks set forth under "Risk Factors" attached hereto as
Exhibit D and the considerations described in subsections (ii) and (iii)
below relating to the information contained in the SEC Filings.
(ii) Has been provided an opportunity for a reasonable time
prior to the date hereof to obtain additional information concerning the
offering of the Securities, the Company and all other information to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense;
(iii) Has been given the opportunity for a reasonable time
prior to the date hereof to ask questions of, and receive answers from,
the Company or its representatives concerning the terms and conditions of
the offering of the Securities and other matters pertaining to an
investment in the Securities, and has been given the opportunity for a
reasonable time prior to the date hereof to obtain such additional
information necessary to verify the accuracy of the information which was
provided in order for them to evaluate the merits and risks of a purchase
of the Securities to the extent the Company possesses such information or
can acquire it without unreasonable effort or expense and has agreed that
it will keep confidential any non-public information received as part of
its investigation referred to in subsections (i) and (ii) and this
subsection (iii);
(iv) Has not been furnished with any oral representation or
oral information in connection with the offering of the Securities which
is not contained in the SEC Filings; and
(v) Has determined that the Securities are a suitable
investment for the Subscriber and that at this time the Subscriber could
bear a complete loss of such investment.
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(f) The Subscriber is not relying on any statements or
representations made by the Company or its affiliates with respect to economic
considerations involved in an investment in the Securities. Each Subscriber is
capable of evaluating the merits and risks of an investment in the Securities on
the terms and conditions set forth herein.
(g) The Subscriber will not sell or otherwise transfer the
Securities without registration under the Securities Act or an exemption
therefrom and the Subscriber fully understands and agrees that it must bear the
economic risk of its purchase because, among other reasons, the Securities have
not been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states or unless exemptions from such
registration requirements are available. In particular, the Subscriber is aware
that the Securities are "restricted securities," as such term is defined in Rule
144 promulgated under the Securities Act ("Rule 144"), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The
Subscriber also understands that, except as otherwise provided herein, the
Company is under no obligation to register the Securities on its behalf or to
assist him in complying with any exemption from the registration requirements of
the Securities Act or applicable state securities laws. The Subscriber further
understands that sales or transfers of the Securities are further restricted by
state securities laws and the provisions of this Agreement.
(h) No representations or warranties have been made to the
Subscriber by the Company, or any officer, employee, agent, affiliate or
subsidiary of the Company, other than the representations of the Company
contained herein, and in subscribing for Securities the Subscriber is not
relying upon any representations other than those contained herein or in the SEC
Filings.
(i) Any information which the Subscriber has heretofore furnished
or is simultaneously herewith furnishing to the Company with respect to its
financial position and business experience is correct and complete as of the
date of this Agreement and, if there should be any material change in such
information prior to the Closing, it will immediately furnish revised or
corrected information to the Company.
(j) The Subscriber understands and agrees that the certificates
representing the Warrant and the Warrant Shares shall bear the following legend
until (i) such securities shall have been registered under the Securities Act
and effectively been disposed of in accordance with the registration statement;
or (ii) in the opinion of counsel for the Company such securities may be sold
without registration under the Securities Act as well as any applicable "Blue
Sky" or similar state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT
TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
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 SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW.
(k) The Subscriber, if an individual, is a citizen of the United
States, and is at least 21 years of age, or if a partnership, corporation or
trust, the members, shareholders or beneficiaries thereof are all citizens of
the United States and each is at least 21 years of age. The address set forth
below is the Subscriber's correct principal home address, or if the Subscriber
is other than an individual, the Subscriber's correct principal office and the
Subscriber has no present intention of changing such address.
(l) The Subscriber understands that an investment in the
Securities is a speculative investment which involves a high degree of risk of
loss of its entire investment.
(m) The Subscriber's overall commitment to investments which are
not readily marketable is not disproportionate to the Subscriber's net worth,
and an investment in the Securities will not cause such overall commitment to
become excessive.
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(n) The Subscriber has not retained any finder, broker, agent,
financial advisor or other intermediary in connection with the transactions
contemplated by this Agreement and agrees to indemnify and hold harmless the
Company from liability for any compensation to any such intermediary retained by
the Subscriber and the fees and expenses of defending against such liability or
alleged liability.
(o) The Subscriber acknowledges that this offering of Securities
may involve tax consequences and that the contents of the SEC Filings do not
contain tax advice or information. The Subscriber acknowledges that it must
retain its own professional advisors to evaluate the tax and other consequences
of an investment in the Securities.
(p) The Subscriber is duly organized, validly existing, and in
good standing under the laws of its jurisdiction of formation, is duly qualified
to conduct business under the laws of each jurisdiction in which the nature of
the business transacted by it requires such qualification or where failure to so
qualify would have a material adverse effect upon it or its assets or
properties, and has all requisite corporate power and authority to own and
operate its assets and properties and carry on its business as is being or is
contemplated to be conducted.
(q) The execution and delivery of this Agreement and the
performance of the Subscriber's obligations hereunder, including without
limitation the payment of the purchase price in the manner contemplated herein
has been duly and validly authorized by the taking of all requisite corporate
action of the Subscriber, and does not constitute a breach of or violate, nor
create an event of default under, any indenture, mortgage, deed of trust,
fiduciary duty toward any other person or entity, contract, agreement,
certificate of incorporation, bylaw, order, judgment, or decree to which the
Subscriber or any of its principals is a party or by which the Subscriber or any
of its principals or assets are bound. When executed and delivered by the
Subscriber, this Agreement will constitute a valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with the terms
hereof, except as such enforcement may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity.
(r) To the Subscriber's best knowledge, no consents, approvals,
authorizations, expiration of any statutory waiting periods, or orders of any
court or government agency relating to the Subscriber or its business is
required as a condition of the Subscriber's purchase of the Securities in the
manner contemplated herein, and receipt of the Securities in exchange therefor,
or the execution and deliver of this Agreement or consummation of the
transactions contemplated herein.
(s) To the Subscriber's best knowledge, there is no pending or
threatened litigation, injunction, action, investigation, or other proceeding
against it or to which it is a party or by which it or any of its principals,
properties, or assets is or may be affected seeking to enjoin its execution,
delivery, or performance of its obligations under this Agreement or which, if
adversely determined, either individually or in the aggregate, would have a
material adverse effect upon the Subscriber, the Subscriber's ability to conduct
its business as it is being or contemplated to be conducted, or the Subscriber's
ability to perform its obligations hereunder; and there is no judgment, decree,
injunction, rule, or order of any governmental authority or arbitrator
outstanding against the Subscriber having, or which, insofar as reasonably can
be foreseen, in the future would have, any such effect.
(t) The foregoing representations, warranties and agreements shall
survive the execution of this Agreement.
3.2 Company Representations and Warranties. The Company hereby represents
and warrants to the Subscriber as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has or will have
on or prior to Closing all requisite corporate power and authority (i) to own
and operate its properties and assets and to carry on its business as now
conducted; (ii) to execute and deliver this Agreement; (iii) to issue and sell
the Shares and the Warrant; (iv) upon the conversion of the Warrant to issue
shares of Common Stock; and (v) to carry out the provisions of this Agreement.
(b) All corporate action on the part of the Company, its officers
and directors necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder at the
Closing, and the authorization, issuance (or reservation for issuance, as
applicable), sale, and delivery of the Note and Warrant being sold hereunder and
the Common Stock to be issued upon the exercise of the Warrant has been taken or
will be taken prior to the Closing. This Agreement constitutes a valid and
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legally binding obligation of the Company, enforceable in accordance with its
terms except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, or as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies.
(c) The authorized capital stock of the Company consists of (i)
30,000,000 shares of Common Stock, of which 17,696,367 shares (including shares
held in treasury) are issued and outstanding as of June 30, 1997; (ii) 2,415,946
shares of Class B Common Stock, of which no shares are issued and outstanding as
of the date hereof; (iii) 50,000 shares of preferred stock, of which 10,000 have
been designated Series A Preferred Stock and are issued and outstanding and
convertible at the election of the holder thereof into 1,218,487 shares of
Common Stock (subject to adjustment pursuant to certain anti-dilution
provisions); and (iv) 4,500 shares of preferred stock which have been designated
Series B Preferred Stock, all of which are issued and outstanding as of the date
hereof and which are not presently convertible into shares of Common Stock of
the Company (such conversion right being exercisable only after December 31,
1998). In addition, the Company has granted options to acquire up to 2,399,488
shares of Common Stock to certain former and current employees, consultants and
directors of the Company pursuant to stock option plans whereby the Company has
reserved for issuance up to 4,000,000 shares of Common Stock. Except as set
forth in this subsection (c) or otherwise provided in this Agreement, there are
no options, warrants or other rights to purchase any of the Company's authorized
but unissued capital stock.
(d) The Warrant Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the purchase price, will be duly
and validly issued, fully paid, non-assessable, not subject to any preemptive
rights, and free and clear of all liens, claims and encumbrances. Shares of
Common Stock have been duly and validly reserved for issuance upon exercise of
the Warrant into Common Stock. When issued upon the exercise of the Warrant or
upon the conversion of the Shares, the Warrant Shares will be duly and validly
issued, fully paid, non-assessable, not subject to any preemptive rights, and
free and clear of all liens, claims and encumbrances.
(e) To the best of the Company's knowledge, no consent, approval,
qualification, order or authorization of, or filing with, any local, state, or
federal governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery, or performance of this
Agreement, the offer, sale or issuance of the Securities, except for the consent
of ______________________ to the incurrence of indebtedness by the Company which
consent shall be delivered at or prior to the Closing and except to the extent
that a pre-merger notification under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of any applicable
waiting period without action having been taken to prevent the consummation of
the transactions contemplated may be required in connection with the exercise of
the Warrant and the delivery of the Warrant Shares.
(f) Subject in part to the truth and accuracy of the Company's
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Securities, as contemplated by this Agreement are exempt from
the registration requirements of the Securities Act of 1933, as amended
("Securities Act"). Neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
(g) [Intentionally Omitted]
(h) The Company is not in violation or default of any provision of
its Certificate of Incorporation, Bylaws, or any mortgage, indenture, agreement,
instrument, or contract to which it is a party or by which it is bound or, to
the best of its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company, except to the
extent that the failure to do so would not have a material adverse effect on the
Company. The execution, delivery, and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or be in material conflict with or constitute, with
or without the passage of time or giving of notice, either a material default
under any such provision or an event that results in the creation of any
material lien, charge, or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or non-renewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations, or any of its assets or properties.
(i) No representation or warranty of the Company contained in this
Agreement or any other such document furnished to the Subscriber by or on behalf
of the Company, including without limitation, the SEC Filings contains an untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading. The SEC Filings conformed in all material respects as
of the date each was filed with the SEC to the disclosure requirements
applicable to such filing.
(j) The Company has filed the required federal, state and local
tax returns required of it and has paid all material taxes shown on such returns
as they become due. No claim has been assessed and is unpaid with respect to
such taxes.
(k) Except as described in the SEC filings, there is no action or
proceeding pending or, to the knowledge of the Company, currently threatened
against the Company in any court or before any arbitration panel or before or by
any federal, state or other governmental department or agency which may
substantially affect the validity of this Agreement or the right of the Company
to enter into it, or to consummate the transactions contemplated hereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company.
(l) The Company owns its property and assets free and clear of all
mortgages, liens, claims, and encumbrances other than liens arising by operation
of law which do not affect the Company's use of such property and assets. With
respect to the property and assets it leases, the Company is in compliance with
such leases and, to the best of its knowledge, holds a valid leasehold interest
free of any liens, claims, or encumbrances.
(m) Except as otherwise disclosed in the audited financial
statements at and for the year ended August 31, 1996, or the audited financial
statements at December 31, 1996, and for the four-month period then ended,
copies of which have been previously delivered by the Company to the Subscriber
(the "Financial Statements"), since December 31, 1996 there has not been (i) any
changes in the assets, liabilities, financial condition or operations of the
Company from that reflected in the Financial Statements except changes in the
ordinary course of business which have not been, either in any individual case
or in the aggregate, materially adverse; (ii) any material change, except in the
ordinary course of business, in the contingent obligations of the Company,
whether by way of guaranty, endorsement, indemnity, warranty or otherwise; (iii)
any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties or business of the Company; (iv) any
declaration or payment of a dividend or other distribution of the assets of the
Company; or (v) to the best of the Company's knowledge, any other event or
condition of any character which materially and adversely affected the Company's
assets, liabilities, financial condition or operations.
(n) The foregoing representations, warranties and agreements shall
survive the execution of this Agreement.
ARTICLE IV
Registration Rights
4.1 Registration
(a) The Company shall use its best efforts to effect the
registration under the Securities Act of the Warrant Shares prior to September
30, 1998 to the extent required to permit the disposition (in accordance with
the intended methods as specified in writing by the Subscriber at any time prior
to September 30, 1998) of the Warrant Shares; provided, however, that the
Company shall not be required to maintain the effectiveness of such registration
at any time when an exemption from registration is otherwise available to the
Subscriber affording the Subscriber the right to dispose of the Warrant Shares.
Any registration requested pursuant to this Section 4.1 shall be effected by the
filing of a registration statement on Form S-1, S-2 or S-3 (or any other form
that includes substantially the same information as would be required to be
included in a registration statement on such forms as presently constituted,
other than a registration statement relating to offers to employees pursuant to
plans or of securities to be issued in business combinations).
4.2 [Intentionally Omitted]
4.3 Precedence of Registration Rights.
The Subscriber and the Company agree that the registration rights
contained in this Article IV are in addition to any and all registration rights
which Subscriber is entitled to under any other agreement with the Company.
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4.4 Registration Procedures.
(a) If, whenever and to the extent that the Company is required to
use its best efforts to register shares of Common Stock pursuant to this Article
IV, the Company shall as promptly as practicable:
(i) Prepare and file with the SEC a registration statement
with respect to such shares, and cause such registration statement to comply as
to form and content in all material respects with the SEC's forms, rules and
regulations and use its reasonable best efforts to cause such registration
statement to become effective;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as all of such shares have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement;
(iii) Furnish to the Subscriber such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits, except that the Company shall not
be obligated to furnish the Subscriber with more than three copies of such
exhibits), and such number of copies of the prospectus that is a part of such
registration statement (including each preliminary prospectus and any summary
prospectus), as the Subscriber may reasonably request in order to facilitate the
disposition of the Warrants Shares;
(iv) Use its best efforts to register or qualify the Warrant
Shares for sale under the securities or blue sky laws of such jurisdictions in
the United States as the Subscriber shall reasonably request in writing, and to
keep such registration or qualification in effect for so long as the period of
distribution contemplated thereby, and do any and all other acts and things
which may be necessary or advisable to enable the disposition in such
jurisdictions of the Warrant Shares, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, to subject
itself to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) [Intentionally Omitted];
(vi) Notify the Subscriber, at any time when a prospectus
relating to a registration statement is required to be delivered under the
Securities Act, of 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 the Subscriber prepare and furnish to the Subscriber 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 shares, 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 light of the circumstances then existing;
(vii) Use its best efforts to list the Warrant Shares so
registered on any securities exchange (including NASDAQ) on which the Common
Stock of the Company is then listed, if such shares are not already so listed
and if such listing is then permitted under the rules of such exchange; and
(viii)Make available for inspection by the Subscriber, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any the Subscriber,
underwriter, attorney, accountant or agent in connection with such registration
statement.
(b) Required Actions by the Subscriber. In connection with the
registration of Warrant Shares pursuant to this Article IV, the Subscriber
hereby agrees as follows:
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(i) the Subscriber shall cooperate with the Company and any
underwriters to facilitate the timely preparation and filing of the registration
statement, and for so long as the Company is obligated to file and keep
effective the registration statement, shall provide to the Company, in writing,
for use in the registration statement, all such information regarding the
Subscriber and their plan of distribution of the Warrant Shares as may be
necessary to enable the Company to prepare the registration statement and
prospectus covering such Warrant Shares, to maintain the currency and
effectiveness thereof and otherwise to comply with all applicable requirements
of law in connection therewith;
(ii) the Subscriber shall timely complete and execute all
questionnaires, powers of attorney, indemnities, hold-back agreements,
underwriting agreements and other documents required under the terms of any
underwriting arrangements or by the SEC or by any state securities regulatory
body;
(iii) during such time as the Subscriber may be engaged in a
distribution of Warrant Shares registered pursuant to this Article IV, the
Subscriber shall comply with Regulation M promulgated under the Exchange Act
(the "Rules"), to the extent applicable, and pursuant thereto it shall, among
other things: (w) not engage in any stabilization activity in connection with
the securities in contravention of the Rules; (x) distribute the shares solely
in the manner described in the registration statement; (y) cause to be furnished
to each broker through whom the shares may be offered, if any, or to the offeree
if an offer is not made through a broker, such copies of the prospectus and any
amendment or supplement thereto and documents incorporated by reference therein
as may be required by law; and (z) not bid for or purchase any securities of the
Company or attempt to induce any person to purchase any securities of the
Company other than as permitted under the Exchange Act;
(iv) upon receipt of a notice from the Company, promptly
discontinue any distribution of shares until notified by the Company that the
distribution of shares may re-commence;
(v) upon written notice from the Company that the Company
intends to proceed with a distribution of any of its shares and that in
connection therewith it requires the suspension by the Subscriber of the
distribution of its shares, to cease distributing such shares until such time as
the distribution by the Company has been completed; and
(vi) at least five (5) days prior to any distribution of
registered shares other than in an underwritten offering, the Subscriber will
(y) advise the Company in writing of the dates on which the distribution will
commence and terminate, the number of the shares to be sold and the terms and
the manner of sale; and (z) inform the Company and any broker/dealers through
whom sales of the shares may be made when each distribution of such shares is
completed.
(c) Registration Expenses. The registration expenses incurred in
connection with any registration pursuant to this Article IV shall be paid in
full by the Company except that the Subscriber shall pay its own legal expenses
and all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of any Warrant Shares owned by the
Subscriber and sold pursuant to a registration statement effected pursuant to
this Article IV.
(d) Postponement. The Company shall be entitled to postpone the
filing of a registration statement otherwise required to be prepared and filed
by it pursuant to Section 4.1, for a reasonable period of time not to exceed (x)
with respect to clause (i) of this sentence, the date which is five (5) days
after the filing with the SEC of the Company's next regularly required quarterly
or annual report and (y) with respect to clauses (ii) and (iii) of this
sentence, 60 days, if, at the time it receives a registration request from
Subscriber, (i) such registration would require the public disclosure of
material non-public information concerning any transaction or negotiations
involving the Company or any affiliate (as defined in Rule 12b-2 under the
Exchange Act) that, in the opinion of counsel to the Company, is not yet
required to be publicly disclosed and the Board of Directors of the Company, in
good faith, determines that such disclosure would materially interfere with such
transaction or negotiations, (ii) such registration would interfere, in the good
faith judgment of the Board of Directors, with bona fide financing plans of the
Company or would otherwise require premature disclosure of information which
would adversely affect or otherwise be detrimental to the Company, or (iii) the
Company proposes to file a registration statement under the Securities Act for
the offering and sale of securities for its own account in an underwritten
offering and the managing underwriter therefor shall advise the Company in
writing that in its opinion the filing or effectuation of a registration
requested pursuant to Section 4.1 herein would materially adversely affect the
success of the offering of the securities proposed to be registered for the
account of the Company.
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(e) Holdback Agreements. If any registration of Shares pursuant to
this Article IV shall be in connection with an underwritten public offering, the
Subscriber agrees not to effect any public sale or distribution, including any
sale under Rule 144 of any shares of Common Stock or any other security
convertible into or exchangeable or exercisable for any shares of Common Stock
(in each case, other than as part of such underwritten public offering) during
the ten (10) days prior to, and during the 90-day period (or such longer period
as any underwriter may reasonably request) beginning on, the effective date of
the related registration statement. The Company may impose stop-transfer
instructions with respect to the shares subject to the foregoing restrictions
during such period.
(f) Term. The indemnification obligations contained in subsections
(g) and (h) shall survive for the period of the statute of limitations with
respect thereto.
(g) Indemnification. Each of the Subscriber and the Company agree
to indemnify the other in connection with any registration effected pursuant to
this Article IV as follows:
(i) To the extent permitted by law, the Company will
indemnify the Subscriber, its officers, directors, employees, subcontractors,
consultants, agents, legal counsel, and accountants and each underwriter, broker
or dealer, if any, of the Company's securities covered by such a registration
statement, and each person who controls the Subscriber or such underwriter,
broker or dealer within the meaning of Section 15 of the Securities Act, against
all expenses, claims, losses, damages, and liabilities (or actions, proceedings,
or settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular, or other document (including any related
registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on 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, or any violation by the
Company of the Securities Act, the Exchange Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse the Subscriber and its officers, directors,
employees, subcontractors, consultants, agents, legal counsel, and accountants,
each such underwriter, broker or dealer, and each person who controls the
Subscriber or such underwriter, for any legal and other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by or on behalf
of the Subscriber or such underwriter, broker or dealer and stated to be
specifically for use therein or any failure by the Subscriber or such
underwriter, broker or dealer to deliver a final prospectus or supplement or
amendment correcting earlier documents. It is agreed that the indemnity
agreement contained in this Article IV shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company.
(ii) To the extent permitted by law, the Subscriber will
indemnify the Company, each of its officers, directors, partners, employees,
subcontractors, consultants, agents, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, and each person who controls the Company or such underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, 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, and will reimburse
the Company, each of its officers, directors, partners, employees,
subcontractors, consultants, agents, legal counsel, and accountants, each such
underwriter, and each such control person, for any legal and other expenses
reasonably incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Subscriber; provided, however, that the Subscriber will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in strict
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conformity with information pertaining to the Subscriber, as such, furnished in
writing to the Company by the Subscriber stated to be specifically for use in
such registration statement and prospectus; provided, further, however, that the
liability of the Subscriber hereunder shall be limited to the proportion that
the public offering price of the Warrant Shares sold by the Subscriber under
such registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by the Subscriber from the sale of the Warrant Shares covered by such
registration statement; and provided, further, however, that the obligations of
the Subscriber hereunder shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Subscriber.
(iii) If the indemnification provided for in Section 4.5(g) is
held by a court of competent jurisdiction to be unavailable to the party seeking
such indemnification (the "Indemnified Party") with respect to any loss,
liability, claim, damage, or expense referred to therein, then the party which
is required to provide indemnification pursuant to Section 4.5(g) (the
"Indemnifying Party") in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations, provided,
however, that in any such case, (x) no such Indemnifying Party will be required
to contribute any amount in excess of the public offering price of all shares
offered by it pursuant to such registration statement; and (y) no person or
entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(iv) Notwithstanding the foregoing or Section 4.5(h) below,
to the extent that the provisions on indemnification contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(h) Indemnification Procedures. Each party entitled to
indemnification under Section 4.5(g) of this Agreement (the "Indemnified Party")
shall give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and (if the claim is made by a
third party) shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligations to
the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, 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 to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(i) Delay of Registration. the Subscriber shall have no right to
take an action to restrain, enjoin or otherwise delay any registration as a
result of any controversy that might arise with respect to the interpretation or
implementation of this Article IV.
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ARTICLE V
Miscellaneous
5.1 Indemnity. Without prejudicing any other remedy available to the
parties at law or in equity and except as set forth in Article IV hereof, the
parties hereby covenant, immediately upon demand therefor, to indemnify, defend,
and hold each other (and their respective subsidiary, affiliated, or parent
entities, officers, directors, stockholders, attorneys, employees, agents, and
representatives) harmless from and against any and all costs, losses, damages,
penalties, fines, or expenses (including without limitation reasonable
attorneys' fees, court costs, and associated expenses) suffered, imposed upon,
or incurred by them in any manner arising out of, relating to, or in connection
with the following:
(a) any representation or warranty of either of the parties set
forth herein being untrue or incorrect in any material respect or the failure of
either of the parties to materially observe or timely and fully perform any of
their respective obligations hereunder;
(b) any material misrepresentation in or material omission from
any information provided by the parties to each other in connection with this
Agreement or the consummation of the transactions contemplated herein; and
(c) any expenses, claims, costs, or other liabilities or
obligations of any description whatsoever arising from or in any way connected
with any claim that may be brought against either party by a stockholder of that
party.
5.2 Modification. Neither this Agreement nor any provisions hereof shall
be modified, discharged or terminated except by an instrument in writing signed
by the party against whom any waiver, change, discharge or termination is
sought.
5.3 Notices.
(a) Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (i) deposited, postage prepaid, in a United
States mail letter box, registered or certified mail, return receipt requested,
addressed to such address as may be given herein, or (ii) delivered personally
at such address.
(b) Addresses:
If to the Company to:
Precision Systems, Inc.
11800 30th Court North
St. Petersburg, Florida 33716
Facsimile: (813) 573-9193
Attn: President
If to Subscriber to the address set forth on the signature
page hereof.
5.4 Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
5.5 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns. If the
Subscriber is more than one person, the obligation of the Subscriber shall be
joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and its heirs, executors, administrators and successors
5.6 Entire Agreement. This instrument contains the entire agreement of the
parties and there are no representations, covenants or other agreements except
as stated or referred to herein.
5.7 Assignability. This Agreement is not transferable or assignable by the
Subscriber.
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5.8 Governing Law; Jurisdiction and Choice of Forum. Notwithstanding the
place where this Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of Delaware.
5.9 Pronouns. The use herein of the masculine pronouns "him" or "his" or
similar terms shall be deemed to include the feminine and neuter genders as well
and the use herein of the singular pronoun shall be deemed to include the plural
as well.
5.10 Severability. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect.
5.11 Waiver. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party
5.12 Further Assurances. The parties agree to execute and deliver all such
further documents agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
IN WITNESS WHEREOF, the Company and the Subscriber have executed this
Agreement as of the date first written above.
_____________________________ Precision Systems, Inc.,
a ___________________________ a Delaware Corporation
_____________________________ __________________________________
By: _________________________ By: ______________________________
Its: ________________________ Its: _____________________________
Address:
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Exhibit A
Form of Note
[Attached]
13
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Exhibit B
Warrant Certificate
[Attached]
14
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Exhibit B-1
Loan Agreement
[Attached]
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Exhibit C
SEC Filings
The Company's Report on Form 10-K for the transition period ended December 31,
1996.
The Company's Report on Form 10-K for the fiscal year ended August 31, 1996.
The Company's Quarterly Report on Form 10-Q for the quarters ended March 31 and
June 30, 1997.
The description of the Common Stock of the Company which is contained in the
Company's Registration Statement on Form 10 dated April 27, 1992, amended by
Form 8 on June 22, 1994, and July 24, 1994 and August 3, 1994.
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Exhibit D
Risk Factors
Dependence on Certain Customers
Sales to MCI Telecommunications, Inc. accounted for approximately 45% and
6%, respectively of the Company's revenues for the year ended August 31, 1996
and the four months ended December 31, 1996. The loss of this customer could
have a material adverse effect on the Company's operations and financial
condition.
Competition
The worldwide telecommunications industry is highly competitive. The
Company believes that the features and functionalities of its products coupled
with its distribution capability, system reliability, service, support, and
pricing, position the Company to compete in the telecommunications industry
worldwide. In addition, the Company is committed to ongoing research and
development (R&D) efforts and is dedicated to developing new products and
strengthening existing products. The Company views its extensive R&D efforts as
essential to maintaining a competitive position in the industry.
One of the most important competitive advantages for the Company is its
multi-application platform. It is the Company's view that the majority of
service providers purchasing enhanced services now consider it a necessity to
have the ability to run multiple applications on a single platform. If a service
provider introduces an enhanced service that does not deliver the expected
subscriber acceptance, it has the capability to add-on or replace the service
with a different application which can run on the same installed platform. A
multi-application platform diffuses the risk associated with the investment
required to run enhanced services. In addition, the Company's multi-application
platform enables a layered, open architecture design to support the most widely
used hardware solutions (including media servers, switches, voice response
units, and network standards).
In the United States, the manufacturing prohibition that precluded the
Regional Bell Operating Companies ("RBOCs") from manufacturing hardware and
software that provide voice processing services has been lifted. This allows the
RBOCs to compete against the Company for these products. It is the Company's
view that the RBOCs will focus their priorities on protecting their existing
customers and markets, moving into their competitors' markets, and introducing
new services. The Company believes that in order to introduce new services
competitively, the RBOCs will contract with companies, such as Precision
Systems, so as to eliminate the large capital investment, expertise, and time
necessary to develop these products. However, the Company could potentially be
competing with the RBOCs for provision of these types of services.
Internationally, it is the Company's view that the deregulation underway
or proposed in many countries will continue to increase the opportunities for
expansion of markets for the Company's products. The acquisition of Vicorp was a
major factor in establishing an international presence for the Company as Vicorp
is a European-based company that has an existing customer base and strong
partner relationships. See "International Operations."
The Company expects to continue to face substantial competition from
existing and new competitors including other companies with considerably greater
financial, technical, marketing and sales resources. The Company also
anticipates that a number of its competitors will be introducing new or enhanced
products during the next several years. Accordingly, other companies may succeed
in developing products earlier than the Company or developing products that are
more effective or less costly than those developed and introduced by the
Company.
Volatility of Stock Price
Based on its trading history, the Company believes that the market for the
Company's Common Stock is highly volatile. Factors such as quarterly
fluctuations in operating results, announcements by the Company or its
competitors or technological innovations or product improvements, as well as
changes in general economic conditions and other factors, potentially affect the
market price of the Common Stock. The Company's three largest shareholders
("Large Shareholders"), Alta Investissements SA (2,808,427 shares of Common
Stock), Vulcan Ventures Incorporated (2,750,000 shares of Common Stock) and RMS
Limited Partnership (2,415,945 shares of Common Stock and 10,000 shares of
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<PAGE>
Series A Preferred Stock which are convertible into 1,218,487 shares of Common
Stock) own large blocks of the Company's Common Stock. RMS Limited Partnership
has exercised its "piggyback" registration rights with respect to 2,415,495
shares of Common Stock. The Company has caused the resale of those shares of
Common Stock to be registered under the Securities Act, which registration could
cause a large number of shares of Common Stock to be sold in the public market.
The Company is unable to predict the effect that sales by the Large Stockholders
may have on the then prevailing price of the Common Stock. However, such sales
may have an adverse effect on the market price for the Common Stock and could
impair the Company's ability to raise capital through an offering of its
securities. See "Shares Eligible for Future Sale."
Key Personnel and Management of Growth
The Company's success will depend upon the continued contributions of its
officers and key personnel, the loss of any of whom could materially adversely
affect the Company's operations. The Company's growth will depend upon its
ability to attract and retain skilled employees, particularly in sales and
research and development, and the ability of its officers and key employees to
successfully manage growth, to implement appropriate management information
systems and controls to assure timely delivery of the Company's products, and to
continue to refine its products and to develop new products which incorporate
advancements in technology. Any failure to do so could have a material adverse
effect on the Company's operations.
Business-Related Risks
The information set forth under the captions "Markets", "Competition" and
"Customers" in Part I of the Company's Annual Report on Form 10-K for the
transition period ended December 31, 1996, in addition to the other information
included therein, is hereby incorporated by reference herein.
International Operations
A significant portion of the Company's business is derived from
international markets, including major operations throughout Europe. Such
operations may be subject to various risks including governmental activities
that may limit or disrupt markets, restrict the movement of funds or result in
the deprivation of contract rights or the taking of property without fair
compensation. In certain countries, such operations may be subject to the
additional risk of fluctuating currency values and exchange controls. In the
international markets in which the Company operates, it is subject to various
laws and regulations with respect to the operation and taxation of its business,
the imposition, application and interpretation of which can prove to be
uncertain.
Dividend Policy
The Company has not paid any cash dividends on its Common Stock. It is
currently contemplated that the Company will not pay cash dividends on its
Common Stock in the immediately foreseeable future. The payment and level of
cash dividends by the Company on its Common Stock are subject to the discretion
of the Board of Directors of the Company. Decisions regarding the payment of
dividends will be based upon a number of factors, including the operating
results and financial requirements of the Company. The Company's dividend policy
will be reviewed by the Board of Directors of the Company at such future times
as may be appropriate in light of relevant factors existing at such times.
Technological Changes
The market for the Company's products is subject to rapid technological
change, requiring a high level of expenditures by the Company for research and
development. Current competitors or new market entrants may introduce and
deliver new products or features that could adversely affect the competitive
position of the Company's systems in some or all of its markets. In order to
maintain its competitive position, the Company must continue to enhance its
existing products and to develop and market new products successfully, and there
is no assurance that the Company will be able to do so.
The Company releases performance enhancements and new features for its
products on an ongoing basis. Because of the increasing complexity of the
Company's products, these efforts have continued to increase in technical
difficulty. Products as complex as the Company's often contain undetected errors
or "bugs" when first released, which are discovered only after the product has
been used by different customers and in varying applications. Because of the
importance the Company places on product reliability, the Company has, from time
to time, temporarily delayed product shipments to complete "debugging" efforts.
Moreover, rapid technology changes in the voice and data communications industry
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<PAGE>
may render the Company's technology obsolete at any time, requiring the Company
to react quickly to develop more sophisticated and competitive technology and
thereby increasing the possibility of design errors. Identifying and correcting
errors and making required design modifications typically is costly, can be time
consuming and be expected to become more difficult as the Company's products
increase in complexity. Despite extensive testing, there can be no assurance
that errors will not be discovered in the future, causing delays in
productintroductions and shipments or requiring design modifications which could
advers ely affect operating results.
Limited Sources of Supply
Although the Company generally uses standard parts and components in
assembling its products, certain of the processing boards used in the Enhanced
Services Platform ("ESP") platform are currently manufactured to the Company's
specifications by a single supplier. The Company is currently exploring the
availability of additional manufacturing capacity for these processing boards.
To date, the Company has been able to obtain adequate supplies of these
components in a timely manner from existing sources. However, delay or lack of
supply from existing sources or the inability to develop alternative sources if
and as required in the future could adversely affect the Company's operating
results.
Marketing Uncertainties
The Company plans to expand its current efforts to market its product by
increasing the number of its direct sales personnel and by entering into
additional joint marketing arrangements with computer and telephone switch
manufacturers. The Company expects that, for 1997, it will substantially
increase its marketing efforts in the Asia/Pacific region in order to increase
its revenue opportunities. In the course of expanding its marketing efforts, the
Company may encounter many of the difficulties typically associated with such an
expansion, including problems in identifying and retaining qualified sales
personnel. While the Company believes that an expanded marketing effort will
contribute to an increase in sales, there can be no assurance that this increase
will occur or that any increase will be sufficient to offset increased costs of
marketing.
Future Operating Results, Cash Flow and Quarterly Fluctuations
Based on the fact that the Company acquired Vicorp N.V. and subsidiaries
in April, 1996 and BFD Productions in October, 1996 (both acquisitions accounted
for using the purchase method) and that the Company participates in a rapidly
changing technological market, the Company can give no assurance as to its
ability to generate revenue growth, profitability or positive cash flow on a
quarterly or annual basis. The Company's operating expenses are increasing as
the Company expands its operations, and operating results for 1997 will
potentially be adversely affected if revenues do not increase correspondingly.
Management is actively involved in discussions with several potential sources of
capital investment. The Company expects that with the recent acquisitions of
Vicorp N.V. and BFD Productions, Inc., its working capital requirements will
increase significantly over prior periods. The Company will be able to fund its
operating and investing activities through 1997 through the use of its current
working capital, including the collection of existing accounts receivables and
the generation of future revenue. In the event that such sources prove to be
insufficient, the Company may be required to seek additional debt or equity
financing. However, there is no assurance that any such efforts will result on
additional capital sources for the Company.
Business Expansion
The Company expects to engage in significant research and development and
to undertake marketing efforts in order to introduce new products and services.
There can be no assurances that such products and services can be developed or
marketed or that the sales of such products and services will be profitable to
the Company. In addition, the Company may attempt to acquire complementary
businesses which manufacture products or provide services in the industry. There
can be no assurances that acquisition candidates can be found, that acquisitions
can be consummated on favorable terms or that such acquisitions, if completed,
will be successful. Additionally, given the Company's acquisition of Vicorp N.V.
and its large presence in international markets, regulatory, monetary, and
inflationary factors can potentially negatively impact the Company's operations
in the future.
Shares Eligible for Future Sale
Subject to certain limitations, Vulcan Ventures Incorporated ("Vulcan") is
entitled to request the registration of the greater of 750,000 shares of Common
Stock or 10% of the number of outstanding shares of Common Stock and to
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<PAGE>
"piggyback" on registrations effected by the Company. Vulcan owns 2,750,000
shares of Common Stock. Additionally, Alta Investisements SA has certain demand
and "piggyback" registration rights with respect to its 2,808,427 shares of
Common Stock. By exercising their registration rights, subject to certain
conditions, such holders could cause a large number of shares of Common Stock to
be sold in the public market. The Company is unable to predict the effect that
sales by such holders may have on the then prevailing price of the Common Stock.
However, such sales may have an adverse effect on the market price for the
Common Stock. See "Volatility of Stock Price."
Litigation
The Company is subject to certain legal proceedings in the ordinary course
of business (see Item 3 - "Legal Proceedings" of the Company's December 31, 1996
Form 10-K). After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their final resolution will not have
a significant adverse effect upon the Company's business or its consolidated
financial statements, although there can be no assurance given of the ultimate
outcome of any of such litigation.
The Company operates in an industry with increased risk of litigation
resulting from aggressive prosecution of intellectual property claims. This
litigation uncertainty could potentially postpone, delay or eliminate potential
sales opportunities and, therefore, affect the Company's operations.
Product Protection
The Company relies on a combination of trade secrets and copyright laws,
patents, licenses, non-disclosure agreements, and technical measures to protect
its rights in its products. However, there can be no assurance that these
measures will fully protect the Company from the wrongful disclosure or
misappropriation of its proprietary information.
Patents and Licenses
The Company has obtained a patent for certain elements of the ESP
platform. There can be no assurance, however, that the Company's intellectual
property protection will be sufficient to prevent competitors from developing
similar technology. The Company currently licenses certain technology from third
parties and plans to do so in the future. Although the Company is not aware of
any infringement by its products or patent on any patent owned by any third
party, if such infringement were to exist, it could have a material adverse
effect on the Company. The Company believes that any additional licenses or
other rights to products or features under patents or copyrights of others could
be obtained under conditions that would not have a material adverse effect on
the Company; however, there can be no assurance of this.
Fixed Price Contracts
The Company negotiates certain of its customer contracts under fixed-price
terms. The Company expends significant effort to analyze the requirements of
such opportunity in order to minimize any potential cost over-runs above the
contract value. However, there an be no assurance that such measures will fully
protect the Company against material losses on these fixed-price contracts.
20
EXHIBIT 20.1
PRECISION SYSTEMS RAISES $6 MILLION FROM MAJOR INVESTORS
October 1, 1997 8:42 AM EDT
St. Petersburg, Fla.--(BUSINESS WIRE)--October 1, 1997--Precision Systems, Inc.
(NASDAQ:PSYS, BOS:PNS) today announced that it has completed a $6 million
financing with Vulcan Ventures Incorporated, Didier Primat, and RMS Limited
Partnership. In connection with the financing, each shareholder invested $2
million and received unsecured promissory notes which bear interest at 8% and
mature January 1, 1999.
In addition to the promissory notes, each shareholder received a warrant to
purchase 275,000 shares of Common Stock. The warrants will be exercisable for a
five year period beginning September 30, 1998 at $4 per share. The company
granted the investors certain registration and anti-dilution rights in conn
ection with the transaction. The funds will primarily be used for general
corporate purposes.
"This financing represents the continued confidence of the company's major
stockholders regarding management's efforts and strategic focus," stated Wim
Huisman, president and chief executive officer. "This financing provides the
working capital to fund the company's continual growth in revenue and global
market opportunities. Our view of the company's operations through 1997 remains
optimistic."
Precision Systems is a global company that, together with its subsidiaries,
Vicorp N.V. and BFD Productions, Inc., delivers telecommunications solutions to
service providers and corporations. Vicorp's software and hardware products
support enhanced calling and prepaid services, toll-free services, and advanced
call center applications. BFD Productions is a service bureau specializing in
audiotext and Internet applications. Headquartered in St. Petersburg, Florida
(USA), Precision Systems meets the needs of customers in more than 30 countries.
This press release contains forward-looking information, and actual results may
vary from those expressed or implied herein. Factors that could affect these
results include those mentioned in the company's Form 10-K.
(C) Business Wire. All Rights Reserved.
