As filed with the Securities and Exchange Commission on May 22, 1997.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
INFOSAFE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 5045 13-3645702
___________________________ ____________________________ __________________
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
342 Madison Avenue
New York, New York 10173
(212) 867-7200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_______________________________
Arthur R. Medici
President and Chief Executive Officer
Infosafe Systems, Inc.
342 Madison Avenue
New York, New York 10173
(212) 867-7200
(Name, address including zip code, and telephone number, including
area code, of agent for service)
________________________________
with copies to:
Sheldon E. Misher, Esq.
Steven A. Fishman, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue, 18th Floor
New York, New York 10017
Telephone: (212) 687-7000
Fax: (212) 682-5729
_________________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable from time to time after the date of this Registration
Statement.
_________________________________
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended, check the following box. __X__
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. _____
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. _____
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. _____
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Maximum
Amount Aggregate Amount of
Title of Each to be Offering Registration
Class of Securities to be Registered Registered Price Fee(7)
<S> <C> <C> <C>
Units, each consisting of one share of Class A 1,603,274 $11,523,531.87 $ 3,491.98
Common Stock, $.01 value (the "Class A
Common Stock"), 1.11721 Class A Warrants and
1.11721 Class B Warrants (1)
Units, each consisting of one share of 1,791,193 $10,424,743.26 $ 3,159.01
Class A Common Stock and one Class B
Warrant (2)
Class A Common Stock (3) 3,582,386 $28,050,082.38 $ 8,500.02
Units, each consisting of one share of Class A 561,146 $ 1,767,500.00 $ 535.61
Common Stock, 1.11721 Class A Warrants and
1.11721 Class B Warrants (4)
Units, each consisting of one share of 626,917 $ 3,648,658.94 $ 1,105.65
Class A Common Stock, and one Class B
Warrant (5)
Class A Common Stock (6) 1,253,834 $ 9,817,520.22 $ 2,975.01
__________________________________________________
TOTAL: $65,232,036.67 $19,767.28
<FN>
<F1>
(1) Registered for resale by the Selling Securityholders. The
Registration fee was calculated pursuant to the terms of Rule
457(c) and was based on a Unit price of $7 3/16 which was the
average of the high ask and the low bid prices of the Units as
traded on the Nasdaq SmallCap Market on May 19, 1997.
<F2>
(2) Issuable on exercise of the Class A Warrants at an exercise
price of $5.82 per Class A Warrant. Registered for resale by
the Selling Securityholders.
<F3>
(3) Issuable on exercise of the Class B Warrants at an exercise
price of $7.83 per Class B Warrant. Registered for resale by
the Selling Securityholders.
<F4>
(4) Issuable on exercise of the Private Placement Unit Purchase
Option issued to D.H. Blair Investment Banking Corp. or its
designees in connection with the 1997 Private Placement and/or
the Warrants issuable thereunder.
<F5>
(5) Issuable on exercise of the Class A Warrants issuable on
exercise of the Private Placement Unit Purchase Option, which
Class A Warrants are exercisable at a price of $5.82 per Class A
Warrant.
<F6>
(6) Issuable on exercise of the Class B Warrants issuable on
exercise of the Private Placement Unit Purchase Option, which
Class B Warrants are exercisable at a price of $7.83 per Class B
Warrant.
<F7>
(7) Pursuant to Rule 429, the following securities are being carried
over from the Company's registration statement on Form SB-2,
Registration No. 33-83940, (i) 208,918 Class A Warrants issuable pursuant
to anti-dilution provisions contained in 1,782,500 Class A Warrants
issued in connection with the Company's initial public offering
(the "IPO") which provide for the issuance of approximately 1.11721
Class A Warrants for every outstanding Class A Warrant, as a result
of the issuance of Class A Common Stock in a private placement of the
Company's securities in March 1997 (the "1997 Private Placement");
(ii) 1,991,418 shares of Class A Common Stock and 1,991,418 Class B
Warrants issuable on exercise of 1,991,418 Class A Warrants issued in
connection with the IPO (includes 208,918 shares of Class A Common Stock
and 208,918 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 208,918 Class B Warrants
issuable pursuant to anti-dilution provisions contained in 1,782,500
Class B Warrants issued in connection with the IPO, which provide for
the issuance of approximately 1.11721 Class B Warrants for every outstanding
Class B Warrant; (iv) an aggregate of 3,982,836 shares of Class A Common
Stock issuable on exercise of the 1,991,418 Class B Warrants issued in
connection with the IPO and the 1,991,418 Class B Warrants issuable on
exercise of 1,991,418 Class A Warrants, above (includes 417,836 shares
of Class A Common Stock issuable pursuant to anti-dilution provisions
contained in such Class B Warrants); (v) 155,000 Units issuable to
D.H. Blair Investment Banking Corp. ("Blair"), the Company's underwriter
in its IPO, pursuant to a unit purchase option issued in connection with
the IPO (the "IPO Unit Purchase Option"); (vi) 155,000 shares of Class A
Common Stock, 173,167 Class A Warrants and 173,167 Class B Warrants issuable
on exercise of the IPO Unit Purchase Option and an aggregate of
519,501 shares of Class A Common Stock issuable on exercise of
such Warrants (includes 18,167 Class A Warrants and 18,167 Class B
Warrants and an aggregate of 54,501 shares of Class A Common
Stock issuable pursuant to anti-dilution provisions contained in such
Warrants); (vii) 87,904 Class A Warrants issuable pursuant to anti-dilution
provisions contained in the 750,000 Class A Warrants issued to Selling
Securityholders in the IPO (the "IPO Selling Securityholders");
(viii) 837,904 shares of Class A Common Stock and 837,904 Class B
Warrants issuable on exercise of the 837,904 Class A Warrants issued
to the IPO Selling Securityholders (includes 87,904 shares of
Class A Common Stock and 87,904 Class B Warrants issuable pursuant
to anti-dilution provisions contained such Class A Warrants) and;
(ix) 837,904 shares of Class A Common Stock issuable on exercise of the
837,904 Class B Warrants underlying the 837,904 Class A Warrants (includes
87,904 shares of Class A Common Stock issuable pursuant to anti-dilution
provisions contained in such Class B Warrants). Pursuant to Rule 429, the
following securities are being carried over from the Company's
registration statement on Form S-3, Registration No. 333-04361:
(i) 9,889 Class A Warrants issuable pursuant to anti-dilution
provisions contained in 84,375 Class A Warrants issued as a
settlement in an arbitration; (ii) 94,264 shares of Class A Common
Stock and 94,264 Class B Warrants issuable on exercise of the 94,264
Class A Warrants (includes 9,889 shares of Class A Common Stock and
9,889 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 94,264 shares of Class A
Common Stock issuable on exercise of the 94,264 Class B Warrants
(including 9,889 shares of Class A Common Stock issuable pursuant to
anti-dilution provisions contained in such Class B Warrants) and;
(iv) 540,814 shares of Class A Common Stock issued or issuable on
exercise of certain warrants to purchase Class A Common Stock received
in connection with certain private placements in 1992 (including
22,064 shares of Class A Common Stock issuable pursuant to anti-dilution
provisions contained in such warrants). The carried over filing
fees for the foregoing securities are $3,093, $8,328, $248, $993,
$3,944, $553 and $1,125, respectively except that there are no filing fees
required or carried over with respect to the shares of Class A Common Stock,
the Class A Warrants and the Class B Warrants issuable pursuant to
anti-dilution provisions contained in the outstanding Class A Warrants and
Class B Warrants which have previously been registered by the
Company pursuant to Rule 416.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
Pursuant to Rule 416 under the Securities Act of 1933, as
amended, there are also being registered such additional shares of
Class A Common Stock as may become issuable pursuant to anti-
dilution provisions on exercise of the Class A and Class B Warrants
and the Private Placement Unit Purchase Option and the IPO Unit
Purchase Option.
Pursuant to Rule 429(a) under the Securities Act of 1933, this
Registration Statement also relates to the Company's prior
Registration Statement on Form SB-2, Registration No. 33-83940 and
on Form S-3, Registration No. 333-04361.
EXPLANATORY NOTE
This Registration Statement relates to four different offerings, as follows:
Offering #1: This Registration Statement relates to the resale,
from time to time, by certain securityholders of the following
securities of Infosafe Systems, Inc. (the "Company") which the Company
issued in a private placement (the "1997 Private Placement") on
March 31, 1997: (i) 1,603,274 Units, each Unit consisting of one share
of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), approximately 1.11721 Redeemable Class A Warrants and
approximately 1.11721 Redeemable Class B Warrants, issued in connection
with the 1997 Private Placement; (ii) up to 1,603,274 shares of Class A
Common Stock contained in such Units; (iii) up to 1,791,186 redeemable
Class A Warrants (the "Class A Warrants") contained in such Units
(including 187,912 Class A Warrants issuable pursuant to anti-dilution
provisions contained in the Class A Warrants contained in the Units) such
Class A Warrants exercisable to purchase up to 1,791,186 shares of Class A
Common Stock and 1,791,186 Class B Warrants; (iv) up to 1,791,186
redeemable Class B Warrants (the "Class B Warrants," and together
with the Class A Warrants the "Warrants") contained in such Units
(including 187,912 Class B Warrants issuable pursuant to anti-dilution
provisions contained in the Class A Warrants contained in the Units)
such Class B Warrants exercisable to purchase up to 1,791,186 shares
of Class A Common Stock; (v) up to 1,791,186 Class B Warrants underlying
the 1,791,186 Class A Warrants (such Class B Warrants exercisable
to purchase up to 1,791,186 shares of Class A Common Stock including up to
187,912 shares of Class A Common Stock issuable as a result of anti-dilution
provisions contained in such Class A Warrants); (vi) an aggregate of
5,373,558 shares of Class A Common Stock issuable on exercise of such
Class A Warrants and Class B Warrants; (vii) 561,146 Units issuable on
exercise of a Unit Purchase Option issued to D.H. Blair Investment
Banking Corp. (the placement agent in the 1997 Private Placement) or its
designees ("Blair"); (viii) 561,146 shares of Class A Common Stock,
626,915 Class A Warrants and 626,915 Class B Warrants underlying such
Unit Purchase Option (including 65,769 Class A Warrants and 65,769
Class B Warrants issuable pursuant to anti-dilution provisions contained
in such Warrants); (ix) 626,915 Class B Warrants underlying the
626,915 Class A Warrants and (x) an aggregate of 1,880,745 shares of
Class A Common Stock issuable on exercise of such Class A Warrants and
Class B Warrants.
Each Class A Warrant entitles the holder to purchase one share of Class A
Common Stock and one Class B Warrant at an exercise price of $5.82, subject
to adjustment, at any time until February 18, 2002. Each Class B Warrant
entitles the holder to purchase one share of Class A Common Stock at an
exercise price of $7.83, subject to adjustment, at any time until
February 18, 2002. The Class A Warrants and the Class B Warrants are
subject to redemption by the Company at a redemption price of $.05
per Warrant on 30 days' written notice, provided the closing bid
prices of the Class A Common Stock and the Class B Common Stock
average in excess of $9.10 or $12.25 per share, respectively, for any
30 consecutive trading days ending within 15 days of the date the
Warrants are called for redemption.
Offering #2: Pursuant to Rule 429, the following securities are
being carried over from the Company's registration statement on Form SB-2,
Registration No. 33-83940: (i) 208,918 Class A Warrants issuable pursuant
to anti-dilution provisions contained in 1,782,500 Class A Warrants
issued in connection with the IPO which provide for the issuance of
1.11721 Class A Warrants for every outstanding Class A Warrant,
(ii) 1,991,418 shares of Class A Common Stock and 1,991,418 Class B
Warrants issuable on exercise of 1,991,418 Class A Warrants issued in
connection with the IPO (includes 208,918 shares of Class A Common Stock
and 208,918 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 208,918 Class B Warrants
issuable pursuant to anti-dilution provisions contained in 1,782,500
Class B Warrants issued in connection with the IPO, which provide for
the issuance of 1.11721 Class B Warrants for every outstanding Class B
Warrant; (iv) an aggregate of 3,982,836 shares of Class A Common Stock
issuable on exercise of the 1,991,418 Class B Warrants issued in
connection with the IPO and the 1,991,418 Class B Warrants issuable on
exercise of 1,991,418 Class A Warrants, above (includes 417,836 shares
of Class A Common Stock issuable pursuant to anti-dilution provisions
contained in such Class B Warrants); (v) 155,000 Units issuable to
D.H. Blair Investment Banking Corp. ("Blair"), the Company's underwriter
in its IPO, pursuant to a unit purchase option issued in connection with
the IPO (the "IPO Unit Purchase Option"); (vi) 155,000 shares of Class A
Common Stock, 173,167 Class A Warrants and 173,167 Class B Warrants issuable
on exercise of the IPO Unit Purchase Option and an aggregate of
519,501 shares of Class A Common Stock issuable on exercise of
such Warrants (includes 18,167 Class A Warrants and 18,167 Class B
Warrants and an aggregate of 54,501 shares of Class A Common
Stock issuable pursuant to anti-dilution provisions contained in such
Warrants); (vii) 87,904 Class A Warrants issuable pursuant to anti-dilution
provisions contained in the 750,000 Class A Warrants issued to Selling
Securityholders in the IPO (the "IPO Selling Securityholders");
(viii) 837,904 shares of Class A Common Stock and 837,904 Class B Warrants
issuable on exercise of the 837,904 Class A Warrants issued
to the IPO Selling Securityholders (includes 87,904 shares of
Class A Common Stock and 87,904 Class B Warrants issuable pursuant
to anti-dilution provisions contained such Class A Warrants) and;
(ix) 837,904 shares of Class A Common Stock issuable on exercise of the
837,904 Class B Warrants underlying the 837,904 Class A Warrants (includes
87,904 shares of Class A Common Stock issuable pursuant to anti-dilution
provisions contained in such Class B Warrants).
Offering #3: Pursuant to Rule 429, the following securities are
being carried over from the Company's registration statement on Form S-3,
Registration No. 333-04361: (i) 9,889 Class A Warrants issuable pursuant to
anti-dilution provisions contained in 84,375 Class A Warrants issued as a
settlement in an arbitration; (ii) 94,264 shares of Class A Common
Stock and 94,264 Class B Warrants issuable on exercise of the 94,264
Class A Warrants (including 9,889 shares of Class A Common Stock and
9,889 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 94,264 shares of Class A
Common Stock issuable on exercise of the 94,264 Class B Warrants
(including 9,889 shares of Class A Common Stock issuable pursuant to
anti-dilution provisions contained in such Class B Warrants) and;
(iv) 540,814 shares of Class A Common Stock issued or issuable on
exercise of certain warrants to purchase Class A Common Stock received
in connection with certain private placements in 1992 (including
22,064 shares of Class A Common Stock issuable pursuant to anti-dilution
provisions contained in such warrants).
SUBJECT TO COMPLETION DATED , 1997
PROSPECTUS
INFOSAFE SYSTEMS, INC.
2,319,420 Units, each consisting of one share of Class A Common Stock,
1.1172 Redeemable Class A Warrant
and 1.1172 Redeemable Class B Warrant
18,472,626 Shares of Class A Common Stock
2,897,979 Redeemable Class A Warrants
8,315,039 Redeemable Class B Warrants
This Prospectus relates to the resale, from time to time, by
certain securityholders of the following securities of Infosafe
Systems, Inc. (the "Company") which the Company issued in a private
placement (the "1997 Private Placement") on March 31, 1997:
(i) 1,603,274 Units, each Unit consisting of one share
of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), approximately 1.11721 Redeemable Class A Warrants and
approximately 1.11721 Redeemable Class B Warrants, issued in connection
with the 1997 Private Placement; (ii) up to 1,603,274 shares of Class A
Common Stock contained in such Units; (iii) up to 1,791,186 redeemable
Class A Warrants (the "Class A Warrants") contained in such Units
(including 187,912 Class A Warrants issuable pursuant to anti-dilution
provisions contained in the Class A Warrants contained in the Units) such
Class A Warrants exercisable to purchase up to 1,791,186 shares of Class A
Common Stock and 1,791,186 Class B Warrants; (iv) up to 1,791,186
redeemable Class B Warrants (the "Class B Warrants," and together
with the Class A Warrants the "Warrants") contained in such Units
(including 187,912 Class B Warrants issuable pursuant to anti-dilution
provisions contained in the Class A Warrants contained in the Units)
such Class B Warrants exercisable to purchase up to 1,791,186 shares
of Class A Common Stock; (v) up to 1,791,186 Class B Warrants underlying
the 1,791,186 Class A Warrants (such Class B Warrants exercisable
to purchase up to 1,791,186 shares of Class A Common Stock including up to
187,912 shares of Class A Common Stock issuable as a result of anti-dilution
provisions contained in such Class A Warrants); (vi) an aggregate of
5,373,558 shares of Class A Common Stock issuable on exercise of such
Class A Warrants and Class B Warrants; (vii) 561,146 Units issuable on
exercise of a Unit Purchase Option issued to D.H. Blair Investment
Banking Corp. (the placement agent in the 1997 Private Placement) or its
designees ("Blair"); (viii) 561,146 shares of Class A Common Stock,
626,915 Class A Warrants and 626,915 Class B Warrants underlying such
Unit Purchase Option (including 65,769 Class A Warrants and 65,769
Class B Warrants issuable pursuant to anti-dilution provisions contained
in such Warrants); (ix) 626,915 Class B Warrants underlying the
626,915 Class A Warrants and; (x) an aggregate of 1,880,745 shares of
Class A Common Stock issuable on exercise of such Class A Warrants and
Class B Warrants. The shares of Class A Common Stock, the Class A
Warrants and the Class B Warrants issued in the 1997 Private Placement
are sometimes hereinafter referred to as the "Private Placement Class A
Common Stock," the "1997 Private Placement Class A Warrants," and the
"Private Placement Class B Warrants," respectively, and collectively
as the "Private Placement Securities." The Selling Securityholders
have agreed not to sell certain percentages of the 1997 Private
Placement Securities for periods ranging from June 18, 1997 to
October 18, 1997.
This Prospectus also relates to: (i) 208,918 Class A Warrants issuable
pursuant to anti-dilution provisions contained in 1,782,500 Class A Warrants
issued in connection with the IPO which provide for the issuance of
approximately 1.11721 Class A Warrants for every outstanding Class A Warrant,
(ii) 1,991,418 shares of Class A Common Stock and 1,991,418 Class B
Warrants issuable on exercise of 1,991,418 Class A Warrants issued in
connection with the IPO (includes 208,918 shares of Class A Common Stock
and 208,918 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 208,918 Class B Warrants
issuable pursuant to anti-dilution provisions contained in 1,782,500
Class B Warrants issued in connection with the IPO, which provide for
the issuance of approximately 1.11721 Class B Warrants for every outstanding
Class B Warrant; (iv) an aggregate of 3,982,836 shares of Class A Common
Stock issuable on exercise of the 1,991,418 Class B Warrants issued in
connection with the IPO and the 1,991,418 Class B Warrants issuable on
exercise of 1,991,418 Class A Warrants, above (includes 417,836 shares
of Class A Common Stock issuable pursuant to anti-dilution provisions
contained in such Class B Warrants); (v) 155,000 Units issuable to
D.H. Blair Investment Banking Corp. ("Blair"), the Company's underwriter
in its IPO, pursuant to a unit purchase option issued in connection with
the IPO (the "IPO Unit Purchase Option"); (vi) 155,000 shares of Class A
Common Stock, 173,167 Class A Warrants and 173,167 Class B Warrants issuable
on exercise of the IPO Unit Purchase Option and an aggregate of
519,501 shares of Class A Common Stock issuable on exercise of
such Warrants (includes 18,167 Class A Warrants and 18,167 Class B
Warrants and an aggregate of 54,501 shares of Class A Common
Stock issuable pursuant to anti-dilution provisions contained in such
Warrants); (vii) 87,904 Class A Warrants issuable pursuant to anti-dilution
provisions contained in the 750,000 Class A Warrants issued to Selling
Securityholders in the IPO (the "IPO Selling Securityholders");
(viii) 837,904 shares of Class A Common Stock and 837,904 Class B Warrants
issuable on exercise of the 837,904 Class A Warrants issued
to the IPO Selling Securityholders (includes 87,904 shares of
Class A Common Stock and 87,904 Class B Warrants issuable pursuant
to anti-dilution provisions contained such Class A Warrants) and;
(ix) 837,904 shares of Class A Common Stock issuable on exercise of the
837,904 Class B Warrants underlying the 837,904 Class A Warrants (includes
87,904 shares of Class A Common Stock issuable pursuant to anti-dilution
provisions contained in such Class B Warrants).
This Prospectus also relates to: (i) 9,889 Class A Warrants issuable
pursuant to anti-dilution provisions contained in 84,375 Class A Warrants
issued as a settlement in an arbitration; (ii) 94,264 shares of Class A
Common Stock and 94,264 Class B Warrants issuable on exercise of the 94,264
Class A Warrants (including 9,889 shares of Class A Common Stock and
9,889 Class B Warrants issuable pursuant to anti-dilution provisions
contained in such Class A Warrants); (iii) 94,264 shares of Class A
Common Stock issuable on exercise of the 94,264 Class B Warrants
(including 9,889 shares of Class A Common Stock issuable pursuant to
anti-dilution provisions contained in such Class B Warrants) and;
(iv) 540,814 shares of Class A Common Stock issued or issuable
on exercise of certain warrants to purchase Class A Common Stock
received in connection with certain private placements in 1992
(including 22,064 shares of Class A Common Stock issuable pursuant to
anti-dilution provisions contained in such warrants).
Each Class A Warrant entitles the holder to purchase, at an
exercise price of $5.82, subject to adjustment, one share of Class A
Common Stock and one Class B Warrant. Each Class B Warrant entitles
the holder to purchase, at an exercise price of $7.83, subject to
adjustment, one share of Class A Common Stock. The Class A Warrants
and the Class B Warrants are exercisable at any time after issuance
until February 18, 2002. The Class A Warrants, and the Class B
Warrants are subject to redemption by the Company at $.05 per Class A
Warrant or $.05 per Class B Warrant, on 30 days' written notice, if
the average closing bid price of the Company's Class A Common Stock
has equalled or exceeded $9.10 per share with respect to the Class A
Warrants or $12.25 per share with respect to the Class B Warrants
(subject to adjustment in each case) for 30 consecutive trading days
ending within 15 days of the date the Warrants are called for
redemption. See "Description of Securities."
______________________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________
Certain securityholders offering securities under this
Prospectus and the securities offered by such securityholders are
sometimes hereinafter referred to as the "Selling Securityholders"
and the "Selling Securityholder Securities," respectively. The
Selling Securityholder Securities offered by this Prospectus may be
sold from time to time by the Selling Securityholder or by their
transferees. The distribution of the Selling Securityholder
Securities offered hereby by the Selling Securityholders may be
effected in one or more transactions that may take place on the
Nasdaq Stock Market or other exchanges or markets on which the
Company's securities may be traded, in the over-the-counter market,
including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of
such securities as principals at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling
Securityholders. Certain Selling Securityholders have agreed not to
exercise the Private Placement Class A Warrants and the Private
Placement Class B Warrants for certain periods relating to each
Selling Securityholder ending from February 18, 1998 to March 31, 1998,
provided, however, that purchasers of such Warrants from Selling
Securityholders are not subject to such restrictions on
exercisability. The Company has agreed to pay a solicitation fee
(the "Solicitation Fee") equal to 5% of the exercise price in
connection with the exercise of Warrants under certain conditions.
See "Plan of Distribution."
The Selling Securityholders, and intermediaries through whom
such securities are sold, may be deemed underwriters within the
meaning of the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered, and any profits
realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities
under the Securities Act.
The Company will not receive any of the proceeds from the sale
of securities offered herein. In the event all the outstanding Class
A Warrants, Class B Warrants and other warrants are exercised, the
Company will receive gross proceeds of approximately $94 million.
The Company's Units, Class A Common Stock, Class A Warrants and
Class B Warrants are traded on the Nasdaq SmallCap Market under the
symbols "ISFEU," "ISFEA," "ISFEW," and "ISFEZ," respectively, and the
closing bid prices of these securities on _____ __, 1997 as reported
by Nasdaq were $ , $ , $ and $ , respectively. The
exercise prices and other terms of the Class A Warrants and Class B
Warrants were determined by negotiation between the Company and Blair
at the time of the IPO and were adjusted pursuant to anti-dilution
provisions contained in the Warrant Agreements covering the Warrants,
and do not necessarily bear any relationship to the Company's assets,
book value, results of operations, net worth or any other recognized
criteria of value. Blair is subject to an investigation by the
Securities and Exchange Commission (the "Commission"). See "Risk
Factors."
INFOSAFE, PROTECTED BY INFOSAFE, and DESIGN PALETTE are trademarks
of the Company. All other brand names or trademarks appearing in this
Prospectus are the property of the respective holders.
The Company is currently a reporting company under the Exchange
Act, and as such, furnishes its securityholders with annual reports
containing audited financial statements and such interim unaudited
reports as it deems appropriate.
The date of this Prospectus is ________, 1997.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-3 under the Securities Act with respect to the
Securities offered hereby. This Prospectus constitutes a part of the
Registration Statement and does not contain all of the information
set forth therein and in the exhibits thereto, certain portions of
which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company
and the Common Stock offered hereby, reference is hereby make to such
Registration Statement and exhibits. Statements contained in this
Prospectus as to the contents of any document are not necessarily
complete and in each instance are qualified in their entirety by
reference to the copy of the appropriate documents filed with the
Commission.
The Registration Statement and the reports and other information
to be filed by the Company following the offering in accordance with
the Exchange Act can be inspected and copied at the principal office
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices
of the Commission: 7 World Trade Center, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60601. Copies of such materials may be obtained from the Public
Reference Section of the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the Commission. In addition, the Commission maintains
a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by
the Company are incorporated in this Prospectus by reference and made
a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the year
ended July 31, 1996.
(2) The Company's Quarterly Reports on Form 10-QSB for the
quarters ended October 31, 1996 and January 31, 1997.
(3) The Company's Current Reports on Form 8-K dated November 26, 1996,
February 26, 1997 and March 5, 1997.
Each document or report subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and prior to the termination of
the offering of the securities under this Prospectus shall be deemed
to be incorporated by reference into this Prospectus from the date of
filing of such document. Any statement contained herein, or in the
document all or a portion of which is incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
the Registration Statement or this Prospectus.
The Corporation will provide, without charge, to any person to
whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the foregoing documents
incorporated by reference, other than certain exhibits to such
documents. Written requests should be directed to Infosafe Systems,
Inc., 342 Madison Avenue, Suite 622, New York, New York 10173.
Attention: Investor Relations (telephone: (212) 867-7200).
THE COMPANY
The following summary is qualified in its entirety by the more
detailed information and financial statements (including the notes
thereto) incorporated herein by reference. Unless otherwise
indicated, the information in this Prospectus does not give effect to
the exercise of: (i) the Warrants; (ii) Blair's Private Placement
Unit Purchase Option; (iii) Blair's IPO Unit Purchase Option; or (iv)
options granted or available for grant under the Company's 1992 Stock
Option Plan (the "1992 Plan") or the Company's 1994 Stock Option
Plan, as amended (the "1994 Plan") or other outstanding options or
warrants. This Prospectus contains certain forward-looking
statements within the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 including statements
concerning applications of the Company's technologies, the Company's
proposed products and future prospects, the Company's strategy and
the Company's future cash flow requirements that involve risks and
uncertainties, including the possibility that the Company: (i) will
not be successful in commercializing the Infosafe copyright metering
system; (ii) will be unable to identify other suitable product
opportunities based on its technology or successfully commercialize
other technology and (iii) that it will never achieve profitable
operations, as detailed in "Risk Factors." 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.
Infosafe Systems, Inc. (the "Company") is a development stage
company engaged in the design, development and marketing of systems
for securing, controlling, delivering, metering and auditing
electronic products, documents and programs, for use in stand-alone
applications, corporate networks and open networks such as the
Internet. The Company believes its technology (the "Infosafe
System"), as well as the technology recently licensed from Visus
Technologies, Inc. (VTI), and technology and methods being developed
by a new subsidiary of the Company, Internet Commerce Corporation
(ICC), address critical areas of electronic commerce such as
security, delivery, verification and metering of information. The
Infosafe System meters the usage of information and can release
information on a "pay per use" basis. The Company initially
developed a hardware-based distribution system and is currently
developing software-based distribution systems utilizing this
technology. The Company is seeking, inter alia, to position itself
as an independent third party to authenticate, certify, validate,
authorize and facilitate secure transactions for electronic
information. The Company believes that its technology is flexible
and suitable for a wide range of electronic commerce and information
security applications.
The Company recently commenced marketing the Infosafe copyright
metering system, a software based electronic copyright permission
vending system to be made available through photocopy shops (quick
printers) which allows customers to immediately obtain copyright
licenses necessary to legally reproduce copyrighted materials. In
December 1996, the Company entered into a two-year agreement with the
Copyright Clearance Center ("CCC"), the largest licensor of
photocopy reproduction rights in the United States which is currently
responsible for licensing 1.75 million titles of books and
periodicals from 9,200 publishers and which regularly acquires
additional titles. Under the agreement, the Company has agreed to
operate at commercial printers the first electronic copyright
permission vending system for CCC-licensed material. Quick printers
can then access the CCC copyright authorization database for
customers who wish to reproduce copyrighted materials. All
transactions are tabulated and recorded by Company. The Company is
currently in the process of marketing this system to quick print
chains and other venues. CCC is expected to participate in marketing
the Infosafe copyright metering system jointly with the Company. The
Company is currently in the process of developing a "software only"
version of this system. Because it is expected that most users will
prefer a software only solution, the Company is writing off
substantially all of its equipment held for lease and the related
software, which the Company had anticipated using in connection with
its copyright metering system. In order to provide Infosafe
copyright metering services until such development is complete, the
Company expects to launch an interim system which will allow quick
printers and their customers to call an "800" number, request
permission to reproduce material from a publication and rapidly
receive a faxed authorization.
The Company's first commercial product, the Design Palette, was
introduced in July 1995. The Design Palette is a point-of-sales
hardware/software device incorporating the Company's patented
technology which provides "pay-per-use" access to an encrypted CD-ROM
library of graphic design products. To date, the Company's revenues
from marketing the Design Palette have been minimal and the system
has not achieved the sales results anticipated by the Company.
Additionally, PhotoDisc, the largest supplier of images sold through
the Design Palette, terminated its participation in the Design
Palette program effective November 30, 1996. The Company is
currently evaluating the extent, if any, to which it will continue to
support and market the Design Palette system.
The Company had recently been involved in creating a product,
AudiNet, to monitor "hits" on a user's Internet or "Web" site which
would make use of the Company's existing technology. Management has
terminated development and marketing activities related to the
AudiNet product due to a proliferation of competitive products that
would preclude the Company from gaining a significant market presence
and acceptance in this arena and from achieving satisfactory profit
margins.
Due to the development of sophisticated new mass delivery media
such as closed corporate intranets and open networks such as the
Internet, the Company believes that there may be other new, broad-
based opportunities for securing and metering digital content for
large-scale information providers to offer to their existing and
prospective customer base. The Company has targeted several of such
opportunities for commercialization.
First, the Company believes that there is a potential market for
a software-only digital image and information sale and distribution
system which will allow for the sale of information and images
through catalogues on the Internet or on CD-ROM. The Company is
currently developing such a system and believes that its expertise in
connection with its hardware and proprietary search-engine software
technology will enable it to develop a software only distribution
system using catalogues on the Internet, CD-ROM or other media. The
system being developed by the Company would permit an individual user
to select information or an image through the Company's catalogue and
payment system and the information or image would be delivered either
on-line, including the Internet, or on disc through the mail. The
Company is considering initially targeting this potential application
of its technology to two sectors of the imaging industry: the Royalty
Free ("RF") market, where images can be purchased, for unlimited use,
and the high-quality stock photo market where the terms, use,
exclusivity and price of a photograph are negotiated. The Company
believes that these are markets where the Company's technology could
provide better search tools and timely, cost-effective delivery of
the image.
Second, the Company believes that there are opportunities to
acquire technology complementary to the Company's technology and the
Company intends to pursue, under appropriate circumstances, license
agreements or strategic acquisitions to acquire rights to technology.
The Company is currently pursing opportunities for: (i) development
of an Internet software application for on-line delivery of original
documents pursuant to an exclusive license which was recently entered
into; and (ii) has agreed in principle to acquire a majority interest
in a company which intends to develop a system which, the Company
believes, will provide a competitively priced system for validating
purchase orders and other business documents transmitted via
electronic media, such as the Internet. See "Recent Developments"
below.
In March 1997, the Company completed a private placement of an
aggregate of 1,603,274 units, each unit consisting of one share of
Class A Common Stock, 1.1172 Class A Warrant and 1.1172 Class B Warrant,
which units are identical to the units issued in the Company's IPO,
though D.H. Blair Investment Banking Corp. and Joseph Stevens & Co.,
Inc. as placement agents. As a result of the 1997 Private Placement,
the Company received net proceeds of approximately $4.1 million
after placement agent fees and expenses and other offering expenses.
The Company commenced operations in January 1992 and is in the
development stage. The Company was incorporated under the laws of
the State of Delaware on November 18, 1991. The Company's executive
offices are located at 342 Madison Avenue, New York, New York 10173
and its telephone number is (212) 867-7200.
Recent Developments
In March, 1997, the Company entered into an exclusive licensing
agreement with Visus Technologies, Inc. (VTI) for the resale of its
Scan2Web software. Scan2Web enables users to browse an on-line
document archive and view content on a computer while preventing the
printing of a "business quality" document. To receive an original
document or a "business" quality copy, the user must pay the system
provider (i.e. the Company, or the archive manager). The Company
intends to use VTI's technology in combination with its own
proprietary metering and encryption technologies to create secure
sales delivery channels for documents and images over private and
public networks. The Company has paid an advance royalty fee
to VTI. The exclusivity of this license is terminable if
the Company fails to generate certain revenues from the sale of the
Scan2Web technology and VTI retains the exclusive right to use this
technology in certain circumstances. In addition, the Company has
an outstanding letter of intent with VTI which provides the Company
with an option to acquire 100% of VTI for Class A Common Stock of the
Company. The Company is currently conducting discussions with VTI to
change the terms of acquisition to terms more favorable to the
Company.
The Company has agreed in principal to purchase a majority
interest in Internet Commerce Corporation (ICC), a new company which
is developing Internet-based products and services for the electronic
commerce marketplace. ICC currently intends to develop a system
which, the Company believes, will provide a competitively priced
system for facilitating and validating purchase orders and other
business documents transmitted via electronic media, such as the
Internet. The co-founders of ICC have been developing a technical
and commercial plan for such a system and will contribute all their
rights pursuant thereto to ICC. The Company believes that the
synergy between the Company's proprietary security and encryption
technology and ICC's electronic commerce services may enable both
companies to broaden the appeal and usability of their products.
RISK FACTORS
The discussion in this "Risk Factors" section contains certain
forward-looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995
including statements concerning applications of the Company's
technologies, the Company's proposed products and future prospects,
the Company's strategy and the Company's future cash flow
requirements that involve risks and uncertainties, including the
possibility that the Company: (i) will not be successful in
commercializing the Infosafe copyright metering system; (ii) will be
unable to identify other suitable product opportunities based on its
technology or successfully commercialize other technology; and
(iii) that it will never achieve profitable operations, as detailed
in this "Risk Factors" section and elsewhere herein. 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.
Limited Operating History; Limited Revenues from Operations;
Independent Auditors' Report. The Company commenced operations in
January 1992, is a development stage company and has a very
limited operating history. From inception on November 18, 1991 to
January 31, 1997 (unaudited), the Company recognized revenues of
approximately $609,000 and had an accumulated deficit of
approximately $9.3 million. Approximately $455,000 of such revenues
were license fees relating to the Design Palette and revenue
recognized on the purchase in April 1995 of the interest in the
Design Palette not already owned by the Company. The Company has
continued to operate at a deficit since January 31, 1997, and it
expects to continue to operate at a deficit until such time, if ever,
as operations generate sufficient revenues to cover its costs. The
Company's ability to generate revenues and operate profitably is
dependent on its success in marketing its Infosafe copyright metering
system and in identifying other opportunities for its technology and
commercializing its technologies. In addition, to the extent that
the Company acquires companies or technologies, its ability to
operate profitably will also be dependent on the success of the
companies or technologies acquired. The likelihood of the success of
the Company must be considered in light of the difficulties and risks
inherent in a new business. There can be no assurance that revenues
will increase significantly in the future or that the Company will
ever achieve profitable operations.
The report of the Company's independent auditors on the
Company's financial statements for the fiscal year ended July 31,
1996 contains a paragraph which expresses substantial doubt about the
Company's ability to continue as a going concern. The Company has
incurred substantial losses since inception and, although shipments
of its first product commenced in late July 1995, this product has
not achieved commercial success and the Company anticipates losses to
continue at a substantial rate in the future until such time, if
ever, as there is a substantial increase in product sales as it
markets its products and develops new applications for its
technology.
Need for Additional Financing. The Company has significant cash
requirements in connection with its business, including expenditures
for research and development of new applications of its existing and
new technology, marketing, acquisitions and general corporate
purposes. The Company anticipates losses to continue through at
least the fiscal year to end July 31, 1998. The Company may be
required to seek additional financing in the event of delays, cost
overruns or unanticipated expenses, or in the event the Company is
unable to realize increases in its revenues. The Company's ability
to increase its revenues and reduce or eliminate losses will be
dependent on its success in marketing the Infosafe copyright metering
system and its ability to identify and successfully develop and
market other products utilizing its capabilities. In the event such
necessary financing is not obtained, the Company's operations will be
materially adversely affected and the Company will have to cease or
substantially reduce operations. Any additional equity financings
may be dilutive to stockholders, and debt financings, if available,
may involve restrictive covenants.
Uncertainty of Commercialization of the Infosafe System. The
Infosafe System has not yet achieved commercial acceptance and its
viability has not been determined under large scale commercial
operations. To date, the Design Palette is the only product of the
Company which has been commercialized. Although the Company has
historically devoted much of its efforts to developing and marketing
the Design Palette, this product has failed to achieve the desired
results or penetrate its intended markets. Additionally, PhotoDisc,
the largest supplier of images for the Design Palette, terminated its
participation in the Design Palette program as of November 30, 1996
and access to PhotoDisc images is no longer available through the
Design Palette. There can be no assurance that existing users will
not limit or stop using the Design Palette due to the unavailability
of PhotoDisc images or that such actions by customers would not
adversely effect future sales of the product. The Company is
currently evaluating the extent, if any, to which it will continue
developing and marketing Design Palette and it expects to focus the
majority of future development, production and commercialization
efforts on its Infosafe copyright metering system, as well as on
other Infosafe products.
Need to Successfully Commercialize the Infosafe Copyright
Metering System and Other New Infosafe Products. The Company's
principal focus in the near term will be on marketing the Infosafe
copyright metering system. In December 1996, the Company signed a
two year agreement with CCC with respect to the Company's offering of
the Infosafe copyright metering system to commercial locations which
will provide users access to CCC's licensing facilities and database.
While CCC is the largest vendor of copyright permissions in the
United States, there are a substantial number of publishers which do
not license their material through CCC. The success of the Infosafe
copyright metering system will depend in part on the ability of the
Company to successfully complete development of a software only
version to install at quick print locations as well as its ability to
effectively market this product to quick print chains and other
vendors as a profitable addition to their services. These vendors
must educate their personnel to use the system and market this
service to the public. Copyright licensing fees are paid when
reprints of published materials are purchased from the publisher.
There can be no assurances that the Company's marketing efforts will
be successful or that, the Infosafe copyright metering system will
ever become widely used or generate significant revenues for the
Company.
The CCC Agreement requires the Company to provide services to
the vendor at the Company's expense. The agreement with CCC does not
include a specific commitment that CCC will provide the Company with
full access to its database and licensing facilities during the term
of the agreement nor does it restrict CCC's right to grant such
access to other companies. Accordingly, there can be no assurance
that CCC will continue to provide access to its database and
licensing facilities to the Company or that CCC will not grant access
to its database and licensing facilities to competitors of the
Company. Furthermore, there can be no assurance that the agreement
with CCC will be renewed after the expiration of its term. The
Company does not believe that there exists a viable alternative
licensing database to CCC's.
The Company's success will be dependent on its ability to
commercialize other new products and identify new opportunities using
the Company's technology or to make licensing arrangements with or
acquire companies having technologies which create new product
opportunities. There can be no assurance that the Company will
successfully develop these products, that the Company will be
successful in completing any licensing agreements or fulfilling its
obligations under its existing license agreement with VTI or that any
products developed, licensed or acquired by the Company will attain
significant market acceptance, result in significant sales or
generate sufficient revenues.
Limited Marketing Capabilities; Inability of Design Palette to
Penetrate Target Markets. The Company's operating results will
depend to a large extent on its ability to successfully market
Infosafe products while creating market acceptance for its digital
information management and verification system. The Company
currently has limited marketing capabilities and experience and needs
to hire additional sales and marketing personnel, as well as
concentrate its limited resources and personnel on defined, active
commercial purchasers of information. The Company's Design Palette
product has not successfully penetrated its target market and there
can be no assurance that any future marketing efforts undertaken by
the Company will be successful or will result in any significant
sales of products utilizing the Infosafe System.
Possible Delisting of Securities from the Nasdaq Stock Market.
While the Company's Units, Class A Common Stock, Class A Warrants and
Class B Warrants are currently listed on the Nasdaq SmallCap market,
there can be no assurance that the Company will meet the criteria for
continued listing. Continued inclusion on Nasdaq generally requires
that: (i) the Company maintain at least $2,000,000 in total assets
and $1,000,000 in capital and surplus; (ii) the minimum bid price of
the Class A Common Stock be $1.00 per share; (iii) there be at least
100,000 shares in the public float valued at $1,000,000 or more;
(iv) the Class A Common Stock have at least two active market makers;
and (v) the Common Stock be held by at least 300 holders. Nasdaq has
proposed more stringent requirements for continued inclusion on the
Nasdaq SmallCap Market, which, if approved without modification,
would require that a company, among other things, have at least
$2,000,000 in "net tangible assets" ("net tangible assets" equals
total assets less total liabilities and goodwill) or at least
$35,000,000 in total market value or at least $500,000 in net income
in two out of its last three fiscal years, as well as at least
500,000 shares in the public float, at least $1,000,000 in market
value of the public float, and a bid price of not less than $1.00 per
share.
If the Company is unable in the future to satisfy Nasdaq's
maintenance requirements, its securities may be delisted from Nasdaq.
In such event, trading, if any, in the Units, Class A Common Stock
and Warrants would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board." Consequently, the liquidity of the Company's
securities could be severely adversely affected, not only in the
number of securities which could be bought and sold, but also through
delays in the timing of transactions, reduction in security analysts'
and media coverage of the Company and lower prices for the Company's
securities than might otherwise be attained.
Risk of Low-Priced Stock. If the Company's securities were
delisted from Nasdaq (See "- Possible Delisting of Securities from
the Nasdaq Stock Market"), they could become subject to Rule 15g-9
under the 1934 Act, which imposes additional sales practice
requirements on broker-dealers which sell such securities to persons
other than established customers and "accredited investors"
(generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their
spouses). For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and
have received the purchaser's written consent to the transaction
prior to sale. Consequently, such rule may adversely affect the
ability of broker-dealers to sell the Company's securities and may
adversely affect the ability of purchasers of the Company's
securities to sell any of the securities acquired in the secondary
market.
Securities and Exchange Commission (the "Commission")
regulations generally define a "penny stock" to be any non-Nasdaq
equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving
a penny stock, unless exempt, the rules require delivery, prior to
any transaction in a penny stock, of a disclosure schedule prepared
by the Commission relating to the penny stock market. Disclosure is
also required to be made about commissions payable to both the
broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in
penny stocks.
The foregoing required penny stock restrictions will not apply
to the Company's securities if such securities continue to be listed
on Nasdaq and have certain price and volume information provided on a
current and continuing basis or meet certain minimum net tangible
assets or average revenue criteria. There can be no assurance that
the Company's securities will continue to qualify for exemption from
these or modified restrictions. In any event, even if the Company's
securities were exempt from such restrictions, it would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the
Commission the authority to prohibit any person that is engaged in
unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a
distribution of a penny stock, if the Commission finds that such a
restriction would be in the public interest.
If the Company's securities were subject to the existing or
proposed rules on penny stocks, the market liquidity for the
Company's securities could be severely adversely affected.
Dependence on Key Personnel; Change in President and Chief
Executive Officer. The Company's success depends upon the continued
contributions of its executive officers, sales and marketing
personnel and technical personnel, particularly Arthur R. Medici, who
recently joined the Company as its President and Chief Executive
Officer. Thomas Lipscomb, who served as the Company's President and
Chief Executive Officer until recently, has resigned from these
positions, but continues to serve as the Company's non-executive
Chairman of the Board. Although the Company has entered into an
employment agreement with Mr. Medici and has obtained "key-man" life
insurance on his life, competition for qualified personnel is
intense, and the loss of services of Mr. Medici or other key
personnel could adversely affect the business of the Company. There
can be no assurance that the Company will be able to retain existing
personnel or attract additional qualified personnel.
Uncertain Patent Protection. In February 1995, the U.S.
Patent and Trademark Office granted the Company U.S. Patent No.
5,394,469 entitled "Method and Apparatus for Retrieving Secure
Information from Mass Storage Media" for its system to retrieve and
monitor the use of protected information from digital media. This
patent covers the Company's system for protecting, retrieving, and
monitoring the use of information from media, delivered via CD-ROM,
Internet or local area (intranet) networks. In December 1995, the
Company was granted a second patent, U.S. Patent No. 5,473,687,
entitled "Method for Retrieving Secure Information from a Database"
covering its technology for providing a secure method for the
commercial distribution and use of digital information on a rental
basis using a technique to discourage long term use without
endangering the computer or the operating system. In January 1997,
the Company was granted a third patent, U.S. Patent No. 5,592,549,
entitled "Method and Apparatus for Retrieving Selected Information
From a Secure Information Source" relating to a system for
integrating document "branding" with decryption so that the buyer,
time and place of sale of information are identified. The Company
has a pending U.S. patent application entitled "Apparatus and Storage
Medium for Decrypting Information," as to which it has received a
notice of allowance, relating to a secure electronic information
distribution system for information stored in an encrypted form on a
CD-ROM or other medium. This allows different decryption keys to be
used for various stored data and eliminates the need to transmit an
entire decryption code to a user. The patents and patent
applications seek to protect the basic Company technology whether it
is used for Design Palette, the Infosafe copyright metering system,
or in RF or other image product sales.
Although the Company has obtained certain patent rights, the
Company believes that the protection of its rights will depend
primarily on its proprietary algorithms and encryption techniques
which constitute "trade secrets." The Company has made no
determination as to the patentability of these trade secrets. The
Company will continue to evaluate, on a case-by-case basis, whether
applying for additional patents in the future is in the best
interests of the Company. There can be no assurance that the
Company's technology will remain a secret or that others will not
develop similar technology and use such technology to compete with
the Company.
Additionally, there can be no assurance that any issued patents
owned by the Company will afford adequate protection to the Company
or not be challenged, invalidated, infringed or circumvented, or that
patent applications relating to the Company's products or
technologies that it may license in the future or file itself,
including any patent as to which a notice of allowance has issued,
will result in patents being issued, or that any rights granted
thereunder will provide competitive advantages to the Company.
Although the Company believes that its technology does not infringe
upon the proprietary hardware or software of others, it is possible
that others may have or be granted patents claiming products or
processes that are necessary for or useful to the development of the
Infosafe System and that legal actions could be brought against the
Company claiming infringement. In the event that the Company is
unsuccessful against such a claim, it may be required to obtain
licenses to such patents or to other patents or proprietary
technology in order to develop, manufacture or market its products.
There can be no assurance that the Company will be able to obtain
such licenses on commercially reasonable terms, if at all. If the
Company is required to and does not obtain such licenses, it would
encounter delays in the development and manufacturing of its products
and technologies while it attempted to design around such patents or
other rights and there can be no assurance that such attempts would
be successful. Failure to obtain such licenses or to design around
such patents or other rights would have a material adverse effect on
the Company.
In November 1992, the Company received notice of a possible
infringement from a patent holder but believes that such claim is
without merit.
Competition. The business of distributing textual material and
other forms of digital information through CD-ROMs is intensely
competitive and fragmented and is characterized by rapidly evolving
technology. Numerous companies, substantially all of which have
greater financial and other resources than the Company, are currently
engaged in the provision of this service. Although the Company is
unaware of any company actually engaged in the commercial
implementation of a hardware-based encryption/metering system for the
distribution of digital information and software, the Company, as
well as, other companies are attempting to develop functionally
similar metering and encryption systems, on a software only basis.
The Company anticipates it will also face competition as publishers
and repackagers of information attempt to develop encrypted digital
distribution technology in-house or in conjunction with others.
Although the Company believes it will compete on the basis of the
services it offers, there can be no assurance that the Company will
be able to compete successfully.
The Company further believes that it is possible to provide some
of the benefits of Infosafe products by other means and that
competitors may provide other solutions to problems involving the
distribution of digital information in particular market segments.
In the market for business and professional information, the Company
believes that it will continue to experience competition from
paper-based systems such as loose-leaf information services,
newsletters and books, from conventional on-line services that
connect directly to PCs or through LANs. Alternative methods for the
delivery of CD-ROMs such as unlimited usage CD-ROM products and
CD-ROM products delivered in closed-end systems with usage monitoring
capability will also compete with the Infosafe System. Other methods
of protecting software, such as dongles, may be considered as
alternatives to the Infosafe digital information distribution system.
A dongle is a device that attaches to an I/O port of a computer.
Dongle designs vary, but they typically contain a number of security
locks, general purpose registers, and an access counter.
The graphic and photo image industry already offers online and
Internet-based distribution systems. Many of the large Royalty Free
("RF") image banks have created their own online search and
distribution channels, among the most prominent of which are
PhotoDisc and Publishers Depot ("PNI"), both of which sell large
image collections online which can be downloaded by the purchaser.
Other RF image vendors such as Comstock and Index Stock are engaged
in online marketing and support online distribution of low-resolution
images. While the Company believes that it has a high quality
search engine which could allow it to be competitive with these
companies and that the market for this service remains largely
undeveloped, the Company does not have any agreements with suppliers
of images to support such a product and there can be no assurance
that such image suppliers or other competitors will not provide
alternative services or systems, superior to what the Company could
provide, at a more cost-effective price.
There are other companies, including those listed in the markets
above, that have developed or are in the process of developing
technologies that are, or in the future may be, the basis for
competitive products in the field of electronic information and
software distribution or other applications the Company intends to
develop for its technology. Most of such companies have
substantially greater resources than the Company. Some of those
technologies may have an entirely different approach or means of
accomplishing the desired effects of the products being developed by
the Company. There can be no assurance that the Company's
competitors will not succeed in developing technologies and products
that are more effective or more cost-efficient than those being
developed by the Company.
Rapid Technological Change; Need for New Products; Introduction
of Competitive Products. The market for the Company's technology is
characterized by rapidly changing technology and frequent new product
introductions. Even if the Company's technology gains initial
acceptance, the Company's success will depend, among other things, on
its ability to enhance its products and to develop and introduce new
products and services that keep pace with technological developments,
respond to evolving customer requirements and achieve continued
market acceptance. There can be no assurance that the Company will be
able to identify, develop, manufacture, market, support or acquire
new products or deploy new services successfully, that such new
products or services will gain market acceptance, or that the Company
will be able to respond effectively to technological changes or
product announcements by competitors. Any failure by the Company to
anticipate or respond adequately to technological developments and
customer requirements or any significant delays in product
development or introductions could result in a loss of market share
or revenues. The Company has devoted a substantial amount of its
efforts to adapting its technology to the CD-ROM medium. There can
be no assurance that CD-ROM technology will not be replaced by other
distribution and access technologies including distribution over the
Internet or that any such replacement will not involve substantial
time and expense by the Company to adopt its technology, if at all
possible, or that the technology being developed by the Company for
application to information and images being delivered over the
Internet will be successful.
Uncertainties Relating to Commercial Use of the Internet. One
of the Company's strategies is to apply its technology to the
development of products for use in connection with the Internet. The
success of these products is dependent on the continued development
and acceptance of the Internet as a medium for delivery of published
materials and distribution of commercial products and business-to-
business purchase transactions. The failure of the Internet to be an
effective distribution channel could have a material adverse effect
on the Company's business and prospects. There can be no assurance
that commerce over the Internet will become widespread and it is not
known whether this market will develop to the extent necessary for
demand for the Company's products to emerge and become sustainable.
The Internet may not prove to be a viable commercial marketplace for
a number of reasons, including inadequate communications bandwidth
and a lack of secure payment mechanisms. Critical issues concerning
the commercial use of the Internet (including security, reliability,
cost, ease of use and access and speed) remain unresolved and may
affect the use of the Internet as a commercial medium. To the extent
that the Internet continues to experience significant growth in the
number of users and level of use, there can be no assurance that the
Internet infrastructure will continue to be able to support the
demands placed upon it. Moreover, the Internet could lose its
viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of
Internet activity or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications
services to support the Internet also could result in slower response
times which might adversely affect customers' ability or willingness
to use the Internet as a commercial marketplace. In addition the
security and privacy concerns of existing and potential customers, as
well as concerns related to computer viruses, may inhibit the growth
of the Internet marketplace.
If use of the Internet does not continue to grow or if the
Internet infrastructure does not effectively support customer demand,
the Company's business, results of operations and financial condition
could be materially adversely affected.
Charge to Income in the Event of Release of Escrow Shares or
Conversion of Class B or Class E Shares. In the event any shares of
Class B Common Stock held in escrow (the "Escrow Shares") or Class E
shares (the "Class E Shares") held by the stockholders of the Company
who are officers, directors, employees or consultants of the Company
are released from escrow or converted, compensation expense will be
recorded for financial reporting purposes. Therefore, in the event
the Company attains any of the earnings thresholds or the Company's
Class A Common Stock meets certain minimum bid prices required for
the release of the Escrow Shares or conversion of the Class E Shares,
such release or conversion will be deemed additional compensation
expense of the Company. Such charge is not deductible for income tax
purposes. Accordingly, the Company will, in the event of the release
of the Escrow Shares or conversion of the Class E Shares, recognize
during the period in which the reportable earnings thresholds are met
or such minimum bid prices obtained, what could be a substantial
charge which would have the effect of substantially increasing the
Company's reportable loss or reducing or eliminating reportable
earnings, if any, at such time. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
stockholders' equity, it may have a depressive effect on the market
price of the Company's securities.
Control by Insiders; Possible Depressive Effect on the Company's
Securities. As of the date of this prospectus, the executive
officers and directors of the Company beneficially owned
approximately 30% of the outstanding Class A, Class B (including the
Escrow Shares) and Class E Common Stock of the Company, representing
approximately 50.5% of the voting power of the Company. Thomas H.
Lipscomb, who is Chairman of the Board and was formerly President and
Chief Executive Officer of the Company, and Alan N. Alpern, Chief
Financial Officer of the Company, have deposited substantially all of
the approximately 2.2 million shares of Common Stock beneficially
owned by them and other members of their families, which includes
Class B Common Stock and Class E Common Stock of the Company and
which represents approximately 49.4% voting power of the Company, in
a voting trust until February 18, 2000. The shares of Common Stock
held in the voting trust will be voted at the direction of a majority
of the non-management directors of the Company and Arthur R. Medici,
the President and Chief Executive Officer of the Company, and will
effectively enable them to elect all the Company's directors and
thereby direct the policies of the Company. Furthermore, the voting
trust and the disproportionate vote afforded the Class B Common Stock
could serve to impede or prevent a change of control of the Company.
As a result, potential acquirors may be discouraged from seeking to
acquire control of the Company through the purchase of Class A Common
Stock, which could have a depressive effect on the price of the
Company's securities.
Future Sales of Common Stock. All of the Company's 1,372,566
shares of Class B Common Stock (including 70,000 shares to be issued
to Arthur R. Medici pursuant to his employment agreement) are
restricted securities, 781,244 shares of which are subject to escrow
and are not transferable except upon the Company's meeting certain
earnings levels or market price targets. See "Description of
Securities -- Escrow Shares." Additionally, all of the Company's
1,478,637 shares of Class E-1 Common Stock and 1,478,637 shares of
Class E-2 Common Stock (including the aggregate of 270,000 shares of
Class E Common Stock to be issued to Arthur R. Medici pursuant to his
employment agreement) are "restricted securities." These shares are
also not transferable except upon the Company's meeting certain
earnings levels or market price targets. See "Description of
Securities -- Class E-1 and Class E-2 Common Stock."
The Company is unable to predict the effect that sales made
under Rule 144, or otherwise, may have on the then prevailing market
price of the Company's securities although any future sales of
substantial amounts of securities pursuant to Rule 144 could
adversely affect prevailing market prices.
Arbitrary Determination of Exercise Prices; Possible Volatility
of Stock Price. The exercise prices of the Warrants (which have been
adjusted for dilution) have been determined by negotiation between
the Company and Blair and are not necessarily related to the
Company's asset value, net worth or other established criteria of
value. Market prices for the securities are influenced by a number
of factors, including quarterly variations in the financial results
of the Company and any competitors, changes in earnings, estimates by
analysts, conditions in the digital information market, the overall
economy and the financial markets. Such volatility can distort
market value and can be particularly severe in the case of small
capitalization stocks and immediately before or after an important
corporate event such as a public offering. In recent years, the
stock markets in general, and the securities of technology companies
in particular, have experienced extreme price fluctuations in
response to such occurrences as quarterly variations in operating
results, changes in earnings estimates by analysts, announcements
concerning new products, strategic relationships or technological
innovations, general conditions in the technology industries and
other events or facts. This pattern of extreme volatility in the
stock market, which in many cases was unrelated to the operating
performance of, or announcements concerning, the issuers of the
affected stock may adversely affect the market price of the Class A
Common Stock.
Dividends Unlikely. The Company has not paid any cash dividends
on its Common Stock and does not intend to declare or pay cash
dividends in the foreseeable future. The Company expects that it
will retain all available earnings, if any, to finance and expand its
business. See "Dividend Policy."
Current Prospectus and State Registration Requirements for the
Exercise of Warrants; Resale of Warrants. Holders of Warrants will
be able to exercise the Warrants only if (i) a current prospectus
under the Securities Act relating to the securities underlying the
Warrants is then in effect and (ii) such securities are qualified for
sale or exempt from qualification under the applicable securities
laws of the states in which the various holders of Warrants reside.
Although the Company has undertaken to maintain a current prospectus
covering the securities underlying the Warrants to the extent
required by Federal securities laws, there can be no assurance that
the Company will be able to do so. The value of the Warrants may be
greatly reduced if a prospectus covering the securities issuable upon
the exercise of the Warrants is not kept current or if the securities
are not qualified, or exempt from qualification, in the states in
which the holders of Warrants reside. Persons holding Warrants who
reside in jurisdictions in which such securities are not qualified
and in which there is no exemption will be unable to exercise their
Warrants and would either have to sell their Warrants pursuant to an
exemption from registration or allow them to expire unexercised. If
and when the Warrants become redeemable by the terms thereof, the
Company may exercise its redemption right even if it is unable to
qualify the underlying securities for sale under all applicable state
securities laws. See "Description of Securities -- Redeemable
Warrants."
Potential Adverse Effect of Redemption of Warrants. The
Warrants may be redeemed by the Company at any time after March 31,
1998 at a redemption price of $.05 per Warrant upon 30 days' notice
provided the average closing Bid Price of the Class A Common Stock
for any 30 consecutive trading days ending within 15 days of the
notice of redemption exceeds $9.10, in the case of the Class A
Warrants, or $12.25, in the case of the Class B Warrants (subject to
adjustment in each case). Redemption of the Warrants could force the
holders to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for the holders to do so, to sell the
Warrants at the then current market price when they might otherwise
wish to hold the Warrants, or to accept the redemption price, which
will be substantially less than the market value of the Warrants at
the time of redemption. See "Description of Securities -- Redeemable
Warrants."
Effect of Outstanding Options and Warrants; Registration Rights.
As of the date of this Prospectus, after giving effect to the
issuance of the securities issued in the 1997 Private Placement and
the anti-dilution adjustments in the exercise price of the Class A
Warrants and Class B Warrants issued and outstanding or issuable upon
the exercise of certain options the Company had outstanding: (i) an
aggregate of 4,714,772 Class A Warrants (including 494,623 Class A
Warrants issuable pursuant to anti-dilution provisions contained
in such Class A Warrants) exercisable for 4,714,772 shares of
Class A Common Stock and 4,714,772 Class B Warrants; (ii) an aggregate
of 8,497,376 Class B Warrants (including the 4,714,722 Class B Warrants
issued on the exercise of Class A Warrants, and including 891,453 Class
B Warrants issuable pursuant to anti-dilution provisions contained in such
Class B Warrants), exercisable for 8,497,376 shares of Class A Common Stock;
(iii) the Unit Purchase Options issued to Blair and its designees in
connection with the Company's IPO and the Company's 1997 Private Placement
to purchase an aggregate of 716,146 Units indentical to the Units sold in
the IPO and the 1997 Private Placement, such Units containing an aggregate
of 716,146 shares of Class A Common Stock, 800,082 Class A Warrants and
and aggregate of 1,600,164 Class B Warrants (including 800,082 Class B
Warrants underlying the Class A Warrants), such Class A Warrants and
Class B Warrants exercisable for an aggregate of 2,400,246 shares of
Class A Common Stock (including 251,808 shares of Class A Common Stock
issuable pursuant to anti-dilution provisions contained in such Warrants);
(iv) options to purchase 966,999 shares of Class A Common Stock under the
1994 Plan; (v) options to purchase 57,500 shares of Class A Common Stock,
28,750 shares of Class E-1 Common Stock and 28,750 shares of Class E-2
Common Stock under the 1992 Plan and (vi) 210,314 other warrants (the
"Private Placement Warrants") (including 22,064 warrants issuable
pursuant to anti-dilution provisions contained in such warrants)
to purchase 210,314 shares of Class A Common Stock, 94,125
shares of Class E-1 Common Stock and 94,125 shares of Class E-2
Common Stock. For the respective terms of such securities, the
holders thereof are given an opportunity to profit from a
rise in the market price of the Company's Class A Common Stock
with a resulting dilution in the interests of the other stockholders.
The existence of the IPO Unit Purchase Options, outstanding options
and warrants, Class A Warrants, Class B Warrants, and other options
that may be issued by the Company may hinder future financing by the
Company. Further, the holders of such options and warrants may
exercise them at a time when the Company would otherwise be able to
obtain additional equity capital on terms more favorable to the
Company. No prediction can be made as to the effect, if any, that
sale of these securities or the availability of such securities for
sale without restriction will have on the market prices of the
Company's securities prevailing from time to time. Nevertheless, the
possibility that substantial amounts of securities may be sold in the
public market may adversely affect prevailing market prices for the
Company's securities and could impair the Company's ability to raise
capital through the sale of its securities.
In addition, holders of the IPO Unit Purchase Option and the
Private Placement Unit Purchase Option have registration rights with
respect to such option and the underlying securities. Exercise of
the registration rights may involve substantial expense to the
Company. Additionally, as of the date of this Prospectus, the
Company's other warrants were exercisable through September 10, 2002
at exercise prices of $.50 to $2.50 per share, and contain anti-
dilution provisions, demand and "piggy-back" registration rights.
All the executive officers and directors of the Company and 5%
of shareholders holding in the aggregate approximately 2,640,000
shares of Class B and Class E Common Stock have agreed that they will
not sell any of the Company's securities owned by them prior to 13
months from the effective date of the Registration Statement relating
to this Prospectus, without the consent of Blair, subject to certain
immaterial exceptions.
The shares of Class A Common Stock issuable upon exercise of the
Company's Class A and Class B Warrants issued or issuable principally
in connection with the Company's IPO may be resold without
restriction provided there is a current prospectus under the Act
relating thereto and applicable state securities laws are complied
with.
Possible Adverse Effects of Authorization of Preferred Stock;
Anti-Takeover Provisions. The Company's Certificate of Incorporation
authorizes the issuance of 4,950,000 shares of "blank check"
preferred stock with such designations, rights and preferences as may
be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common
Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although
the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not
do so in the future. See "Description of Securities."
Limitation of Liability of Directors and Officers. The
Company's Certificate of Incorporation limits the liabilities of the
directors of the Company for monetary damages for breach of fiduciary
duty as a director to the maximum extent permitted by Delaware law.
Although such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or
rescission, the presence of these provisions in the Certificate of
Incorporation could prevent the recovery of monetary damages against
directors of the Company.
Possible Restrictions on Market-Making Activities in the
Company's Securities. Blair & Co. is currently, and the Company
believes that it intends in the future to continue to be, a
marketmaker in the Company's securities. Regulation M, which was
recently adopted to replace Rule 10b-6 and certain other rules under
the Exchange Act, prohibits Blair & Co. from engaging in any market-
making activities with regard to the Company's securities for the
period from up to five business days (or such other applicable period
as Regulation M may provide) prior to (i) any solicitation by Blair
or Blair & Co. of the exercise of Warrants until the later of the
termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that Blair or Blair & Co. may have
to receive a fee for the exercise of such Warrants following such
solicitation and (ii) any period during which Blair & Co. or any
affiliated parties participate in a distribution of any securities of
the Company owned for their own account. As a result, Blair & Co.
may be unable to provide a market for the Company's securities during
certain periods while the Warrants are exercisable. Any temporary
cessation of such market-making activities could have an adverse
effect on the market prices of the Company's securities. An
unfavorable resolution of the investigation by the Securities and
Exchange Commission (described below) could have the effect of
limiting such firm's ability to make a market in the securities. Any
temporary cessation of such market-making activities could have a
material adverse affect on the market prices of the Company's
securities.
Possible Adverse Effect on Liquidity of the Company's Securities
Due to the Investigation of D.H. Blair Investment Banking Corp. and
D.H. Blair & Co., Inc. by the Securities and Exchange Commission.
The Commission is conducting an investigation concerning various
business activities of Blair and Blair & Co., a selling group member
which will distribute substantially all of the Units offered hereby.
The investigation appears to be broad in scope, involving numerous
aspects of Blair's and Blair & Co.'s compliance with the Federal
securities laws and compliance with the Federal securities laws by
issuers whose securities were underwritten by Blair or Blair & Co.,
or in which Blair or Blair & Co. made over-the-counter markets,
persons associated with Blair or Blair & Co., such issuers and other
persons. The Company has been advised by Blair that the
investigation has been ongoing since at least 1989 and that it is
cooperating with the investigation. Blair has advised the Company
that it cannot predict whether this investigation will ever result in
any type of formal enforcement action against Blair or Blair & Co.,
or, if so, whether any such action might have an adverse effect on
Blair or Blair & Co. or the securities offered hereby. The Company
has been advised that Blair & Co. currently makes a market in the
Company's securities. An unfavorable resolution of the Commission's
investigation could have the effect of limiting such firm's ability
to make a market in the Company's securities, which could adversely
affect the liquidity or price of such securities.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale
of securities by the Selling Securityholders. In the event all of
the outstanding Class A Warrants, Class B Warrants, and other
warrants are exercised, the Company will receive gross proceeds of
approximately $94 million.
DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock
and intends to continue to follow a policy of retaining earnings to
finance future growth. Accordingly, the Company does not anticipate
the payment of cash dividends to holders of Common Stock in the
foreseeable future.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation, as amended, as
permitted by the Delaware General Corporation Law, limits the
liability of the Company's directors to the Company or its
stockholders for monetary damages arising from a breach of their
fiduciary duties as directors in certain circumstances. This
provision presently limits a directors' liability except where a
director (i) breaches his or her duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or
engages in intentional misconduct or a knowing violation of law,
(iii) for any transaction from which a director obtains an improper
personal benefit, or (iv) under Section 174 of the Delaware General
Corporation Law which imposes liability for willful or negligent
payment of unlawful dividends, distributions or redemptions. This
provision does not prevent the Company or its stockholders from
seeking equitable remedies, such as injunctive relief or rescission.
If equitable remedies are found not to be available to stockholders
in any particular case, stockholders may not have any effective
remedy against actions taken by directors that constitute negligence
or gross negligence.
The Bylaws of the Company authorize the Company to indemnify its
directors, officers or other persons serving at the request of the
Company against liabilities and losses arising from their services in
such capacities to the fullest extent permitted by law, including
payment in advance of a final disposition of a director's or
officer's expenses or attorneys' fees reasonably incurred in
defending any action, suit or proceeding, other than in the case of
an action, suit or proceeding brought by the Company on its own
behalf against such person.
The Company has been advised that it is the position of the
Commission that insofar as the foregoing provisions may be invoked to
disclaim liability for damages arising under the Securities Act, such
provision is against public policy as expressed in the Securities Act
and is therefore unenforceable.
The Company believes that these charter provisions are
consistent with certain provisions of the Delaware General
Corporation Law, which are designed, among other thinks, to encourage
qualified individuals to serve as directors and officers of Delaware
corporations. The Company also believes these provisions will assist
it in maintaining and securing the services of qualified directors
and officers.
SELLING SECURITYHOLDERS
This Prospectus relates to an offering by the Selling
Securityholders of (i) 1,603,274 Units, each Unit consisting of one
share of Class A Common Stock, approximately 1.11721 the Class A Warrants
and approximately 1.11721 Class B Warrants and (ii) 540,814 shares of
Class A Common Stock issued or issuable on exercise of certain warrants to
purchase Class A Common Stock issued in connection with certain private
placements in 1992 (including 22,064 shares of Class A Common Stock
issuable pursuant to anti-dilution provisions contained in such warrants).
The Selling Securityholder Securities are being registered to permit public
secondary trading of the Units, the Class A Common Stock and/or the
Warrants, and the Selling Securityholders may offer such Units,
shares of Class A Common Stock and Warrants for resale from time to
time. See "Plan of Distribution." For a description of the
Company's Common Stock, Class A Warrants, Class B Warrants, see
"Description of Securities."
The following table sets forth the names of each Selling
Securityholder and for each, the number of shares of Class A Common
Stock beneficially owned at the commencement of the offering and the
number of Shares or Units (and/or shares of Class A Common Stock,
Class A Warrants and Class B Warrants contained therein) offered for
sale, based on information provided to the Company by such Selling
Securityholders. The shares of Class A Common Stock, the Units and
the underlying securities are being registered to permit public
secondary trading of such securities and the Selling Securityholders
may offer such securities for resale from time to time. See "Plan of
Distribution."
The Company has filed with the Commission under the Securities
Act a Registration Statement on Form S-3, of which this Prospectus
forms a part, with respect to the resale of the Selling
Securityholder Securities. The Company has agreed, among other
things, to bear certain expenses in connection with the registration
and sale of the shares of Class A Common Stock and Warrants being
offered by the Selling Securityholders. See "Plan of Distribution."
Set forth below is certain information with respect to each
Selling Securityholder as of the date of this Prospectus. Except as
indicated below, to the best of the Company's knowledge, there have
been no material relationships between any of the Selling
Securityholders and the Company within the past three years. Except
as noted below, none of the Selling Securityholders hold any other
securities of the Company. None of the Selling Securityholders are
officers or directors of the Company.
<TABLE>
1997 Private Placement Securities
<CAPTION>
Number of Shares of
Class A Common Stock
Number of Beneficially Owned Percentage
Units(1) offered by the by Selling securityholder at Beneficially Owned
Selling Securityholder Selling Securityholder Commencement of Offering(2) Commencement of Offering
<S> <C> <C> <C>
Edith Abramowitz 7,937 74,757 1.61
Robert Paul Albrecht 3,968 25,535 *
Allenstown Partners 15,874 69,077 1.49
Jacob M. Alpert 3,968 17,817 *
Bruce Ampolsky 23,811 103,616 2.22
John D. Balk 7,937 82,131 1.77
David & Louis Beakley, JTWROS 3,968 24,618 *
Philip S. & Carolyn Lofton Benner, JTWROS 3,968 17,267 *
Charles M. Berger 15,874 69,077 1.49
B. F. Industries, Inc. 7,937 34,538 *
Edwin R. Bindseil 31,748 232,500 4.87
John E. Bishop 7,937 34,538 *
Owen W. Blum 15,874 104,052 2.24
John C. Botdorf 7,937 79,114 1.17
Marialby Caceres 15,874 69,077 1.49
Buford Campbell Revocable Trust 7,937 80,242 1.74
Charles W. & Roberta S. Chambers, JTWROS 15,874 69,077 1.49
D. Clein 15,874 124,620 2.67
Jack B. Cook 7,937 34,538 *
Charles J. & Ilga A. Cooper, JTWROS 15,874 86,600 1.87
Keith H. Cooper 7,937 77,997 1.68
Rox Barnes Covert 15,874 69,077 1.49
Raymond A. Dearchs 15,874 70,077 1.51
Thomas A. Diliberto 7,937 34,538 *
Joseph DiMauro 15,874 154,812 3.29
Mitchell C. & Patricia G. Elman, JTWROS 7,937 34,538 *
Benjamin & Sylvia Fader, JTWROS 7,937 62,116 1.35
Edward J. Farrell 15,874 69,077 1.49
Holly Freyre 7,937 46,089 1.00
Stephen J. Garchik 15,874 69,077 1.49
Jerry W. Grace 7,937 34,538 *
Graves Oil Company, Inc. 3,968 17,267 *
Lloyd A & Alemene C. Greene, JTWROS 3,968 17,267 *
John T. & Carol A. Haran, JTWROS 7,937 82,011 1.77
Delaware Charter Guaratee & Trust Co.
F/B/O Laurence S. Heller IRA-RO
(Retirement Plan) 15,874 69,077 1.49
HT Partners 7,937 34,538 *
G.C. Jewell 15,874 70,077 1.51
Lowell N. Kairys 15,874 85,835 1.85
Ralph K. Kato 15,874 69,077 1.49
Steve & Rebecca Sue Katz, JTWROS 7,937 36,538 *
Edward J. Kfoury 3,968 17,267 *
Robert R.B. Kidd 3,968 23,345 *
P. Elliott Kirven 15,874 73.077 1.58
Gary & Tatyana Komsky, JTWROS 7,937 45,710 *
Israel Krakowski 23,811 107,302 2.30
Lawrence R. Jackqueline L. Kuhnert, JTWROS 15,874 77,780 1.68
George Kupfrian IRA 31,748 138,155 2.94
Landmark Associates 15,874 69,077 1.49
Daniel R. Lee 31,748 164,327 3.94
James Lees 7,937 34,538 *
A.F. Lehmkuhl 7,937 162,183 3.49
Charles Leithauser 7,937 34,538 *
Julie A. Lerner 3,968 39,025 *
Stanley F. Lincoln 7,937 34,538 *
Barry J. Lind 3,968 17,267 *
Barry J. Lind Revocable Trust 35,716 155,422 3.30
Barry J. Lind & Neil G. Bluhm, TIC 31,748 138,155 2.94
Christian Ludwigsen 15,874 69,077 1.49
Peter & Patricia A. Maher, JTWROS 23,811 154,408 3.29
Gary Marano 7,937 94,050 2.03
John Marks 15,874 95,921 2.06
Bruce P. Martin 7,937 69,691 1.51
Donald P. Martin 7,937 47,592 1.03
Herbert Maxwell 7,937 68,968 1.49
David H. McAlpin, Jr. 23,811 155,205 3.30
William H. McCartney 7,937 87,812 1.89
Jane & Thomas McLendon, JTWROS 7,937 34,538 *
James J. & Judy A. McQuade, TIC 7,937 34,538 *
Paul Medici 3,968 17,267 *
Danny L. & Janet E. Messick, JTWROS 3,968 19,267 *
Mid Plains Construction 3,968 60,779 1.32
Abraham Mizrahi 3,968 17,267 *
Philip Montagno 7,937 34,538 *
Charles Morgan 7,937 34,538 *
Peter Muserlian 47,622 207,233 4.35
David P. Norum Trust 7,937 49,333 1.07
F/B/O David W. Oliver IRA Rollover 15,874 85,177 1.84
Steven N. Ostrovsky 7,937 196,853 4.17
Anthony Pace 3,968 26,763 *
William A. Pair 15,874 111,057 2.38
Anthony J. Palma 7,937 34,538 *
Augusto Panzini 7,937 34,538 *
Geoffrey M. Parrillo 3,968 17,267 *
Eugene L. Pearce, III 7,937 70,288 1.52
Craig A. & Barbara Peterson, JTWROS 7,937 34,538 *
John S. Pirretti 7,937 74,171 1.60
August Pisto 7,937 56,491 1.22
Michael Pizitz 7,937 34,538 *
Richard Pizitz 7,937 34,538 *
Herbert B. & Marilyn Platzner, JTROS 7,937 34,538 *
James M. & Nell W. Potter, TIC 15,874 107,509 2.30
Jack Price 7,937 119,429 2.56
Michael & Irene Reingold JTWROS 3,968 21,618 *
Dennis B. Richards 23,811 138,155 2.94
M. Jerome Rieger IRA Rollover 15,874 69,077 1.49
Dawn Roccaro 7,937 34,538 *
Lawrence J. Rodler 3,968 33,790 *
Nancy A. Roehl 31,748 152,580 3.25
Gene Rosenberg 7,937 34,538 *
Leonard & Nancy Rossicone, JTWROS 7,937 45,710 *
Lawrence Rothberg 3,968 21,618 *
Alan J. Rubin 15,874 69,077 1.49
Rodney Ruebsahm 7,937 34,538 *
Robert A. Scappa 7,937 39,006 *
Richard B. Schechter 7,937 34,538 *
Adolph R. Shiver 7,937 34,538 *
Richard S. & Cynthia D. Simms, JTWROS 7,937 35,655 *
Robert B. Speed Retirement Plan 15,874 97,865 2.10
Eugene L. Smith 3,968 23,970 *
Richard Staelin 15,874 69,077 1.49
Faye Stilley 7,937 66,581 1.44
Joel A. Stone 47,622 207,233 4.35
Stephen J. Stoute 31,748 164,178 3.49
Harriet Sussman 7,937 34,538 *
Roger Tallman 3,968 17,267 *
Samuel J. Talucci 3,968 47,728 1.04
Richard Tauber 7,937 34,538 *
Elizabeth Taylor 7,937 45,519 *
Stewart Taylor 7,937 34,538 *
Douglas M. Trabilcy 39,685 225,538 4.72
Perry Trebatch 7,937 34,538 *
Triad Petroleum Defined Benefit
Pension Plan 7,937 34,538 *
James & Li-Mei Tzeng, JTWROS 3,968 36,873 *
Lee Van Lenten 3,968 17,267 *
Francine Urdang 15,874 99,956 2.56
Andrew Weissman 7,937 34,538 *
William Wesley 7,937 34,538 *
Wilner Enterprises 31,748 185,918 3.92
C.W. Witte 7,937 153,712 3.27
The David C. Wohl Trust u/a/d 6/18/91 7,937 51,497 1.12
Randall L. Wood Trust u/t/a dated
6/17/96 7,937 34,538 *
Woodland Construction Corp. 31,748 138,155 2.94
Greg Alan Yolowitz 3,968 17,817 *
<FN>
<F1>
(1) Each Unit consisting of one share of Class A Common Stock,
approximately 1.11721 Class A Warrants and approximately
1.11721 Class B Warrants.
<F2>
(2) Includes shares of Class A Common Stock underlying the Units, the
Class A Warrants and the Class B Warrants purchased in the 1997
Private Placement and offered by the Selling Securityholder as well
as any Class A Common Stock held by such Selling Securityholder or
underlying any Units, Class A Warrants or Class B Warrants held by
such Selling Securityholder in addition to the securities purchased
in the 1997 Private Placement.
</FN>
</TABLE>
The above Selling Securityholders have agreed not to sell the Class A
Common Stock, the Class A Warrants and the Class B Warrants comprising
such Units except after the time periods and in the percentage amounts
set forth below and not to exercise the Class A Warrants and the Class B
Warrants for a period of one year following the Closing relating to the
issuance thereof.
Percentage
Lock Up Period Eligible for Resale
_______________________________________________ ___________________
Prior to June 18, 1997 None
Period from June 18, 1997 to October 18, 1997 50%
After October 18, 1997 100%
1992 Private Placement Securities
Each of the Selling Securityholders listed below with a reference to
footnote (2) is either an officer, director or employee of either D.H.
Blair Investment Banking Corp. ("Blair"), an investment banking firm
which acted as underwriter of the Company's IPO in January 1995 and
placement agent for private placements of securities by the Company in
1992, 1994 and 1997, or D.H. Blair & Co., Inc. ("Blair & Co."), which was
a selected dealer in these offerings.
In connection with the Company's 1997 Private Placement, Blair received
a placement agent fee of $300,000, a non-accountable expense allowance
of $90,000 and a Unit Purchase Option to purchase 561,146 Units. In
connection with the Company's IPO in January and February 1995, Blair
received an aggregate of $891,250 in underwriting discounts and
commissions and a non-accountable expense allowance of $267,375, and
Blair and its designees were issued Unit Purchase Options to purchase up
to 155,000 Units (which options and their underlying securities are not
transferable until January 18, 1998). In connection with a private
placement in September 1994, Blair served as placement agent and
received an aggregate of $195,000 from the Company as commissions
(including a non-accounting expense allowance).
<TABLE>
Number of Number of Shares of
Shares of Class A Class A Common Stock Percentage
Common Stock Offered Beneficially Owned Beneficially Owned
by the Selling by Selling Securityholder at Commencement
Selling Securityholder Securityholder at Commencement of Offering(1) of Offering
<S> <C> <C> <C>
Kenton Wood(2) 4,500 4,500 *
Rivki Rosenwald(2) 44,100(3) 44,100(3) *
Ruki Renov(2) 75,600(4) 75,600(4) 1.65
Esther Stahler(2) 69,300(5) 69,300(5) 1.52
Laya Perlysky(2) 31,500 31,500 *
Martin A. Bell(2) 50,000 50,000 1.10
Evan Novak(2) 18,500 18,500 *
Dominic Cavagnulo(2) 18,500 18,500 *
Darren Orlando(2) 18,500 18,500 *
David Lerner(2) 63,691(6) 63,681(6) 1.40
Al Palagonia(2) 125,686(6) 125,686(6) 2.76
William L. Cameron 3,491(6) 3,491(6) *
Donald Softness Family Trust 3,491(6) 3,491(6) *
Fred Kassner 13,965(6) 13,965(6) *
________________________________________________________________________________
TOTAL 540,814 540,814
<FN>
<F1>
(1) Does not include shares of Class E-1 Common Stock and Class E-2
Common Stock held or shares of Class A Common Stock and warrants
underlying Unit Purchase Options not exercisable within 60 days
of the date hereof.
<F2>
(2) Each individual is an officer, director or employee of Blair or
Blair & Co.
<F3>
(3) Includes 6,300 shares of Class A Common Stock owned by each of
Rivki Rosenwald C/F Doni Rosenwald and Rivki Rosenwald C/F Joshy
Rosenwald.
<F4>
(4) Includes 6,300 shares of Class A Common Stock beneficially owned
by each of Ruki Renov C/F Ari Renov, Ruki Renov C/F Yarel Renov,
Ruki Renov C/F Yoni Renov, Ruki Renov C/F Tova Renov, Ruki Renov
C/F Tani Renov, Ruki Renov C/F Eli Renov and Ruki Renov C/F
Emily Renov.
<F5>
(5) Includes 6,300 shares of Class A Common Stock beneficially owned
by each of Esther Stahler C/F Jamie Stahler, Esther Stahler C/F
Daniel Stahler, Esther Stahler C/F David Stahler, Esther Stahler
C/F Lisa Stahler, Esther Stahler C/F Avi Stahler and Esther
Stahler C/F Eli Stahler.
<F6>
(6) Consists of Class A Common Stock issuable upon exercise of the
1992 Private Placement Warrants.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Selling Securityholder Securities may be sold from time to
time to purchasers directly by any of the Selling Securityholders,
or, alternatively, any of the Selling Securityholders may from time
to time offer the Selling Securityholder Securities through dealers
or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling
Securityholders and/or purchasers of the Selling Securityholder
Securities for whom they may act as agent. Sales will be made at
prices and on terms then prevailing or at prices related to the
current market price, or in negotiated transactions. A Selling
Securityholder that sells such Selling Securityholder Securities
pursuant to the Registration Statement of which this Prospectus is a
part will be required to deliver such Prospectus to purchasers and
will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales. There can be no
assurance that any of the Selling Securityholder Securities will be
sold by the Selling Securityholders.
Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the Selling Securityholder
Warrants may not simultaneously engage in market-making activities
with respect to any securities of the Company during the applicable
"cooling off" period (currently a period of up to five business days)
prior to the commencement of such distribution. Accordingly, in the
event Blair or Blair & Co. is engaged in a distribution of the
Selling Securityholder Warrants, neither of such firms will be able
to make a market in the Company's securities during the applicable
restrictive period. However, neither Blair nor Blair & Co. have
agreed to nor is either of them obligated to act as a broker-dealer.
In addition, each Selling Securityholder desiring to sell Warrants
will be subject to the applicable provisions of the Exchange Act and
the rules and regulations thereunder, which provisions may limit the
timing of the purchases and sales of shares of the Company's
securities by such Selling Securityholders.
Holders of outstanding Warrants can exercise their Warrants for
their applicable underlying securities upon payment of the exercise
prices therefor to the Company. The Company has agreed not to
solicit Warrant exercises other than through Blair unless Blair
declines or is unable to make such solicitation. Except for any
Warrants held by Blair at the time of exercise, upon any exercise of
the Class A and Class B Warrants, the Company will pay a fee to Blair
(the "Solicitation Fee") of 5% of the aggregate exercise price if
(i) the market price of the Company's Class A Common Stock on the
date the Warrants are exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrants was
solicited by a member of the National Association of Securities
Dealers, Inc. designated in writing by the warrantholder as having
solicited the exercise; (iii) the Warrants are not held in a
discretionary account; (iv) disclosure of compensation arrangements
is made both at the time of the offering and at the time of exercise
of the Warrants; and (v) the solicitation of exercise of the Warrants
was not in violation of Regulation M promulgated under the Exchange
Act. Blair may reallow a portion of the Solicitation Fee to members
of the National Association of Securities Dealers, Inc. The costs of
Blair's solicitation will be borne by the Company.
The Selling Securityholders and broker-dealers, if any, acting
in connection with such sale might be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the
securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
The Company has agreed to pay substantially all of the expenses
incident to the registration of all of the securities covered under
this Prospectus, other than transfer taxes, if any, and commissions
and discounts of dealers and agents.
DESCRIPTION OF SECURITIES
Units. Each Unit consists of one share of Class A Common Stock,
approximately 1.11721 redeemable Class A Warrants and approximately
1.11721 redeemable Class B Warrants. Each Class A Warrant entitles
the holder to purchase one share of Class A Common Stock and
one redeemable Class B Warrant. Each Class B Warrant entitles the
holder to purchase one share of Class A Common Stock. The Class A
Common Stock and Warrants comprising the Units are transferable
separately immediately upon issuance.
Common Stock
Class A Common Stock. The Company is authorized to issue
20,000,000 shares of Class A Common Stock. The Company currently has
2,954,260 shares of Class A Common Stock outstanding and an
additional 4,329,840 shares of Class A Common Stock reserved for
issuance on conversion of outstanding Class B Common Stock and Class
E Common Stock and exercise of Class A Warrants, Class B Warrants
(including the Class B Warrants underlying the Class A Warrants) and
options. Due to the number of Units sold in the 1997 Private
Placement, there is not sufficient authorized Class A Common Stock
for issuance in, or reservation for issuance on exercise of the
Warrants issued in the 1997 Private Placement. Accordingly,
officers, directors and employees of the Company and others
(including certain officers of Blair and Blair & Co.) holding an
aggregate of 1,328,399 shares of Class B Common Stock, 2,092,144
shares of Class E Common Stock issued and to be issued and options
and warrants to purchase 2,166,000 shares of Class A Common Stock,
which are convertible into or exercisable, under certain
circumstances, into an aggregate of 5,586,543 shares of Class A
Common Stock, have agreed that they will not convert shares of Class
B and Class E Common Stock or exercise certain options into Class A
Common Stock to the extent required until a sufficient number of
additional shares of Class A Common Stock are authorized by the
Stockholders of the Company. The Company's Board of Directors has
approved an increase in the authorized Class A Common Stock to
35,000,000 shares, subject to approval by the Company's shareholders.
Holders of Class A Common Stock have the right to cast one vote
for each share held of record on all matters submitted to a vote of
holders of Class A Common Stock, including the election of directors.
The Class A, Class B, Class E-1 and Class E-2 Common Stock vote
together as a single class on all matters on which stockholders may
vote, except when class voting is required by applicable law. The
Class A Common Stock shareholders will vote as a class for the
increase in the authorized Class A Common Stock.
Holders of Class A Common Stock are entitled to receive such
dividends, together with the holders of Class B, Class E-1 and
Class E-2 Common Stock, pro rata based on the number of shares held,
when, as and if declared by the Board of Directors, from funds
legally available therefor, subject to the rights of holders of any
outstanding preferred stock. In the case of dividends or other
distributions payable in stock of the Company, including
distributions pursuant to stock splits or division of stock of the
Company, only shares of Class A Common Stock will be distributed with
respect to Class A Common Stock. In the event of the liquidation,
dissolution or winding up of the affairs of the Company, all assets
and funds of the Company remaining after the payment of all debts and
other liabilities, subject to the rights of the holders of any
outstanding preferred stock, shall be distributed, pro rata, among
the holders of the Class A, Class B, Class E-1 and Class E-2 Common
Stock. Holders of Class A Common Stock are not entitled to
preemptive, subscription, cumulative voting or conversion rights, and
there are no redemption or sinking fund provisions applicable to the
Class A Common Stock. All outstanding shares of Class A Common Stock
are, and the shares of Class A Common Stock offered hereby will be
when issued, fully paid and non-assessable.
Class B Common Stock. The Company is authorized to issue
2,000,000 shares of Class B Common Stock, $.01 par value, 1,372,566
of which are issued and outstanding as of January 31, 1997 and held
by 23 holders of record, including 781,244 shares held in escrow.
Each share of Class B Common Stock is entitled to six votes on
all matters on which stockholders may vote, including the election of
directors. The Class A, Class B, Class E-1 and Class E-2 Common
Stock vote together as a single class on all matters on which
stockholders may vote, except when class voting is required by
applicable law.
Holders of Class B Common Stock are entitled to participate
together with the holders of Class A, Class E-1 and Class E-2 Common
Stock, pro rata based on the number of shares held, in the payment of
cash dividends and in the liquidation, dissolution and winding up of
the Company, subject to the rights of holders of any outstanding
preferred stock. In the case of dividends, or other distributions
payable in stock of the Company, including distributions pursuant to
stock splits or divisions of stock of the Company, only shares of
Class A Common Stock shall be distributed with respect to Class B
Common Stock.
Shares of Class B Common Stock are automatically convertible
into an equivalent number of fully paid and non-assessable shares of
Class A Common Stock upon the sale or transfer of such shares by the
original record holder thereof except to another holder of Class B
Common Stock. Each share of Class B Common Stock also is convertible
at any time upon the option of the holder into one share of Class A
Common Stock. There are no preemptive, subscription, redemption,
conversion or cumulative voting rights applicable to the Class B
Common Stock.
Class E-1 and E-2 Common Stock. The Company is authorized to
issue 2,000,000 shares of Class E-1 Common Stock, $.01 par value,
1,478,637 of which are issued, outstanding and to be issued and held
by approximately 100 holders of record and is authorized to issue
2,000,000 shares of Class E-2 Common Stock, $.01 par value, 1,478,637
of which are issued, outstanding and to be issued and held by
approximately 100 holders of record. Each share of Class E-1 and E-2
Common Stock is entitled to one vote on all matters on which
stockholders may vote, including the election of directors. The
Class A, Class B, Class E-1 and Class E-2 Common Stock vote together
as a single class on all matters on which stockholders may vote,
except when class voting is required by applicable law.
Holders of Class E-1 and E-2 Common Stock are entitled to
participate together with the holders of Class A and Class B Common
Stock, pro rata based on the number of shares held, in the payment of
cash dividends and in the liquidation, dissolution and winding up of
the Company, subject to the rights of holders of any outstanding
preferred stock. In the case of dividends, or other distributions
payable in stock of the Company, including distributions pursuant to
stock splits or divisions of stock of the Company, only shares of
Class A Common Stock shall be distributed with respect to Class E-1
and E-2 Common Stock.
The Class E-1 shares will be automatically converted into Class
A Common Stock, if, and only if, one or more of the following
conditions is met: (i) the Company's net income before provision for
income taxes and exclusive of any extraordinary earnings (as audited
by the Company's independent public accountants) (the "Minimum Pretax
Income") amounts to at least $8.9 million for the fiscal year ending
July 31, 1997; (ii) the Minimum Pretax Income amounts to at least
$11.9 million for the fiscal year ending July 31, 1998; (iii) the Bid
Price of the Company's Class A Common Stock averages in excess of
$22.33 per share for 30 consecutive business days through January 18,
1998; (iv) the Company is acquired by or merged into another entity
for which stockholders of the Company receive per share consideration
equal to or greater than the levels set forth in (ii) and (iii)
above.
The Class E-2 Shares will be automatically converted into Class
A Common Stock if, and only if, one or more of the following
conditions is met: (i) the Minimum Pretax Income amounts to at least
$10.9 million for the fiscal year ending July 31, 1997; (ii) the
Minimum Pretax Income amounts to at least approximately $14.6 for the
fiscal year ending July 31, 1998; (iii) the Bid Price of the
Company's Class A Common Stock averages in excess of $29.70 per share
for 30 consecutive business days through January 18, 1998; (iv) the
Company is acquired by or merged into another entity for which
stockholders of the Company receive per share consideration equal to
or greater than the levels set forth in (iii) above.
Any Class E Shares not previously converted will be redeemed by
the Company for nominal consideration if such earnings levels or
market price targets are not attained.
Escrow Shares. In connection with a private placement completed
in September 1993, the present holders of the Company's Class B
Common Stock (other than Mr. Medici, who acquired his shares of Class
B Common Stock subsequent to September 1993) placed into escrow on a
pro rata basis, an aggregate of 781,244 of their shares. Such
stockholders will continue to vote the Escrow Shares; however, the
Escrow Shares are not assignable or transferable. The following sets
forth the number of Escrow Shares owned by the executive officers,
directors and principal stockholders of the Company:
Name Number of Shares
_____________________ __________________
Thomas H. Lipscomb 427,409
Alan N. Alpern 94,591
The Escrow Shares will be released to the stockholders in the
event that: (i) the Minimum Pretax Income amounts to at least
approximately $10 million for the twelve months ending December 31,
1997; (ii) the Bid Price of the Company's Class A Common Stock shall
average in excess of $18.00 for 30 consecutive days through January
18, 1998.
The Minimum Pretax Income amounts set forth above are subject to
increase proportionately, with certain limitations, for issuance of
the additional shares of Class A Common Stock and securities
convertible into, exchangeable for Class A Common Stock and will be
subject to increase on the occurrence of certain events. The Bid
Price amounts set forth above are subject to adjustment in the event
of any stock splits, reverse stock splits or other similar events.
Any money, securities, rights or property distributed in respect
of the Escrow Shares or the Class E Shares, including any property
distributed as dividends or pursuant to any stock split, merger,
recapitalization, dissolution, or total or partial liquidation of the
Company, shall be held in escrow until release of the Escrow Shares
or conversion of the Class E Shares. If none of the applicable
earnings or market price levels set forth above have been met by May
1, 1998, the Escrow Shares, as well as any dividends or other
distributions made with respect thereto, will be contributed to the
capital of the Company and the Class E Shares, as well as any
dividends or other disbursements made with respect thereto, will be
redeemed by the Company for nominal consideration and cancelled. The
Company expects that the release of the Escrow Shares to, or
conversion of Class E Shares held by, officers, directors, employees
and consultants of the Company will be deemed compensatory and,
accordingly, will result in a substantial charge to reportable
earnings, which would equal the fair market value of such shares on
the date of release. Such charge could substantially increase the
loss or reduce or eliminate the Company's net income for financial
reporting purposes for the period(s) during which such shares are, or
become probable of being, released from escrow or converted to Class
A Common Stock. Although the amount of compensation expense
recognized by the Company will not affect the Company's total
stockholders' equity, it may have a negative effect on the market
price of the Company's securities.
The earnings and market price levels set forth above were
determined by negotiation between the Company and Blair and should
not be construed to imply or predict any future earnings by the
Company or any increase in the market price of its securities.
Voting Trust. Substantially all of the Class A Common Stock,
Class B Common Stock and Class E Common Stock beneficially owned by
Thomas H. Lipscomb and Alan N. Alpern constituting 40.3% and 9.1% of
the percentage of the vote of all classes of common stock of the
Company, respectively, have been deposited in a voting trust or are
subject to an irrevocable proxy until February 18, 2000. Pursuant to
the voting trust or irrevocable proxy, the shares will be voted at
the direction of a majority of the Company's non-management directors
and Mr. Medici, subject to certain exceptions, including certain
mergers and sale of all or substantially all of the Company's assets.
The shares deposited in the voting trust or irrevocable proxy will
be released from the voting trust or irrevocable proxy on the sale of
the shares.
Redeemable Warrants
Class A Warrants. At the date of this Prospectus the Company
had 4,714,772 Class A Warrants outstanding including 494,623 Class A
Warrants issued pursuant to anti-dilution provisions contained in the
Class A Warrnts. Each Class A Warrant entitles the registered holder to
purchase one share of Class A Common Stock and one Class B Warrant at an
exercise price which is currently equal to $5.82 at any time until 5:00 P.M.,
New York City time, on February 18, 2002. The number of shares of Class A
Warrants held be the holders thereof is exercisable and the exercise
price of such Warrants have been adjusted as a result of the issuance
of securities in the 1997 Private Placement pursuant to anti-dilution
provisions contained in such Warrants. The Class A Warrants will be
redeemable by the Company commencing after March 31, 1998, on 30
days' written notice at a redemption price of $.05 per Class A
Warrant if the "closing price" of the Company's Class A Common Stock
for any 30 consecutive trading days ending within 15 days of the
notice of redemption averages in excess of $9.10 per share. "Closing
price" shall mean the closing bid price if listed in the
over-the-counter market on Nasdaq or otherwise or the closing sale
price if listed on the Nasdaq National Market or a national
securities exchange. All Class A Warrants must be redeemed if any
are redeemed.
Class B Warrants. At the date of this Prospectus, the Company
had 3,782,604 Class B Warrants outstanding, including 396,830 Class B
Warrants issued pursuant to anti-dilution provision contained in the
Class B Warrants. Each Class B Warrant entitles the registered holder to
purchase one share of Class A Common Stock at an exercise price which is
currently equal to $7.83 at any time after issuance until 5:00 P.M.
New York City time, on February 18, 2002. The number of Class A
Warrants held by the holders thereof and the exercise price of
such Warrants have been adjusted as a result of the issuance of
securities in the 1997 Private Placement pursuant to anti-dilution
provisions contained in such Warrants. The Class B Warrants will be
redeemable by the Company on 30 days' written notice at a redemption
price of $.05 per Class B Warrant if the closing price of the Company's
Class A Common Stock for any 30 consecutive trading days ending within
15 days of the notice of redemption averages in excess of $12.25 per share.
All Class B Warrants must be redeemed if any are redeemed.
General. The Class A Warrants and Class B Warrants were issued
pursuant to the Warrant Agreement and are evidenced by warrant
certificates in registered form. The Warrants provide for adjustment
of the exercise price and for a change in the number of shares
issuable upon exercise to protect holders against dilution in the
event of a stock dividend, stock split, combination or
reclassification of the Common Stock or upon certain issuances of
shares of Common Stock at prices lower than the market value other
than certain excluded issuances, including issuances upon exercise of
options granted to employees, directors and consultants to the
Company, or options to be granted under the Company's stock option
plans and upon the sale of common stock or convertible securities in
a firm commitment public offering including shares sold upon exercise
of an underwriter's over-allotment option.
The exercise prices of the Warrants were determined by
negotiation between the Company and Blair in connection with the IPO
and should not be construed to be predictive of or to imply that any
price increases in the Company's securities will occur.
A Warrant may be exercised upon surrender of the Warrant
certificate on or prior to its expiration date (or earlier redemption
date) at the offices of American Stock Transfer & Trust Company, New
York, New York, the warrant agent, with the form of "Election to
Purchase" on the reverse side of the Warrant certificate completed
and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of
the Company) for the number of shares with respect to which the
Warrant is being exercised. Shares issued upon exercise of Warrants
and payment in accordance with the terms of the Warrants will be
fully paid and non-assessable.
Investors in the 1997 Private Placement agreed not to (i) sell
any of the Securities until June 18, 1997 and thereafter, not to sell
more than 50% of the Securities until the October 18, 1997
anniversary of the First Closing Date and (ii) not to exercise the
Warrants until one year after the closing relating to the issuance
thereof.
The Warrants do not confer upon the Warrantholder any voting or
other rights of a stockholder of the Company. Upon notice to the
holders of Warrants, the Company has the right to reduce the exercise
price or extend the expiration date of the Warrants.
Other Warrants. At January 31, 1997, the Company had other
outstanding warrants to purchase an aggregate of 210,324 shares of
Class A Common Stock, which are exercisable through September 10,
2002 at an exercise price of $.50 to $2.50 per share and which
contain anti-dilution provisions and demand and "piggy-back"
registration rights.
IPO Unit Purchase Option
The Company has outstanding IPO Unit Purchase Option to purchase
155,000 Units, such Units consisting of an aggregate of 155,000 shares of
Class A Common Stock, 173,167 Class A Warrants and, 173,167 Class B
Warrants (including 18,167 Class A Warrants and 18,167 Class B
Warrants issuable pursuant to anti-dilution provisions contained in
such Warrants) and 173,167 shares of Class A Common Stock and 173,167
Class B Warrants underlying the 173,167 Class A Warrants. The Class A
Warrants and the Class B Warrants are exercisable until January 18, 2000
at an exercise price of $6.60 per share of Class A Common Stock,
$.05 per Class A Warrant and $.10 per Class B Warrant, subject to
adjustment in certain limited events to protect against dilution.
The Class A Warrants and Class B Warrants underlying the IPO Unit
Purchase Options are exercisable on the same terms and conditions
as the Class A and Class B Warrants except that they are not subject to
redemption by the Company unless, on the redemption date, the IPO Unit
Purchase Option has been exercised and the underlying Warrants are
outstanding. The holders of the IPO Unit Purchase Options have
demand and piggy-back registration rights with respect to the
securities underlying the IPO Unit Purchase Options.
Private Placement Unit Purchase Option
The Company has granted to Blair the Private Placement Unit
Purchase Option to purchase up to 561,146 Units consisting of an aggregate
of 561,146 shares of Class A Common Stock, 626,917 Class A Warrants and
626,917 Class B Warrants. The Units issuable upon exercise of the
Private Offering Unit Purchase Option will, when so issued,
be identical to the Units offered in the 1997 Private Placement.
The Private Placement Unit Purchase Option is exercisable until
February 18, 2002. The holders of the Private Placement Unit
Purchase Option have certain demand and piggyback registration
rights. The Class A Warrants and Class B Warrants underlying the
Private Placement Unit Purchase Option are exercisable on the same
terms and conditions as the Class A and Class B Warrants except that
they are not subject to redemption by the Company unless, on the
redemption date, the Private Placement Unit Purchase Option has been
exercised and the underlying Warrants are outstanding. The holders
of the Private Placement Unit Purchase Options have demand and piggy-
back registration rights with respect to the securities underlying
the Private Placement Unit Purchase Options.
Preferred Stock
General. The Certificate of Incorporation of the Company
authorizes the issuance of up to 4,950,000 shares of preferred stock,
none of which are currently outstanding. The Board of Directors,
within the limitations and restrictions contained in the Certificate
of Incorporation and without further action by the Company's
stockholders, has the authority to issue shares of preferred stock
from time to time in one or more series and to fix the number of
shares and the relative rights, conversion rights, voting rights, and
terms of redemption, liquidation preferences and any other
preferences, special rights and qualifications of any such series.
Any issuance of preferred stock could, under certain circumstances,
have the effect of delaying or preventing a change in control of the
Company and may adversely affect the rights of holders of Common
Stock. The Company has no present plans to issue any shares of
preferred stock.
Business Combination Provisions
The Company is subject to a Delaware statute regulating
"business combinations," defined to include a broad range of
transactions, between Delaware corporations and "interested
shareholders," defined as persons who have acquired at least 15% of a
corporation's stock. Under the law, a corporation may not engage in
any business combination with any interested shareholder for a period
of three years from the date such person became an interested
shareholder unless certain conditions are satisfied. The statute
contains provisions enabling a corporation to avoid the statute's
restrictions.
The Company has not sought to "elect out" of the Delaware
statute and, therefore, the restrictions imposed by such statute will
apply to the Company.
Transfer Agent and Warrant Agent
American Stock Transfer & Trust Company, New York, New York
serves as transfer agent for the Class A Common Stock and warrant
agent for the Warrants.
LEGAL MATTERS
The validity of the securities offered hereby will be passed
upon for the Company by Bachner, Tally, Polevoy & Misher LLP, New
York, New York. Bachner, Tally, Polevoy & Misher represents Blair in
other matters.
EXPERTS
The balance sheet as of July 31, 1996, and the related
statements of operations, cash flows and stockholders' equity for the
year ended July 31, 1996 and for the period from November 18, 1991
(inception) to July 31, 1996 included in the Company's Form 10-KSB
dated July 31, 1996 and incorporated herein by reference, have been
included therein in reliance on the report of Richard A. Eisner &
Company, LLP independent auditors, given on the authority of that firm
as experts in accounting and auditing. Their report includes a
modification relating to an uncertainty regarding the Company's ability
to continue as a going concern.
_____________________________
PROSPECTUS
_____________________________
INFOSAFE SYSTEMS, INC.
2,3189,420 UNITS
18,472,626 Shares of Class A Common Stock
2,897,979 Redeemable Class A Warrants
8,315,039 Redeemable Class B Warrants
________________, 1997
___________________________
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus in connection with the offer made by this Prospectus
and, if given or made, such information and representations must not
be relied upon has having been authorized by the Company or the Selling
Securityholders. This Prospectus does not constitute an offer to
sell or any offer to buy any security other than the Warrants and shares
of Common Stock offered by this Prospectus, nor does it constitute an
offer to sell or a solicitation of any offer to buy the Warrants and
shares of Common Stock by anyone in any jurisdiction in which
such offer or solicitation is not authorized to do so, or
in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that information contained herein is correct as of
any time subsequent to the date hereof.
____________________________
TABLE OF CONTENTS
Page
____
Available Information 5
Incorporation of Certain Documents by Reference 5
The Company 7
Risk Factors 9
Use of Proceeds 23
Dividend Policy 23
Limitation of Liability andIndemnification 23
Selling Securityholders 24
Description of Securities 28
Legal Matters 35
Experts 35
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Registrant in connection
with the issuance and distribution of the securities being registered
are as follows:
Amount
_______________
SEC Registration Fee $ 19,767.00
Nasdaq Fees 7,500.00
Printing and Engraving Expense 5,000.00
Accounting Fees and Expenses 20,000.00
Legal Fees and Expenses 175,000.00
Blue Sky Fees and Expenses 14,000.00
Miscellaneous Expenses 20,000.00
_______________
Total $261,267.00
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law which
covers the indemnification of directors, officers, employees and agents
of a corporation is hereby incorporated herein by reference. Reference
is made to Article Ninth of Registrant's Articles of Incorporation and
Article V of Registrant's By-Laws which provide for indemnification by
the Registrant in the manner and to the full extent permitted by
Delaware law.
The Company has obtained a directors and officers insurance policy.
Item 16. Exhibits.
(a) 4.1 Warrant Agreement, dated February 18, 1997 with
attached Form of Class A Warrant expiring February
18, 2002 and Form of Class B Warrant expiring
February 18, 2002
4.2 Amendment to Warrant Agreement of January 25, 1995,
dated February 18, 1997
4.2 Form of Placement Agent's Unit Purchase Option
5.1 Opinion of Bachner, Tally, Polevoy & Misher LLP
23.1 Consent of Richard Eisner & Company, LLP (included on
page II-4)
23.2 Consent of Bachner, Tally, Polevoy & Misher LLP
(included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
Item 17. Undertakings
Undertaking Required by Regulation S-B, Item 512(a).
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material changes to such
information to the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
Undertaking required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
controlling persons pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable ground to believe
that it meets all of the requirements for filing on Form S-3 and
authorized this Registration Statement or amendment thereto to be
signed on its behalf by the undersigned, in the City of New York,
State of New York, on this 21st day of May, 1997.
INFOSAFE SYSTEMS, INC.
By: _/s/ Arthur R. Medici__________
Arthur R. Medici, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below under the heading "Signatures" constitutes
and appoints each of Arthur R. Medici and Alan N. Alpern his true and
lawful attorney-in-fact and agent, each with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign any or all amendments
(including post effective amendments) to this Registration Statement
(or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises,
as fully and for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-
fact and agent or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Name Title Date
__________________________ _______________________ ____________
_/s/ Arthur R. Medici_____ President and Chief May 22, 1997
Arthur R. Medici Executive Officer (Principal
Executive Officer) and
Director
_/s/ Thomas H. Lipscomb___ Chairman of the Board of May 22, 1997
Thomas H. Lipscomb Directors
_/s/ Alan N. Alpern_______ Chief Financial and Legal May 22, 1997
Alan N. Alpern Officer and Director
_/s/ Patrick Brosnan______ Controller May 22, 1997
Patrick Brosnan (Principal Accounting
Officer)
_/s/ Charles C. Johnston__ Director May 22, 1997
Charles C. Johnston
_/s/ Robert S. Christie___ Director May 22, 1997
Robert S. Christie
Exhibit 4.1
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:
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 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 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, 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 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 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 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 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.
(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.
(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 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 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 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 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 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 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:
(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 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
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.
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
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 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 February 18, 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.
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
[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.
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
_______________________________
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.
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.
The term "Expiration Date" shall mean 5:00 P.M. (New York
time) on February 18, 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 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
[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.
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
_______________________________
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.
EXHIBIT 4.2
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 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"). 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:
(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.
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
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 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 February 18, 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.
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
[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.
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
_______________________________
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.
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.
The term "Expiration Date" shall mean 5:00 P.M. (New York
time) on February 18, 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 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
[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.
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
_______________________________
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.
EXHIBIT 4.3
Option to Purchase
_______ Units
FORM OF
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 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 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 (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 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.
(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 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
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 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.
(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 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 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 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.
(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:
__________________________
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
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
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:
EXHIBIT 5.1
May 20, 1997
Infosafe Systems, Inc.
342 Madison Avenue
New York, NY 10173
Gentlemen:
We have acted as counsel to Infosafe Systems, Inc. (the "Company")
in connection with its filing of a registration statement on Form S-3
File No. 333-_____ (the "Registration Statement") covering
(i) 1,603,274 Units, each Unit consisting of one share of Class A
Common Stock, $.01 par value (the "Class A Common Stock"), 1.11721
redeemable Class A Warrants, each Class A Warrant exercisable for one
share of Class A Common Stock and one Class B Warrant, and 1.11721
redeemable Class B Warrants exercisable for one share of Class A Common
Stock (the "Warrants") and (ii) certain other securities of the
Company including shares of Class A Common Stock issuable upon exercise
of outstanding warrants of the Company, as more particularly set forth
in the Registration Statement.
In our capacity as counsel to the Company, we have examined the
Company's Certificate of Incorporation, as amended and By-laws, as
amended to date, and the minutes and other corporate proceedings of the
Company.
With respect to factual matters, we have relied upon statements
and certificates of officers of the Company. We have also reviewed
such other matters of law and examined and relied upon such other
documents, records and certificates as we have deemed relevant hereto.
In all such examinations we have assumed conformity with the original
documents of all documents submitted to us as originals and the
genuineness of all signatures on all documents submitted to us.
On the basis of the foregoing, we are of the opinion that:
(i) the shares of Class A Common Stock covered by the
Registration Statement which are currently outstanding have been
validly authorized and are legally issued, fully paid and non-
assessable;
(ii) the Warrants included in the Units and Warrants issuable
upon exercise of the Unit Purchase Option issued to D.H. Blair
Investment Banking Corp. (the "Unit Purchase Option") will, when
sold as contemplated by the Registration Statement, constitute
legal, valid and binding obligations of the Company; and
(iii) the shares of Class A Common Stock issuable upon
exercise of the foregoing Warrants and the Unit Purchase Option
will, upon issuance and payment in accordance with the terms of
the Warrants and Unit Purchase Option, be legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and the reference made to us under the
caption "Legal Matters" in the prospectus constituting part of the
Registration Statement.
Very truly yours,
_/s/ BACHNER, TALLY, POLEVOY & MISHER LLP____
BACHNER, TALLY, POLEVOY & MISHER LLP
SBM:dmc
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration
Statement being filed by Infosafe Systems Inc. on Form S-3 of our
report, dated October 22, 1996, appearing in its Annual Report on
Form 10K-SB for the year ended July 31, 1996, and to the reference
to our firm under the caption "Experts" in the Prospectus.
_/s/ Richard A. Eisner_____
Richard A. Eisner
RICHARD A. EISNER & COMPANY, LLP
New York, New York
May 15, 1997
