<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended January 31, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from November 1, 1996 to January 31, 1997
Commission File No. 1-25362
INFOSAFE SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3645702
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
342 Madison Avenue
Suite 622
New York, NY 10173
(Address of Principal Executive Offices)
(212) 867-7200
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at March 17, 1997:
----- ------------------------------
Class A Common Stock, $.01 par value 3,906,700 shares
Class B Common Stock, $.01 par value 1,372,566 shares
Traditional Small Business Disclosure Format
Yes |X| No |_|
<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
INDEX TO FORM 10-QSB
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of July 31, 1996,
January 31, 1997 (unaudited) and Pro Forma, January 31, 1997
(unaudited) ............................................................ 2
Condensed Statements of Operations for the Three and
Six Months ended January 31, 1996 and January 31, 1997
(unaudited) and for the period November 18, 1991
(inception) to January 31, 1997 (unaudited)............................. 4
Condensed Statements of Cash Flows for the Six Months
ended January 31, 1996 and January 30, 1997 (unaudited)
and for the period November 18, 1991 (inception) to
January 31, 1997 (unaudited)............................................ 5
Notes to Condensed Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 12
Item 2. Changes in Securities............................................. 13
Item 5. Other Information................................................. 14
Item 6. Exhibits and Reports on Form 8-K.................................. 14
SIGNATURES................................................................. 17
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
July 31, January 31, January 31,
ASSETS 1996 1997 1997
------------ ------------ ------------
(Unaudited) (Unaudited)
(Note E)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ....................................... $ 50,466 $ 101,930 $ 2,626,930
Marketable securities - available for sale ...................... 908,178
Other current assets ............................................ 132,609 168,035 168,035
------------ ------------ ------------
Total current assets ...................................... 1,091,253 269,965 2,794,965
Prepaid financing fees ............................................. 33,600
Equipment held for lease (Note C) .................................. 420,613 349,283 349,283
Non-current assets ................................................. 513,466 441,652 441,652
------------ ------------ ------------
TOTAL...................................................... $ 2,025,332 $ 1,094,500 $ 3,585,900
============ ============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities ........................ $ 375,481 $ 368,542 $ 368,542
Due to stockholder .............................................. 116,163 60,000 60,000
------------ ------------ ------------
Total current liabilities ................................. 491,644 428,542 428,542
Non current liabilities ............................................ 10,364 5,319 5,319
------------ ------------ ------------
Total liabilities ......................................... 502,008 433,861 433,861
------------ ------------ ------------
Commitments and contingencies (Note D)
<PAGE>
STOCKHOLDERS' EQUITY
Common Stock:
Class A - par value $.01 per share, 20,000,000 shares
authorized, one vote per share; 2,908,549 and 2,954,260
(unaudited) shares issued and outstanding, respectively . 29,085 29,542 39,067
Class B - par value $.001 per share, 2,000,000 shares
authorized, six votes per share; 1,326,309 and 1,372,566
(unaudited) shares issued and outstanding, respectively
including 781,244 shares held in escrow ................. 1,387 1,435 1,435
Class E-1 -par value $.01 per share, 2,000,000 shares authorized,
one vote per share; 1,347,637 and 1,478,637 (unaudited)
shares issued and to be issued, redemption value
$.0001 per share ........................................ 13,436 14,786 14,786
Class E-2 par value $.01 per share, 2,000,000 shares authorized,
one vote per share; 1,347,637 and 1,478,637 (unaudited)
shares issued and to be issued, redemption value
$.0001 per share ........................................ 13,436 14,786 14,786
Additional paid-in capital ......................................... 9,694,582 9,935,823 12,417,698
(Deficit) accumulated during the development stage ................. (8,234,154) (9,335,733) (9,335,733)
Unrealized gain on marketable securities ........................... 5,552
------------ ------------ ------------
Total stockholders' equity ......................................... 1,523,324 660,639 3,152,039
------------ ------------ ------------
TOTAL...................................................... $ 2,025,332 $ 1,094,500 $ 3,585,900
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Period From
January 31, January 31, November 18, 1991
--------------------------- -------------------------------- (Inception) to
1996 1997 1996 1997 January 31, 1997
----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues .............................. $ 15,981 $ 5,045 $ 35,871 $ 16,723 $ 608,563
----------- ----------- ----------- ----------- -----------
Expenses:
Cost of revenue ..................... 27,748 11,531 51,125 26,172 217,937
Write down of assets (Note C) ...... 30,000 60,000 530,000
Operating expenses .................. 823,839 547,140 1,551,812 1,052,730 8,815,360
----------- ----------- ----------- ----------- -----------
Total ............................ 851,587 588,671 1,602,937 1,138,902 9,563,297
----------- ----------- ----------- ----------- -----------
Operating loss ........................ (835,606) (583,626) (1,567,066) (1,122,179) (8,954,734)
Interest income ....................... 70,380 6,689 146,375 21,546 416,721
Settlement expense (Note D) ........... (394,828)
Interest expense (including debt
discount and deferred financing fees (5,793) (442) (14,875) (946) (394,492)
----------- ----------- ----------- ----------- -----------
Net (loss) ............................ $ (771,019) $ (577,379) $(1,435,566) $(1,101,579) $(9,327,333)
=========== =========== =========== =========== ============
Net (loss) per common share ........... $(.23) $(.16) $(.42) $(.31)
===== ===== ===== =====
Weighted average number of common
shares and common shares equivalent
outstanding ........................ 3,409,656 3,545,582 3,409,656 3,545,582
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the
Period from
Six Months Ended November 18, 1991
January (Inception) to
1996 1997 January 31,1997
------------ ------------ -----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) ..................................... $ (1,435,566) $ (1,101,579) $ (9,327,333)
Write off equipment held for lease .......... 60,000 530,000
Other adjustments to reconcile net (loss)
to net cash (used in) operating activities . (131,343) 139,305 1,359,098
------------ ------------ ------------
Net cash used in operating activities: .... (1,566,909) (902,274) (7,438,235)
Cash flows from investing activities
Purchase of marketable securities ........... (109,235) (339,238) (13,003,771)
Sale of marketable securities ............... 1,523,233 1,241,864 13,003,771
Other investing activities .................. (34,621) 10,650 (1,542,574)
------------ ------------ ------------
Net cash provided by (used in)
investing activities 1,379,377 913,276 (1,542,574)
Cash flows from financing activities
Proceeds from issuance of common stock ...... 11,025,260
Cost in connection with sale of common
securities ................................ (2,027,905)
Payment of deferred financing costs ......... (224,919)
Proceeds from bridge loan ................... 1,500,000
Payment of bridge loan ...................... (1,500,000)
Exercise of warrants ........................ 157,500 60,000 396,395
Other financing activities .................. (89,153) (19,538) (86,092)
------------ ------------ ------------
Net cash provided by financing activities ...... 68,347 40,462 9,082,739
NET INCREASE (DECREASE) IN CASH ................ (119,185) 51,464 101,930
Cash beginning of period ....................... 154,726 50,466
------------ ------------ ------------
CASH END OF PERIOD ............................. $ 35,541 $ 101,930 $ 101,930
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(NOTE A) Basis of Presentation and the Company:
(1) Basis of presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 3 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Operating results for the three-month and six month periods ended
January 31, 1997 and for the period from November 18, 1991 (inception) to
January 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1997.
The balance sheet at July 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the audited financial
statements and footnotes thereto included in the Form 10-KSB, for the Company's
fiscal year ended July 31, 1996.
(2) Organization and business:
Infosafe Systems, Inc. (the "Company") is a development stage company
engaged in the design, and marketing of secure electronic distribution and
metering systems for digital products. The company has developed the
"Infosafe(R) System" which consists of hardware and software products to enable
publishers and other information owners to distribute digital information
without risk of theft.
(NOTE B) - Summary of Significant Accounting Policies:
Net loss per share of common shares is based on the weighted average number
of shares outstanding during the period excluding Class B shares in escrow, all
Class E-1 and Class E-2 shares.
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<PAGE>
(NOTE C) - Equipment Held for Lease:
Equipment held for lease is composed of an encryption and metering control
unit . During the fiscal year ended July 31, 1996, the Company stopped
production of these control units until such time as the demand for these units
increases. Therefore, the Company has reduced the value of the control units to
reflect their remaining realizable value. This resulted in a write down of
long-lived assets aggregating $30,000 for the three month period ended January
31, 1997.
(NOTE D) - Contingencies and Other Matters :
1) Effective November 26, 1996, the Company appointed Arthur R. Medici as
President and Chief Executive Officer pursuant to a three-year employment
agreement ("Agreement"). The Agreement provides for the new President and Chief
Executive Officer to receive aggregate annual base salary payments from $175,000
to $225,000 over the Agreement's term. The new President and Chief Executive
Officer is also entitled to receive annual cash bonus and deferred compensation
payments in cash and Class A Common Stock based on the Company's net profits, as
defined. In addition, the Company will issue the new President and Chief
Executive Officer 70,000 shares of Class B Common Stock, 135,000 Shares of Class
E-1 Common Stock and 135,000 shares of Class E-2 Common Stock, which can not be
transferred by the new President and Chief Executive Officer until August 1999
and will be canceled by the Company if his employment is terminated prior to
August 1999 ("Vesting Period"). The Company will reflect compensation expense
and an increase to additional paid in capital aggregating $298,593 in connection
with the issuance of such shares over the Vesting Period, compensation expense
and an increase in additional paid in capital was $18,662 for the six month
period ended January 31, 1997. Pursuant to the Agreement, the new President and
Chief Executive Officer was also granted options to purchase 350,0000 shares of
the Company's Class A Common Stock, at an exercise price of $4.06 per share,
one-third of which are immediately exercisable and the balance of which shall
become exercisable if the Company achieves certain profit levels in the future.
The former President and Chief Executive Officer of the Company was
appointed Chairman of the Board of Directors of the Company.
(Note E) - Pro Forma Balance Sheet:
On February 10, 1997, the Company commenced the private placement (the
"1997 Private Placement") of a minimum of $1 million and a maximum of a $5
million of the Company's securities through a placement agent. During February
1997, the Company closed a portion of the 1997 Private Placement resulting in
aggregate gross proceeds of $3,000,000 (net proceeds of approximately $2,491,000
) and issued 952,440 shares of Class A Common Stock, 952,440 Class A Warrants
and 952,440 Class B Warrants. In addition the Company issued warrants to
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<PAGE>
the placement agent to purchase 333,353 shares of Class A Common Stock, 333,354
Class A Warrants and 333,354 Class B Warrants. In conjunction with the 1997
Private Placement, certain employees and directors of the Company have agreed to
wave payment of unpaid salaries and fees aggregating approximately $145,000,
which has been contributed to capital during January 1997.
The Pro Forma balance sheet gives effect to the foregoing transaction as if
it occurred on January 31,1997. The Pro Forma balance sheet should be read in
conjunction with the historical unaudited financial statements and notes.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for the description of historical facts contained herein, this Form
10-QSB contains certain forward-looking statements within the meaning of the
"safe harbor"provisions of the Private Securities Litigation Reform Act of 1995
concerning applications of the Company's technologies and the Company's proposed
products and future prospects, that involve risks and uncertainties, including
the possibility that the Company will (i) be unable to commercialize products
based on its technology, or (ii) that it will ever achieve profitable
operations, as detailed herein under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and from time to time
in the Company's filings with Securities and Exchange Commission and elsewhere.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements. The
Company's actual results could differ materially from those discussed herein.
Overview
The Company is a development stage company engaged in the development and
marketing of secure electronic distribution systems for digitally stored
information products. The Company commenced operations in January 1992. From
November 18, 1991 (inception) to January 31, 1997, the Company recognized
revenues of approximately $609,000, of which $455,000 was from one customer
(including a non-recurring license fee of $350,000 from such customer), and had
an accumulated deficit of approximately $9.3 million. The Company has continued
to operate at a deficit since inception and expects to continue to operate at a
deficit until such time as operations generate sufficient revenues to cover
costs.
The Company's first commercial product, the Design Palette(R), has not
achieved commercial acceptance and the Company is evaluating the market
potential of this product. The Company is currently evaluating the extent, if
any, to which it will continue to support and market the Design Palette.
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<PAGE>
The Company and Copyright Clearance Center(R) ("CCC"), the largest licensor
of photocopy reproduction rights in the United States, entered into a contract
on December 12, 1996. The agreement between the Company and CCC is for a
two-year term and will automatically renew unless notice of termination is
given by either party six months prior to the expiration of the term. Under the
agreement, the Company has agreed to install, at its own cost, its Mark III
system at each copy center which enters into an outlet agreement in form
approved by CCC and the Company. This system allows customers at commercial copy
locations to easily obtain permission to photocopy CCC registered materials and
to conveniently pay royalties. The system will provide information concerning
transaction and rights costs, material to be copied, number of copies, the
customer and usage or licensing information. The agreement provides that the
outlet will be responsible for collection of charges due to the Company and CCC,
which will include royalties, administrative charges for the account of CCC and
a service charge for the account of the Company. Pursuant to the terms of the
agreement, the Company has commenced marketing this proprietary turnkey
hardware/software system.
The Company is also investigating other potential applications for is
technologies which may include, but is not limited to, potential acquisition of
complementary technologies. The Company's viability depends on its ability to
successfully develop and market these and other products and there can be no
assurance that the Company will ever generate sufficient sales from its
technologies and services to yield significant revenues.
Results of Operations
Three Months Ended January 31, 1997 Compared with Three Months Ended January 31,
1996.
Revenues were approximately $5,000 for the three months ended January 31,
1997 (the "1997 Three Months"), and approximately $16,000 for the three months
ended January 31, 1996 (the "1996 Three Months"). The revenues were generated
from sales through the Design Palette. The Company is currently evaluating the
extent, if any, to which it will continue to support the Design Palette.
For the 1997 Three Months, assets held for lease were written down by
$30,000. The value of the assets held for lease was reduced to reflect the
assets' estimated remaining realizable value.
Operating expenses were approximately $547,000 in the 1997 Three Months and
approximately $824,000 in the 1996 Three Months. Approximately 60% of this
decrease is attributable to non-recurring costs incurred in the 1996 Three
Months relating to the launch and refinement of the Design Palette System. The
remainder of the decrease is due to the Company's efforts to reduce overhead
costs in the 1996 Three Months in order to conserve its cash position.
The Company had income from investments of approximately $7,000 for the
1997 Three Months and approximately $70,000 in the 1996 Three Months. The
investment income relates to interest earned on funds received during January
and February 1995 from an initial public offering prior to their expenditure.
The decrease in interest income is due to the decrease in these funds as they
are expended for operations.
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<PAGE>
Interest expense was approximately $400 in the 1997 Three Months and
approximately $6,000 in the 1996 Three Months. Interest expense is attributed to
the financing of capital assets.
Due to the above, the Company had a net (loss) of approximately $(577,000)
in the 1997 Three Months compared to a net (loss) of approximately $(771,000) in
the 1996 Three Months.
Six Months Ended January 31, 1997 Compared with Six Months Ended January 31,
1996.
Revenues were approximately $17,000 for the six months ended January 31,
1997 (the "1997 Six Months") and approximately $36,000 for the six months ended
January 31, 1996 (the "1996 Six Months"). The revenues were generated from sales
through the Design Palette.
For the 1997 Six Months, assets held for lease were written down by
$60,000. The value of the assets held for lease was reduced to reflect the
assets' estimated remaining realizable value.
Operating expenses were approximately $1,053,000 in the 1997 Six Months and
approximately $1,552,000 in the 1996 Six Months. Approximately one half of this
decrease is attributed to non-recurring costs incurred in the 1996 Six Months
relating to the launch of the Design Palette System. The remainder of the
decrease is due to the Company's efforts to reduce overhead costs in the 1997
Six Months in order to conserve its cash position.
The Company had income from investments of approximately $22,000 for the
1997 Six Months and approximately $147,000 in the 1996 Six Months. The
investment income relates to interest earned on funds received during January
and February 1995 from an initial public offering prior to their expenditure.
The decrease in interest income is due to the decrease in these funds as they
are expended for operations.
Interest expense was approximately $1,000 in the 1997 Six Months and
approximately $15,000 in the 1996 Six Months. Interest expense is attributed to
the financing of capital assets.
Due to the above, the Company had a net (loss) of approximately
$(1,102,000) in the 1997 Six Months compared to a net (loss) of approximately
$(1,436,000) in the 1996 Six Months.
Liquidity and Capital Resources
The Company has incurred substantial losses and negative cash flow from
operations since its inception. At January 31, 1997 the Company had negative
working capital and did not have sufficient financial resources to continue its
operations without obtaining financing. On February 10, 1997, the Company
commenced a private placement ("1997 private placement") of a minimum of $1
million and a maximum of a $5 million of units of the Company's securities.
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<PAGE>
Each unit consists of 15,874 IPO Units, each IPO Unit being identical to the IPO
Units issued in the Company's initial public offering at a price of $3.15 per
IPO Unit. Each IPO Unit consists of one share of Class A Common Stock, one Class
A Warrant and One Class B Warrant. To date, the Company has closed a portion of
the 1997 Private Placement resulting in gross proceeds of $3,000,00 (net
proceeds of $2,491,000).
The Company has financed its operations primarily through private
placements during fiscal 1994 and the initial public offering during fiscal
1995, which aggregated net proceeds of approximately $8.5 million. The Company
has significant cash requirements in connection with its business, including
expenditures for research and development of new applications of its technology,
marketing, working capital and acquisitions. The Company anticipates losses to
continue through the next fiscal year as the Company attempts to market its
products and develop new applications for its technologies. The Company believes
that the maximum net proceeds from the 1997 Private Placement, together with
funds expected to be generated from operations, will be sufficient to finance
the Company's working capital requirements until the end of fiscal 1998. There
can be no assurance that the Company will generate sufficient revenues to fund
its operations after such period or that the Company will realize sufficient
revenue from commercializing its technology by that time.
The report of the Company's independent auditors on the Company's financial
statements as of July 31, 1996 and for the year then ended and for the period
from November 18, 1991 (inception) to July 31, 1996 contains a paragraph
regarding the uncertainty with respect to the ability of the Company to continue
as a going concern.
The Company has a net operating loss carryforward for tax purposes of
approximately $8 million to offset future taxable income for federal tax
purposes. The utilization of the loss carryforward to reduce future income taxes
will depend on the Company's ability to generate sufficient taxable income prior
to the expiration of the net operating loss carryforwards. The carryforward
expires from 2007 to 2011. The Internal Revenue Code and Regulations contain
provisions which limit the use of available net operating loss carryforwards in
any given year should significant changes (greater than 50%) in ownership
interests occur. Due to the initial public offering, the net operating loss
carryover of approximately $1,900,000 incurred prior to the initial public
offering will be subject to an annual limitation of approximately $400,000 until
the net operating loss is utilized or expires.
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PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Other than as described below, there are no pending legal proceedings to
which the Company is a party.
The Company and its former President and Chief Executive Officer, Thomas H.
Lipscomb, now Chairman, and RAS Securities Corp., which acted as the "qualified
independent underwriter" of the IPO (engaged by D.H. Blair Investment Banking
Corp., the underwriter of the IPO, to deliver an opinion as to the fairness of
the public offering price and with no other role in the IPO) are defendants in
an action entitled Wave Systems Corp. ("Wave") v. Infosafe Systems Inc., Thomas
H. Lipscomb and RAS Securities Corp., filed on November 25, 1994 in the Supreme
Court of the State of New York for New York County. Mr. Lipscomb was co-founder
and the former President of Wave, a competitor of the Company, until July 1991.
Wave alleges, among other things, that (i) Mr. Lipscomb and the Company
misappropriated trade secrets and proprietary and confidential business
information belonging to Wave, breached a confidentiality agreement with Wave
and have engaged in unfair competition with Wave; and (ii) that it would be
irreparably damaged by such wrongful appropriation and unfair competition. Wave
also alleges that RAS, the "qualified independent underwriter" of the Company's
initial public offering, who in 1993 acted as Wave's investment banker, breached
its fiduciary duties to Wave and assisted the Company and Mr. Lipscomb in
unlawfully competing with Wave. The complaint makes a demand for damages in
excess of $10 million, plus attorneys' fees against all three defendants, and
injunctive relief against the Company and Mr. Lipscomb barring the alleged
misappropriation and unfair competition.
In April, the Company presented to the court an affidavit from Dr. John
Michener, Wave's former Chief Scientist for seven years and the Wave officer who
verified Wave's complaint, stating Dr. Michener's belief that the Company had
not misappropriated any proprietary technical information or trade secrets
belonging to Wave. On May 3 1996, Wave requested permission from the Court to
discontinue its claims against the Company, Mr. Lipscomb and RAS with prejudice.
In response, the Company has agreed that the claims should be dismissed with
prejudice and asked the Court to require that Wave be required to pay a portion
of the attorney's fees and costs the Company has incurred in defending this
action.
Wave has also requested leave to file an Amended Complaint against the
Company and Mr. Lipscomb alleging that the Company and Mr. Lipscomb tortiously
interfered with its business relationship with unnamed current and future
customers, as well as with its contractual relationship with Dr. Michener. The
Company believes these proposed claims lack any factual basis and has therefore
opposed Wave's request. The Company intends to vigorously defend this action
although it is unable to predict its outcome. An unfavorable outcome in this
litigation could likely have a material adverse effect on the Company's business
and financial condition.
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<PAGE>
In any event, the Company is unable to determine the amount of liability, if
any, it may incur and has thus not set up any reserve for such claim. In
addition, future costs which may be incurred in connection with this litigation
could have an adverse effect on the Company's prospects, business and financial
condition.
In March 1996 the Company and Mr. Lipscomb filed a counter suit against
Wave seeking an award of $20 million for damages and attorneys fees as well as
declaratory and injunctive relief. The complaint alleges that Wave: (i)
conducted a predatory campaign of tortious interference against the Company's
business and financial relationships, trademarks and employees; (ii) commenced
baseless litigation against the Company to prevent it from obtaining financing,
selling to potential customers and entering into favorable business
relationships; and (iii) made material misrepresentation about the nature and
characteristics of the Company's goods and services. Wave's withdrawal of its
claims would not affect the pendency of the Company's counter claim, which
remains pending.
Item 2: Changes in Securities
On February 10, 1997, the Company commenced a private placement to
accredited investors pursuant to Regulation D of the Securities Act of 1933 (the
"1997 private placement"), through D.H. Blair Investment Banking Corp. as
placement agent, of a minimum of $1 million and a maximum of a $5 million of
units. Each unit consists of 15,874 IPO Units, each IPO Unit being identical to
the IPO Units issued in the Company's initial public offering, at a price of
$3.15 per IPO Unit. Each IPO Unit consists of one share of Class A Common Stock,
one Class A Warrant and one Class B Warrant. The number of IPO Units in each
unit is subject to adjustment prior to the final closing. Each Class A Warrant
is exercisable until February 18, 2002 to purchase one share of Class A Common
Stock and one Class B Warrant at an exercise price which is currently equal to
$6.50 per share. Each Class B Warrant will be exercisable until February 18,
2002 to purchase one share of Class A Common Stock at an exercise price which is
currently equal to $8.75. To date, closings have been held on February 18, 1997
as to $1,000,000 of the 1997 Private Placement and on February 25, 1997 as to
$2,000,000 of the 1997 Private Placement for an aggregate of 952,440 shares of
Class A Common Stock, 952,440 Class A Warrants and 952,440 Class B Warrants. The
net proceeds from the 1997 Private Placement are currently approximately
$2,491,000 after deducting an aggregate of $300,000 and $90,000 in placement
agent fees and expenses, respectively, and other expenses of the offering. In
addition the Company issued warrants to the placement agent to purchase 333,353
shares of Class A Common Stock, 333,354 Class A Warrants and 333,354 Class B
Warrants. The Company also executed an agreement with the placement agent
extending for three years an agreement regarding compensation payable to the
placement agent in the event the placement agent originates a financing or a
merger, acquisition or other prescribed transaction to which the Company is a
party. The Company has agreed to use its best efforts to effect the registration
of such securities under the Securities Act of 1933, as amended, by June 18,
1997.
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<PAGE>
As a result of the sale of securities in the 1997 Private Placement, the
exercise price of Class A Warrants and Class B Warrants of the Company and the
number of shares of Class A Common Stock issuable upon exercise of Class A
Warrants and Class B Warrants (and, in addition, in the case of the Class A
Warrants, the number of Class B Warrants issuable upon exercise of the Class A
Warrants) will be adjusted following the final closing of the 1997 Private
Placement pursuant to the anti-dilution provisions of the Warrant Agreements
covering such warrants. Additionally, the expiration dates of the currently
outstanding Class A Warrants and Class B Warrants was extended to February 18,
2002.
Item 5: Other Information
As previously announced, the Company received a notice from the Nasdaq
Stock Market that its securities would be delisted from the Nasdaq SmallCap
Stock Market for failure to meet the amount of total assets required for
continued listing. As a result of the receipt of the net proceeds from the 1997
Private Placement, the Nasdaq Stock Market has determined not to delist the
Company's securities.
On November 26, 1996 Arthur R. Medici was appointed President and Chief
Executive Officer of the Company, replacing Thomas H. Lipscomb, who was
appointed Chairman of the Company.
On January 7, 1997 the Company was granted a patent by the U.S. Patent and
Trademark Office, U.S. Patent No. 5,592,549. This patent covers the Company's
method for retrieving digital information or products from any secure electronic
source, which is composed of : a) an information retrieval device; b) a device
which affixes a unique branding code; c) a decryption device, and d) a data
logging device that records the item identification and its brand code. The
system may be hardware-based, software-based or a combination.
On March 4, 1997 Mr. Robert S. Christie was appointed to the Company's
Board of Directors. In addition Mr. Christie received options to purchase 40,000
shares of the Company's Class A Common Stock at an exercise price per share of
$3.50, of which 10,000 options are immediately exercisable and the remaining
options vest evenly over the next three years.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits.
---------
4.2(1) Form of Underwriter's Option
4.3(1) Form of Warrant Agreement
4.5(1) Escrow agreement, as amended
4.6(1) Form of Warrant expiring September 10, 2002
10.1(1) 1992 Stock Option Plan
10.2(1) 1994 Stock Option Plan
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<PAGE>
10.3(1) Employment Agreement with Thomas H. Lipscomb, as amended
10.4(1) Consulting Agreement with Alan N. Alpern, as amended
10.5(1) Lease for Executive Offices, as supplemented
10.6(1) License and Option Agreement dated February 9, 1994 between the
Registrant and International Typeface Corporation**
10.7(1) Employment agreement with Charlton Calhoun III, as amended
10.8(2) Agreement between International Typeface Corporation and
the Company dated April 21, 1995
10.9(3) Employment Agreement with Arthur R. Medici
10.10 Warrant Agreement, dated February 10, 1997
10.11 Amendment, dated February 10, 1997, to Warrant Agreement dated
January 25, 1995
10.12 Form of Agent's Option
10.13 M/A Agreement Extension
10.14 Agreement with Copyright Clearance Center, dated December 12,
1996*
10.15(4) October 31, 1996 Balance Sheet and Pro Forma Balance Sheet to
reflect proceeds from 1997 Private Placement.
10.16(5) Preliminary January 31, 1997 Financial Statements and Pro Forma
Balance Sheet to reflect the proceeds from 1997 Private
Placement.
11.1 Computation of Net Loss Per Share
- ----------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-83940)
(2) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1995
(3) Incorporated by reference to the Company's report on Form 8-K dated
November 26,1996
(4) Incorporated by reference to the Company's report on Form 8-K dated
February 26 ,1997
(5) Incorporated by reference to the Company's report on Form 8-K dated March
5,1997
* This Document has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment. An excised version
of the Document is being filed as an exhibit hereto.
** Confidential treatment has been granted for portions of this Exhibit.
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<PAGE>
(b) Reports on Form 8-K
For the three months ended January 31, 1997 the Company filed a Current
Report on form 8-K, on December 5, 1996, regarding the appointment of Arthur R.
Medici as President and Chief Executive Officer of the Company effective
November 26, 1996.
On February 26, 1997, the Company filed a Current Report on Form 8-K, which
contained a Balance Sheet as at October 31, 1996 and a Pro forma Balance Sheet
as at October 31, 1996 to reflect the receipt of proceeds from the 1997 Private
Placement.
On March 5, 1997, the Company filed a Current Report on Form 8-K which
contained preliminary Financial Statements as at January 31, 1997 and a Pro
Forma Balance Sheet as of January 31, 1994 reflecting the receipt the proceeds
from the 1997 Private Placement.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INFOSAFE SYSTEMS, INC.
Dated: March 17, 1997 By: /s/ Arthur R. Medici
-----------------------
Arthur R. Medici, President and
Chief Executive Officer
By: /s/ Alan. N. Alpern
-----------------------
Alan N. Alpern, Chief
Financial and Legal Officer
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<PAGE>
EXHIBIT INDEX
Exhibits.
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4.2(1) Form of Underwriter's Option
4.3(1) Form of Warrant Agreement
4.5(1) Escrow agreement, as amended
4.6(1) Form of Warrant expiring September 10, 2002
10.1(1) 1992 Stock Option Plan
10.2(1) 1994 Stock Option Plan
10.3(1) Employment Agreement with Thomas H. Lipscomb, as amended
10.4(1) Consulting Agreement with Alan N. Alpern, as amended
10.5(1) Lease for Executive Offices, as supplemented
10.6(1) License and Option Agreement dated February 9, 1994 between the
Registrant and International Typeface Corporation **
10.7(1) Employment agreement with Charlton Calhoun III, as amended
10.8(2) Agreement between International Typeface Corporation and the
Company dated April 21, 1995
10.9(3) Employment Agreement with Arthur R. Medici
10.10 Warrant Agreement, dated February 10, 1997
10.11 Amendment, dated February 10, 1997, to Warrant Agreement dated
January 25, 1995
10.12 Form of Agent's Option
10.13 M/A Agreement Extension
10.14 Agreement with Copyright Clearance Center, dated December 12,
1996*
10.15(4) October 31, 1996 Balance Sheet and Pro Forma Balance Sheet to
reflect proceeds from 1997 Private Placement.
10.16(5) Preliminary January 31, 1997 Financial Statements and Pro Forma
Balance Sheet to reflect the proceeds from 1997 Private
Placement.
11.1 Computation of Net Loss Per Share
- ----------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-83940)
(2) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1995
(3) Incorporated by reference to the Company's report on Form 8-K dated
November 26, 1996
(4) Incorporated by reference to the Company's report on Form 8-K dated
February 26, 1997
(5) Incorporated by reference to the Company's report on Form 8-K dated March
5, 1997
* This Document has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment. An excised version
of the Document is being filed as an exhibit hereto.
** Confidential treatment has been granted for portions of this Exhibit.
WARRANT AGREEMENT
AGREEMENT, dated as of the 10th day of February, 1997, by and among
INFOSAFE SYSTEMS, INC., a Delaware corporation (the "Company"), AMERICAN STOCK
TRANSFER & TRUST COMPANY, as Warrant Agent (the "Warrant Agent"), and D.H. BLAIR
INVESTMENT BANKING CORP., a New York corporation ("Blair").
W I T N E S S E T H :
WHEREAS, in connection with a private placement (the "Private
Placement") of a minimum of twenty (20) and a maximum of one hundred (100) units
("Units"), each unit consisting of units identical to those sold by the Company
in its initial public offering ("IPO") in January 1995 ("IPO Units"), each IPO
Unit consisting of one (1) share of the Company's Class A Common Stock, $.01 par
value ("Class A Common Stock"), one (1) redeemable Class A Warrant ("Class A
Warrants") and one (1) redeemable Class B Warrant ("Class B Warrants") pursuant
to an agency agreement (the "Agency Agreement") dated as of February 10, 1997
between the Company and Blair and the issuance to Blair or its designees of Unit
Purchase Options to purchase additional Units (the "Private Placement Unit
Purchase Options"), the Company may issue up to such number of Class A Warrants
and Class B Warrants (collectively referred to as the "Warrants") as shall be
determined in accordance with the Confidential Term Sheet relating to the
Private Placement; and
WHEREAS, the Company has granted Blair the option to sell an
additional twenty (20) Units in the Private Placement (the "Over-allotment
Option"); and
WHEREAS, each Class A Warrant initially entitles the Registered
Holder thereof to purchase one (1) share of Class A Common Stock and one (1)
Class B Warrant, and accordingly, the Company may issue additional Class B
Warrants on exercise of the Class A Warrants; and
WHEREAS, each Class B Warrant initially entitles the Registered
Holder thereof to purchase one (1) share of Class A Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
<PAGE>
SECTION 1. Definitions. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 20,000,000 shares of Class A
Common' Stock, $.01 par value, 2,000,000 shares of Class B Common Stock, $.01
par value, 2,000,000 shares of Class E-1 Common Stock, $.01 par value and
2,000,000 shares of Class E-2 Common Stock, $.01 par value.
(b) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 40 Wall Street,
New York, New York 10005.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean as to each Class A
Warrant and Class B Warrant, January 18, 1995, or such earlier date as Blair may
designate.
(e) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Class A Warrant or Class B Warrant in accordance with the terms
hereof, which price shall be $6.50 as to the Class A Warrants and $8.75 as to
the Class B Warrants, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce the
Purchase Price upon notice to all warrantholders.
(f) "Redemption Price" shall mean the price at which the Company
may, at its option in accordance with the terms hereof, redeem the Class A
Warrants and/or Class B Warrants, which price shall be $0.05 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on February 18, 2002 or, with respect to Warrants which are outstanding as of
the applicable Redemption Date, the Redemption Date as defined in Section 8,
whichever is earlier; provided
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<PAGE>
that if such date shall in the State of New York be a holiday or a day on which
banks are authorized or required to close, then 5:00 P.M. (New York time) on the
next following day which in the State of New York is not a holiday or a day on
which banks are authorized or required to close. Upon notice to all
warrantholders the Company shall have the right to extend the warrant expiration
date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Class A Warrant initially shall entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase one share of
Class A Common Stock and one Class B Warrant upon the exercise thereof, in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 9.
(b) A Class B Warrant initially shall entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase one share of
Class A Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 9.
(c) The Class B Warrants will be detachable and separately
transferable immediately from the shares of Class A Common Stock issued upon
exercise of the Class A Warrants.
(d) Upon execution of this Agreement, Warrant Certificates
representing the number of Class A Warrants sold pursuant to the Agency
Agreement shall be executed by the Company and delivered to the Warrant Agent.
Upon written order of the Company signed by its President or Chairman or a Vice
President and by its Secretary, an Assistant Secretary or its Treasurer, the
Warrant Certificates shall be countersigned, issued and delivered by the Warrant
Agent as part of the Units.
(e) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to the number of shares of Class A
Common Stock as shall be issuable on exercise of the Class A Warrants and the
Class B Warrants included in the Units issued pursuant to the Private Placement
and the Private Placement Unit Purchase Option and the Class B Warrants issuable
on exercise of the Class A Warrants, subject to adjustment as described herein,
upon the exercise of Warrants in accordance with this Agreement.
(f) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon
the exercise of fewer than all Warrants represented by any Warrant Certificate,
to evidence any unexercised Warrants held by the exercising Registered Holder,
(iii) those issued upon any transfer or
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<PAGE>
exchange pursuant to Section 6; (iv) those issued in replacement of lost,
stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7; (v)
those issued pursuant to Blair's Private Placement Unit Purchase Options; (vi)
those issued pursuant to the Over-allotment Option; (vii) at the option of the
Company, in such form as may be approved by its Board of Directors, to reflect
any adjustment or change in the Purchase Price, the number of shares of Class A
Common Stock purchasable upon exercise of the Warrants or the Redemption Price
therefor made pursuant to Section 9 hereof; and (viii) those Class B Warrants
issued upon exercise of Class A Warrants.
(g) Pursuant to the terms of the Private Placement Unit Purchase
Options, the Company shall issue to Blair a number of Units equal to 35% of the
number of Class A Warrants sold in the Private Placement. Notwithstanding
anything to the contrary contained herein, the Warrants underlying the Private
Placement Unit Purchase Options shall not be subject to redemption by the
Company except under the terms and conditions set forth in the Private Placement
Unit Purchase Options.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A as to the Class A Warrants and Exhibit B as to the
Class B Warrants (the provisions of which are hereby incorporated herein) and
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Class A Warrants or Class B Warrants may be
listed, or to conform to usage or to the requirements of Section 2(b). The
Warrant Certificates shall be dated the date of issuance thereof (whether upon
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered form. Warrant
Certificates shall be numbered serially with the letter AW on Class A Warrants
of all denominations and the letters BW on Class B Warrants of all
denominations.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary, an Assistant Secretary or its Treasurer, by manual signatures or by
facsimile signatures printed thereon, and shall have imprinted thereon a
facsimile of the Company's seal. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be an officer of the Company or to
hold the particular office referenced in the Warrant Certificate before the date
of issuance of the Warrant Certificates or before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent,
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<PAGE>
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as otherwise provided by
Section 4(a) hereof.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly following, and
in any event within five days after the date of such notice from the Warrant
Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise, (plus a certificate for any remaining unexercised Warrants of the
Registered Holder) unless prior to the date of issuance of such certificates the
Company shall instruct the Warrant Agent to refrain from causing such issuance
of certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Notwithstanding the foregoing, in the case of
payment made in the form of a check drawn on an account of Blair or such other
investment banks and brokerage houses as the Company shall approve in writing to
the Warrant Agent, certificates shall immediately be issued without prior notice
to the Company or any delay. Upon the exercise of any Warrant and clearance of
the funds received, the Warrant Agent shall promptly remit the payment received
for the Warrant (the "Warrant Proceeds") to the Company or as the Company may
direct in writing, subject to the provisions of Sections 4(b) and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of any
Warrant, (i) the market price of the Company's Class A Common Stock is greater
than the then Purchase Price of the Warrant, (ii) the exercise of the Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. ("NASD") as designated in writing on the warrant Certificate Subscription
Form, (iii) the Warrant was not held in a discretionary account, (iv) disclosure
of compensation arrangements was made both at the time of the original offering
and at the time of exercise; and (v) the solicitation of the exercise of the
Warrant was not in violation of Regulation M which was recently adopted to
replace Rule 10b-6 and certain other rules promulgated under the Securities
Exchange Act of 1934, as amended, then the Warrant Agent, simultaneously with
the distribution of the Warrant Proceeds to the Company shall, on behalf of the
Company, pay from the Warrant Proceeds, a fee of 5% (the "Blair Fee") of the
Purchase Price to Blair (of which a portion may be reallowed to the dealer who
solicited the exercise, which may also be Blair or D.H. Blair & Co., Inc.). In
the event the Blair Fee is not received within five days of the date on which
the Company receives Warrant Proceeds, then the Blair Fee shall begin accruing
interest at an annual rate of prime plus four (4)`, payable by the
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<PAGE>
Company to Blair at the time Blair receives the Blair Fee. Within five days
after exercise the Warrant Agent shall send Blair a copy of the reverse side of
each Warrant exercised. Blair shall reimburse the Warrant Agent, upon request,
for its reasonable expenses relating to compliance with this section 4(b). In
addition, Blair and the Company may at any time during business hours, examine
the records of the Warrant Agent, including its ledger of original Warrant
Certificates returned to the Warrant Agent upon exercise of Warrants. The
provisions of this paragraph may not be modified, amended or deleted without the
prior written consent of Blair.
(c) In order to enforce the provisions of Section 4(b) above, in the
event there is any dispute or question as to the amount or payment of the Blair
Fee, the Warrant Agent is hereby expressly authorized to withhold payment to the
Company of the Warrant Proceeds unless and until the Company establishes an
escrow account for the purpose of depositing the entire amount of the Blair Fee,
which amount will be deducted from the net Warrant Proceeds to be paid to the
Company. The funds placed in the escrow account may not be released to the
Company without a written agreement from Blair that the required Blair Fee has
been received by Blair.
SECTION 5. Reservation of Shares: Listing: Payment of Taxes: etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Class A Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Class A Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Class A Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be duly
and validly issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, (other than those which the Company
shall promptly pay or discharge) and that upon issuance such shares shall be
listed on each national securities exchange, including the Nasdaq National
Market, or eligible for inclusion on the Nasdaq SmallCap Market on which the
other shares of outstanding Class A Common Stock of the Company are then listed
or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use reasonable efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Class A Common Stock issued to, any Registered
Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance or delivery of any shares of Class A Common Stock
or Class B Warrants upon exercise
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<PAGE>
of the Class A Warrants, or the issuance or delivery of any shares of Class A
Common Stock upon exercise of the Class B Warrants; provided, however, that if
the shares of Class A Common Stock or Class B Warrants, as the case may be, are
to be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Class A Common Stock issuable upon exercise of the
Warrants, and the Company will authorize the Transfer Agent to comply with all
such proper requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of the Transfer Agent of the
Company for shares of Class A Common Stock issuable upon exercise of the
Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
or her attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and
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<PAGE>
thereafter retained by the Warrant Agent until termination of this Agreement or
resignation as Warrant Agent, or, with the prior written consent of Blair,
disposed of or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants, which are being offered in the Private Placement
Units with the Notes pursuant to the Agency Agreement, will be immediately
detachable from the Notes and transferable separately therefrom.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Class A Warrants or Class B Warrants, as the case may be. Applicants for a
substitute Warrant Certificate shall comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, commencing
one year from the Final Closing Date of the Private Placement, on not less than
thirty (30) days notice to Registered Holders of the Warrants being redeemed at
any time the Warrants may be redeemed, at the option of the Company, at a
redemption price of $0.05 per Warrant, provided the Market Price of the Common
Stock receivable upon exercise of such Warrants shall exceed $9.10 with respect
to the Class A Warrants and $12.25 with respect to the Class B Warrants (the
"Target Prices"), subject to adjustment as set forth in Section 8(f), below.
Market Price for the purpose of this Section 8 shall mean (i) the average
closing bid price, for thirty (30) consecutive business days (or such other
period as Blair may consent to), ending within 15 days of the date of the notice
of redemption, which notice shall be mailed no later than five days thereafter,
of the Common Stock as reported by Nasdaq or (ii) the last reported sale price,
for thirty (30) consecutive business days (or such other period as Blair may
consent to), ending within 15 days of the date of the notice of redemption,
which notice shall be mailed no later than five days thereafter, on the primary
exchange on which the Common Stock is traded, if the Common Stock is traded on a
national securities exchange, including the Nasdaq National Market. All Warrants
of a class must be redeemed if any of that class are redeemed, provided that the
Warrants underlying the Private Placement Unit Purchase Options may be redeemed
only in compliance
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with and subject to the terms and conditions of the Private Placement Unit
Purchase Options. The date fixed for redemption of the Warrants is referred to
herein as the "Redemption Date." The Class B Redemption Date may not be earlier
than thirty-one (31) days after the Class A Redemption Date.
(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall request
Blair to mail a notice of redemption to each of the Registered Holders of the
Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that Blair will assist each
Registered Holder of a Warrant in connection with the exercise thereof and (v)
that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of Blair or the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
On and after the Redemption Date, Holders of the Warrants shall have no further
rights except to receive, upon surrender of the Warrant, the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the notice of redemption, upon presentation and surrender to
the Company by or on behalf of the Registered Holder thereof of one or more
Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Holder a sum in cash equal to the
redemption price of each such Warrant. From and after the Redemption Date and
upon the deposit or setting aside by the Company of a sum sufficient to redeem
all the Warrants called for redemption, such Warrants shall expire and become
void and all rights hereunder and under the Warrant Certificates, except the
right to receive payment of the redemption price, shall cease.
(f) If the shares of the Company's Class A Common Stock are
subdivided or combined into a greater or smaller number of shares of Class A
Common Stock, the Target Price shall be proportionally adjusted by the ratio
which the total number of shares of Class A Common Stock outstanding immediately
prior to such event bears to the total number of shares of Class A Common Stock
to be outstanding immediately after such event.
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(g) So long as any Warrants are outstanding, the Company shall use
its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to Blair and each dealer as many copies of
each such Prospectus as Blair or such dealer may reasonably request. The Company
shall not call for redemption any of the Warrants unless a registration
statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, for so long as any Warrant is outstanding, the
Company will promptly notify Blair of any material change in the business,
financial condition or prospects of the Company.
SECTION 9. Adjustment of Exercise Price and Number of Shares of
Common Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Market Price of the Class A Common Stock (as defined in Section 8(a)) on the
date of the sale or issue any shares of Common Stock as a stock dividend to the
holders of Common Stock, or subdivide or combine the outstanding shares of
Common Stock into a greater or lesser number of shares (any such sale, issuance,
subdivision or combination being herein called a "Change of Shares"), then, and
thereafter upon each further Change of Shares, the Purchase Price in effect
immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received (determined as
provided in subsection 9(f)(F) below) for the issuance of such additional shares
would purchase at the Market Price and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately after the
issuance of such additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section
9, the total number of shares of Class A Common Stock and Class B Warrants
purchasable upon the exercise of each Class A Warrant or the total number of
shares of Class A Common Stock purchasable upon exercise of each Class B
Warrant, as applicable, shall (subject to the provisions contained in Section
9(b) hereof) be such number of shares (and Class B Warrants, if applicable)
(calculated to the nearest tenth) purchasable at the Purchase Price in effect
immediately prior to such adjustment multiplied by a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect immediately
after such adjustment.
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(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class A Warrants or Class B Warrants
outstanding, in lieu of the adjustment in the number of shares of Common Stock
(and Class B Warrants, if applicable) purchasable upon the exercise of each
Warrant as hereinabove provided, so that each Class A Warrant outstanding after
such adjustment shall represent the right to purchase one share of Class A
Common Stock and one Class B Warrant, and each Class B Warrant outstanding after
such adjustment shall represent the right to purchase one share of Class A
Common Stock. Each Warrant held of record prior to such adjustment of the number
of Warrants shall become that number of Warrants (calculated to the nearest
tenth) determined by multiplying the number one by a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect immediately
after such adjustment. Upon each adjustment of the number of Warrants pursuant
to this Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 11 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of such Warrant immediately prior
to such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Warrant Agent, the obligation to deliver to the holder of
each Warrant such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holders may be entitled to purchase and the other
obligations under this Agreement. The foregoing provisions shall similarly apply
to successive reclassifications, capital reorganizations and other
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changes of outstanding shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Class A Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder and the Redemption Price
therefor as the Purchase Price per share, and the number of shares purchasable
and the Redemption Price therefore were expressed in the Warrant Certificates
when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Class A Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will promptly
file such certificate with the Warrant Agent and cause a brief summary thereof
to be sent by ordinary first class mail to Blair and to each registered holder
of Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares
shall not be considered a Change of Shares for purposes of said
sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least
$.10 in such price; provided that any adjustments which by reason of
this clause (B) are not required to be made shall be carried forward
and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment(s) so
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carried forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
(C) In case of (1) the sale by the Company for cash (or as a
component of a unit being sold for cash) of any rights or warrants
to subscribe for or purchase, or any options for the purchase of,
Common Stock or any securities convertible into or exchangeable for
Common Stock without the payment of any further consideration other
than cash, if any (such securities convertible, exercisable or
exchangeable into Common Stock being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the
receipt by the Company of any consideration therefor, of any rights
or warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or Convertible Securities, in each case,
if (and only if) the consideration payable to the Company upon the
exercise of such rights, warrants or options shall consist of cash,
whether or not such rights, warrants or options, or the right to
convert or exchange such Convertible Securities, are immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such rights, warrants or
options, plus the consideration received by the Company for the
issuance or sale of such rights, warrants or options, plus, in the
case of such Convertible Securities, the minimum aggregate amount of
additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the
exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities issuable upon the
exercise of such rights, warrants or options) is less than the
Market Price of the Common Stock on the date of the issuance or sale
of such rights, warrants or options, then the total maximum number
of shares of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of
such rights, warrants or options) shall be deemed to be outstanding
shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(D) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (x)
the total amount of consideration received by the Company for the
sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum
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number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the Market
Price of the Common Stock on the date of the sale of such
Convertible Securities, then the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall
be deemed to have been sold for cash in an amount equal to such
price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C)
above or any other securities of the Company convertible,
exchangeable or exercisable for shares of Common Stock, for any
reason other than an event that would require adjustment to prevent
dilution, so that the consideration per share received by the
Company after such modification is less than the Market Price on the
date prior to such modification, the Purchase Price to be in effect
after such modification shall be determined by multiplying the
Purchase Price in effect immediately prior to such event by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding multiplied by the Market Price on the date
prior to the modification plus the number of shares of Common Stock
which the aggregate consideration receivable by the Company for the
securities affected by the modification would purchase at the Market
Price and of which the denominator shall be the number of shares of
Common Stock outstanding on such date plus the number of shares of
Common Stock to be issued upon conversion, exchange or exercise of
the modified securities at the modified rate. Such adjustment shall
become effective as of the date upon which such modification shall
take effect. On the expiration of any such right, warrant or option
or the termination of any such right to convert or exchange any such
Convertible Securities referred to in Paragraph (C) or (D) above,
the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (a) had the
adjustments made upon the issuance or sale of such rights, warrants,
options or Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as adjusted
under clause (a) for all transactions (which would have affected
such adjusted Purchase Price) made after the issuance or sale of
such rights, warrants, options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to
subscribe for or purchase, or any options for the purchase of,
Common Stock or Convertible Securities, the consideration received
by the Company therefor shall be deemed to be the gross
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sales price therefor without deducting therefrom any expense paid or
incurred by the Company or any underwriting discounts or commissions
or concessions paid or allowed by the Company in connection
therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Class A Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the exercise of any of the options presently
outstanding under the Company's 1992 Stock Option Plan and the 1994
Stock Option Plan (collectively, the "Plans") for officers,
directors and certain other key personnel of the Company; or
(ii) upon-the issuance or exercise of any other securities which
may hereafter be granted or exercised under the Plans or under any
other employee benefit plan of the Company; or
(iii) upon the sale or exercise of the Warrants or any currently
outstanding warrants, including, but not limited to, those issued in
connection with the IPO and upon the sale or exercise of the Unit
Purchase Options issued in connection with the IPO or securities
issuable thereunder; or
(iv) upon the sale of any shares of Common Stock or Convertible
Securities in a firm commitment underwritten public offering,
including, without limitation, shares sold upon the exercise of any
over-allotment option granted to the underwriters in connection with
such offering; or
(v) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(vi) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such Convertible Securities and whether
or not such Convertible Securities were outstanding on the date of
the original sale of the Warrants or were thereafter issued or sold.
(h) As used in this Section 9, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to
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participate in dividends and in the distribution of assets upon the voluntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares issuable upon exercise of the Warrants shall include only shares of
such class designated in the Company's Certificate of Incorporation as Common
Stock on the date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(j) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section 9(j), that
exercise of Warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
SECTION 10. Registration Under The Securities Act of 1933. The
Company agrees to register for resale the Warrants and the shares of Class A
Common Stock issued or issuable upon exercise of the Warrants under the
Securities Act of 1933, as amended (the "Act") no later than June 18, 1997 as
more fully set forth in Section IV of the Subscription Agreement between the
Company and each of the investors in the Private Placement, subject to certain
contractual restrictions applicable to the Holder.
SECTION 11. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Class A Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon any exercise hereof, the Company shall pay to the Holder an amount in cash
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equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(1) If the Class A Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq National Market,
the current market value shall be the last reported sale price of
the Common Stock on such exchange or market on the last business day
prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and asked prices
for such day on such exchange or market; or
(2) If the Class A Common Stock is not listed or admitted to
unlisted trading privileges, the current market value shall be the
mean of the last reported bid and asked prices reported by the
Nasdaq Small Cap Market or, if not traded thereon, by the National
Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Class A Common Stock is not so listed or admitted
to unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount determined in
such reasonable manner as may be prescribed by the Board of
Directors of the Company.
SECTION 12. Warrant Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Class A Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Class A Common Stock in accordance with the provisions
hereof.
SECTION 13. Rights of Action. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered Holder of a Warrant, without consent of the Warrant Agent or
of the holder of any other Warrant, may, in his own behalf and for his own
benefit, enforce against the Company his right to exercise his Warrants for the
purchase of shares of Class A Common Stock in the manner provided in the Warrant
Certificate and this Agreement.
SECTION 14. Agreement of Warrant Holders. Every holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company, the Warrant
Agent and every other holder of a Warrant that:
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(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 15. Cancellation of Warrant Certificates. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and cancelled by it and retired. The Warrant Agent shall also
cancel the Warrant Certificate or Warrant Certificates following exercise of any
or all of the Warrants represented thereby or delivered to it for transfer,
split-up, combination or exchange.
SECTION 16. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory--to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action
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taken, suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust
-19-
<PAGE>
business of the Warrant Agent shall be a successor warrant agent under this
Agreement without any further act, provided that such corporation is eligible
for appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 17. Modification of Agreement. Subject to the provisions of
Section 4(b), the parties hereto and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; (ii) to reflect an
increase in the number of Class A or Class B Warrants which are to be governed
by this Agreement resulting from a subsequent public offering of Company
securities which includes Class A or Class B Warrants having the same terms and
conditions as the Class A or Class B Warrants, respectively, originally covered
by or subsequently added to this Agreement under this Section 17; or (iii) that
they may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrant Certificates; provided, however, that this
Agreement shall not otherwise be modified, supplemented or altered in any
respect except with the consent in writing of the Registered Holders of Warrant
Certificates representing not less than 50` of the Warrants then outstanding;
and provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, or the Purchase Price therefor, or
the acceleration of the Warrant Expiration Date, shall be made without the
consent in writing of the Registered Holder of the Warrant Certificate
representing such Warrant, other than such changes as are specifically
prescribed by this Agreement as originally executed or are made in compliance
with applicable law.
SECTION 18. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at Infosafe Systems, Inc., 342 Madison Avenue, New
York, New York 10173, attention: President, or at such other address as may have
been furnished to the Warrant Agent in writing by the Company; if to the Warrant
Agent, at its Corporate Office; if to Blair, at D.H. Blair Investment Banking
Corp., 44 Wall Street, New York, New York 10005.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
-20-
<PAGE>
SECTION 20. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates.. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 21. Termination. This Agreement shall terminate at the close
of business on the earlier of the Warrant Expiration Date or the date upon which
all Warrants (including the warrants issuable upon exercise of the Underwriter's
Option) have been exercised, except that the Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 16 hereof shall
survive such termination.
SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
INFOSAFE SYSTEMS, INC.
By: /s/ Arthur R. Medici
-----------------------------
Authorized Officer
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ Herbert Lemmer
-----------------------------
Authorized Officer
D.H. BLAIR INVESTMENT BANKING CORP.
By: /s/ Martin A. Bell
-----------------------------
Martin A. Bell, Vice Chairman
and General Counsel
-21-
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW Class A Warrants
VOID AFTER __________, 2002
CLASS A WARRANT CERTIFICATE FOR PURCHASE OF
CLASS A COMMON STOCK AND REDEEMABLE CLASS B WARRANTS
INFOSAFE SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED _____ or registered assigns
(the "Registered Holder") is the owner of the number of Class A Warrants ("Class
A Warrants") specified above. Each Class A Warrant represented hereby initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Warrant Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Class A Common Stock, $.01
value ("Class A Common Stock"), of Infosafe Systems, Inc., a Delaware
corporation (the "Company"), and one Class B Warrant of the Company at any time
between January 18, 1995 and the Expiration Date (as hereinafter defined), upon
the presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of American
Stock Transfer & Trust Company, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $6.50 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to Infosafe Systems, Inc.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth either in the Warrant Agreement, dated February 10, 1997,
or the Warrant Agreement dated January 25, 1995, as amended, by and among the
Company, the Warrant Agent and D.H. Blair Investment Banking Corp. (which
agreements may each be referred to interchangeably as the "Warrant Agreement"),
except as set forth below.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
and Class B Warrants subject to purchase upon the exercise of each Class A
Warrant represented hereby are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new
A-1
<PAGE>
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_______, 2002 or such earlier date as the Class A Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Class A Warrants represented hereby unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file a registration statement and will use its best efforts to
cause the same to become effective and to keep such registration statement
current while any of the Class A Warrants are outstanding. The Class A Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Class A Warrant at any
time, provided the Market Price (as defined in the Warrant Agreement) for the
Class A Common Stock shall exceed $9.10 per share. Notice of redemption shall be
given not later than the thirtieth day before the date fixed for redemption, all
as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the Class
A Warrants represented hereby except to receive the $.05 per Class A Warrant
upon surrender of this Warrant Certificate.
A-2
<PAGE>
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of five (5)% of the Purchase
Price upon certain conditions as specified in the Warrant Agreement upon the
exercise of the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
INFOSAFE SYSTEMS, INC.
Dated:__________________ By:_______________________________
By:_______________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:_____________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ______________________________ Class A Warrants represented by this
Warrant Certificate, and to purchase the securities issuable upon the exercise
of such Class A Warrants, and requests that certificates for such securities
shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and be delivered to
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
A-4
<PAGE>
The undersigned represents that the exercise of the within Class A
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in
the space below.
______________________________
(Name of NASD Member)
Dated:_________________________ X _______________________________
______________________________
______________________________
Address
______________________________
Taxpayer Identification Number
______________________________
Signature Guaranteed
______________________________
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
______________________________ of the Class A Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated:_________________________ X _______________________________
Signature Guaranteed
_______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
<PAGE>
EXHIBIT B
[FORM OF FACE OF CLASS B WARRANT CERTIFICATE]
No. BW Class B Warrants
VOID AFTER _________, 2002
CLASS B WARRANT CERTIFICATE FOR
PURCHASE OF CLASS A COMMON STOCK
INFOSAFE SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED ______ or registered assigns
(the "Registered Holder") is the owner of the number of Class B Warrants
specified above. Each Class B Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Class Common Stock, $.01 par value ("Class
A Common Stock"), of Infosafe Systems, Inc., a Delaware corporation (the
"Company"), at any time between January 18, 1995 and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company, as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $8.75
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to Infosafe Systems, Inc.
This Warrant Certificate and each Class B Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth either in the Warrant Agreement, dated February 10, 1997,
or the Warrant Agreement dated January 25, 1995, as amended, by and among the
Company, the Warrant Agent and D.H. Blair Investment Banking Corp. (which
agreements may each be referred to interchangeably as the "Warrant Agreement"),
except as set forth below.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
subject to purchase upon the exercise of each Class B Warrant represented hereby
are subject to modification or adjustment.
Each Class B Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class B Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor, which the Warrant Agent shall countersign,
for the balance of such Class B Warrants.
B-1
<PAGE>
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
___________, 2002, or such earlier date as the Class B Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Class B Warrants represented hereby unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file a registration statement and will use its best efforts to
cause the same to become effective and to keep such registration statement
current while any of the Class B Warrants are outstanding. The Class B Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class B Warrants, each of such new Warrant Certificates to
represent such number of Class B Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee in addition to any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Class B Warrants will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Class B Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class B Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Class B Warrant at any
time provided the Market Price (as defined in the Warrant Agreement) for the
Class A Common Stock shall exceed $12.25 per share. Notice of redemption shall
be given not later than the thirtieth day before the date fixed for redemption,
all as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the Class
B Warrants represented hereby except to receive the $.05 per Class B Warrant
upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class B Warrant represented hereby
(notwithstanding any notations of ownership or writing
B-2
<PAGE>
hereon made by anyone other than a duly authorized officer of the Company or the
Warrant Agent) for all purposes and shall not be affected by any notice to the
contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class B Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
INFOSAFE SYSTEMS, INC.
Dated:__________________________ By:_________________________________
By:_________________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:___________________________________
Authorized Officer
B-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ____________________ Class B Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Class B Warrants, and requests that certificates for such securities shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and be delivered to
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and if such number of Class B Warrants shall not be all the Class B Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class B Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
B-4
<PAGE>
The undersigned represents that the exercise of the within Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. If not solicited by an NASD member, please write "unsolicited in the space
below.
_______________________________
(Name of NASD Member)
Dated:_________________________ X _______________________________
_______________________________
_______________________________
Address
_______________________________
Taxpayer Identification Number
_______________________________
Signature Guaranteed
_______________________________
B-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________________ hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
___________________________ of the Class A Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
__________________________ ___________________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated:_________________________ X _______________________________
Signature Guaranteed
_______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
B-6
AMENDMENT TO WARRANT AGREEMENT
AMENDMENT, (the "Amendment"), dated February 10, 1997 to the Warrant
Agreement dated January 25, 1995 (the "Warrant Agreement") by and among INFOSAFE
SYSTEMS, INC., a New York corporation (the "Company"), AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent (the "Warrant Agent"), and D.H. BLAIR INVESTMENT
BANKING CORP., a New York corporation ("Blair"). All terms used in this
Amendment, unless otherwise defined herein, shall have such meaning as ascribed
to them in the Warrant Agreement.
WHEREAS, in connection with a private placement (the "Private
Placement") of a minimum of twenty (20) and a maximum of one hundred (100) units
("Units"), each unit consisting of units identical to those sold by the Company
in its initial public offering ("IPO") in January 1995 ("IPO Units"), each IPO
Unit consisting of one (1) share of the Company's Class A Common Stock, $.01 par
value ("Class A Common Stock"), one (1) redeemable Class A Warrant ("Class A
Warrants") and one (1) redeemable Class B Warrant ("Class B Warrants") pursuant
to an agency agreement (the "Agency Agreement") dated as of February 10, 1997
between the Company and Blair and the issuance to Blair or its designees of Unit
Purchase Options to purchase additional Units (the "Private Placement Unit
Purchase Options"), the Company may issue up to such number of Class A Warrants
and Class B Warrants (collectively referred to as the "Warrants") as shall be
determined in accordance with the Confidential Term Sheet relating to the
Private Placement (the "Term Sheet"); and
WHEREAS, the Company has granted Blair the option to sell an
additional twenty (20) Units in the Private Placement (the "Over-allotment
Option"); and
WHEREAS, each Class A Warrant initially entitles the Registered
Holder thereof to purchase one (1) share of Class A Common Stock and one (1)
Class B Warrant, and accordingly, the Company may issue additional Class B
Warrants on exercise of the Class A Warrants; and
WHEREAS, each Class B Warrant initially entitles the Registered
Holder thereof to purchase one (1) share of Class A Common Stock; and
WHEREAS, in connection with the Private Placement, the parties
hereto desire to amend certain provisions of the Warrant Agreement as set forth
in this Amendment:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties intending to be legally bound,
hereby agree as follows:
1. Amendments to Warrant Agreement. Upon the First Closing Date, as
defined in the Term Sheet, the Warrant Agreement shall be amended as follows:
<PAGE>
(a) The date "January 17, 2000" as it appears in Section 1(i) of the
Warrant Agreement entitled "Warrant Expiration Date" shall be deleted and
replaced by the date "February 18, 2002."
(b) The date "January 17, 1996" as it appears in Section 8(a) of the
Warrant Agreement entitled "Redemption" shall be deleted and replace by the "the
first anniversary of the final Closing of the Private Placement."
2. Certificates. All Warrant certificates issued pursuant to the Warrant
Agreement subsequent to the date hereof, including Warrant Certificates issued
upon transfer of outstanding Warrants, shall be substantially in the form of the
amended Class A Warrant certificate and the amended Class B Warrant Certificate
attached hereto as Exhibit A and Exhibit B, respectively.
3. Amendment. This Amendment has been made pursuant to section 16(iii) of
the Warrant Agreement which permits the parties to the Warrant Agreement,
without the consent of the Holders of the Warants, to make changes in the
Warrant Agreement that they deem necessary or desirable and which shall not
adversely affect the interests of the holders of the Warrant Certificates.
4. Definitions. Any defined term used herein and not otherwise defined
shall have the meaning set forth in the Warrant Agreement.
5. Full Force and Effect. Except as provided herein, all other terms and
provisions of the Warrant Agreement shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in one or more
counterparts, which taken together shall constitute a single document.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
INFOSAFE SYSTEMS, INC.
By: /s/ Arthur R. Medici
-------------------------------
Authorized Officer
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ Herbert Lemmer
-------------------------------
Authorized Officer
D.H. BLAIR INVESTMENT BANKING CORP.
By: /s/ Martin A. Bell
-------------------------------
Martin A. Bell, Vice Chairman and
General Counsel
-3-
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW Class A Warrants
VOID AFTER __________, 2002
CLASS A WARRANT CERTIFICATE FOR PURCHASE OF
CLASS A COMMON STOCK AND REDEEMABLE CLASS B WARRANTS
INFOSAFE SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED _____ or registered assigns
(the "Registered Holder") is the owner of the number of Class A Warrants ("Class
A Warrants") specified above. Each Class A Warrant represented hereby initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Warrant Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Class A Common Stock, $.01
value ("Class A Common Stock"), of Infosafe Systems, Inc., a Delaware
corporation (the "Company"), and one Class B Warrant of the Company at any time
between January 18, 1995 and the Expiration Date (as hereinafter defined), upon
the presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of American
Stock Transfer & Trust Company, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $6.50 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to Infosafe Systems, Inc.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth either in the Warrant Agreement, dated February 10, 1997,
or the Warrant Agreement dated January 25, 1995, as amended, by and among the
Company, the Warrant Agent and D.H. Blair Investment Banking Corp. (which
agreements may each be referred to interchangeably as the "Warrant Agreement"),
except as set forth below.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
and Class B Warrants subject to purchase upon the exercise of each Class A
Warrant represented hereby are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new
A-1
<PAGE>
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_______, 2002 or such earlier date as the Class A Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Class A Warrants represented hereby unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file a registration statement and will use its best efforts to
cause the same to become effective and to keep such registration statement
current while any of the Class A Warrants are outstanding. The Class A Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Class A Warrant at any
time, provided the Market Price (as defined in the Warrant Agreement) for the
Class A Common Stock shall exceed $9.10 per share. Notice of redemption shall be
given not later than the thirtieth day before the date fixed for redemption, all
as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the Class
A Warrants represented hereby except to receive the $.05 per Class A Warrant
upon surrender of this Warrant Certificate.
A-2
<PAGE>
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of five (5)% of the Purchase
Price upon certain conditions as specified in the Warrant Agreement upon the
exercise of the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
INFOSAFE SYSTEMS, INC.
Dated:__________________ By:_______________________________
By:_______________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:_____________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ______________________________ Class A Warrants represented by this
Warrant Certificate, and to purchase the securities issuable upon the exercise
of such Class A Warrants, and requests that certificates for such securities
shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and be delivered to
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
A-4
<PAGE>
The undersigned represents that the exercise of the within Class A
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in
the space below.
_______________________________
(Name of NASD Member)
Dated:_________________________ X _______________________________
_______________________________
_______________________________
Address
_______________________________
Taxpayer Identification Number
_______________________________
Signature Guaranteed
_______________________________
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
______________________________ of the Class A Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated:_________________________ X _______________________________
Signature Guaranteed
_______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
<PAGE>
EXHIBIT B
[FORM OF FACE OF CLASS B WARRANT CERTIFICATE]
No. BW Class B Warrants
VOID AFTER _________, 2002
CLASS B WARRANT CERTIFICATE FOR
PURCHASE OF CLASS A COMMON STOCK
INFOSAFE SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED ______ or registered assigns
(the "Registered Holder") is the owner of the number of Class B Warrants
specified above. Each Class B Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Class Common Stock, $.01 par value ("Class
A Common Stock"), of Infosafe Systems, Inc., a Delaware corporation (the
"Company"), at any time between January 18, 1995 and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company, as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $8.75
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to Infosafe Systems, Inc.
This Warrant Certificate and each Class B Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth either in the Warrant Agreement, dated February 10, 1997,
or the Warrant Agreement dated January 25, 1995, as amended, by and among the
Company, the Warrant Agent and D.H. Blair Investment Banking Corp. (which
agreements may each be referred to interchangeably as the "Warrant Agreement"),
except as set forth below.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
subject to purchase upon the exercise of each Class B Warrant represented hereby
are subject to modification or adjustment.
Each Class B Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class B Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor, which the Warrant Agent shall countersign,
for the balance of such Class B Warrants.
B-1
<PAGE>
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
___________, 2002, or such earlier date as the Class B Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Class B Warrants represented hereby unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file a registration statement and will use its best efforts to
cause the same to become effective and to keep such registration statement
current while any of the Class B Warrants are outstanding. The Class B Warrants
represented hereby shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class B Warrants, each of such new Warrant Certificates to
represent such number of Class B Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee in addition to any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Class B Warrants will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Class B Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class B Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Class B Warrant at any
time provided the Market Price (as defined in the Warrant Agreement) for the
Class A Common Stock shall exceed $12.25 per share. Notice of redemption shall
be given not later than the thirtieth day before the date fixed for redemption,
all as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the Class
B Warrants represented hereby except to receive the $.05 per Class B Warrant
upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class B Warrant represented hereby
(notwithstanding any notations of ownership or writing
B-2
<PAGE>
hereon made by anyone other than a duly authorized officer of the Company or the
Warrant Agent) for all purposes and shall not be affected by any notice to the
contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class B Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
INFOSAFE SYSTEMS, INC.
Dated:__________________________ By:_________________________________
By:_________________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:___________________________________
Authorized Officer
B-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise ____________________ Class B Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Class B Warrants, and requests that certificates for such securities shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and be delivered to
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
and if such number of Class B Warrants shall not be all the Class B Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class B Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
B-4
<PAGE>
The undersigned represents that the exercise of the within Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. If not solicited by an NASD member, please write "unsolicited in the space
below.
_______________________________
(Name of NASD Member)
Dated:_________________________ X _______________________________
_______________________________
_______________________________
Address
_______________________________
Taxpayer Identification Number
_______________________________
Signature Guaranteed
_______________________________
B-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
________________________________________
[please print or type name and address]
_______________________________________ of the Class A Warrants represented by
this Warrant Certificate, and hereby irrevocably constitutes and appoints
______________________________________________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated:_________________________ X _______________________________
Signature Guaranteed
_______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
B-6
Option to Purchase
_______ Units
INFOSAFE SYSTEMS, INC.
Unit Purchase Option
Dated: February 18, 1997
THIS CERTIFIES THAT D.H. Blair Investment Banking Corp. (herein
sometimes called the "Holder") is entitled to purchase from Infosafe Systems,
Inc., a Delaware corporation (hereinafter called the "Company"), at the prices
and during the periods as hereinafter specified, up to_______________ (_______)
Units ("Units"), each Unit consisting of _______ units identical to those sold
by the Company in its initial public offering ("IPO") in January 1995 ("IPO
Unit"), each IPO Unit consisting of one share of Class A Common Stock, $.01 par
value ("Common Stock") of the Company, one Class A Warrant ("Class A Warrant")
and one Class B Warrant ("Class B Warrant"). Each Class A Warrant is exercisable
to purchase one share of Common Stock and one Class B Warrant at an exercise
price of $6.50 from January 18, 1995 until __________, 2002, and each Class B
Warrant is exercisable to purchase one share of Common Stock at an exercise
price of $8.75 until ___________, 2002. The Class A Warrants and Class B
Warrants are herein collectively referred to as the "Warrants."
This Option, together with options of like tenor, constituting in
the aggregate options (the "Options") to purchase Units, subject to adjustment
in accordance with Section 8 of this Option (the "Option Units"), was originally
issued pursuant to an agency agreement between the Company and D.H. Blair
Investment Banking Corp., as placement agent (the "Placement Agent") in
connection with a private placement (the "Offering") of up to one hundred Units
(the "Private Units") through the Placement Agent in consideration for
$__________ received for the Options.
Except as specifically otherwise provided herein, the Common Stock
and the Warrants issued pursuant to the option herein granted (the "Option")
shall bear the same terms and conditions as described under the caption
"Description of Securities" in the Confidential Term Sheet dated February 10,
1997, and the Exhibits thereto (the "Term Sheet") and the Warrants shall be
governed by the terms of the Warrant Agreement dated as of February 10, 1997
executed in connection with the Offering (the "Warrant Agreement"), and except
that (i) the holder shall have registration rights under the Securities Act of
1933, as amended (the "Act"), for the Option, the Common Stock and the Warrants
included in the Option Units, and the shares of Common Stock underlying the
Warrants, as more fully described in Section 6 of this Option and (ii) the
Warrants issuable upon exercise of the Option will not be subject to redemption
by the Company. The Company will list the Option Units, the Common Stock and the
Warrants underlying this Option on the Nasdaq National Market, the Nasdaq Small
Cap Market or such other exchange or market as the IPO Units, Common Stock or
Warrants may then be listed or quoted. In the event of any extension of the
expiration date or reduction of the
<PAGE>
exercise price of the Warrants, the same changes to the Warrants included in the
Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) Between ____________, 1997 and February ___, 2002
inclusive, the Holder shall have the option to purchase Option
Units hereunder at a price of $50,000 per Unit. For purposes
of the adjustments under Section 8 hereof, the Per Share
Exercise Price shall be deemed to be $50,000 subject to
further adjustment as provided in such Section 8.
(b) After February ___, 2002, the Holder shall have no
right to purchase any Option Units hereunder.
2. (a) The rights represented by this Option may be exercised at any
time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and (ii)
payment to the Company of the exercise price then in effect for the number of
Option Units specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any. This Option shall be deemed to have
been exercised, in whole or in part to the extent specified, immediately prior
to the close of business on the date this Option is surrendered and payment is
made in accordance with the foregoing provisions of this Section 2, and the
person or persons in whose name or names the certificates for shares of Common
Stock and Warrants shall be issuable upon such exercise shall become the holder
or holders of record of such Common Stock and Warrants at that time and date.
The certificates for the Common Stock and Warrants so purchased shall be
delivered to the Holder as soon as practicable but not later than ten (10) days
after the rights represented by this Option shall have been so exercised.
(b) At any time during the period above specified, during
which this Option may be exercised, the Holder may, at its option, exchange this
Option, in whole or in part (an "Option Exchange"), into the number of Option
Units determined in accordance with this Section (b), by surrendering this
Option at the principal office of the Company or at the office of its stock
transfer agent, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Option Units into which this Option is to be
exchanged and the date on which the Holder requests that such Option Exchange
occur (the "Notice of Exchange"). The Option Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares of Common Stock and Warrants issuable upon such Option Exchange and, if
applicable, a new Option of like tenor evidencing the balance of the Option
Units remaining subject to this Option, shall be issued as of the Exchange Date
and delivered to the Holder within
-2-
<PAGE>
seven (7) days following the Exchange Date. In connection with any Option
Exchange, this Option shall represent the right to subscribe for and acquire the
number of Option Units (rounded to the next highest integer) equal to (x) the
number of Option Units specified by the Holder in its Notice of Exchange up to
the maximum number of Option Units subject to this option (the "Total Number")
less (y) the number of Option Units equal to the quotient obtained by dividing
(A) the product of the Total Number and the existing Exercise Price by (B) the
Fair Market Value. "Fair Market Value" shall mean first, if there is a trading
market as indicated in Subsection (i) below for the Units, such Fair Market
Value of the Units and if there is no such trading market in the Units, then
Fair Market Value shall have the meaning indicated in Subsections (ii) through
(v) below for the aggregate value of all shares of Common Stock and Warrants
which comprise a Unit:
(i) If the Units are listed on a national securities exchange
or listed or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market or the
Nasdaq Small Cap Market, the Fair Market Value shall be the average
of the last reported sale prices or the average of the means of the
last reported bid and asked prices, respectively, of the Units on
such exchange or market for the twenty (20) business days ending on
the last business day prior to the Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a national
securities exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq National Market or
the Nasdaq Small Cap Market, the Fair Market Value shall be the
average of the last reported sale prices or the average of the means
of the last reported bid and asked prices, respectively, of Common
Stock or Warrants, respectively, on such exchange or market for the
twenty (20) business days ending on the last business day prior to
the Exchange Date; or
(iii) If the Common Stock or Warrants are not so listed or
admitted to unlisted trading privileges, the Fair Market Value shall
be the average of the means of the last reported bid and asked
prices of the Common Stock or Warrants, respectively, for the twenty
(20) business days ending on the last business day prior to the
Exchange Date; or
(iv) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal year of
the Company ending prior to the Exchange Date, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company; or
(v) If the Warrants are not so listed or admitted to unlisted
trading privileges, and bid and asked prices are not so reported for
Warrants, then Fair Market Value for the Warrants shall be an amount
equal to the difference between
-3-
<PAGE>
(i) the Fair Market Value of the shares of Common Stock and Warrants
which may be received upon the exercise of the Warrants, as
determined herein, and (ii) the Warrant Exercise Price.
3. Any transfer, sale or such assignment of this Option shall be
effected by the Holder (i) executing the form of assignment at the end hereof
and (ii) surrendering this Option for cancellation at the office or agency of
the Company referred to in Section 2 hereof, accompanied by a certificate
(signed by an officer of the Holder if the Holder is a corporation), stating
that each transferee is a permitted transferee under this Section 3 hereof;
whereupon the Company shall issue, in the name or names specified by the Holder
(including the Holder) a new Option or Options of like tenor and representing in
the aggregate rights to purchase the same number of Option Units as are
purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Option Units purchased hereunder and the
Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the holder thereof. The Company further
covenants and agrees that during the periods within which this Option may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants included in
the Option Units.
5. This Option shall not entitle the Holder to any voting rights or
any other rights, or subject to the Holder to any liabilities, as a stockholder
of the Company.
6. (a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds Option
Units or any of the securities underlying the Option Units, by written notice at
least thirty (30) days prior to the filing of any post-effective amendment to
the Registration Statement or of any new registration statement or
post-effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others, and will for a period
of seven years from the effective date of the Registration Statement, upon the
request of the Holder, include in any such post-effective amendment or
registration statement, such information as may be required to permit a public
offering of the Option, all or any of the Option Units, the Common Stock or
Warrants included in the Option Units or the Common Stock issuable upon the
exercise of the Warrants (the "Registrable Securities").
(b) If the Placement Agent, D.H. Blair & Co., Inc. or J.
Morton Davis (each a "Holder" and together, the "Holders") shall give notice to
the Company at any time to the effect that such holder desires to register under
the Act this Option, the Option Units or any of the underlying securities
contained in the Option Units under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved then the Company will promptly, but no later than twenty days after
receipt of such notice, file a
-4-
<PAGE>
post-effective amendment to the current Registration Statement or a new
registration statement on Form S-1 or such other form as the Holder requests
pursuant to the Act, to the end that the Option, the Option Units and/or any of
the securities underlying the Option Units may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best efforts to
cause such registration to become and remain effective (including the taking of
such steps as are necessary to obtain the removal of any stop order); provided,
that such holder shall furnish the Company with appropriate information in
connection therewith as the Company may reasonably request in writing. The
Holder may, at its option, request the filing of a post-effective amendment to
the current Registration Statement or a new registration statement under the Act
on two occasions during the seven year period beginning ___, 1997. The Holder
may, at its option request the registration of the Option and/or any of the
securities underlying the Option in a registration statement made by the Company
as contemplated by Section 6(a) or in connection with a request made pursuant to
this Section 6(b) prior to acquisition of the Option Units issuable upon
exercise of the Option and even though the Holder has not given notice of
exercise of the Option. The Holder may, at its option, request such
post-effective amendment or new registration statement during the described
period with respect to the Option, the Option Units as a unit, or separately as
to the Common Stock and/or Warrants included in the Option Units and/or the
Common Stock issuable upon the exercise of the Warrants, and such registration
rights may be exercised by the Holder prior to or subsequent to the exercise of
the Option.
Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to the other holders of the Options,
advising that the Company is proceeding with such post-effective amendment or
registration statement and offering to include therein the securities underlying
the Options of the other holders, provided that they shall furnish the Company
with such appropriate information (relating to the intentions of such holders)
in connection therewith as the Company shall reasonably request in writing. In
the event the registration statement is not filed within the period specified
herein, the expiration date of this Option and the underlying Warrants shall be
extended by an amount of time equal to the delay in filing, and in the event the
registration statement is not declared effective under the Act prior to February
__, 2004, the Company shall extend the expiration date of the Option and the
underlying Warrants to a date not less than 90 days after the effective date of
such registration statement. All costs and expenses of the first such
post-effective amendment or new registration statement under this paragraph 6(b)
shall be borne by the Company, except that the holders shall bear the fees of
their own counsel and any underwriting discounts or commissions applicable to
any of the securities sold by them. If the Company determines to include
securities to be sold by it in any registration statement originally requested
pursuant to this Section 6(b), such registration shall instead be deemed to have
been a registration under Section 6(a) and not under this Section 6(b).
The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least six
months (and for up to an additional three months if requested by the Holder)
from the effective date thereof.
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(c) Whenever pursuant to Section 6 a registration statement
relating to any Registrable Securities is filed under the Act, amended or
supplemented, the Company shall (i) supply prospectuses and such other documents
as the Holder may request in order to facilitate the public sale or other
disposition of the Registrable Securities, (ii) use its best efforts to register
and qualify any of the Registrable Securities for sale in such states as such
Holder designates, (iii) furnish indemnification in the manner provided in
Section 7 hereof, (iv) notify each Holder of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and, at the request of any such Holder, prepare and furnish to such
Holder a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not included an
untrue statement of a material fact or omit to state material fact required to
be stated therein or necessary to make the statements therein not misleading and
(v) do any and all other acts and things which may be necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, The Holder shall furnish appropriate information in
connection therewith and indemnification as set forth in Section 7.
(d) The Company shall not permit the inclusion of any
securities other than the Registrable Securities to be included in any
registration statement filed pursuant to Section 6(b) hereof without the prior
written consent of the Holder.
(e) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) if such registration
includes an underwritten public offering, a "cold comfort" letter dated the
effective date of such registration statement and dated the date of the closing
under the underwriting agreement signed by the independent public accountants
who have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(f) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
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<PAGE>
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonable
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to non-confidential books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
as any such Holder shall reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement
relating to the Registrable Securities is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each holder of the
Registrable Securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"), and
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Distributing Holder, any such controlling person
or any such underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse the Distributing
Holder and each such controlling person and underwriter for any legal or other
expenses reasonably incurred by the Distributing Holder or such controlling
person or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder specifically for use in the
preparation thereof.
(b) If requested by the Company prior to the filing of any
registration statement covering the Registrable Securities, each Distributing
Holder will agree, severally but not jointly, to indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final
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<PAGE>
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing Holder specifically for
use in the preparation thereof; except that the maximum amount which may be
recovered from the Distributing Holder pursuant to this Section 7 or otherwise
shall be limited to the amount of net proceeds received by the Distributing
Holder from the sale of the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(8) In addition to the provisions of Section 1(a) of this Option,
the Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying
the Exercise Price by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding after giving effect
to such action, and the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock
entitling them to subscribe
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<PAGE>
for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having
a conversion price per share) less than (i) the current market price
of the Common Stock (as defined in Subsection (h) below) on the
record date mentioned below, or (ii) the Exercise Price on a per
share basis giving no value to the Warrants included in the Option
Units (the "Per Share Exercise Price") on such record date, the
Exercise Price shall be adjusted so that the same shall equal the
lower of (i) the price determined by multiplying the number of
shares then comprising an Option Unit by the product of the Per
Share Exercise Price in effect immediately prior to the date of such
issuance multiplied by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding on the
record date mentioned below and the number of additional shares of
Common Stock which the aggregate offering price of the total number
of shares of Common Stock so offered (or the aggregate conversion
price of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of
additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are
convertible) or (ii) in the event the Subscription Price is equal to
or higher than the current market price but is less than the Per
Share Exercise Price, the price determined by multiplying the number
of shares then comprising an Option Unit by the product of the Per
Share Exercise Price in effect immediately prior to the date of
issuance multiplied by a fraction, the numerator of which shall be
the sum of the number of shares outstanding on the record date
mentioned below and the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Per Share
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares of Common Stock
offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would
then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into
Common Stock) actually delivered.
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<PAGE>
(c) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (a) above) or subscription
rights or warrants (excluding those referred to in Subsection (b)
above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the number of shares
then comprising an Option Unit by the product of the Per Share
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of shares
of Common Stock outstanding multiplied by the current market price
per share of Common Stock (as defined in Subsection (h) below), less
the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately
after the record date for the determination of shareholders entitled
to receive such distribution.
(d) In case the Company shall issue shares of its Common
Stock, (excluding shares issued (i) in any of the transactions
described in Subsections (a), (b), (c) or (e) of this Section 8;
(ii) upon exercise of options granted to the Company's employees
under a plan or plans adopted by the Company's Board of Directors
and approved by its shareholders, if such shares would otherwise be
included in this Subsection (d), (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date
hereof, shall not exceed 5% of the Company's Common Stock
outstanding at the time of any issuance); (iii) upon exercise of
options and warrants or upon conversion of convertible securities
outstanding at February ___, 1997 and this Option; (iv) to
shareholders of any corporation which merges into the Company in
proportion to their stock holdings of such corporation immediately
prior to such merger, upon such merger, or (v) in a bona fide public
offering pursuant to a firm commitment underwriting; but only if no
adjustment is required pursuant to any other specific subsection of
this Section (8) (without regard to Subsection (i) below) with
respect to the transaction giving rise to such rights) for a
consideration per share (the "Offering Price") less than (i) the
current market price per share, as defined in Subsection (h) below,
on the date the Company fixes the offering price of such additional
shares, or (ii) the Per Share Exercise Price, then the Exercise
Price shall be adjusted immediately thereafter so that it shall
equal the lower of (i) the price determined by multiplying the
number of shares then comprising an Option Unit by the product of
the Per Share Exercise Price in effect immediately prior thereto
multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares and the number of shares
of Common Stock which the
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<PAGE>
aggregate consideration received, determined as provided in
Subsection (g) below, for the issuance of such additional shares
would purchase at such current market price per share of Common
Stock, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance of such
additional shares or (ii) in the event the Offering Price is equal
to or higher than the current market price per share but less than
the Per Share Exercise Price, the price determined by multiplying
the number of shares then comprising an Option Unit by the product
of the Per Share Exercise Price in effect immediately prior to the
date of issuance multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration
received, determined as provided in Subsection (g) below, for the
issuance of such additional shares would purchase at the Per Share
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
(e) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock, excluding securities
issued in transactions described in Subsections (b) and (c) above,
for a consideration per share of Common Stock (the "Conversion
Price") initially deliverable upon conversion or exchange of such
securities, determined as provided in Subsection (g) below, less
than (i) the current market price per share, as defined in
Subsection (h) below, in effect immediately prior to the issuance of
such securities, or (ii) the Per Share Exercise Price, then the
Exercise Price shall be adjusted immediately thereafter so that it
shall equal the lower of (i) the price determined by multiplying the
number of shares then comprising an Option Unit by the product of
the Per Share Exercise Price in effect immediately prior thereto
multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior
to the issuance of such securities and the number of shares of
Common Stock which the aggregate consideration received, determined
as provided in Subsection (g) below, for such securities would
purchase at such current market price per share of Common Stock, and
the denominator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock of the Company deliverable
upon conversion of or in exchange for such securities at the initial
conversion or exchange price or rate, or (ii) in the event the
Conversion Price is equal to or higher than the current market price
per share but less than the Per Share Exercise Price, the price
determined by multiplying the number of shares then comprising an
Option Unit by the product of the Per Share Exercise Price in effect
immediately prior to the date of issuance multiplied by a fraction,
the numerator of which shall be the sum of the number of
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shares outstanding immediately prior to the issuance of such
securities and the number of shares of Common Stock which the
aggregate consideration received, determined as provided in
Subsection (g) below, for such securities would purchase at the Per
Share Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the maximum number of shares of
Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate. Such adjustment shall be made successively whenever
such an issuance is made.
(f) Whenever the Exercise Price payable upon exercise of each
Option is adjusted pursuant to Subsections (a), (b), (c), (d) or (e)
above, (i) the number of shares of Common Stock included in an
Option Unit shall simultaneously be adjusted by multiplying the
number of shares of Common Stock included in Option Unit immediately
prior to such adjustment by the Exercise Price in effect immediately
prior to such adjustment and dividing the product so obtained by the
Exercise Price, as adjusted and (ii) the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants
included in the Option Units and the exercise price of such Warrants
shall be adjusted in accordance with the applicable terms of the
Warrant Agreement.
(g) For purposes of any computation respecting consideration
received pursuant to Subsections (d) and (e) above, the following
shall apply:
(A) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the
Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be
conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion
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<PAGE>
or exchange thereof the consideration in each case to be
determined in the same manner as provided in clauses (A) and
(B) of this Subsection (g).
(h) For the purpose of any computation under Subsections (b),
(c), (d) and (e) above, the current market price per share of Common
Stock at any date shall be deemed to be the average of the daily
closing prices for 30 consecutive business days before such date.
The closing price for each day shall be the last sale price regular
way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange, including
the Nasdaq National Market, on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on such
exchange or market, the average of the highest reported bid and
lowest reported asked prices as reported by Nasdaq, or other similar
organization if Nasdaq is no longer reporting such information, or
if not so available, the fair market price as determined by the
Board of Directors.
(i) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Subsection (c)(i) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by this
Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of
Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any
Federal Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants
issuable upon exercise of this Option).
(j) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days after
any request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Option Units issuable upon exercise of each Option and, if
requested, information describing the transactions giving rise to
such adjustments, to be mailed to the Holders, at the address set
forth herein, and shall cause a certified copy thereof to be mailed
to its transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the
Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
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<PAGE>
(k) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder of this
Option thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Subsections (a) to (i) inclusive
above.
(l) In case any event shall occur as to which the other
provisions of this Section 8 or Section 1(a) hereof are not strictly
applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by this Option in
accordance with the essential intent and principles hereof then, in
each such case, the Holders of Options representing the right to
purchase a majority of the Option Units may appoint a firm of
independent public accountants reasonably acceptable to the Company,
which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles
established herein, necessary to preserve the purchase rights
represented by the Options. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this
Option and shall make the adjustments described therein. The fees
and expenses of such independent public accountants shall be borne
by the Company.
9. This Agreement shall be governed by and in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, Infosafe Systems, Inc. has caused this Option to
be signed by its duly authorized officers under its corporate seal, and this
Option to be dated February ___, 1997.
INFOSAFE SYSTEMS, INC.
By: ____________________________
Authorized Officer
(Corporate Seal)
Attest:
__________________________
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<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, Units of Infosafe Systems, Inc., each Unit
consisting of _______ IPO Units, each IPO Unit consisting of one (1) share of
$.01 par value Class A Common Stock, one (1) Class A Warrant to purchase one
share Series A of Common Stock and one (1) Class B Warrant, and one Class B
Warrant and herewith makes payment of $_________ thereof.
Dated:_________, ____. Instructions for Registration of Stock and Warrants
___________________________________________________
Print Name
___________________________________________________
Address
___________________________________________________
Signature
<PAGE>
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option,
hereby elects to exchange its Option for _________ Units of Infosafe Systems,
Inc., each Unit consisting of _______ IPO Units, each IPO Unit consisting of one
(1) share of $.01 par value Class A Common Stock, one (1) Class A Warrant to
purchase one (1) share of Series A Common Stock and one (1) Class B Warrant, and
one (1) Class B Warrant, pursuant to the Option Exchange provisions of the
Option.
Dated:_____________, ____.
___________________________________________________
Print Name
___________________________________________________
Address
___________________________________________________
Signature
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto the right to purchase Units represented by the foregoing Option
to the extent of _____ Units , and appoints _____________ attorney to transfer
such rights on the books of _____________, with full power of substitution in
the premises.
Dated: _______________, ______
D.H. BLAIR INVESTMENT BANKING CORP.
By: _______________________________________
____________________________________________
Address
In the presence of:
EXTENSION AGREEMENT
Agreement dated this 18th day of February, 1997 between Infosafe Systems,
Inc., a Delaware corporation (the "Company") and D. H. Blair Investment Banking
Corp. ("Blair").
WHEREAS, the Company and Blair are parties to an agreement dated January
25, 1995 regarding mergers, acquisitions and similar transactions (the "M/A
Agreement"); and
WHEREAS, on the date hereof, the Company has completed a closing of a
private placement (the "Offering") through Blair, as placement agent, pursuant
to a Confidential Term Sheet dated February 10, 1997 (the "Term Sheet"); and
WHEREAS, in connection with, and as a condition to, the Offering, the
Company has agreed to extend the M/A Agreement.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
hereby agree that the M/A Agreement shall expire on the fifth anniversary of the
Final Closing of the Offering, as defined in the Term Sheet, subject to the
provisions M/A Agreement. Except as set forth herein, the M/A Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INFOSAFE SYSTEMS, INC. D. H. BLAIR INVESTMENT
BANKING CORP.
By: /s/ Arthur R. Medici By: /s/ Martin A. Bell
--------------------------- ---------------------------------
Authorized Officer Martin A. Bell, Vice Chairman and
General Counsel
AGREEMENT CONCERNING REPORTING OF PHOTOCOPYING TO CCC
BY COPYING, BUSINESS AND INFORMATION CENTER CLIENTS
THROUGH INFOSAFE SYSTEMS, INC.
This Agreement is made as of December 12, 1996, between Infosafe Systems, Inc.
("IS"), a New York corporation with its principal place of business at 342
Madison Avenue, Suite 622, New York, NY 10173, and Copyright Clearance Center,
Inc. ("CCC"), a New York not-for-profit corporation with its principal place of
business at 222 Rosewood Drive, Danvers, Massachusetts 01923. This Agreement
concerns a strategic relationship under which IS will provide equipment to
commercial print and copy locations, business service centers and other
locations providing information/business services, which equipment will allow
customers at these locations to obtain permissions and to pay royalties to
photocopy CCC registered materials and allow IS to aggregate the reporting of
such photocopying and such royalty payments for transmission to and processing
by CCC under its Transactional Reporting Service ("TRS").
1) Term. The term of this Agreement is two years, subject to automatic
renewal for successive two year periods thereafter unless one party
notifies the other in writing of its intention to terminate at least six
months prior to the termination of the original or a renewal term, in
which case the Agreement shall terminate at the end of the original or
such renewal term.
2) Outlets. An "Outlet" is a copying, business or other information center
approved in writing for this program by IS and CCC, which center has
entered into an Outlet Agreement in the form approved by CCC and IS.
3) IS System. IS will provide at its own expense at each Outlet an IS
proprietary Mark III unit with related software and firmware (together the
"IS System'), capable of providing the services described herein.
4) The Service. The IS System will provide to requesting customers of an
"Outlet" a "Transactional Reporting Service Statement" ("Statement"), in
substantially the form attached hereto as Exhibit A, containing necessary
information as to transaction and rights costs, material to be copied,
number of copies authorized, name and address of the customer and any
necessary usage or licensing information or license limitations. The
Statement will act as evidence of a valid permission for the client to
photocopy the described material at the Outlet, subject to the limitations
contained in the Statement and payment of the royalty set out in the
Statement to the Outlet on behalf of CCC. A copy of the information
contained in the Statement will be maintained by IS in electronic form for
transmission to CCC. Periodically, as agreed between IS and CCC, IS will
submit the individual transactions in electronic form to CCC.
<PAGE>
5) Charges. The price of each transaction set out on the Statement shall be
the allocable base fee per copy and/or the per page fee reflected in the
then current CCC database, plus an administrative charge for the account
of CCC (currently anticipated to be *___* per transaction). Service
charges for the account of IS and any service charge imposed by the Outlet
may also be itemized upon the Statement. The actual cost for copying
charged by the Outlet need not appear on the Statement.
6) Collections and Payments. The Outlet will be responsible for collection of
all charges due CCC and IS and any related sales or similar taxes. IS will
maintain electronic records of each Statement and of CCC and IS charges
and royalties, and will bill the Outlet for all such charges due CCC and
IS. IS will collect from each Outlet sums for the account of CCC
(including applicable royalty and CCC administrative fees) and will pay
these sums over to CCC on a periodic basis, together with information
necessary to review and internally audit those charges and report usage
back to the CCC registered rightsholders. Such reporting and payment by IS
to CCC shall be made within 10 business days of collection by IS of a
total amount of $100,000 during any reporting period, provided that in no
event shall the reporting and payment be made later than 20 business days
from the end of the month in which any reported Statement was issued. CCC
will be solely responsible for payment of all collected and remitted
royalty charges and usage information to its registered rightsholders.
7) IS Warranty and Indemnification.
(a) IS represents and warrants that it has any and all necessary rights
to the IS System, that it has the requisite authority to enter into
this Agreement and to confer on CCC all of the rights and privileges
provided for herein without the consent of any other person, company
or agency, and that CCC, the Outlets and customers may use the IS
System without infringing on the rights of anyone else.
(b) IS agrees to defend, and hereby indemnifies and holds harmless CCC,
and any customer of CCC, against any direct or consequential loss,
injury, damages or expenses, including, without limitation,
attorney's fees and disbursements, incurred by any of em arising out
of any claim, suit, action, demand or proceeding in which any party
asserts or alleges that the manufacture, use, sale, or marketing of
the IS System or any component thereof, constitutes an infringement
or misappropriation of that party's industrial or intellectual
property rights.
(c) IS agrees to defend, and hereby indemnifies and holds harmless CCC,
and any customer of CCC, against any direct or consequential loss,
injury, damages or expenses, including, without limitation,
attorney's fees and disbursements,
-2-
<PAGE>
incurred by any of them arising out of any claim, suit, action,
demand or proceeding related to t' mishandling of Statements or
royalties by IS.
8) CCC Warranty. Each copyright rightsholder which has granted CCC the right
to grant permission under the Transactional Reporting System (TRS) which
will be used by IS and Outlet to report photocopying to CCC has warranted
that it has the rights necessary to authorize CCC to act on its behalf.
The current policies related to TRS photocopying and reporting through CCC
are set out in Exhibit B.
9) Parties not Joint Venturers. Nothing contained herein shall cause either
party to be a partner, joint venturer or agent of the other or to have any
authority to bind the other with respect to any thing or matter, except as
to those matters specifically authorized by this Agreement and in the
related agreements with Outlets.
10) Assignment. Neither party may sell, transfer, assign or subcontract any
right or obligation set forth in this Agreement, regardless of how
effected, without the prior written consent of the other party.
11) Governing Law. The validity, construction and performance of this
Agreement will be governed by the substantive law of the State of New York
applicable to agreements signed and to be wholly performed within the
State. The failure to act on any breach or default hereunder shall not be
deemed a waiver or approval thereof nor shall the taking of any remedy be
deemed a waiver of any other remedy.
12) Section Headings. The section headings contained in this document are
inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or extent of such section, or in any way
affect this Agreement.
13) Amendments in Writing. No modification or amendment of this Agreement
shall be binding on the parties unless executed in writing on behalf of
each of them by a duly authorized representative.
14) Entire Agreement. The provisions of this Agreement constitute the entire
agreement between the parties and supersede all prior agreements, oral or
written, relating to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective authorized representatives.
COPYRIGHT CLEARANCE CENTER, INC. INFOSAFE SYSTEMS, INC.
By: Joseph S. Alen By: /s/ Arthur R. Medici
--------------------------- --------------------------------
-3-
<PAGE>
EXHIBIT A
Copyright Clearance Center, Inc.
Transactional Reporting Service Statement
Store #11
New York, NY
Customer: John Q. Public Order# 901873
17 Broad St. 45th Fl; Order Date: Sept. 23, 1996
New York, NY 10006 Reference: NewsAlert
ISSN Title / Details Year Fee
- --------------------------------------------------------------------------------
0-11-10253 Wall Street Journal 1995 40.00
2 Copies of 10 page article
1-22-12121 Business Week 1996 9.00
"Internet Commerce Today"
5 Copies of 2 page article
- --------------------------------------------------------------------------------
Rights Sub Total 49.00
CCC Service Charge 6.00
Rights Total $55.00
Copying costs and sales tax are not included.
Please retain this proof of authorization to photocopy.
This authorization to photocopy is limited to personal or internal
use or, unless otherwise indicated in the permissions policy statement printed
in the publication, to the personal or internal use of specific clients.
Permission policy statements may incorporate title-specific conditions
established by the publishers and/or their authors under which photocopying is
authorized. The TRS system of authorizations does not include reproduction for
public distribution (such as advertising or promotion), reproduction of the
entire publication (cover-to-cover) or reproduction for resale to the general
public.
If you have questions regarding this TRS statement, please contact:
Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA, 01923, USA /
Tel: 508-750-8400 / Fax: 508-750-4470, URL: http://www.copyright.com/
This TRS reporting location provided by: INFOSAFE SYSTEMS, INC.
<PAGE>
EXHIBIT B
Rights to Photocopy: Transactional Reporting Service
================================================================================
Individuals and organizations may reproduce articles* from the publications
included in the TRS by reporting those copies and paying the publishers' fees
through CCC. Authorizations are limited to personal or internal use or, unless
otherwise indicated in the permissions policy statement printed in the
publication, to the personal or internal use of specific clients. Reproduction
by photocopy and microform machine, as well as the facsimile transmission of
copies ("faxing" or "telecopying"), is included in the system of authorizations.
The TRS system of authorizations expressly does not include:
o input of works into computerized databases (or any other
electronic/digital form)
o reproduction for public distribution, such as for advertising or
promotion
o reproduction of an entire publication (cover-to-cover)
o reproduction for resale to the general public
Please obtain authorizations for the above uses directly from CCC or the
publisher.
CCC operates a separate Academic Permissions Service (APS) for collections of
photocopies of copyrighted material for the academic community, often called
"coursepacks." For information on titles and fees for this service, please
contact CCC.
Many publications carry a permissions policy statement. The statement usually
notifies readers that the publication is registered with CCC. These statements
may incorporate title-specific conditions established by publishers, and I their
authors, under which photocopying may be authorized.
Following is a sample statement which illustrates the scope of
authorization for a specific title:
from FORBES, published by Forbes, Inc.
Where necessary, permission is granted by the copyright owner for those
registered with the Copyright Clearance Center (CCC), 222 Rosewood Drive,
Danvers, Mass. 01923 to photocopy articles owned by Forbes for a net fee
of $1.50 per copy per article. Send payment to the CCC stating the ISSN
(0015- 6914), volume, and first and last page number of each article
copied. Copying for other than personal use or internal reference or of
articles or columns not owned by Forbes without express permission of
Forbes or the copyright owner is expressly prohibited.
The responsibility rests with those making photocopies to determine the scope
and limitations of each permissions policy statement. In those cases where a
publication has no statement, readers can rely on the procedures in this
catalog.
USERS OUTSIDE THE USA
CCC is one of twenty-five national Reproduction Rights Organizations (RROs)
throughout the world. Each RRO provides a variety of photocopy authorization
services. If there is no RRO in the country in which copying is being done, or
if the existing RRO does not provide a service for the type of authorization
required and CCC does, copying from titles in the TRS can be reported to CCC.
* The word "article" refers to any portion of a publication that is being copied
(such as column, page, chapter, or any series of consecutive pages).
Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923
Ph: (508)750-8400 Fax: (508)750-4470
URL: http://www.copyright.com
E:mail. [email protected]
EXHIBIT 11.1
COMPUTATION OF NET (LOSS) PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31 January 31
--------------------------- ---------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET (LOSS) ATTRIBUTABLE TO COMMON
SHAREHOLDERS ......................... $(771,019,) $ (557,379) $(1,435,566) $(1,101,579)
=========== =========== =========== ===========
Weighted average number of Class A common
share outstanding .................... 2,721,850 2,954,260 2,721,850 2,954,260
Weighted average number of Class B common
share outstanding .................... 1,469,050 1,372,566 1,469,050 1,372,566
Less escrow shares ...................... (781,244) (781,244) (781,244) (781,244)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARE
AND COMMON SHARE EQUIVALENTS
OUTSTANDING .......................... 3,409,656 3,545,582 3,409,656 3,545,582
=========== =========== =========== ===========
NET (LOSS) PER SHARE OF COMMON SHARE AND
COMMON SHARE EQUIVALENTS ............. $ (.23) $ (.16) $ (.42) $ (.31)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET (UNAUDITED) AND THE OPERATIONS FOR THE THREE MONTHS ENDED JANUARY
31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 101,930
<SECURITIES> 0
<RECEIVABLES> 16,811
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 269,965
<PP&E> 501,005
<DEPRECIATION> 245,557
<TOTAL-ASSETS> 1,094,500
<CURRENT-LIABILITIES> 428,542
<BONDS> 0
0
0
<COMMON> 60,549
<OTHER-SE> 600,090
<TOTAL-LIABILITY-AND-EQUITY> 1,094,500
<SALES> 16,723
<TOTAL-REVENUES> 16,723
<CGS> 26,172
<TOTAL-COSTS> 26,172
<OTHER-EXPENSES> 1,112,730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 946
<INCOME-PRETAX> (1,101,579)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,101,579)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,101,579)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
