<PAGE> 1
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
APRIL 7, 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
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(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 April 7, 1997, Precision Systems, Inc. (the "Company") issued
4,500 shares of Series B Preferred Stock ("Preferred Stock") and warrants to
purchase up to 450,000 shares of Common Stock ("Warrants") to RMS Limited
Partnership, a Nevada limited partnership ("RMS"), Primwest Holding, N.V., a
corporation organized under the laws of the Netherlands Antilles ("Primwest")
and Vulcan Ventures Incorporated, a Washington corporation ("Vulcan") for an
aggregate purchase price of $4,500,000.
A cumulative dividend of 8% per annum will be payable quarterly, when
and as declared by the Board of Directors, with respect to the Preferred Stock.
Such dividend will be payable prior to the payment of any dividends (other than
stock dividends) payable to holders of Common Stock. Interest will accrue on
unpaid dividends at a rate of 8% per anum, beginning on January 1, 1998.
Holders of the Preferred Stock have no voting rights and have no board
representation. The Preferred Stock will be subordinate to the outstanding
Series A Preferred Stock and will have a liquidation preference equal to the
purchase price therefor (the "Purchase Price").
The Company will have the right to require that shares of Preferred
Stock be exchanged for shares of securities which may be offered by the Company
to third parties prior to December 31, 1997 (the "Conversion Securities"). The
number of Conversion Securities issued in exchange for the Preferred Stock
shall be determined by dividing the sum of the Purchase Price plus any
accumulated and unpaid dividends on the Preferred Stock by the price per share
or unit at which the Conversion Securities are sold to a third party. The
Company's right to require such exchange shall expire on December 31, 1997.
In the event shares of Preferred Stock remain outstanding on December
31, 1998, such shares shall become convertible at the option of the holder
thereof into that number of shares of Common Stock equal to the quotient
realized by dividing (i) the sum of the Purchase Price and any accumulated and
unpaid dividends plus interest thereon by (ii) the average bid closing price
for the Company's Common Stock during the ten trading days prior to the closing
date of the sale of the Preferred Stock. The conversion price is subject to
adjustment for certain deemed issuances of additional shares of Common Stock.
The foregoing is a description of certain of the features of the
Preferred Stock which description is qualified in its
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entirety by reference to the Certificate of Designations attached hereto as
Exhibit 4.1.
Each Warrant will have an exercise price equal to $6.0938 which
represents: (i) the current market price of the common stock as determined by
the closing price of the common stock on the Nasdaq Stock Market on the day
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 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 4.2.
Purchasers of the Preferred Stock will have demand and "piggyback"
registration rights with respect to shares of Common Stock issuable upon the
exercise of each Warrant and upon conversion of the Preferred Stock by the
holder.
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.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
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<S> <C>
4.1 Certificate of Designations of Preferred Stock filed on April 7, 1997.
4.2 Form of Warrant Certificate.
4.3 Form of Subscription Agreement
20.1 Press Release of Precision Systems, Inc. dated April 8, 1997.
</TABLE>
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ITEM 9.
On April 7, 1997, the Company sold 1,500 shares of Series B Convertible
Redeemable Preferred Stock and a warrant to purchase up to 150,000 shares of
Common Stock to Primwest pursuant to Regulation S promulgated pursuant to the
Securities Act for aggregate consideration of $1,500,000. See Item 5 of this
Form 8-K, incorporated in this Item 9, for the terms of conversion for the
Preferred Stock and the terms of exercise of the Warrants.
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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: April 25, 1997 By: /s/ STEVE GRANT
---------------------------------
By: Steve Grant
Its: Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
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<S> <C> <C>
4.1 Certificate of Designations of Preferred Stock
filed on April 7, 1997.
4.2 Form of Warrant Certificate.
4.3 Form of Subscription Agreement
20.1 Press Release of Precision Systems, Inc. dated
April 8, 1997.
</TABLE>
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EXHIBIT 4.1
PRECISION SYSTEMS, INC.
SERIES B PREFERRED STOCK
CERTIFICATE OF DESIGNATIONS
______________
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
Precision Systems, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation") and
the undersigned officers of the Corporation, do hereby certify that (i) the
Corporation is authorized by its Certificate of Incorporation to issue 50,000
shares of Preferred Stock, and pursuant thereto has determined to issue 4,500
shares of a series of Preferred Stock which shall be designated and known as
"Series B Preferred Stock," and (ii) the following resolution was duly adopted
by the members of the Board of Directors of the Corporation on March 21, 1997:
RESOLVED that pursuant to the authority expressly vested in the Board
of Directors of the Corporation by Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby establishes a
series of the Preferred Stock of the Corporation, which series is hereby
designated "Series B Preferred Stock" (referred to herein as "Series B
Preferred Stock") consisting of 4,500 shares, par value $.01 per share, and
hereby fixes and determines the voting rights, designations, preferences,
qualifications, privileges, limitations, options and other rights of the Series
B Preferred Stock of the Corporation as follows:
1. VOTING RIGHTS. The holders of Series B Preferred Stock shall not
be entitled to vote on any matters submitted to the stockholders of the
Corporation, except as required by applicable law.
2. DIVIDEND PROVISIONS.
(a) DIVIDEND AMOUNT. The holders of shares of Series B
Preferred Stock shall be entitled to receive therefor, prior and in preference
to any declaration or payment of any dividend (except for dividends payable
solely in Common Stock, par value $.01 per share ("Common Stock"), or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation), on any shares of any class or series of capital stock of the
Corporation (other than Series A Preferred Stock, which is senior in right to
payment of dividends to the Series B Preferred Stock) dividends at an annual
rate per share equal to the product of eight percent (8%) multiplied by one
thousand dollars ($1,000) for so long as the Series B Preferred Stock is
outstanding. Dividends shall be payable on the first day of each calendar
quarter commencing after the date of issuance of the Series B Preferred Stock
(and the amount payable shall be reduced pro rata for a partial calendar
quarter), when and as declared by the Board of Directors. Such dividends shall
be cumulative, and accumulations of dividends shall bear interest at an annual
rate per share equal to eight percent (8%), compounded quarterly, commencing on
January 1, 1998 or such later date as such dividends
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first become payable until the date such dividends are paid.
(b) DIVIDEND POLICY. For so long as accumulated dividends and
interest with respect to the Series B Preferred Stock remain unpaid, (i) no
dividend or other distribution (except for dividends payable solely in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock
of the Corporation) shall be paid or made on any Junior Stock (as hereinafter
defined), (ii) no share of Junior Stock shall be purchased or otherwise
acquired by the Corporation or any subsidiary of the Corporation during the
period any share of the Series B Preferred Stock is outstanding (except for
shares purchased in connection with the administration of an employee benefit
or retirement plan which plan has been approved by the Board of Directors of
the Corporation), and (iii) no deposit, payment, or distribution of any kind
shall be made in or to any purchase or redemption requirement applicable to any
Junior Stock. All accumulated dividends and interest with respect to the
Series A Preferred Stock must be paid prior to the payment of any dividends on
the Series B Preferred Stock. The term "Junior Stock" shall refer to Common
Stock, any class or series of preferred stock or any security or right
convertible into or entitling the holder to receive shares of Common Stock;
provided, however that in no event shall shares of Series A Preferred Stock or
Series B Preferred Stock be considered Junior Stock hereunder.
3. LIQUIDATION. Upon the dissolution and liquidation of the
Corporation and following the distribution of assets to holders of Series A
Preferred Stock in accordance with the terms of the Series A Preferred Stock
Certificate of Designations, but prior to the distribution of any assets of the
Corporation to the holders of Junior Stock, the assets remaining after the
payment of all debts and liabilities of the Corporation shall be distributed to
the holders of the Series B Preferred Stock, to the extent available, in an
amount equal to one thousand dollars ($1,000) per share (the "Series B
Liquidation Preference"), plus an amount equal to all accumulated and unpaid
dividends and interest thereon, but if the funds available therefor are
insufficient, then to the holders of Series B Preferred Stock on a pro-rata
basis. The Series B Liquidation Preference shall be paid to the holders of
Series B Preferred Stock before the holders of any series of Preferred Stock
(except for Series A Preferred Stock) or the holders of any other class or
series of Junior Stock are entitled to receive any payment or distribution of
cash, securities or other property with respect to such shares following the
dissolution or liquidation of the Corporation. Notwithstanding the foregoing,
the amounts to which the holders of Series B Preferred Stock shall be entitled
shall be equitably adjusted to take account of any stock splits, stock
dividends, recapitalizations, reorganizations or other transactions affecting
the shares of capital stock of the Corporation effected without the receipt of
consideration by the Corporation.
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4. CONVERSION AT THE OPTION OF THE HOLDERS. The holders of the
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. Each outstanding share of Series B
Preferred Stock may be converted upon the election of a holder thereof into
shares of Common Stock of the Corporation at any time following December 31,
1998. Each share of Series B Preferred Stock may be converted at the office of
the Corporation, or any transfer agent for such stock, into such whole number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing one thousand dollars ($1,000) plus any accumulated and unpaid
dividends and any interest accrued thereon, if any (the "Conversion Amount") by
the Conversion Price (as hereinafter defined) applicable to such share in
effect on the date the certificate is surrendered for conversion. The price at
which shares of Common Stock shall be deliverable upon conversion of shares of
Series B Preferred Stock (the "Conversion Price") shall initially equal the
average of the closing bid price for the Common Stock on the Nasdaq Stock
Market for the ten (10) trading days prior to the issuance of the Series B
Preferred Stock. Such initial conversion price shall be adjusted as
hereinafter provided.
(b) MECHANICS OF CONVERSION.
(i) Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for such stock, and shall
give written notice to the Corporation at such office that he elects to convert
the same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series B Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series B Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
(ii) If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act of 1933, as
amended, the conversion may, at the option of any holder tendering shares of
Series B Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock upon conversion of the
Series B Preferred Stock shall not be deemed to have converted such Series B
Preferred Stock until immediately prior to the closing of such sale of
securities.
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(c) ADJUSTMENTS TO CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
subsection (c), the following definitions apply:
(1) "OPTIONS" shall mean rights, options
(excluding options issued to officers, directors or employees of or consultants
to the Corporation pursuant to a stock option plan on terms approved by the
Board of Directors), or warrants to subscribe for, purchase or otherwise
acquire either Junior Stock or Convertible Securities (defined below).
(2) "ORIGINAL ISSUE DATE" shall mean April 4,
1997.
(3) "CONVERTIBLE SECURITIES" shall mean any
evidence of indebtedness, shares (other than Common Stock), any series of
Preferred Stock (other than Series B Preferred Stock) or other securities
convertible into or exchangeable for Junior Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall
mean all shares of Common Stock issued (or, pursuant to subsection (c)(iii),
deemed to be issued) by the Corporation after December 31, 1997, other than
shares of Common Stock issued or issuable:
(A) upon conversion of shares of Series
A Preferred Stock or Series B Preferred Stock;
(B) to officers, directors or employees
of, or consultants to, the Corporation as restricted stock or pursuant to stock
option or stock purchase plans or agreements on terms approved by the Board of
Directors;
(C) as a dividend or distribution on
Series A Preferred Stock or Series B Preferred Stock; or
(D) for which adjustment of the
Conversion Price is made pursuant to subsection 4(c)(iv) below.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any
provision herein to the contrary notwithstanding, no adjustment in the
Conversion Price for Series B Preferred Stock shall be made in respect of the
issuance of Additional Shares of Common Stock unless the consideration per
share (determined pursuant to subsection 4(c)(v) hereof) for an Additional
Share of Common Stock issued or deemed to be issued by the Corporation is less
than the Conversion Price for the Series B Preferred Stock, in effect
immediately prior to the date of such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Corporation at any time or from time to time after
December 31, 1997 shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
then entitled to receive any such Options or Convertible Securities, then the
maximum
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number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided that in any such case Additional Shares of Common Stock shall be
deemed to have been issued;
(1) no further adjustments in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of Options or conversion or exchange
of such Convertible Securities;
(2) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
in proportion to its affect on such Options or the rights of conversion or
exchange under such Convertible Securities (provided, however, that no such
adjustment of the Conversion Price shall affect Common Stock previously issued
upon conversion of the Series B Preferred Stock);
(3) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if in the case of Convertible Securities or Options for Common
Stock the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such exercise, or for
the issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange.
(4) in the case of any Options which expire
by their terms not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation, at any time
after December 31, 1997, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock
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deemed to be issued pursuant to subsection (c)(iii)) without consideration or
for a consideration per share less than the Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, the
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at such Conversion Price in effect immediately prior to such
issuance, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For the purpose of the above
calculation, the number of shares of Common Stock outstanding immediately prior
to such issue shall be calculated on a fully diluted basis, as if all shares of
Series A Preferred Stock, Series B Preferred Stock and all Convertible
Securities had been fully converted into shares of Common Stock immediately
prior to such issuance and any outstanding warrants, options or other rights
for the purchase of shares of stock or Convertible Securities had been fully
exercised immediately prior to such issuance (and the resulting securities
fully converted into shares of Common Stock, if so convertible) as of such
date, but not including in such calculation any additional shares of Common
Stock issuable with respect to shares of Series A Preferred Stock, Series B
Preferred Stock, Convertible Securities, or outstanding options, warrants or
other rights for the purchase of shares of stock or convertible securities,
solely as a result of the adjustment of the respective Conversion Prices (or
other conversion ratios) resulting from the issuance of Additional Shares of
Common Stock causing such adjustment.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this subsection (c), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid for accrued interest or accrued dividends;
(B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the time of receipt
of such property, as determined in good faith by the Board; and
(C) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, the proportion
of such consideration so received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board of Directors of the
Corporation.
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(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to subsection 5(c)(iii),
relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities by
(B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against the dilution)
issuable upon the exercise of such Options or conversion or exchange of such
Convertible Securities.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR STOCK DIVIDENDS AND
FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that this
Corporation at any time or from time to time after the Original Issue Date
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion Price
for Series B Preferred Stock in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. In the event that this Corporation shall declare
or pay, without consideration, any dividend on the Common Stock payable in any
right to acquire Common Stock for no consideration, then the Corporation shall
be deemed to have made a dividend payable in Common Stock in any amount of
shares equal to the maximum number of shares issuable upon exercise of such
rights to acquire Common Stock.
(e) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If
the Common Stock issuable upon conversion of the Series B Preferred Stock shall
be changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
subsection (d) above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted so that the Series B Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series B Preferred Stock
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immediately before the change.
(f) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 5 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred Stock against impairment.
(g) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of any Conversion Price pursuant to this
Section 5, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series B Preferred Stock a certificate executed by
the Corporation's President or Chief Financial Officer setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price for the Series B
Preferred Stock at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series B Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event that the Corporation
shall propose at any time; (i) to declare any dividend or distribution upon its
Common Stock or Class B Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus; (ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights; (iii) to effect any reclassification or
recapitalization of its Common Stock or Class B Common Stock outstanding
involving a change in the Common Stock or Class B Common Stock; or (iv) to
merge or consolidate with or into any other corporation where the Corporation
is not the surviving corporation, or sell, lease or convey all or substantially
all of its assets, or to liquidate, dissolve or wind up; then, in connection
with each such event, the Corporation shall send to the holders of Series B
Preferred Stock;
(1) at least twenty (20) days' prior written notice
of the record date for such dividend, distribution or subscription rights (and
specifying the date upon which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least twenty (20) days' prior written notice of the date
when the same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such event).
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(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series B Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred Stock; and if at
any time the number of authorized but unissued shares of Common stock shall not
be sufficient to effect the conversion of all then outstanding shares of Series
B Preferred Stock, the Corporation will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
5. CONVERSION AT THE OPTION OF THE CORPORATION.
(a) RIGHT OF CONVERSION. The Corporation shall have the right
to call for and require at its sole discretion the conversion of any and all
outstanding shares of Series B Preferred Stock into a class or series of
preferred stock or other securities of the Corporation to be designated by the
Corporation (the "Conversion Stock") at any time following the Original Issue
Date and prior to December 31, 1997.
(b) CONVERSION PRICE. The conversion price for each share or
unit of Conversion Stock into which the Series B Preferred Stock may be
converted upon a mandatory conversion under this Section 5 (the "Mandatory
Conversion Price") shall be equal to the price for each share or unit of
Conversion Stock which the Corporation offers to sell such Conversion Stock to
any person other than an affiliate (as hereinafter defined) of the Corporation.
Upon a mandatory conversion, each share of Series B Preferred Stock shall be
converted into such whole number of fully paid and nonassessable shares or
units of Conversion Stock as is determined by dividing the Conversion Amount by
the Mandatory Conversion Price. The term affiliate means any person or entity
which directly or indirectly controls, is controlled by or is under direct or
indirect common control with the Corporation.
(c) CONVERSION NOTICE. Notice of a mandatory conversion of
the Series B Preferred Stock pursuant to this Section 5 shall be given by the
Corporation by first-class mail, not less than two (2) nor more than thirty
(30) days prior to the date fixed by the Board of Directors of the Corporation
for conversion, to the holders of record of the Series B Preferred Stock at
their respective addresses then appearing on the records of the Corporation.
The notice of the conversion shall state: (i) the conversion date; (ii) the
conversion price; (iii) that on the conversion date all rights and preferences
of the Series B Preferred Stock shall cease, and thereafter such Series B
Preferred Stock shall not be deemed to be outstanding for any reason
whatsoever; and (iv) the place or place where such shares of Series B Preferred
Stock to be converted are to be surrendered for shares of Conversion Stock.
6. PROTECTIVE PROVISIONS. So long as shares of Series B Preferred
Stock are outstanding, the Corporation shall not without first obtaining the
approval (by vote or written consent) of the holders of at least a majority of
the then outstanding shares of Series B Preferred Stock (voting as a separate
class): (a) alter or change the rights, preferences or privileges of the shares
of Series B
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<PAGE> 10
Preferred Stock so as to affect adversely such shares; or (b) amend its
Certificate of Incorporation in any respect so as to adversely affect the shares
of Series B Preferred Stock, except that the Corporation may authorize and
increase the number of authorized shares of Common Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed this 4th day of April, 1997.
PRECISION SYSTEMS, INC.
By: _______________________________
Name:
Title:
ATTEST:
By: __________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.2
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 March __, 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 March __, 1997 (the
"Subscription Agreement") between the Company and _________________, a
__________ __________ , 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 one hundred fifty
thousand (150,000) 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 $_________ [the sum of (i) the current
market price of the Common Stock as determined by the closing price of the
common stock on the Nasdaq Stock Market on the day prior to the Issue Date;
plus (ii) a 25% premium] (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
<PAGE> 2
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 permitted pursuant to Section 1 hereof of the Warrant 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.
(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 the
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
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<PAGE> 3
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) their 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.
3
<PAGE> 4
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 notice of issuance of Warrant Shares) on all stock exchanges on
which the Common Stock is listed not later than December 31, 1997 (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,
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<PAGE> 5
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 of such 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
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<PAGE> 6
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 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
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<PAGE> 7
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 that 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
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<PAGE> 8
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.
(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
8
<PAGE> 9
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. 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. 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.
(d) Adjustment for Certain Special Dividends. In case
the Company
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<PAGE> 10
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
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<PAGE> 11
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);
(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
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<PAGE> 12
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
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<PAGE> 13
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 PSI 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.
(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 after such 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
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<PAGE> 14
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 date hereof.
Precision Systems, Inc.
By:_____________________________________
Its: President
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<PAGE> 15
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:________________________________
<PAGE> 1
EXHIBIT 4.3
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and entered
into as of the ___ day of ______, 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 sell to the Subscriber and the
Subscriber desires to purchase from the Company 1,500 shares of 8% cumulative
convertible preferred stock, par value $.01 per share ("Series B Preferred
Stock"), and a warrant (the "Warrant") to purchase up to 150,000 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 thousand five
hundred (1,500) shares ("Shares") of Series B Preferred Stock and the Warrant.
The holder of Shares shall be entitled to such rights and preferences as set
forth in that certain Certificate of Designation attached hereto as Exhibit A
(the "Certificate"). The Warrant shall entitle the holder thereof to the rights
set forth in that certain Warrant Certificate between the Subscriber and the
Company, a copy of which is 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
Shares, 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 Shares and the Warrant for a purchase price of one million five
hundred thousand dollars ($1,500,000) (the "Purchase Price"). Payment for the
Shares and the Warrant 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.
1.3 Terms of Series B Preferred Stock. Pursuant to Article Fourth of
its Amended Certificate of Incorporation, the Board of Directors of the Company
shall have adopted prior to the Closing (as hereinafter defined) resolutions
adopting the Certificate in the form attached hereto as Exhibit A setting forth
the rights, privileges and preferences governing the Series B preferred
<PAGE> 2
Stock and shall cause the Certificate to be filed with the Secretary of State
of Delaware on or prior to the Closing.
ARTICLE II
CLOSING
2.1 Closing of Subscription. The closing of the purchase and sale of
the Shares and the Warrant (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
certificates for the Shares and the Warrant, duly registered in the
Subscriber's name against payment in full by the Subscriber of the aggregate
Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Investor Representations and Warranties. The Subscriber hereby
acknowledges, represents and warrants to the Company as follows:
(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;
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<PAGE> 3
(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;
(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
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<PAGE> 4
investment.
(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 Shares, 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
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<PAGE> 5
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.
(1) 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.
(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
5
<PAGE> 6
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) Except for the authorization of Series C Preferred
Stock (as such term is defined in the Certificate), all corporate action on the
part of the Company, its officers and
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<PAGE> 7
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 Securities being sold hereunder and the
Common Stock to be issued upon the exercise of the Warrant or the conversion of
the Shares into Common Stock has been taken or will be taken prior to the
Closing. This Agreement constitutes a valid and 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 [__________] shares are
issued and outstanding as of the date hereof; (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, none of which are issued and outstanding
as of the date hereof. In addition, the Company has granted options to
acquire up to [1,758,047] shares of Common Stock to certain former and current
employees and directors of the Company pursuant to stock option plans whereby
the Company has reserved for issuance up to [3,500,000] 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 Securities being purchased by the Subscriber
hereunder, 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 or conversion of the
Shares into Common Stock. When issued upon the exercise of the Warrant or upon
the conversion of the Shares, the Common Stock 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
filings that shall be made at or prior to Closing.
(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
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<PAGE> 8
acting on its behalf will take any action hereafter that would cause the loss
of such exemption.
(g) The Company does not have any liability, contingent
or otherwise, for any brokerage fee, finder's fee commission or financial
advisory fee in connection with the transactions contemplated herein.
(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. 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 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 taxes shown on such returns
as they become due. No claim has been assessed and is unpaid with respect to
such taxes.
(k) 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 financial
statements at and for the year
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<PAGE> 9
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"), 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 Requested Registration
(a) Upon the written request of the Subscriber that the
Company effect the registration under the Securities Act of shares of Common
Stock held by the Subscriber and specifying the intended method of disposition
thereof, the Company shall use its best efforts to effect such registration
under the Securities Act of the number of shares of Common Stock (the
"Requested Shares") to the extent required to permit the disposition (in
accordance with the intended methods as specified by the Subscriber) of the
Requested Shares; provided, however, that (i) the Company shall not be required
to effect any such registration at any time when an exemption from registration
is otherwise available to the Subscriber affording the Subscriber the right to
dispose of all of the shares of Common Stock held by the Subscriber; (ii) the
Company shall be required to effect no more than [one (1) registration(s)] for
the Subscriber in any twelve month period (including any registration effected
pursuant to Section 4.2 hereof) and no more than [three (3)] registrations in
the aggregate (not including any registration effected pursuant to Section 4.2
hereof) pursuant to this Section 4.1; (iii) the Company shall not be required
to effect a registration under this Section 4.1 after the sixth anniversary of
the Closing; (iv) the Company shall not be required to effect a registration
pursuant to this Section 4.1 during the period starting with the date 60 days
prior to the estimated date of filing of, and ending on the date 90 days
immediately following the effective date of, any registration statement
pertaining to a public offering of securities of the Company (other than a
registration of securities in a Rule 145 transaction or a registration relating
to an employee benefit plan); and (v) the Company shall not be required to
effect a registration under this Section 4.1 if the number of Requested Shares
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<PAGE> 10
exceeds the greater of 750,000 shares or 10% of the issued and outstanding
Common Stock of the Company of the number of issued and outstanding shares of
Common Stock (excluding shares of Common Stock beneficially owned by officers,
directors, employees or affiliates (as such term is defined in the Warrant
Certificate) of the Company). 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).
(b) The right of the Subscriber to registration pursuant
to this Section 4.1 shall be conditioned upon the Subscriber's participation in
the underwriting arrangements determined by the Company and the inclusion in
the underwriting of the Requested Shares. The Company and the Subscriber shall
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company, which managing
underwriter shall be a nationally recognized or regional underwriting firm that
is reasonably acceptable to the Subscriber. Notwithstanding any other provision
of this Section 4.1, if the managing underwriter determines, in good faith,
that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of shares to be
included in the registration and underwriting to the extent such managing
underwriter deems necessary. The Company shall so advise the Subscriber, and
the number of shares that may be included in the registration and underwriting
shall be limited accordingly; provided, however, that in the event the number
of shares excluded from such registration exceeds 25% of the number of shares
for which registration was originally requested by the Subscriber, then the
Company and the Subscriber shall proceed with such registration of such shares,
as so reduced, but such registration, if so effected, shall not be included for
purposes of determining the aggregate number of registrations permitted to the
Subscriber pursuant to this Section 4.1, but will count as a registration for
purposes of determining the twelve month period during which the Subscriber
would not be entitled to demand a registration pursuant to Section 4.1(a)(ii)
above.
(c) The Company and the holders of any securities of the
Company to whom the Company has granted registration rights may include their
respective securities for their own accounts in such registration if the
managing underwriter so agrees and if the number of Requested Shares which
would otherwise have been included in such registration and underwriting will
not thereby be limited.
4.2 Company Registration.
(a) If the Company proposes to register any of its equity
securities under the Securities Act, whether or not for sale for its own
account or for the account of an affiliate or other person, in a manner that
would permit registration of shares of Common Stock for sale to the public
under the Securities Act on the same form proposed to be used in such
registration (other than a registration (i) on Form S-8 or S-4 or any successor
or similar forms or (ii) relating to securities of the Company issuable upon
exercise of employee stock options or in connection with
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<PAGE> 11
any employee benefit or similar plan of the Company or in connection with an
acquisition by the Company of any company involving the issuance of the
Company's capital stock), it will give twenty (20) days' prior written notice
to the Subscriber of its intention to do so and, upon the written request of
the Subscriber made within ten (10) days after the receipt of any such notice
(which request shall specify the number of shares of Common Stock intended to
be disposed of by the Subscriber and the intended method of disposition
thereof), the Company shall use its best efforts to effect the registration
under the Securities Act of the number of shares of Common Stock that the
Company has been requested to register by the Subscriber (the "Additional
Shares"), to the extent required to permit the disposition (in accordance with
the intended methods as specified by the Subscriber) of the Common Stock so to
be registered; provided, however, that (i) the Company shall not be required to
effect any such registration at any time when an exemption from registration is
otherwise available to the Subscriber affording Subscriber the right to dispose
of all of the shares of Common Stock held by the Subscriber; (ii) the Company
shall not be required to effect any such registration if the market value of
the number of Additional Shares requested by any holder of securities of the
Company with registration rights exceeds one-third of the estimated market
value of the securities to be registered and sold by the Company and/or such
other holder which may have requested such registration; and (iii) the Company
shall not be required to effect a registration pursuant to this Section 4.2
after the sixth anniversary of the Closing.
(b) If at any time after giving written notice to the
Subscriber of its intention to register any of the Company's equity securities
under the Securities Act (i) the Company in good faith shall determine not to
register such securities, the Company may, at its election, give written notice
of such determination to the Subscriber and, thereupon, shall be relieved of
its obligation to register such shares pursuant to this Section 4.2 in
connection with such registration, without prejudice, however, to any rights of
the Subscriber to request that such registration be effected as a registration
under Section 4.1, or (ii) the Company shall determine in good faith to delay
the registration of such securities, the Company shall be permitted to delay
the registration of such shares for the same period as the delay in registering
the securities to be registered by the Company for its own account or for
others; and provided, further, that the Company shall not be required to
include in any registration pursuant to this Section 4.2 any shares requested
by the Subscriber to be included therein if the Board of Directors of the
Company shall have concluded, in good faith, that the inclusion of the shares
in the same offering as the Company's securities proposed to be offered would
have a material adverse effect upon the offering of such securities of the
Company, in which case the offering of the shares may be delayed for a period
of up to 90 days and shall then be effected pursuant to Section 4.1 as if the
Subscriber had requested such registration.
(c) In the event that shares are requested to be included
in any registration initiated pursuant to this Section 4.2 that contemplates an
underwritten public offering, and if, in the good faith judgment of the
managing underwriting of such public offering, the inclusion of all of the
shares originally covered by a request for registration hereunder, together
with the number or amount of securities to be offered by the Company or other
security holders who hold registration rights, would materially interfere with
the successful marketing of such securities,
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<PAGE> 12
then, such managing underwriter may limit the number or amount of securities to
be included in the registration such that all holders of securities (including
the Subscriber) who hold registration rights and who have requested
registration (collectively, "Security Holders") shall participate in the
underwritten public offering pro rata based upon the total number or amount of
securities held by each Security Holder (including the number or amount of
securities which each such holder may then be entitled to receive upon the
exercise of any option or warrant, or the exchange or conversion of any
security, held by such holder). If any such holder would thus be entitled to
include more securities than such holder requested to be registered, the excess
shall be allocated among other Security Holders pro rata in a manner similar to
that described in the previous sentence.
(d) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise the Subscriber as a part of the written notice given pursuant
to this Section 4.2. In such event, the right to registration pursuant to this
Section 4.2 shall be conditioned upon the Subscriber's participation in such
underwriting and the inclusion of the shares in the underwriting to the extent
provided herein. If such offering is to be effected through an underwritten
offering, the Subscriber shall (together with the Company and the other holders
(if any) distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. If the Subscriber disapproves
of the terms of any such underwriting, it may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any shares excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
4.3 [Intentionally Omitted]
4.4 Precedence of Registration Rights.
The Subscriber and the Company agree that the registration rights
contained in this Article IV are in lieu of and in substitution for any and all
registration rights which Subscriber is entitled to under any other agreement
with the Company[; provided, however, that the registration rights contained
herein will not supersede or limit or otherwise effect in any way the rights of
RMS Limited Partnership to request the filing of a registration statement
pursuant to Sections 5.1(c) and (d) of that certain Stock Purchase Agreement
dated as of December 13, 1993 between the Company and RMS Limited Partnership
(the "1993 Agreement"). The registration rights contained herein shall not
limit or effect in any way the obligation of the Company and Subscriber to
indemnify each other pursuant to the terms of the 1993 Agreement or the
obligations of the Company with respect to performing any acts under Article V
of such agreement with respect to a request for registration pursuant to
Section 5.1(c) of the 1993 Agreement.
4.5 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
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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: with respect to securities registered pursuant to Sections 4.1 and 4.2
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, but in no event for a period of more than ninety
(90) days after such registration statement becomes effective;
(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 Requested Shares or Additional Shares;
(iv) Use its best efforts to register or qualify
the Requested Shares or Additional 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 Requested Shares or
Additional 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) Use its best efforts to furnish to
Subscriber (i) an opinion of counsel for the Company, dated the effective date
of the registration statement and (ii) a "comfort" letter addressed to the
Subscriber signed by the independent public accountants who have certified the
Company's financial statements included in the registration statement, covering
substantially the same matters with respect to the registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuers' counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities; provided, however, that the Company shall not be obligated to
furnish such an accountants' letter except in connection with an underwritten
offering;
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(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 Requested
Shares or Additional 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 Requested Shares or Additional Shares owned by the
Subscriber pursuant to this Article IV, the Subscriber hereby agrees as
follows:
(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 Requested Shares or
Additional Shares as may be necessary to enable the Company to prepare the
registration statement and prospectus covering such Requested Shares or
Additional 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;
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<PAGE> 15
(iii) during such time as the Subscriber may be
engaged in a distribution of Requested Shares or Additional Shares registered
pursuant to this Article IV, the Subscriber shall comply with Rules 10b-6 and
10b-7 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 their own
legal expenses and all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of any shares of Additional
Shares owned by the Subscriber and sold pursuant to a registration statement
effected pursuant to this Article IV.
(d) 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 or 4.2, 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
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<PAGE> 16
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. If the
Company shall postpone the filing of any registration statement requested
pursuant to Section 4.1 herein, Subscriber shall have the right to withdraw the
request for such registration by giving written notice to the Company within 15
days after the date of the Company's notice of postponement.
(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. Notwithstanding any other provision of this
Agreement, the respective covenants and agreements contained in this Section
4.5 shall continue until the earlier of the date as of which Holder no longer
owns any shares of Common Stock or the sixth anniversary of the Closing. With
respect to any registration made prior to the end of such period, the covenants
and agreements set forth in this Section 4.5 shall continue in effect until all
obligations hereunder with respect thereto are fulfilled, and provided that 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.
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(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 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 Additional 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 Requested 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
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<PAGE> 18
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.
ARTICLE V
MISCELLANEOUS
5.1 Indemnity. Without prejudicing any other remedy available to the
parties at law or in equity, 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:
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<PAGE> 19
(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 ( ) -
Attn:
If to Subscriber to:
Facsimile ( ) -
Attn:
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.
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<PAGE> 20
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.
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.
5.12 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
5.13 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:____________________
20
<PAGE> 21
Exhibit A
Certificate of Designation for Series B Preferred Stock
[Attached]
<PAGE> 1
EXHIBIT 20.1
COMPANY RAISES $4.5 MILLION IN BRIDGE FINANCING
FROM MAJOR INVESTORS
St. Petersburg, Florida; April 7, 1997 -- Precision Systems, Inc.
(NASDAQ - PSYS) announced today that it has completed a $4.5 million bridge
financing with RMS Limited Partnership, Vulcan Ventures Incorporated, and
Primwest Holdings, Inc. which the Company expects will be converted into
another class of equity securities by the end of the year. In connection with
the financing, each shareholder invested $1.5 million and received 1,500 shares
of a newly designated class of preferred stock. The Series B Preferred Stock
carries a cumulative 8% dividend and may be converted at the option of the
Company at any time prior to December 31, 1997 into new securities on the same
terms as such securities may be offered to third parties. In the event the
Company does not effect a mandatory conversion of the bridge securities, each
shareholder will be entitled to convert the Series B Preferred Stock into
common stock after December 31, 1998, at $X.XX per share.
In addition to the Preferred Stock, each Shareholder received a
warrant to purchase 150,000 shares of Common Stock. The Warrants will be
exercisable for a five year period beginning April 4, 1998 at $X.XX, which
represents a 25% premium to Friday's closing price. The Company granted the
investors certain registration and anti-dilution rights in connection with the
transaction.
The funds will primarily be used for general corporate purposes. The
Company was advised by The Robinson-Humphrey Company Inc. in the transaction.
Wim Huisman, President and Chief Executive Officers stated "We are
pleased our major shareholders have expressed a vote of confidence in the
Company's management and overall strategic direction with their additional
investments. This financing provides the Company with needed working capital
while giving PSI the opportunity to convert the bridge security on market-based
terms at a later date. This gives the Company additional structural
flexibility as we consider potential capital raising opportunities." Mr.
Huisman further stated "We look forward to our challenge in successfully
rebuilding the Company."
Precision Systems, Inc.
