AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 27, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
TELEPAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1680936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
380 HERNDON PARKWAY
SUITE 1900
HERNDON, VIRGINIA 22070
(703) 834-9000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
DONALD W. BARRETT, CHIEF EXECUTIVE OFFICER
380 HERNDON PARKWAY
SUITE 1900
HERNDON, VIRGINIA 22070
(703) 834-9000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Henry I. Rothman, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000 (Telephone)
(212) 704-6288 (Facsimile)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
possible after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to Offering Price Aggregate Amount of
to be Registered be Registered (1) Per Security Offering Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock (2) 524,317 Shares $3.80 (3) $1,992,404.60 (3) $ 603.76
Class C Warrants (4) 256,218 Warrants $ .20 (3) $ 51,243.60 (3) $ 15.53
Class A Common Stock (5) 256,218 Shares $3.80 (3) $ 973,628.40 (3) $ 295.04
Class A Common Stock (6)(7) 15,000 Shares $ .01 (8) $ 150.00 (8) $ 0.05
Class A Common Stock (6)(9) 228,505 Shares $ .33 (8) $ 75,406.65 (8) $ 22.85
Class A Common Stock (6) 4,500 Shares $2.00 (8) $ 9,000.00 (8) $ 2.73
Class A Common Stock (6) 20,000 Shares $5.25 (8) $ 105,000.00 (8) $ 31.82
Class A Common Stock (6) 12,375 Shares $5.33 (8) $ 65,958.75 (8) $ 19.99
Class A Common Stock (6) 20,000 Shares $7.375 (8) $ 147,500.00 (8) $ 44.70
Class A Common Stock (6) 20,000 Shares $7.88 (8) $ 157,600.00 (8) $ 47.76
Class A Common Stock (6)(10) 37,500 Shares $5.0625(11) $ 189,843.75 (11) $ 57.53
Class A Common Stock (12) 26,250 Shares $5.0625(11) $ 132,890.62 (11) $ 40.27
- --------------------------------------------------------------------------------------------------------------------
Total $3,900,626.20 $1,182.03
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</TABLE>
(1) Pursuant to Rule 416, there also are being registered such additional
shares of Class A Common Stock as may become issuable pursuant to
anti-dilution provisions of the Warrants.
(2) Issued in 1994 private placement offerings (the "1994 Private Placement")
or 1995 private placement offerings ("1995 Private Placement") and
registered hereby for resale.
(3) Estimated solely for purposes of calculating the registration fee.
(4) Issued in connection with the 1994 Private Placement and 1995 Private
Placement and registered hereby for resale.
(5) Issuable upon exercise of certain Class C Warrants issued in connection
with the 1994 Private Placement and the 1995 Private Placement, and certain
additional Class C Warrants issued by the Company pursuant to the
anti-dilution provisions under certain applicable warrant agreements, and
registered hereby for resale.
(6) Issuable upon exercise of certain options granted by the Company on various
dates prior to the date hereof.
(7) Of such options, 1,000 have been exercised prior to the date hereof and the
Company intends to issue shares of Common Stock in connection therewith
following the effectiveness of this Registration Statement.
(8) Based, pursuant to Rule 457(g), on the exercise price of the related
option.
(9) Of such options, 50,137 have been exercised prior to the date hereof and
the Company intends to issue shares of Common Stock in connection therewith
following the effectiveness of this Registration Statement.
(10) Issuable upon the sale and/or conversion of 37,500 shares of Class B Common
Stock of the Company by a former Chairman of the Company's Board of
Directors, which shares of Class B Common Stock are issuable upon exercise
of an outstanding option granted by the Company to such former Chairman.
(11) Based, pursuant to Rule 457(c), on $5.0625 per share which was the average
of the high and low prices of the Registrant's Common Stock on the National
Association of Securities Dealers Automated Quotation System on November
26, 1996.
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<PAGE>
(12) Issued in March 1996 upon exercise of certain options granted in connection
with advisory services rendered by the optionee to the Company and
registered hereby for resale.
- ----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
-3-
<PAGE>
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
SUBJECT TO COMPLETION DATED NOVEMBER 27, 1996
PROSPECTUS
TELEPAD CORPORATION
357,880 SHARES OF CLASS A COMMON STOCK
This Prospectus relates to 357,880 shares of Class A Common Stock
par value $.01 per share ("Class A Common Stock") of TelePad Corporation, a
Delaware corporation (the "Company"). Such shares of Common Stock will be issued
by the Company following the exercise of certain options granted prior to the
date hereof by the Company as described herein (the "Options").
Concurrently with this offering, the Company also has registered for
resale the following securities which may be sold by certain securityholders
(the "Selling Securityholders") as described herein: 550,567 outstanding shares
of Class A Common Stock, 524,317 of which were issued by the Company in certain
1994 private placement offerings and certain 1995 private placement offerings
(the "Private Placements") and 26,250 of which were issued upon the exercise of
a certain option granted by the Company prior to the date hereof, 256,218
redeemable Class C Warrants ("Class C Warrants") of the Company issued in
connection with the Private Placements and pursuant to certain anti-dilution
provisions included in applicable warrant agreements, which may be sold by the
Selling Securityholders, all as described herein, and 256,218 shares of Class A
Common Stock issuable upon the exercise of such Class C Warrants. Each Class C
Warrant issued in connection with the Private Placements entitles the registered
holder thereof to purchase one share of Class A Common Stock at an exercise
price of $3.65 per share through September 27, 2000. See "Description of
Securities" and "Selling Securityholders and Plan of Distribution."
The Company expects the Registration Statement in which this
Prospectus is included (the "Registration Statement") to become effective upon
its filing with the Securities and Exchange Commission (the "Commission") or as
soon as possible thereafter.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. AN INVESTMENT IN THESE SECURITIES SHOULD ONLY BE MADE BY INVESTORS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" ON
PAGE 9 AND "DILUTION."
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
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<PAGE>
The Company has agreed, pursuant to certain Warrant Agreements
between the Company and D.H. Blair Investment Banking Corp. ("Blair"), to pay to
Blair a solicitation fee (the "Solicitation Fee") equal to 4% of the exercise
price in connection with the exercise of the Class C Warrants, as well as the
Class A and Class B Warrants (each, a "Warrant" and collectively, the
"Warrants"), if (i) the market price of the Class A Common Stock on the date the
Warrant is exercised is greater than the then applicable Warrant exercise price;
(ii) the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc. (the "NASD"); (iii) the Warrant was not
held in a discretionary account; (iv) disclosure of compensation arrangements
was made both at the time of the offering and at the time of exercise of the
Warrant; and (v) the solicitation of exercise of the Warrant was not in
violation of Rule 10b-6 as promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or applicable state blue sky laws. The
exercise prices of the Warrants were determined by negotiation between the
Company and Blair at the time such Warrants were offered, and are not
necessarily related to the Company's asset value, net worth or other criteria of
value.
The Company's IPO units, consisting of one share of Class A Common
Stock, one Class A Warrant and one Class B Warrant (the "IPO Units"), Class A
Common Stock, Class A Warrants, Class B Warrants, Class C Warrants and Class D
Warrants are listed on the Nasdaq Small Cap Market under the symbols TPADU,
TPADA, TPADW, TPADZ, TPADM and TPADL respectively. Reports and other information
concerning the Company can be inspected at Nasdaq.
The closing bid price as reported by the National Quotation Bureau,
Inc. on the dates indicated below for the IPO Units, the Class A Common Stock,
the Class A Warrants, the Class B Warrants, the Class C Warrants and the Class D
Warrants was $7.125 (November 21, 1996), $5.00 (November 26, 1996), $2.25
(November 26, 1996), $.375 (November 25, 1996), $1.125 (November 22, 1996) and
$2.125 (November 26, 1996), respectively.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. See "Use of Proceeds" and "Selling
Securityholders and Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS _________________, 1996.
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<PAGE>
This Prospectus relates to the possible issuance and sale by the
Company of 357,880 shares of Common Stock upon the exercise of the Options which
include an option granted by the Company to a former Chairman of the Company's
Board of Directors to acquire up to 37,500 shares of Class B Common Stock which
shares are convertible into an equal number of shares of Class A Common Stock.
The Registration Statement of which this Prospectus is a part, also
relates to the possible resale, by the Selling Securityholders, of up to 256,218
Class C Warrants, up to 256,218 shares of Class A Common Stock issuable upon the
exercise of such Class C Warrants, up to 550,567 outstanding shares of Class A
Common Stock issued by the Company in the Private Placements and up to 26,250
shares of Class A Common Stock previously issued upon the exercise of an option
granted by the Company as consideration for certain advisory services.
-6-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission ("Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices, Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company (at http://www.sec.gov).
INFORMATION INCORPORATED BY REFERENCE
The Company's (i) Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1995, heretofore filed by the Company with the Commission
(File No. 0-21934); (ii) Quarterly Report on Form 10- QSB for the quarter ended
March 31, 1996; (iii) Quarterly Report on Form 10-QSB for the quarter ended June
30, 1996, (iv) Quarterly Report on Form 10-QSB for the quarter ended September
30, 1996,(v) the description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on June 14, 1993
under the 1934 Act, including any amendment or report filed by the Company for
the purpose of updating such description, and (vi) the description of the
Company's Class C Warrants contained in the Registration Statement on Form 8-A
filed with the Commission on March 26, 1996 under the 1934 Act, including any
amendment or report filed by the Company for the purpose of updating such
description, are incorporated herein by reference. Each document filed by the
Company subsequent to the date of the Prospectus pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act prior to the termination of this offering
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus does not contain all the information set forth in
the Registration Statement of which this Prospectus is a part, including
exhibits relating thereto, which has been filed with the Commission in
Washington, D.C. Copies of the Registration Statement and the exhibits thereto
may be obtained, upon payment of the fee prescribed by the Commission, or may be
examined, without charge, at the office of the Commission.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON (INCLUDING
ANY BENEFICIAL OWNER) TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY DOCUMENT INCORPORATED
BY REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS UNLESS SUCH EXHIBITS ARE
EXPRESSLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS SHOULD BE
DIRECTED TO TELEPAD CORPORATION, 380 HERNDON PARKWAY, SUITE 1900, HERNDON,
VIRGINIA 22070, (703) 834-9000, ATTENTION: ROBERT D. RUSSELL, CHIEF FINANCIAL
AND ACCOUNTING OFFICER.
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<PAGE>
INTRODUCTION
THE COMPANY
TelePad Corporation (the "Company") is engaged in the design,
development and marketing of pen-based computing and mobile communications
systems and, to a lesser extent, applications software. The only product
currently being marketed by the Company is the TelePad 3 -- a highly portable,
tablet-sized computing device which offers voice recognition and a pen interface
as well as a detachable keyboard. Its unique modular architecture includes a
base platform currently available with a 66 MHZ processor, a dual scan color
display and up to 36 MB of internal memory. It also features three docking bays
that can hold a variety of hardware accessories. The platform is designed to
facilitate the Company's planned development of upgrades to more powerful
processors, different types of displays and additional memory. The Company plans
to develop additional modules capable of accommodating various communications,
computing and special purpose accessories.
The Company was incorporated in Delaware on April 11, 1990. Its
executive offices are located at 380 Herndon Parkway, Suite 1900, Herndon,
Virginia 22070. The Company's telephone number is (703) 834-9000.
RECENT DEVELOPMENTS
On April 3, 1996, the Company completed a public offering of 20,000
units (the "Units") each unit consisting of 285 shares of Class A Common Stock
and 1,000 Class D Warrants, which Units were sold for $1,000 per Unit for an
aggregate offering of $20,000,000 (the "Unit Offering"). On April 25, 1996, the
Company completed the sale of an additional 3,000 Units as a result of the
exercise of the over-allotment option granted to Blair in connection with the
Unit Offering.
On May 28, 1996, the Company and IBM executed a Letter Agreement
Addendum (the "Addendum") to the January 25, 1996 Letter Agreement executed by
the Company and IBM (the "IBM Resolution Agreement") pursuant to which IBM and
the Company agreed that the following actions would constitute full performance
under the IBM Resolution Agreement without any admission of liability by either
party: (i) issuance by the Company's new contract manufacturer, Sanmina
Corporation ("Sanmina"), of a purchase order to IBM for a single lot purchase of
all TelePad 3 parts available from IBM (excluding parts for Blue Lightning
processor cards and H8 microcontrollers) for the items, unit prices and
quantities specified in IBM's TelePad 3 Parts Listing totaling $1,317,943.00
(the "Listing") attached to the IBM Resolution Agreement, provided that IBM and
Sanmina may mutually agree to differences between the purchase order and the
Listing; (IBM and the Company also agreed that IBM's acceptance of Sanmina's
purchase orders would eliminate any requirement for a Letter of Credit from the
Company for any such inventory and Sanmina's payment for such purchase orders
would eliminate any liability of the Company for such inventory; as for
remaining inventory, the Company and IBM agreed that Sanmina would from time to
time issue purchase orders to IBM for the manufacture of Blue Lightning
processor cards); (ii) except as set forth in (i) above, settlement of all other
financial obligations set forth in the IBM Resolution Agreement by a single
payment to IBM by the Company of $450,000 (which payment was made by the Company
on May 30, 1996); and (iii) delivery by IBM to the Company of a total of 458 H8
microcontrollers programmed with the current version of firmware provided by
IBM's Austin facility. IBM and the Company also agreed that the Addendum would
not in any way change or modify the agreement between IBM and the Company with
respect to the licensing of certain IBM software or the provision of certain
services under a certain services agreement between IBM and the Company. Prior
to the date hereof the Company entered into a number of interim agreements with
Sanmina for the manufacture of TelePad 3s. The Company began shipping TelePad 3s
on June 26, 1996.
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<PAGE>
RISK FACTORS
An investment in the securities offered hereby is highly speculative
in nature, involves a high degree of risk and should be made only by investors
who can afford the loss of their entire investment. In addition to the factors
set forth elsewhere in this Prospectus, prospective investors should give
careful consideration to the following risk factors in evaluating the Company
and its business before purchasing any securities offered hereby.
GOING CONCERN CONSIDERATIONS. The Report of the Company's
Independent Auditors accompanying the Company's audited Financial Statements for
the year ended December 31, 1995, contains an explanatory paragraph as to the
uncertainty of the Company's ability to continue as a going concern. Among the
factors cited in that Report as raising substantial doubt as to the Company's
ability to continue as a going concern is that the Company has not generated
sufficient revenues from the sale of its principal products to cover its
operating expenses. The Company is currently negotiating a definitive agreement
with Sanmina to establish a consistent manufacturing process and source of
product. The inability to do so may have a material adverse effect on the
Company's business and financial condition. See "-- Transition to a New
Manufacturer."
DELAYS IN PRODUCT COMMERCIALIZATION. The Company has experienced
substantial technical and financial difficulties that have led to significant
delays in the commencement of product commercialization. The Company also may
incur additional delays in product commercialization as a result of the need to
redesign the TelePad 3 processor card to accommodate a different microprocessor
since it has been advised that the Blue Lightning microprocessor, a principal
component of the TelePad 3, is being phased out of production by IBM, the sole
source supplier of such product. The Company anticipates that the delays in
commencing commercial production of the TelePad 3 it has experienced, and will
continue to experience, have and may continue to adversely affect the demand for
TelePad 3s as potential customers elect to purchase competing products. There
can be no assurance that the Company ever will overcome technical difficulties
or successfully commercialize the TelePad 3 or any other product. See "Risk
Factors -- Dependence on Manufacturer and Suppliers," "--Reliance on Proprietary
Component; Need to Redesign the TelePad 3," and "-- Unproven Products; Reliance
on a Single Product; Need for Market Acceptance."
SUBSTANTIAL OPERATING LOSSES; NO ASSURANCE OF SUCCESS. The Company
has incurred substantial operating losses since its inception. At September 30,
1996, the Company had an accumulated deficit since inception of $27,492,082. The
Company's losses have continued since that date. Such deficits reflect the cost
of developmental and other start-up activities, including the industrial design,
development and marketing of TelePad prototypes and management's efforts to
obtain financing for the Company, without significant offsetting revenues. The
Company expects to continue to incur significant losses in the future. However,
management believes that it has developed a plan of operations which, if
successfully implemented, should permit the Company to achieve and sustain
profitable operations. The Company's proposed operations are subject to numerous
risks associated with establishing any new business, including unforeseeable
expenses, delays and complications, as well as specific risks of the computer
industry. There can be no assurance that the Company's plan of operations will
be successful, that it will be able to market any product on a commercial scale,
that it will achieve or sustain profitable operations or that it will be able to
remain in business.
DEPENDENCE ON MANUFACTURER AND SUPPLIERS. The Company has no
manufacturing capability and, therefore, contracts with third parties to perform
its manufacturing and out-sources production of components. The TelePad 3
currently employs the IBM Blue Lightning microprocessor and, until such time, if
any, as the Company completes a redesign permitting the use of another
microprocessor, the Company (or Sanmina) will be required to purchase the
processor cards for the TelePad 3 from IBM. IBM is the only source of Blue
Lightning microprocessors. IBM has agreed to manufacture the processor cards for
the Company as long as the Company continues to be in compliance with the IBM
Resolution Agreement. See "--Transition to New Manufacturer" and "--Reliance on
Proprietary Component; Need to Redesign the TelePad 3." The components of the
TelePads are supplied by various sources. Certain of the components are highly
technical in nature and, with respect to such components, there can be no
assurance that the Company would be able to locate, on a timely basis or at all,
alternative sources of supply. The inability to locate such alternative sources
of supply may have a material adverse effect on the Company's business and
financial condition.
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<PAGE>
RELIANCE ON PROPRIETARY COMPONENT; NEED TO REDESIGN THE TELEPAD 3.
The TelePad 3 currently employs the IBM Blue Lightning microprocessor. IBM has
informed the Company that it no longer produces the Blue Lightning
microprocessor. On January 26, 1996, IBM had an inventory of TelePad 3 parts
which included Blue Lightning processors for approximately 5,000 units. Under
the IBM Resolution Agreement, as amended, IBM has agreed to manufacture
electronic card assemblies (i.e., motherboards, processor cards and WIMM cards)
until the first to occur of (i) the approximately 5,000 Blue Lightning
microprocessors have been utilized, or (ii) June 30, 1997. The Company's
engineering staff has begun redesigning the TelePad 3 processor card to use a
microprocessor not manufactured by IBM. The Company expects to have the new
design ready for production by the end of March 1997, although there can be no
assurance that the time required will not be substantially longer. In the event
that IBM should not reserve Blue Lightning microprocessors, or should the
redesign not be completed prior to the exhaustion of the available supply of
such microprocessors, the Company would be forced to suspend any ongoing
production pending completion of the redesign. Such a suspension would result in
a break in supply of TelePad 3s, and may adversely affect the Company's business
and financial condition.
TRANSITION TO NEW MANUFACTURER. The Company has moved the
manufacture and assembly of the TelePad 3 from IBM to Sanmina. The Company is
currently operating with Sanmina under a letter of intent and certain purchase
orders and is engaged in negotiations with Sanmina to establish a definitive
manufacturing agreement. In addition, until such time, if any, as the Company
completes the redesign of the TelePad 3 permitting the use of a microprocessor
other than IBM's Blue Lightning, it will be required to purchase the
microprocessor cards for the TelePad 3 from IBM. There can be no assurance as to
when, if ever, the Company will be able to enter into an acceptable definitive
manufacturing agreement and there can be no assurance that the Company will not
experience substantial production delays in the event that an acceptable
agreement is not concluded. See "-- Dependence on Manufacturer and Suppliers,"
"-- Reliance on Proprietary Component; Need to Redesign the TelePad 3".
RISK OF PRODUCT LIABILITY. The Company is subject to the inherent
business risk of product liability claims in the event that any of its products
are alleged to have resulted in adverse effects to a user of such products. The
Company does not presently carry product liability insurance, but the Company
expects that it will obtain such insurance. However, there can be no assurance
that adequate product liability insurance can be obtained at acceptable costs.
In the event of an uninsured or inadequately insured product liability claim,
the Company's business and financial condition could be materially adversely
affected.
RAPID TECHNOLOGICAL CHANGE; POSSIBLE OBSOLESCENCE. The Company's
products and marketing strategy are subject to rapid technological changes,
short product life cycles, product obsolescence, and rapid price erosion,
particularly with respect to the hardware components which represent the most
significant portion of the Company's business. The Company believes that its
future success will depend in significant part upon its ability to establish
full-scale production and sale of the TelePad 3 and to develop new products and
services incorporating technological changes and meeting changing customer
demands. To the extent products developed by the Company are based upon evolving
new technology, sales of such products may be adversely affected if such
technology ultimately is not widely accepted. If the Company does not
successfully develop and introduce new or enhanced products in a timely manner,
any competitive position the Company may develop could be lost and the Company's
sales, if any, would be reduced. In this regard, IBM has announced that it no
longer produces the Blue Lightning microprocessor used in the TelePad 3. While
IBM has informed management that it has reserved approximately 5,000 Blue
Lightning microprocessors for use in the manufacture of TelePad 3s, and
management believes that this supply would be sufficient to meet the Company's
needs pending design modification to permit the use of another microprocessor,
should the Company not modify the design of the TelePad 3 to permit use of
another microprocessor in a timely fashion, the Company's ability to produce and
market its products, and its business and financial results, would be adversely
affected. See "-- Reliance on Proprietary Component; Need to Redesign TelePad 3.
There can be no assurance that the Company will have sufficient funds to sustain
its development activities, that any such activities will be successful or that
any such activities will enable the Company to obtain or maintain any
competitive advantage. See "-- Going Concern Considerations."
UNPROVEN PRODUCTS; RELIANCE ON SINGLE PRODUCT; NEED FOR MARKET
ACCEPTANCE. The primary product currently being marketed by the Company is the
TelePad 3. The Company purchased IBM's remaining stock of parts for the TelePad
SL (the Company's original product) for $300,000 and intends to build finished
TelePad
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<PAGE>
SL units using these parts if a market for the SL is then in existence and the
parts can be assembled at a loss that will yield a profit. These parts are
expected to yield between 200 and 400 finished units, but there is no assurance
as to the number which can ultimately be built. There is no assurance that the
TelePad 3 or any other product the Company may develop will achieve market
acceptance. It is anticipated that many potential purchasers of the TelePad 3
will require that it pass elaborate tests performed both by the Company and, in
many instances, by the user itself, prior to completion of their purchases. No
assurance can be given that the TelePad 3 will satisfactorily pass such tests
or, if it does, that the product will function during actual operating use at
levels acceptable to users or will operate free of maintenance, product control
or other performance problems for sustained periods of time. In addition, users
may be reluctant to purchase any products from the Company unless they are
satisfied as to the Company's ability to provide an adequate supply of its
products, as well as its continued viability, as to neither of which assurance
can be given. See "-- Going Concern Considerations" and "-- Substantial
Operating Losses; No Assurance of Success"
LIMITED MARKETING CAPABILITIES. Because of the sophisticated nature
of its products and the early stage of development of the field force computing
industry, the Company must expend substantial resources to identify prospective
customers and educate them as to the merits of the Company's products and
strategy. There can be no assurance the Company will have sufficient funds to
market its products effectively. Further, the Company reduced its sales force in
January 1995, and, therefore, there can be no assurance that remaining personnel
can be retained, that new, qualified personnel will be attracted by the Company
or that any marketing efforts by such personnel will be successful. In addition,
the Company's marketing efforts have been and will continue to be adversely
affected to the extent that its supply of products is disrupted and design
defects occur. See "-- Delays in Product Commercialization," and "-- Reliance on
Proprietary Component; Need to Redesign the TelePad 3." Failure to market the
Company's products effectively would impair the Company's ability to generate
revenues from product sales.
COMPETITION. The Company currently is subject to substantial
competition and management expects competition in the field force computing
industry to intensify in the future. There can be no assurance that competing
products will not be introduced that achieve greater market acceptance than, or
are technologically superior to, the TelePad 3. Most of the Company's
competitors and future competitors are, or can be expected to be, larger than
the Company and to have more extensive experience and records of successful
operations than the Company. Such competitors also have, or can be expected to
have, greater financial, marketing and other resources, more employees and
larger facilities than the Company now has or can be expected to have in the
foreseeable future. In particular, certain of the Company's present and future
competitors are, or can be expected to be, the most prominent and well-respected
computer manufacturers in the world, including IBM (the Company's sole source
supplier of Blue Lightning microprocessors), Fujitsu Limited, Toshiba Corp., NEC
Technologies, Inc., Zenith Data Systems Corp., Symbol, Telxon, Motorola, Samsung
and others. The Company believes that such companies have the resources and
technological capability to produce and market products competitive with, if not
superior to, the TelePads. In addition, the Company expects that other
competitors will emerge and competing products will be introduced in the near
future. No assurance can be given that the Company will be able to compete
successfully or that competitive pressures will not adversely affect its
financial performance.
LIMITED PATENT PROTECTION. Other than the four patents on the
multi-purpose handle and adjustable locking handle mechanism used on the
TelePads, the Company currently does not have patents relating to its products,
although its patent application for the industrial and mechanical design of the
portable electronic platform which is the basis of the TelePad 3 has been
allowed. There can be no assurance patents will be issued on the basis of the
Company's applications. Further, the Company otherwise does not intend to pursue
patents, because it does not believe that the technology it employs is
patentable. While the Company views the patents relating to the multi-purpose
handle used on the TelePads as important to the value of the TelePads as a
whole, there can be no assurance that any issued patent will provide the Company
with a meaningful competitive advantage, that competitors will not design
alternatives to reduce or eliminate the benefits of any issued patent or that
challenges will not be instituted against the validity or enforceability of
these patents. Other companies may obtain patents claiming products or processes
that are necessary for, or useful to, the development of the Company's products,
in which event the Company may be required to obtain licenses for patents or for
proprietary technology in order to develop, manufacture or market its products.
There can be no assurance that the Company would be able to obtain such licenses
on commercially reasonable terms, if at all.
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It is the Company's practice to protect its proprietary materials
and processes by relying on trade secret laws and non-disclosure and
confidentiality agreements. There can be no assurance that confidentiality or
trade secrets will be maintained or that others will not independently develop
or obtain access to such materials or processes.
DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN TECHNICAL PERSONNEL. The
Company's success will depend to a large extent upon the continued contributions
of Donald W. Barrett, currently Chief Executive Officer, Ronald C. Oklewicz,
currently President, and Joseph J. Elkins, currently Vice President. The loss of
the services of any or all of the executive personnel could materially adversely
affect the Company. The Company also has entered into an employment agreements
with Messrs. Barrett, Oklewicz and Elkins. The Company has obtained term
key-person life insurance coverage in the amount of $2,000,000 on the life of
Mr. Oklewicz.
The success of the Company also will depend, in part, upon its
ability to retain qualified engineering and other technical and marketing
personnel. There is significant competition for technologically qualified
personnel in the geographical area of the Company's business and there can be no
assurance that the Company will be successful in recruiting or retaining
qualified personnel.
GOVERNMENT REGULATION. The TelePad 3 and the TelePad SL are subject
to government regulation of electromagnetic emissions that are conducted from
the devices over power lines, when the devices are operated from AC wiring, and
radiated through the air. In particular, the regulations of the Federal
Communications Commission ("FCC") require products of this kind to have been
approved by the FCC as meeting the Class B digital device requirements under
Parts 2 and 15 of the FCC rules before the products may be marketed (i.e.
imported, sold or leased or advertised for sale or lease). These regulations are
designed to minimize interference with certain other electronic products and
communications services. The approvals (a form of equipment authorization known
as "certification") are granted only after the products have passed various
electromagnetic compatibility tests and an application submitted to the FCC has
been granted. The FCC approves equipment of the kind produced by the Company
only on the condition that operation of the equipment not cause interference to
licensed radio communications and that the equipment accept interference from
licensed radio facilities, even if the interference results in undesirable
operation of the equipment. Modems that the Company sells for the connection of
the TelePad SL and the TelePad 3 to the public switched telephone line are
subject to certification under the FCC Rules in the same manner and subject to
an additional approval requirement of "registration" under Part 68 of the FCC
Rules governing certain telephone equipment.
Although the TelePad 3 and TelePad SL have received FCC
certification, the devices must continue to comply with federal regulations.
Changes in the design of the products generally will require the Company to have
the products reexamined as to continued compliance. Depending on the nature of
the change, the products may be subject to the receipt of new or modified
approvals before the changed products may be marketed.
The Company also must ensure that the TelePad 3 and TelePad SL
comply with the Occupational Safety and Health Act ("OSHA") regulations
requiring electrical equipment to have been approved for safety by a nationally
recognized testing laboratory. Safety approvals for the TelePad SL and the
TelePad 3 have been obtained. Changes in either device may require retesting and
further approvals, which could result in delay that could have an adverse
material effect on the Company.
To the extent that the Company desires to sell its products
internationally, it also will be required to comply with the regulations of
other nations as to electrical emissions and safety, some of which may be
expected to be more stringent than those imposed by the FCC or under regulations
adopted by OSHA. In particular, the TelePad 3 currently is certified for sale
within the European Union (the "EU"), whose standards are more stringent, in
order to permit export to members of the EU, including the United Kingdom.
To the extent that the Company sells products, directly or
indirectly, to the United States Government, the Company's contracts and
subcontracts will be subject to termination, reduction or modification at the
Government's convenience.
Failure to comply with FCC, OSHA and other governmental regulations
would have a material adverse effect on the Company. The delay associated with
obtaining any future approvals may also have a material adverse effect on the
Company.
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POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK;
ANTI-TAKEOVER EFFECTS. The Company's Second Restated Certificate of
Incorporation, as amended (the "Charter"), authorizes the issuance of a maximum
of 5,000,000 shares of Preferred Stock on terms which may be fixed by the
Company's Board of Directors without further stockholder action. The terms of
any series of Preferred Stock, which may include priority claims to assets and
dividends, and special voting rights, could adversely affect the rights of
holders of the Class A Common Stock. The issuance of Preferred Stock could make
the possible takeover of the Company or the removal of management of the Company
more difficult, discourage hostile bids for control of the Company in which
stockholders may receive premiums for their shares of Class A Common Stock, or
otherwise dilute the rights of holders of Class A Common Stock and the market
price of the Class A Common Stock. See "Description of Securities -- Preferred
Stock."
CONTROL BY PRESENT STOCKHOLDERS AND MANAGEMENT. The Company's former
Chairman of the Board of Directors, Scott J. Dankman, owns 150,000 shares of
Class B Common Stock (excluding options), representing approximately 6.15% of
the total voting power of the Company. Mr. Dankman has granted an irrevocable
voting proxy covering all such shares to the Company's non-employee directors.
Including such shares, the Company's officers and directors have approximately
11.5% of the voting power of the Company's Common Stock. As a result, they may
be able to influence the election of the Company's directors and otherwise
influence control over the Company's operations. Furthermore, the
disproportionate vote afforded the Class B Common Stock could also serve to
impede or prevent a change of control of the Company. As a result, potential
acquirers may be discouraged from seeking to acquire control of the Company
through the purchase of Class A Common Stock, which could depress the price of
the Company's securities. See "Description of Securities."
NO DIVIDENDS. The Company has not paid any cash dividends and does
not presently intend to pay cash dividends. It is not likely that any cash
dividends will be paid in the foreseeable future.
POSSIBLE ADVERSE EFFECT OF INVESTIGATION BY SECURITIES AND EXCHANGE
COMMISSION OF D. H. BLAIR INVESTMENT BANKING CORP. AND D.H. BLAIR AND CO., INC.
AND ISSUERS WHOSE SECURITIES WERE UNDERWRITTEN THEREBY. The Commission is
conducting an investigation concerning various business activities of Blair, the
Company's underwriter (the "Underwriter") and D.H. Blair & Co., Inc. ("Blair &
Co."). The investigation appears to be broad in scope, involving numerous
aspects of the Underwriter's and Blair & Co.'s compliance with the Federal
securities laws and compliance with the Federal securities laws by issuers whose
securities were underwritten by the Underwriter or Blair & Co., or in which
Blair & Co. made over-the-counter markets, persons associated with such
entities, such issuers and other persons. The Company has been advised by the
Underwriter that the investigation has been ongoing since at least 1989 and that
the Underwriter is cooperating with the investigation. The Underwriter cannot
predict whether this investigation will ever result in any type of formal
enforcement action against the Underwriter or Blair & Co., or, if so, whether
any such action might have an adverse effect on the Underwriter or the
securities offered hereby. Blair & Co. makes a market in the Company's
securities. An unfavorable resolution of the Commission's investigation could
have the effect of limiting Blair & Co.'s ability to make a market in the
Company's securities, which could adversely affect the liquidity or price of
such securities.
POSSIBLE RESTRICTIONS ON MARKET MAKING ACTIVITIES IN COMPANY'S
SECURITIES. Blair & Co. currently makes a market in the Company's securities.
Rule 10b-6 under the Exchange Act may prohibit Blair & Co. from engaging in any
market making activities with regard to the Company's securities for the period
from nine business days (or such other applicable period as Rule 10b-6 may
provide) prior to any solicitation by Blair & Co. of the exercise of Warrants
until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right that Blair & Co. may have to
receive a fee for the exercise of Warrants following such solicitation. As a
result, Blair & Co. may be unable to provide a market for the Company's
securities during the period while Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the securities offered hereby may not simultaneously engage
in market-making activities with respect to any securities of the Company for
the applicable "cooling off" period (at least two and possibly nine business
days) prior to the commencement of such distribution. Accordingly, in the event
the Underwriter or Blair & Co. is engaged in a distribution of the securities
offered hereby, neither of such firms will be able to make a market in the
Company's securities during the applicable restrictive period. Any temporary
cessation of such market-making activities could have an adverse effect on the
market price of the Company's securities.
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POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. On or prior to
September 27, 2000, the Company may redeem the Class C Warrants at a redemption
price of $.05 per Warrant upon 30 days' prior written notice if the average bid
price per share of the Class A Common Stock exceeds $8.00 (subject to
adjustment) for 30 consecutive trading days ending within 15 days of the notice
of redemption. Redemption of the Class C Warrants could force the holders to
exercise such Warrants and pay the exercise price for such Warrants at a time
when it may be disadvantageous for them to do so, to sell the Warrants at the
then-current market price when they might otherwise wish to hold such Warrants,
or to accept the redemption price, which, at the time such Warrants are called
for redemption, is likely to be substantially less than the market value of such
Warrants. The Company will not call the Class C Warrants for redemption except
pursuant to a currently effective prospectus and registration statement. See
"Description of Securities -- Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE
WARRANTS. A holder only will be able to exercise Class C Warrants if (i) a
current prospectus under the Securities Act, relating to the securities
underlying the Class C Warrants, is then in effect and (ii) such securities are
qualified or registered for sale or exempt from qualification or registration
under the applicable securities laws of the jurisdiction in which the holder
resides. Although the Company has undertaken to use its best efforts to maintain
the effectiveness of a current prospectus relating to the securities underlying
the Class C Warrants, there can be no assurance, due to financial and other
resource constraints, that the Company will be able to do so. The value of the
Class C Warrants may be significantly adversely affected if a current prospectus
relating to the securities issuable upon exercise thereof is not kept effective.
Similarly, the value of the Class C Warrants may be significantly adversely
affected if such securities are not qualified or registered, or exempt from
qualification or registration, in the jurisdiction of residence of a holder
wishing to exercise such Warrants. The Company has qualified or registered its
securities, or established the availability of exemption from registration, with
respect to the securities underlying the Class C Warrants in the following
jurisdictions which, according to the records of the Company and Blair,
represent the jurisdictions in which warrantholders reside: California,
Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia,
Illinois, Indiana, Louisiana, Maryland, Nebraska, New Hampshire, New Jersey, New
York, Oregon, Pennsylvania and Virginia. The Warrants may not be exercised in
certain states unless a notice has been filed pursuant to an available exemption
or a registration has been filed. Although none of the IPO Units, 1994 PPO Units
or 1995 PPO Units knowingly were sold to persons residing in jurisdictions in
which they were not qualified or registered for sale or subject to an available
exemption from such qualification or registration, original purchasers may have
moved to jurisdictions, and purchasers of Warrants in the aftermarket may reside
in or may move to jurisdictions, in which the securities underlying the Warrants
are not so qualified, registered or exempt. In this event, the Company would not
be able to issue shares of Class A Stock to a holder desiring to exercise his or
her Class C Warrants until the underlying securities could be qualified or
registered for sale, or an exemption established, in the jurisdiction in which
such holder resides. See "Description of Securities -- Warrants."
RISK OF LOW-PRICED STOCKS. If the Company's securities were delisted
from Nasdaq they may become subject to Rule 15c2-6 under the 1934 Act, which
imposes additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worth in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouses). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
adversely affect the ability of purchasers in this offering to sell any of the
securities acquired hereby in the secondary market.
The Commission has adopted regulations which define a "penny stock"
to be an equity security that has a market price (as therein defined) less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require delivery, prior to any transaction in a penny stock,
of a disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to
the Company's securities to the extent such securities are listed on Nasdaq and
have certain price and volume information provided on a current and
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continuing basis or meet certain minimum net tangible assets or average revenue
criteria. In any event, even if the Company's securities are exempt from such
restrictions, the Company would remain subject to Section 15(b)(6) of the 1934
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest.
If the Company's securities were subject to the rules on penny
stocks, the market liquidity for the Company's securities could be severely
adversely affected.
USE OF PROCEEDS
Holders are not obligated to exercise their Options and there can be
no assurance that holders will exercise all or any of their Options. The Company
intends to use any net proceeds received upon the exercise of the Options for
general corporate purposes and working capital to support anticipated growth,
including possible acquisitions, the production of the TelePad 3 and related
hardware and software products and the development of additional products. The
Company does not currently have any agreements, commitments or arrangements with
respect to any proposed acquisitions and there can be no assurance that any
acquisition will be consummated. There can be no assurance that any Options will
be exercised and, therefore, there can be no assurance that the Company will
realize any net proceeds from the exercise of the Options. The Company will
receive no proceeds from sales of securities, if any, by the Selling
Securityholders. See "Selling Securityholders and Plan of Distribution."
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of an aggregate
of 94,406,937 shares of Class A Common Stock, par value $.01 per share, 593,063
shares of Class B Common Stock, and 5,000,000 shares of Preferred Stock. As of
the date hereof, there were outstanding 11,520,037 shares of Class A Common
Stock and 150,000 shares of Class B Common Stock.
IPO UNITS
Each IPO Unit consists of one share of Class A Common Stock, one
Class A Warrant and one Class B Warrant. Each Class A Warrant currently entitles
the holder to purchase approximately 1.44 shares of Class A Common Stock (as
adjusted) and one Class B Warrant.
Each Class B Warrant currently entitles the holder to purchase
approximately 1.44 shares of Class A Common Stock (as adjusted). The Class A
Common Stock, Class A Warrants and Class B Warrants became separately
transferable upon issuance.
COMMON STOCK
Class A Common Stock
Holders of Class A Common Stock have one vote per share on each
matter submitted to a vote of the stockholders. Holders of the Class A Common
Stock do not have preemptive rights to purchase additional shares of Common
Stock or other subscription rights. The Class A Common Stock carries no
conversion rights and is not subject to redemption or to any sinking fund
provisions. All shares of Class A Common Stock are entitled to share equally in
dividends from legally available sources as determined by the Board of
Directors, subject to any preferential dividend rights of the Preferred Stock
(described below). Upon dissolution or liquidation of the Company, whether
voluntary or involuntary, holders of the Class A Common Stock are entitled to
receive assets of the Company available for distribution to the stockholders,
subject to the preferential rights of the Preferred Stock.
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Class B Common Stock
The Class B Common Stock is substantially identical to the Class A
Common Stock, except that (i) the holders of Class B Common Stock have five
votes per share on each matter considered by stockholders and the holders of the
Class A Common Stock have one vote per share on each matter considered by
stockholders; (ii) if stock dividends, splits, distributions, reverse splits,
combinations, reclassification of shares, or other recapitalizations
(collectively, "Recapitalizations") are declared or effected, such
Recapitalizations shall be effected in a like manner with respect to the Class A
Common Stock and the Class B Common Stock and payments in shares of capital
stock shall be paid in shares of Class A Common Stock with respect to the Class
A Common Stock and the Class B Common Stock; and (iii) shares of Class B Common
Stock are convertible into shares of Class A Common Stock at the option of the
holder at any time.
In addition, the transferability of the Class B Common Stock is
restricted by the Company's Charter, unless the shares are first converted into
Class A Common Stock. There is no trading market for the Class B Common Stock
and none will develop. All shares of Class B Common Stock held by any
stockholder automatically convert to Class A Common Stock if the beneficial
owner transfers such shares of Class B Common Stock or upon the death of the
holder of the Class B Common Stock. Scott J. Dankman, former Chairman of the
Board of Directors of the Company, holds all of the outstanding shares and
options to purchase shares of Class B Common Stock. Mr. Dankman has granted a
proxy covering these shares to the Directors of the Company who are not also
employees. Presently, there are 150,000 shares of Class B Common Stock issued
and outstanding. There are 37,500 options to purchase Class B Common Stock
outstanding.
The difference in voting rights increases the voting power of
holders of Class B Common Stock (or their proxy) and accordingly may have an
anti-takeover effect. The existence of the Class B Common Stock may make the
Company a less attractive target for a hostile takeover bid or render more
difficult or discourage a merger proposal, an unfriendly tender offer, a proxy
contest, or the removal of incumbent management, even if such transactions were
favored by the Class A stockholders of the Company. Thus, such stockholders may
be deprived of an opportunity to sell their shares at a premium over prevailing
market prices in the event of a hostile takeover bid. Those seeking to acquire
the Company through a business combination will be compelled to consult first
with the holders of Class B Common Stock (or their proxy) in order to negotiate
the terms of such business combination. Any such proposed business combination
will have to be approved by the Board of Directors, and if stockholder approval
were required, the approval of the holders of Class B Common Stock will be
necessary before any such business combination can be consummated.
PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to determine the rights,
preferences, privileges and restrictions granted to, and imposed upon any series
of Preferred Stock and to fix the number of shares of any series of Preferred
Stock and the designation of any such series, subject, to the consent of the
existing holders of preferred stock, in certain instances. The issuance of
Preferred Stock could be used, under certain circumstances, as a method of
preventing a takeover of the Company and could permit the Board of Directors,
without any action of the holders of the Common Stock to issue Preferred Stock
which could have a detrimental effect on the rights of holders of the Common
Stock, including loss of voting control. Anti-takeover provisions that could be
included in the Preferred Stock when issued may depress the market price of the
Company's securities and may limit stockholders' ability to receive a premium on
their shares of Common Stock by discouraging takeover and tender offer bids. As
of the date of this Prospectus, no shares of Preferred Stock were outstanding.
WARRANTS
Class A Warrants
Each Class A Warrant currently entitles the registered holder to
purchase approximately 1.44 shares of Class A Common Stock and one Class B
Warrant, at a per share exercise price of $4.71 through the close of business on
July 15, 1998, provided that at such time a current prospectus relating to the
Class A Common Stock and the Class B Warrants is in effect and the Class A
Common Stock and the Class B Warrants are qualified for
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sale or exempt from qualification under applicable state securities laws. The
Class A Warrants are transferable separately from the Class A Common Stock
issued with such Class A Warrants as part of the IPO Units.
The Class A Warrants are currently redeemable by the Company on 30
days' prior written notice at a redemption price of $.05 per Class A Warrant,
provided the average closing bid price of the Company's Class A Common Stock for
any 30 consecutive business days ending within 15 days of the notice of
redemption exceeds $9.50 per share (subject to adjustment by the Company, as
described below, in the event of any reverse stock split or similar events). The
notice of redemption will be sent to the registered address of the registered
holder of the Class A Warrant. All Class A Warrants must be redeemed if any are
redeemed; provided, however, that the Class A Warrants underlying the IPO Unit
Purchase Option may not be called for redemption. See "Plan of Distribution."
Class B Warrants
Each Class B Warrant currently entitles the registered holder to
purchase approximately 1.44 shares of Class A Common Stock at a per share
exercise price of $6.81 per share at any time from the date of issuance through
the close of business on July 15, 1998, provided that at such time a current
prospectus relating to the Class A Common Stock is then in effect and the Class
A Common Stock is qualified for sale or exempt from qualification under
applicable state securities laws. The Class B Warrants included in the Units are
transferable separately from the Class A Common Stock and the Class B Warrants
underlying the Class A Warrants will be separately transferable from the Class A
Common Stock received upon exercise of the Class A Warrants.
The Class B Warrants are currently redeemable by the Company on 30
days' prior written notice at a redemption price of $.05 per Class B Warrant,
provided the average closing bid price of the Class A Common Stock for any 30
consecutive business days ending within 15 days of the notice of redemption
exceeds $13.80 per share (subject to adjustment by the Company, as described
below, in the event of any reverse stock split or similar events). The notice of
redemption will be sent to the registered address of the registered holder of
the Class B Warrant. All Class B Warrants must be redeemed if any are redeemed;
provided, however, that the Class B Warrants subject to the IPO Unit Purchase
Option may not be called for redemption. See "Plan of Distribution."
Class C Warrants
Each Class C Warrant currently entitles the registered holder to
purchase one share of Class A Common Stock at an exercise price of $3.65 per
share any time through the close of business on September 27, 2000, provided
that at such time a current prospectus relating to the Class A Common Stock is
then in effect and the Class A Common Stock is qualified for sale or exempt from
qualification under applicable state securities laws.
The Class C Warrants are currently redeemable by the Company on 30
days' prior written notice at a redemption price of $.05 per Class C Warrant,
provided the average closing bid price of the Class A Common Stock for any 30
consecutive business days ending within 15 days of the notice of redemption
exceeds $8.00 per share (subject to adjustment by the Company, as described
below, in the event of any reverse stock split or similar events). The notice of
redemption will be sent to the registered address of the registered holder of
the Class C Warrant. All Class C Warrants must be redeemed if any are redeemed;
provided, however, that the Class C Warrants subject to the 1994 PPO Unit
Purchase Option granted to Blair (the "1994 PPO Unit Purchase Option") and the
1995 PPO Unit Purchase Option granted to Blair (the "1995 PPO Unit Purchase
Option") may not be called for redemption. See "Plan of Distribution."
Class D Warrants
Each Class D Warrant entitles the registered holder to purchase one
share of Class A Common Stock at a per share exercise price of $3.50 at any time
through the close of business on the fifth anniversary of the date of this
Prospectus, provided that at such time a current prospectus relating to the
Class A Common Stock is in effect and the Class A Common Stock is qualified for
sale or exempt from qualification under applicable state securities laws. See
"Risk Factors -- Current Prospectus and State Registration Required to Exercise
Warrants."
The Class D Warrants are subject to redemption by the Company
starting on the first anniversary of the Effective Date at a redemption price of
$0.05 per Class D Warrant, on 30 days' written notice, if the closing bid
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price of the Class A Common Stock exceeds $7.00 (subject to adjustment by the
Company, in the event of any reverse stock split or similar events) for 30
consecutive business days ending within 15 days of the date on which notice of
redemption is given. The notice of redemption will be sent to the registered
address of the registered holder of the Class D Warrant. All Class D Warrants
must be redeemed if any are redeemed; provided, however, that the Class D
Warrants underlying the Unit Purchase Option granted to Blair in connection with
the Company's 1996 unit offering may not be called for redemption. See "Plan of
Distribution."
General
The Class A Warrants, Class B Warrants, Class C Warrants and Class D
Warrants (collectively, "Warrants") were issued pursuant to warrant agreements
(the "Warrant Agreements") among the Company, Blair and American Stock Transfer
& Trust Company as warrant agent (the "Warrant Agent"), and are evidenced by
warrant certificates in registered form. The exercise prices of the Warrants and
the number and kind of shares of Class A Common Stock or other securities and
property to be obtained upon exercise of the Company Warrants are subject to
adjustment in certain circumstances including a stock split of, or stock
dividend on, or a subdivision, combination or recapitalization of, the Common
Stock or the issuance of shares of Common Stock at less than the market price of
the Common Stock. The exercise prices of the Class A Warrants, Class B Warrants
and Class C Warrants and the number of shares of Class A Common Stock underlying
the Warrants have been adjusted to give effect to the dilution caused by the
1994 Private Placements, the 1995 Private Placement and the Company's 1995
bridge financing transaction in connection with the Company's 1996 unit
offering. Additionally, an adjustment would be made upon the sale of all or
substantially all of the assets of the Company for less than the market value, a
merger or other unusual events (other than share issuances pursuant to employee
benefit and stock incentive plans for directors, officers and employees of the
Company) so as to enable Warrant holders to purchase the kind and number of
shares or other securities or property (including cash) receivable in such event
by a holder of the kind and number of shares of Class A Common Stock that might
otherwise have been purchased upon exercise of such Warrant. No adjustment for
previously paid cash dividends, if any, will be made upon exercise of the
Warrants. The Company is not required to issue fractional shares of Class A
Common Stock, and in lieu thereof will make a cash payment based upon the
current market value of such fractional shares.
The Warrants may be exercised upon surrender of the certificate
representing such Warrants on or prior to the expiration date (or earlier
redemption date) of such Warrants at the offices of the Warrant Agent with the
form of "Election of Purchase" on the reverse side of the warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price (by certified or bank check payable to the order of the Company) for the
number of Company Warrants being exercised. Shares of Class A Common Stock
issued upon exercise of Company Warrants for which payment has been received in
accordance with the terms of the Warrants, will be fully paid and
non-assessable. The Warrants may not be exercised unless there is an available
exemption or the underlying securities have been registered.
The Warrants do not confer upon the holder any voting or other
rights of the stockholder of the Company. Upon notice to the warrant holders,
the Company has the right to reduce the exercise price or extend the expiration
date of the Class A, Class B and Class C Warrants. Although this right is
intended to benefit Warrant holders, to the extent the Company exercises this
right when the Warrants would otherwise be exercisable at a price higher than
the prevailing market price of the Class A Common Stock, the likelihood of
exercise, and resultant increase in the number of shares outstanding, may result
in making more costly, or impeding, a change in control in the Company.
TRANSFER AGENT AND WARRANT AGENT
The Company's transfer and warrant agent for the IPO Units, Class A
Common Stock and the Warrants is American Stock Transfer & Trust Company, New
York, New York.
-18-
<PAGE>
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 550,567 outstanding shares of Class A Common
Stock and 256,218 Class C Warrants, may be offered for resale by Selling
Securityholders. Of these, 524,317 shares of Class A Common Stock and all of
such Class C Warrants were received by Securityholders in connection with the
Private Placements, and 26,250 shares were issued upon the exercise of a certain
option previously granted by the Company as described below.
The following table sets forth certain information with respect to
each Selling Securityholder for whom the Company is registering Class A Common
Stock and/or Class C Warrants for resale to the public which shares and Warrants
were issued in connection with the Private Placements. Each Selling
Securityholder is registering or has registered all of the Class C Warrants held
thereby and each such Selling Securityholder, is registering or has registered
all of the Class A Common Stock held thereby. Consequently, in each case with
respect to Class C Warrants and with respect to Class A Common Stock, if the
maximum amount is sold, either pursuant to this Prospectus or pursuant to a
prospectus of the Company dated March 29, 1996, which provided for the
registration of certain securities of the Company (including shares of Class A
Common Stock and Class C Warrants), the Selling Securityholder will own no Class
C Warrants or Common Stock. The Company will not receive any of the proceeds
from the sale of such securities. Except for John Diesel, Sydney Dankman and
Ronald Oklewicz, there are no material relationships between any of such Selling
Securityholders and the Company or any of its predecessors or affiliates, nor
have any such material relationships existed within the past three years other
than a prior consulting arrangement between the Company and Mr. Morris Sedaka.
The Warrants may not be exercised unless there is an available exemption or the
underlying securities have been registered.
-19-
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS C WARRANTS
-------------------------------- ---------------------------------
BENEFICIAL MAXIMUM BENEFICIAL MAXIMUM
SELLING SECURITYHOLDER OWNERSHIP AMOUNT OWNERSHIP AMOUNT
PRIOR TO OFFERING TO BE SOLD PRIOR TO OFFERING TO BE SOLD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Magid M. Abraham 50,000 0 27,497 1,000
David Boone 12,500 12,500 6,874 6,874
Boyer & Scheive Pension Fund 12,500 12,500 6,875 6,875
James E. Butler 50,000 50,000 27,494 27,494
Calmerica, Inc. 6,250 6,250 3,438 3,438
Michael Cantor 0 0 13,749 500
John Constantino & Marion Constantino 0 0 1,719 124
Philip Cramer 12,500 12,500 6,875 6,875
Sydney J. Dankman 85,286 85,286 13,750 13,750
John P. Diesel & Joy Guernsey Diesel 37,750 2,500 17,187 999
Robert Donohue 6,250 6,250 3,438 3,438
Donald G. Drapkin 62,500 0 34,370 995
Jules Dreyfus 12,500 12,500 6,874 6,874
Ralph Falk II 25,000 25,000 13,747 13,747
Barry Fradkin 6,250 6,250 3,438 1,238
William Frankel 6,250 6,250 3,438 3,438
Irving L. Goldman 31,250 0 17,185 250
James J. Higbee 6,250 6,250 3,437 3,437
Andrew Alan Holder 6,250 0 3,438 3,438
Thomas M. Horrigan 6,250 6,250 3,437 3,437
Steven P. Hurlburt 34,375 0 18,905 909
Douglas M. Jordan & Wendy A. Jordan 12,500 12,500 6,875 6,875
Alan C. Levinson & Stephanie Levinson 0 0 3,438 3,438
David Moiola 12,500 12,500 6,875 6,875
John Motulsky, IRA Account 6,250 6,250 3,438 3,438
Thomas J. Myers Revocable Trust 25,000 0 13,750 13,750
Eric P. Neibart 18,750 0 10,312 497
Ronald C. Oklewicz & Renette G. Oklewicz 17,781 17,781 3,438 3,438
Michael Ornstein 12,500 12,500 6,874 6,874
Melvin Paradise, Julius Horowitz & Elizabeth
Krulik, Executors, Estate of Lawrence Krulik 12,500 12,500 6,875 6,875
Michael Patoff & Mary Patoff 3,125 0 1,719 1,719
Alan Perl 12,500 0 6,875 6,875
Chester A. Powell, IRA 12,500 12,500 6,875 6,875
Darell L. Price & Bonita L. Price 6,250 6,250 3,438 3,438
Prudential Securities C/F Fay R. Devine, IRA 25,000 25,000 13,750 13,750
Matt C. Schilowitz 43,750 43,750 24,060 24,060
Morris Sedaka 26,250 26,250 0 0
Eugene Silverman 18,750 0 10,312 499
Steven Sklow 18,750 0 10,312 499
George R. Slater, Trustee, the George R. Slater
Irrevocable Trust 6,250 6,250 3,438 3,438
Robert M. Smith, IRA 0 0 3,438 3,438
Patrick J. Storm & Marie A. Storm 6,250 6,250 3,438 3,438
Edward Tawil & Susan E. Tawil 6,250 6,250 3,437 3,437
Laurel R. Tennis, IRA 0 0 6,875 6,875
Mike Teofilovich 12,500 12,500 6,875 6,875
Venturetek L.P. 25,000 25,000 13,750 13,750
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS C WARRANTS
-------------------------------- ---------------------------------
BENEFICIAL MAXIMUM BENEFICIAL MAXIMUM
SELLING SECURITYHOLDER OWNERSHIP AMOUNT OWNERSHIP AMOUNT
PRIOR TO OFFERING TO BE SOLD PRIOR TO OFFERING TO BE SOLD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harold H. Wippler & Charleen E. Wippler 0 0 3,438 3,438
Aaron Wolfson 12,500 12,500 6,874 6,874
Abraham Wolfson 6,250 6,250 3,437 3,437
Morris Wolfson 25,000 25,000 13,747 13,747
Xanadu Associates L.L.C. 12,500 0 6,875 500
Herman Zeller 12,500 12,500 6,874 6,874
=================================================================================================================
Total 875,567 550,567 458,877 256,218
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PLAN OF DISTRIBUTION OF THE SELLING SECURITYHOLDERS
The securities offered hereby are being offered on behalf of the
Selling Securityholders. No underwriter is being utilized in connection with
this offering.
The sale of the securities by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination of such methods of sale or otherwise. Sales may be
made at final prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling
their securities directly to purchasers, through broker-dealers acting as agents
for the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commission).
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares of Class A Common Stock and/or
Warrants of the Selling Securityholders may not simultaneously engage in market
making activities with respect to any securities of the Company for a period of
at least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event Blair is engaged in a distribution of
the shares of Class A Common Stock and/or Warrants of the Selling
Securityholders, such firm will not be able to make a market in the Company's
securities during the applicable restrictive period. However, Blair has not
agreed nor is Blair obligated to act as a broker/dealer in the sale of the
shares of Class A Common Stock and/or Warrants of the Selling Securityholders
and the Selling Securityholders may be required, and in the event Blair is a
market maker, will likely be required, to sell such securities through another
broker/dealer. In addition, each Selling Securityholder desiring to sell shares
of Class A Common Stock and/or Warrants will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of the purchases and sales of the Company's securities by such
Selling Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed to pay Blair a Solicitation Fee of 4% of the
aggregate exercise price of each Warrant which is exercised, if (i) the market
price of the Class A Common Stock on the date the Warrant is exercised is
greater than the exercise price of the Warrant; (ii) the exercise of the Warrant
was solicited by a member of the NASD; (iii) the Warrant is not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the
-21-
<PAGE>
solicitation of exercise of the Warrants was not in violation of Rule 10b-6 as
promulgated under the Exchange Act or respective state blue sky laws. Any costs
incurred by the Company in connection with the exercising of the Warrants shall
be borne by the Company. Certain states limit or restrict the payment of
commissions in conjunction with the exercise of warrants. Any exercise of the
Warrants in those states will not result in the payment of the Solicitation Fee.
Unless granted an exemption by the Commission from Rule 10b-6, Blair
will be prohibited from engaging in any market making activities with regard to
the Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation of the
exercise of Warrants until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right that Blair may
have to receive a fee for the exercise of Warrants following such solicitation.
As a result, Blair may be unable to continue to make a market in the Company's
securities during certain periods while the Warrants are exercisable.
Blair acted as the underwriter of the Company's Initial Public
Offering in July 1993, a public offering in March 1996 and as the placement
agent in the Private Placements. In connection with the Initial Public Offering
and subsequent public offering and the Private Placements, the Company and Blair
agreed to indemnify each other against certain liabilities in connection with
such prior offerings and this offering including liabilities under the
Securities Act.
In connection with the Initial Public Offering, the Company agreed
to sell to Blair and its designees, for nominal consideration, the IPO Unit
Purchase Option to purchase up to 155,000 IPO Units at an adjusted exercise
price of $4.90 per IPO Unit. The IPO Unit Purchase Option and the underlying
securities may not be sold, assigned or transferred for three years from the
date of issuance except to officers of Blair or to any NASD member participating
in the offering and is exercisable during the period ending July 15, 1997.
In connection with the 1994 Private Placement, the Company agreed to
sell to Blair and its designees, for nominal consideration, the 1994 PPO Unit
Purchase Option to purchase up to 31,425 PPO Units at an adjusted exercise price
of $3.63 per PPO Unit. The 1994 PPO Unit Purchase Option is exercisable until
the close of business on September 18, 2000.
In connection with the 1995 Private Placement, the Company agreed to
sell to Blair and its designees, for nominal consideration, the 1995 PPO Unit
Purchase Option to purchase up to 15.45 PPO Units at an adjusted exercise price
of $3.65 per PPO Unit. The 1995 PPO Unit Purchase Option is exercisable until
the close of business on September 18, 2000.
In connection with the 1996 public offering, the Company agreed to
sell to Blair and its designees, for nominal consideration, a Unit Purchase
Option (the "1996 Unit Purchase Option") to purchase up to 2,000 units (each
unit consisting of 285 shares of Class A Common Stock and 1,000 Redeemable Class
D Warrants the "1996 Units") at an exercise price of $1,400 per 1996 Unit. The
1996 Unit Purchase Option and the underlying securities may not be sold,
assigned or transferred for three years from the date of issuance except to
officers of Blair or to any NASD member participating in the offering, and is
exercisable during the two-year period commencing March 29, 1999.
Blair has informed the Company that the Commission is conducting an
investigation concerning various business activities of Blair & Co., a selling
group member which distributed substantially all of the securities offered in
the Initial Public Offering, the 1996 public offering and the Private
Placements. The investigation appears to be broad in scope, involving numerous
aspects of Blair and Blair & Co.'s compliance with the federal securities laws
and compliance with federal securities laws by issuers whose securities were
underwritten by Blair or Blair & Co., or in which Blair or Blair & Co. made
over-the-counter markets, persons associated with Blair or Blair & Co., such
issuers and other persons. The Company has been advised by Blair that the
investigation has been ongoing since at least 1989 and that it is cooperating
with the investigation. Blair cannot predict whether this investigation will
ever result in any type of formal enforcement action against Blair or Blair &
Co., or, if so, whether any such action might have an adverse effect on Blair or
the Company's securities, including those offered hereby. Blair & Co. makes a
market in the securities. An unfavorable resolution of the Commission's
investigation could have the effect of limiting such firm's ability to make a
market in the Company's securities, which could affect the liquidity or price of
such securities.
-22-
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
by Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York.
EXPERTS
The financial statements of TelePad Corporation appearing in Telepad
Corporation's Annual Report (form 10-K SB) for the year ended December 31, 1995
and for the years then ended, incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which report contains an
explanatory paragraph indicating substantial doubt about the ability of the
Company to continue as a going concern as mentioned in Note 2 to the financial
statements) incorporated by reference therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement under the 1933 Act with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed therewith. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal office, and copies of all or any part of the Registration Statement
may be obtained from such office upon the payment of the fees prescribed by the
Commission.
-23-
<PAGE>
====================================== =======================================
NO PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH THE OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS OR A SUPPLEMENT TO
THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR
ANY OTHER PERSON. NEITHER THIS
PROSPECTUS NOR ANY SUPPLEMENT TO THIS
PROSPECTUS CONSTITUTES AN OFFER TO 357,880 SHARES OF CLASS A COMMON STOCK
SELL OR A SOLICITATION OF AN OFFER TO
BUY, ANY SECURITIES OTHER THAN THE TELEPAD CORPORATION
SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY
SUPPLEMENT TO THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO PROSPECTUS
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THEREOF OR
THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATES AS OF WHICH SUCH
INFORMATION IS FURNISHED.
-----------------
TABLE OF CONTENTS
Page
----
Available Information............... 7
Information Incorporated by
Reference.......................... 7
Introduction........................ 8
The Company......................... 8
Risk Factors........................ 9
Use of Proceeds.....................15
Description of Securities ..........15
Selling Securityholders and
Plan of Distribution..............19
Legal Matters.......................23
Experts.............................23
Additional Information..............23 _____________ , 1996
====================================== =======================================
<PAGE>
[ALTERNATE FRONT COVER PAGE FOR
PROSPECTUS FOR SELLING SECURITYHOLDERS]
SUBJECT TO COMPLETION DATED NOVEMBER 27, 1996
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
PROSPECTUS
TELEPAD CORPORATION
550,567 OUTSTANDING CLASS A COMMON STOCK
256,218 REDEEMABLE CLASS C WARRANTS
AND
256, 218 SHARES OF CLASS A COMMON STOCK
This Prospectus relates to the following securities which may be
sold by certain securityholders (the "Selling Securityholders") of TelePad
Corporation, a Delaware corporation (the "Company"): 550,567 outstanding shares
of Class A Common Stock, par value $.01 per share ("Class A Common Stock"),
524,317 of which were issued by the Company in certain 1994 private placement
offerings and 1995 private placement offerings (the "Private Placements") and
26,250 of which were issued upon the exercise of a certain option granted by the
Company prior to the date hereof, 256,218 redeemable Class C Warrants ("Class C
Warrants") of the Company issued in the Private Placements and pursuant to
certain anti-dilution provisions included in applicable warrant agreements which
may be sold by the Selling Securityholders, and 256,218 shares of Class A Common
Stock issuable upon the exercise of such Class C Warrants. Each Class C Warrant
issued in connection with the Private Placements entitles the registered holder
thereof to purchase one share of Class A Common Stock at an exercise price of
$3.65 per share through September 27, 2000. See "Description of Securities" and
"Selling Securityholders and Plan of Distribution.
Concurrently with this offering, the Company also has registered
357,880 shares of Class A Common Stock which may be issued by the Company
following the exercise of certain options granted prior to the date hereof by
the Company as described herein (the "Options").
The Company expects the Registration Statement in which this
Prospectus is included (the "Registration Statement") to become effective upon
its filing with the Securities and Exchange Commission (the "Commission") or as
soon as possible thereafter.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE SECURITIES SHOULD ONLY BE
MADE BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" ON PAGE __ AND "DILUTION."
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
A-1
<PAGE>
A former chairman of the Company's Board of Directors owns 150,000
shares of the Company's Class B Voting Common Stock (excluding options),
representing approximately 6.15% of the Company's outstanding capital stock and
approximately 11.5% of the total voting power prior to this offering. See "Risk
Factors --Control by Present Stockholders" and "Description of Securities."
The Company has agreed, pursuant to Warrant Agreements between the
Company and D.H. Blair Investment Banking Corp. ("Blair"), to pay to Blair a
solicitation fee (the "Solicitation Fee") equal to 4% of the exercise price in
connection with the exercise of the Class C Warrants, as well as the Class A and
Class B Warrants (each, a "Warrant" and collectively, the "Warrants"), if (i)
the market price of the Class A Common Stock on the date the Warrant is
exercised is greater than the then applicable Warrant exercise price; (ii) the
exercise of the Warrant was solicited by a member of the National Association of
Securities Dealers, Inc. (the "NASD"); (iii) the Warrant was not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the solicitation of exercise of the Warrant was not in violation of Rule
10b-6 as promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or applicable state blue sky laws. The exercise prices of the
Warrants were determined by negotiation between the Company and Blair at the
time such Warrants were offered, and are not necessarily related to the
Company's asset value, net worth or other criteria of value.
The Company's IPO Units (consisting of one share of Class A Common
Stock, one Class A Warrant and one Class B Warrant), Class A Common Stock, Class
A Warrants, Class B Warrants, Class C Warrants and Class D Warrants are listed
on the Nasdaq Small Cap Market under the symbols TPADU, TPADA, TPADW, TPADZ,
TPADM and TPADL respectively. Reports and other information concerning the
Company can be inspected at Nasdaq.
The closing bid price as reported by the National Quotation Bureau,
Inc. on the dates indicated below for the IPO Units, the Class A Common Stock,
the Class A Warrants, the Class B Warrants, the Class C Warrants and the Class D
Warrants was $7.125 (November 21, 1996), $5.00 (November 26, 1996), $2.25
(November 26, 1996), $.375 (November 25, 1996), $1.125 (November 22, 1996), and
$2.125 (November 26, 1996), respectively.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. See "Use of Proceeds" and "Selling
Securityholders and Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS _________________, 1996.
A-2
<PAGE>
This Prospectus relates to the possible resale, by the Selling
Securityholders, of up to 256,218 Class C Warrants, up to 256,218 shares of
Class A Common Stock issuable upon the exercise of such Class C Warrants, up to
550,567 outstanding shares of Class A Common Stock issued by the Company in the
Private Placements and up to 26,250 shares of Class A Common Stock previously
issued upon the exercise of an option granted by the Company as consideration
for certain advisory services. The shares of Class A Common Stock and Class C
Warrants issued in connection with the Private Placements were immediately
separately transferable upon issuance.
The Registration Statement of which this Prospectus is a part also
relates to the possible issuance and sale by the Company of 357,880 shares of
Common Stock upon the exercise of the Options which include an option granted by
the Company to a former Chairman of the Company's Board of Directors to acquire
up to 37,500 shares of Class B Common Stock which shares are convertible into an
equal number of Class A Common Stock.
Each Class C Warrant entitles the registered holder thereof to
purchase one share of Class A Common Stock at an adjusted exercise price of
$3.65 per share. The Class C Warrants are exercisable until the close of
business on September 27, 2000. The Class C Warrants are immediately exercisable
and subject to redemption by the Company at $.05 per Warrant under certain
circumstances. See "Description of Securities."
The securities offered by the Selling Securityholders under this
Prospectus may be sold from time to time by the Selling Securityholders or by
their transferees. See "Selling Securityholders and Plan of Distribution." The
Selling Securityholders and intermediaries through whom such securities are sold
may be deemed underwriters within the meaning of the Securities Act of 1933, as
amended (the "Securities Act") with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Securityholders
against certain liabilities, including liabilities under the Securities Act.
A-3
<PAGE>
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 550,567 outstanding shares of Class A Common
Stock and 256,218 Class C Warrants, may be offered for resale by Selling
Securityholders. Of these, 524,317 shares of Class A Common Stock and all of
such Class C Warrants were received by Securityholders in connection with the
Private Placements, and 26,250 shares were issued upon the exercise of a certain
option previously granted by the Company as described below.
The following table sets forth certain information with respect to
each Selling Securityholder for whom the Company is registering Class A Common
Stock and/or Class C Warrants for resale to the public which shares and Warrants
were issued in connection with the Private Placements. Each Selling
Securityholder is registering or has registered all of the Class C Warrants held
thereby and each such Selling Securityholder, is registering or has registered
all of the Class A Common Stock held thereby. Consequently, in each case with
respect to Class C Warrants and with respect to Class A Common Stock, if the
maximum amount is sold, either pursuant to this Prospectus or pursuant to a
prospectus of the Company dated March 29, 1996, which provided for the
registration of certain securities of the Company (including shares of Class A
Common Stock and Class C Warrants), the Selling Securityholder will own no Class
C Warrants or Common Stock. The Company will not receive any of the proceeds
from the sale of such securities. Except for John Diesel, Sydney Dankman and
Ronald Oklewicz, there are no material relationships between any of such Selling
Securityholders and the Company or any of its predecessors or affiliates, nor
have any such material relationships existed within the past three years other
than a prior consulting arrangement between Mr. Morris Sedaka and the Company.
The Warrants may not be exercised unless there is an available exemption or the
underlying securities have been registered.
A-4
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS C WARRANTS
---------------------------------- -------------------------------------
BENEFICIAL MAXIMUM BENEFICIAL MAXIMUM
SELLING SECURITYHOLDER OWNERSHIP AMOUNT OWNERSHIP AMOUNT
PRIOR TO OFFERING TO BE SOLD PRIOR TO OFFERING TO BE SOLD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Magid M. Abraham 50,000 0 27,497 1,000
David Boone 12,500 12,500 6,874 6,874
Boyer & Scheive Pension Fund 12,500 12,500 6,875 6,875
James E. Butler 50,000 50,000 27,494 27,494
Calmerica, Inc. 6,250 6,250 3,438 3,438
Michael Cantor 0 0 13,749 500
John Constantino & Marion Constantino 0 0 1,719 124
Philip Cramer 12,500 12,500 6,875 6,875
Sydney J. Dankman 85,286 85,286 13,750 13,750
John P. Diesel & Joy Guernsey Diesel 37,750 2,500 17,187 999
Robert Donohue 6,250 6,250 3,438 3,438
Donald G. Drapkin 62,500 0 34,370 995
Jules Dreyfus 12,500 12,500 6,874 6,874
Ralph Falk II 25,000 25,000 13,747 13,747
Barry Fradkin 6,250 6,250 3,438 1,238
William Frankel 6,250 6,250 3,438 3,438
Irving L. Goldman 31,250 0 17,185 250
James J. Higbee 6,250 6,250 3,437 3,437
Andrew Alan Holder 6,250 0 3,438 3,438
Thomas M. Horrigan 6,250 6,250 3,437 3,437
Steven P. Hurlburt 34,375 0 18,905 909
Douglas M. Jordan & Wendy A. Jordan 12,500 12,500 6,875 6,875
Alan C. Levinson & Stephanie Levinson 0 0 3,438 3,438
David Moiola 12,500 12,500 6,875 6,875
John Motulsky, IRA Account 6,250 6,250 3,438 3,438
Thomas J. Myers Revocable Trust 25,000 0 13,750 13,750
Eric P. Neibart 18,750 0 10,312 497
Ronald C. Oklewicz & Renette G. Oklewicz 17,781 17,781 3,438 3,438
Michael Ornstein 12,500 12,500 6,874 6,874
Melvin Paradise, Julius Horowitz & Elizabeth
Krulik, Executors, Estate of Lawrence Krulik 12,500 12,500 6,875 6,875
Michael Patoff & Mary Patoff 3,125 0 1,719 1,719
Alan Perl 12,500 0 6,875 6,875
Chester A. Powell, IRA 12,500 12,500 6,875 6,875
Darell L. Price & Bonita L. Price 6,250 6,250 3,438 3,438
Prudential Securities C/F Fay R. Devine, IRA 25,000 25,000 13,750 13,750
Matt C. Schilowitz 43,750 43,750 24,060 24,060
Morris Sedaka 26,250 26,250 0 0
Eugene Silverman 18,750 0 10,312 499
Steven Sklow 18,750 0 10,312 499
George R. Slater, Trustee, the George R. Slater
Irrevocable Trust 6,250 6,250 3,438 3,438
Robert M. Smith, IRA 0 0 3,438 3,438
Patrick J. Storm & Marie A. Storm 6,250 6,250 3,438 3,438
Edward Tawil & Susan E. Tawil 6,250 6,250 3,437 3,437
Laurel R. Tennis, IRA 0 0 6,875 6,875
Mike Teofilovich 12,500 12,500 6,875 6,875
Venturetek L.P. 25,000 25,000 13,750 13,750
Harold H. Wippler & Charleen E. Wippler 0 0 3,438 3,438
Aaron Wolfson 12,500 12,500 6,874 6,874
Abraham Wolfson 6,250 6,250 3,437 3,437
- ------------------------------------------------------------------------------------------------------------------------------------
A-5
<PAGE>
CLASS A COMMON STOCK CLASS C WARRANTS
---------------------------------- -------------------------------------
BENEFICIAL MAXIMUM BENEFICIAL MAXIMUM
SELLING SECURITYHOLDER OWNERSHIP AMOUNT OWNERSHIP AMOUNT
PRIOR TO OFFERING TO BE SOLD PRIOR TO OFFERING TO BE SOLD
- ------------------------------------------------------------------------------------------------------------------------------------
Morris Wolfson 25,000 25,000 13,747 13,747
Xanadu Associates L.L.C. 12,500 0 6,875 500
Herman Zeller 12,500 12,500 6,874 6,874
====================================================================================================================================
Total 875,567 550,567 458,877 256,218
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLAN OF DISTRIBUTION OF THE SELLING SECURITYHOLDERS
The securities offered hereby are being offered on behalf of the
Selling Securityholders. No underwriter is being utilized in connection with
this offering.
The sale of the securities by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination of such methods of sale or otherwise. Sales may be
made at final prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling
their securities directly to purchasers, through broker-dealers acting as agents
for the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commission).
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares of Class A Common Stock and/or
Warrants of the Selling Securityholders may not simultaneously engage in market
making activities with respect to any securities of the Company for a period of
at least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event Blair is engaged in a distribution of
the shares of Class A Common Stock and/or Warrants of the Selling
Securityholders, such firm will not be able to make a market in the Company's
securities during the applicable restrictive period. However, Blair has not
agreed nor is Blair obligated to act as a broker/dealer in the sale of the
shares of Class A Common Stock and/or Warrants of the Selling Securityholders
and the Selling Securityholders may be required, and in the event Blair is a
market maker, will likely be required, to sell such securities through another
broker/dealer. In addition, each Selling Securityholder desiring to sell shares
of Class A Common Stock and/or Warrants will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of the purchases and sales of the Company's securities by such
Selling Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed to pay Blair a Solicitation Fee of 4% of the
aggregate exercise price of each Warrant which is exercised, if (i) the market
price of the Class A Common Stock on the date the Warrant is exercised is
greater than the exercise price of the Warrant; (ii) the exercise of the Warrant
was solicited by a member of the NASD; (iii) the Warrant is not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the solicitation of exercise of the Warrants was not in violation of Rule
10b-6 as promulgated under the Exchange Act or respective state blue sky laws.
Any costs incurred by the Company in connection with the exercising of the
Warrants shall be borne by the Company. Certain states limit or restrict the
payment of commissions in conjunction with the exercise of warrants. Any
exercise of the Warrants in those states will not result in the payment of the
Solicitation Fee.
A-6
<PAGE>
Unless granted an exemption by the Commission from Rule 10b-6, Blair
will be prohibited from engaging in any market making activities with regard to
the Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation of the
exercise of Warrants until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right that Blair may
have to receive a fee for the exercise of Warrants following such solicitation.
As a result, Blair may be unable to continue to make a market in the Company's
securities during certain periods while the Warrants are exercisable.
Blair acted as the underwriter of the Company's Initial Public
Offering in July 1993, a public offering in March 1996 and as the placement
agent in the Private Placements. In connection with the Initial Public Offering
and subsequent public offering and the Private Placements, the Company and Blair
agreed to indemnify each other against certain liabilities in connection with
such prior offerings and this offering including liabilities under the
Securities Act.
In connection with the Initial Public Offering, the Company agreed
to sell to Blair and its designees, for nominal consideration, the IPO Unit
Purchase Option to purchase up to 155,000 IPO Units at an adjusted exercise
price of $4.90 per IPO Unit. The IPO Unit Purchase Option and the underlying
securities may not be sold, assigned or transferred for three years from the
date of issuance except to officers of Blair or to any NASD member participating
in the offering and is exercisable during the period ending July 15, 1997.
In connection with the 1994 Private Placement, the Company agreed to
sell to Blair and its designees, for nominal consideration, the 1994 PPO Unit
Purchase Option to purchase up to 31,425 PPO Units at an adjusted exercise price
of $3.63 per PPO Unit. The 1994 PPO Unit Purchase Option is exercisable until
the close of business on September 18, 2000.
In connection with the 1995 Private Placement, the Company agreed to
sell to Blair and its designees, for nominal consideration, the 1995 PPO Unit
Purchase Option to purchase up to 15.45 PPO Units at an adjusted exercise price
of $3.65 per PPO Unit. The 1995 PPO Unit Purchase Option is exercisable until
the close of business on September 18, 2000.
In connection with the 1996 public offering, the Company agreed to
sell to Blair and its designees, for nominal consideration, a Unit Purchase
Option (the "1996 Unit Purchase Option") to purchase up to 2,000 units (each
unit consisting of 285 shares of Class A Common Stock and 1,000 Redeemable Class
D Warrants the "1996 Units") at an exercise price of $1,400 per 1996 Unit. The
1996 Unit Purchase Option and the underlying securities may not be sold,
assigned or transferred for three years from the date of issuance except to
officers of Blair or to any NASD member participating in the offering, and is
exercisable during the two-year period commencing March 29, 1999.
Blair has informed the Company that the Commission is conducting an
investigation concerning various business activities of Blair & Co., a selling
group member which distributed substantially all of the securities offered in
the Initial Public Offering, the 1996 public offering and the Private
Placements. The investigation appears to be broad in scope, involving numerous
aspects of Blair and Blair & Co.'s compliance with the federal securities laws
and compliance with federal securities laws by issuers whose securities were
underwritten by Blair or Blair & Co., or in which Blair or Blair & Co. made
over-the-counter markets, persons associated with Blair or Blair & Co., such
issuers and other persons. The Company has been advised by Blair that the
investigation has been ongoing since at least 1989 and that it is cooperating
with the investigation. Blair cannot predict whether this investigation will
ever result in any type of formal enforcement action against Blair or Blair &
Co., or, if so, whether any such action might have an adverse effect on Blair or
the Company's securities, including those offered hereby. Blair & Co. makes a
market in the securities. An unfavorable resolution of the Commission's
investigation could have the effect of limiting such firm's ability to make a
market in the Company's securities, which could affect the liquidity or price of
such securities.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon
by Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York.
A-7
<PAGE>
EXPERTS
The financial statements of TelePad Corporation appearing in Telepad
Corporation's Annual Report (form 10-K SB) for the year ended December 31, 1995
and for the years then ended, incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which report contains an
explanatory paragraph indicating substantial doubt about the ability of the
Company to continue as a going concern as mentioned in Note 2 to the financial
statements) incorporated by reference therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement under the 1933 Act with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed therewith. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal office, and copies of all or any part of the Registration Statement
may be obtained from such office upon the payment of the fees prescribed by the
Commission.
A-8
<PAGE>
====================================== =======================================
NO PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH THE OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS OR A SUPPLEMENT TO
THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR
ANY OTHER PERSON. NEITHER THIS
PROSPECTUS NOR ANY SUPPLEMENT TO THIS 550,567 OUTSTANDING SHARES OF CLASS A
PROSPECTUS CONSTITUTES AN OFFER TO COMMON STOCK
SELL OR A SOLICITATION OF AN OFFER TO
BUY, ANY SECURITIES OTHER THAN THE 256,218 REDEEMABLE
SECURITIES TO WHICH IT RELATES OR AN CLASS C WARRANTS
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY AND
JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN 256,218 SHARES OF CLASS A
OFFER OR SOLICITATION. NEITHER THE COMMON STOCK
DELIVERY OF THIS PROSPECTUS NOR ANY
SUPPLEMENT TO THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER TELEPAD CORPORATION
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THEREOF OR
THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATES AS OF WHICH SUCH
INFORMATION IS FURNISHED.
PROSPECTUS
-----------------
TABLE OF CONTENTS
Page
----
Available Information..............
Information Incorporated by
Reference.........................
Introduction.......................
The Company........................
Risk Factors.......................
Description of Securities..........
Selling Securityholders and
Plan of Distribution.............
Legal Matters......................
Experts............................
Additional Information............. _____________ , 1996
====================================== =======================================
A-9
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
It is estimated that the following expenses will be incurred in
connection with the proposed offering hereunder. All of such expenses will be
borne by the Company.
Registration fee - Securities and Exchange Commission.....$ 1,182.03
Legal fees and expenses....................................25,000.00
Blue Sky fees and expenses................................. 2,500.00
Accounting fees and expenses............................... 5,000.00
Printing expenses.......................................... 2,500.00
Miscellaneous.............................................. 3,817.97
----------
Total......................................$40,000.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Second Restated Certificate of Incorporation, as amended, and
By-Laws of the Company, as amended, provide that the Company shall indemnify its
officers and directors to the full extent permitted by the Delaware General
Corporation Law.
Reference is hereby made to Section 145 of the Delaware General
Corporation Law relating to the indemnification of officers and directors, which
Section is hereby incorporated herein by reference.
ITEM 16. EXHIBITS.
Exhibit
No. Document
- ------- --------
4.1 Form of Warrant Agreement (including forms of Class A and Class B
Warrant Certificates). (Incorporated herein by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form
SB-2 (File No. 33-61328)).
4.2 Form of Specimen of Class A Common Stock Certificate.
(Incorporated herein by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form SB-2 (File No.
33-61328)).
4.3 Form of Specimen of Class B Common Stock Certificate.
(Incorporated herein by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form SB-2 (File No.
33-61328)).
4.4 Form of Warrant Agreement (including form Class C Warrant
Certificate) from 1994 Private Placement. (Incorporated herein by
reference to Exhibit 10.17 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994.)
4.5 Form of Warrant Agreement (including form Class C Warrant
Certificate) from 1995 Private Placement. (Incorporated herein by
reference to Exhibit 10.24 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994.)
4.6 Form of Warrant Agreement (including Form of Class D Warrant
Certificate). (Incorporated herein by reference to Exhibit 4.8 to
the Registrant's Registration Statement on Form SB-2 (File No.
33-90278)).
4.7* Form of Stock Option Agreement.
4.8* Form of Stock Option Agreement for use in connection with the 1992
Stock Option Plan.
II-1
<PAGE>
Exhibit
No. Document
- ------- --------
4.9* Warrant to purchase shares of Class A Common Stock issued to
Morris Sedaka on May 30, 1993.
5.1* Opinion and consent of Parker Chapin Flattau & Klimpl, LLP as to
the legality of the securities being offered.
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Parker Chapin Flattau & Klimpl, LLP (included in
Exhibit 5.1)
24.1* Powers of Attorney of certain Officers and Directors of the
Registrant (included on signature page).
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers
or sales are being made, a post-effective
amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, and the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or l5(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any
liability under the Securities Act of 1933,
each such post-effective amendment shall be
deemed to be a new registration statement
relating to the securities offered therein,
and the offering of such securities at that
time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the
securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange
II-2
<PAGE>
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Herndon, State of Virginia, on the 27th day of
November, 1996.
TELEPAD CORPORATION
By /s/ Ronald C. Oklewicz
--------------------------
Ronald C. Oklewicz, President
POWER OF ATTORNEY
The undersigned directors and officers of Telepad Corporation hereby
constitute and appoint Donald W. Barrett and Ronald C. Oklewicz, and each of
them, with full power to act without the other and will full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below any
and all amendments (including post-effective amendments and amendments thereto)
to this registration statement and to file the same, with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission and hereby ratify and confirm that such attorneys-in-fact, or either
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 27th day of November, 1996.
SIGNATURE TITLE
/s/ Donald W. Barrett Chairman of the Board and Chief
- ------------------------------- Executive Officer
Donald W. Barrett
/s/ Ronald C. Oklewicz President and Director
- -------------------------------
Ronald C. Oklewicz
/s/ Robert D. Russell Vice President (Chief Financial and
- ------------------------------- Accounting Officer) and Secretary
Robert D. Russell
/s/ John P. Diesel Director
- -------------------------------
John P. Diesel
/s/ Sydney J. Dankman Director
- -------------------------------
Sydney J. Dankman
/s/ John M. Toups Director
- -------------------------------
John M. Toups
/s/ E. Donald Shapiro Director
- -------------------------------
E. Donald Shapiro
/s/ Alan B. Salisbury Director
- -------------------------------
Alan B. Salisbury
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document
- ------- --------
4.1 Form of Warrant Agreement (including forms of Class A and Class B
Warrant Certificates). (Incorporated herein by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form
SB-2 (File No. 33-61328)).
4.2 Form of Specimen of Class A Common Stock Certificate.
(Incorporated herein by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form SB-2 (File No.
33-61328)).
4.3 Form of Specimen of Class B Common Stock Certificate.
(Incorporated herein by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form SB-2 (File No.
33-61328)).
4.4 Form of Warrant Agreement (including form Class C Warrant
Certificate) from 1994 Private Placement. (Incorporated herein by
reference to Exhibit 10.17 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994.)
4.5 Form of Warrant Agreement (including form of Class C Warrant
Certificate) from 1995 Private Placement. (Incorporated herein by
reference to Exhibit 10.24 to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994.)
4.6 Form of Warrant Agreement (including Form of Class D Warrant
Certificate). (Incorporated herein by reference to Exhibit 4.8 to
the Registrant's Registration Statement on Form SB-2 (File No.
33-90278)).
4.7* Form of Stock Option Agreement.
4.8* Form of Stock Option Agreement for use in connection with the 1992
Stock Option Plan.
4.9* Warrant to purchase shares of Class A Common Stock issued to
Morris Sedaka on May 30, 1993.
5.1* Opinion and consent of Parker Chapin Flattau & Klimpl, LLP as to
the legality of the securities being offered.
23.1* Consent of Ernst & Young LLP
23.2* Consent of Parker Chapin Flattau & Klimpl, LLP (included in
Exhibit 5.1)
24.1* Power of Attorney of certain Officers and Directors of the
Registrant (included on signature page)
- -------------------
* Filed herewith.
EXHIBIT 4.7
STOCK OPTION AGREEMENT
1. Grant of Option. TelePad, Corporation, a Delaware corporation
(the "Company"), hereby grants to __________ (the "Optionee"), an option to
purchase an aggregate of ______ shares of common stock, $.01 par value ("Common
Stock"), of the Company at a price of $_____ per share, purchasable as set forth
in and subject to the terms and conditions of this Agreement.
2. Vesting, Exercise of Option and Provisions for Termination.
(a) Vesting. This option may be exercised at any time after
__________, 199_, provided that the Optionee remains an advisor to the Company
at all times from the date of the grant of this option through __________, 199_.
Notwithstanding any other provision of this option, if the Optionee voluntarily
terminates his status as an advisor to the Company at any time on or before
__________, 199_, this option shall become null and void in its entirety.
(b) Exercise Period. Except as otherwise provided herein, this
option may be exercised at any time prior to __________, 199_, as to the number
of shares equal to an aggregate of ______ shares. The right of exercise shall be
cumulative so that if the option is not exercised to the maximum extent
permissible at any one time, it shall be exercisable, in whole or in part, with
respect to all shares not so purchased at any time prior to __________, 199_.
(c) Exercise Procedure. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the Optionee's delivery of
written notice of exercise to the Treasurer of the Company, specifying the
number of shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in cash. Such exercise shall be effective upon
receipt by the Treasurer of the Company of such written notice, together with
the required payment.
(d) Exercise Period Upon Death or Disability. If the Optionee dies
or becomes disabled prior to __________, 199_ this option shall be exercisable,
within the period of three months following the date of death or disability of
the Optionee, by the Optionee or the person to whom this option is transferred
by will or the laws of descent and distribution.
3. Delivery of Shares; Compliance With Securities Laws, Etc.
(a) General. The Company shall, upon payment of the option price
for the number of shares purchased and paid for, make prompt delivery of such
shares to the Optionee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action.
<PAGE>
(b) Listing, Qualification, Etc. This option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares hereunder, this,
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
(c) Agreement by Optionee to Execute Stock Restriction Agreement.
The Optionee hereby agrees to execute a Stock Restriction Agreement,
substantially in the form, and containing the terms and provisions, of the Stock
Restriction Agreement attached hereto as Exhibit A, with respect to any shares
of Common Stock acquired by Optionee pursuant to this option.
4. Nontransferability of Option. Except as provided in paragraph (d)
of Section 2, this option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall, at the
election of the Company, become null and void.
5. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this option unless and until a certificate representing such shares is duly
issued and delivered to the Optionee. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
6. Adjustments.
(a) General. If, as a result of a merger, consolidation, sale of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or additional shares or new or different shares or other securities
are distributed with respect to such shares of Common Stock or other securities,
an appropriate and proportionate adjustment may be made in (i) the number and
kind of shares or other securities subject to this option and (ii) the price for
each share subject to this option, without changing the aggregate purchase price
as to which this option remains exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this
Section 6 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made
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<PAGE>
and the extent thereof will be final, binding and conclusive. No fractional
shares will be issued pursuant to this option on account of any such
adjustments.
(c) Limits on Adjustments. No adjustment shall be made under this
Section 6 which would, within the meaning of any applicable provision of the
Code, constitute a modification, extension or renewal of this option or a grant
of additional benefits to the Optionee.
7. Investment Representations; Legend.
(a) Representations. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option shall
be acquired for the Optionee's account for investment
only and not with a view to, or for sale in connection
with, any distribution of the shares in violation of the
Securities Act of 1933 (the "Securities Act") or any
rule or regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he has deemed
adequate to obtain from representatives of the Company
such information as is necessary to permit the Optionee
to evaluate the merits and risks of his investment in
the Company.
(iii) The Optionee is able to bear the economic risk of
holding shares acquired pursuant to the exercise of this
option for an indefinite period.
(iv) The Optionee understands that:
(A) the shares acquired pursuant to the exercise of this
option will not be registered under the Securities Act
and are "restricted securities" within the meaning of
Rule 144 under the Securities Act;
(B) such shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered
under the Securities Act or an exemption from
registration is then available;
(C) in any event, the exemption from registration under Rule
144 will not be available for at least two years and
even then will not be available unless a public market
then exists for the Common Stock, adequate information
concerning the Company is then available to the public
and other terms and conditions of Rule 144 are complied
with; and
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<PAGE>
(D) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any
stock of the Company and the Company has no obligation
or current intention to register any shares acquired
Pursuant to the exercise of this option under the
Securities Act.
By making payment upon exercise of this option, the
Optionee shall be deemed to have reaffirmed, as of the date of
such payment, the-representations made in this Section 7.
(b) Legend on Stock Certificates. All stock 'certificates
representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto a legend substantially in the following form,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares
evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to
the Company to the effect that registration under such Act is not
required."
8. Miscellaneous.
(a) Except as provided herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Optionee.
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.
(c) This option shall be governed by and construed in accordance
with the laws of the State of Maryland.
Date of Grant: TELEPAD CORPORATION
__________, 199_
By:___________________
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<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to
terms and conditions thereof.
OPTIONEE
______________________
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<PAGE>
EXHIBIT A
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO THE REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR
AN INDEFINITE PERIOD OF TIME.
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (this "Agreement") is made this
__th day of 199_, between TELEPAD CORPORATION, a Delaware corporation, (the
"Company"), and _______________ ("Optionee").
For valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. Purchase of Shares. Optionee hereby subscribes for and, upon
acceptance hereof, shall purchase, subject to the terms and conditions set forth
in this Agreement, ______ shares (the "Shares") of common stock, $0.01 par
value, of the Company (the "Common Stock"), at a purchase price of $_____ per
Share. The aggregate purchase price for the Shares shall be paid by Optionee by
check payable to the order of the Company or such other method as may be
acceptable to the Company. Upon receipt of payment by the Company for the
Shares, the Company shall issue to Optionee one or more certificates in the name
of Optionee for that number of Shares purchased by Optionee. Optionee agrees
that the Shares shall be subject to the restrictions on transfer set forth in
Sections 2 of this Agreement.
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<PAGE>
2. Restrictions on Transfer.
(a) Except as otherwise provided in Section 2b below, Optionee
shall not, during the term of the Purchase Option, sell, assign, transfer,
pledge, hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares.
(b) Notwithstanding the foregoing, Optionee may transfer Shares to
or for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that such Shares shall remain subject to this Agreement
(including, without limitation, the restrictions on transfer set forth in this
Section 2 and such permitted transferee shall, as a condition to such transfer,
deliver to the Company a written instrument confirming that such transferee
shall be bound by all of the terms and conditions of this Agreement.
(c) Optionee shall not transfer any of the Shares except by a
transfer that satisfies the following requirements:
(i) If Optionee proposes to transfer any Shares (the
"Offered Shares"), then Optionee shall first give
written notice of the proposed transfer (the "Transfer
Notice") to the Company. The Transfer Notice shall name
the proposed transferee(s) and state the number of
shares to be transferred, the price per share and all
other material terms and conditions of the transfer.
(ii) For thirty (30) days following receipt by the Company of
such Transfer Notice, the Company shall have the option
to purchase all or any lesser part of the Offered Shares
at the price and upon the terms set forth in the
Transfer Notice. In the event the Company elects to
purchase all of the Offered Shares, it shall give
written notice of its election to Optionee within such
30-day period and the settlement of the sale of such
Offered Shares being purchased by the Company shall be
made as provided below in Section 2c(iv).
(iii) If the Company does not elect to acquire all of the
Offered Shares, the Company shall, within 30 days after
receipt of Optionee's Transfer Notice, give written
notice of its decision to such holders of Common Stock
or Preferred Stock (if any) of the Company as the
Company deems appropriate ("Eligible Stockholders").
Such notice shall state the number of Offered Shares
available for purchase. Each Eligible Stockholder shall
be entitled to purchase that proportion of the Offered
Shares available for purchase as the number of shares of
Common Stock owned by him or her bears to the total
number of issued and outstanding shares of Common Stock
of the Company then owned by all Eligible Stockholders.
For this purpose, any shares of
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<PAGE>
Preferred Stock of the Company then outstanding shall be
treated as if converted into the number of shares of
Common Stock into which such shares may then be
converted. Within ten days after mailing of such notice
to the Eligible Stockholders, each Eligible Stockholder
shall give written notice to the Company and to Optionee
stating how many additional shares such Eligible
Stockholder win purchase if additional Offered Shares
are made available. If an Eligible Stockholder fails to
respond in writing within this ten-day period to the
notice given by the Company, the right of such Eligible
Stockholder to acquire his or her proportionate part of
the Offered Shares shall terminate. If one or more
Eligible Stockholders does not elect to acquire his or
her full pro rata shares of the Offered Shares
available, these Offered Shares shall be allocated to
each other Eligible Stockholder in the same proportion
as the Eligible Stockholders holdings of Common Stock
bears to the aggregate of all Eligible Stockholders
holdings of Common Stock (treating all shares of
Preferred Stock, if any, as if converted into Common
Stock). If any Eligible Stockholder is thereby given the
right to purchase a greater number of Offered Shares
than he or she has subscribed for, the excess shall be
reallocated to the other Eligible Stockholders on the
same proportionate basis described above. The Company
shall allocate and reallocate the shares available
according to this procedure, but it shall have
discretion to allocate amounts of less than 100 shares
as it sees fit in its sole discretion. All allocations
and reallocations pursuant to this Section 2c(iii) must
be completed within 14 days after the end of the ten-day
period referred to above.
(iv) If the Company and/or Eligible Stockholders elect to
acquire all, but not less than all, of the Offered
Shares of Optionee as specified in Optionee's Transfer
Notice, the Company shall so notify Optionee and
settlement shall be made at the principal office of the
Company in cash within 60 days after the Company
receives Optionee's Transfer Notice; provided that if
the terms of payment set forth in Optionee's Transfer
Notice were other than cash against delivery, the
Company and/or the Eligible Stockholders may pay for
said Offered Shares on the same terms and conditions set
forth in Optionee's Transfer Notice.
(v) If the Company and/or the Eligible Stockholders do not
elect to acquire all of the Offered Shares specified in
Optionee's Transfer Notice, Optionee may, within the
60-day period following the expiration of the option
rights granted to the Company and the Eligible
Stockholders pursuant to this Section 2, transfer the
Offered Shares specified in Optionee's Transfer Notice
to the proposed
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<PAGE>
transferee(s), provided that this sale shall not be on
terms and conditions more favorable to the purchaser
than those contained in Optionee's Transfer Notice. Upon
completion of such a transfer, the transferred shares
shall thereafter be released from all restrictions under
this Section 2. If Optionee does not consummate the
transfer within such 60-day period, the rights provided
hereby shall be deemed to be revived with respect to
such shares and no transfer shall be effected without
first offering the shares in accordance herewith.
(vi) The following transactions shall be exempt from the
provisions of this Section 2c:
(A) Optionee's transfer of any or all of his shares, either
during his lifetime or death, by will or intestacy, to
his immediate family or to a trust, the beneficiaries of
which are exclusively one or more of Optionee and a
member or members of Optionee's immediate family, except
any such transfers made pursuant to any divorce or
separation proceedings or settlement. The term
"immediate family" shall mean spouse, lineal descendant,
father, mother, brother or sister of Optionee; or
(B) Any transfer pursuant to a registration statement filed
by the Company with the Securities and Exchange
Commission; provided, however, that, except with respect
to a transfer pursuant to Section 2c(vi)(B), the
transferee shall receive and hold such stock subject to
the provisions of this Agreement and there shall be no
further transfer of such stock except in accordance with
this Agreement.
(vii) The foregoing right of first refusal shall terminate
upon the closing of the first public offering of
securities of the Company that is effected pursuant to a
registration statement filed with, and declared
effective by, the Securities and Exchange Commission
under the Securities Act (as defined below) that results
in aggregate gross proceeds to the Company of at least
$7,500,001 with a net sales price per share of at least
$5.00.
3. Effect of Prohibited Transfer. The Company shall not be required
(a) to transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.
4. Restrictive Legend. All certificates representing Shares shall
have affixed thereto a legend in substantially the following form, in addition
to any other legends that may be required under federal or state securities
laws: "the shares of stock represented by this certificate are subject to
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<PAGE>
restrictions on transfer and an option to purchase set forth in a certain Stock
Restriction Agreement between the Corporation and the registered owner of this
certificate (or his or her predecessor in interest), and such Stock Restriction
Agreement is available for inspection without charge at the office of the
Treasurer of the Corporation."
5. Investment Representations. Optionee represents, warrants and
covenants as follows:
(a) Optionee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) Optionee has had such opportunity as he has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit him to evaluate the merits and risks of his investment in the Company.
(c) Optionee, along with his advisors, has sufficient experience
in business, financial and investment matters to be able to evaluate the risks
involved in the purchase of the Shares and to make an informed investment
decision with respect to such purchase.
(d) Optionee can afford a complete loss of the value of the Shares
and is able to bear the economic risk of holding such Shares for an indefinite
period.
(e) Optionee understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 will not be
available for at least two years and even then will not be available unless a
public market then exists for the Common Stock, adequate information concerning
the Company is then available to the public, and other terms and conditions of
Rule 144 are complied with; and (iv) there is now no registration statement on
file with the Securities and Exchange Commission with respect to any stock of
the Company and the Company has no obligation or current intention to register
the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on
the certificate or certificates representing the Shares: "the shares represented
by this certificate have not been registered under the Securities Act of 1933,
as amended, and may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such Act or an opinion of
counsel satisfactory to the corporation to the effect that such registration is
not required."
6. Adjustments for Stock Splits, Stock Dividends, etc.
(a) If from time to time during the term of this Agreement there
is any stock split stock dividend, stock distribution or other reclassification
of the Common Stock of the Company, any
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<PAGE>
and all new, substituted or additional securities to which Optionee is entitled
by reason of his ownership of the Shares shall be immediately subject to, the
restrictions on transfer and other provisions of this Agreement in the same
manner and to the same extent as the Shares.
(b) If the Shares are converted into or exchanged for, or
stockholders of the Company receive by reason of any distribution in total or
partial liquidation, securities of another corporation, or other property
(including, without limitation, cash), pursuant to any merger of the Company or
acquisition of its assets, then the rights of the Company under this Agreement
shall inure to the benefit of the Company's successor and this Agreement shall
apply to the securities or other property received upon such conversion,
exchange or distribution in the same manner and to the same extent as to the
Shares, except as otherwise provided herein.
7. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
8. Waiver. Any provision contained in this Agreement may be waived
on behalf of the Company, either generally or in any particular instance, by the
Board of Directors of the Company.
9. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and Optionee and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Sections 2 of this Agreement.
10. No Rights To Employment. Nothing contained in this Agreement
shall be construed as giving Optionee any right to be retained, in any position,
or as an employee of the Company.
11. Notice. All notices required or permitted hereunder shall be in
writing and deemed effectively given upon personal delivery or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 11.
12. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice-versa.
13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties, and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement.
14. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and Optionee.
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<PAGE>
15. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
TELEPAD CORPORATION
__________________________ __________________________
By: By:
SSN:________________
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EXHIBIT 4.8
TELEPAD CORPORATION
STOCK OPTION AGREEMENT
____________________ Stock Option Grant number:
Employee Date of Grant:
Option price per share:
Total number of shares granted:
On the date of the grant shown above, TelePad Corporation (the "Company"), a
Delaware corporation, granted to you (the "Optionee") an option to purchase
shares of Common Stock of the Company, in the number and at the price as shown
above, and in all respects subject to the terms, definitions and provisions of
the 1992 Stock Option Plan, as amended (the "Plan") of the Company, which is
incorporated herein by reference, as follows:
1. NATURE OF THE OPTION - This option is intended to be an Incentive Stock
Option.
2. OPTION PRICE - The option price indicated above for each share of Common
Stock is $______.
3. EXERCISE OF OPTION - The option shall be exercisable, cumulatively, as
follows:
(i) RIGHT TO EXERCISE - The option shall be exercisable,
cumulatively, as follows:
* ______ shares will vest upon _______________________________.
* ______ shares will vest upon _______________________________.
* ______ shares will vest upon _______________________________.
All outstanding options vest in the event that the Company is purchased or if
the Company should go public.
(ii) METHOD OF EXERCISE - This option shall be exercisable by
written notice which shall state the election to exercise this option, the
number of shares in respect of which this option is being exercised, and such
other representation and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Company. The written notice shall be accompanied by
payment of the purchase price.
(iii) RESTRICTIONS ON EXERCISE - This option may not be exercised if
the issuance of such shares upon such exercise would constitute a violation of
any applicable federal or state securities law or other law or regulation. The
shares represented by this certificate have not been registered under the
Securities Act of 1933 and may not be transferred, sold or otherwise disposed of
in the absence of an effective registration statement with respect to the shares
<PAGE>
evidenced by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Company to the effect of
that registration under such Act is not required. No Option is valid without a
signed non-compete agreement on the part of the Optionee.
4. NON-TRANSFERABILITY OF OPTION - This option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The terms
of this option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
5. TERMINATION OF EMPLOYMENT - If an Optionee's employment terminates, he/she
may, within 180 days after the termination date, exercise the Option to the
extent that he/she was entitled to exercise it on the termination date.
TelePad Corporation
By____________________ By___________________ By_____________________
Chairman President Optionee
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EXHIBIT 4.9
May 30, 1993
TELEPAD CORPORATION
The Transferability of this warrant is
Restricted as Provided in Article 3
In consideration of $.001 per Warrant and other good and valuable
consideration, the receipt of which is hereby acknowledged by TELEPAD
CORPORATION, 1861 Wiehle Avenue, Reston, Virginia 22090, a Delaware corporation
("Company"), Morris Sedaka is hereby granted the right to purchase, at the
initial exercise price of $7.875 per share, at any time commencing 5:00 P.M.,
New York time on August 31, 1993, until 5:00 P.M., New York time, on August 31,
1998, 10,000 Shares of Class A Common Stock (the "Shares") of the Company.
This Warrant initially is exercisable at a price of $7.875 per Share
payable in cash or by certified or official bank check in New York Clearing
House funds, subject to adjustment as provided in Article 5 hereof. Upon
surrender of this warrant, with the annexed Subscription Form duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Shares purchased, at the offices of the Company, the registered holder of this
Warrant ("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased.
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at
the option of the Holder hereof, in whole or in part (but not as to fractional
Shares underlying this Warrant), during any period in which this Warrant may be
exercised as set forth above. In the case of the
<PAGE>
purchase of less than all the Shares purchasable under this Warrant, the Company
shall cancel this Warrant upon the surrender hereof and shall execute and
deliver a new Warrant of like tenor for the balance of the Shares purchasable
hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant, the issuance of certificates for
Shares underlying this warrant shall be made forthwith (and in any event within
five business days thereafter) without charge to the Holder hereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 3
hereof) be issued in the name of, or in such names as may be directed by, the
Holder hereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The certificates
representing the Shares underlying this Warrant shall be executed on behalf of
the Company by the manual or facsimile signature of one of the present or any
future Chairman or President of the Company and any present or future Vice
President or Secretary of the Company. 3. RESTRICTION ON TRANSFER OF WARRANT.
The Holder of this Warrant, by its acceptance hereof, covenants and
agrees that this Warrant is being acquired as an investment and not with a view
to the distribution thereof, and that it may not be exercised, sold,
transferred, assigned, hypothecated or otherwise disposed
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<PAGE>
of, in whole or in part unless in the opinion of counsel concurred in by the
Company's counsel such transfer is in compliance with all applicable securities
laws.
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial purchase price
shall be $7.875 per Share. The adjusted purchase price shall be the price which
shall result from time to time from any and all adjustments of the initial
purchase price in accordance with the provisions of Article 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, depending upon the
context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF UNITS.
5.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding Shares, the Purchase Price shall
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination.
5.2 ADJUSTMENT IN NUMBER OF UNITS. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Article 6, the number of
Shares issuable upon the exercise of this Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Purchase Price in effect
immediately prior to such adjustment by the number of Shares issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.
5.3 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any
reclassification or change of the outstanding Shares (other than a change in par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in the case of any
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<PAGE>
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Shares, except a change as a result of a subdivision
or combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the Holder of this Warrant shall thereafter have the
right to purchase upon the exercise of this Warrant the kind and number of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holder were the owner of the Shares underlying this warrant immediately prior to
any such events at the Purchase Price in effect immediately prior to the record
date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holder had exercised this Warrant.
6. EXCHANGE AND REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender
hereof by the registered Holder at the principal executive office of the Company
for a new Warrant of like tenor and date representing in the aggregate the right
to purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
- 4 -
<PAGE>
7. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated pursuant to
Section 5.2.
8. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Shares, solely for the purpose of issuance upon the exercise of this
Warrant, such number of Shares as shall be issuable upon the exercise hereof and
thereof. The Company covenants and agrees that, upon exercise of this warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable. As
long as this Warrant shall be outstanding, the Company shall use its reasonable
best efforts to cause all Shares issuable upon the exercise of this warrant to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Shares of the Company's Common Stock may then be listed and/or
quoted on NASDAQ. 9. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Warrant, to the
address of such
Holder as shown on the books of the Company; or
- 5 -
<PAGE>
(b) If to the Company, to the address set forth on the
first page of this Warrant or to such other address as the Company
may designate by notice to the Holders.
10. SUCCESSORS.
All the covenants, agreements, representations and warranties
contained in this warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
11. HEADINGS.
The Article and Section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
12. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Virginia.
WITNESS the seal of the Company and the signature of its duly
authorized President.
TELEPAD CORPORATION
[SEAL]
By: /S/ RONALD C. OKLEWICZ
-------------------------
Ronald C. Oklewicz
President
Attest:
/S/ WAYNE M. ZELL
- ------------------------
Wayne M. Zell, Secretary
- 6 -
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase ____ Shares by this Warrant according to the conditions hereof and
herewith makes payment of the Purchase Price of such Shares in full.
_____________________________
Signature
_____________________________
Address
Dated:___________________, 19__. _____________________________
Social Security Number or
Taxpayer's Identification
Number
- 7 -
[PARKER CHAPIN FLATTAU & KLIMPL, LLP]
Letter Head
November 27, 1996
TelePad Corporation
380 Herndon Parkway
Suite 1900
Herndon, Virginia 22070
Re: TELEPAD CORPORATION
Gentlemen:
We have acted as counsel to TelePad Corporation (the "Company") in
connection with its filing of a registration statement on Form S-3 (the
"Registration Statement") covering (i) 357,880 shares (the "Option Shares") of
Class A Common Stock, par value $.01 per share (the "Class A Common Stock"),
issuable upon the exercise of certain options granted by the Company (the
"Options"), (ii) 350,567 outstanding shares of Class A Common Stock (the
"Shares"), (iii) 256,218 outstanding redeemable Class C Warrants ("Class C
Warrants"), and (iv) 256,218 shares (the "Warrant Shares") of Class A Common
Stock issuable upon the exercise of the Class C Warrants, as more particularly
described in the Registration Statement.
In our capacity as counsel to the Company, we have examined the
Registration Statement, the Company's Certificate of Incorporation and By-laws,
as amended to date, the Options, the Class C Warrants and the minutes and other
corporate proceedings of the Company.
With respect to factual matters, we have relied upon statements and
certificates of officers of the Company. We have also reviewed such other
matters of law and examined and relied upon such other documents, records and
certificates as we have deemed relevant hereto. In all such examinations we have
assumed conformity with the original documents of all documents submitted to us
as conformed or photostatic copies, the authenticity of all documents as
originals and the genuineness of all signatures on all documents submitted to
us.
<PAGE>
TelePad Corporation
November 27, 1996
Page 2
On the basis of the foregoing, we are of the opinion that:
(i) the Option Shares and the Warrant Shares, when issued
upon the exercise of the Options and the Class C Warrants, respectively, and in
accordance with the applicable terms thereof, will be legally issued, fully paid
and non-assessable;
(ii) the Shares have been validly authorized and legally
issued and are fully paid and non-assessable; and
(iii) the Class C Warrants constitute legal, valid and binding
obligations of the Company.
We hereby consent to the use of our name under the caption "Legal
Opinions" in the prospectus constituting a part of the Registration Statement
and to the filing of a copy of this opinion as an Exhibit thereto.
Very truly yours,
/s/ PARKER CHAPIN FLATTAU & KLIMPL, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Telepad Corporation
and to the incorporation by reference therein of our report dated February 15,
1996, with respect to the financial statements included in its Annual Report
(Form 10-KSB) for the year ended December 31, 1995, filed with the Securities
and Exchange Commission.
/S/ ERNST & YOUNG LLP
Ernst & Young LLP
Vienna, Virginia
November 27, 1996
