AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1996
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
OBJECTSOFT CORPORATION
(Name of small business issuer in its charter)
Delaware 7373 22-3091075
(State of other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation Classification
or organization) Code Number)
---------------------
Continental Plaza III, 433 Hackensack Avenue,
Hackensack, New Jersey 07601 (201)343-9100
(Address and telephone number of principal
executive offices)
---------------------
Continental Plaza III, 433 Hackensack Avenue,
Hackensack, New Jersey 07601 (Address of principal
place of business or intended principal place of
business)
---------------------
David E.Y. Sarna, Chairman
ObjectSoft Corporation
Continental Plaza III, 433 Hackensack Avenue,
Hackensack, New Jersey 07601
(201)343-9100 (Name, address and
telephone number of agent for service)
---------------------
Copies to:
Melvin Weinberg, Esq. C. Walter Stursberg, Jr., Esq.
Parker Chapin Flattau & Klimpl, LLP Stursberg & Veith
1211 Avenue of the Americas 405 Lexington Avenue - Suite 4949
New York, New York 10036 New York, New York 10174-4902
(212) 704-6000 (212) 922-1177
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective 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, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_] __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
---------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT PROPPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
=====================================================================================================================
Units, each Unit (the 1,437,500 $7.00 $10,062,500 $ 3,469.55
"Units") consisting of
one share of Common
Stock, par value $.0001
per share ("Common
Stock"), and one Class A
Warrant to purchase
one share of Common
Stock ("Class A
Warrant")
- ---------------------------------------------------------------------------------------------------------------------
Common Stock included in 1,437,500 -- -- --
the Units
- ---------------------------------------------------------------------------------------------------------------------
Class A Warrants included 1,437,500 -- -- --
in the Units
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon 1,437,500 $9.10 $13,081,250 $ 4,510.42
exercise of the Class A
Warrants included in the
Units
- ---------------------------------------------------------------------------------------------------------------------
Representative's Unit 125,000 $.0001 $ 100 $ .03
Purchase Option
- ---------------------------------------------------------------------------------------------------------------------
Units issuable upon exercise 125,000 $8.40 $ 1,050,000 $ 362.04
of the Unit Purchase Option
- ---------------------------------------------------------------------------------------------------------------------
Common Stock included in the 125,000 -- -- --
Units issuable upon exercise
of the Unit Purchase Option
- ---------------------------------------------------------------------------------------------------------------------
Class A Warrants included in 125,000 -- -- --
the Units issuable upon
exercise of the Unit Purchase
Option
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon 120,000 $9.10 $ 1,137,500 $ 392.21
exercise of the Class A
Warrants included in the
Units issuable upon exercise
of the Unit Purchase Option
- ---------------------------------------------------------------------------------------------------------------------
Units issuable upon exercise 37,500 $7.00 $ 262,500 $ 90.51
of the Placement Agent's
Warrant
- ---------------------------------------------------------------------------------------------------------------------
Common Stock included in the 37,500 -- --
Units issuable upon exercise --
of the Placement Agent's Warrant
- ---------------------------------------------------------------------------------------------------------------------
Class A Warrants included in 37,500 -- -- --
the Units issuable upon exercise
of the Placement Agent Warrant
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon 37,500 $9.10 $ 341,250 $ 117.66
exercise of the Class A
Warrants included in the Units
issuable upon exercise of the
Placement Agent Warrant
- ---------------------------------------------------------------------------------------------------------------------
Units issuable upon exercise 375,000 $7.00 $ 2,625,000 $ 905.51
of the Bridge Warrants
- ---------------------------------------------------------------------------------------------------------------------
Common Stock included in the 375,000 -- -- --
Units issuable upon exercise
of the Bridge Warrants
- ---------------------------------------------------------------------------------------------------------------------
Class A Warrants included in 375,000 -- -- --
the Units issuable upon
exercise of the Bridge Warrants
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon 375,000 $9.10 $ 3,412,500 $ 1,176.63
exercise of the Class A
Warrants included in the
Units issuable upon exercise
of the Bridge Warrants
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issued in 273,001 $7.00 $ 1,911,000 $ 658.92
the July 1996 Offering
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable 182,004 $7.00 $ 1,274,028 $ 439.29
upon exercise of July 1996
Warrants issued in the
July 1996 Offering
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable 27,300 $7.00 $ 191,100 $ 65.90
upon exercise of July
Placement Warrant
- ---------------------------------------------------------------------------------------------------------------------
<PAGE>
TITLE OF EACH CLASS AMOUNT PROPPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1)(2) REGISTRATION FEE
=====================================================================================================================
Common Stock issuable on 18,200 7.00 $ 127,400 $ 43.93
exercise of July 1996
Warrants issuable upon
exercise of the July
Placement Warrant
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable 106,250 7.00 $ 743,750 $ 256.45
upon exercise of Investor
Warrants
- ---------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon 43,333 7.00 $ 303,331 $ 104.59
exercise of Officer Warrants
- ---------------------------------------------------------------------------------------------------------------------
Common Stock for resale 69,000 7.00 $ 486,500 $ 167.75
by certain Selling
Securityholders
- ---------------------------------------------------------------------------------------------------------------------
TOTAL $37,009,609 $ 12,761.36
=====================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(o).
(2) Pursuant to Rule 416, there are also being registered such additional
number of Units, shares of Common Stock, and Class A Warrants as may
be issuable, as the case may be, pursuant to the anti-dilution
provisions of the Unit Purchase Option, Class A Warrants, Bridge
Warrants, Placement Agent's Warrant, July 1996 Warrants, July
Placement Warrant, Investor Warrants and Officer Warrants.
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) 1,437,500
units ("Units"), including Units to cover over-allotments, if any; each Unit
consisting of one share of Common Stock, $.0001 par value ("Common Stock"), of
ObjectSoft Corporation, a Delaware corporation (the "Company"), and one
redeemable Class A Warrant ("Class A Warrants"), for sale by the Company in an
underwritten public offering and (ii) an additional 412,500 Units and 719,588
shares of Common Stock (collectively, the "Selling Securityholder Securities"),
all for resale by the holders thereof or of certain outstanding warrants (the
"Selling Securityholders") from time to time, subject to the contractual
restriction that certain Selling Securityholders may not sell their Selling
Securityholder Securities for periods of nine or 12 months after the completion
of the underwritten offering without the prior written consent of the
representative of the underwriters.
The complete Prospectus relating to the underwritten offering follows
immediately after this Explanatory Note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the Selling
Securityholder Securities, including alternative front and back cover pages and
sections entitled "Concurrent Public Offering," "Plan of Distribution," and
"Selling Securityholders" to be used in lieu of the sections entitled
"Concurrent Registration of Common Stock" and "Underwriting" in the Prospectus
relating to the underwritten offering. Certain sections of the Prospectus for
the underwritten offering, such as "Use of Proceeds" and "Dilution," will not be
used in the Prospectus relating to the Selling Securityholder Securities.
<PAGE>
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
SUBJECT TO COMPLETION, DATED AUGUST 20, 1996
PROSPECTUS
1,250,000 Units
OBJECTSOFT CORPORATION [LOGO]
Each Unit consisting of one Share
of Common Stock and one Redeemable Class A Warrant
-------------------
ObjectSoft Corporation (the "Company") hereby offers 1,250,000 Units,
each Unit consisting of one share of the Company's common stock, par value
$.0001 per share (the "Common Stock"), and one Redeemable Class A Warrant (the
"Class A Warrants") of the Company (the "Offering"). The shares of Common Stock
and the Class A Warrants comprising the Units are immediately detachable and
separately transferable upon issuance. See "Underwriting."
Each Class A Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $____ per share (130% of the
initial public offering price per Unit), subject to adjustment, at any time
commencing _________ __, 1997 (one year after the date of this Prospectus) until
_________ __, 2001 (five years after the date of this Prospectus). The Class A
Warrants are redeemable by the Company at a price of $.10 per Class A Warrant
commencing one year after the date of this Prospectus (or earlier with the prior
consent of Renaissance Financial Securities Corporation, the representative of
the Underwriters (the "Representative")), on not less than 30 days prior written
notice to the holders thereof, provided the average closing bid quotation of the
Common Stock as reported on the NASDAQ SmallCap Market ("NASDAQ"), if traded
thereon, or if not traded thereon, the average closing bid quotation of the
Common Stock if listed on a national securities exchange (or other reporting
system that provides last sale prices), has been at least 130% of the then
current exercise price of the Class A Warrants (initially, $_____ per share),
for a period of 20 consecutive trading days ending within 15 days of the date on
which the Company gives notice of redemption. The Class A Warrants will be
exercisable until the close of business on the day immediately preceding the
date fixed for redemption. See "Underwriting" and "Description of Securities -
Class A Warrants."
It is anticipated that the Units will be sold at a price between
$5.00 and $7.00 per Unit. Prior to the Offering, there has been no public market
for the Units, the Common Stock or the Class A Warrants, and there can be no
assurance that any such market will develop after the closing of the Offering or
that, if developed, it will be sustained. The offering price of the Units and
the initial exercise price and other terms of the Class A Warrants were
established by negotiation between the Company and the Representative and do not
necessarily bear any direct relationship to the Company's assets, earnings, book
value per share or other generally accepted criteria of value. See
"Underwriting." The Company has applied for inclusion of the Common Stock and
the Class A Warrants on NASDAQ under the symbols OSFT and OSFTW, respectively.
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF
LOSS OF THEIR ENTIRE INVESTMENT SHOULD INVEST. FOR A
DESCRIPTION OF CERTAIN RISKS REGARDING AN INVEST-
MENT IN THE COMPANY AND IMMEDIATE SUBSTANTIAL
DILUTION, SEE "RISK FACTORS"AND "DILUTION."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
Per Unit............$ $ $
Total (3)...........$ $ $
================================================================================
(footnotes on following page)
<PAGE>
(1) Does not include additional compensation to the Underwriters
consisting of (i) a non-accountable expense allowance payable to the
Representative equal to 3% of the gross proceeds of the Offering, of
which $50,000 has been paid by the Company to date, (ii) an option to
be granted to the Representative to purchase 125,000 Units at a price
of $____ per Unit exercisable for four years commencing one year from
the date of this Prospectus (the "Representative's Unit Purchase
Option") and (iii) a financial consulting agreement with the
Representative for three years from the closing of the Offering at an
aggregate fee of $150,000, the first year of which ($50,000) is
payable at such closing. The Company has agreed to pay to the
Representative, under certain circumstances, a warrant solicitation
fee of 5% of the exercise price for each Class A Warrant exercised.
The Company has also agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act
of 1933 (the "Securities Act"). See "Underwriting."
(2) After deducting discounts and commissions payable to the
Underwriters, but before payment of the Representative's
non-accountable expense allowance ($_______, or $_______ if the
Over-allotment Option, defined below, is exercised in full), the
other expenses of the Offering payable by the Company (estimated at
$_________) and the consulting fee for the first year after the
closing of the Offering. See "Underwriting."
(3) The Company has granted the Representative an option, exercisable
within 45 days from the date of this Prospectus, to purchase up to
187,500 additional Units on the same terms set forth above, solely to
cover over-allotments, if any (the "Over-allotment Option"). If this
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $_________,
$_______ and $_________, respectively. See "Underwriting."
--------------------------
Concurrently with the Offering, the Company has registered under the
Securities Act, the offering of 719,588 shares of Common Stock that are
outstanding or issuable upon the exercise of warrants (the "Selling
Securityholder Shares") and 412,500 Units issuable upon the exercise of warrants
(collectively, the "Selling Securityholder Securities") on behalf of certain of
its stockholders and holders of certain warrants (the "Selling
Securityholders"), pursuant to a Selling Securityholder Prospectus included
within the Registration Statement of which this Prospectus forms a part. The
Selling Securityholders include the Representative with respect to 37,500 Units
issuable upon the exercise of a warrant to purchase Units (the "Placement
Agent's Warrant") granted to the Representative in its capacity as the placement
agent for a private offering, in March - June 1996, of bridge loans (the "Bridge
Loans") and warrants (the "Bridge Loan Offering"). The Selling Securityholder
Securities are not part of this underwritten Offering, however, and 375,000
Units and the Selling Securityholder Shares may not be sold prior to the
expiration of 12 months (nine months in the case of 106,250 of such shares)
after the date of this Prospectus without the prior written consent of the
Representative. The Company will not receive any of the proceeds from the sale
of the Selling Securityholder Securities, but will receive the proceeds of the
exercise, if any, of the various warrants pursuant to which the 412,500 Units
and 377,087 of the Selling Securityholder Shares are issuable. See "Certain
Transactions" and "Concurrent Offering."
The Units are offered by the Underwriters subject to prior sale,
when, as and if delivered to and accepted by the Underwriters and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify the Offering and to
reject any order in whole or in part. It is expected that delivery of
certificates representing the Units will be made against payment therefor at the
offices of the Representative, 200 Old Country Road, Mineola, New York 11501, on
or about _________, 1996.
RENAISSANCE FINANCIAL SECURITIES CORPORATION
The date of this Prospectus is ___________, 1996
-2-
<PAGE>
[PICTURES OF KIOSKS TO COME]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS,
THE COMMON STOCK OR THE CLASS A WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
As of the date of this Prospectus, the Company will become subject to
the reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), and, in accordance therewith, will file reports, proxy and information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information can be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following regional offices: New York Regional Office,
Suite 1300, 7 World Trade Center, New York, New York 10048, and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at prescribed rates. Electronic registration
statements made though the Electronic Data Gathering Analysis and Retrieval
("EDGAR") System are publicly available through the Commission's Website
(http://www.sec.gov). See "Additional Information."
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other reports as the Company
deems appropriate or as may be required by law.
ObjectSoft(TM), SmartStreet(TM), OLEBroker(TM), and CafeOLE(TM) are
trademarks of the Company. This Prospectus also includes other trademarks and
trade names of the Company and trademarks, service marks and trade names of
other companies, including ActiveX(TM), a trademark of Microsoft Corporation
("Microsoft").
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, all of the
information contained herein (i) gives effect to the mandatory redemption of the
212,500 outstanding shares of the Company's Series A Preferred Stock upon
closing of the Offering and (ii) assumes that the Over-allotment Option and the
Representative's Unit Purchase Option are not exercised and that no other
outstanding options or warrants to purchase Common Stock are exercised. To aid
the reader, a Glossary of technical terms has been included on page 40 of this
Prospectus.
THE COMPANY
The Company is in the business of providing information and
transaction-based services using proprietary software and off-the-shelf,
reusable software components based on Microsoft's ActiveX(TM) (formerly OLE)
component technology. The Company's strategy is initially to provide information
and services through public access kiosks, known as SmartStreet(TM), over
private networks known as Intranets. The kiosks will be located in high density
pedestrian traffic areas. The first five kiosks were deployed in New York City
in July 1996 under an agreement with the City of New York (the "City"). Kiosk
users are able to obtain information and documents and transact certain business
without the necessity of interacting directly with City employees or appearing
personally at certain City offices.
In early 1996, the City of New York entered into an agreement with
the Company to develop public kiosks to be located in City offices and other
public locations in an effort to expedite transactions with the City. Using the
first five kiosks currently operating and additional kiosks that the Company
anticipates locating throughout the New York City area, members of the public
can obtain certain information and documents from the Buildings Department and
the Department of Health, as well as information about City government and
elected officials and general information about transportation and attractions
in New York.
The kiosks are configured to permit the Company to offer additional
services provided either by the Company or third parties and to sell advertising
on such kiosks. Under the agreement with the City, a portion of the revenue, if
any, derived from such services and advertising will be shared with the City.
The Company will seek to provide SmartStreet(TM) services to other
municipalities, states and government agencies and to organizations in the
private sector that provide a large volume of information, records and documents
to the public. The Company may also seek to enter into agreements with the City
and other customers to provide information and services over the Internet, in
order to significantly expand the accessibility of such information and
services.
The Company also operates an Internet-based site, OLEBroker(TM), a
subscription service that allows customers to search its database of information
about software components, find the
-3-
<PAGE>
information needed and at the customer's option, purchase needed components
on-line. This service is of benefit to customers developing computer programs
for Microsoft Windows, and subscribers to OLEBroker(TM) come from over 16
countries.
In addition to developing products and services for its own account,
the Company has in the past provided, and continues to provide, educational and
consulting services related to the Internet, reusable software components and
rapid application development. Clients for these services have come from a
variety of industries, including the insurance, manufacturing and fashion
industries, as well as from the public sector. The Company has written technical
papers published by Microsoft.
ObjectSoft Corporation was incorporated in Delaware in January 1996
and is the surviving corporation of the merger on January 31, 1996 (the
"Merger") between it and its predecessor, ObjectSoft Corporation, a New Jersey
corporation ("ObjectSoft-NJ"), which was incorporated in December 1990. The sole
purpose of the Merger was to effect a change of the corporate domicile of
ObjectSoft-NJ to Delaware. The Company was organized as a wholly-owned
subsidiary of ObjectSoft-NJ; prior to the Merger, the Company conducted no
business unrelated to its organization or to effecting the Merger. Throughout
this Prospectus, the "Company" will, unless the context otherwise requires,
include ObjectSoft-NJ.
The Company's executive offices are located at Continental Plaza III,
433 Hackensack Avenue, Hackensack, New Jersey 07601; its telephone number is
(201) 343-9100; its facsimile number is (201) 343-0056; and its Internet e-mail
address is [email protected].
-4-
<PAGE>
THE OFFERING
Securities being offered hereby.....1,250,000 Units, each Unit consisting of one
share of Common Stock and one Class A
Warrant. Each Class A Warrant entitles the
holder thereof to purchase one share of
Common Stock at a price of $ ____ per share
(130% of the initial public offering price
per Unit), subject to adjustment, at any
time commencing one year after the date of
this Prospectus until five years after the
date of this Prospectus. The Class A
Warrants may be redeemed by the Company
commencing one year from the date of this
Prospectus (or earlier with the consent of
the Representative), upon 30 days notice,
provided the closing bid quotation for the
Common Stock has exceeded 130% of the
exercise price of the Class A Warrants
(initially, $_____ per share) for at least
20 consecutive trading days ending within 15
days of the date of the notice of
redemption. See "Description of Securities."
The shares of Common Stock and the Class A
Warrants comprising the Units are
immediately detachable and separately
transferable upon issuance. See
"Underwriting."
Offering Price .....................$_____ per Unit
Common Stock Outstanding prior to
Offering (1).......................2,566,001 shares
Common Stock to be Outstanding
after the Offering (1)............3,816,001 shares
Class A Warrants to be
Outstanding after the
Offering (2).......................1,250,000 Class A Warrants
-5-
<PAGE>
Risk Factors........................The securities offered hereby involve a high
degree of risk and substantial dilution to
public investors. See "Risk Factors" and
"Dilution."
Use of Proceeds.....................Repayment of the Bridge Loans, mandatory
redemption of Series A Preferred Stock,
working capital (including payment of
deferred compensation to executive officers)
and general corporate purposes. See "Use of
Proceeds."
Proposed NASDAQ symbols:
Common Stock.....................OSFT
Class A Warrants.................OSFTW
- ------------------------------
(1) Does not include: (i) 1,250,000 shares issuable upon exercise of the
Class A Warrants included in the Units offered hereby, (ii) up to
375,000 shares included in the Units issuable upon exercise of the
Over-allotment Option and issuable upon exercise of the Class A
Warrants included in such Units, (iii) 250,000 shares included in the
Units (and upon exercise of the Class A Warrants included in such
Units) issuable upon exercise of the Representative's Unit Purchase
Option, (iv)143,333 shares issuable upon exercise of warrants issued
to certain present and former members of senior management (the
"Officer Warrants"), (v ) 60,000 shares issuable upon exercise of
options held by consultants, (vi) 106,250 shares issuable upon
exercise of warrants granted to investors in connection with certain
prior financings by the Company (the "Investor Warrants"), (vii)
750,000 shares included in the Units (and upon exercise of the Class
A Warrants included in such Units) issuable upon exercise of warrants
issued to investors in the Bridge Loan Offering (the "Bridge
Warrants"), (viii) 75,000 shares included in the Units (and upon
exercise of the Class A Warrants included in such Units) issuable
upon the exercise of the Placement Agent's Warrant issued to the
Representative in connection with the Bridge Loan Offering, (ix)
182,004 shares issuable upon exercise of warrants (the "July 1996
Warrants") issued to investors in the Company's July and August 1996
private equity offering (the "July 1996 Offering") of 273,001 units
each consisting of one share of Common Stock and one July 1996
Warrant (the "July 1996 Units"), (x) 45,500 shares issuable upon
exercise of the warrant (and the July 1996 Warrants issuable upon
exercise of such warrant) issued to the placement agent of the July
1996 Offering (the "July Placement Warrant"), (xi) 20,000 shares
issuable upon the exercise of warrants issued to a principal
stockholder of the Company in connection with the redemption of the
Company's Series B Preferred Stock, and (xii) 250,000 shares reserved
for issuance under the Company's 1996 Stock Option Plan, options for
145,000 of which have been granted. See "Management," "Certain
Transactions," "Description of Securities" and "Underwriting."
(2) Does not include 725,000 Class A Warrants, of which (i) 187,500 are
included in the Units issuable upon the exercise of the
Over-allotment Option, (ii) 125,000 are included in the Units
-6-
<PAGE>
issuable upon the exercise of the Representative's Unit Purchase
Option, (iii) 375,000 are included in the Units issuable upon the
exercise of the Bridge Warrants, and (iv) 37,500 are included in the
Units issuable upon the exercise of the Placement Agent's Warrant.
See "Certain Transactions," "Description of Securities" and
"Underwriting."
-7-
<PAGE>
SUMMARY FINANCIAL INFORMATION
(In thousands, except per share amounts)
The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus. Such information
should be read in conjunction with such financial statements, including the
notes thereto.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
STATEMENT OF OPERATIONS DATA: 1995 1996 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Consulting $ 282,562 $ 258,000 $ 509,920 $ 447,976
Development and Training 97,900 37,954 245,836 118,618
Net loss (13,798) (300,722) (45,504) (122,400)
Net loss applicable to common stock (23,361) (316,535) (64,629) (141,525)
Net loss per share of common stock (0.01) (0.11) (0.02) (0.05)
Weighted average number of common stock 2,894,418 2,897,418 2,894,418 2,894,418
outstanding
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1996
------------------ ----------------------------------------------
BALANCE SHEET DATA: Historical Pro Forma(1) As Adjusted(2)
---------- ------------ --------------
<S> <C> <C> <C> <C>
Working capital (deficiency) ($390,290) $ 246,384 $ 937,669 $ 5,444,200
Total assets 343,534 1,107,160 1,698,445 6,201,768
Redeemable preferred stock 383,906 393,469 268,469 --
Accumulated deficit (877,404) (1,193,939) (1,193,939) (1,385,201)
Total stockholders' equity (598,844) (787,854) 28,431 5,962,169
(capital deficiency)
</TABLE>
(1) Gives effect to the sale of 273,001 shares of Common Stock and July
1996 Warrants to purchase 182,004 shares of Common Stock in July and
August 1996 and the redemption of the Company's Series B Preferred
Stock in July 1996.
(2) Assumes an offering price per Unit of $6.00, the midpoint of the
range set forth on the cover page of this Prospectus, and gives
effect to (i) the sale of 1,250,000 Units offered hereby and the
application of the estimated net proceeds therefrom, including the
repayment of $1,250,000 principal amount of the Bridge Loans
outstanding, plus accrued interest thereon and redemption of the
Series A Preferred Stock at its liquidation value of $212,500 plus
accrued dividends, (ii) the sale of the July 1996 Units and the
issuance of the July Placement Warrant and (iii) the redemption of
the Series B Preferred Stock at its liquidation value of $125,000 and
the issuance of the warrants to purchase 20,000 shares of Common
Stock at $7.00 per share in connection therewith. See "Use of
Proceeds" and "Certain Transactions."
-8-
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be carefully considered in evaluating the Company before
purchasing the Units offered by this Prospectus:
LIMITED OPERATING HISTORY; RECENT ESTABLISHMENT OF NEW BUSINESS DIVISIONS;
POTENTIAL FUTURE OPERATING LOSSES
The Company was founded in 1990, has only a limited operating history
and recently changed its focus from consulting and training services to
transactional fee-based products and services. Consequently, any analysis of the
Company's prior operations has only minimal relevance to an evaluation of the
Company, its current products and services, and its prospects. The Company's
Intranet-based SmartStreet(TM) kiosk service business, as well as its Internet
service business (consisting primarily of the operation of OLEBroker(TM)), have
been recently created, are limited in scope and have not generated significant
revenues to date.
The operations to which the Company is now devoting its resources are
in the early stages of development. There can be no assurance that the Company
will be successful in attracting new customers or retaining current customers
for its new business divisions or in generating significant revenues or profits
from such business divisions. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets. To address these risks, the Company must, among other
things, respond to competitive developments, attract, retain and motivate
qualified product development and marketing personnel, and continue to upgrade
its existing technologies, develop new technologies and commercialize products
and services incorporating such technologies. There can be no assurance that the
Company will be successful in addressing such risks. The Company may also be
required to enter into strategic alliances to effect cooperative development
efforts in order to have the financial and technical resources to respond to
changing market demands on a timely basis. There can be no assurance that
entities with the necessary technical or financial resources will be willing to
enter into such alliances with the Company on acceptable terms or at all.
The Company has incurred, and will continue to incur, significant
costs in connection with the development of its Intranet kiosk and Internet
operations, which may result in operating losses. There can be no assurance that
such operations will ultimately generate significant revenues for the Company or
that the Company will achieve profitable operations.
During the period of April through June 1996, in the Bridge Loan
Offering, the Company issued promissory notes in the aggregate amount of
$1,250,000 and the Bridge Warrants. The Company will be required to amortize the
"original issue discount" incurred in connection with such
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<PAGE>
bridge loans (the "Bridge Loans") and the issuance of the Bridge Warrants over
the period of time such loans are outstanding. Assuming such bridge loans are
repaid not later than September 30, 1996, the Company's financial statements
reflected, and will reflect, amortization of the discount of approximately
$77,000 and $191,000 in the three month periods ending June 30, and September
30, 1996, respectively. The Company incurred a loss for the six months ended
June 30, 1996 and even if it shows earnings from operations for the three months
ending September 30, 1996, will, in all likelihood, incur a loss for the nine
months ending September 30, 1996. In addition, the issuance, in the July 1996
Offering, of shares of Common Stock and warrants to purchase Common Stock at
prices below the price per Unit of the Units offered hereby reduces the loss per
share for the year ended December 31, 1995 and the six months ended June 30,
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note D of the Notes to Financial Statements.
DEPENDENCE ON NEW, UNTESTED PRODUCT
The Company has recently refocused its efforts to concentrate on the
development of kiosks based on Internet technology from which it hopes to derive
transaction-based and advertising revenues. In January 1996, the Company entered
into an agreement with the City of New York pursuant to which the Company agreed
to install and operate a minimum of five kiosks at City offices and other
locations to provide expedited public access to various City government
services. However, the City has also entered into agreements with two other
entities to install and operate kiosks. The Company installed its first five
kiosks in July 1996, and such kiosks have been operating since that time.
The Company anticipates that revenues from the kiosks will be provided
by leasing fees paid by the service providers, such as the City, and by usage
fees paid by consumers who obtain City services through the kiosks. Although
kiosks are in operation in other municipalities, there can be no assurance that
the Company's kiosks will be able to operate consistently and efficiently to
provide the anticipated services, that members of the general public will find
the kiosks user-friendly, that they will be comfortable with or be willing to
pay the additional cost for, the convenience of using the kiosks to transact
business with the City by electronic means, that the City will be satisfied with
the results of the operations of the Company's kiosks, or that even if the
kiosks perform adequately, that the City and other potential users of similar
kiosks will not opt for the products of the Company's competitors. The Company
does not have any agreements to provide kiosks or other Intranet services to any
other customers, and its ability to market such services to other potential
customers will be highly dependent on the success and acceptance of the New York
City kiosks. Furthermore, the municipalities, states and other government
agencies that constitute a primary target market for the Company's kiosks are
subject to potentially severe budgetary constraints and cuts that may limit
their ability to fund the acquisition of new technology such as the kiosks.
In addition, the Company anticipates that a significant portion of the
revenues related to the kiosks will consist of leasing fees and usage fees
derived by providing unrelated transactions, such
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<PAGE>
as restaurant information and shopping services, to the users of the kiosks and
from commercial advertising by local and national companies and businesses. The
Company has engaged only in negotiating for agreements to provide such services
or advertising and has not as yet entered into any significant agreements. There
can be no assurance that commercial entities will be interested in marketing or
advertising their products and services by means of kiosks providing government
services, that such services or advertising can be sold at rates that will
provide significant revenues to the Company, or that such services or
advertising, if, commenced, will prove to be effective and will be continued.
See "Business - Products and Services - SmartStreet(TM) Kiosk Services."
RISKS RELATED TO OLEBROKER(TM) AND CONSULTING AND TRAINING SERVICES
Although the development of the OLEBroker(TM) service included the
development of much of the software used in the development and configuration of
the Company's kiosk technology, the service itself currently generates limited
revenues. The Company believes that while there will continue to be a growing
market for the OLEBroker(TM) service, particularly as the use of Microsoft
Windows programs increases, such market may consist primarily of persons
involved in computer programming, rather than computer users in general.
The Company has historically provided consulting and training services
primarily on a project basis, and long-term continuing projects have been
limited. There can be no assurance that the Company will obtain future
consulting projects. Furthermore, the Company will seek to accept consulting and
training assignments primarily in connection with the sale of kiosk services or
that will otherwise expand its skill base. See "Business - Products and Services
- - OLEBroker(TM) -- Consulting, Training and Authoring Services."
TECHNOLOGICAL FACTORS - UNCERTAINTY OF PRODUCT DEVELOPMENT, RAPID CHANGES,
MARKET ACCEPTANCE OF EVOLVING STANDARDS AND ERRORS INVOLVING THE PROPRIETARY
SOFTWARE OF THIRD PARTY COULD REQUIRE THE REDESIGN OF THE COMPANY'S PROPRIETARY
PROGRAMS
It is common for hardware and software as complex and sophisticated
as that employed by the Company in its kiosks to experience errors, or "bugs,"
both during development and subsequent to commercial introduction. As kiosks are
installed in New York City, the Company may identify such problems, either in
the software platforms developed by others or in its proprietary software. There
can be no assurance that all the potential problems will be identified, that any
bugs that are located can be corrected at all or on a timely basis, or that
additional errors will not be located in existing or future products at a later
time or when usage increases. Any such errors could delay commercial
introduction or use of existing or new products and require modifications in
systems that have already been installed. Remedying such errors could be costly
and time consuming, and bugs involving the proprietary software of third parties
could require the redesign of the Company's proprietary software. Delays in
debugging or modifying the Company's products could materially adversely affect
the Company's competitive position with respect to existing and new technologies
-11-
<PAGE>
and products offered by its competitors. In particular, delays in remedying
existing or newly identified errors in the Company's kiosks could materially
adversely affect the Company's ability to achieve significant market penetration
with the kiosks.
The markets the Company serves are subject to rapid technological
change, changing customer requirements, frequent new product introductions and
evolving industry standards that may render existing products and services
obsolete. As a result, the Company's position in its existing markets or other
markets that it may enter could be eroded rapidly by product advancements by
competitors. The life cycles of the Company's products and services are
difficult to estimate. The Company's future success will depend, in part, upon
its ability to enhance existing products and services and to develop new
products and services on a timely basis. In addition, its products and services
must keep pace with technological developments, conform to evolving industry
standards, particularly client/server and Internet communication and security
protocols, and publishing formats, and address increasingly sophisticated
customer needs. In particular, the success of the Company's kiosks will depend
in large measure on their being user-friendly to the general public. There can
be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products and services, or that new products and services and enhancements will
meet the requirements of the marketplace and achieve market acceptance. If the
Company is unable to develop and introduce products and services in a timely
manner in response to changing market conditions or customer requirements, the
Company's financial condition and results of operations would be materially and
adversely affected.
COMPETITION
The Company's Intranet kiosk business competes with numerous
companies, including IBM, North Communications, DSSI and NCR (currently a
division of AT&T). All of these companies have resources much greater than those
of the Company. The Company's contract with the City of New York is presently
the most significant part of this business. The City has also awarded
demonstration contracts, comparable to the contract awarded to the Company, to
North Communications and DSSI. Both North Communications and DSSI's primary
supplier have supplied kiosks to other municipalities. After fulfillment of the
initial contracts, if the City chooses to install additional kiosks throughout
the City of New York, it may award to others, and not the Company, the contract
to install such additional kiosks. Further, there can be no assurance that other
municipalities or other entities will seek to acquire kiosks from the Company.
In addition, if the use of kiosks provided by the Company and others proves to
be successful in New York City and other municipalities and locations,
additional companies in the software, hardware and communications areas, among
others, may seek to enter the market.
OLEBroker's(TM) competition includes Fawcette Technical Publications,
which offers a website concerning OLE components and which is supported by
advertising revenues. At this time, the site does not offer vendor's help files,
although this could change in the future. Cybersource offers a website called
SoftwareNet for the sale of software, including software components on-line, and
a
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<PAGE>
Canadian subsidiary of Sterling Software also provides electronic commerce.
Objects are generally listed on OLEBroker(TM) on a non-exclusive basis. While
OLEBroker(TM) competes on the basis of the organization, comprehensiveness and
accessibility of its offerings, the barriers to entry in the field are limited
and additional competitors are expected to enter the field. Many of these will
have resources far greater than the Company. See "Business -- Competition."
CONTRACT REQUIREMENTS
The Company's kiosks are initially being marketed to entities
including municipalities, states and other government agencies, among others. As
governmental authorities, these prospective purchasers are subject to public
contract requirements which vary from one jurisdiction to another and include
regulations relating to insurance coverage, non-discrimination in hiring
practices, access to the disabled, and record-keeping, among other things. Some
public contract requirements may be onerous or even impossible for the Company
to satisfy, such as large bonding requirements, and the Company may be precluded
from making sales in these jurisdictions. In addition, public contracts
frequently are awarded only after a formal competitive bidding process. The
process to date has been and may continue to be protracted. Even following
contract award, significant delays in contract implementation are possible. See
"Business - Governmental Regulation."
RELIANCE ON MICROSOFT IN MARKETING
The Company has established a strategic relationship with Microsoft
that it believes is important to its sales, marketing and support activities, as
well as to its product development efforts relating to its kiosks. Microsoft has
provided technical and marketing support to the Company in connection with the
development and marketing of its kiosk services, has indicated that it will
exhibit the Company's kiosks in Microsoft displays at various trade shows and
has issued public statements that included favorable references to the Company's
products. The Company serves as regional director of Microsoft's "Developer
Days" program, an on-going series of conferences, from which the Company derives
publicity and exposure to senior Microsoft personnel. In addition, the Company
also benefits from Microsoft's continued willingness to enter into
non-disclosure agreements with the Company with respect to unannounced Microsoft
products, under which the Company has the opportunity to have advance knowledge
of software technology being developed be Microsoft. There is no assurance that
Microsoft will continue to support the Company's products, continue the
Company's participation in the Developer Days program or enter into such
agreements with the Company in the future. The Company also obtains benefits
from a Cooperation Agreement, under which Microsoft offers customers for certain
of its software products a discounted subscription rate on OLEBroker(TM). The
Cooperation Agreement has an initial one year term that concludes in November
1996. While an extension of the term is currently being negotiated, there is no
assurance that Microsoft in the future will not elect to terminate the
Cooperation Agreement or enter into similar agreements with the Company's
competitors. If Microsoft were to sever its relationships with
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<PAGE>
the Company, the Company's sales and financial condition could be severely and
adversely affected. See "Business - Products and Services."
DEPENDENCE UPON MICROSOFT'S WINDOWS OPERATING SYSTEM
The Company has invested in software built on Microsoft's Internet
Explorer, Windows NT and Windows 95 platforms and has written in certain
programming languages designed for these operating systems. To the extent that
such platforms do not remain competitive, the Company might have to expend
significant time and resources to port its software to other platforms. Any
factor adversely affecting the demand for, or use of, Microsoft's Windows
operating system could have an impact on demand for the Company's products or
services causing a material adverse effect on the Company's business, results of
operations and financial condition. Additionally, any changes to the underlying
components of the Windows operating system that would require changes to the
Company's products would materially adversely affect the Company if it were not
able successfully to develop or implement such changes in a timely fashion.
DEPENDENCE UPON COMMON CARRIERS AND INTERNET ACCESS PROVIDERS
The Company is also dependent on various regulated common carriers and
unregulated Internet access providers, such as AT&T, Bell Atlantic, NYNEX, and
NYSERNET. In the event such carriers or providers cannot timely respond to the
Company's requirements for service, fail to provide reliable service or increase
their rates substantially, the Company's service or profitability could be
adversely effected.
DEPENDENCE ON THE INTERNET
Sales of the Company's Internet-related products and services,
including its OLEBroker(TM) and new or expanded products and services, if any,
will depend in large part upon a robust industry and infrastructure for
providing commercial Internet access and carrying Internet traffic and upon
increased commercial use of the Internet. If the necessary infrastructure or
complementary products are not developed or available to the Company on
reasonable terms, or if development of the Internet as a significant commercial
marketplace is interrupted or delayed, the Company's business, operating results
and financial condition could be materially adversely affected.
LIMITED CUSTOMER BASE
The long term success of the Company's business will depend not only
on the Company's ability to enter into arrangements with municipalities and
private entities to make services available through kiosks and with advertisers
to use the kiosks as an advertising medium, but ultimately upon
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<PAGE>
the willingness of consumers to pay fees to transact business by means of the
kiosks. To date, the Company is operating only five kiosks, which were installed
pursuant to the agreement with the City of New York and which have been
available for public use for a short period of time. The decision by the City to
acquire kiosks from providers other than the Company would have a direct and
materially adverse effect on the prospects of the Company and could also
decrease the Company's ability to market the kiosks to other potential service
providers and advertisers. In addition, there can be no assurance that the
volume of use by consumers of the kiosks to obtain City services and conduct
other transactions will be sufficient to generate significant revenues for the
Company.
The Company historically has derived a significant portion of its
revenues from a relatively limited number of customers. During the six months
ended June 30, 1996, two customers accounted for 76% of the Company's revenues.
During 1995, two customers accounted for approximately 56% of the Company's
revenues, and during 1994, four customers accounted for approximately 67% of
revenues. The Company provided consulting and related services, and more
recently, services related to the development of OLEBroker(TM) and Intranet and
kiosk technology, to such customers. There can be no assurance that such
customers or others will retain the Company to install kiosks or provide such
services in the future. Furthermore, no customers of OLEBroker(TM) account for a
material portion of the Company's revenues, and there can be no assurance that
the Company will be able to develop a significant customer base for this
service.
RISK OF MANUFACTURING ACTIVITIES
The Company's kiosks involve the design by the Company, and the
engineering and manufacture by subcontractors, of the hardware and graphical
components of the kiosks. Only a limited number of kiosks have been fabricated
to date, so it is difficult for the Company to predict if its current
subcontractors will be able to engineer and produce kiosks on a satisfactory
basis. While the Company believes that it could arrange to have kiosks
fabricated by other subcontractors on comparable terms, there can be no
assurance that the need to establish relationships with other subcontractors
would not result in costs and delays to the Company. The future success of the
Company will depend in part on its ability to retain, and maintain good
relationships with, subcontractors in order to assure the timeliness and quality
of the manufacture of its kiosks.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have in the past and may in
the future vary significantly depending upon factors such as the timing of
significant orders, which in the past have been, and will in the future be,
delayed from time to time by delays in the contracting process. The potential
customers for the Company's kiosks are expected to include municipalities,
government agencies and large organizations; that is, entities that typically
engage in extended competitive bidding, approval and negotiation procedures with
respect to contracts, with no assurance that the contract will ultimately be
awarded to the Company. Additional factors contributing to variability
-15-
<PAGE>
of operating results include the pricing and mix of services and products sold
by the Company, terminations of service, new product introductions by the
Company and its competitors, market acceptance of new and enhanced versions of
the Company's products and services, changes in pricing or marketing policies by
its competitors and the Company's responses thereto, the Company's ability to
obtain sufficient vendors, to obtain supplies of sole or limited source
components, changes in the Company's network infrastructure costs, as a result
of demand variation or otherwise, the lengthening of the Company's sales cycle
and the timing of the expansion of the Company's network infrastructure.
Variations in the timing and amounts of revenues and costs could have a
materially adverse effect on the Company's quarterly operating results.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the
performance of its executive officers and key employees, and on its ability to
attract key personnel. In particular, the future success of the Company is
dependent upon the personal efforts of the Company's founders, David E. Y. Sarna
and George J. Febish, each of whom is a director and an executive officer of the
Company. Messrs. Sarna and Febish have long-term employment agreements with the
Company. The Company has in place key person life insurance policies, of which
it is the beneficiary, on the lives of Messrs. Sarna and Febish in the amount of
$1,000,000 each. However, the loss of the services of its executive officers or
other key employees could have a materially adverse effect on the business,
operating results and financial condition of the Company. See "Management."
ATTRACTION AND RETENTION OF EMPLOYEES AND CONTRACT PROVIDERS
The Company's success will depend in large part upon its ability to
attract, develop, motivate and retain highly skilled technical employees,
particularly software developers, project managers and other senior personnel,
as well as independent providers of creative content for the Company's kiosks
and websites. Qualified project managers and skilled developers with Intranet,
Internet and ActiveX(TM) skills are in particularly great demand and are likely
to remain a limited resource for the foreseeable future. Although the Company
expects to continue to be able to attract and retain sufficient numbers of
highly skilled technical employees, developers, project managers and independent
content providers for the foreseeable future, there can be no assurance that the
Company will be able to do so. The loss of some or all of the Company's project
managers and other senior personnel could have a materially adverse impact on
the Company, particularly on its ability to secure and complete engagements.
Other than Messrs. Sarna and Febish, no other senior personnel have entered into
employment agreements obligating them to remain in the Company's employ for any
specific term; however, substantially all key employees of the Company are
parties to nonsolicitation, confidentiality and noncompetition agreements with
the Company.
-16-
<PAGE>
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success and ability to compete is dependent in part upon
its proprietary technology. While the Company relies on trade secret, contract,
trademark and copyright law to protect its technology, the Company believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable product maintenance are more essential to establishing and maintaining
a technology leadership position. The Company presently has no patents or patent
applications pending. There can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology. The
source code for the Company's proprietary software is protected as a trade
secret. In addition, because the Company does not sell or license its technology
to third parties, but rather delivers services thorough its kiosks and
OLEBroker(TM), its proprietary software is not disclosed to third parties.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary or to develop similar technology independently. Policing
unauthorized use of the Company's products is difficult. In addition, effective
trade secret and copyright protection may be unavailable or limited in certain
foreign countries. There can be no assurance that the steps taken by the Company
will prevent misappropriation of its technology. In addition, litigation may be
necessary in the future to enforce the Company's intellectual property rights,
to protect the Company's trade secrets, to determine the validity and scope of
the proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.
Certain technology used in the Company's products or services is
licensed or leased from third parties, generally on a nonexclusive basis. While
the licenses involved are primarily "shrink wrap licenses;" that is, licenses
available to anyone who purchases publicly available software programs, the
termination of any of these licenses or leases or the discontinuance of the
underlying programs may have a material adverse effect on the Company's
operations. Replacement of certain technologies licensed or leased by the
Company could be costly and could result in product delays which would
materially adversely affect the Company's operating results. While it may be
necessary or desirable in the future to obtain other licenses or leases relating
to one or more of the Company's products or services or relating to current or
future technologies, there can be no assurance that the Company will be able to
do so on commercially reasonable terms or at all.
RISK OF SYSTEM FAILURE; SECURITY RISKS; LIABILITY RISKS
The Company's operations are dependent upon its ability, and the
ability of its suppliers, such as AT&T, Bell Atlantic, NYSERNET, Sprint and
NYNEX, to protect its network infrastructure against damage from fire,
earthquakes, power loss, telecommunications failures and similar events. Despite
precautions taken by the Company and its suppliers, the occurrence of a natural
disaster or other unanticipated problems at the Company's network operations
center or kiosks in the future
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<PAGE>
could cause interruptions in the services provided by the Company. In addition,
failure of the Company's telecommunications providers to provide the data
communications capacity required by the Company as a result of a natural
disaster, operational disruption or for any other reason could cause
interruptions in the services provided by the Company. Any damage or failure
that causes interruptions in the Company's operations could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Despite the implementation of security measures, the core of the
Company's network infrastructure is vulnerable to computer viruses and
disruptive problems. The Company and Internet access providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. Unauthorized use could also potentially jeopardize
the security of confidential information stored in the computer systems of the
Company and its customers, which may result in liability of the Company to its
customers and also may deter potential subscribers. Although the Company intends
to continue to implement industry-standard security measures, such measures have
been circumvented in the past, and there can be no assurance that measures
implemented by the Company will not be circumvented in the future. Eliminating
computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to the Company's customers which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's success will depend upon the capacity, reliability and
security of its network infrastructure, including processing capability and the
facilities and capacity leased from access providers and telecommunications
vendors. The Company must continue to expand and adapt its network
infrastructure as the number of users and the amount of information they wish to
transfer increases, and to meet changing customer requirements. The expansion
and adaptation of the Company's network infrastructure will require substantial
financial, operational and management resources. There can be no assurance that
the Company will be able to expand or adapt its network infrastructure to meet
additional demand or its customers' changing requirements on a timely basis, at
a commercially reasonable cost, or at all. Any failure of the Company to expand
its network infrastructure on a timely basis or adapt it either to changing
customer requirements or to evolving industry standards could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The kiosks that were installed in various locations in New York City
in July 1996 have only been operating for a short time, so the Company has only
limited experience with actual consumer interaction with the kiosks. While the
Company has designed the kiosks to be resistant to vandalism, there can be no
assurance that vandals will not succeed in damaging or disabling the kiosks. In
addition, although the Company believes it is unlikely, users of the kiosks may
seek to hold the Company liable for injuries allegedly incurred in connection
with the use of the kiosks.
While the Company has obtained insurance covering losses resulting
from business interruptions caused by system failures, damages to kiosks or
claims by users of the kiosks, there can
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<PAGE>
be no assurance that such insurance will provide sufficient coverage or that if
there are multiple claims, such insurance will be not terminated or will be
available for terms affordable to the Company.
GOVERNMENT REGULATION; POTENTIAL LIABILITY FOR INFORMATION AND CONTENT
DISSEMINATED THROUGH NETWORK
The Company is not currently subject to direct regulation by the
Federal Communications Commission or any other agency, other than regulations
applicable to businesses generally and businesses doing business with
governmental agencies. In connection with its contract with the City of New York
and future contracts, if any, with the City and other municipalities or
government entities, the Company will have to comply to such regulations,
including bidding procedures and record-keeping, audit, insurance, bonding and
anti-discrimination provisions, among others.
Changes in the regulatory environment relating to the Internet access
industry could have an adverse effect on the Company's business. Due to the
increase in Internet use and publicity, it is possible that laws and regulations
may be adopted with respect to the Internet, including with respect to privacy,
pricing and characteristics of products or services. The Company cannot predict
the impact, if any, that future laws and regulations or legal or regulatory
changes may have on its business.
The law relating to the liability of on-line services companies and
Internet access providers for information carried on or disseminated through
their systems is currently unsettled. Several private lawsuits seeking to impose
such liability upon on-line services companies and Internet access providers are
currently pending. In addition, legislation has been proposed which would impose
liability for or prohibit the transmission on the Internet of certain types of
information and content. In the event the Company were to make services such as
the one offered through its kiosks available over the Internet, the imposition
upon Internet access providers of potential liability for information carried on
or disseminated through their systems could require the Company to implement
measures to reduce its exposure to such liability, which may require the
expenditure of substantial resources, or to discontinue certain product or
service offerings. The increased attention focused upon liability issues as a
result of these lawsuits and legislative proposals could impact the growth of
Internet use. While the Company carries insurance, it may not be adequate to
compensate the Company in the event the Company becomes liable for information
carried on or disseminated through its systems. Any costs not covered by
insurance incurred as a result of such liability or asserted liability could
have a material adverse effect on the Company's business, financial condition
and results of operations.
TAX LOSS CARRYFORWARDS
At December 31, 1995, the Company had available unused net operating
loss carryforwards ("NOLs") aggregating approximately $350,000 to offset future
income. Under Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), utilization of prior NOLs is limited after
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<PAGE>
an ownership change, as defined in such Section 382, to an amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change, multiplied by the federal long-term tax-exempt rate in
effect during the month that the ownership change occurred. Upon the
consummation of the Offering, the Company may be subject to limitations on the
use of its NOLs as provided under Section 382. Accordingly, there can be no
assurance that the Company will be able to fully utilize existing NOLs to offset
taxable income, if any.
CONTINUING CONTROL BY CURRENT MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Upon completion of the Offering, David E. Y. Sarna, the Company's
Chairman and Co- Chief Executive Officer, and George J. Febish, the Company's
President and Co-Chief Executive Officer, each of whom is a director of the
Company, and Cyndel & Co., Inc. ("Cyndel"), a principal stockholder of Company,
will beneficially own, in the aggregate, approximately 79% of the issued and
outstanding shares of Common Stock. As a result, these stockholders will have
effective control over the Company and on the outcome of any matters submitted
to the Company's stockholders for approval, which influence might not be
consistent with the interests of other stockholders. In addition, if they were
to act in concert, they would be able to elect a majority of the Company's
directors, deter or cause a change in control of the Company and otherwise
generally control the Company's affairs. See "Principal Stockholders."
DILUTION
The Company's present stockholders acquired their shares of the
Company's Common Stock at a cost substantially below the imputed price at which
such shares are being offered in the Offering. Purchasers of the Units offered
hereby will, therefore, suffer an immediate and substantial dilution, in the
amount of $4.41 per share of their investment (assuming an offering price of
$6.00 per Unit and without allocating any value to the Class A Warrants) insofar
as it relates to the resulting tangible book value of the Company's Common Stock
after completion of the Offering. To the extent outstanding warrants and options
to purchase the Company's Units and Common Stock are exercised, there will be
further dilution. See "Dilution."
BROAD DISCRETION IN APPLICATION OF PROCEEDS; BENEFITS TO AFFILIATES
A significant portion of the net proceeds of the Offering will be
available for expansion and working capital purposes. Accordingly, the Company's
management will have broad discretion as to the application of such proceeds. In
addition, approximately $1,283,000 (20.95%) of the net proceeds of the Offering
will be used to repay the Bridge Loans made to the Company during the period of
April through June 1996 and related interest and to redeem the Series A
Preferred Stock, and, accordingly, such funds will not be available to fund
future growth.
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<PAGE>
A portion of the net proceeds of Bridge Loans, as well as a portion of
the proceeds of the July 1996 Offering, were used to pay a portion of accrued
but unpaid salaries to the executive officers of the Company, and the balance of
such accrued salaries will be paid from the proceeds of the Offering. A portion
of the proceeds of the July 1996 Offering was also used to redeem the
convertible Series B Preferred Stock owned by Cyndel, a principal stockholder of
the Company. See "Use of Proceeds" and "Certain Transactions."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company's current policy is to own and operate its kiosks, which
may require substantial capital investment. It is the Company's intention to
enter into lease financing arrangements for the kiosks. While the Company has
entered into such an arrangement to cover substantially all the costs of the
first five kiosks, it has not entered into an agreement for such financing for
future kiosks, if any, and there can be no assurance that it will be able to do
so on acceptable terms or at all. The Company believes that the net proceeds
from the Offering, together with anticipated revenues from operations, and
assuming the establishment of an acceptable lease financing arrangement, will be
sufficient to meet its presently anticipated working capital and capital
expenditure requirements for at least 24 months. However, if the Company's
expectations are not fulfilled, there can be no assurance that the net proceeds
of the Offering will be sufficient to implement successfully the Company's
business plan or meet its working capital or financing requirements. The Company
may need to raise additional funds through public or private debt or equity
financings in order to take advantage of unanticipated opportunities, including
acquisitions of complementary businesses or technologies, or to develop new
products or otherwise respond to unanticipated competitive pressures. In
addition, if the Company experiences rapid growth, it may require additional
funds to expand its operations or enlarge its organization. In any such event,
continued operation of the Company may be dependent on the ability of the
Company to procure additional financing through sales of additional equity or
debt. If the Company were to issue any equity or convertible debt securities,
such issuance could substantially dilute the interests of the Company's then
existing security holders. Such equity securities may also have rights,
preferences or privileges senior to those of the holders of the Company's Common
Stock. There can be no assurance that additional financing will be available on
terms favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to take
advantage of unanticipated opportunities, develop new products or otherwise
respond to unanticipated competitive pressures. Such inability could have a
materially adverse effect on the Company's business, financial condition and
results of operations. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
DIVIDENDS
Other than distributions made prior to 1993, when the Company was a
closely-held "S corporation," the Company has not paid any dividends on its
Common Stock in the past, and does
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not anticipate that it will declare or pay any dividends in the foreseeable
future. However, the Company's Series A Preferred Stock currently accrues
dividends at the annual rate of 9%. The Company is obligated to pay all accrued
but unpaid dividends on the Series A Preferred Stock in connection with the
redemption of the Series A Preferred Stock upon closing of the Offering. See
"Dividend Policy."
ARBITRARY DETERMINATION OF OFFERING PRICE
The initial public offering price of the Units and the exercise price
and other terms of the Class A Warrants were determined by negotiations between
the Company and the Representative. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price of the Units
and the exercise price and other terms of the Class A Warrants.
NO PRIOR MARKET FOR THE COMPANY'S SECURITIES; POSSIBLE VOLATILITY
OF MARKET PRICE OF THE COMPANY'S SECURITIES
Prior to the Offering, there has been no public market for the
Company' securities. There can be no assurance that an active public market will
develop or be sustained after the Offering or that the market price of the
Company's securities will not decline below the public offering price. Future
announcements concerning the Company or its competitors, quarterly variations in
operating results, announcements of technological innovations, the introduction
of new products or services or changes in product or service pricing policies by
the Company or its competitors, litigation concerning proprietary rights or
other matters, changes in earnings estimates by analysts or other factors could
cause the market price of the Company's securities to fluctuate substantially.
In addition, stock prices for many technology companies fluctuate widely for
reasons which may be unrelated to operating results. These fluctuations, as well
as general economic, market and political conditions such as recessions or
military conflicts, may materially and adversely affect the market price of the
Company's securities.
POSSIBLE DELISTING AND RISK OF LOW PRICED SECURITIES
The Company has applied for inclusion of the Common Stock and Class A
Warrants comprising the Units on the NASDAQ SmallCap Market. No assurance can be
given that the Common Stock and the Class A Warrants will qualify for initial
quotation or listing or that the Company will continue to be able to satisfy
certain specified financial tests and market related criteria required for
continued quotation on NASDAQ following the Offering. If the Company is unable
to satisfy such maintenance criteria in the future, the Common Stock and Class A
Warrants may be delisted from trading on NASDAQ and consequently an investor
could find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Company's securities, and the Class A Warrants would no
longer be redeemable.
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The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
In addition, if the Company's securities are not quoted on NASDAQ, or
if the Company does not meet the other exceptions to the penny stock regulations
cited above, trading in the Company's securities would be covered by Rule 15g-9
promulgated under the Exchange Act for non-NASDAQ and non-national securities
exchange listed securities. Under such rule, broker/dealers who recommend such
securities to persons other than established customers and accredited investors
must make a special written suitability determination for each purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities also are exempt from this rule if the market price is at least $5.00
per share.
If the Company's securities become subject to the regulations
applicable to penny stocks, the market liquidity for the Company's securities
could be adversely affected. In such event, such regulations could limit the
ability of broker/dealers to sell the Company's securities and thus the ability
of purchasers of the Company's securities to sell their securities in the
secondary market.
RELATIONSHIP OF REPRESENTATIVE TO TRADING
The Representative may participate in the solicitation of the exercise
of the Class A Warrants. In connection with the solicitation of the Class A
Warrant exercises, unless the Representative is granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, the Representative and any
other soliciting broker-dealer will be prohibited from engaging in any
market-making activities with respect to the Company's securities for the period
commencing either two or nine business days (depending on the market price of
the Common Stock) prior to any solicitation activity until the later of (i) the
termination of such solicitation activity, (ii) the termination (by waiver or
otherwise) of any right that the Representative or any other soliciting
broker-dealer may have to receive a fee for the exercise of Class A Warrants
following such solicitation. As a result, the Representative or other soliciting
broker-dealer may be unable to provide a market for the Company's securities,
should it desire to do so, during certain periods while the Class A Warrants are
exercisable. In addition, under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the Selling
Securityholder Securities may not simultaneously engage in market-making
activities with respect to any securities of the Company for the applicable
"cooling off" period (at least two and possibly nine business days) prior to the
commencement of such distribution. Accordingly, in the event the Representative
is engaged in a distribution of any Selling Securityholder Securities, it will
not be able to make a market in the Company's securities during the applicable
restrictive period. Such restrictions may adversely affect the price and
liquidity of the Common Stock
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<PAGE>
and the Class A Warrants. See "Description of Securities," "Underwriting" and
"Concurrent Offering."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
All of the shares of Common Stock currently issued and outstanding
are "restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act in that such shares were issued and sold by the Company
in private transactions not involving a public offering. In general, under Rule
144 as currently in effect, beginning 91 days after the date hereof, subject to
the satisfaction of certain other conditions, a person, including an affiliate
of the company, after at least two years have elapsed from the sale by the
Company or any affiliate of the restricted securities, can (along with any
person with whom such individuals is required to aggregate sales) sell, within
any three-month period, a number of shares of restricted securities that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or, if the Common Stock is quoted on NASDAQ or a stock exchange, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three months,
after at least three years have elapsed from the sale by the Company or an
affiliate of the restricted securities, is entitled to sell such restricted
shares under Rule 144 without regard to any of the limitations described above.
The Company's executive officers, David E. Y. Sarna and George J. Febish, have
agreed not to sell or otherwise transfer any of their shares of Common Stock for
a period of 18 months after the date of this Prospectus without the prior
written consent of the Representative, and the other securityholders of the
Company (including the holders of the Investors Warrants but not the other
Selling Securityholders) have agreed not to sell any of their shares of Common
Stock for a period of nine months after the date of this Prospectus without the
prior written consent of the Representative. In addition, concurrently with the
Offering, the Company is registering for sale by the Selling Securityholders
412,500 Units and 719,588 Selling Securityholder Shares that are outstanding or
issuable upon the exercise of currently exercisable warrants; however, the
Selling Securityholders other than the Representative and the holders of the
Investor Warrants (which holders are subject to the nine month agreement with
the Representative described above) have agreed not to sell any of such
securities for a period of 12 months after the date of this Prospectus without
the prior written consent of the Representative. Furthermore, certain holders of
the Company's outstanding Common Stock, warrants and options (including current
and former executive officers) have "piggyback" registration rights and/or as
well as demand registration rights that they may exercise commencing one year
from the date of this Prospectus.
No prediction can be made as to the effect, if any, the future sales
of Common Stock or the availability of Common Stock for future sale will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock (including shares issued upon exercise of
stock options or warrants) in the public market following the Offering, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock. See "Description of Securities - Registration
Rights," "Shares Eligible For Future Sale" and "Underwriting."
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<PAGE>
EFFECT OF OUTSTANDING WARRANTS, OPTIONS AND CONVERTIBLE SECURITIES
The Company has outstanding warrants to purchase an aggregate of
412,500 Units, all of which are exercisable at a price per Unit below the per
Unit offering price of the Units offered by this Prospectus. In addition,
412,500 shares of Common Stock will be issuable upon the exercise of the Class A
Warrants issuable upon the exercise of such outstanding warrants. The Company
also has outstanding other options and warrants to purchase an aggregate of
656,587 shares of Common Stock (as well as the July Placement Warrant to
purchase (1) 23,700 shares of Common Stock and (2) July 1996 Warrants to
purchase 18,200 shares), of which all except warrants to purchase 20,000 shares
of Common Stock are exercisable at price below the per share offering price
(assuming no value is ascribed to the Class A Warrants included in the Units) of
the Units offered by this Prospectus. The Company has also agreed to grant to
the Representative the Unit Purchase Option, consisting of the right to
purchase, commencing one year from the date of this Prospectus, 125,000 Units.
The sale of 719,588 Selling Securityholder Shares, as well as 412,500 Units,
have been registered in the Concurrent Offering, and the Company has granted
certain demand and piggyback registration rights to the holders of certain
shares of Common Stock, outstanding options and warrants and the
Representative's Unit Purchase Option. While holders of certain of these rights
(including the Selling Securityholders other than the Representative) have
agreed not to sell the securities issuable upon the exercise of outstanding
options and warrants for nine or 12 months after the date of this Prospectus,
these rights could result in substantial expense to the Company and restrict the
Company's ability to obtain future financing. The exercise and sale of the
Common Stock subject to these registration rights would have a dilutive effect
on the Company's stockholders. See "Certain Transactions," "Description of
Securities - Registration Rights," "Underwriting" and "Concurrent Offering."
ADVERSE EFFECT OF REDEMPTION OF CLASS A WARRANTS
The Company has the right to redeem the Class A Warrants, commencing
one year from the date of the Prospectus (or earlier, with the consent of the
Representative), provided that the average closing bid price of the Common Stock
has exceeded 130% of the then current exercise price of the Class A Warrants
(initially $_____ per share), for a period of 20 consecutive trading days ending
within 15 days prior to the date on which the Company gives notice of
redemption. If the Company gives such notice of redemption, holders of the Class
A Warrants will lose their rights to exercise the Warrants after the date fixed
therein for their redemption. Upon the receipt of a notice of redemption of the
Class A Warrants, the holders thereof would be required to (i) exercise the
Class A Warrants and pay the exercise price at a time when it may
disadvantageous for them to do so, (ii) sell the Class A Warrants at the then
market price, if any, when they might otherwise wish to hold the Class A
Warrants or (iii) accept the redemption price, which is likely to be
substantially less than the market value of the Class A Warrants at the time of
redemption. See "Description of Securities--Class A Warrants."
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<PAGE>
NECESSITY OF FUTURE REGISTRATION OF CLASS A WARRANTS AND STATE BLUE
SKY REGISTRATION; EXERCISE OF CLASS A WARRANTS
The shares of Common Stock and the Class A Warrants comprising the
Units are immediately detachable and separately transferable upon issuance.
Although Units will not knowingly be sold to purchasers in jurisdictions in
which the Class A Warrants are not registered or otherwise qualified for sale or
exempt, purchasers may buy Class A Warrants in the after-market or may move to
jurisdictions in which the Class A Warrants and the Common Stock underlying the
Class A Warrants are not so registered or qualified or exempt. In this event,
the Company would be unable lawfully to issue Common Stock to those persons
desiring to exercise their Class A Warrants (and the Class A Warrants will not
be exercisable by those persons) unless and until the Class A Warrants and the
underlying Common Stock are registered or qualified for sale in jurisdictions in
which such purchasers reside or an exemption from such registration or
qualification requirements exists in such jurisdictions. There can be no
assurance that the Company will be able to effect any required registration or
qualification.
The Class A Warrants offered hereby will not be exercisable unless
the Company maintains a current registration statement on file with the
Commission either by filing post-effective amendments to the Registration
Statement of which this Prospectus is a part or by filing a new registration
statement with respect to the exercise of such Class A Warrants. The Company has
agreed to use its best efforts to file and maintain, so long as the Class A
Warrants offered hereby are exercisable, a current registration statement with
the Commission relating to such Class A Warrants and the shares of Common Stock
underlying such Class A Warrants. However, there can be no assurance that it
will do so or that such Class A Warrants or such underlying Common Stock will be
or continue to be so registered.
The value of the Class A Warrants could be adversely affected if a
then current prospectus covering the Common Stock issuable upon exercise of the
Class A Warrants is not available pursuant to an effective registration
statement or if such Common Stock is not registered or qualified for resale or
exempt from registration or qualification in the jurisdictions in which the
holders of Class A Warrants reside. See "Description of Securities--Class A
Warrants."
ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law and the Company's Certificate of
Incorporation, as amended, and its Amended and Restated Bylaws could make it
more difficult for a third party to acquire, and could discourage a third party
from attempting to acquire, control of the Company. Certain of these provisions
allow the Company to issue Preferred Stock with rights senior to those of the
Common Stock without any further vote or action by the stockholders, eliminate
the right of stockholders to act by written consent and impose various
procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. The classification
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of the Company's Board of Directors could have the effect of delaying a change
in control of the Company. In addition, the Company will have 5,000,000 shares
of authorized Preferred Stock, which the Company could issue in the future
without further stockholder approval and upon such terms and conditions, and
have such rights, privileges and preferences, as the Board of Directors may
determine. The rights of the holder of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of Preferred Stock that may
be issued in the future. The Company has no current plans to issue any
additional Preferred Stock. See "Certain Transactions" and "Description of
Securities - Preferred Stock."
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
The Certificate of Incorporation, as amended, and the Amended and
Restated Bylaws of the Company contain provisions limiting the liability of
directors of the Company for monetary damages to the fullest extent permissible
under Delaware law. This is intended to eliminate the personal liability of a
director for monetary damages on an action brought by or in the right of the
Company for breach of a director's duties to the Company or its stockholders
except in certain limited circumstances. In addition, the Certificate of
Incorporation, as amended, and the Amended and Restated Bylaws contain
provisions requiring the Company to indemnify directors, officers, employees and
agents of the Company serving at the request of the Company against expenses,
judgments (including derivative actions), fines and amounts paid in settlement.
This indemnification is limited to actions taken in good faith in the reasonable
belief that the conduct was lawful and in or not opposed to the best interests
of the Company. The Certificate of Incorporation, as amended, and the Amended
and Restated Bylaws provide for the indemnification of directors and officers in
connection with civil, criminal, administrative or investigative proceedings
when acting in their capacities as agents for the Company. The foregoing
provisions may reduce the likelihood of derivative litigation against directors
and executive officers and may discourage or deter stockholders or management
from suing directors or executive officers for breaches of their duties to the
Company, even though such an action, if successful, might otherwise benefit the
Company and its stockholders.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of Units offered hereby,
assuming an offering price per Unit of $6.00, are estimated to be approximately
$6,125,000 ($7,103,250 if the Over-allotment Option is exercised in full), after
deducting estimated underwriting discounts and commissions, payment of the first
year's consulting fee to the Representative and estimated offering expenses
payable by the Company. The Company expects to use the net proceeds (assuming no
exercise of the Over-allotment Option) during the next 24 months as follows:
APPROXIMATE
APPROPRIATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
----------------------- ------------- ------------
Repayment of Bridge Loans (1)........................ $1,283,000 20.95%
Redemption of Series A Preferred Stock (2)........... 273,000 4.45
Working capital and general corporate purposes (3)... 4,569,000 74.60
--------- -----
TOTAL........................................ $6,125,000 100.00%
========= ======
- -------------------------------
(1) Represents the repayment of outstanding Bridge Loans in the aggregate
principal amount of $1,250,000 plus estimated accrued interest thereon
at the annual rate of 7% to the date of the closing of the Offering.
The Company used the net proceeds of the Bridge Loans to pay for
product development, operating expenses, working capital (including
the payment of accrued but unpaid salaries to the Company's executive
officers) and various expenses related to the Offering. See "Certain
Transactions" and Note D of Notes to Financial Statements.
(2) Represents the redemption, at $1.00 per share plus estimated accrued
but unpaid dividends at the annual rate of 9%, of the 212,500
outstanding shares of Series A Preferred Stock.
(3) Includes anticipated payment of the salaries of the Company's current
personnel plus an additional six or more staff members and payment of
approximately $92,000 of accrued but unpaid salaries to the Company's
executive officers. See "Certain Transactions." The remainder will be
used for working capital and general corporate purposes such as
occupancy expenses, professional expenses, insurance payments and
purchases of supplies. The Company intends to finance the costs of
deploying up to 25 additional kiosks under leasing arrangements. If it
does not enter into such financing arrangements, it may apply up to
$1,700,000 to such costs. The net proceeds may also be used to acquire
technology, licenses or companies that complement the business of the
Company, although no such acquisitions are planned or are being
negotiated as of the date of this Prospectus.
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If the Representative exercises its Over-allotment Option in full, the
Company will realize additional net proceeds of approximately $978,750, which
amount will be added to the Company's working capital.
The amount and timing of expenditures for each purpose will depend on
technological, competitive and business developments; determinations as to
commercial potential; the terms of any collaborative arrangements entered into
by the Company for development and licensing; and other factors, many of which
are beyond the Company's control. The Company's current policy is to own and
operate its kiosks, which may require substantial capital investment. It is the
Company's intention to enter into lease financing arrangements for the kiosks.
While the Company has entered into such an arrangement to cover substantially
all the costs of the first five kiosks, it has not entered into an agreement for
such financing for future kiosks, and there can be no assurance that it will be
able to do so on acceptable terms or at all. The Company believes that the net
proceeds from the Offering, together with anticipated revenues from operations
and assuming the establishment of an acceptable lease financing arrangement,
will be sufficient to meet its presently anticipated working capital and capital
expenditure requirements for at least 24 months. In the event the Company's
plans change or its assumptions change or prove to be inaccurate or the proceeds
of the Offering prove to be insufficient to fund operations (due to
unanticipated expenses, delays, problems or otherwise), the Company may find it
necessary or advisable to use portions thereof for other purposes and could be
required to seek additional financing sooner than currently anticipated.
Depending on the Company's progress in the development of its products and
technology, their acceptance by the marketplace, and the state of the capital
markets, the Company may also determine that it is advisable to raise additional
equity capital. The Company has no current arrangements with respect to, or
sources of, additional financing and there can be no assurance that additional
financing will be available to the Company when needed on commercially
reasonable terms or at all. Any inability to obtain additional financing when
needed would have material adverse effect on the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Pending such uses, the net proceeds will be invested in short-term,
investment grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States.
The net proceeds to the Company do not include any proceeds to be
realized by the Company upon the exercise of the Class A Warrants or the Unit
Purchase Option and the resulting issuance of shares of Common Stock. The
Company anticipates that if the Class A Warrants or Unit Purchase Option are
exercised, the proceeds will be used for working capital purposes.
DIVIDEND POLICY
Other than distributions made prior to 1993, when the Company was a
closely-held "S corporation," the Company has never declared or paid cash
dividends on its Common Stock. The
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Company currently anticipates that it will retain all available funds for use in
the operation of its business, and therefore does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. The Company's Series A
Preferred Stock currently accrues dividends at the annual rate of 9%. The
Company is obligated to pay all accrued but unpaid dividends on the Series A
Preferred Stock in connection with the redemption of the Series A Preferred
Stock upon closing of the Offering. See "Use of Proceeds" and "Description of
Securities-Preferred Stock."
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CAPITALIZATION
The following table sets forth, as of June 30, 1996, (i) the
capitalization of the Company, (ii) the pro forma capitalization of the Company,
as adjusted to give effect to the sale in July and August 1996 of 273,001 shares
of Common Stock and July 1996 Warrants to purchase 182,004 shares of Common
Stock and the redemption of the Company's Series B Preferred Stock in July 1996,
and (iii) the capitalization of the Company as further adjusted to give effect
to (A) the sale of the Units in the Offering (assuming an offering price of
$6.00 per Unit) and the receipt by the Company of the estimated net proceeds
therefrom, after deducting estimated underwriting discounts and commissions and
other expenses of the Offering, (B) repayment of the $1,250,000 principal
balance of the outstanding Bridge Loans and the accrued interest thereon, and
(C) the concurrent mandatory redemption of all the outstanding shares of Series
A Preferred Stock.
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------------
(In thousands)
Historical Pro Forma As Adjusted
---------- --------- -----------
<S> <C> <C> <C>
Note payable ......................................... $ 1,058,738 $ 1,058,738 $ --
============ ============ ============
Preferred stock, $.0001 par value;
5,000,000 shares authorized; 212,500 shares
of Series A Preferred
Stock issued and outstanding actual and pro
forma; no shares to be issued and outstanding
as adjusted ................................. 268,469 268,469
1,250 shares of Series B Preferred Stock
issued and outstanding; no shares to be
issued and outstanding pro forma and as
adjusted .................................... 125,000
------------ ------------ ------------
393,469 268,469
============ ============ ============
Common stock, $.0001 par value;
20,000,000 shares authorized; 2,293,000
issued and outstanding; ................... 2,566,001
issued and outstanding pro forma;
and 3,816,001 to be issued
and outstanding as adjusted ................ 229 257 382
Capital in excess of par value ....................... 405,856 1,222,113 7,346,988
Accumulated deficit (2) .............................. (1,193,939) (1,193,939) (1,385,201)
------------ ------------ ------------
Total stockholders' equity (capital ........ $ (787,854) $ 28,431 $ 5,962,169
deficiency) ............................. =========== ============ ==========
</TABLE>
(1) Does not include: (i) 1,250,000 shares of Common Stock issuable upon
exercise of the Class A Warrants included in the Units offered hereby,
(ii) up to 375,000 shares of Common Stock issuable upon exercise of
the Over-allotment Option and the Class A Warrants underlying the
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<PAGE>
Over-allotment Option, (iii) 250,000 shares of Common Stock issuable
upon the exercise of the Representative's Unit Purchase Option and the
Class A Warrants issuable upon the exercise thereof , (iv) 1,114,587
shares of Common Stock issuable upon exercise of outstanding options
and warrants and the Class A Warrants issuable upon the exercise of
certain of such warrants. See "Management," "Certain Transactions,"
"Description of Securities" and "Underwriting."
(2) Reflects, among other things, the write-off of unamortized note
payable discounts and deferred financing costs amounting to $191,262
upon repayment of an aggregate of $1,283,000, consisting of the
principal and accrued interest of the Bridge Loans received by the
Company in the Bridge Loan Offering during the period of April though
June 1996 and repayable from the proceeds of the Offering. See "Use of
Proceeds."
DILUTION
The unaudited pro forma net tangible book value of the Company as at
June 30, 1996 was a negative $50,855, or $(0.02) per share of Common Stock. "Pro
forma net tangible book value per share of Common Stock" represents the pro
forma book value of the Company's total tangible assets, less its total
liabilities and preferred stock, divided by the number of shares of Common Stock
outstanding (2,566,001 pro forma shares at June 30, 1996 giving pro forma effect
to the sale of July 1996 Units and redemption of Class B Preferred Stock). After
giving effect to the sale of the Units offered hereby (assuming an offering
price of $6.00 per Unit and without allocating any value to the Class A Warrants
contained in the Units and the application of the net proceeds therefrom, the
Company's adjusted net tangible book value of Common Stock as of June 30, 1996
would have been $6,074,145, or $1.59 per share of Common Stock. This represents
an immediate increase in net tangible book value per share of Common Stock of
$1.61 to existing holders of Common Stock and immediate dilution in net tangible
book value of $4.41 per share to new investors purchasing Units in the Offering.
The following table illustrates the per share dilution:
Assumed initial public offering price per share........................$6.00
Pro forma net tangible book value per share of
Common Stock before the Offering.................................($.02)
Increase per share attributable to new investors....................$1.61
Adjusted tangible book value per share of Common Stock
after the Offering ................................................$1.59
-----
Dilution per share to new investors(1).................................$4.41
=====
- -------------------------
(1) If the Over-allotment Option is exercised in full, dilution per share
to new investors would be $4.24. The foregoing table does not give any
effect to the possible exercise of any warrants or options.
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<PAGE>
The following table summarizes, as at June 30, 1996, on a pro forma
basis, the number of shares purchased from the Company, the total consideration
paid and the average price per share paid by the existing stockholders and by
new investors before deduction of underwriting discounts and commissions and
estimated offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------- ------------------- Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders 2,566,001 67.24% $1,196,013 13.75% $0.47
New Investors 1,250,000 32.76% $7,500,000 86.25% $6.00
--------- ------- ---------- ------
Total 3,816,001 100.00% $8,696,013 100.00%
========= ======= ========== ======
</TABLE>
The foregoing table assumes no exercise of the Over-allotment Option.
The foregoing table also does not include (i) the 250,000 shares of Common Stock
included in the Units issuable upon exercise of the Representative's Unit
Purchase Option and the Class A Warrants issuable upon the exercise of such
option, (ii) the 1,114,587 shares of Common Stock issuable upon exercise of
outstanding warrants and options, or (iii) the 250,000 shares of Common Stock
reserved for issuance upon the exercise of options granted to date or in the
future under the Company's 1996 Stock Option Plan of which only 145,000 have
been granted to date (which are included in (ii) above). See "Management- 1996
Stock Option Plan," "Description of Securities" and "Underwriting."
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<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below as at December 31, 1995
and 1994 and for each of the years then ended have been derived from the audited
financial statements of the Company. The financial statements of the Company as
at December 31, 1995, and for each of the two fiscal years then ended, including
the notes thereto, and the related report of Richard A. Eisner & Company, LLP,
independent auditors, are included elsewhere in this Prospectus. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements of the Company and related notes thereto included
elsewhere in this Prospectus. Data for the six month periods ended June 30, 1996
and 1995 are unaudited, but in the opinion of management include all adjustments
necessary for a fair presentation of the data. Results for the six month period
ended June 30, 1996 may not be indicative of results expected for the year
ending December 31, 1996.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
STATEMENT OF OPERATIONS DATA: 1995 1996 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Consulting 282,562 $258,000 $509,920 $447,976
Development and training 97,900 37,954 245,836 118,618
Net loss (13,798) (300,722) (45,504) (122,400)
Net loss applicable to common stock (23,361) (316,535) (64,629) (141,525)
Net loss per share of common stock (0.01) (0.11) (0.02) (0.05)
Weighted average number of common stock 2,894,418 2,897,418 2,894,418 2,894,418
outstanding
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1996
------------------ ----------------------------------------------
BALANCE SHEET DATA: Historical Pro Forma(1) As Adjusted(2)
---------- ------------ --------------
<S> <C> <C> <C> <C>
Working capital (deficiency) $(390,290) $246,384 937,669 $5,444,200
Total assets 343,534 1,107,160 1,698,445 6,201,768
Redeemable preferred stock 383,906 393,469 268,469 ---
Accumulated deficit (877,404) (1,193,939) (1,193,939) (1,385,201)
Total stockholders' equity
(capital deficiency) (598,844) (787,854) 28,431 5,962,169
</TABLE>
(1) Gives effect to the sale of 273,001 shares of Common Stock and July
1996 Warrants to purchase 182,004 shares of Common Stock in July and
August 1996 and the redemption of the Company's Series B Preferred
Stock in July 1996.
(2) Assumes an offering price per Unit of $6.00, the midpoint of the range
set forth on the cover page of this Prospectus, and gives effect to
(i) the sale of 1,250,000 Units offered hereby and the application of
the estimated net proceeds therefrom, including the repayment of
$1,250,000 principal amount of the Bridge Loans outstanding, plus
accrued interest thereon
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<PAGE>
and redemption of the Series A Preferred Stock at its liquidation
value of $212,500 plus accrued dividends, (ii) the sale of the July
1996 Units and the issuance of the July Placement Warrant and (iii)
the redemption of the Series B Preferred Stock at its liquidation
value of $125,000 and the issuance of the warrants to purchase 20,000
shares of Common Stock at $7.00 per share in connection therewith. See
"Use of Proceeds" and "Certain Transactions."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the notes thereto included elsewhere in this Prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
A number of statements contained in this Prospectus are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties that could
cause actual results to differ materially from those expressed or implied in the
applicable statements. These risks and uncertainties include but are not limited
to: limited operating history; recent establishment of new business divisions;
potential future operating losses; dependence on new untested product; risks
related to technological factors; potential manufacturing difficulties;
dependence on certain third parties and on the Internet; limited customer base;
risk of manufacturing activities; dependence on key personnel and proprietary
technology; risk of system failure, security risks and liability risks;
uncertainty of additional financing; the Company's vulnerability to rapid
industry change and technological obsolescence; the limited nature of its
product life and the uncertainty of market acceptance of the Company's products;
the unproven status of the Company's products in widespread commercial use,
including the risks that the Company's current and future products may contain
errors that would be difficult and costly to detect and correct; uncertainties
with respect to the Company's business strategy; general economic conditions and
other risks described in this Prospectus. See "Risk Factors."
OVERVIEW
The Company provides information and transaction-based services using
proprietary software and off-the-shelf, reusable software components based on
Microsoft's ActiveX(TM) (formerly OLE) component technology. The Company's
strategy is initially to provide information and services through public access
kiosks, known as SmartStreet(TM), over Intranets. The kiosks are located in high
density pedestrian traffic locations. In addition to developing products and
services for its own account, the Company has in the past provided, and
continues to provide, educational and consulting services related to the
Internet, reusable software components and rapid application development.
Beginning in mid-1994, the Company changed its focus from consulting and
training services to transactional, fee-based and advertising-supported products
and services. The Company has sustained net losses in each of the last two
fiscal years with a net loss of $122,400 in 1995 and a net loss of $45,504 in
1994. For the six months ended June 30, 1996, the Company had a net loss of
$300,722. In September 1995, the Company introduced OLEBroker(TM), its fee-based
website on the Internet. The Company's SmartStreet(TM) kiosks were introduced in
July 1996. The Company has not recognized any significant income to date from
the SmartStreet(TM) kiosk rentals or from OLEBrokerTM. Consequently, any
analysis of the Company's prior operations has only minimal relevance to an
evaluation of the Company, its current products and services and its prospects.
Although the
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<PAGE>
Company anticipates that it will begin to recognize greater revenues from the
SmartStreet(TM) kiosks and from OLEBrokerTM during the second half of 1996, it
cannot predict the actual timing or amount of such revenues.
RESULTS OF OPERATIONS
The Company commenced operations in December 1990. Through 1994, the
Company derived the majority of its revenues from consulting, custom development
and training. In this connection, beginning in mid-1994, the Company began
developing a core of reusable software objects. These objects were used in the
development of OLEBrokerTM and in the Company's SmartStreet(TM) kiosks. In
accordance with the provisions of generally accepted accounting principles
(GAAP), much of the costs associated with this development have been expensed.
Therefore, the Company may be dependent upon obtaining additional
debt financing, raising additional capital and/or achieving sustained profitable
operations or a combination thereof. The Company anticipates that its kiosk
operations are unlikely to produce a positive cash flow until at least early
1997. It is management's opinion that these conditions are a result of the
start-up of operations and are not permanent.
Year ended December 31, 1995 compared to year ended December 31, 1994
During the year ended December 31, 1995 the net loss of the Company
increased to $122,400 ($.05 per share) from $45,504 ($.02 per share) for the
year ended December 31, 1994, reflecting the expensed development and marketing
expenses for OLEBrokerTM.
During the year ended December 31, 1995, revenues declined to
$566,594 from $755,756 for the year ended December 31, 1994. Consulting revenue
declined from $509,920 to $447,976 and development and training revenues
declined from $245,836 to $118,618. This decline is due to the Company's shift
away from fee-based consulting, training, and custom development and redirection
of its focus to transactional, fee-based and advertising-supported products and
services.
Expenses for the year ended December 31, 1995 declined to $688,994
from $801,260 in 1994. The decline in expenses reflects a decline in revenue and
management's emphasis on achieving profitability for the consulting, training,
and custom development business of the Company. During the year ended December
31, 1995, research and development conducted by the Company aggregated $62,863
as a result of expenditures for object development.
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<PAGE>
During the year ended December 31, 1995, the general and
administrative expenses declined to $278,942 from $412,019 for the year ended
December 31, 1994, reflecting a temporary decrease in market-building activities
while the Company's new products were in development.
At December 31, 1995, the Company had federal net operating loss
carryforwards of approximately $350,000. Utilization of the carryforwards may be
subject to annual limitation due to changes in the Company's ownership resulting
from this and other offerings. A valuation allowance has been recorded for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset due to the lack of earnings history of the Company. See Note I of
Notes to Financial Statements.
Six months ended June 30, 1996 compared to six months ended June 30, 1995
During the six months ended June 30, 1996, the net loss of the
Company increased to $300,722 ($.11 per share) from $13,798 ($.01 per share) for
the six months ended June 30, 1995, reflecting increased expenses primarily in
connection with the Bridge Offering, professional fees and marketing expenses
for OLEBroker(TM) and SmartStreet(TM).
During the six months ended June 30, 1996, revenues declined to
$295,954 from $380,462 for the six months ended June 30, 1995. Consulting
revenue declined from $282,562 to $258,000 and development and training revenues
declined from $97,900 to $37,954. This decline is due to the Company's shift
away from fee-based consulting, training, and custom development and redirection
of those resources to SmartStreet(TM).
Expenses for the six months ended June 30, 1996 increased to $596,676
from $394,260 for the six months ended June 30, 1995. The increase in general
and administrative costs reflects an increase in expenses related to
SmartStreet(TM). The Company's selling expenses declined from $232,418 for the
six months ending June 30, 1995 to $153,781, reflecting a reduction in efforts
to build the Company's consulting, training, and custom development business.
For the six months ended June 30, 1996 and 1995, respectively,
development expenses were either charged to client expense (if related to income
from one or more clients) or were capitalized in accordance with GAAP.
In the six months ended June 30, 1996, general and administrative
costs increased to $442,895 from $161,842 for the six months ended June 30,
1995, primarily reflecting costs associated with the SmartStreet(TM) kiosk
program and the agreement with the City of New York.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of financing for its operations and
working capital requirements has been from sales of its consulting, training and
development services and from certain private placements by the Company of debt
and equity securities. In April through June 1996 the
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<PAGE>
Company sold 12.5 Bridge Units for a net consideration of $1,105,000 and in July
and August 1996, the Company sold an aggregate of 273,001 Units for net
consideration of $816,285. See "Certain Transactions - Recent Financings."
The Company has generated a net loss in each of the last two fiscal
years, with a net loss of $122,400 in 1995 and a net loss of $45,504 in 1994.
For the six months ended June 30, 1996, the Company had a net loss of $300,722.
At June 30, 1996, the Company had $424,059 in cash and working capital of
$246,384.
As of June 30, 1996 the Company was committed to spending an
additional $100,000 on the initial five kiosks. In addition it expects to spend
approximately $1,700,000 for hardware and software in connection with the
additional 25 kiosks which it intends to install in the New York City area in
the next six to nine months. The Company intends to lease as much of this
equipment as possible. However, there is no assurance that such equipment lease
financing will be available on favorable terms to the Company or at all. The
Company also plans to increase the number of its employees.
The Company anticipates that it will require an additional $2,600,000
to fund its operations, primarily to further expand its SmartStreet(TM) kiosk
operations in the next 24 months and that such funding will be obtained through
the net proceeds of the Offering and from operations. In the event additional
capital is required to fund the Company's operations during such period, such
additional capital may be obtained through anticipated revenue which may be
derived from the Company's operations, principally monthly base charges,
transaction fees and advertising revenues. No assurance can be given that any of
the amounts referred to in this paragraph will be obtained. If such amounts are
not available, the Company could be required to seek additional financing sooner
than currently anticipated. See "Use of Proceeds."
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<PAGE>
GLOSSARY
ALGORITHM - A detailed sequence of actions to perform or to accomplish some
task. The term is named after an Iranian mathematician, Al-Khawarizmi. An
algorithm reaches a result after a finite number of steps. The term is also used
loosely for any sequence of actions (which may or may not terminate).
ActiveX(TM) TECHNOLOGY - Microsoft's implementation of OLE designed to run over
slow Internet links.
APPLETS - A program, written in the Java language, which can be distributed as
an attachment in a World-Wide Web document and executed either by a browser or
server that supports Java.
CLIENT/SERVER COMPUTING - A computer system architecture in which two
independent processors communicate via an established protocol. The client is
typically a single user personal computer with a graphical user interface
operated by the end-user that makes requests to the server. The server typically
runs database software, maintains information and responds to one or more
clients.
FIREWALL - A system that controls the flow of data between an internal network
and the Internet or between internal network segments.
FRAME RELAY - A wide area communications interface. Frame Relay could connect
dedicated lines and X.25 to ATM, SMDS, BISDN and other "fast packet"
technologies. Frame Relay uses the same basic framing and Frame Check Sequence
at layer 2 so current X.25 hardware still works. It adds addressing (a 10 bit
Datalink Connection Identifier (DLCI)) and a few control bits but does not
include retransmissions, link establishment, windows or error recovery. It has
none of X.25's layer 3 (session layer) but adds some simple interface
management. Any layer three protocol can be used inside the layer two Frames.
GRAPHIC USER INTERFACE (GUI) - Interfacing with a computer by manipulating
graphical icons and windows (usually by pointing and clicking a mouse) rather
than using text commands.
HYPERTEXT MARKUP LANGUAGE (HTML) - A page description language used to convey
both content and formatting information about content to a Web browser.
INTEROPERABILITY - The ability of software and hardware on multiple machines
from multiple vendors to communicate.
INTERNET - An open global network of interconnected commercial, educational and
governmental computer networks that utilize a common communications protocol.
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<PAGE>
INTERNET SERVICE PROVIDER - (ISP) A company which provides other companies or
individuals with access to, or presence on, the Internet. Most ISPs are also
Internet Access Providers; extra services include help with design, creation and
administration of World-Wide Websites, training, and administration of
Intranets.
INTERNET PROTOCOL (IP) - The network layer for the TCP/IP protocol suite widely
used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless,
best-effort packet switching protocol. It provides packet routing, fragmentation
and re-assembly through the Datalink layer.
INTRANET - An organization's private network of its local area networks that
utilizes Internet data formats and communications protocols and that may use the
Internet's facilities as the backbone for network communications.
LOCAL AREA NETWORK (LAN) - A group of one or more computers connected together
within a localized environment for the purpose of sharing data and networked
resources such as printers, modems or servers.
MICROSOFT WINDOWS - Computer operating systems providing graphical user
interfaces and, in the case of Windows NT, that is optimized for use as a
network server.
OLE - Microsoft's component architecture which competes with OpenDoc and COBRA.
See "Business - Industry Background - Reusable Software Components."
PRIME NUMBERS - numbers divisible only by themselves and one (1).
RAPID APPLICATION DEVELOPMENT (RAD) - a technique for developing software
quickly that makes use of prototyping and reusable software components.
SHRINK WRAP LICENSE - A printed agreement included in product packaging that
typically provides that opening the package indicates the user's acceptance of
its terms and conditions.
UNIVERSAL RESOURCE LOCATOR (URL) - a complete address to reach a site on the
WorldWide Web specifying the protocol and fully qualified address.
WEB BROWSER - Client programs that allow users to browse the Web.
WEB SERVER - A server process running at a website which sends out web pages in
response to requests from remote browsers. If one site runs more than one server
they must use different port numbers.
WEBSITE - Any computer on the Internet running a World-Wide Web server process.
A particular website is identified by the hostname part of a URL.
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<PAGE>
WIDE AREA NETWORK (WAN) -A communications network that uses commercial
transmission resources to connect geographically dispersed users or LANs.
WORLD-WIDE WEB (Web or WWW) - A network of computer servers that uses a special
communications protocol to link different servers throughout the Internet,
allowing a user to move from document to related document, no matter where it is
stored on the Internet, and permits communication of graphics, video and sound.
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<PAGE>
BUSINESS
The Company is in the business of providing information and
transaction-based services using proprietary software and off-the-shelf,
reusable software components based on Microsoft's ActiveX(TM) (formerly OLE)
component technology. The Company's strategy is initially to provide information
and services through public access kiosks, known as SmartStreet(TM), over
Intranets. The kiosks will be located in high density pedestrian traffic areas.
The first five kiosks were deployed in New York City in July 1996, under an
agreement with the City of New York. Kiosk users are able to obtain information
and documents and transact certain business without the necessity of interacting
directly with City employees or appearing personally at certain City offices.
In early 1996, the City of New York entered into an agreement with
the Company to develop public kiosks to be located in City offices and other
public locations in an effort to expedite transactions with the City. Using the
first five kiosks currently operating and additional kiosks that the Company
anticipates locating throughout the New York City area, members of the public
can obtain certain information and documents from the Buildings Department and
the Department of Health, as well as information about City government and
elected officials and general information about transportation and attractions
in New York.
The kiosks are configured to permit the Company to offer additional
services provided either by the Company or third parties and to sell advertising
on such kiosks. Under the agreement with the City, a portion of the revenue, if
any, derived from such services and advertising will be shared with the City.
The Company will seek to provide SmartStreet(TM) services to other
municipalities, states and government agencies and to organizations in the
private sector that provide a large volume of information, records and documents
to the public. The Company may also seek to enter into agreements with the City
and other customers to provide information and services over the Internet, in
order to expand significantly the accessibility of such information and
services.
The Company also operates an Internet-based site, OLEBroker(TM), a
subscription service that allows customers to search its database of information
about software components, find the information needed and at the customer's
option, purchase needed components on-line. This service is of benefit to
customers developing computer programs for Microsoft Windows. Subscribers to
OLEBroker(TM) come from over 16 countries.
In addition to developing products and services for its own account,
the Company has in the past provided, and continues to provide, educational and
consulting services related to the Internet, reusable software components, and
rapid application development. Clients for these services have come from a
variety of industries, including the insurance, manufacturing and fashion
industries, as well as from the public sector. The Company has written technical
papers published by Microsoft.
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<PAGE>
INDUSTRY BACKGROUND
INTERNET DEVELOPMENT
In recent years, computers have become increasingly interconnected
through local area networks, wide area networks, and a technology for linking
computers together known as the Internet Protocol (IP), as well as through
various proprietary services. Increasingly, desktop personal computers (PCS)
communicate with larger, shared servers using an arrangement known as
client/server technology, as well as with other PCS on a peer to peer basis. The
Internet, in particular, has experienced explosive growth in recent years as a
means for computers to communicate with each other. While in its initial years,
the Internet was used primarily for the transmission of electronic mail and for
the dissemination of information, a technology called the World Wide Web ("WWW"
or "Web"), a graphical approach to seeking and providing information, has proven
to be very popular, and more than 40,000 websites operate to support Web
browsers.
Recently, CommerceNet, through Nielsen Media Research, conducted the
Internet Demographics Survey, which the companies say is the first
population-projectable survey regarding Internet usage. Among the survey's
findings were these: there is a sizable base of Internet users--some 24 million
people--in the United States and Canada; users of the World Wide Web are
potentially ideal targets for business applications since they were found
typically to be more educated and to have higher incomes than the rest of the
population; and some 2.5 million people have already made purchases using the
Web. The study found that users access the Internet fairly frequently, with 31%
accessing it at least once a day. In addition, Internet users spend an average
of five hours and 28 minutes online per week. The CommerceNet study has been
criticized by some as unrepresentative, in that it over-represents highly
educated individuals and under-represents individuals with less than a high
school education. However, the critics generally acknowledge that even if the
sample is skewed, the overall conclusions, if not their magnitude, are valid.
Leading developers of Web browser software include Netscape, NCSA
Mosaic and Microsoft. Leading developers of software for web servers include
Netscape, O'Reilly and Purveyor. In 1996, Microsoft included an Internet server
called Internet Information Server as part of Release 4.0 its NT operating
system package.
Internet technology has been enhanced in various ways to permit
conventional applications to interact with users having access to an Internet
connection and a web browser, to effect purchases and other transactions over
the Internet. Such commercial use typically requires custom programming, and
special techniques to provide for an acceptable level of security, given that
the Internet is inherently an insecure network. Visa and Mastercard have
announced standards to support the secure approval of credit card transactions
over the Internet. These standards were developed jointly with Microsoft and
Netscape. Separately, Netscape and VeriFone Inc. announced plans to develop
software to support this standard with Netscape's commerce server software.
DigiCash, N.A., CyberCash, Inc., and First Virtual Holdings have implemented
their own Internet payment systems. The ability to accept payments easily over
the Internet opens up many possibilities; for
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<PAGE>
example, users can pay on a "per transaction" basis for use of specialized
software or for obtaining information such as documents, price quotations, and
the like.
Many vendors, including Microsoft, offer techniques for improving the
level of security on the Internet, including secure servers, firewalls,
encryption techniques and other devices; however, even in the aggregate, these
techniques are not wholly foolproof and the lack of full security may impede the
growth of commerce on the Internet. New studies using very large Prime Numbers
propose to have keys that all computing power in the world today would take over
a million years to break. Although this may be drastically reduced by new
techniques in factoring Prime Numbers, finding a pattern to Prime Numbers, or
future computer power growing much more than expected, these new techniques
would offer far greater security than any codes in use today.
In the past year, reusable software components have begun to be
adapted for the Internet. Two strategies have emerged. The first is a language
called Java created by Sun Microsystems for development of "applets" of
downloadable and reusable software components over the Internet. More recently,
Microsoft has developed software to support its ActiveX(TM) technology over the
Internet, and has released a beta version of Visual Basic called Visual Basic
Script for the development and support of ActiveX(TM) components over the
Internet. Microsoft has also signed an agreement with Sun for support of Java
applets in its Internet Explorer, an Internet Browser used by the Company.
INTRANET TECHNOLOGY
Internet software is being used in private networks also. Such usage
is referred to as an Intranet and it is increasingly becoming a part of the
information services delivery strategy of many large organizations. Using
Internet software to organize a private network can provide the same ease of
use, hypertext capabilities, and downloading as does the Internet today.
Intranets can be used to support a broad range of business solutions; that is,
software programs that support business functions. Drawing from the usage of
Internet e-mail and the Internet's World-Wide Web, Intranets can be used to
publish and exchange information within a company.
Additionally, Intranets can be used to make interactive business
applications broadly accessible to a company's users wherever they are located.
This is not just the traditional automating of business processes within a
company. These applications can also tie together business processes between
companies. An example of this would be linking suppliers with a manufacturing
company's inventory system. This inter-company communication can take place by
combining Intranets and the Internet. A new capability, called point-to-point
tunneling protocol (PPTP), makes it feasible for secure business processes to
operate over the Internet. In this connection, according to Microsoft, over 1.2
million people use the Microsoft Office family of web authoring tools.
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KIOSK TECHNOLOGY
Kiosks are public access stations that can supply information or
perform transactions. Many kiosks today are self-contained. Others may be linked
to a central site. Kiosks have traditionally used conventional or proprietary
technology. In contrast, the Company's kiosk technology combines the advantages
of Internet and Intranet technology.
Kiosks are becoming more and more common across the United States.
Inteco, a Norwalk, Connecticut-based market research firm that tracks the kiosk
market, estimates the installed kiosk base is approximately 86,500 units and
includes such applications as custom greeting card machines, automotive parts
look-up centers, music CD-preview stations, museum information kiosks, and movie
ticketing dispensers. By 1997, Inteco expects the installed base of kiosks to
grow over five-fold to approximately 519,000 units.
REUSABLE SOFTWARE COMPONENTS
Historically, the Company engaged in rapid application development
for others. It was attracted to this field because, as noted by Microsoft,
software development in many companies today accounts for half or more of total
expenditure for information processing. Often, software development takes longer
than expected to complete, and fails to live up to expectations. In "Software's
Chronic Crisis," W. Wayt Gibbs reports that over half of complex software
projects fail (Scientific American, September 1994). Although U.S. corporations
and institutions spend an annual $250 billion on software development, the
Standish Group International reports that only 16% of projects come in on
budget, on time, with all the planned features. Fifty-three percent are either
over budget, delayed, have fewer functions than planned, or any combination
thereof (Investor's Business Daily, January 25, 1995). Several techniques have
been developed to remedy this situation, including a trend towards client/server
computing, the use of graphical user interfaces, such as Windows, rapid
application development languages and environments such as Visual Basic,
PowerBuilder and Delphi and SQLWindows, and the development of techniques for
reuse of software components such as OLE and OpenDoc.
Reusable software has been a goal of software developers for many
years, as a means of reducing the cost and time frames for software development.
Programming languages that are "object-oriented" provide facilities that
encourage development of reusable blocks of software called "objects." The
leading languages which support object development are C++ and Smalltalk. Such
objects can be reused only in their own environments, and modest success has
been reported using such tools. More recently, the software community has begun
to develop mechanisms for larger reuse through language- and
platform-independent reusable software components. The goal of reusable software
components is to provide a mechanism for reusing tested objects, without the
necessity for the programmer reusing the code to need to understand the internal
algorithms or structures of the code being reused. This reuse is accomplished by
establishing a "contract" or agreed-upon mechanism for objects to interoperate.
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Currently, the leading technology for reusable components is called
Object Linking and Embedding (OLE), now known as ActiveX(TM), and was developed
by Microsoft. It is supported by over 300 independent software vendors (ISVs)
who have developed several thousand reusable objects that are offered for
commercial sale. Many organizations also develop their own reusable software
components that they do not market to others. OLE is a proprietary Microsoft
standard, but it is an open standard in the sense that it is published and
anyone can build components conforming to this standard without payment of fees
to Microsoft and without obtaining a license.
A competing standard, developed by IBM and Apple and known as
OpenDoc, was contributed to Component Integration Laboratories (CILabs), a
non-profit industry-wide organization and is offered as an "open" cross-platform
standard (that is, it can be used with computers with different operating
systems). Initial supporters of CILabs include Apple, IBM, Novell, Oracle,
SunSoft and Xerox. Microsoft has not endorsed this standard. To date, few
components have been developed to support OpenDoc. Once OpenDoc becomes
available for the Windows platform, an effort which IBM has announced is
underway, additional vendors may be motivated to develop for this specification.
OLE is available for the Windows platforms and the Apple Macintosh
line of computers with support provided by Microsoft. IBM, Microsoft, Computer
Associates, Wang as well as specialized vendors such as Sheridan and Progress
among others, have developed and offer for sale OLE components for these
environments. In addition, Microsoft has licensed several third parties,
including Digital Equipment Corporation, Software AG, and Insignia and Bristol
Technologies to develop support for OLE on Digital's VMS platform, IBM's MVS
mainframes and AS/400 computers, and UNIX platforms, respectively. Microsoft has
estimated that 98% of computers will support OLE by 1998.
A third standard, known as CORBA, a specification endorsed by the
Object Management Group, is designed to allow objects written on different and
otherwise incompatible platforms to interact using software known as object
request brokers (ORBs). ORBs are offered by vendors including Digital and Orbit.
OBJECTSOFT STRATEGY
Since its founding in 1990, the Company has been active in the field
of rapid application development (RAD). It was an early user of OLE as well as
RAD languages such as Visual Basic. Initially, the Company directed its efforts
to, and derived its revenues principally from, consulting, writing, training and
custom development for clients that included large corporations in the computer,
consulting, banking, manufacturing, cosmetics and apparel industries, among
others, as well as government agencies.
In performance of its consulting and related activities, the Company
developed a base of courseware and software objects to which it retains title.
In 1995, the Company made a strategic
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decision to leverage its skills in rapid application development and its
expanding body of reusable software objects toward the development of services
through which it can derive revenue on a "per transaction" basis. In connection
with its development of the OLEBroker(TM) program, the Company developed
significant additional software objects which it then used in the development of
technology for the kiosk and Internet service delivery programs.
The Company's strategy is to focus on development and marketing of
the kiosk and Internet service delivery products. In this regard, it will seek
to enter into strategic alliances with, and provide Intranet and/or Internet
software to, entities that have a need to provide information and documents
contained in proprietary databases to, or conduct a large volume transactions of
transactions with, the general public or specific, but large, audiences in an
expeditious, widely and easily accessible manner. Such entities include
municipalities, other government entities and agencies and large public and
private entities such as publishers, trade and business associations and others.
The Company will seek to develop alliances with software and hardware
manufacturers whose products may be used in or integrated with the software
being developed and marketed by the Company. The Company intends to retain an
ownership interest in the objects it develops in support of such projects.
Wherever possible, the Company also intends to contract, as it has with the City
of New York, to own and operate the services itself.
In addition, the Company will seek to structure its arrangements with
customers to permit it to offer related and unrelated information and services,
particularly to kiosk users who might not otherwise have access to the Internet.
This could include commercial and public service advertising and potentially the
ability to make purchases and conduct other transactions through the Internet.
There can be no assurance that the Company will be able to fully
implement its strategic objectives or that it will be able to successfully
market its kiosk and Internet based transaction services.
PRODUCTS AND SERVICES
SMARTSTREET(TM) KIOSK SERVICES
The Company makes transactional services available via public access
kiosks that combine the advantages of Internet and Intranet technology. Like an
Intranet, the communication between the kiosk and its servers is accomplished
over private, secure lines. Like an Internet, it enables an organization to
interact with the general public, not just its own employees and customers. The
Company anticipates that revenues from the kiosks will be provided by leasing
fees paid by the service providers, such as the City, and by usage fees paid by
consumers who obtain services through the kiosks.
On January 11, 1996 The Company entered into an agreement with The
City of New York (the "City Agreement") to provide a minimum of five kiosks to
transact municipal services. Services
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to be provided from these kiosks include access (for a fee) to the records of
the Department of Buildings, certain Department of Health services, including
obtaining copies of birth certificates, death certificates, dog licenses,
obtaining public health information, and registering for certain courses offered
by the Department of Health. Information on City government, directional
information and information about New York City's events, museums, tourist
attractions, shopping and similar matters is provided without fee. Kiosks are
located at 125 Worth Street in Manhattan, in the Borough Halls of the Bronx,
Brooklyn, and Queens, and in the Staten Island terminus of the Staten Island
Ferry. All kiosks providing City services or information, whether operated by
the Company or other suppliers, carry the City's "CityAccess(TM)" logo.
Pursuant to the City Agreement, the Company is to receive
customization fees and minimum monthly payments and per transaction fees. The
City Agreement runs for one year after all five kiosks are installed, which
occurred in July 1996, and is renewable for up to two years at the option of the
City. The Company has certain other rights, including the right to sell
advertising and additional services developed by the Company or third parties. A
portion of the revenue from such collateral sales is to be shared with the City.
The Company plans to exercise these rights and to actively solicit additional
service providers and advertisers. Pursuant to the City Agreement, the Company
also has the right to install additional kiosks in the City, subject to certain
conditions. The City will not be required to pay additional monthly payments for
such kiosks, but it is anticipated, although there can be no assurance, that use
by the public will generate transaction fees. The Company had commenced
evaluating potential sites and will seek to install up to 25 additional kiosks
over the next six to nine months.
At the time the City Agreement with the Company was executed, the
City also signed similar agreements with two other companies for additional
kiosks. The City expects to evaluate its success with this program and, if it
deems it successful, to issue a Request for Proposals for competitive bidding to
supply additional kiosks throughout the City.
The Company intends to market kiosks to other municipalities,
government agencies and organizations in the private sector. In the future, the
Company may seek to make its transactional services available over the Internet
and to make the Internet available from the Company's public kiosks.
There can be no assurance that the Company's initial kiosks will
perform on a commercial basis as anticipated, that the Company will be able to
install and operate additional kiosks pursuant to the City Agreement, that City
will seek to acquire additional kiosks, that the Company will secure a contract
to supply additional kiosks to the City, that it will succeed in marketing its
kiosks to other potential users, or that it will be able to attract additional
service providers or advertisers to kiosks that may be located in New York City
or elsewhere.
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Operation of Smartstreet(TM) Kiosks
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The Company's goal in designing the SmartStreet(TM) kiosks was to
maximize potential use by developing software that would be inviting and easy to
use. The kiosks are designed so that a potential user is attracted to the kiosk
by digital videos played from the upper monitor. Initially these videos will
include an "attract loop," narrated by the noted actor Tony Randall (currently
Director of the National Repertory Theater) and a message from Mayor Rudolph W.
Giuliani, as well as "spot" advertisements. The attract loop explains what can
be done with the kiosks and how to use them, and shows people from many walks of
life using them successfully.
Once a user approaches the kiosk, he or she is greeted by a message,
and invited to press on the touchscreen to continue. In the future, the Company
expects to make the kiosks accessible in multiple languages. The user is guided
with verbal and on-screen prompts to the various services and categories of
information available from the kiosk. As currently configured, the Opening
Screen is divided into five parts or frames (see Figure 1 below):
1. MULTIMEDIA FRAME - The upper left corner presents graphics, pictures
of people or places, and "talking heads" to help the user navigate
SmartStreet(TM).
2. TOOLBAR FRAME - SmartStreet(TM) navigation buttons are located just
below the Multimedia Frame. These buttons are always visible and
allow the user, at any time, to:
a) Return to Home Menu
b) Take a survey
c) Get on-screen help in using the kiosk
3. CONTENT FRAME - Located to the right of the Multimedia and Toolbar
Frames, this contains the content and menus of the information and
services available on SmartStreet(TM).
4. FOOTER FRAME - Located below the Toolbar Frame and most of the
Content Frame, this contains a place for local advertising and the
keyboard for data input when needed.
5. VOLUME FRAME - Located to the right of the Footer Frame and beneath
the Content Frame, this controls the kiosk volume. When a user walks
away and the kiosk resets itself (after about two minutes of idle
time), it automatically resets the volume to 5 (mid position). A
small feedback area confirms the current setting for the user.
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[GRAPHIC OMITTED - For description, please see
Items 1 through 5 on the previous page.]
SmartStreet Kiosk - Opening Screen
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The user has several choices on the Opening Screen to begin the
SmartStreet(TM) experience. The user can:
1. Touch the Touch Here to Begin link in the Content Frame, the Home
button in the Toolbar Frame, or the graphic in the Content Frame to
jump to the Home Menu (see Figure 2 below).
2. Touch I'm Finished to take a short survey on his or her experience on
the kiosk or leave a message.
3. Touch I Need Help to get online verbal or video help on
a) What is available on the kiosk
b) How to use the kiosk
[GRAPHIC OMITTED - For description, please see
Items 1 through 7 below.]
SmartStreet Kiosk - Home Menu
The Home Menu contains the starting point for each service available
through SmartStreet(TM). The current services are:
1. KEYS TO CITY HALL - This service allows a user to look up city
agencies, elected officials and city transportation (see below)
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2. AROUND NEW YORK CITY - This service provides information on New York
City attractions, tours, hospitals, churches, museums, theaters,
sports arenas, etc. Most of the items in this section include maps of
the attraction.
3. DEPARTMENT OF HEALTH ("DOH") - DOH services and publications are
listed as well as the ability to print applications for Birth
Certificates, Death Certificates, and Dog Licenses.
4. CITYACCESS(TM) KIOSKS - Lists the location and services available at
all CityAccess(TM) kiosks.
5. DEPARTMENT OF BUILDINGS ("DOB") - DOB services include review of
outstanding violations against a building, tracing of ownership
records and review of heat complaint information.
6. MARKETING ON SMARTSTREET(TM) - Information on how to contact the
Company.
7. TRANSPORTATION - Maps and routes for subways, buses and railroads as,
well as street maps.
If a user wants to carry out a transaction for which there is a cost
(such as obtaining a license or an official copy of a document), the user is
advised of the charge and prompted to insert a credit card. The credit card
reader in use is designed so that the user never lets go of the card, for added
security. The transaction request is sent to the central server site over a
secure frame-relay network. In turn, the server sends the credit information to
a credit authorizer for approval. If the transaction is declined, the user is
advised and invited to submit another card. If the transaction is accepted, the
a reservation is made against the user's credit line, and the server then
proceeds to initiate a transaction with the City's computers, to which it is
connected via private leased lines. Once the required service has been performed
by the City's computers, and a confirming transaction number sent back, the
credit authorizer is again contacted and the transaction is settled. The
authorizer causes the user's account the be debited, and the merchant accounts
of the City and the Company to be credited for the transaction fee and service
fee, respectively. The Company expects to install a credit card transaction
capability in the fourth quarter of 1996.
Smartstreet(TM) Kiosk Technology
- --------------------------------
SmartStreet(TM) kiosks were designed using advanced Internet
technology. This technology allows the kiosks to operate either on a private
Intranet or as an Internet site. The "browser" in the kiosk is Microsoft's
Internet Explorer 3.0 (IE3) and Internet Information Server 1.1 (IIS)
technologies. By using IE 3 as an OLE object running full screen, hiding the
Windows environment from the user, the Company was able to present a custom
interface without having to develop custom operating system software or add-ons.
The browser operates in a fashion suitable for use by the general public from a
touch screen. Scroll bars, menus and status areas are turned off, and only
functions which are specifically programmed or permitted are allowed.
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IE3 allows the use of new "light-weight" ActiveX(TM) controls and
supports client-side VB Script and Java. IE3 also supports SSL 2.0, SSL 3.0, and
PCT 1.0 security standards as well as advanced HTML Features such as Style
Sheets, Frames & Tables, which convey content to the user at the kiosk. Many of
these pages contain VB Script code to perform functions beyond the scope of
normal HTML. This code uses objects, many of which were initially developed by
the Company in connection with consulting contracts or OLEBroker(TM), to perform
complex tasks on behalf of the kiosk. Some of these tasks are:
1. Printing formatted documents
2. Reading a credit card
3. Printing a receipt
4. Transmitting Credit Card information to a bank for
approval/disapproval
5. Logging and error handling
6. Storing the survey results into a database
7. Adjustment of volume
8. Production of custom maps
In addition, many third party ActiveX(TM) controls are or will be
used:
1. ESRI's Map Objects (Custom Maps)
2. Wall Data's Rumba (mainframe connections)
3. Microsoft's custom controls and timers (Look and feel of the kiosk)
4. Microsoft Visual Basic's buttons (keyboards)
The Server is built on Windows NT and runs Microsoft Internet
Information Server, which supports "server-side" Visual Basic, and ActiveX(TM)
controls. Microsoft BackOffice is also used for the databases and for system
management. The connection between the remote kiosks (each of which is operated
as a separate LAN) and the Server is accomplished through Frame Relay
connections, and uses equipment manufactured by RAD and by Cisco.
The connection is transmitted via regulated common carriers.
The kiosks were designed to comply with the accessibility
requirements of the Americans with Disabilities Act. The Company used
subcontractors for the design hardware and graphics associated with its kiosks,
and the kiosks are constructed by a subcontractor in accordance with the
specifications developed by the Company. They are constructed of hardened steel,
with baked-on, vandal-resistant paint. The touchscreen in use is made of
tempered glass for secure and vandal-resistant operation.
Marketing
- ---------
To market kiosks successfully, the Company believes it must obtain
the rights to place its kiosks in compelling high-density locations. In
addition, the Company will seek to attract
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advertisers based on the number of "impressions" that the Company can offer to
advertisers and their demographics. To this end the Company has commissioned
site surveys that will count the actual population at each existing location.
The Company has retained a consultant to assist the Company in leasing space in
favorable locations and on satisfactory terms. In addition, the Company has
retained a media consultant to prepare a media kit and to target it to suitable
advertisers. The Company has retained well-known public relations counsel to
disseminate news related to its kiosks and to stimulate demand. Additional
marketing efforts focus on identifying content-providers whose offerings can
create additional transaction revenue for the Company's kiosks. In seeking
content providers, the Company will exhibit at major trade shows where it will
partner with several of its major vendors. For example, the Company expects to
partner with Dell, Microsoft and Lexmark at the Government Technology trade show
in September 1996, and to participate in similar joint efforts on an ongoing
basis. A telemarketing program has been initiated to target tourist,
recreational and similar facilities to list their facilities on the Company's
kiosks. This effort has been contracted to a telemarketing firm on a commission
basis.
The Company's marketing activities are currently performed by its
executive officers and consultants under such officers' supervision. The Company
intends to devote a portion of the proceeds of the Offering to marketing
activities, which may include the employment of one or more dedicated marketing
personnel, as well as the continued engagement of specialized consultants.
OLEBROKER(TM)
The Company's first commercial product for the Internet was
OLEBroker(TM), introduced in November 1995. OLEBroker is an on-line subscription
service for OLE reusable components. This service is operated on the Internet
with the Universal Resource Locator (URL) of http://www.olebroker.com. The
service contains the searchable full text of the help files of OLE and
ActiveX(TM) components that have been provided for listing by component vendors.
In addition, it contains white papers, specifications, standards, training
materials, and news articles. OLEBroker(TM) is designed to be a one stop place
to get information on OLE, as well as to find component needs for particular
purposes.
Component vendors participating in OLEBroker(TM) include: ASP of
Japan, Blue Sky Software, Crescent Division of Progress software, Crystal (a
Seagate Company), Kelro Software, Looking Glass Software, Media Architects,
Microsoft, Pronexus, Protoview, Sheridan Software, Soups, SQA, Stylus
Innovation, Sylvan Ascent, and Texas Instruments.
Microsoft and the Company entered into a Cooperation Agreement on
November 7, 1995 with respect to OLEBroker(TM). The Cooperation Agreement
provides that Microsoft will undertake various promotional activities relating
to OLEBroker(TM), including the distribution of an OLEBroker(TM) subscription
offer in copies of Microsoft's Visual Basic 4.0
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and Access Development Toolkit and in a Magazine supplied to purchasers of
Microsoft Visual C++. The Company, in turn, provides Microsoft with a number of
complementary subscriptions and a discounted price for additional subscriptions.
The term of the Cooperation Agreement is initially one year, and the parties are
currently negotiating an extension of the initial term. The agreement may be
renewed for successive one-year terms upon written agreement of the parties at
least two months prior to the expiration of the then-current term.
The Company derives revenue related to OLEBroker(TM) from the sale of
subscriptions, and from advertising. Subscribers come from the United States and
approximately 15 other nations. As of June 1996, OLEBroker(TM) subscriptions had
a list price of $199 per year, and an initial price of $129 per year is
currently in effect. In accordance with the Cooperation Agreement, Microsoft
customers are entitled to a discounted subscription rate of $99 per year. In the
year ended December 31, 1995 and the six month period ended June 30, 1996,
revenues from OLEBroker(TM) were not significant. The Company believes that
while there will continue to be a growing market for the OLEBroker(TM) service,
particularly as the use of Microsoft Windows programs increases, such market may
consist primarily of persons involved in computer programming, rather than
computer users in general.
CONSULTING, TRAINING AND AUTHORING SERVICES
The Company's historical business has been to assist clients in
making the transition from mainframes and minicomputers to client/server and
rapid application development. These services have included include training,
authoring and consulting for numerous clients in a variety of industries,
including the insurance, manufacturing and fashion industries, as well as the
public sector. The Company intends to continue to engage in these activities as
resources permit. In selecting opportunities, the Company will focus primarily
on consulting and training assignments in connection with the sale of kiosk
services or that can otherwise enhance its skill base.
Training Services
The Company has provided training courses in subjects including:
* Client/Server Rapid Application Development
* Graphical User Interface Design
* Internet Development
* Automated Testing of Software
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* Introductory and Advanced Visual Basic
* Component Development with OLE 2.0
* Help Authoring and Software Documentation
Training fees are typically charged on the basis of per-diem fees of
$2,000 - $3,000 per day and a materials cost, if applicable, plus reimbursement
for out-of-pocket expenses.
Most seminars are held at client sites.
Authoring Services
David E. Y. Sarna and George J. Febish, Co-Chief Executive Officers
of the Company, author a semi-monthly column, called Paradigm Shift, focussing
on development, Internet and Intranet issues, for Datamation, a magazine
published by Cahners Publishing Company, a division of Reed Elsevier Inc. In
addition, the Company has authored three white papers for Microsoft covering
OLE, Three-tier Client/Server Architecture and Visual Basic for Enterprise
Development, and completed various assignments for other clients. Fees from
these services are negotiated on a project basis.
Custom Development and Consulting Services
Custom Development and Consulting Services include the design of OLE
objects, as well as complete multimedia systems. Fees for such services are
negotiated either on the basis of hourly billing rates for the staff assigned or
for fixed fees for specified services.
The Company entered into a contract in 1995 with ACORD Corporation, a
non-profit organization, whose members include property and casualty insurers
and about 40,000 independent agents ("ACORD"). ACORD develops and maintains
communications standards for the property and casualty industry. The Company
assisted ACORD in defining AL4, an OLE-based standard and set of objects for
implementing ACORD forms, which comply with 184 standards set by various
regulatory organizations. Developers from ACORD and the Company are creating and
distributing the reusable ACORD knowledge objects for particular insurance
forms. The standard also describes how ACORD's Independent Software Developers
(ISDs) can incorporate these OLE-based objects into their systems. The Company
intends to work with ISDs to assist them in implementing support for AL4 on the
basis of consulting agreements.
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RELATIONSHIP WITH MICROSOFT
The Company has established a strategic relationship with Microsoft
that it believes is important to its sales, marketing and support activities, as
well as to its product development efforts relating to its kiosks. Microsoft
supports the Company in marketing its kiosk services, has informally agreed to
exhibit the Company's kiosks in Microsoft displays at various trade shows and
has issued statements that included favorable references relating to the
Company's products. Microsoft has also entered into various non-disclosure
agreements with the Company with respect to unannounced Microsoft products,
under which the Company has the opportunity to have advance knowledge of
software technology being developed be Microsoft.
Since 1994, the Company has served as the regional host and sponsor
of Developer Days, an ongoing series of technical conferences organized and
operated by Microsoft. The Company's President and Chairman have served as the
Regional Directors for these events. Although the Company is not directly
compensated by Microsoft for its participation, the Company has derived
substantial benefit from this relationship, including access to senior Microsoft
executives, early disclosure of technology and publicity. The Company will
continue to act in this capacity for the fourth Developer Days conference,
currently scheduled for February 1997.
In November 1995, Microsoft and the Company entered into the
Cooperation Agreement with respect to OLEBroker(TM). The Cooperation Agreement
provides that Microsoft will undertake various promotional activities relating
to the Service including the distribution of a subscription offer in copies of
Microsoft's Visual Basic 4.0, Access Development Toolkit, and in a magazine
supplied to purchasers of Microsoft Visual C++. The Company, in turn, will
provide Microsoft with a number of complementary subscriptions and a discounted
price for additional subscriptions. An extension of the initial term of the
Cooperation Agreement, currently one year, is being negotiated, and the
agreement may be renewed for successive one year terms upon written agreement of
the parties at least two months prior to the expiration of the then current
term.
COMPETITION
The Company is subject to competition from different sources for its
different services. The Company's Intranet kiosk business competes with numerous
companies, including IBM, North Communications, DSSI and NCR (currently a
division of AT&T). All of these companies have resources much greater than those
of the Company. The Company's contract with the City of New York is presently
the most significant part of this business. The City has also awarded contracts,
comparable to the contract awarded to the Company, to North Communications and
DSSI, both of which have sold similar kiosks to other municipalities. After
fulfillment of the initial contracts, if the City chooses to install additional
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kiosks throughout the City of New York, it may award to others, and not the
Company, the contract to install such additional kiosks. Further, there can be
no assurance that other municipalities or other entities will seek to acquire
kiosks from the Company. In addition, if the use of kiosks provided by the
Company and others proves to be successful in New York City and other
municipalities and locations, additional companies in the software, hardware and
communications areas, among others, may seek to enter the market. A total of 19
companies competed for the contracts with the City of New York, many of which
can be expected to compete aggressively in other competitive situations.
OLEBroker's(TM) competition includes Fawcette Technical Publications
("Fawcette"), which offers a web-site about OLE components which is supported by
advertising revenues. At this time, the Fawcette site does not offer vendor's
help files, and does not sell components, although this may change in the
future. Cybersource offers a website called software net for the sale of
software on-line, including components. A Canadian subsidiary of Sterling
Software also provides electronic commerce, and additional competitors are
expected to enter the field as barriers to entry are reduced or eliminated. Many
of these will have resources far greater than the Company.
The Company is subject to competition from different sources for its
different services. In its historical business, the Company competes with the
consulting division of Microsoft, the consulting arms of the "Big Six"
independent public accountants, IBM, EDS, and a host of small and large
consultants, integrator and trainers. Many of these organizations have
significant and long-standing relationships with their clients, and because of
their economies of scale may be able to offer more favorable terms or prices.
CUSTOMERS
The long term success of the Company's business will depend not only
on the Company's ability to enter into arrangements with municipalities and
private entities to make services available through kiosks and with advertisers
to use the kiosks as an advertising medium, but ultimately upon the willingness
of consumers pay fees to transact business by means of the kiosks. To date, the
Company is operating only five kiosks, which were installed pursuant to the
agreement with the City of New York and which have been available for public use
for a short period of time. The decision by the City to acquire kiosks from
providers other than the Company would have a direct and materially adverse
effect on the prospects of the Company and could also decrease the Company's
ability to market the kiosks to other potential service providers and
advertisers. In addition, there can be no assurance that the volume of use by
consumers of the kiosks to obtain City services and conduct other transactions
will be sufficient to generate significant revenues for the Company.
The Company historically has derived a significant portion of its
revenues from a relatively limited number of customers. During the six months
ended June 30, 1996, two
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customers accounted for 76% of the Company's revenues. During 1995, two
customers accounted for approximately 56% of the Company's revenues, and during
1994, four customers accounted for approximately 67% of revenues. The Company
provided consulting and related services, and more recently, services related to
the development of OLEBroker(TM) and Intranet and kiosk technology to such
customers. There can be no assurance that such customers or others will retain
the Company to install kiosks or provide such services in the future.
Furthermore, no customers of OLEBroker(TM) account for a material portion of the
Company's revenues, and there can be no assurance that the Company will be able
to develop a significant customer base for this service.
PROPRIETARY RIGHTS AND LICENSES
The Company's success is highly dependent on its proprietary
technology. The Company views its software as proprietary, and relies on a
combination of trade secret, copyright and trademark laws, non-disclosure
agreements and contractual provisions to establish and protect its proprietary
rights. The Company has no patents or patents pending and has not to date
registered any of its trademarks or copyrights. The Company plans to seek
registrations in the United States for the following trademarks:
SmartStreet(TM), ObjectSoft(TM), OLEBroker(TM), CafeOLE(TM). In addition, the
Company plans to register certain of these trademarks in principal foreign
jurisdictions.
The source code for the Company's proprietary software is protected
as a trade secret. In addition, because the Company does not sell or license its
technology to third parties, but rather delivers services thorough its kiosks
and OLEBroker(TM), its proprietary software is not disclosed to third parties.
Furthermore, the Company enters into agreements, as appropriate, with employees,
consultants and subcontractors containing provisions relating to confidentiality
and the assignment of inventions and other developments to the Company. However,
despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary. Policing unauthorized
use of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, such
piracy can be expected to be a persistent problem, particularly in international
markets and as a result of the growing use of the Internet. In addition, the
laws of some foreign countries either do not protect the Company's proprietary
rights or offer
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only limited protection for those rights. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate or
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technologies or
products.
There has been substantial litigation in the software industry
involving intellectual property rights. Although the Company does not believe
that it is infringing the intellectual property rights of others, there can be
no assurance that such claims, if asserted, would not have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, as the Company may acquire or license a portion of the software
included in its products from third parties, its exposure to infringement
actions may increase because the Company must rely upon such third parties for
information as to the origin and ownership of such acquired or licensed
software. Although the Company would intend to obtain representations as to the
origins and ownership of such acquired or licensed software and obtain
indemnification to cover any breach of any such representations, there can be no
assurance that such representations will be accurate or that such
indemnification will provide adequate compensation for any breach of such
representations. In the future, litigation may be necessary to enforce and
protect trade secrets, copyrights and other intellectual property rights of the
Company. The Company may also be subject to litigation to defend against claimed
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. Any such litigation could be costly
and divert management's attention, either of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Adverse determinations in such litigation could result in the loss of the
Company's proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from third parties and prevent the Company
from selling its products, any one of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
FACILITIES
The Company's corporate headquarters were recently relocated to
Hackensack, New Jersey, in a leased facility consisting of approximately 4,300
square feet, which it occupied effective April 1, 1996 under a lease expiring
March 31, 2002. The rent paid by the Company for this office will be
approximately $36,000 for the period commencing April 1, 1996 and ending
December 31, 1996. The Company's rent payment obligations are subject to certain
increases in subsequent periods. See Note K[2] of Notes to Financial Statements.
The Company believes that its new space will be adequate to meet its
requirements through 1997. The Company has made no decision on how to expand, if
necessary, beyond this period.
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EMPLOYEES
As of June 30, 1996, the Company had six full-time and three
temporary employees, all of whom are based in its Hackensack, NJ offices. These
include three in product development, two in sales and marketing, and one in
finance and administration. The Company's employees are not represented by any
collective bargaining organization, and the Company has never experienced a work
stoppage and considers its relations with its employees to be good.
Although the Company expects to increase its full-time staff to 12 or
more, the Company intends to continue with its policy to outsource non-strategic
functions such as subscription fulfillment, repetitive testing, and bookkeeping
rather than using its own staff for these functions.
Other than Messrs. Sarna and Febish, the Company's executive
officers, no other senior personnel have entered into employment agreements
obligating them to remain in the Company's employ for any specific term;
however, substantially all key employees of the Company are parties to
nonsolicitation, confidentiality and noncompetition agreements with the Company.
In addition, independent contractors enter into confidentiality agreements with
the Company.
LEGAL PROCEEDINGS
The Company has not been, and is not currently, involved in any
material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
David E. Y. Sarna1 46 Chairman, Secretary and Director
George J. Febish1 47 President, Treasurer and Director
Daniel E. Ryan1(1)(2)(3)(4) 48 Director
Julius Goldfinger(2)(4) 67 Director
- --------------------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Member of Stock Option Plan Committee.
David E. Y. Sarna together with Mr. Febish founded the Company in
1990. Mr. Sarna has been the Chairman, Co-Chief Executive Officer and a director
of the Company since December 1990. Prior to founding the Company, Mr. Sarna
founded Image Business Systems Corporation, a computer software development
company, in 1988. Prior to founding Image Business Systems Corporation, Mr.
Sarna was formerly Executive Vice- President and a co-founder of International
Systems Services Corp. ("ISS"), a computer software company that developed ISS
Three(TM). From 1976 to 1981, Mr. Sarna was employed by Price Waterhouse & Co.,
as a management consultant, beginning as a senior consultant and rising to the
position of senior manager. From 1970 to 1976 Mr. Sarna was employed by IBM
Corporation in technical and sales positions. Mr. Sarna began his professional
career at Honeywell in 1968. Mr. Sarna holds a BA degree from Brandeis
University and did graduate work at the Technion - Israel Institute of
Technology. Mr. Sarna is a Certified Systems Professional and a Certified
Computer Programmer.
George J. Febish together with Mr. Sarna founded the Company in 1990.
Mr. Febish has been the President, Co-Chief Executive Officer, Treasurer and a
director of the Company since December 1990. Prior to joining the Company, Mr.
Febish was Executive Vice President and Chief Operating Officer of Image
Business Systems Corporation, a computer software development company, from 1988
to 1990. Prior to joining Image Business Systems Corporation, Mr. Febish was the
Director of Marketing at ISS, a computer software company that developed ISS
Three(TM). Prior to joining ISS, Mr. Febish was the Eastern Regional Sales
Manager for Bolle & Babbage. In 1970, Mr. Febish began his professional
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career with New York Life Insurance Company. Mr. Febish holds a BS degree from
Seton Hall University.
Daniel E. Ryan has been a director since 1991. Mr. Ryan has been
employed by New York Life Insurance Company since July, 1965 where, since 1981,
he has held the title of Corporate Vice President. Mr. Ryan is the head of the
Service Center Development of New York Life Insurance Company's Information
Systems organization. Mr. Ryan holds an MBA in Computer Science from Baruch
College and a BS/BA in Industrial Management from Manhattan College. Mr. Ryan is
a Certified Systems Professional.
Julius Goldfinger became a director in 1996. Mr. Goldfinger is the
founder and Managing Partner of Plowshares Capital Group, a New York based
international business development company with interests in the former Soviet
Union. Prior to founding Plowshares Capital Group, from February 1993 to
September 1995 Mr. Goldfinger was Manager of Corporate Finance at Redstone
Securities, Inc. From December 1991 to February 1993, Mr. Goldfinger was a
consultant to Herbert Young Securities, and from July 1989 to November 1991, Mr.
Goldfinger was a consultant to Rosenkrantz, Lyon and Ross (now Josephthal Lyon &
Ross). All of the foregoing companies are members of the National Association of
Securities Dealers, Inc. Mr. Goldfinger was the manager of the venture capital
group at The Bankers Trust Company and President of Walnut Capital Corp, a Small
Business Investment Company that he founded. Mr. Goldfinger holds a BBA from
Baruch College, and he is a Chartered Financial Analyst.
Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve at the discretion of the Board of
Directors.
Upon the closing of the Offering, the Company will have a staggered
Board of Directors. It is expected that initially two directors will serve until
the 1997 Annual Meeting of Stockholders and two directors will serve until the
1998 Annual Meeting of Stockholders and, thereafter, that directors will be
elected to serve two year terms as their initial terms expire. Directors hold
office until the expiration of their respective terms and until their successors
are elected or until death, resignation or removal. Vacancies on the Board of
Directors may be filled only with the approval of a majority of the Board of
Directors then in office. Furthermore, any director elected by the stockholders,
or by the Board of Directors to fill a vacancy, may be removed only for cause
and by a vote of 75% of the outstanding shares of Common Stock. See "Description
of Securities - Delaware Takeover Statute and Certain Charter Provisions."
DIRECTOR COMPENSATION
Members of the Board of Directors have not in the past received any
compensation for serving on the Board of Directors. Non-employee directors of
the Company shall each
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be granted, under the Company's 1996 Stock Option Plan, (i) an outside director
option for 10,000 shares of Common Stock when first elected to the Board of
Directors, and (ii) following each Annual Meeting of Stockholders (commencing
with the 1997 Annual Meeting), outside director options to purchase 5,000 shares
of Common Stock, in each case at an exercise price equal to the fair market
value of the Common Stock on the date of grant, and exercisable for a term of
five years commencing on the date of grant.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established a compensation committee whose sole
member is Daniel E. Ryan. The Company's audit committee consists of Messrs. Ryan
and Goldfinger.
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation paid by
the Company during the last three fiscal years ended December 31 to each of its
Co-Chief Executive Officers. Other than the Co-Chief Executive Officers, there
are no employees of the Company whose compensation exceeded $100,000 in 1995.
SUMMARY COMPENSATION TABLE
Name and Principal
Position or Number
In Group Annual Compensation
- ------------------ -------------------
Year Salary(1) Bonus
---- --------- -----
David E. Y. Sarna 1995 $200,000 0
Chairman, Co-Chief 1994 $200,000 0
Executive Officer and 1993 $200,000 0
Secretary
George J. Febish 1995 $200,000 0
President, Treasurer 1994 $200,000 0
and Co-Chief 1993 $200,000 0
Executive Officer
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(1) Includes $61,250, and $107,220 that were accrued but not paid to each
of Messrs. Sarna and Febish in 1993 and 1995, respectively. The total
amount of compensation accrued but not paid to each of Messrs. Sarna
and Febish, inclusive of prior years, was $195,844. Of such amounts,
$100,000 and $50,000 were paid to each of them from the proceeds of
the Bridge Loan Offering and the July 1996 Offering, respectively,
and the balance owed will be paid from the proceeds of the Offering.
See "Use of Proceeds" and "Certain Transactions."
No stock options or warrants were granted to, or exercised by, either
of the individuals named in the Summary Compensation Table during the fiscal
year ended December 31, 1995.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with each of
David E. Y. Sarna and George J. Febish, effective as of July 1, 1996, which
expires on December 31, 2001. The employment agreements provide for a current
annual base salary of $208,000. Each employment agreement also provides for a
bonus of 5% per annum of the Company's Earnings Before Depreciation, Interest,
Taxes and Amortization. In addition, on an annual basis, the Board of Directors
will consider paying an additional bonus to each of Messrs. Sarna and Febish
that is based upon the increase in the Company's gross revenues, taking into
account any increase in the Company's expenses. Although the prior employment
agreements of Messrs. Sarna and Febish also had a bonus arrangement and they
were entitled to bonuses thereunder, they waived the payment of such bonuses.
The annual base salary under the current agreements may be increased at the
discretion of the Board of Directors. The agreements provide for (i) a severance
payment of the base compensation and bonus of the prior full fiscal year and
payment of all medical, health, disability and insurance benefits then payable
by the Company for the longer of (a) the remainder of the term of the employment
agreement or (b) 12 months, as well as (ii) the base compensation and bonus
accrued to the date of termination, upon the occurrence of (x) termination by
the Company without cause, (y) termination by the employee for good reason or
(z) a change in control of the Company, if the employee resigns after the
occurrence of the such change in control. Each of the employment agreements
limit the severance payments to an amount that is less than the amount that
would cause an excise tax or loss of deduction under the rules relating to
golden parachutes under the Internal Revenue Code.
EXECUTIVE WARRANTS
Each of David E. Y. Sarna and George J. Febish have entered into a
Warrant and Warrant Agreement with the Company. The Warrant and Warrant
Agreement, dated April 15, 1993 (the "Executive Warrant") provides for the right
of each of them to purchase 50,000 shares of Common Stock at an exercise price
per share of $.50. The Executive
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Warrant permits the executive's estate to cause the Company to purchase the
underlying shares at the Company's book value per share. The Executive Warrant
provides that the number of shares and the exercise price are subject to
anti-dilution adjustments and grants "piggyback" registration rights with
respect to the underlying shares.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Plan") was approved by the
Company's Board of Directors in 1996. The Company has reserved 250,000 shares of
Common Stock under the Plan. Options granted under the Plan may include those
qualified as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended, as well as non-qualified options. Key employees as
well as other individuals, such as outside directors, consultants and advisors
who provide necessary services to the Company are eligible to participate in the
Plan. Non-employees and part-time employees may receive only non-qualified
options. Options to purchase an aggregate of 145,000 options have been granted
to date under the Plan.
The Plan will be administered by the Stock Option Committee of the
Board of Directors, which will be comprised solely of non-employee directors
(who are "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and "disinterested
persons" within the meaning of Rule 16b-3 under the Exchange Act (the
"Committee")). The Committee can make such rules and regulations and establish
such procedures for the administration of the Plan as it deems appropriate. No
member of the Committee shall be eligible to receive discretionary grants of
options during, and for a period of one year following, their service on the
Committee. The Committee presently consists of Mr. Ryan. The description of the
Plan set forth herein is qualified in its entirety by reference to the text of
the Plan, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
The exercise price for the shares purchased upon exercise of
non-qualified options granted under the Plan is determined by the Committee. The
exercise price of an incentive stock option must be at the fair market value of
the Company's Common Stock on the date of grant (110% of the fair market value
for stockholders who, at the time the option is granted, own more than 10% of
the total combined classes of stock of the Company or any subsidiary). No
employees may exercise more than $100,000 in options held by them in any year.
In addition, non-employee directors of the Company shall each be
granted (i) an outside director option for 10,000 shares of Common Stock upon
adoption of the plan or when first elected to the Board of Directors after the
adoption of the Plan and (ii) following each Annual Meeting of Stockholders
(commencing with the 1997 Annual Meeting), outside director options to purchase
5,000 shares of Common Stock, in each case at an exercise price equal to the
fair
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market value of the Common Stock on the date of grant, and exercisable for a
term of five years commencing on the date of grant.
No option may have a term of more than ten years (five years for 10%
or greater stockholders and outside directors). Options generally may be
exercised only if the option holder remains continuously associated with the
Company or a subsidiary from the date of grant to the date of exercise. However,
options may be exercised upon termination of employment or upon death or
disability of any employee within certain specified periods.
The following is a general summary of the federal income tax
consequences under current tax law of nonqualified stock options ("NQSOs") and
incentive stock options ("ISOs"). It does not purport to cover all of the
special rules, including special rules relating to persons subject to the
reporting requirements of Section 16 under the Exchange Act who do not hold the
shares acquired upon the exercise of an option for at least six months after the
date of grant of the option and special rules relating to the exercise of an
option with previously-acquired shares, or the state or local income or other
tax consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and the
Company will generally be entitled to a deduction for such amount at that time.
If the optionee later sells shares acquired pursuant to the exercise of a NQSO,
he or she will recognize long-term or short-term capital gain or loss, depending
on the period for which the shares were held. Long-term capital gain is
generally subject to more favorable tax treatment than ordinary income or
short-term capital gain. Proposed legislation would treat long-term capital gain
even more favorably. There can be no assurance, however, that such proposed
legislation will be enacted.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss and the Company will not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain will be treated as ordinary income
and the Company will generally be entitled to deduct such amount.
In addition to the federal income tax consequences described above,
an optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair
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market value of the shares over the exercise price therefor is an adjustment
which increases alternative minimum taxable income. In addition, the optionee's
basis in such shares is increased by such excess for purposes of computing the
gain or loss on the disposition of the shares for alternative minimum tax
purposes. If an optionee is required to pay an alternative minimum tax, the
amount of such tax which is attributable to deferral preferences (including the
ISO adjustment) is allowed as a credit against the optionee's regular tax
liability in subsequent years. To the extent the credit is not used, it is
carried forward.
SEP
The Company established in 1990 a simplified employee pension ("SEP")
covering all qualified employees. Pursuant to the SEP, employees may elect to
contribute up to 15% of their compensation on a pre-tax basis (up to the
statutory prescribed annual limit ($9,500 in 1996)) to the SEP. The SEP Plan is
intended to qualify under Section 408(k) of the Internal Revenue Code.
KEY-MAN LIFE INSURANCE
The Company currently maintains key man insurance, of which it is the
beneficiary, on the lives of each of David E. Y. Sarna and George J. Febish in
the amount of $1,000,000 each.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and its Amended and Restated By-laws (the
"By-laws") provide that, except to the extent prohibited by the Delaware General
Corporation Law, its directors shall not be personally liable to the Company or
its stockholders for monetary damages for any breach of fiduciary duty as
directors of the Company. Under Delaware law, the directors have a fiduciary
duty to the Company which is not eliminated by the provisions of the Certificate
of Incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available. In
addition, each director will continue to be subject to liability under Delaware
law for breach of the director's duty of loyalty to the Company for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
Delaware law. This provision also does not affect the directors'
responsibilities under any other laws, such as the Federal securities laws or
state or Federal environmental laws.
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The Certificate of Incorporation and By-laws also provides that the
Company shall indemnify, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, all of its present and former officers and
directors, and any party agreeing to serve as an officer, director or trustee of
any entity at the Company's request, in connection with any civil or criminal
proceeding threatened or instituted against such party by reason of actions or
omissions while serving in such capacity. Indemnification by the Company
includes payment of expenses in defense of the indemnified party in advance of
any proceeding or final disposition thereof if the indemnified party undertakes
to repay the Company upon an ultimate determination that the indemnified party
was not entitled to indemnification by the Company. This provision also requires
Board of Director approval as a precondition to any indemnification by the
Company for proceedings instituted by the indemnified party. The rights to
indemnification provided in this provision do not preclude the exercise of any
other indemnification rights by any party pursuant to any law, agreement or vote
of the stockholders or the disinterested directors of the Company.
Section 145 of the Delaware General Corporation Law generally allows
the Company to indemnify the parties described in the preceding paragraph for
all expenses, judgments, fines and amounts in settlement actually paid and
reasonably incurred in connection with any proceedings so long as such party
acted in good faith and in a manner reasonably believed to be in or not opposed
to the Company's best interests and, with respect to any criminal proceedings,
if such party had no reasonable cause to believe his or her conduct to be
unlawful. Indemnification may only be made by the Company if the applicable
standard of conduct, set forth in Section 145 has been met by the indemnified
party upon a determination made (1) by the Board of Directors by a majority vote
of a quorum of directors who are not parties to such proceedings, or (2) if such
a quorum is not obtainable or if directed by a quorum of disinterested
directors, by independent legal counsel in a written opinion, or (3) by the
stockholders.
The Company will seek to purchase and maintain directors and officers
insurance as soon as the Board of Directors determines practicable, in amounts
that is considers appropriate, insuring the directors and officers against any
liability arising out of their status as such, regardless of whether the Company
has the power to indemnify such persons against such liability under applicable
law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 14, 1996, by (i)
each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director, (iii) each executive
officer and (iv) all officers and directors as a group.
<TABLE>
<CAPTION>
Percentage of
Outstanding Shares (1)
----------------------
Number of Shares of
Name and Common
Address of Stock Beneficially Before
Beneficial Owners Owned(2) Offering After Offering
- ----------------- -------- -------- --------------
<S> <C> <C> <C>
David E. Y. Sarna (3) 867,500 33.81% 22.73%
c/o ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
George J. Febish (3) 907,500 35.37 23.78
c/o ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Cyndel & Co., Inc. (4) 245,000 9.55 6.42
26 Ludlam Avenue
Bayville, New York 11709
Daniel E. Ryan (5) 10,000 * *
c/o ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Julius Goldfinger (5) 10,000 * *
c/o ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
All officers and directors as a group
(4 persons)(3)(5) 1,795,000 69.95 47.04
</TABLE>
- -------------------------
* Less than 1%.
(1) Each person's percentage interest is determined assuming that all
options, warrants and convertible securities that are held by such
person (but not by anyone else) and
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which are exercisable or convertible within 60 days have been
exercised for or converted into Common Stock.
(2) Unless otherwise noted, the Company believes that all persons named
have sole voting and investment power with respect to all shares of
Common Stock listed as owned by them.
(3) Includes, for each of Messrs. Sarna and Febish, immediately
exercisable warrants to purchase 50,000 shares of Common Stock and
50,000 options granted under the Company's 1996 Stock Option Plan.
See "Management - 1996 Stock Option Plan "Description of Securities -
Outstanding Options and Warrants - Executive Officer/Stockholder
Common Stock Warrants."
(4) Includes immediately exercisable warrants to purchase 20,000 shares
of Common Stock. Does not include the 27,300 shares of Common Stock
issuable upon the exercise of the July Placement Warrant issued to
Win Capital Corporation, the placement agent of the July 1996
Offering, or the 18,200 shares issuable upon the exercise of the July
1996 Warrants included in such option. A principal of Cyndel is also
a principal of Win Capital Corporation; however, Cyndel disclaims
beneficial ownership of the July Placement Warrant and the underlying
securities. See "Description of Securities - Outstanding Options and
Warrants -Executive Officer/Stockholder Common Stock Warrants -
Placement Agent's Warrants; July Placement Warrant."
(5) Includes, for each of Messrs. Ryan and Goldfinger, immediately
exercisable options to purchase 10,000 shares of Common Stock granted
under the Company's 1996 Stock Option Plan.
CERTAIN TRANSACTIONS
ISSUANCE AND REDEMPTION OF SERIES B PREFERRED STOCK
In December 1995, Cyndel, a principal stockholder, acquired 1,250
shares of Series B Preferred Stock in consideration of the payment of $125,000
($25,000 of which was paid in January 1996). The Series B Preferred Stock was
convertible into a number of shares of Common Stock equal to a fraction the
numerator of which was $100 per share and the denominator of which was 125% of
the offering price per share for the shares of Common Stock in an initial public
offering. In July 1996, the Company used $125,000 of the proceeds of the July
1996 Offering to redeem the Series B Preferred Stock. In connection with the
redemption, Cyndel received warrants, exercisable for a period of three years,
to purchase 20,000 shares of Common Stock at an exercise price of $7.00 per
share.
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OFFICERS COMPENSATION DEFERRAL
Each of Mr. Sarna and Mr. Febish, Co-Chief Executive Officers of the
Company, agreed to defer a portion of his salary for various periods through
1995 until the Company had sufficient working capital to pay them. As of
December 31, 1995, the Company owed Messrs. Sarna and Febish an aggregate of
$391,687, of which $200,000 was paid from the proceeds of the Bridge Loan
Offering, $100,000 was paid from the proceeds of the July 1996 Offering, and the
balance will be paid from the proceeds of the Offering. See "Management
Executive Compensation" and "Use of Proceeds."
MERGER
The Company is the successor-in-interest to the assets, liabilities
and business of ObjectSoft New Jersey, which was merged into the Company in
January 1996. The purpose of the Merger was to effect the change of the state of
incorporation of ObjectSoft New Jersey. The directors determined that it was in
the best interests of the Company that the Company be re-incorporated in the
State of Delaware. The re-incorporation was effected by a migratory merger of
ObjectSoft New Jersey into the Company. The stockholders of ObjectSoft New
Jersey were duly noticed and voted in favor of the Merger at a Special Meeting
of the Stockholders held on January 30, 1996. Each share of capital stock of
ObjectSoft New Jersey was exchanged for a like share of capital stock of the
Company upon the effectiveness of the Merger.
EXTENSION OF EXPIRATION DATES OF INVESTOR AND OFFICER WARRANTS
The Company has extended to November 29, 1996 the expiration date of
the 106,250 Investor Warrants, which were issued to investors in a private
placement effected between September 1992 and November 1993. The result is that
certain of these warrants will expire at a date which effectively makes them
four year warrants instead of three year warrants. In addition, in consideration
of their waiver of the registration rights with respect to the Offering and
their agreement to enter into an 18 month lock-up agreement with the
Representative, the expiration date of the Officer Warrants held by Messrs.
Sarna and Febish was extended to April 30, 2000. See "Description of Securities
- - Investor Warrants - "Officer/Stockholder Warrants."
RECENT FINANCINGS
The Company recently completed two financings in the form of private
placements to "accredited investors". In April through June 1996, in the Bridge
Loan Offering, the Company sold 12.5 Bridge Units, each Bridge Unit consisting
of a $100,000 7% Note (the
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"Bridge Notes") and warrants to purchase 30,000 shares of Common Stock or such
other securities as might be offered in the Company's initial public offering.
Assuming the Offering is completed, the Bridge Warrants will be exercisable to
purchase Units identical to the Units offered hereby.
Interest on the Bridge Notes is payable semi-annually commencing
December 31, 1996, and the Bridge Notes will mature and be payable in full
within fourteen (14) days of the date of closing of the Offering or September
30, 1997, whichever is earlier. The Bridge Notes may be prepaid in whole or in
part at the option of the Company at any time prior to maturity.
The Bridge Notes are senior unsecured obligations of the Company and
will rank senior in right of payment to all future subordinated indebtedness of
the Company. Although the Bridge Notes are senior obligations of the Company,
the Company does not have any commitments to issue indebtedness to which the
Bridge Notes would be senior in right of payment. The Bridge Notes will be
effectively subordinated to all secured indebtedness of the Company.
The Bridge Warrants are exercisable at a price equal to 70% of the
offering price for securities offered in an initial public offering. The Bridge
Warrant component of each Bridge Unit provides for the purchase either (i) if
the Company completes an initial public offering ("IPO") on or before September
30, 1997, 30,000 shares of Common Stock (the "Shares") or other securities at
70% of the per share or other security price in the IPO exercisable for a period
of three (3) years (the "IPO Securities"), or (ii) if the Company does not
complete an IPO on or before September 30, 1997, 30,000 shares of Common Stock,
exercisable until September 30, 1999 at $3.50 per share. The term of the Bridge
Warrants if exercisable into IPO securities shall be extended for an additional
period, up to one (1) year, equal to the period that lapses between September
30, 1996 and the consummation of the Company's initial public offering on or
before September 30, 1997. If the Offering is completed prior to September 30,
1997, each such Bridge Warrant will be exercisable to purchase 30,000 Units at
$____ per Unit. The Bridge Warrants have piggyback registration rights pari
passu with other warrant holders. In addition, if the Bridge Warrants are not
included in any registration statement, then the holders of Bridge Warrants
shall have the right to one demand registration, at the cost of the Company, one
year after the Company is public.
The Representative acted as the placement agent for the Bridge Loan
Offering and, in connection with its services as placement agent, received
commissions equal to 8% of the gross proceeds of the Bridge Loan Offering, a
non-accountable expense allowance equal to 2% of the gross proceeds and the
Placement Agent's Warrant to purchase a number of securities equal to 10% of the
number of securities issuable upon the exercise of the Bridge Warrants at an
exercise price equal to 91% of the offering price for securities offered in an
initial public offering. Assuming the Offering is completed, the Placement
Agent's Warrant will entitle the Representative to purchase 37,500 Units at an
exercise price of $____ per Unit
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for a period of five years commencing on the date of this Prospectus. The Units
issuable upon the exercise of the Bridge Warrants have been registered for
resale. See "Concurrent Offering."
In the July 1996 Offering, the Company sold an aggregate of 273,001
units (the "July 1996 Units") for an aggregate of $955,504, or $3.50 per July
1996 Unit. Each July 1996 Unit consists of one share of Common Stock and one
July 1996 Warrant to purchase two-thirds (2/3) of a share of Common Stock at an
exercise price of $3.00 per 2/3 share (or $4.50 per share). The July 1996
Warrants are exercisable until the later of July 30, 1999 or three years after
the date of this Prospectus (but in no event later than September 30, 2000). The
shares of Common Stock included in the July 1996 Units and the shares of Common
Stock issuable upon the exercise of the July 1996 Warrants contained therein
have been registered for resale.
See "Concurrent Offering."
Win Capital Corporation, an affiliate of Cyndel, a principal
stockholder of the Company, acted as the placement agent for the July 1996
Offering and, in connection with its services as placement agent, received
commissions equal to 10% of the gross proceeds of the July 1996 Offering, a
non-accountable expense allowance equal to 3% of the gross proceeds and a
warrant to purchase 27,300 July 1996 Units at an exercise price of $4.50 per
July 1996 Unit for a period of three years commencing upon issuance (the "July
Placement Warrant").
REDEMPTION OF SERIES A PREFERRED STOCK
Pursuant to the terms of the Series A Preferred Stock, upon the
effectiveness of the Offering, all shares of Series A Preferred Stock are
required to be redeemed at $1.00 per share plus all accumulated, but unpaid,
dividends. The Company anticipates that the redemption will require an aggregate
redemption payment of approximately $273,000. See "Use of Proceeds."
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 20,000,000 shares of Common
Stock, par value $.0001 per share and up to 5,000,000 shares of Preferred Stock,
par value $.0001 per share.
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COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share
on all matters that are submitted to the stockholders for their approval and
have no cumulative voting rights. Subject to the prior rights of Preferred
Stock, the holders of Common Stock are entitled to receive dividends, if any, as
may be declared by the Board of Directors from funds legally available therefor,
from time to time. Upon liquidation or dissolution of the Company, the remainder
of the assets of the Company will be distributed ratably among the holders of
Common Stock, after the payment of all liabilities and the holders of any
Preferred Stock. The Common Stock has no preemptive or other subscription rights
and there are no conversion or sinking fund provisions with respect to such
shares. All of the outstanding shares of Common Stock are, and the shares
issuable upon exercise of Class A Warrants will be, upon payment of the exercise
price, fully paid and nonassessable. As of August 14, 1996, there were 2,566,001
shares of Common Stock outstanding.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors without the approval of the stockholders of the Company. The Board of
Directors is authorized to issue these shares in different classes and series
and, with respect to each class or series, to determine the dividend rights, the
redemption provisions, conversion provisions, liquidation preferences and other
rights and preferences not in conflict with the Certificate of Incorporation of
the Company or Delaware law. The Board of Directors, without stockholder
approval, could issue Preferred Stock which would adversely affect the voting
and other rights of the holders of Common Stock.
The Company has issued a series of Preferred Stock designated Series
A. There are currently 212,500 shares of Series A Preferred Stock. The Series A
Preferred Stock accrues cumulative annual dividends, payable quarterly, at the
rate of 9% per annum, based upon the liquidation value. Upon the closing of an
initial public offering, as required by the terms of the Series A Preferred
Stock all of the Series A Preferred Stock will be redeemed by the Company at
$1.00 per share plus all accumulated dividends accrued but unpaid. The Company
anticipates that this redemption will require an aggregate redemption payment of
approximately $273,000, which will be paid out of the net proceeds of the
Offering. Following the redemption, no Series A Preferred Stock will be
outstanding. See "Use of Proceeds."
The Company also issued a series of Preferred Stock designated Series
B, with a redemption and liquidation value of $100 per share and issued 1,250
shares of Series B Preferred Stock. The holders of the Series B Preferred Stock
had the right, for the period commencing upon the close of an initial public
offering through December 31, 1997, to convert all of the Series B Preferred
Stock into shares of Common Stock at a conversion
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price equal to 125% of the per share offering price of shares of Common Stock in
an initial public offering. The Series B Preferred Stock accrued cumulative
annual dividends, payable quarterly, at the rate of 10% per annum, based upon
the liquidation value. The Company was required, commencing in March 31, 1998,
and in each subsequent calendar quarter, to the extent that the shares of Series
B Preferred Stock had not been redeemed or converted, to redeem at the
liquidation value of $100 per share of Series B Preferred Stock, 12.5% of the
outstanding Series B Preferred Stock, until all of the shares of Series B
Preferred Stock had been redeemed. In July 1996, the Company used a portion of
the proceeds of the July 1996 Offering to redeem the Series B Preferred Stock.
See "Certain Transactions."
OUTSTANDING WARRANTS AND OPTIONS
Investor Warrants
There are currently outstanding warrants to purchase 106,250 shares
of Common Stock (the "Investor Warrants"). The Investor Warrants were issued in
connection with the Company's private placement of its securities in 1992 and
1993. The Investor Warrants are exercisable at $2.00 per share of Common Stock.
The expiration date of the Investor Warrants has been extended to November 29,
1996. The Investor Warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares underlying the
Investor Warrants upon the occurrence of certain events, including any
recapitalization, reclassification, consolidation, merger, sale, lease or
conveyance of all or substantially all of the assets of the Company, stock
dividend, stock split, stock combination or similar transaction. The resale of
the shares issuable upon the exercise of the Investor Warrants has been
registered in the Selling Securityholder Prospectus. See "Concurrent Offering."
Officer/Stockholder Warrants; 1996 Stock Option Plan
In April 1993 the Company issued common stock warrants to purchase an
aggregate of 143,333 shares of Common Stock, exercisable at $.50 per share of
Common Stock (the "Officer Warrants"). The Officer Warrants were issued to two
executive officers and a former officer of the Company in consideration of their
foregoing salaries in 1992. The Officer Warrants contain anti-dilution
provisions providing for adjustments of the exercise price and the number of
shares underlying the Officer Warrants upon the occurrence of certain events,
including any recapitalization, reclassification, consolidation, merger, sale,
lease or conveyance of all or substantially all of the assets of the Company,
stock dividend, stock split, stock combination or similar transaction. The
holder of the Officer Warrants have the right to cause the Company to register
the Officer Warrants and the shares of Common Stock including the Officers
Warrants, if the Company registers any of its securities on a registration
statement filed with the SEC for sale to the general public. The original
expiration date of the Officer Warrants was April 30, 1998. In consideration of
their waiver of the registration rights with respect to the Offering and their
agreement to enter into an 18
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month lock-up agreement with the Representative, the expiration date of the
100,000 Officer Warrants held by Messrs. Sarna and Febish was extended to April
30, 2000. The resale of shares issuable upon the exercise of the other 43,333
Officer Warrants has been registered in the Selling Securityholder Prospectus.
See "Concurrent Offering."
In July 1996, in connection with the redemption of the Company's
Series B Preferred Stock, the Company issued to Cyndel, a principal stockholder
of the Company, warrants to purchase 20,000 shares of the Company's Common Stock
at an exercise price of $7.00 per share. These warrants expire on July 29, 1999
and contain anti-dilution provisions providing for adjustments of the exercise
price and the number of shares underlying such warrants upon the occurrence of
certain events, including any recapitalization, reclassification, consolidation,
merger, sale, lease or conveyance of all or substantially all of the assets of
the Company, stock dividend, stock split, stock combination or similar
transaction.
As of July 31, 1996, options to purchase an aggregate of 145,000
shares had been granted under the Company's 1996 Stock Option Plan.
Consultant Stock Options
In August 1995, the Company issued to a consultant of the Company the
right to acquire up to 100,000 shares of Common Stock, exercisable at $1.00 per
share in consideration of the consultant foregoing the payment of up to $10,000
for services rendered. On September 15, 1995, the consultant accepted the offer.
This option was exercisable at any time from the date of grant until the fifth
anniversary of the date of grant. In May 1996, the agreement with the consultant
was amended, and warrants for 50,000 shares were canceled in consideration of a
cash payment of $10,000.
The Company has also entered into agreements with other consultants
pursuant to which the Company issued to such consultants options to purchase an
aggregate of 10,000 shares of Common Stock exercisable for a period of five
years at an exercise price of $1.00.
Private Placement Warrants
The Company has outstanding 375,000 Bridge Warrants and July 1996
Warrants to purchase 182,004 shares of Common Stock, as described in "Certain
Transactions -- Recent Financings," above.
Placement Agent's Warrant; July Placement Warrant
In connection with Bridge Loan Offering, the Company sold to the
Representative, in its capacity as Placement Agent of such offering the
Placement Agent's Warrant to purchase a number of Units equal to 10% of Units
issuable upon the exercise of the Bridge
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Warrants contained in the Bridge Units. The exercise price of the Placement
Agent's Warrant is either (i) in the event an IPO is completed on or before
September 30, 1997, 91% of the per IPO Security offering price exercisable
commencing on or after the consummation of a public offering and ending on the
fifth anniversary thereof or (ii) in the event an IPO is not completed on or
before September 30, 1997, $4.55, exercisable for five (5) years from the date
of issuance. Assuming the Offering is completed prior to September 30, 1997, the
Placement Agent's Warrant will be exercisable at a price of $____ per Unit. The
Placement Agent's Warrant contains anti-dilution provisions providing for
adjustments of the exercise price and the number of shares underlying the
Placement Agent's Warrant upon the occurrence of certain events, including any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. None of the securities underlying the
Placement Agent's Warrant will be redeemable. The Placement Agent's Warrant
grants the holders thereof certain registration rights which are described
below.
In connection with the sale of the July 1996 Units, the placement
agent for such sale, Win Capital Corporation , was granted the July Placement
Warrant to purchase 27,300 July 1996 Units at an exercise price of $4.50 per
July 1996 Unit. The July Placement Warrant contains anti-dilution provisions
providing for adjustments of the exercise price and the number of shares
underlying the July Placement Warrant upon the occurrence of certain events,
including any recapitalization, reclassification, stock dividend, stock split,
stock combination or similar transaction. None of the securities underlying the
July Placement Warrant will be redeemable, and the holders of the July Placement
Warrant have certain registration rights, described below.
The resale of the shares of Common Stock issuable upon the exercise
of the Placement Agent's Warrant and the Class A Warrants issuable upon the
exercise thereof as well as the resale of the shares of Common Stock issuable
upon the exercise of the July Placement Warrant and the July 1996 Warrants
issuable upon the exercise thereof, has been registered in the Selling
Securityholder Prospectus. See "Description of Securities - Registration Rights"
and "Concurrent Offering."
Class A Warrants
Each Class A Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $____ per share (130% of the
initial public offering price per Unit), subject to adjustment, at any time
commencing _________ __, 1997 (one year after the date of this Prospectus) until
_________ __, 2001 (five years after the date of this Prospectus). The Class A
Warrants are redeemable by the Company at a price of $.10 per Class A Warrant
commencing one year after the date of this Prospectus (or earlier with the prior
consent of the Representative, on not less than 30 days prior written notice to
the holders thereof, provided the average closing bid quotation of the Common
Stock as reported on NASDAQ, if traded thereon, or if not traded thereon, the
average closing bid quotation of the Common Stock if listed on a national
securities exchange (or other reporting system that provides last sale prices),
has been at least 130% of the then current exercise price of the Class A
Warrants (initially, $_____ per share), for a period of 20 consecutive trading
days ending within 15 days of the date on which the Company gives notice of
redemption. The
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Class A Warrants will be exercisable until the close of business on the day
immediately preceding the date fixed for redemption.
REGISTRATION RIGHTS
Currently, the holders of the Bridge Warrants, the July 1996 Warrants
and the Officer Warrants, as well as the holders of the shares of Common Stock
issued in the July 1996 Offering, have certain rights with respect to the
registration of such shares and the Units and shares of Common Stock issuable
upon the exercise of such warrants under the Securities Act. Under the terms of
the agreements between the Company and the holders of such registrable
securities, if the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other security
holders exercising registration rights, such holders are entitled to notice of
such registration and are entitled to include shares of such Common Stock
therein. The stockholders benefiting from these rights may also require the
Company to file a registration statement under the Securities Act at its expense
with respect to their shares of Common Stock, and the Company is required to use
its best efforts to effect such registration. All of these rights are subject to
certain conditions and limitations, among them the right of the underwriters of
an offering to limit the number of shares included in such registration.
The holders of the Common Stock issuable upon exercise of the
Placement Agent's Warrant have rights similar to those described in the
preceding paragraph. In addition, the right to notice and inclusion in any
registration statement filed by the Company is effective for five years after
the effective date of an initial public offering. The right to demand the
registration of the Common Stock issuable upon exercise of the Placement Agent's
Warrant extends from one year after the closing of the Offering to the fifth
(5th) anniversary of the date of this Prospectus. The holders of the July
Placement Warrants have similar registration rights, except that the right to
demand the registration of Common Stock issuable upon exercise of the July
Placement Warrants extends from two years after the closing of the Offering to
the fifth (5th) anniversary of the date of this Prospectus.
The Units and certain of the shares of Common Stock subject to
registration rights have been registered in the Selling Securityholder
Prospectus. Certain of the Selling Securityholders have agreed not to sell such
shares for periods of nine or twelve months following the date of this
Prospectus without the prior consent of the Representative. See "Shares Eligible
for Future Sale" and "Concurrent Offering."
TRANSFER AGENT AND WARRANT AGENT
Continental Stock Transfer & Trust Company, New York, New York will
act as transfer agent for the Units and the Common Stock and Warrant Agent for
the Class A Warrants.
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DELAWARE TAKEOVER STATUTE AND CERTAIN CHARTER PROVISIONS
The Company is subject to Section 203 of the Delaware General
Corporation Law ("Section 203") which, subject to certain exceptions, prohibits
a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
In anticipation of a public offering, the Company expects the
stockholders of the Company to amend the Company's Certificate of Incorporation
to provide that the directors of the Company be classified into two classes as
nearly equal in size as possible, with staggered two-year terms. Assuming the
initial public offering occurs in 1996, the initial term of office of the first
class of directors to expire at the 1997 Annual Meeting of Stockholders and the
initial term of office of the second class of directors to expire at the 1998
Annual Meeting of Stockholders. The Company's Certificate of Incorporation will
further provide that vacancies on the Board of Directors could be filled only
with the approval of a majority of the Board of Directors then in office.
Furthermore, any director elected by the stockholders, or by the Board of
Directors to fill a vacancy, could be removed only for cause and by a vote of
75% of the combined voting power of the shares of Common Stock entitled to vote
for the election of directors, voting as a single class.
The Company's Certificate of Incorporation and Amended and Restated
Bylaws, after the closing of an initial public offering, will provide that any
action required or permitted to be taken by the stockholders of the Company may
be taken only at a duly called annual or special meeting of the stockholders.
These provisions, if adopted, could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of the outstanding voting securities of the Company, since special
meetings of stockholders may be called only by (x) the Board of Directors
pursuant to a resolution adopted by a majority of the entire Board of Directors,
either upon motion of a director or upon written request by the holders of at
least 50% of the voting power of all the
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shares of capital stock of the Corporation then entitled to vote generally in
the election of directors, voting together as a single class, or (y) the
president of the Corporation.
The foregoing provisions, which could be amended only by a 75% vote
of the stockholders, could have the effect of making it more difficult for a
third party to effect a change in the control of the Board of Directors. In
addition, these provisions could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, an interest in the Company which constitutes less than a majority of
the outstanding voting stock of the Company and may make more difficult or
discourage a takeover of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 3,816,001
outstanding shares of Common Stock (assuming no exercise of outstanding options
or warrants). Of these shares, the 1,250,000 shares contained in the Units being
sold to the public in the Offering will be freely tradeable without restrictions
or further registration under the Securities Act, except for any shares held by
"affiliates" of the Company within the meaning of the Securities Act, which will
be subject to the resale limitations of Rule 144. The remaining 2,566,001 shares
held by existing stockholders were issued by the Company in private transactions
in reliance upon one or more exemptions under the Securities Act, are
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act and may be sold in compliance with such Rule, pursuant to
registration under the Securities Act or pursuant to an exemption therefrom.
Generally, under Rule 144, each person holding restricted securities for a
period of two years may, every three months after such two-year holding period,
sell in ordinary brokerage transactions or to market makers an amount of shares
equal to the greater of one percent of the Company's then outstanding Common
Stock or the average weekly trading volume during the four weeks prior to the
proposed sale. In addition, sales under Rule 144 may be made only through
unsolicited "broker's transactions" or to a "market maker" and are subject to
various other conditions. The limitation on the number of shares which may be
sold under the Rule and the "broker's transaction" requirement do not apply to
restricted securities sold for the account of a person who is not and has not
been an "affiliate" of the Company (as that term is defined in the Act) during
the three months prior to the proposed sale and who has beneficially owned the
securities for at least three years.
Under Rule 701 of the Securities Act, employees who purchase shares
upon exercise of options granted prior to the date of this Prospectus are
entitled to sell such shares after the 90th day following the date of this
Prospectus in reliance on Rule 144, without having to comply with the holding
period requirements of Rule 144 and, in the case of non-affiliates, without
having to comply with the public information, volume limitation or notice
provisions of Rule 144. Affiliates are subject to all Rule 144 restrictions
after this 90-day period, but
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without the Rule 144 holding period requirement. If all the requirements of Rule
701 are met, an aggregate of 288,333 shares of Common Stock issuable on exercise
of outstanding vested stock options will be tradeable pursuant to such rule,
subject to the lockup period described below. Such options are exercisable at
prices below the initial public offering price.
Prior to the Offering, there has been no market for the Common Stock,
and no predictions can be made as to the effect, if any, that sales of shares
under Rule 144 or Rule 701 or the availability of shares for sale will have on
the market prices prevailing from time to time. Sales of substantial amounts of
Common Stock pursuant to Rule 144 could subsequently adversely affect the market
prices of the Common Stock offered hereby. The Company's executive officers,
David E. Y. Sarna and George J. Febish, have agreed not to sell or otherwise
transfer any of their shares of Common Stock for a period of 18 months after the
date of this Prospectus without the prior written consent of the Representative,
and the other current securityholders (including the holders of the Investor
Warrants but not the other Selling Securityholders) have agreed not to sell any
of their shares of Common Stock for a period of nine months after the date of
this Prospectus without the prior written consent of the Representative. Upon
the expiration of the nine month period, 612,000 of the outstanding shares of
Common Stock will be eligible for sale under Rule 144, and the balance of the
outstanding shares will become eligible for sale under Rule 144 from time to
time thereafter. In addition, concurrently with the Offering, the Company is
registering for sale by the Selling Securityholders 412,500 Units, and 719,588
shares of Common Stock that are outstanding or issuable upon the exercise of
currently exercisable warrants; however, the Selling Securityholders other than
the Representative and the holders of the Investor Warrants have agreed not to
sell their registered securities for a period of 12 months after the date of
this Prospectus without the prior written consent of the Representative, and the
holders of the Investor Warrants have agreed not to sell the underlying shares
for a period of nine months from the date of the Prospectus without the consent
of the Representative. Furthermore, certain holders of the Company's outstanding
Common Stock, warrants and options (including current and former executive
officers) have "piggyback" registration rights and/or as well as demand
registration rights that they may exercise commencing one year from the date of
this Prospectus (but commencing two years from the date of this Prospectus with
respect to the July Placement Warrants). See "Risk Factors-Shares Eligible for
Future Sale; Effect on Ability to Raise Capital; No Prior Public Market for the
Common Stock; Possible Volatility of Common Stock Price" and "Concurrent
Offering."
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UNDERWRITING
The Underwriters listed below, for whom Renaissance Financial
Securities Corporation is acting as the representative (the "Representative"),
have severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company the number of Units, each Unit
consisting of one share of Common Stock and one Class A Warrant, set forth
opposite their respective names:
Name Of Underwriter Number Of Units
------------------- ---------------
Renaissance Financial Securities Corporation
TOTAL --------------
1,250,000
==============
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to the approval of certain legal matters by counsel and
various other conditions precedent, and that the Underwriters are severally
obligated to purchase all the Units offered hereby (other than the Units covered
by the Over-allotment Option described below), if any are purchased.
The Underwriters have advised the Company that they propose to offer
the Units to the public at the public offering price set forth on the cover page
of this Prospectus and that they may allow to certain dealers concessions not in
excess of $.___ per Unit, of which amount a sum not in excess of $.___ per Unit
may, in turn, be reallowed by such dealers to other dealers. After the initial
public offering, the offering price, discount and reallowance may be changed.
The shares of Common Stock and the Class A Warrant comprising the Units are
immediately detachable and separately transferable upon issuance.
The Company also has agreed to pay to the Representative an expense
allowance on a nonaccountable basis equal to 3% of the gross proceeds of the
Offering ($____________ if the Over-allotment Option is not exercised and
$____________if the Over-allotment Option is exercised), $50,000 of which has
been paid to date. The Company also has agreed to pay all expenses in connection
with qualifying the Units offered hereby for sale under the laws of such states
as the Representative may designate and filing the Offering with the
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National Association of Securities Dealers, Inc., including fees and expenses of
counsel retained for such purposes by the Underwriters.
The Company has granted the Representative the Over-allotment Option,
which may be exercised within 45 days after the date of this Prospectus, to
purchase up to an additional 187,500 Units solely to cover over-allotments, if
any, at the initial public offering price, less the underwriting discount.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriters against liabilities in connection with
the Offering, including liabilities under the Securities Act.
In connection with the Offering, the Company has agreed to sell to
the Representative, for nominal consideration, the Representative's Unit
Purchase Option to purchase up to an aggregate of 125,000 Units. The
Representative's Unit Purchase Option contains anti-dilution provisions
providing for adjustments of the exercise price and the number of Units
underlying the Representative's Unit Purchase Option upon the occurrence of
certain events, including any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. None of the
securities underlying the Representative's Unit Purchase Option will be
redeemable. The Representative's Unit Purchase Option is exercisable at a price
per Unit equal to 120% of the initial public offering price of the Units for a
period of four years commencing one year from the date of this Prospectus. The
Representative's Unit Purchase Option grants to the holders thereof certain
demand registration rights on two occasions with respect to the registration
under the Securities Act of the shares underlying the Unit Purchase Option. In
addition, the holders of the Unit Purchase Option have the right to notice of
and inclusion in any registration statement filed by the Company for seven years
after the date of this Prospectus. These registration rights are subject to
certain limitations.
For the life of the Representative's Unit Purchase Option, the
holders thereof are given, at nominal cost, the opportunity to profit form a
rise in the market price of the Company's securities, with a resulting dilution
in the interest of other stockholders. Further, such holders may be expected to
exercise such options at a time when the Company would in all likelihood be able
to obtain equity capital on terms more favorable than those provide in such
option.
The Company has agreed, for a period of 24 month after the date of
this Prospectus, not to issue any share of Common Stock or preferred stock, or
any warrants, options or other rights to purchase Common Stock without the prior
consent of the Representative, except for issuances (a) upon the exercise of any
options described herein, or existing options, warrants and convertible
securities, or up to 250,000 options to purchase Common Stock (including the
issuance of such underlying shares) under the Company's existing 1996 Stock
Option Plan, ((b) pursuant to and in order to consummate a merger with or
acquisition from an
-85-
<PAGE>
unaffiliated party in a transaction negotiated at arms length and approved by a
majority of the Board of Directors, (c) in a public offering, at a price not
less than 90% of the average of the closing bid prices of the Common Stock as
reported on NASDAQ for the 21 consecutive trading days immediately preceding the
date of the sale (the "Exempt Price"), and (d) in a private sale at a price not
less than 80% of the Exempt Price. The Company's executive officers, David E. Y.
Sarna and George J. Febish, have agreed not to sell or otherwise transfer any of
their shares of Common Stock for a period of 18 months after the date of this
Prospectus without the prior written consent of the Representative, and the
other securityholders (including the holders of the Investor Warrants but not
the other Selling Securityholders) have agreed not to sell any of their shares
of Common Stock for a period of nine months after the date of this Prospectus
without the prior written consent of the Representative. The Selling
Securityholders other than the Representative and the holders of the Investor
Warrants (which holders are subject to the nine month agreement with the
Representative described above) have agreed not to sell any of their securities
for a period of 12 months after the date of this Prospectus without the prior
written consent of the Representative. See "Shares Eligible for Future Sale."
The Company has agreed that for a period of five years from the date
of this Prospectus, if requested by the Representative during such period, to
nominate and use its best efforts to cause the election of a designee of the
Representative as a director of the Company. The Representative has not yet
designated any such person.
Further, the Company has agreed to retain the Representative as a
financial consultant at an aggregate fee of $150,000 for a three year period,
commencing on the closing of the Offering. The fee is payable annually, with the
payment for the first year payable at the closing.
Commencing one year after the date of this Prospectus, until the
expiration of the exercise period of the Class A Warrants, the Company will pay
the Representative a fee of 5% of the exercise price of each Class A Warrant
exercised, provided, (i) the market price of the Common Stock on the date such
warrant was exercised was greater than the warrant exercise price on that date,
(ii) the exercise of such warrant was solicited by a member of the NASD, (iii)
such warrant was not held in a discretionary account, (iv) the disclosure of
compensation arrangements was made both at the time of the Offering and at the
time of exercise of such warrant, (v) the solicitation of the exercise of such
warrant was not a violation of Rule 10b-6 under the Exchange Act and (vi) the
Representative is designated in writing as the soliciting NASD member. Unless
granted an exemption from Rule 10b-6 by the Commission, the Representative and
any other soliciting broker/dealers will be prohibited from engaging in any
market making activities or solicited brokerage activities with regard to the
Company's securities during the periods prescribe by exemption (xi) to Rule
10b-6 before the solicitation of the exercise of any Class A Warrant until the
later of the terminating of such solicitation activity or the termination of any
right the Representative and any other soliciting broker/dealer may have to
receive a fee for the solicitation of the Class A Warrants.
-86-
<PAGE>
Prior to the Offering, there has been no market for the securities of
the Company. Accordingly, the initial public offering price of the Units and the
exercise price of the Class A Warrants has been determined by negotiation
between the Company and the Representative. Among the factors considered in
determining the initial public offering price and the exercise price of the
Class A Warrants were the Company's results of operations, the Company's current
financial conditions, its future prospects, the state of the markets for its
services, the experience of its management, the economics of the industry in
general, the general condition of the equity securities market and the demand
for similar securities of companies considered comparable to the Company.
CONCURRENT OFFERING
Concurrently with the Offering, the Company has registered the
offering of 412,500 Units, and 719,588 Selling Securityholder Shares under the
Securities Act on behalf of the Selling Securityholders pursuant to a Selling
Securityholder Prospectus included within the Registration Statement of which
this Prospectus forms a part. The Selling Securityholder Securities are
outstanding or issuable upon the exercise of immediately exercisable warrants.
The Selling Securityholders include the Representative with respect to 37,500
Units issuable upon the exercise of the Placement Agent's Warrant. The Selling
Securityholder Securities are not part of the underwritten Offering, however,
and 375,000 Units and all the Selling Securityholder Shares of Common Stock may
not be sold prior to the expiration of 12 months (or nine months, as to the
shares issuable upon the exercise of the Investor Warrants) after the date of
this Prospectus without the prior written consent of the Representative. The
Company will not receive any of the proceeds from the sale of the Selling
Securityholder Securities, but will receive the proceeds of the exercise, if
any, of the various warrants pursuant to which the 412,500 Units and 377,087 of
the Selling Securityholder Shares are issuable. It is anticipated that when the
Selling Securityholder Securities are eligible for sale free of contractual
restriction described above, they will be offered and sold from time to time in
the over-the-counter market, or otherwise, at prices and terms then prevailing
or at prices related to the then current market price, or in negotiated
transactions.
LEGAL MATTERS
The validity of the Units being offered hereby will be passed upon
for the Company by Parker Chapin Flattau & Klimpl, LLP, New York, New York.
Stursberg & Veith, New York, New York, has acted as counsel for the Underwriters
with respect to certain legal matters in connection with the Offering.
-87-
<PAGE>
EXPERTS
The financial statements of the Company as at December 31, 1995 and
for each of the two years then ended included in this Prospectus have been so
included in reliance on the report of Richard A. Eisner & Company, LLP,
independent auditors given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933, with
respect to the Units offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and such
Units, reference is made to the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein are not necessarily complete,
and, in each instance, if such contract or document is an exhibit to the
Registration Statement, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge and copied at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. and at its
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of fees at rates prescribed by the Commission. Electronic
registrations statements made through the Electronic Data Gathering Analysis and
Retrieval ("EDGAR") System are publicly available through the Commission's
Website (http://www.sec.gov).
Prior to the Offering, the Company has not been subject to the
reporting requirements of the Exchange Act.
The Company will provide without charge to each person who receives
this Prospectus, upon written or oral request of such person, a copy of any of
the information that is incorporated by reference in this Prospectus. Any such
request should be directed to the attention of the Corporate Secretary,
ObjectSoft Corporation, Continental Plaza III, 433 Hackensack Avenue, Hackensack
New Jersey 07601, telephone number (201) 343-9100.
-88-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors..............................................F-2
Balance Sheet as at June 30, 1996 (Unaudited) and December 31, 1995 ........F-3
Statements of Operations for the Six Months Ended June 30, 1996 and 1995
(Unaudited) and the Years Ended December 31, 1995 and 1994................F-4
Statements of Changes in Capital Deficiency for the Six Months Ended
June 30, 1996 (Unaudited) and the Years ended
December 31, 1995 and 1994................................................F-5
Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995
(Unaudited) and the Years ended December 31, 1995 and 1994................F-6
Notes to Financial Statements...............................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
ObjectSoft Corporation
We have audited the accompanying balance sheet of ObjectSoft
Corporation as at December 31, 1995 and the related statements of operations,
changes in capital deficiency and cash flows for the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of ObjectSoft
Corporation as at December 31, 1995 and the results of its operations and cash
flows for the two years then ended, in conformity with generally accepted
accounting principles.
/s/ RICHARD A. EISNER & COMPANY, LLP
Florham Park, New Jersey
March 2, 1996
With respect to Note M
August 15, 1996
F-2
<PAGE>
OBJECTSOFT CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
1996 June 30, December 31,
----------- 1996 1995
Pro Forma ----------- -----------
A S S E T S (Note M[1]) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash ........................................................................... $ 1,015,344 $ 424,059 $ 63,995
Accounts receivable, less allowance for doubtful accounts
of $16,200 at December 31, 1995 (Note A[4]) .................................. 226,397 226,397 72,602
Prepaid expenses and other current assets ...................................... 12,420 12,420 26,579
----------- ----------- -----------
Total current assets .................................................... 1,254,161 662,876 163,176
Equipment, at cost, net of accumulated depreciation
(Notes A[2], B and E) ............................................................ 158,854 158,854 23,433
Capitalized software and courseware (Notes A[5] and C) ............................ 191,834 191,834 121,326
Other assets (Note F) ............................................................ 93,596 93,596 35,599
----------- ----------- -----------
T O T A L ............................................................... $ 1,698,445 $ 1,107,160 $ 343,534
=========== =========== ===========
L I A B I L I T I E S
Current liabilities:
Current portion of obligations under capital
lease (Note E) ................................................................ $ 10,839 $ 10,839 $ 9,210
Accounts payable ............................................................... 150,994 150,994 58,314
Accrued and other liabilities .................................................. 62,972 62,972 94,255
Accrued officer compensation (Note A[1]) ...................................... 91,687 191,687 391,687
----------- ----------- -----------
Total current liabilities ............................................... 316,492 416,492 553,466
----------- ----------- -----------
Noncurrent liabilities:
Note payable (Note D) .......................................................... 1,058,738 1,058,738
Obligations under capital lease (Note E) ...................................... 19,205 19,205 3,390
Other liabilities .............................................................. 7,110 7,110 1,616
----------- ----------- -----------
Total noncurrent liabilities ............................................ 1,085,053 1,085,053 5,006
----------- ----------- -----------
Preferred stock $.0001 par, authorized 5,000,000 shares:
Series A, 9% cumulative voting; issued and
outstanding 212,500 shares ($212,500 aggregated
liquidation preference plus cumulative dividends)
(Note.G) ................................................................... 268,469 268,469 258,906
Series B, 10% cumulative non-voting convertible
$.0001 par 1,250 shares issued and outstanding
($125,000 aggregate liquidating preference)
(Notes G and M) ............................................................. 125,000 125,000
----------- ----------- -----------
268,469 393,469 383,906
----------- ----------- -----------
Commitments (Notes K and L)
CAPITAL DEFICIENCY
(Note H)
Common stock, $.0001 par, authorized 20,000,000 shares
issued and outstanding 2,293,000 shares and (proforma)
2,566,001 shares ............................................................... 257 229 229
Additional paid-in capital ........................................................ 1,222,113 405,856 278,331
Accumulated deficit ............................................................... (1,193,939) (1,193,939) (877,404)
----------- ----------- -----------
Total capital deficiency ................................................ 28,431 (787,854) (598,844)
----------- ----------- -----------
T O T A L ............................................................... $ 1,698,445 $ 1,107,160 $ 343,534
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-3
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
-------------------------- --------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues (Note L):
Consulting .............. $ 258,000 $ 282,562 $ 447,976 $ 509,920
Development and
training .............. 37,954 97,900 118,618 245,836
----------- ----------- ----------- -----------
Total revenues .... 295,954 380,462 566,594 755,756
----------- ----------- ----------- -----------
Expenses:
Selling ................. 153,781 232,418 347,189 389,241
Research and
development ........... 62,863
General and
administrative ........ 442,895 161,842 278,942 412,019
----------- ----------- ----------- -----------
Total expenses ... 596,676 394,260 688,994 801,260
----------- ----------- ----------- -----------
NET (LOSS) (Note I) ....... $ (300,722) $ (13,798) $ (122,400) $ (45,504)
=========== =========== =========== ===========
Net loss per share ......... $ (0.11) $ (0.01) $ (0.05) $ (0.02)
=========== =========== =========== ===========
Weighted average number
of shares outstanding . 2,897,418 2,894,418 2,894,418 2,894,418
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in
Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 ................. 2,275,000 $ 228 $ 255,332 $ (671,250) $ (415,690)
Accretion of dividends on the Series A
preferred stock ........................ (19,125) (19,125)
Net loss .................................. (45,504) (45,504)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 ............... 2,275,000 228 255,332 (735,879) (480,319)
Accretion of dividends on the Series A
preferred stock ........................ (19,125) (19,125)
Series B preferred stock issuance
costs (Note G[2]) ..................... (2,500) (2,500)
Common stock issued, net of costs ......... 18,000 1 15,499 15,500
Compensatory option granted (Note H) ..... 10,000 10,000
Net loss .................................. (122,400) (122,400)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 ............... 2,293,000 229 278,331 (877,404) (598,844)
Warrants issued in connection with bridge
loan, net of costs (Note D) ............ 123,525 123,525
Compensatory warrants granted (Note H) .... 4,000 4,000
Accretion of dividends on the Series A
preferred stock ........................ (9,563) (9,563)
Dividends declared on the Series B
preferred stock ........................ (6,250) (6,250)
Net loss (unaudited) ..................... (300,722) (300,722)
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1996 (Unaudited) ....... 2,293,000 $ 229 $ 405,856 $(1,193,939) $ (787,854)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
-------------------------- --------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) ................................................... $ (300,722) $ (13,798) $ (122,400) $ (45,504)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ............................. 52,719 24,092 58,056 35,244
Amortization of discount on note payable .................. 77,263
Provision for doubtful accounts ........................... 9,000 16,200
Stock options issued for services rendered ................ 4,000 10,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable ................................... (137,795) 66,254 67,091 (102,953)
Prepaid expenses and other current assets ............. 14,159 (37,117) 6,311 (1,028)
Other assets .......................................... (8,961) 34,587 34,587 (175)
Increase (decrease) in:
Accounts payable ...................................... 92,680 (30,188) (48,332) 82,832
Accrued and other liabilities ......................... (28,914) (104,073) (28,574) 104,100
Accrued officer compensation .......................... (200,000) 58,333 107,220
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities ........................................ (426,571) (1,910) 100,159 72,516
----------- ----------- ----------- -----------
Cash flow from investing activities:
Capital expenditures .......................................... (126,258) (399)
Capitalized software and courseware ........................... (109,684) (118,478) (60,757)
----------- ----------- -----------
Net cash (used in) investing activities ............. (235,942) (118,478) (61,156)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from note payable .................................... 981,475
Proceeds from issuance of shares and options (Note G[2]) ..... 113,000
Proceeds from issuance of warrants (Note D) ................... 123,525
Deferred offering costs ....................................... (74,036) (30,250)
Dividends ..................................................... (3,125)
Principal payments on obligations under capital leases ........ (5,262) (3,816) (7,928) (4,663)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities ........................................ 1,022,577 (3,816) 74,822 (4,663)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH .................................. 360,064 (5,726) 56,503 6,697
Cash, beginning of period ........................................ 63,995 7,492 7,492 795
----------- ----------- ----------- -----------
CASH, END OF PERIOD .............................................. $ 424,059 $ 1,766 $ 63,995 $ 7,492
=========== =========== =========== ===========
Supplemental disclosures of cash flow Cash paid during the period:
Interest expense ............................................ $ 1,512 $ 366 $ 3,502 $ 2,683
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-6
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE A) - Summary of Significant Accounting Policies:
- ------------------------------------------------------
[1] THE COMPANY:
ObjectSoft Corporation(the "Company") is currently engaged
in business of providing transaction based services over the Internet and
through kiosks, computer software training and consulting.
In January 1996, ObjectSoft Corporation, a New Jersey
corporation merged into a newly formed corporation, ObjectSoft Corporation, a
Delaware corporation. In conjunction with the merger, shares of the preferred
and common stock outstanding were exchanged for the same number of shares of
stock, the shares authorized increased to 5,000,000 preferred and 20,000,000
common and the par value was reduced to $.0001. This transaction is given
retroactive effect in the accompanying financial statements.
The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company sustained
substantial operating losses through June 30, 1996. The officer/shareholders of
the Company have agreed not to demand payment of their accrued compensation
until there is sufficient working capital. Upon the sale of the Bridge Units
(see Note D), $200,000 of the accrued officer compensation was paid.
Prior period financial statements have been reclassified
to conform to the present period presentation.
[2] EQUIPMENT:
Equipment is carried at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method over
estimated useful lives of the assets (three to seven years).
[3] PROVISION FOR INCOME TAXES:
Deferred income taxes arise from temporary differences
resulting primarily from income and expense items being reported on an accrual
basis for financial reporting purposes and on a cash basis for tax purposes,
capitalized software and net operating loss carryforwards. The Company has
available at December 31, 1995, Federal net operating loss carryforwards of
approximately $350,000 which may be applied against future taxable income
through 2010. Upon consummation of the proposed initial public offering, the
Company may be subject to limitations on its use of the net operating loss
carryforwards.
(continued)
F-7
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE A) - Summary of Significant Accounting Policies: (continued)
- ------------------------------------------------------------------
[4] SOFTWARE REVENUE RECOGNITION POLICIES:
The Company is engaged as a developer in a number of
software transactions. Generally, revenue from generic software is recognized
upon delivery of the software. After the sale, if significant obligations remain
or significant uncertainties exist about customer acceptance of the software,
revenue is deferred until the obligations are satisfied or the uncertainties are
resolved. Revenue from software services is recognized as the services are
performed. Revenue from software leased through the Internet (generally one
year) is deferred and amortized over the lease term. Revenue from custom
software development (included in consulting revenue) is recognized based upon
its percentage completion. At June 30, 1996, $120,000 of unbilled receivables
was included in accounts receivable.
[5] SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes software development costs when
project technological feasibility is established and concluding when the project
is ready for release. Research and development costs related to software
development are expensed as incurred. Software development costs are amortized
on a straight-line basis over its expected life.
[6] USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The Company's policy is to amortize capitalized software
costs by the greater of (a) the ratio that current gross revenues for a product
bears to the total of current and anticipated future gross revenues for that
product or (b) the straight-line method over the remaining estimated economic
life of the product including the period being reported on. It is reasonably
possible that those estimates of anticipated future gross revenues, the
remaining economic useful life of the product or both will be reduced in the
near term.
[7] STOCK OPTIONS:
The Company accounts for employee stock options using the
intrinsic value method. Options granted to nonemployees in exchange for services
are accounted for based upon the value of the services received.
(continued)
F-8
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE A) - Summary of Significant Accounting Policies: (continued)
- ------------------------------------------------------------------
[8] NET LOSS PER SHARE:
Net loss per share was computed based on the weighted
average number of shares of common stock outstanding during the year and the net
loss increased by the dividends accruing on the cumulative preferred stock.
Since, in 1995 and 1996, certain shares of common stock and common stock
equivalents were issued at less than the anticipated offering price of the
proposed initial public offering, all such shares of common stock were
considered outstanding for all periods presented in accordance with certain
rules of the Securities and Exchange Commission. Fully diluted net loss per
share is not shown since it would be anti-dilutive.
In July 1996, the Company issued units consisting of
common stock and warrants (see Note M[1]) and utilized $125,000 of the proceeds
to redeem the Series B preferred stock. Additionally, the Company anticipates
redeeming the Series A preferred stock and repaying the short term debt with
proceeds from the proposed initial public offering. Had the Series A preferred
been retired on January 1, 1995, the Series B preferred stock not been issued on
December 31, 1995 nor the short term debt initiated in 1996 and had the Company
issued common stock instead, the net loss per share for the year ended December
31, 1995 and the six months ended June 30,1996 would have been $(0.04) and $
(0.07). These loss per share computations assume an additional weighted average
number of shares outstanding for the year ended December 31, 1995 and the six
months ended June 30, 1996 of 43,367 and 111,656, respectively.
[9] INTERIM FINANCIAL STATEMENTS:
The accompanying interim financial statements at June 30,
1996 and for the six months ended June 30, 1996 and 1995 are unaudited. However,
in the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to be in conformity with generally accepted
accounting principles have been made.
The results of operations and cash flows for the six
months ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the full year ending December 31, 1996.
(continued)
F-9
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE B) - Equipment:
- ---------------------
At June 30, 1996 and December 31, 1995, equipment consists of:
June 30, December 31,
1996 1995
---- ----
Kiosks under construction. . . . $107,436
Equipment. . . . . . . . . . . . 114,113 $72,585
--------- -------
221,549 72,585
Accumulated depreciation . . . . 62,695 49,152
--------- -------
T o t a l. . . . . . . $158,854 $23,433
========= =======
Depreciation expense aggregated $13,543, $9,787, $19,573 and $15,818,
for the six months ended June 30, 1996 and 1995 and the years ended December 31,
1995 and 1994, respectively. Included in depreciation expense is depreciation
expense on equipment under capital lease which aggregated $5,657, $4,198, $8,396
and $4,198, for the six months ended June 30, 1996 and 1995 and the years ended
December 31, 1995 and 1994, respectively.
In 1996 and 1994, the Company acquired equipment under capital lease
aggregating $22,706 and $25,188, respectively.
Kiosks under construction represents equipment acquired for the City
of New York agreement (see Note K[1]). This equipment is expected to be put into
service in August 1996.
(NOTE C) - Capitalized Software And Courseware:
- -----------------------------------------------
The Company developed software which is leased under annual
subscriptions through the Internet. During 1995, the Company capitalized
software development costs of $118,478. Amortization of capitalized software
costs aggregated $9,873 and $29,620 for the year ended December 31, 1995 and six
months ended June 30, 1996, respectively. During 1996, the Company has
capitalized additional software development costs of $109,684. Additionally
amortization of capitalized courseware costs aggregated $9,556, $14,305, $28,610
and $19,426 for the six months ended June 30, 1996 and June 30, 1995 and for the
years ended December 31, 1995 and 1994, respectively.
(continued)
F-10
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE D) - Financing:
- ---------------------
In 1996, the Company sold 12.5 bridge units, each consisting of a
$100,000, 7% note and warrants to purchase 30,000 shares of common stock or such
other securities as might be offered in the Company's initial public offering
("IPO Securities"). The notes are due on the earlier of fourteen days of closing
of the initial public offering ("IPO") or September 30, 1997. Additionally, the
placement agent received a warrant to purchase 37,500 shares of common stock or
IPO Securities.
The Company valued the warrants at $138,750. Accordingly, additional
paid-in capital has been credited $123,525 which represents the value of the
warrants less the allocable portion of the offering costs. The short-term note
has been discounted by the value of the warrants and the offering costs. The
discount is being amortized as additional interest expense from the date of
issuance to September 30, 1996, the anticipated maturity date. If the IPO is
completed by September 30, 1997, the bridge unit warrants are exercisable into
the IPO Securities at 70 percent of the offering price or, if the IPO is not
completed by then, into common stock at $3.50 per share. These warrants expire
September 30, 1999 if the IPO is not completed by September 30, 1997 or, if the
IPO is completed by then, they expire three years after completion of the IPO.
If the IPO is completed by September 30, 1997, the placement agent warrants are
exercisable in the IPO Securities at 91 percent of the offering price or, if the
IPO is not completed by then, into the common stock at $4.55 per share. These
warrants expire from April 2001 through June 2001 if the IPO is not completed by
September 30, 1997 or, if IPO is completed, they expire five years after its
completion.
During the six months ended June 30, 1996, amortization aggregated
$77,263.
(continued)
F-11
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE E) - Obligations Under Capital Lease:
Minimum future lease payments under capital leases expiring through
2001, as of June 30, 1996 are as follows:
Twelve Months
Ending
June 30, Amount
-------- ------
1997. . . . . . . . . . . . . . . . . $ 16,527
1998. . . . . . . . . . . . . . . . . 8,210
1999. . . . . . . . . . . . . . . . . 7,950
2000. . . . . . . . . . . . . . . . . 5,080
2001. . . . . . . . . . . . . . . . . 4,657
--------
42,424
Less amount representing interest . . 12,380
--------
Present value of net minimum
lease payments. . . . . . . . . . . 30,044
Less present value of net minimum
lease payments due within one year. 10,839
--------
$ 19,205
========
Minimum future lease payments under capital leases as of December 31,
1995 are as follows:
Year Ending
December 31,
------------
1996. . . . . . . . . . . . . . . . . $10,488
1997. . . . . . . . . . . . . . . . . 3,496
-------
13,984
Less amount representing interest . . 1,384
-------
Present value of net minimum lease
payments. . . . . . . . . . . . . . 12,600
Less present value of net minimum
lease payments due within one year. 9,210
-------
$ 3,390
=======
(NOTE F) - Deferred Offering Costs:
- -----------------------------------
The Company has incurred $79,286 of incremental costs in connection
with a proposed initial public offering of its common stock. Upon consummation
of the offering, the deferred offering costs will be charged against the gross
proceeds of the offering or, if not consummated, they will be charged to
expense. The Company will incur substantial additional offering costs.
(continued)
F-12
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE G) - Preferred Stock:
- ---------------------------
[1] SERIES A PREFERRED STOCK:
The Series A 9% cumulative voting preferred stock is
redeemable at any time at the Company's option and must be redeemed at the time
of the initial public offering. The redemption price is $1 per share plus
accrued and unpaid dividends.
The Company has not declared any dividends. The cumulative
unpaid dividends at June 30, 1996 aggregated $55,969 ($.315 per share of stock
issued in 1992 and $.245 per share of stock issued in 1993).
[2] SERIES B PREFERRED STOCK:
In December 1995, the Company issued 1,250 shares of
nonvoting convertible preferred stock for $100,000 in cash and a note for
$25,000. The note was paid in January 1996 and is included in other current
assets as of December 31, 1995. The cumulative dividend on the preferred stock
is 10% per year. During the six months ended June 30, 1996, the Company declared
dividends aggregating $6,250 (at June 30, 1996, $3,125 was included in accrued
liabilities). In July 1996, the Company redeemed the outstanding shares (see
Note M).
(NOTE H) - Capital Deficiency:
- ------------------------------
As of January 1, 1994, the Company had issued warrants, expiring in
April 1998, to purchase 143,333 shares of common stock at an exercise price of
$0.50 and warrants, expiring in March 1996, to purchase 106,250 shares of common
stock at an exercise price of $2.00. None of these warrants has been exercised.
In 1995, the Board of Directors extended the expiration of the $2.00 warrants
from March 1996 to November 1996.
In 1995, the Company granted an option to purchase 100,000 shares of
common stock at $1.00 per share in exchange for $10,000 of consulting services.
As a result $10,000 was charged to operations and credited to additional paid-in
capital. The options are exercisable through September 2000. In 1996, in
exchange for an additional $5,000 payment to the option holder, the Company
cancelled the option on 50,000 shares.
(continued)
F-13
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE H) - Capital Deficiency: (continued)
- -------------------------------------------
In 1996, the Company granted a warrant to purchase 10,000 shares of
common stock at $1.00 per share in exchange for $20,000 of professional services
to be rendered during the vesting period. This warrant vests ratably over a ten
month period ending March 1997 and are exercisable through May 2001. During
1996, the Company recognized expense of $4,000.
The Company has reserved 1,134,587 shares of its common stock for
issuance upon exercise of the outstanding warrants and options.
See Note M[1] and [2] with regard to warrants and options issued in
July and August 1996.
(NOTE I) - Income Taxes:
- ------------------------
The significant components of the Company's deferred tax assets and
liabilities at June 30, 1996 and December 31, 1995 are as follows:
June 30, December 31,
1996 1995
---- ----
Accrual to cash adjustment. . . . . $ 67,000 $ 203,000
Capitalized software and courseware (70,000) (37,000)
Net operating losses carryforward . 424,000 145,000
Valuation allowance . . . . . . . . (421,000) (311,000)
---------- ----------
Net deferred tax asset. . . . . . . $ - 0 - $ - 0 -
========== ==========
The significant components of the provision for income taxes for each
of the six months ended June 30, 1996 and 1995 and the years ended December 31,
1995 and 1994, are as follows:
June 30, December 31,
-------------------- --------------------
1996 1995 1995 1994
---------- -------- --------- ---------
Accrual to cash
adjustment . . . . . $(136,000) $(15,000) $ 62,000 $ 34,000
Net operating
loss carryforward. . 279,000 19,000 37,000 (19,000)
Capitalized software
and courseware . . . (33,000) 2,000 (35,000) 2,000
Increase in valuation
allowance. . . . . . (110,000) (6,000) (64,000) (17,000)
---------- -------- --------- ---------
Provision for income
taxes. . . . . . . . $ - 0 - $ - 0 - $ - 0 - $ - 0 -
=========== ======== ========= =========
(continued)
F-14
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE I) - Income Taxes: (continued)
- -------------------------------------
The difference between the statutory federal income tax rate on the
Company's net loss and the Company's effective income tax rate for each of the
six months ended June 30, 1996 and 1995 and the years ended December 31, 1995
and 1994, respectively, is summarized as follows:
June 30, December 31,
--------------- ----------------
1996 1995 1995 1994
------ ------ ------ ------
Statutory federal
income tax rate. . . 34.0% 34.0% 34.0% 34.0%
Increase in valuation
allowance. . . . . . (36.6) (43.5) (39.2) (30.8)
Research and
development credit . 7.3
Miscellaneous. . . . . 2.6 9.5 (2.1) (3.2)
------ ------ ------ ------
Effective income tax
rate . . . . . . . . 0.0% 0.0% 0.0% 0.0%
====== ====== ====== ======
(NOTE J) - Employee Benefit Plan:
- ---------------------------------
The Company maintains a noncontributory Employee Savings Plan, in
accordance with the provisions of Section 401(k) of the Internal Revenue Code.
Pursuant to the terms of the plan, participants can defer a portion of their
income through contributions to the Plan.
(NOTE K) - Commitments:
- -----------------------
[1] LEASE INCOME:
In 1995, the Company entered into an agreement with the
City of New York ("New York") whereby the Company would develop custom software
and upon final acceptance of the software by New York, the Company will
initially lease five kiosks, hardware and software to New York for one year,
renewable by New York for two successive one year terms. The annual rental
aggregates $361,080. Additionally, the Company can earn fees based upon the
number of transactions effectuated in the kiosks. The Company anticipates
purchasing additional hardware related to the kiosks project of approximately
$100,000.
(continued)
F-15
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE K) - Commitments: (continued)
- ------------------------------------
[2] LEASES:
The Company leases office space and equipment under
operating leases with an initial or remaining term of more than one year
expiring through 2002.
Twelve Months
Ending
June 30, Amount
-------- ------
1997. . . . . . . . . $ 49,908
1998. . . . . . . . . 58,727
1999. . . . . . . . . 78,444
2000. . . . . . . . . 82,640
2001. . . . . . . . . 86,933
Thereafter. . . . . . 162,061
--------
T o t a l . $518,713
========
Rent expense approximated $24,600, $9,100, $18,300 and
$19,200 for the six months ended June 30, 1996 and June 30, 1995 and for the
years ended December 31, 1995 and December 31, 1994, respectively.
[3] EMPLOYMENT AGREEMENTS:
Effective July 1996, the Company entered into employment
agreements with two key executives expiring in December 2001. Under the terms of
the agreements, the aggregate initial annual compensation is $208,000 per
executive. Additionally, the agreements include provisions for bonuses
(aggregating the sum of 5 percent of earnings before depreciation, interest,
taxes and amortization and other amounts, if any, to be determined by the board
of directors),increases in compensation and severance payment based upon certain
events.
(NOTE L) - Concentration Of Risk:
- ---------------------------------
[1] REVENUES:
For the six months ended June 30, 1996 and June 30, 1995,
76 percent of revenues were derived from two customers and 48 percent of
revenues were derived from one customer, respectively. For the years ended
December 31, 1995 and December 31, 1994, 56 percent of revenues were derived
from two customers and 67 percent of revenues were derived from four customers,
respectively.
(continued)
F-16
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information with respect to June 30, 1996 and the six months
ended June 30, 1996 and June 30, 1995 is unaudited)
(NOTE L) - Concentration of Risk: (continued)
- ---------------------------------------------
[2] MICROSOFT CORPORATION:
The Company's software is generally based upon Microsoft
Windows technology. Additionally, it has established a strategic relationship
with Microsoft that management believes is important to its sales, marketing and
support and product development activities. Accordingly, any change in this
relationship or any factor adversely affecting the demand for, or the use of,
Microsoft's Windows operating system could have a negative impact on demand for
the Company's products and services. Additionally, changes to the underlying
components of the Windows operating system would require changes to the
Company's products and could result in the loss of sales if the Company did not
implement changes in a timely manner.
[3] CASH:
The Company places its cash in banking institutions, which
cash may at times, be in excess of the FDIC insurance limit.
(NOTE M) - Subsequent Events:
- -----------------------------
[1] PRIVATE PLACEMENT EQUITY OFFERING:
In August 1996, the Company issued 273,001 units
consisting of one share of common stock and a warrant to purchase two-thirds of
a share of common stock at an exercise price of $3.00 per two-thirds share. The
Company received proceeds of $816,285, net of estimated offering costs of
$139,215. Concurrently, the Company redeemed all of the outstanding shares of
the Series B preferred stock in exchange for $125,000 and warrants to purchase
20,000 shares of common stock at an exercise price of $7.00 per share. Both
issues of the warrants expire the earlier of September 2000 or three years after
the effective date of the Company's initial public offering. Additionally,
$100,000 of the accrued officer compensation is to be paid from the net
proceeds.
[2] STOCK OPTION PLAN:
In August 1996, the Company adopted a stock option plan
under which 250,000 shares of common stock are reserved for issuance upon
exercise of either incentive or nonincentive stock options which may be granted
from time to time by the Board of Directors to employees and others. The Company
granted options on 145,000 shares at exercise prices ranging from $2.50 to $3.50
per share, expiring July 2001.
F-17
<PAGE>
==================================== ======================================
NO PERSON IS AUTHORIZED IN 1,250,000 UNITS
CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT OBJECTSOFT
CONTAINED IN THIS PROSPECTUS, AND, CORPORATION
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR BY THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION EACH UNIT CONSISTING OF
OF AN OFFER TO BUY ANY SECURITY ONE SHARE OF COMMON STOCK
OTHER THAN THE UNITS OFFERED BY THIS AND ONE REDEEMABLE
PROSPECTUS, NOR DOES IT CONSTITUTE CLASS A WARRANT
AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE UNITS
OFFERED BY THIS PROSPECTUS TO ANY
PERSON TO WHOM, OR BY ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY [LOGO]
CIRCUMSTANCES CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................ 3 ------------------------
Risk Factors...................... 9
Use of Proceeds...................28 PROSPECTUS
Dividend Policy...................29
Capitalization....................30 ------------------------
Dilution..........................31
Selected Financial Data...........33
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.......................34
Glossary..........................38 Renaissance Financial Securities
Business..........................41 Corporation
Management........................59
Principal Stockholders............67
Certain Transactions..............68 ______________, 1996
Description of Securities.........71
Shares Eligible for Future Sale...77
Underwriting......................79
Concurrent Offering...............82
Legal Matters.....................82
Experts...........................82
Additional Information............82
Index to Financial Statements....F-1
UNTIL _____________, 1996 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS
IN THE UNITS, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
==================================== ======================================
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 20, 1996
ALTERNATE PROSPECTUS
OBJECTSOFT CORPORATION
412,500 UNITS
Each Unit consisting of one Share
of Common Stock and one Redeemable Class A Warrant
342,501 SHARES OF COMMON STOCK
377,087 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF
WARRANTS
This Prospectus relates to (i) 412,500 units (the "Units"), each Unit
consisting of one share of the common stock, par value $.0001 per share (the
"Common Stock"), of ObjectSoft Corporation (the "Company") and one Redeemable
Class A Warrant (the "Class A Warrants") of the Company and (ii) 719,588 shares
of Common Stock (the "Selling Securityholder Shares"). The Units and the Selling
Securityholder Shares are collectively referred to herein as the "Selling
Securityholder Securities," and the holders of the Selling Securityholder
Securities and the warrants exercisable for certain of the Selling
Securityholder Securities are collectively referred to herein as the "Selling
Securityholders." The Units are issuable upon the exercise of (1) 375,000
warrants (the "Bridge Warrants") issued to investors in a private placement by
the Company in April through June, 1996 (the "Bridge Loan Offering") and (2)
37,500 warrants issued to Renaissance Financial Securities Corporation
("Renaissance") in its capacity as placement agent of the Bridge Loan Offering
(the "Placement Agent's Warrant"). Of the Selling Securityholder Shares, (1)
273,001 shares are issued and outstanding and were issued to investors in a
private placement by the Company in July and August 1996 (the "July 1996
Offering"), (2) 182,004 shares are issuable upon the exercise of warrants issued
to the investors in the July 1996 Offering ( the "July 1996 Warrants"), (3)
45,500 shares are issuable upon the exercise of a warrant (and the July 1996
Warrants issuable upon the exercise thereof) issued to Win Capital Corporation
("Win Capital") in its capacity as placement agent of the July 1996 Offering
(the "July Placement Warrant"), (4) 106,250 shares are issuable upon the
exercise of warrants issued by the Company in connection with certain private
placements in 1992 and 1993 (the "Investor Warrants"), (5) 43,333 shares are
issuable upon the exercise of warrants originally issued to a former executive
officer of the Company (the "Officer Warrants") and (6) 69,500 shares are held
by certain stockholders of the Company. See "Selling Securityholders" and "Plan
of Distribution." The Selling Securityholders (other than Renaissance) have
agreed not to sell any Selling Securityholder Securities for a period of 12
months (or nine months, in the case of the holders of the Investor Warrants)
from the date of this Prospectus without the prior written consent of
Renaissance, in its capacity as representative of the Underwriters (the
"Representative") of the Company's underwritten initial public offering (the
"Offering"). See "Plan of Distribution" and "Concurrent Public Offering."
The shares of Common Stock and Class A Warrants that comprise the
Units are immediately detachable and separately transferable. Each Class A
Warrant entitles the holder thereof to purchase one share of Common Stock at an
exercise price of $____ per share, subject to adjustment, at any time commencing
_________ __, 1997 (one year after the date of this Prospectus) until _________
__, 2001 (five years after the date of this Prospectus). The Class A Warrants
are redeemable by the Company at a price of $.10 per Class A Warrant commencing
one year after the date of this Prospectus (or earlier with the prior consent of
the Representative), on not less than 30 days prior written notice to the
holders thereof, provided the average closing bid quotation of the Common Stock
as reported on the NASDAQ SmallCap Market ("NASDAQ"), if traded thereon, or if
not traded thereon, the average closing bid quotation of the Common Stock if
listed on a national securities exchange (or other reporting system that
provides last sale prices), has been at least 130% of the then current exercise
price of the Class A Warrants (initially, $____ per share), for a period of 20
consecutive trading days ending within 15 days
<PAGE>
of the date on which the Company gives notice of redemption. The Class A
Warrants will be exercisable until the close of business on the day immediately
preceding the date fixed for redemption.
See "Description of Securities - Class A Warrants."
The Selling Securityholder Securities may be sold from time to time
by the Selling Securityholders or by their transferees. The distribution of the
Selling Securityholder Securities by the Selling Securityholders may be effected
in one or more transactions that may take place on 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.
The Selling Securityholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933 (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 the
Selling Securityholder Securities by the Selling Securityholders. In the event
the Placement Agent's Warrant and all of the Bridge Warrants and the other
warrants exercisable to acquire Selling Securityholder Shares are exercised in
full, the Company will receive gross proceeds of $__________. See "Selling
Securityholders" and "Plan of Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to the "Offering") of 1,250,000 Units, through the
Underwriters for which Renaissance is the Representative, was declared effective
by the Securities and Exchange Commission (the "Commission"). The Company will
receive net proceeds of approximately $__________ from the Offering (assuming no
exercise of the Representative's Over-allotment Option) after payment of
underwriting discounts and commissions and estimated expenses of the Offering.
See "Concurrent Public Offering."
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. See
"Risk Factors" immediately following the "Prospectus Summary" section.
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.
THE DATE OF THIS PROSPECTUS IS ____________, 1996
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
SELLING SECURITYHOLDERS
Up to an aggregate of 412,500 Units and 719,588 Selling
Securityholder Shares may be offered for resale by the Selling Securityholders.
The Units are issuable upon the exercise of the Bridge Warrants issued to
investors in the Bridge Loan Offering and the Placement Agent's Warrant. Of the
Selling Securityholder Shares, 273,001 shares are issued and outstanding and
were issued to investors in the July 1996 Offering, 182,004 shares are issuable
upon the exercise of the July 1996 Warrants, 45,500 shares are issuable upon the
exercise of the July Placement Warrant (and the July 1996 Warrants issuable upon
the execise thereof), 106,250 shares are issuable upon exercise of the Investor
Warrants, 43,333 shares are issuable upon exercise of the Officer Warrants and
69,500 shares are held by certain stockholders of the Company.
The following table sets forth certain information with respect to
each Selling Securityholder for whom the Company is registering Selling
Securityholder Securities for resale to the public. The Company will not receive
any of the proceeds from the sale of such securities. Renaissance acted as the
Representative of the Underwriters of the Offering. A principal of Win Capital
is also a principal of Cyndel & Co., Inc., a principal stockholder of the
Company. Other than as described with respect to Renaissance and Win Capital, to
the Company's knowledge, there are no material relationships between any of the
Selling Securityholders and the Company, nor have any such material
relationships existed within the past three years.
Maximum
Number Of
Selling Securityholders Shares To Be Sold
----------------------- -----------------
Units
-----
Renaissance Financial Securities Corporation 37,500(1)
Nathan Eisen 7,500
Richard, Steven and Kenneth Etra 15,000
William J. Ludwig 15,000
Joseph W. And Ann G. Schantz 7,500
Gregg Gallant 7,500
Mary and Mark Albritton 15,000
Sydney Katz 7,500
Louis Falletta 7,500
Phillip Levien 7,500
Pamda Retirement Trust 15,000
Eric W. Larson 15,000
HRIS Associates, Inc. 15,000
Program Advisors Corporation 7,500
Program Resource Organization, Inc. 7,500
Association of Independent Employers, Ltd. 7,500
Peter S. Morford 7,500
Robert E. Coomes 7,500
Gary G. Hammon 7,500
Sheldon Sisken 7,500
Abraham David 7,500
Bay N. Sayegh 7,500
American Waste Oil Services Corp. 15,000
Gastro Enterology Associates 30,000
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
Maximum
Number Of
Selling Securityholders Shares To Be Sold
----------------------- -----------------
Units
-----
Servesting Investment Co. 7,500
Martin Hodas 15,000
Richard Someck 15,000
Roger Testa 30,000
Cyril J. Galagan 15,000
Jack P. Conlon 15,000
Joseph Schanne and Theresa Schanne 15,000
Anthony Quaranta 15,000
-------
Total Units 412,500
=======
Maximum Number
Of Shares Issuable
On Exercise Of July
Maximum Number Of 1996 Warrants To
Shares To Be Sold Be Sold
----------------- -------
July 1996 Offering
- ------------------
Win Capital Corporation (2) 27,300 18,200
Lawrence Dell Aquila 3,572 2,381
David Barron 10,000 6,667
Louis Chapman and Elaine Chapman 3,000 2,000
Michael Damiani and Beverly Damiani 5,000 3,333
Seymour Fertig 7,143 4,762
Theodore Kaplan & Selma Kaplan 8,000 5,334
Edgar Lindbloh 10,000 6,667
Thomas J. Luisi 9,000 6,000
Donald Markowitz 12,000 8,000
Gary O'Leary 10,000 6,667
PAMCO General Contracting Corp. 5,000 3,334
Pension Solutions 10,000 6,667
Nicholas Ponzio 7,143 4,762
Jeffrey Reizner 5,000 3,334
Samuel Richman 3,000 2,000
Charles Ruppman 25,000 16,667
Rose Salvato 16,000 10,667
James R. Smith 22,000 14,667
John H. Smith 5,000 3,333
Stourbridge Investment Ltd. 62,143 41,429
Suan Investments Inc. 30,000 20,000
Faye Zelmanovicz 5,000 3,333
-------- --------
TOTAL 300,301 200,204
======== ========
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
Maximum Number Of
Selling Securityholders Shares To Be Sold
- ----------------------- -----------------
Investor Warrants
- -----------------
Harold Greenberg 3,125
Gennaro P. Vanacore 3,125
Aaron Ascher 12,500
Harmat Capital Corp. 3,125
Greenberg Associates 3,125
John Farbman 6,250
Scott Berman 6,250
George Mourges 12,500
Agamemnon R. Mourges 12,500
Marshall N. Cyrlin 6,250
Herbert Cyrlin 6,250
Josephine Chast 3,125
John P. Philis and Peter S. Philis, JTWROS 6,250
Elogeanne Grossman 3,125
Anthony Larosa 3,125
Catherine A. Lavin 6,250
Debra and Wesley Oler 3,125
Daniel Shapiro 3,125
Jerome Braunstein 3,125
-------
Total Investor Warrants 106,250
----------------------- =======
OFFICER WARRANTS
Alice F. Wein 21,666
Arthur Wein 21,667
Total Officer Warrants (3) 43,333
-------------------------- ======
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
Maximum Number Of
Selling Securityholders Shares To Be Sold
- ----------------------- -----------------
Outstanding Shares
- ------------------
Gregory Lavin 2,500
Leslie Seiff 2,500
Bruce Seiff 2,500
Stanley Simon 2,000
Sylvia Bageac 2,000
William F. Yetman 1,000
Dr. Michael Smart 5,000
Barbara Bean Hemmer 4,000
Regent Capital Group 10,000
Aaron Lehman 18,000
Goldman, Zolotorofe & Corcoran P.C. 20,000
------
Total Shares 69,500
======
- -------------------------
(1) Consists of Units issuable upon the exercise of the Placement Agent's
Warrant. Does not include 250,000 shares of Common Stock included in
the Units (and issuable upon the exercise of the Class A Warrants
contained in such Units) issuable upon the exercise of the
Representative's Unit Purchase Option to be issued to Renaissance in
connection with the Offering, which option is not exercisable until
one year after the date of this Prospectus. See "Concurrent Public
Offering."
(2) Consists of shares issuable upon the exercise of the July Placement
Warrant and upon the exercise July 1996 Warrants issuable upon such
exercise of the July Placement Warrant.
(3) Does not include shares issuable upon the exercise of 100,000 Officer
Warrants held by David E.Y. Sarna and George J. Febish, executive
officers of the Company, which shares have not been registered for
resale. See "Description of Securities - Outstanding Warrants and
Options - Officer/Stockholder Warrants; 1996 Stock Option Plan."
PLAN OF DISTRIBUTION
The sale of the Selling Securityholder Securities by the Selling
Securityholders may be effected from time to time in transactions (which may
include block transactions by or for the amount of the Selling Securityholders)
in the over-the-counter market or in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale or at negotiated prices.
<PAGE>
[ALTERNATE PROSPECTUS PAGE]
The Selling Securityholders may effect such transactions by selling
their securities directly to purchasers, through broker-dealers acting as agents
for the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Securityholder, other than Renaissance, has agreed not
to sell, transfer or otherwise dispose publicly the Selling Securityholder
Securities for a period of 12 months (or nine months, in the case of the holders
of the Investor Warrants) after the date of this Prospectus without the prior
written consent of Renaissance in its capacity as representative.
Under applicable rules and regulations under the Securities Exchange
Act of 1934 ("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 (at least two, and possibly nine, business days) prior to
the commencement of such distribution. Accordingly, in the event the Renaissance
is engaged in a distribution of Selling Securityholder Securities, it will not
be able to make a market in the Company's securities during the applicable
restrictive period. In addition, each Selling Securityholder desiring to sell
Selling Securityholder Securities will be subject to the applicable provisions
of the Exchange Act and the rules and regulations thereunder, including without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of the
purchases and sales of shares of the Company's securities by such Selling
Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 1,250,000 Units by the Company and up to 187,500 additional Units
to cover over-allotments, if any. The initial offering price of the Units in the
Offering was $____, and such Units were identical to the Units being offered by
certain Selling Securityholders pursuant to this Prospectus.
Renaissance, a Selling Securityholder, acted as Representative of the
Underwriters of the Offering and, in connection therewith, was granted an option
(the "Representative's Unit Purchase Option") to purchase up to 125,000 Units at
an exercise price equal to 120% of the initial public offering price of the
Units sold in the Offering.
<PAGE>
==================================== ======================================
NO PERSON IS AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT OBJECTSOFT
CONTAINED IN THIS PROSPECTUS, AND, CORPORATION
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR BY THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE 412,500 UNITS
AN OFFER TO SELL OR THE SOLICITATION EACH UNIT CONSISTING OF
OF AN OFFER TO BUY ANY SECURITY ONE SHARE OF COMMON STOCK
OTHER THAN THE UNITS OFFERED BY THIS AND ONE REDEEMABLE
PROSPECTUS, NOR DOES IT CONSTITUTE CLASS A WARRANT
AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE UNITS 342,500 SHARES OF
OFFERED BY THIS PROSPECTUS TO ANY COMMON STOCK
PERSON TO WHOM, OR BY ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS 377,087 SHARES OF
UNLAWFUL TO MAKE SUCH OFFER OR COMMON STOCK ISSUABLE
SOLICITATION. NEITHER THE DELIVERY UPON EXERCISE OF WARRANTS
OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS [LOGO]
CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................ ------------------------
Risk Factors......................
Use of Proceeds................... PROSPECTUS
Dividend Policy...................
Capitalization.................... ------------------------
Dilution..........................
Selected Financial Data...........
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.......................
Glossary..........................
Business..........................
Management........................
Principal Stockholders............
Certain Transactions.............. ______________, 1996
Description of Securities.........
Shares Eligible for Future Sale...
Selling Securityholders...........
Plan of Distribution..............
Concurrent Public Offering........
Legal Matters.....................
Experts...........................
Additional Information............
Index to Financial Statements.....
==================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than a
derivative action by or in the right of the corporation ) by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. In the case of a
derivative action, a Delaware corporation may indemnify any such person against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudicated to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or any other court in which such action is brought determines such
person is fairly and reasonably entitled to indemnity for such expenses. Article
Ninth of the Company's Certificate of Incorporation and Article ___ of the
Company's Amended and Restated Bylaws provide that the Company shall indemnify
all persons whom the Company shall have power to indemnify under such Section to
the fullest extent permitted by such Section. In addition, Article Eighth of the
Company's Certificate of Incorporation provides, in general, that no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (which provides that, under certain circumstances, directors may be
jointly and severally liable for willful or negligent violations of the DGCL
provisions regarding the payment of dividends or stock repurchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 5 of the Underwriting Agreement (Exhibit 1.1) provides for
indemnification by the underwriter of directors, officers and controlling person
of the Company for certain liabilities, including certain liabilities under the
Securities Act of 1933, under certain circumstances.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses of the offering, other than underwriting discounts and
commissions, are as follows:
Securities and Exchange Commission registration fee..... $ 12,761
NASD filing fee......................................... 4,201
NASDAQ entry fees....................................... 7,875
Legal fees and expenses*................................ 150,000
Accounting fees and expenses*........................... 75,000
II - 1
<PAGE>
Transfer agent fees*.................................... 3,000
Blue sky fees and expenses (including counsel fees)*.... 40,000
Printing and engraving expenses*........................ 100,000
Miscellaneous*.......................................... 232,164
--------
Total.............................................. $625,000
========
- --------------------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information regarding sales of
securities of the Company issued within the past three years, which were not
registered pursuant to the Securities Act of 1933 (the "Securities Act").
Pursuant to a private placement of securities effected between
September 1992 and November 1993 (the "1992 Private Placement"), the Company
sold 17 units ("Units") to 19 investors, each of whom subscribed to purchase
such Units, at a price of $25,000 per Unit, each Unit consisting of (i) 12,500
shares of Common Stock, (ii) 12,500 shares of Preferred Stock and (ii) a warrant
to purchase 6,250 shares of Common Stock. The securities were issued in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act.
On October 4, 1993, the Company issued 222,500 shares of Common Stock
to Cyndel & Co., Inc. for an aggregate of $10,000. The securities were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
On April 15, 1993, the Company issued to David E. Y. Sarna, Chairman,
Co-Executive Officer and Secretary of the Company, George J. Febish, President,
Co-Executive Officer and Treasurer and Arthur Wein, a former officer of the
Company, warrants to purchase 50,000, 50,000 and 43,333 shares of Common Stock,
respectively, in consideration of forgone salary in 1992. In consideration of
their waiver of the registration rights with respect to the Offering and their
agreement to enter into an 18 month lock-up agreement with the Representative,
the expiration date of the Officer Warrants held by Messrs. Sarna and Febish was
extended to April 30, 2000. The securities were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
On August 22, 1995 the Company granted Benjamin Borneman, a
consultant to the Company, the right to exchange his right to cash payments
under his retainer agreement for an option to acquire up to 100,000 shares of
Common Stock at an exercise price of $1.00 per share and up to 240,000 shares of
Common Stock at an exercise price of $2.00 per share. On September 15, 1995 Mr.
Borneman exercised his right to receive the option for 100,000 shares of Common
Stock at an exercise price of $1.00 per share expiring on the fifth anniversary
of the date of grant. This option is immediately exercisable; however, in May
1996, the option was canceled as to 50,000 shares in consideration of a cash
payment of $5,000. Mr. Borneman's right to acquire an option for 240,000 shares
of Common Stock expired on December 31, 1995. The securities were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
II - 2
<PAGE>
On December 29, 1995, the Company issued to Cyndel & Co., Inc. 1,250
shares of Preferred Stock to be designated Series B Preferred Stock in
consideration of $100,000 in cash and a promissory note in the amount of $25,000
due on January 30, 1996. The securities were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act.
On December 28, 1995, the Company issued to Aaron Lehman 18,000
shares of Common Stock in consideration of $18,000 in cash. No sales commissions
were paid in connection with such offerings. The securities were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
During the period April through June 1996, the Company sold 12.5
Bridge Units to accredited investors, each Bridge Unit consisting of a $100,000
7% Note (the "Bridge Notes") and warrants to purchase 30,000 shares of Common
Stock or such other securities as might be offering in the Company's initial
public offering. Assuming the Offering is completed, the Bridge Warrants will be
exercisable to purchase Units identical to the Units offered hereby. Interest on
the Bridge Notes is payable semi-annually commencing December 31, 1996, and the
Bridge Notes will mature and be payable in full within fourteen (14) days of the
date of closing of the Offering or September 30, 1997, whichever is earlier. The
Bridge Warrants are exercisable at a price equal to 70% of the offering price
for securities offered in an initial public offering. Each Unit Warrant is for
the purchase either (i) if the Company completes an initial public offering
("IPO") on or before September 30, 1997, 30,000 shares of Common Stock (the
"Shares") or other securities at 70% of the per share or other security price in
the IPO exercisable for a period of three (3) years (the "IPO Securities"), or
(ii) if the Company does not complete an IPO on or before September 30, 1997,
30,000 shares of Common Stock, exercisable until September 30, 1999 at $3.50 per
share. The term of the Bridge Warrants if exercisable into IPO securities shall
be extended for an additional period, up to one (1) year, equal to the period
that lapses between September 30, 1996 and the consummation of the Company's
initial public offering on or before September 30, 1997. If the Offering is
completed prior to September 30, 1997, the Bridge Warrants will be exercisable
to purchase 30,000 Units at $____ per Unit. In connection with Bridge Loan
Offering, the Company sold to the Representative, in its capacity as Placement
Agent of such offering, a warrant (the "Placement Agent's Warrant") to purchase
a number of Units equal to 10% of Units issuable upon the exercise of the Bridge
Warrants contained in the Bridge Units. The exercise price of the Placement
Agent's Warrant is either (i) in the event an IPO is completed on or before
September 30, 1997, 91% of the per IPO Security offering price exercisable
commencing on or after the consummation of a public offering and ending on the
fifth anniversary thereof or (ii) in the event an IPO is not completed on or
before September 30, 1997, $4.55, exercisable for five (5) years from the date
of issuance. Assuming the Offering is completed prior to September 30, 1997, the
Placement Agent's Warrant will be exercisable at a price of $____ per Unit. The
securities were issued in reliance on the exemptions from registration provided
by Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In July and August 1996, the Company sold an aggregate of 273,001
units (the "July 1996 Units") for an aggregate of $955,504, or $3.50 per July
1996 Unit. Each July 1996 Unit consisting of one share of Common Stock and a
warrant (the "July 1996 Warrants") to purchase two-thirds (2/3) of a share of
Common Stock at an exercise price of $3.00 per 2/3 share (or $4.50 per share).
The July 1996 Warrants are exercisable until the later of July 30, 1999 or three
years after the date of this Prospectus (but in no event later than September
30, 2000. In connection with the sale of the July 1996 Units, the placement
agent for such sale, Win Capital Corporation , was granted a warrant to purchase
27,300 July 1996 Units at an exercise price of $4.50 per July 1996 Unit (the
"July Placement Warrant"). The securities were issued in reliance on the
exemptions from registration provided by Regulation D promulgated under the
Securities Act and Section 4(2) of the Securities Act.
II - 3
<PAGE>
In July 1996, the Company redeemed the 1,250 shares of Series B
Preferred Stock held by Cyndel & Co., Inc. and in connection therewith, issued
to Cyndel warrants exercisable for a period of three years, to purchase 20,000
shares of Common Stock at an exercise price of $7.00 per share. The securities
were issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act.
On May 7, 1996, the Company issued a warrant to Morton Getman, a
consultant to the Company, for 10,000 shares of Common Stock. The warrants
granted to Mr. Getman vest at the rate of 1,000 per month and are exercisable at
a price of $1.00 per share.
Other than as described above, during the three years immediately
preceding the date hereof, no sales by the Company of its securities were
consummated.
ITEM 27. EXHIBITS.
The following exhibits are filed as part of this registration
statement:
Exhibit Number Description
- -------------- -----------
1.1 Form of Underwriting Agreement.
2.1 Certificate of Ownership and Merger of ObjectSoft Corporation
(a New Jersey corporation) into the Company.
2.2 Plan of Merger of ObjectSoft Corporation (a New Jersey
corporation) into the Company.
3.1(a) Certificate of Incorporation of the Company.
3.1(b) Form of Amendment to Certificate of Incorporation of the
Company to be filed preceding the closing of the Offering
3.2(a) By-laws of the Company.
3.2(b) Form of Amendment to Bylaws of the Company to become effective
upon closing of the Offering.*
4.1 Form of Representative's Unit Purchase Option agreement*
4.2 Specimen Certificate of the Company's Common Stock*
4.3 Form of Class A Warrant Agreement
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP as to the
legality of securities being registered*
10.1 Employment Agreement dated as of July 1, 1996 between the
Company and David E.Y. Sarna.*
10.2 Employment Agreement dated as of July 1, 1996 between the
Company and George J. Febish.*
10.3 1996 Stock Option Plan.
10.4 Form of Bridge Loan Promissory Note.
10.5 Form of Bridge Loan Warrant.
10.6 Form of Warrant Agreement with placement agent for Bridge Loan
Offering.
10.7 Form of Subscription Agreement and Investment Representation
of Investor with each of the investors in the July 1996
Offering.
10.8 Form of July 1996 Warrant Agreement.
II - 4
<PAGE>
10.9 Form of Warrant Agreement with placement agent for July 1996
Offering.
10.10 Agreement, dated January 11, 1996, as amended, with the City
of New York (Department of Information Technology and
Telecommunications).
10.11 Cooperation Agreement with Microsoft Corporation, dated
November 7, 1995.*
10.12 Agreement with ACORD Corporation dated July 5,1995.*
10.13 Form of Investor Warrant.*
10.14 Form of Officer Warrant*
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included in
the their opinion filed as Exhibit 5.1).*
24.1 Power of Attorney (see page II-7).
- ------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes to provide to the underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The Company hereby undertakes that it will:
(1) For determining any liability under the Securities Act of 1933
(the "Act"), treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act as part of this registration statement as of the time the
Commission declared it effective;
(2) For determining any liability under the Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of such securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses incurred or
paid by a director, officer or controlling persons of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling persons in connection with the securities being
registered, the Company 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.
The Company hereby undertakes:
II - 5
<PAGE>
(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 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.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(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 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.
II - 6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of New
York, State of New York, on August 19, 1996.
OBJECTSOFT CORPORATION
By: /s/ David E. Y. Sarna
-------------------------
David E. Y. Sarna, Chairman
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates indicated.
Know all men by these presents, that each of the undersigned
constitutes and appoints David E. Y. Sarna and George J. Febish, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution, for him, and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this registration statement or any registration statement relating to the
offering to which this registration statement relates that is effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933 and any
post-effective amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, 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 to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them or
their substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ David E. Y. Sarna Chairman of the Board Of Directors and August 19, 1996
- --------------------------- Secretary (Co-Principal Executive Officer
David E. Y. Sarna and Principal Financial Officer)
/s/ George J. Febish President, Treasurer And Director (Co- August 19, 1996
- --------------------------- Principal Executive Officer And Principal
George J. Febish Accounting Officer)
/s/ Daniel E. Ryan Director August 19, 1996
- ---------------------------
Daniel E. Ryan
/s/ Julius Goldfinger Director August 19, 1996
- ---------------------------
Julius Goldfinger
</TABLE>
II - 7
OBJECTSOFT CORPORATION
________________ Shares of Common Stock
and
________________ Redeemable Class A Warrants
UNDERWRITING AGREEMENT
New York, New York
____________, 1996
Renaissance Financial Corp.
200 Old Country Road - Suite 400
Mineola, NY 11501
Ladies and Gentlemen:
The undersigned, ObjectSoft Corporation, a Delaware corporation (the
"Company"), hereby confirms its agreement with Renaissance Financial Securities
Corporation (being referred to herein variously as "you" or the "Underwriter"),
as follows:
1. PURCHASE AND SALE OF SECURITIES.
1.1 FIRM SECURITIES.
1.1.1 PURCHASE OF FIRM SECURITIES. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter _____________ shares of the Company's Common Stock, par value $.0001
per share ("Common Stock"), at a purchase price of $ _______ per share (or $
_______ per share net of commissions), and _________________ Redeemable Class A
Warrants ("Warrant(s)") at a purchase price of $ _____ per Warrant (or $ per
Warrant net of commissions), each Warrant to purchase one share of Common Stock
at an initial exercise price of $7.80 per share commencing on _______________
(one year after the Effective Date (as defined hereinafter)) and ending on the
five-year anniversary of the Effective Date (such shares of Common Stock and
Warrants being referred to herein as the "Firm Securities").
1.1.2 Payment and Delivery. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M., New York time, on the third
business day following the day that trading commences for the Firm Securities or
at such earlier time as the Underwriter
<PAGE>
shall determine, or at such other time as shall be agreed upon by the
Underwriter and the Company, at the offices of the Underwriter or at such other
place as shall be agreed upon by the Underwriter and the Company. The hour and
date of delivery and payment for the Firm Securities are called the "Closing
Date." Payment for the Firm Securities shall be made on the Closing Date at the
Underwriter's election by certified or bank cashier's check(s) in New York
Clearing House funds, payable to the order of the Company upon delivery to you
of certificates (in form and substance satisfactory to the Underwriter)
representing the Firm Securities for the account of the Underwriter. The Firm
Securities shall be registered in such name or names and in such authorized
denominations as the Underwriter may request in writing at least two full
business days prior to the Closing Date. The Company will permit the Underwriter
to examine and package the Firm Securities for delivery at least one full
business day prior to the Closing Date. The Company shall not be obligated to
sell or deliver the Firm Securities except upon tender of payment by the
Underwriter for all the Firm Securities.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION SECURITIES. For the purposes only of covering
any over-allotments in connection with the distribution and sale of the Firm
Securities, the Underwriter is hereby granted an option to purchase up to an
additional _____________ shares of Common Stock and to purchase up to an
additional Warrants from the Company ("Over-allotment Option"). Such additional
shares of Common Stock and Warrants are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are, together with
the shares of Common Stock issuable upon exercise of the Warrants, hereinafter
referred to collectively as the "Public Securities." The purchase price to be
paid for the Option Securities will be the same price per Option Security as the
price per Firm Security set forth in Section 1.1.1 hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option
granted pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as
to all or any part of the Option Securities at any time, from time to time,
within forty-five days after the effective date of the Registration Statement
("Effective Date"). The Underwriter will not be under any obligation to purchase
any Option Securities prior to the exercise of the Over-allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from the Underwriter, which must be confirmed by a letter
or telecopy setting forth the number and type of Option Securities to be
purchased, the date and time for delivery of and payment for the Option
Securities and stating that
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the Option Securities referred to therein are to be used only for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Securities. If such notice is given at least two full business days prior
to the Closing Date, the date set forth therein for such delivery and payment
will be the Closing Date. If such notice is given thereafter, the date set forth
therein for such delivery and payment will not be earlier than five full
business days after the date of the notice. If such delivery and payment for the
Option Securities does not occur on the Closing Date, the date and time of the
closing for such Option Securities will be as set forth in the notice
(hereinafter the "Option Closing Date"). Upon exercise of the Over-allotment
Option, the Company will become obligated to convey to the Underwriter, and,
subject to the terms and conditions set forth herein, the Underwriter will
become obligated to purchase, the number of Option Securities specified in such
notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option
Securities will be at the Underwriter's election by certified or bank cashier's
check(s) in New York Clearing House funds, payable to the order of the Company
at the offices of the Underwriter or at such other place as shall be agreed upon
by the Underwriter and the Company upon delivery to you of certificates
representing such securities for the account of the Underwriter. The
certificates representing the Option Securities to be delivered will be in such
denominations and registered in such names as the Underwriter requests not less
than two full business days prior to the Closing Date or the Option Closing
Date, as the case may be, and will be made available to the Underwriter for
inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to
such Closing Date.
1.3 UNDERWRITER'S PURCHASE OPTIONS.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue
and sell to the Underwriter (and/or its designees) on the Closing Date, in
exchange for a check in the amount of $100, an option ("Underwriter's Purchase
Option") at an initial exercise price of $ _______ per share and up to an
aggregate of Warrants ("Underwriter's Warrants") at an initial exercise price of
$ per Underwriter's Warrant. The Underwriter's Purchase Option is exercisable
for a four-year period commencing on the one-year anniversary of the Effective
Date. The Underwriter's Purchase Option, the Underwriter's Shares, the
Underwriter's Warrants and the shares of Common Stock issuable upon exercise of
the Underwriter's Warrants are hereinafter referred to collectively as the
"Underwriter's Securities." The Public Securities and the
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Underwriter's Securities are hereinafter referred to collectively as the
"Securities."
1.3.2 PAYMENT AND DELIVERY. Delivery and Payment for the
Underwriter's Purchase Options in the names and denominations designated by the
Underwriter shall be made on the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriter as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (Reg. No.__________), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date (or, if applicable, the form of final prospectus filed with the
Commission pursuant to Rule 424 of the Regulations), is hereinafter called the
"Prospectus." The Registration Statement will be declared effective by the
Commission on the date hereof.
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has filed
with the Commission a registration statement on Form 8-A (File
No.___-___________) providing for the registration under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), of the Public Securities. Such
registration of the Public Securities will be declared effective by the
Commission on the date hereof.
2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
Company's knowledge, threatened to institute any proceedings with respect to
such an order.
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2.3 DISCLOSURES IN REGISTRATION STATEMENT. At the time the
Registration Statement became effective and at all times subsequent thereto up
to the Closing Date:
2.3.1 SECURITIES ACT REPRESENTATION AND 10B-5
REPRESENTATION: The Registration Statement and the Prospectus will contain, with
respect to the Company and the persons listed on Schedule 2.3.1 attached hereto,
all material statements which are required to be stated therein in accordance
with the Act and the Regulations, and will in all material respects conform to
the requirements of the Act and the Regulations. Neither the Registration
Statement, nor any amendment or supplement thereto, on the Effective Date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and that on the Closing Date, the Prospectus and any
amendment or supplement thereto will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto, at the time such filing was made,
complied in all material respects with the applicable provisions of the Act and
the Regulations. The representation and warranty made in this Section 2.3.1 does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto ("Underwriter's Information").
2.3.2 DISCLOSURE OF CONTRACTS. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is or may be bound or
affected and (i) which is referred to in the Prospectus, or (ii) is material to
the business of the Company has been duly and validly executed, is in full force
and effect in all material respects and is enforceable in accordance with its
terms, and none of such contracts or
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instruments has been assigned by the Company and the Company, to the best of its
knowledge, is not in default thereunder and, to the Company's knowledge, no
event has occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder (except as otherwise disclosed in
the Prospectus). None of the material provisions of such contracts or
instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency or
court having jurisdiction over the Company, or any of its respective assets,
including, without limitation, those relating to environmental laws and
regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. At the time the
Registration Statement becomes effective and at all times subsequent thereto, up
to the Closing Date, since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
specifically stated therein, (i) there has been no material adverse change in
the condition, financial or otherwise, or in the results of operation, business
or business prospects of the Company ("Material Adverse Change"), including, but
not limited to, a material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
whether or not arising in the ordinary course of business, and (ii) there have
been no transactions entered into by the Company, other than those in the
ordinary course of business, which are material with respect to the condition,
financial or otherwise, or the results of its operations, business or business
prospects.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent to
the respective dates as of which information given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (iii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
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2.5 INDEPENDENT ACCOUNTANTS. Richard A. Eisner [LLP], whose reports
are filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
2.6 FINANCIAL STATEMENTS. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date there are, and on the
Closing Date there will be, no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto; and none of such securities were issued in violation of
the preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase shares of Common Stock constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under federal and state laws, and
(iii) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before
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which any proceeding therefor may be sought. The authorized Common Stock and
outstanding options and warrants to purchase shares of Common Stock conform to
all statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock, options and
warrants to purchase shares of Common Stock were at all relevant times either
registered under the Act and registered or qualified under the applicable state
securities or Blue Sky Laws or exempt from such registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the Securities are not and will
not be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
actions required to be taken for the authorization, issuance and sale of the
Securities have been duly and validly taken. When issued, the Underwriter's
Purchase Option, the Underwriter's Warrants and the Warrants will constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the Company
called for thereby and the Underwriter's Purchase Options, the Underwriter's
Warrants and the Warrants are enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under federal and state laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.8.3 SERIES A PREFERRED STOCK. All outstanding shares of
the Company's Series A Preferred Stock will be redeemed at $1.00 per share plus
all accumulated dividends accrued but unpaid on the consummation of the sale of
the Firm Securities and, upon such redemption, such holders of the Series A
Preferred Stock shall have no rights with respect to the Company, and the
Company shall have no obligations to such holders.
2.8.4 SERIES B PREFERRED STOCK. All outstanding shares of
the Company's Series B Preferred Stock were redeemed by the Company in July 1996
and the prior holders of the Series B Preferred Stock have no further rights
with respect to the Company and the Company has no obligations to such holders.
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2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement, the
employment agreements with each of David E. Y. Sarna ("Sarna") and George Febish
("Febish") ("Employment Agreements"), the Underwriter's Purchase Options and the
Warrant Agreement (as hereinafter defined) have been duly and validly authorized
by the Company and constitute, or when executed and delivered will constitute,
the valid and binding agreements of each of the Company, Sarna and Febish, as
the case may be, enforceable against each of them in accordance with their
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 NO CONFLICTS, ETC. The execution, delivery, and performance by
the Company of this Agreement, the consummation by the Company of the
transactions herein contemplated and the compliance by the Company with the
terms hereof do not and will not, with or without the giving of notice or the
lapse of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any of its property or assets pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which it is a party or by which it may be bound
or to which any of its property or assets is subject; (ii) result in any
violation of the provisions of its Certificate of Incorporation or By-Laws;
(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or its operations or any of its properties or business; or
(iv) have a material adverse effect on any permit, license, certificate,
registration, approval, consent, license or franchise concerning it or its
operations; except in the case of (i) or (iii), where such default, breach,
violation or effect, either singly or in the
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aggregate, would not have a material adverse effect on its financial condition
or results of operations.
2.12 NO DEFAULTS; VIOLATIONS. Except as described in the Prospectus,
no default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which the Company, or any of its subsidiaries, if any, is a party or by which
the Company may be bound or to which any of the properties or assets of the
Company is subject, except in each case where such default would not have a
material adverse effect on the Company's financial condition or results of
operations. Neither the Company nor any of its subsidiaries, if any, is in
violation of any term or provision of its Certificate Incorporation or By-Laws
or in violation of any franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over it or its operations, properties or business,
except as described in the Prospectus and except where such violation would have
a material adverse effect on its financial condition or results of operations.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease its properties and conduct its
business as described in the Prospectus, and is and has been doing business in
compliance with all such material authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has
all corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery of
the Securities pursuant to this Agreement, the Warrant Agreement and the
Underwriter's Purchase Options, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
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2.14 TITLE TO PROPERTY; INSURANCE. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or lease by it, free
and clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus, liens for taxes not yet due and payable and liens of an
immaterial nature arising by operation of law. The Company has insured its
properties against loss or damage by fire, other casualty and other insurance in
amounts and on terms as is usually maintained by similarly situated companies
engaged in the same or similar business.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or business
of the Company which might materially and adversely affect the financial
position, prospects, value or the operation of the properties or the business of
the Company or which question the validity of the capital stock of the Company
or this Agreement or of any action taken or to be taken by the Company pursuant
to, or in connection with, this Agreement. There are no outstanding orders,
judgments or decrees of any court, governmental agency or other tribunal naming
the Company and enjoining the Company from taking, or requiring the Company, to
take, any action, or to which the Company, or its respective properties or
business, is bound or subject.
2.16 GOOD STANDING. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on its financial condition or results of operations.
2.17 TAXES. The Company has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. The Company has
paid all taxes (as hereinafter defined) shown as due on such returns that were
filed and has paid all taxes imposed on or assessed against it. The provisions
for taxes payable, if any, shown on the financial statements filed with or as
part of the Registration Statement are sufficient for all accrued and unpaid
taxes, whether or not disputed, and for all periods to and including the dates
of such consolidated financial statements.
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Except as disclosed in writing to the Underwriter, (i) no issues have been
raised (and are currently pending) by any taxing authority in connection with
any of the returns or taxes asserted as due from the Company, and (ii) no
waivers of statutes of limitation with respect to the returns or collection of
taxes have been given by or requested from the Company. The term "taxes" mean
all federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments, or charges of any kind whatever, together with any
interest and any penalties, additions to tax, or additional amounts with respect
thereto. The term "returns" means all returns, declarations, reports,
statements, and other documents required to e filed in respect of taxes.
2.18 EMPLOYEE OPTIONS. No shares of Common Stock are eligible for
sale pursuant to Rule 701 promulgated under the Act in the 12- month period
following the Effective Date.
2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD. Except as disclosed
in the letters from Stursberg & Veith to the NASD (as defined below), dated
_____________________ and _____________________ (copies of which have been
provided to and reviewed by the Company):
2.19.1 FINDER'S FEES. There are no claims, payments,
issuances, arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company that may affect the Underwriter's compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
2.19.2 PAYMENTS WITHIN TWELVE MONTHS. Except as set forth
in the Registration Statement, the Company has not made any direct or indirect
payments (in cash, securities or otherwise) to (i) any person, as a finder's
fee, investing fee or otherwise, in consideration of such person raising capital
for the Company or introducing to the Company persons who provided capital to
the Company, (ii) to any NASD member, or (iii) to any person or entity that has
any direct or indirect affiliation or association with any NASD member, within
the twelve month period prior to the date on which the Registration Statement
was filed with the Commission ("Filing Date") or thereafter, other than payments
to the Underwriter.
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2.19.3 USE OF PROCEEDS. None of the net proceeds of the
offering will be paid by the Company to any NASD member or any affiliate or
associate of any NASD member, except as specifically authorized herein.
2.19.4 INSIDERS' NASD AFFILIATION. No officer or director
of the Company or owner of any of the Company's unregistered securities has any
direct or indirect affiliation or association with any NASD member. The Company
will advise the Underwriter and the NASD if any 5% or greater stockholder of the
Company is or becomes an affiliate or associated person of an NASD member
participating in the distribution.
2.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of
its subsidiaries, officers, directors, employees, agents or any other person
acting on behalf of the Company has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed transaction)
which (i) might subject th Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
2.21 NASDAQ ELIGIBILITY. As of the Effective Date, the Public
Securities have been approved for quotation on the Nasdaq National Market.
2.22 INTANGIBLES. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement. The Intangibles which have been registered by the
Company, if any, in the United States Patent and Trademark Office have been
fully maintained and are in full force and effect. There is no claim or
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action by any person pertaining to, or proceeding pending or threatened and the
Company has not received any notice of conflict with the asserted rights of
others which challenges its exclusive right with respect to any Intangibles used
in the conduct of its business except as described in the Prospectus. To the
Company's knowledge, the Intangibles and the Company's current products,
services and processes do not infringe on any intangibles held by any third
party. To the Company's knowledge, no others have infringed upon the Intangibles
of the Company.
2.23 RELATIONS WITH EMPLOYEES.
2.23.1 EMPLOYEE MATTERS. The Company is in compliance in
all material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company by the U.S. Department of Labor or
any other governmental agency responsible for the enforcement of such federal,
state or local laws and regulations. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, showdown or stoppage pending or
threatened against or involving the Company or any predecessor entity, and none
has ever occurred. No question concerning representation exists respecting the
employees of the Company and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements, if any, of the Company.
2.23.2 EMPLOYEE BENEFIT PLANS. Other than as set forth in
the Registration Statement, the Company does not maintain, sponsor or contribute
to, or is it required to contribute to, any program or arrangement that is an
"employee" pension benefit plan," an "employee welfare benefit plan," or a,
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company has not, at any time, maintained
or contributed to a defined benefit plan, as defined in Section 3(35) of ERISA.
If the Company does maintain or contribute to a defined benefit plan, any
termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended ("Code"), which
could subject the Company to any tax penalty for prohibited transactions and
which has not adequately been corrected. Any ERISA Plan is in compliance with
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all material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multi-employer plan."
2.24 OFFICERS' CERTIFICATE. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
2.25 WARRANT AGREEMENT. The Company has entered into a warrant
agreement with respect to the Warrants and the Underwriter's Warrants
substantially in the form filed as an exhibit to the Registration Statement
("Warrant Agreement") with Continental Stock Transfer Company, in form and
substance satisfactory to the Underwriter, providing for, among other things, no
redemption of the Warrants without the giving of prior written notice to the
Underwriter and in accordance with the Warrant Agreement for the payment of a
warrant solicitation fee, if applicable, as contemplated by Section 3.10 hereof.
2.26 AGREEMENTS WITH INSIDERS AND OTHERS. The Company has caused to
be duly executed lock-up agreements, in substantially the form provided by the
Underwriter, pursuant to which (i) all of the officers and directors of the
Company agree not to sell any shares of Common Stock for two years following the
consummation of the offering, (ii) certain persons who beneficially own or hold
[one percent] or more of the outstanding Common Stock of the Company agree not
to sell any shares of Common Stock owned by them or their family members and
affiliates (either pursuant to Rule 144 of the Regulations or otherwise) for a
period of nine (9) months following the Effective Date except with the consent
of the Underwriter and, if applicable, the Pennsylvania Securities Commission,
and (iii) certain persons who beneficially own or hold warrants to purchase
shares of Common Stock and/or shares of Common Stock purchased from the Company
during ___________ , 1996 agree not to sell any warrants or shares of Common
Stock owned by them or their family members and affiliates (either pursuant to
Rule 144 of the Regulations or otherwise) for a period of twelve (12) months
following the Effective Date except with the consent of the Underwriter and, if
applicable, the Pennsylvania Securities Commission.
2.27 EMPLOYMENT AGREEMENTS. The Company has entered into an
Employment Agreement with each of Messrs. Sarna and Febish in substantially the
same form as set forth in an exhibit to the
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Registration Statement, for a term commencing on ________________, 1996 and
ending on ___________, 19__.
2.28 UNDERWRITER'S PURCHASE OPTION. The Company has executed and
delivered the Underwriter's Purchase Option to the Underwriter substantially in
the form filed as an exhibit to the Registration Statement.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to
the Underwriter, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriter
shall reasonably object.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when (i) a Prospectus is
required to be delivered under the Act so far as necessary to permit the
continuance of sales or of dealings in the Public Securities; and (ii) a Warrant
Exercise Prospectus is required to be delivered under the Act and until such
time as the Warrants are no longer exercisable ("Termination Date") so far as
necessary to permit the continuance of exercise of the Warrants, Underwriter's
Warrants and the Underwriter's Purchase Option; the Company will use all
reasonable efforts to comply with all requirements imposed upon it by the Act,
the Regulations and the Exchange Act and by the regulations under the Exchange
Act, as from time to time in force, in accordance with the provisions hereof and
the Prospectus which requires the Company to keep the Registration Statement
effective until the Termination Date. If at any time when a Prospectus or a
Warrant Exercise Prospectus relating to the Public Securities or the
Underwriter's Securities is required to be delivered under the Act and, in any
event, until the Termination Date, any event shall have occurred as a result of
which, in the opinion of counsel for the Company or counsel for the Underwriter,
such Prospectus, as then amended or supplemented, includes an untrue statement
of material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify the Underwriter promptly and prepare and file with the Commission,
subject to Section 3.1 hereof, an appropriate amendment or supplement in
accordance with Section 10 of the Act.
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3.2.2 FILING OF FINAL PROSPECTUS. The Company will file
the Warrant Exercise Prospectus with the Commission pursuant to the requirements
of Rule 424 of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. For a period of five
years from the Effective Date, the Company will use its best efforts to maintain
the registration of the Common Stock and the Warrants under the provisions of
the Exchange Act.
3.3 BLUE SKY FILING. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective to qualify the Public Securities and the
Underwriter's Securities for offering and sale under the securities laws of such
jurisdictions as the Underwriter may reasonably designate, provided that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Company would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or report at such
times as are or may be required by the laws of such jurisdiction.
3.4 DELIVERY TO UNDERWRITER OF PROSPECTUSES. The Company will deliver
such number of (i) Prospectuses to the Underwriter and (ii) Warrant Exercise
Prospectuses to the Warrantholders as needed, without charge, from time to time
during the period when such prospectuses are required to be delivered under the
Act and, in any event, until the Termination Date. Additionally, the Company
will deliver, as soon as the Registration Statement or any amendment or
supplement thereto becomes effective, two original executed Registration
Statements, including exhibits, and all post-effective amendments thereto and
copies of all exhibits file therewith or incorporated therein by reference and
all original executed consents of certified experts.
3.5 EVENTS REQUIRING NOTICE TO UNDERWRITER. The Company will notify
the Underwriter immediately and confirm the notice in writing (i) filing of any
post-effective amendment to the Registration Statement, (ii) of the by the
Commission of any stop order or of the initiation, or the threatening, of any
proceeding for that purpose, (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Public Securities for offering of sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose, (iv) of the mailing and
delivery to the Commission for filing of any amendment or supplement to the
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Registration Statement or Prospectus, (v) of the receipt of any comments or
request for any additional information from the Commission, and (vi) of the
happening of any event during the period described in Section 3.4 hereof which,
in the judgment of the Company, makes any statement of a material fact made in
the Registration Statement or the Prospectus untrue or which requires the making
of any changes in the Prospectus in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or which
requires the making of any changes in the Registration Statement in order to
make the statements therein not misleading. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
any time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five years from
the Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's Form 10-Q quarterly report and the mailing of quarterly financial
information to stockholders.
3.7 UNAUDITED FINANCIALS. The Company will furnish to the Underwriter
as early as practicable subsequent to the date hereof and at least two full
business days prior to the Closing Date, a copy of the latest available
unaudited interim financial statements ("Unaudited Financials") of the Company
(which in no event shall be as of a date more than thirty days prior to the
Effective Date) which have been read by the Company's independent accountants,
as stated in their letter to be furnished pursuant to Section 4.3 hereof.
3.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. The Company will
take all necessary and appropriate actions to achieve accelerated publication in
Standard and Poor's Corporation Records Corporate Descriptions (within 30 days
after the Effective Date) and to maintain such publication with updated
quarterly information for a period of five years from the Effective Date,
including the payment of any necessary fees and expenses. The Company shall take
such action as may be reasonably requested by the Underwriter to obtain a
secondary market trading exemption in such States as may be requested by the
Underwriter, including the payment of any necessary fees and expenses.
3.9 NASDAQ MAINTENANCE. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the
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quotation by the Nasdaq National Market of the Common Stock and, if outstanding,
the Warrants.
3.10 WARRANT SOLICITATION AND REGISTRATION OF COMMON STOCK UNDERLYING
THE WARRANTS.
3.10.1 WARRANT SOLICITATION FEES. The Company hereby
engages the Underwriter on a non-exclusive basis, as its agent for the
solicitation of the exercise of the Warrants and the additional warrants being
concurrently registered under the Registration Statement. The Company, at its
cost, will (i) assist the Underwriter with respect to such solicitation, if
requested by the Underwriter and will (ii) provide the Underwriter, and direct
the Company's transfer and warrant agent to provide to the Underwriter, lists of
the record and, to the extent known, beneficial owners of the Warrants.
Commencing one year from the Effective Date, the Company will pay the
Underwriter a commission of five percent of the Warrant exercise price for each
Warrant exercised, payable on the date of such exercise, on the terms provided
for in the Warrant Agreement, if allowed under the rules and regulations of the
NASD and only if the Underwriter has provided bona fide services to the Company
in connection with the exercise of such Warrant. In addition to soliciting,
either orally or in writing, the exercise of Warrants, such services may also
include disseminating information, either orally or in writing, to the
Warrantholders about the Company or the market for the Company's securities, and
assisting in the processing of the exercise of Warrants. The Underwriter may
engage sub-agents in its solicitation efforts. The Company will disclose the
arrangement to pay such solicitation fees to the Underwriter in the Warrant
Exercise Prospectus.
3.11 [Reserved]
3.12 REPORTS TO THE UNDERWRITER.
3.12.1 PERIODIC REPORTS, ETC. For a period of five years
from the Effective Date, the Company will furnish to the Underwriter copies of
such financial statements and other periodic and special reports as the Company
from time to time furnishes generally to holders of any class of its securities,
and promptly furnish to the Underwriter (i) a copy of each periodic report to
the Company shall be required to file with the Commission, (ii) a copy of every
press release released by the Company, (iii) copies of each Form SR, (iv) a copy
of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by
the Company, and (v) such additional documents and information with respect to
the Company and the affairs of any future subsidiaries of the Company as the
Underwriter may from time to time reasonably request.
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3.12.2 TRANSFER SHEETS AND WEEKLY POSITION LISTINGS. For
a period of five years from the Closing Date, the Company will furnish to the
Underwriter at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Underwriter may request, including
the daily, weekly and monthly consolidated transfer sheets of the transfer agent
of the Company and the weekly security position listings of the Depository Trust
Co.
3.13 [Reserved]
3.14 APPLICATION OF NET PROCEEDS. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
3.15 PAYMENT OF EXPENSES.
3.15.1 GENERAL EXPENSES. The Company hereby agrees to pay
on each of the Closing Date and the Option Closing Date, if any, to the extent
not paid at Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
(i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement,
the Prospectus and the Preliminary Prospectuses and the printing and mailing of
this Agreement and related documents, including the cost of all copies thereof
and any amendments thereof or supplements thereto supplied to the Underwriter in
quantities as may be required by the Underwriter, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock, the Warrants and the
Underwriter's Purchase Option, including any transfer or other taxes payable
thereon, (iii) the qualification of the Public Securities and Bridge Securities
under state or foreign securities or Blue Sky laws, including the filing fees
under such Blue Sky laws, the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," and all amendments and supplements thereto, fees of
Underwriter's Blue Sky counsel, which fees shall not exceed an aggregate of $
___________ and disbursements of such counsel, and fees and disbursements of
local counsel, if any, retained for such purpose and approved by the Company,
and a one-time fee of $_________ payable to the Underwriter's counsel for the
preparation of the Secondary Market Trading Survey, (iv) costs associated with
applications for assignments of a rating of the Public Securities by qualified
rating agencies, (v) filing fees, costs and expenses (including fees and
disbursements for the Underwriter's counsel) incurred in registering the
offering with the NASD, (vi) costs not to exceed, in the aggregate, [$35,000]
for placing "tombstone" advertisements in THE WALL STREET JOURNAL, THE NEW YORK
TIMES and
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a third publication which may be selected by the Underwriter and transaction
lucite cubes or similar commemorative items in a style and quantity as requested
by the Underwriter, (vii) fees and disbursements of the transfer and warrant
agent, (viii) the Company's expenses associated with "due diligence" meetings
arranged by the Underwriter, (ix) the preparation, binding and delivery of four
sets of transactions "bibles," in form and style satisfactory to the
Underwriter, (x) any listing of the Public Securities on Nasdaq SmallCap or
National Market, as the case may be, or any listing in Standard & Poor's, and
(xi) all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
3.15.1. Since an important part of the public offering process is for the
Company to appropriately and accurately describe both the background of the
principals of the Company and the Company's competitive position in its
industry, the Company has engaged and will pay for an investigative search firm
of the Underwriter's choice to conduct an investigation of principals of the
Company mutually selected by the Underwriter and the Company (this amount will
be credited against the Underwriter's non-accountable expense allowance if the
offering is consummated as provided herein). The Underwriter may deduct from the
net proceeds of the offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth herein to be paid by the
Company to the Underwriter and/or to third parties.
3.15.2 NON-ACCOUNTABLE EXPENSES. The Company further
agrees that, in addition to the expenses payable pursuant to Section 3.15.1, it
will pay to the Underwriter a non-accountable expense allowance equal to three
(3%) percent of the gross proceeds received by the Company from the sale of the
Public Securities, of which [$50,000] has been paid to date, and the Company
will pay the balance on the Closing Date and any additional monies owed
attributable to the Option Securities or otherwise on the Option Closing Date by
certified or bank cashier's check or, at the election of the Underwriter, by
deduction from the proceeds of the offering contemplated herein. If the offering
contemplated by this Agreement is not consummated for any reason whatsoever then
the Company's liability for payment to the Underwriter of the non-accountable
expense allowance shall be equal to the sum of the Underwriter's actual
out-of-pocket expenses (including, but not limited to, counsel fees, "roadshow"
and due diligence expenses). The Underwriter shall retain such part of the
non-accountable expense allowance previously paid as shall equal its actual
out-of-pocket expenses. If the amount previously paid is insufficient to cover
such actual out-of-pocket expenses, the Company shall remain liable for and
promptly pay any other actual out-of-pocket expenses. If the amount previously
paid exceeds the amount of the
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actual out-of-pocket expenses, the Underwriter shall promptly remit to the
Company any such excess.
3.16 [Reserved]
3.17 [Reserved]
3.18 STABILIZATION. Neither the Company, nor, to its knowledge, any
of its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
3.19 INTERNAL CONTROLS. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.20 [Reserved]
3.21 TRANSFER AGENT. The Company shall retain Continental Stock
Transfer Company as its transfer agent for the Common Stock and the Warrants.
For a period of five years following the Effective Date, the Company will not
switch transfer agents without the Underwriter's consent, which shall not be
unreasonably withheld.
3.22 SALE OF SECURITIES. To the extent that the Company is legally
permitted to do so, it shall not permit or cause a private or public sale or
private or public offering of any of its securities (in any manner, including
pursuant to Rule 144 under the Act) owned nominally or beneficially by the
officers, directors and shareholders owning beneficially more than one (1%)
percent of the outstanding shares of Common Stock of the Company (the
"Insiders") if such offering or sale would be in violation of the Insider's
"lock-up" agreement with the Underwriter.
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4. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the Underwriter
to purchase and pay for the Securities, as provided herein, shall be subject to
the continuing accuracy of the representations and warranties of the Company as
of the date hereof and as of each of the Closing Date and the Option Closing
Date, if any, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
4.1 REGULATORY MATTERS.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement shall have become effective not later than 5:00 P.M., New
York time, on the date of this Agreement and, at each of the Closing Date and
the Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for the purpose
shall have been instituted or shall be pending or contemplated by the Commission
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of Stursberg & Veith,
counsel to the Underwriter.
4.1.2 NASD CLEARANCE. By the Closing Date, the Underwriter
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriter as described in the Registration
Statement.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the
sale of the Securities in any jurisdiction designated by you pursuant to Section
3.3 hereof shall have been issued either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 OPINION OF COUNSEL. On the Closing Date, the
Underwriter shall have received the favorable opinion of Parker, Chapin, Flattau
& Klimpl, LLP ("PCF&K"), counsel to the Company, dated the Closing Date,
addressed to the Underwriter, and in form and substance satisfactory to
Stursberg & Veith, counsel to the Underwriter, to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation and is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which it owns or leases any
real property or the character of its operations requires such qualification or
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licensing, except where the failure to qualify would not have a material adverse
effect on its financial condition or results of operations.
(ii) The Company has all requisite corporate
power and authority, and, to such counsel's knowledge, has all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental or regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and is and
has been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates and permits and all federal, state and local
laws, rules and regulations, except where the failure to obtain such
authorizations, approvals, orders, licenses, certificates and permits would not
have a material adverse effect on it or its operations. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, all consents, authorizations, approvals and
orders required in connection herewith have been obtained. No consents,
approvals, authorizations or orders of, and no filing with any court or
governmental agency or body (other than such as may be required under the Act
and applicable Blue Sky laws), is required for the valid authorization,
issuance, sale and delivery of the Securities and the consummation of the
transactions and agreements contemplated by this Agreement, the Warrant
Agreement and the Underwriter's Purchase Option, and as contemplated by the
Prospectus, other than all such authorizations, approvals, consents, orders,
registrations, licenses and permits which have been duly obtained and are in
full force and effect and have been disclosed to the Underwriter and other than
the continuing effectiveness of the Registration Statement and the delivery of
the Warrant Exercise Prospectus as contemplated therein.
(iii) All issued and outstanding securities of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The outstanding options and warrants to purchase
shares of Common Stock constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms. The offers and sales of the
outstanding Common Stock and options and warrants to purchase shares of Common
Stock were at all relevant times either registered under the Act and the
applicable state securities or Blue Sky Laws or exempt from such registration
requirements. The authorized and outstanding capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus.
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(iv) The Securities have been duly authorized
and, when issued and paid for, will be validly issued, fully paid and
non-assessable. The Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or, to such counsel's
knowledge, similar contractual rights granted by the Company. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken. When issued, the Underwriter's
Purchase Option, the Underwriter's Warrants and the Warrants will constitute
valid and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the Company
called for thereby and such Warrants, the Underwriter's Purchase Option, and the
Underwriter's Warrants, when issued, in each case, will be enforceable against
the Company in accordance with their respective terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification provision may be limited under federal and state laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefore may be brought. The
certificates representing the Securities are in due and proper form.
(v) To such counsel's knowledge, except as set
forth in the Prospectus, no holders of any securities of the Company or of any
options, warrants or securities of the Company exercisable for or convertible or
exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Act or to
include any such securities in a registration statement to be filed by the
Company.
(vi) To such counsel's knowledge, there is no
claim or action by any person pertaining to, or proceeding, pending or to such
counsel's knowledge threatened, which challenges the exclusive rights of the
Company with respect to any Intangibles used in the conduct of its business
(including without limitation any such licenses or rights described in the
Prospectus as being owned or possessed by the Company); and to such counsel's
knowledge, the Company's current products, services and processes do not
infringe on any intangibles held by third parties.
(vii) This Agreement, the Warrant Agreement and
the Underwriter's Purchase Option have each been duly and validly authorized
and, when executed and delivered by the Company, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by
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bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(viii) The execution, delivery and performance
by the Company of this Agreement, the Underwriter's Purchase Option and the
Warrant Agreement, the issuance and sale of the Securities, the consummation of
the transactions contemplated hereby and thereby and the compliance by the
Company with the terms and provisions hereof and thereof, do not and will not,
with or without the giving of notice or the lapse of time, or both, (a) to such
counsel's knowledge, conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of any of the Company pursuant to the terms of, any
material mortgage, deed of trust, note, indenture, loan, contract, commitment or
other material agreement or instrument, to which it is a party or by which it or
any of its properties or assets may be bound, (b) result in any violation of the
provisions of the Company's Certificate of Incorporation or By-Laws, (c) to such
counsel's knowledge, violate any statute or any material judgment, order or
decree, rule or regulation applicable to the Company of any court, domestic or
foreign, or of any federal, state or other regulatory authority or other
governmental body having jurisdiction over any of the Company's or its
properties or assets, or (d) to such counsel's knowledge, have a material effect
on any material permit, certification, registration, approval, consent, license
or franchise of the Company.
(ix) The Registration Statement and the
Prospectus and any post-effective amendments or supplements thereto (other than
the financial statements, schedules and data included therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other securities
issued or issuable by the Company conform in all respects to the description
thereof contained in the Registration Statement and the Prospectus. The
descriptions in the Registration Statement and the Prospectus of statutes,
regulations, government classifications, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed. To such
counsel's knowledge, no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not
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described as required, nor are any contracts or documents known to counsel, of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement not so
described or filed as required.
(x) Counsel has participated in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriter at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise set forth in this opinion), no facts have come
to the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment or supplement thereto, as of the date of
such opinion, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus), and that on the Closing Date, the Prospectus and any amendment or
supplement thereto will contain any untrue statement or a material fact or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(xi) The Registration Statement is effective
under the Act, and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the Act
or applicable state securities laws.
(xii) The Company has title to, or valid and
enforceable leasehold estates in, all items of real property owned or leased by
it, free and clear of all liens, encumbrances, claims, security interests,
defects and restrictions of any material nature whatsoever, other than those
referred to in the Prospectus and for taxes not yet due and payable. The Company
has adequately insured its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts.
(xiii) Except as described in the Prospectus,
to such counsel's knowledge, no default exists in the due performance and
observance of any term, covenant or condition of any material license, contract,
indenture, mortgage, deed of trust, note, loan
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or credit agreement known to such counsel, or any other material agreement or
instrument evidencing an obligation for borrowed money known to such counsel, or
any other material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of the properties or assets of
the Company is subject. The Company is not in violation of any term or provision
of its Certificate of Incorporation or By-Laws or of any material franchise,
license, permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over it
or any of its properties or business, except as described in the Prospectus.
(xiv) To such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity.
(xv) To such counsel's knowledge, except as set
forth in the Prospectus, there is no action, suit or proceeding before or by any
court of governmental agency or body, domestic or foreign, now pending, or
threatened against the Company, which might result in any material and adverse
change in the condition (financial or otherwise), business or prospects of the
Company, or might materially and adversely affect the properties or assets
thereof.
(xvi) To such counsel's knowledge, except as
described in the Prospectuses, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD.
Unless the context clearly indicates otherwise, the term
"Company" as used in this Section 4.2.1 shall include each subsidiary, if any,
of the Company. The opinion of counsel for the Company and any opinion relied
upon by such counsel for the Company shall include a statement to the effect
that it may be relied upon by counsel for the Underwriter.
4.2.2 [Reserved]
4.2.3 OPTION CLOSING DATE OPINION OF COUNSEL. On any
Option Closing Date, the Underwriter shall have received the favorable opinions
of PCF&K, counsel to the Company, dated the Option Closing Date addressed to the
Underwriter and in the form
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and substance satisfactory to Stursberg & Veith, counsel to the Underwriter.
4.2.4 RELIANCE. In rendering such opinion, such counsel
may rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to Underwriter's counsel) of other counsel reasonably acceptable to
Underwriter's counsel, familiar with the applicable laws, and (ii) as to matters
of fact, to the extent they deem proper, on certificates or other written
statements of officers of departments of various jurisdiction having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Underwriter's counsel if requested. The opinion of counsel for the Company
shall include a statement to the effect that it may be relied upon by counsel
for the Underwriter in its opinion delivered to the Underwriter.
4.2.5 SECONDARY MARKET TRADING SURVEY. On the Effective
Date the Underwriter shall have received the Secondary Market Trading Survey.
4.3 COLD COMFORT LETTER. At the time this Agreement is executed and
at each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Stursberg
& Veith, counsel for the Underwriter, from Richard A. Eisner [LLP] dated as of
the date of this Agreement and as of the Closing Date and the Option Closing
Date.
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date
and the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the Chairman of the Board or the President,
Chief Financial Officer and the Secretary of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed or complied with by the Company prior to and as of the
Closing Date, or the Option Closing Date, as the case may be, and that the
conditions set forth in Section 4.5 hereof have been satisfied as of such date
and that, as of closing Date and the Option Closing Date, as the case may be,
the representations and warranties of the Company set forth in Section
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2 hereof are true and correct. In addition, the Underwriter will have received a
certificate signed by the Chairman of the Board of the Company in connection
with information supplied to state securities commissions.
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing Date
and the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Closing Date, as the case may be, respectively,
certifying (i) that the By-Laws and Certificate of Incorporation of the Company
are true and complete, have not been modified and are in full force and effect,
(ii) that the resolutions relating to the public offering contemplated by this
Agreement are in full force and effect and have not been modified, (iii) all
correspondence between the Company or its counsel and the Commission, (iv) all
correspondence between the Company or its counsel and the NASD concerning
inclusion on Nasdaq and (v) as to the incumbency of the officers of the Company.
The documents referred to in such certificate shall be attached to such
certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no Material Adverse
Change since the Effective Date, (ii) the Company shall not be in default under
any provision of any instrument relating to any outstanding indebtedness which
default would have a material adverse effect on the Company, (iii) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as set forth in the Registration Statement and Prospectus, (iv) no action suit
or proceeding, at law or in equity, shall have been pending or threatened
against the Company, or affecting any of its property or business before or by
any court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus,
(v) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated or threatened by the Commission, and (vi) the
Registration Statement and the Prospectus and any amendments or supplements
thereto contain all material statements which are required to be stated therein
in accordance with the Act and the Regulations and conform in all material
respects to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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4.6 DELIVERY OF AGREEMENTS. The Company has delivered to the
Underwriter executed copies of the Underwriter's Purchase Option.
4.7 OPINION OF COUNSEL FOR UNDERWRITER. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Stursberg & Veith, counsel to the Underwriter, and you shall have received
from such counsel a favorable opinion, dated the Closing Date and the Option
Closing Date, if any, with respect to such of these proceedings as you may
reasonably require. On or prior to the Effective Date, the Closing Date and the
Option Closing Date, as the case may be, counsel for the Underwriter shall have
been furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF UNDERWRITER.
5.1.1 GENERAL. Subject to the conditions set forth below,
the Company agrees to indemnify and hold harmless the Underwriter, its
directors, officers, agents and employees and each person, if any, who controls
the Underwriter ("controlling person") within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
each may be amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriter's
Purchase Option; or (iii) any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any securities exchange;
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or the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless such statement
or omission was made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to the Underwriter by or on
behalf of the Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement thereof, or
in any application, as the case may be; PROVIDED, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting such losses,
claims, damages or liabilities purchased Public Securities, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Public Securities to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability. The Company agrees promptly to
notify the Underwriter of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with the
Registration Statement or Prospectus.
5.1.2 PROCEDURE. If any action is brought against the
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 5.1.1, the Underwriter shall promptly
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and fees of
counsel (subject to the approval of the Underwriter) and payment of actual
expenses. The Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of the Underwriter or such controlling person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with the defense of such action, or (ii) the
Company shall not have employed counsel to have charge of the defense of such
action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys selected by the Underwriter and
controlling person, as a single group, shall be
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borne by the Company. Notwithstanding anything to the contrary contained herein,
if the Underwriter or controlling person shall assume the defense of such action
as provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. The Underwriter agrees to
indemnify and hold harmless the Company against any and all loss, liability,
claim, damage and expense described in the foregoing indemnity from the Company
to the Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or an application, and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just
and equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriter, as incurred, in such proportions that the Underwriter is
responsible for that portion represented by the
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percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the Company
is responsible for the balance; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Public Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which the Underwriter has otherwise been required to pay in
respect of such losses, liabilities, claims, damages and expenses. For purposes
of this Section, each director, officer and employee of the Underwriter, and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Act shall have the same rights to contribution as the Underwriter.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding which was effected
by such party without the written consent of such contributing party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the
Exchange Act or otherwise available.
6. [Reserved]
7. ADDITIONAL COVENANTS.
7.1 BOARD DESIGNEE. For a period of five years from the Effective
Date, the Underwriter shall have the right to send a representative (who need
not be the same individual from meeting to meeting) to observe each meeting of
the Board of Directors. The
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Company agrees to give the Underwriter written notice of each such meeting and
to provide the Underwriter with an agenda and minutes of the meeting no later
than it gives such notice and provides such items to the other directors.
7.2 [Reserved]
7.3 [Reserved]
7.4 PRESS RELEASES. The Company will not issue a press release or
engage in any other publicity until 25 days after the Effective Date without the
Underwriter's prior written consent.
7.5 FORM S-8 OR ANY SIMILAR FORM. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
______ year(s) from the Effective Date without the Underwriter's written
consent.
7.6 [Reserved]
7.7 COMPENSATION AND OTHER ARRANGEMENTS. The Company hereby agrees
that for a period of three years from the Effective Date, all the compensation
and other arrangements between the Company and its officers, directors and
affiliates shall be determined by a compensation committee of the Company's
Board of Directors, a majority of whom are not employed by the Company.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriter and Company, including the indemnity agreements contained in Section
5 hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriter until the earlier of
the expiration of any applicable statute of limitations and the seventh
anniversary of the later of the Closing Date or the Option Closing Date, if any,
at which time the representations, warranties and agreements shall terminate and
be of no further force and effect.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
9.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective. The time of the initial public offering, for
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the purpose of this Section 9 shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Public
Securities or the time, after the Registration Statement becomes effective, when
the Public Securities are first released by you for offering by the Underwriter
or dealers by letter or telegram, whichever shall first occur. You may prevent
this Agreement from becoming effective without liability to any other party,
except as noted below, by giving the notice indicated below in this Section 9
before the time this Agreement becomes effective. The Underwriter agrees to give
the Company notice of the commencement of the offering described herein.
9.2 TERMINATION. The Underwriter shall have the right to terminate
this Agreement at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction, or (iii) if the United States shall have become involved in a war
or major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the United States
securities market, or (vi) if the Company shall have sustained a material loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
injured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Securities, or (vii) if either David E. Y. Sarna or George Febish shall
no longer serve the Company in his present capacity, or (viii) if the Company
has breached any of its representations, warranties or obligations hereunder, or
(ix) if the Underwriter shall have become aware after the date hereof of a
Material Adverse Change, or such adverse material change in general market
conditions as in the Underwriter's judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Securities or to enforce
contracts made by the Underwriter for the sale of the Securities.
9.3 NOTICE. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as
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such election is made by you by telephone or telecopy, confirmed by letter.
9.4 EXPENSES. In the event that this Agreement shall not be carried
out for any reason, within the time specified herein or any extensions thereof
pursuant to the terms herein, the obligations of the Company to pay the expenses
related to the transactions contemplated herein shall be governed by Section
3.15 hereof.
9.5 INDEMNIFICATION. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way effected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. MISCELLANEOUS.
10.1 NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed
If to the Underwriter:
Renaissance Financial Securities Corporation
200 Old Country Road
Suite 400
Mineola, NY 11501
Attention: Todd M. Spehler
Fax: (516) 294-0072
Copy to:
Stursberg & Veith
405 Lexington Avenue
Suite 4949
New York, NY 10174-4902
Attention: C. Walter Stursberg, Jr., Esq.
Fax: (212) 922-0995
If to the Company:
ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, NJ 07601
Attention: Mr. David E. Y. Sarna
Fax: (201) 343-0056
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Copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036
Attention: Melvin Weinberg, Esq.
Fax: (212) 704-6288
10.2 HEADINGS. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 AMENDMENT. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 BINDING EFFECT. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have nay legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
10.6 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York,
without giving effect to conflicts of law. The Company hereby agrees that any
action, proceeding or claim against it arising out of, relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York, New York County or the Federal District Court of the United States of
America for the Southern District of New York, and irrevocably submits to such
jurisdictions, which jurisdictions shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon the Company
may be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 10 hereof. Such mailing shall be deemed personal service and
shall be
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legal and binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
10.8 WAIVER, ETC. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No wavier of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the
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space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
OBJECTSOFT CORPORATION
By: _____________________________
Name: David E. Y. Sarna
Title: Chairman of the Board
Accepted as of the date first above written.
New York, New York
RENAISSANCE FINANCIAL SECURITIES
CORPORATION
By: ____________________________
Name: Todd M. Spehler
Title: President
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CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
ObjectSoft Corporation, a New Jersey Corporation
INTO
ObjectSoft Corporation, a Delaware Corporation
ObjectSoft Corporation, a corporation organized and existing under the laws of
the State of New Jersey.
DOES HEREBY CERTIFY:
FIRST: That it was organized pursuant to the provisions of Title
14A:2-7 of the New Jersey Corporation Act on the 20th day of December, 1990.
SECOND: That it owns 100% of the outstanding shares of the capital
stock of ObjectSoft Corporation, a corporation organized pursuant to the
provisions of the General Corporation Law of the State of Delaware, on the 4th
day of January, 1996.
THIRD: By unanimous written consent dated January 4, 1996, determined
to merge the corporation into said ObjectSoft Corporation, and did adopt the
following resolutions:
RESOLVED, that this corporation, ObjectSoft Corporation, a New Jersey
corporation merge itself into ObjectSoft Corporation, a Delaware corporation,
assumed all of the obligations of ObjectSoft Corporation, a New Jersey
corporation.
FURTHER RESOLVED, that the terms and conditions of the merger are as
follows:
Upon completion of the merger, the holders of the shares of
ObjectSoft, a New Jersey corporation, shall receive an equivalent number of
shares of the shares of ObjectSoft, a Delaware corporation, and shall have no
further claims of any kind or nature; and all of the shares of ObjectSoft, a
Delaware corporation held by ObjectSoft Corporation, a New Jersey corporation,
its sole shareholder shall be surrendered and canceled.
FOURTH: That this merger has been adopted, approved, certified,
executed and acknowledged by the parent corporation.
<PAGE>
IN WITNESS WHEREOF, said ObjectSoft Corporation, a New Jersey
corporation has caused this Certificate to be signed by George J. Febish its
President, this 31st day of January, 1996.
ObjectSoft Corporation, a New Jersey corporation
By: /s/ George J. Febish
--------------------------
George J. Febish, President
-2-
PLAN OF MERGER (the "Plan of Merger") adopted by ObjectSoft
Corporation, a business corporation organized under the laws of the State of
Delaware ( sometimes hereinafter referred to as "Delaware ObjectSoft"), by
resolution of its Board of Directors on January 4, 1996, and adopted by
ObjectSoft Corporation, a business corporation organized under the laws of the
State of New Jersey (sometimes hereinafter referred to as the "Company"), by
resolution of its Board of Directors on January 4, 1996.
(i) The names of the corporations planning to merge are ObjectSoft Corporation,
a business corporation organized under the laws of the State of Delaware, and
ObjectSoft Corporation, a business corporation organized under the laws of the
State of New Jersey. The name of the surviving corporation into which the
Company plans to merge is ObjectSoft Corporation
(ii) The Company shall, pursuant to the provisions of the New Jersey Business
Corporation Act and the Delaware General Corporation Law, be merged with and
into ObjectSoft Corporation, which shall be the surviving corporation at the
effective time and date of the merger and which is sometimes hereinafter
referred to as the "surviving corporation", and which shall continue to exist as
said surviving corporation under its present name pursuant to the provisions of
the Delaware General Business Corporation Law. The separate existence of the
Company, which is sometimes hereinafter referred to as the "non-surviving
corporation", shall cease at the effective time and date of the merger in
accordance with the provisions of the New Jersey Business Corporation Act.
(iii) The Certificate of Incorporation of the surviving corporation at the
effective time and date of the merger including the Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and other
Special Rights and the Qualifications, Limitations and Restrictions, of Series A
Preferred Stock and the Certificate of Designation, Number, Powers, Preferences
and Relative, Participating, Optional and other Special Rights and the
Qualifications, Limitations and Restrictions, of Series B Preferred Stock, shall
be the Certificate of Incorporation of said surviving corporation and said
Certificate of Incorporation shall continue in full force and effect until
further amended and changed in the manner prescribed by the provisions of the
Delaware General Corporation Law.
(iv) The present bylaws of the surviving corporation will be the bylaws of said
surviving corporation and will continue in full force and effect until changed,
altered or amended as therein provided and in the manner prescribed by the
provisions of the Delaware General Corporation Law.
(v) As of the effective time and date of the merger and without any action on
the part of any holder thereof each share of common stock, $.001 par value, of
the Company, issued and outstanding immediately prior to the effective time and
date of the merger and each share of preferred stock, $.001 par value, of the
Company, issued, outstanding immediately prior to the effective time and date of
the merger, shall be automatically converted such that the stockholders shall
own the same number of shares of common stock of the Surviving Corporation as
previously held in the Company. As of the effective time and date of the merger
and without any action on the part of any holder thereof each share of preferred
stock, $.001 par value, of the Company
<PAGE>
issued and outstanding immediately prior to the effective time and date (other
than the 1,250 shares of Company preferred stock issued in 1995) shall
automatically be converted into one full share of Delaware ObjectSoft's Series A
Preferred Stock $.0001 par value per share and each of the 1,250 shares of the
Company's preferred stock issued in 1995 shall automatically be converted into
one full share of Delaware ObjectSoft's Series B Preferred Stock $.0001 par
value per share. As of the effective time and date of the merger and without any
action on the part of any holder thereof the outstanding options and warrants to
acquire the Company's common stock shall automatically become options and
warrants to acquire Delaware ObjectSoft's Common Stock, $.0001 par value, on the
same terms and conditions. Each share of capital stock of Delaware ObjectSoft
issued and outstanding immediately prior to the effective time and date of the
merger shall be canceled.
(vi) The Plan of Merger herein made and approved shall be submitted to the
stockholders of the Company for their approval or rejection in the manner
prescribed by the provisions of the New Jersey Business Corporation Act.
(vii) In the event that the Plan of Merger shall have been approved by the Board
of Directors and the stockholders of the non-surviving corporation entitled to
vote thereon and by the Board of Directors of the surviving corporation, the
vote of the sole stockholder of the Surviving Corporation not being required as
prescribed by the provisions of the Delaware General Corporation Law, the
non-surviving corporation and the surviving corporation hereby stipulate that
they will cause to be executed and filed and/or recorded any document or
documents prescribed by the laws of the States of New Jersey and Delaware, and
that they will cause to be performed all necessary acts therein and elsewhere to
effectuate the merger.
(viii) The Board of Directors and the proper officers of the non-surviving
corporation and the Board of Directors and the proper officers of the surviving
corporation, respectively, are hereby authorized and empowered to do any and all
acts and things, and to make, execute, deliver, file, and/or record any and all
instruments, papers, and documents which shall be or become necessary, proper or
convenient to carry out or put into effect any of the provisions of this Plan of
Merger or of the merger herein provided for.
CERTIFICATE OF INCORPORATION
OF
OBJECTSOFT CORPORATION
The undersigned, a natural person, for the purposes of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and as hereafter further
amended and supplemented, and known, identified and referred to as the "General
Corporation Law of the State of Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is ObjectSoft Corporation.
SECOND: The address, including street, number, city and county, of
the registered office of the Corporation in the State of Delaware is 1050 South
State Street, City of Dover, County of Kent, Delaware 19903; and the name of the
registered agent of the Corporation in the State of Delaware is Bridge Service
Corp.
THIRD: The nature of the business and the purposes to be conducted
and promoted by of the Corporation shall be to conduct any lawful business, to
promote any lawful purpose and to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware, as amended and supplemented from time to time.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is 25,000,000 shares divided into two classes;
20,000,000 shares of which shall be designated as Common Stock, $.0001 par value
per share, and 5,000,000 shares of which shall be designated as Preferred Stock,
with $.0001 par value per share. There shall be no preemptive rights with
respect to any shares of capital stock of the Corporation.
The following is a statement of the designations and the powers,
preferences and rights, and the relative participating, optional or other
special rights, and the qualifications, limitations and restrictions of the
shares of each class:
1. Except as any provision of law, any provision herein or elsewhere
in the Certificate of Incorporation may otherwise provide, each share of Common
Stock of the Corporation shall have the same rights, privileges, interest and
attributes, and shall be subject to the same limitations, as every other share
of the Corporation and shall entitle the holder of record of any such issued and
outstanding share to receive an equal proportion of any cash dividends which may
be declared, set apart or paid, an equal proportion of any distributions of the
authorized but
<PAGE>
unissued shares of the Corporation and/or its treasury shares, if any, which may
be made, an equal proportion of the distribution of any bonds or property of the
Corporation, including the shares or bonds of other corporations, which may be
made, and an equal proportion of any distributions of the net assets of the
Corporation (whether stated capital or surplus) which may be made upon the
liquidation, dissolution, or winding up of the affairs of the Corporation,
whether voluntary or involuntary; provided, that any distributions of the
authorized but unissued shares of the Corporation and/or its treasury shares, if
any, shall be made only in respect of shares of the same class, and, provided
further, that no statement herein contained shall be deemed to limit, curtail,
or divest the authority of the Board of Directors of the Corporation to make any
proper distributions, including distributions of authorized but unissued shares,
in relation to its treasury shares, if any. Each issued and outstanding share of
Common Stock shall entitle the holder of record thereof to one vote per share.
2. Preferred Stock may be issued from time to time in one or more
series, each of such series to have such designations, relative rights and
limitations as may be fixed in the resolution or resolutions providing for the
issue of such series adopted by the Board of Directors of the Corporation as
hereinafter provided. Any shares of Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
provided herein or by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of voting
by classes unless expressly provided for in the resolutions creating such series
or required by applicable law.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issuance of the shares thereof, to determine and fix such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof including, without
limitation, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be stated and expressed in such resolutions,
all to the fullest extent now or hereafter permitted by the General Corporation
Law of the State of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law.
FIFTH: The Corporation is to have perpetual existence.
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<PAGE>
SIXTH: The name and the mailing address of the incorporator are as
follows:
Name Mailing Address
---- ---------------
Elaine S. Moshe, Esq. c/o Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on this
Corporation.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented from time to time.
NINTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented from time to time, indemnify any and all persons
whom the Corporation shall have power to indemnify under said Section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said Section 145, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified may
be enti tled under any By-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent of
the Corporation and shall inure to the benefit of the heirs, executors, estate
and administrators of such a person. The Corporation shall be entitled to
advance expenses (including, without limitation, reasonable attorneys' fees)
incurred by any such officer or director in advance of the final disposition of
the applicable action, suit or proceeding to the fullest extent
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<PAGE>
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented from time to time.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article TENTH.
IN WITNESS WHEREOF, the undersigned as sole incorporator of the
Corporation has signed this Certificate this 4th day of January, 1996.
/s/ Elaine S. Moshe, Esq.
-------------------------
Elaine S. Moshe, Esq.
Sole Incorporator
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSOFT CORPORATION
I, George J. Febish, being the duly elected President of OBJECTSOFT
CORPORATION, a Delaware corporation (the "Corporation"), do hereby certify as
follows:
(a) The name of the Corporation is ObjectSoft Corporation.
(b) The Certificate of Incorporation is amended by the addition of an
ARTICLE ELEVENTH, ARTICLE TWELFTH and ARTICLE THIRTEENTH to read as follows:
"ELEVENTH:
(i) At a Meeting of Stockholders in 1996, the directors
shall be divided into two classes, with respect to the time that they
severally hold office, as nearly equal in number as possible, with
the initial term of office of the first class of directors to expire
at the 1997 Annual Meeting of Stockholders and the initial term of
office of the second class of directors to expire at the 1998 Annual
Meeting of Stockholders. Commencing with the 1996 Annual Meeting of
Stockholders, directors elected to succeed those directors whose
terms have thereupon expired shall be elected for a term of office to
expire at the second succeeding Annual Meeting of Stockholders after
their election, and upon the election and qualification of their
successors. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain or
attain, if possible, the equality of the number of directors in each
class, but in no case will a decrease in the number of directors
shorten the term of any incumbent director. If such equality is not
possible, the increase or decrease shall be apportioned among the
classes in such a way that the difference in the number of directors
in the classes shall not exceed one.
(ii) Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any
increase in the number of directors may be filled only by the Board
of Directors (unless there are no remaining directors), acting by a
majority of the remaining directors then in office, although less
than a quorum, and any directors so chosen shall hold office until
the next election of the class for which such directors have been
chosen and until their successors are elected and qualified.
(iii) Any director, or the entire Board of Directors, may
be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 75% of the voting
power of all of the shares of capital stock of the
<PAGE>
Corporation then entitled to vote generally in the election of
directors, voting together as a single class.
TWELFTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing by such stockholders.
Special meetings of stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution adopted
by a majority of the entire Board of Directors, either upon motion of
a director or upon written request by the holders of at least 50% of
the voting power of all the shares of capital stock of the
Corporation then entitled to vote generally in the election of
directors, voting together as a single class or (ii) the president of
the Corporation.
THIRTEENTH: In addition to any requirements of the General
Corporation Law of Delaware (and notwithstanding the fact that a
lesser percentage may be specified by the General Corporation Law of
Delaware), the affirmative vote of the holders of at least 75% of the
voting power of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders of
the Corporation to amend, alter, change, adopt or repeal Article
Eleventh, Article Twelfth or Article Thirteenth hereof."
(c) The Board of Directors of the Corporation has adopted resolutions
by unanimous written consent setting forth the amendment herein contained,
declaring its advisability and providing that such resolutions be presented for
adoption by a vote at an annual meeting by the holders of a majority of the
shares entitled to vote thereon. By a vote at the annual meeting of the
stockholders of a majority of the outstanding shares of the Common Stock and
Series A Preferred Stock of the Corporation voting together, such amendment has
been adopted in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
Signed and attested to on __________________, 1996.
(Corporate Seal)
---------------------------
George J. Febish, President
Attest:
- ---------------------------
David E. Y. Sarna, Secretary
BYLAWS
OF
OBJECTSOFT CORPORATION
(a Delaware corporation)
----------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock
in the corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer who
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law of Delaware (the "General Corporation Law"). Any
restrictions on the transfer or registration of transfer of any shares of stock
of any class or series shall be noted conspicuously on the certificate
representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Board of Directors may
require the owner of the lost, stolen or destroyed certificate, or the owner's
legal representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated
<PAGE>
shares, the corporation shall send to the registered owner thereof any written
notice prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined or (3) issue scrip or warrants in registered form (either represented
by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record
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<PAGE>
date has been fixed by the Board of Directors, the record date for determining
the stockholders enti tled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by the
General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date shall be not more than sixty days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS
a. TIME. The annual meeting shall be held on the date and at the
time fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual
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<PAGE>
meeting shall be held on a date within thirteen months after the date of the
preceding annual meeting. A special meeting shall be held on the date and at the
time fixed by the directors.
b. PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
c. CALL. Annual meetings and special meetings may be called by
the directors or by any officer instructed by the directors to call the meeting.
d. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
e. STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either
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<PAGE>
at a place within the city or other municipality or community where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
corporation, or to vote at any meeting of stockholders.
f. CONDUCT OF MEETING. Meetings of the stockholders shall be pre
sided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation, or, in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
g. PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
h. INSPECTORS. The directors, in advance of any meeting, may, but
need not, appoint one or more inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspectors at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
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i. QUORUM. The holders of a majority of the outstanding shares of
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
j. VOTING. Each share of stock shall entitle the holders thereof
to one vote. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Any other action shall be authorized by a
majority of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual meeting or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITIONS. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States or a resident of the State of Delaware. The initial
Board of Directors shall consist of three (3) persons. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be one. The number
of directors may be increased or decreased by action of the stockholders or of
the directors.
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3. ELECTION AND TERM. The first Board of Directors, unless the
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
a. TIME. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
b. PLACE. Meetings shall be held at such place within or without
the State of Delaware as shall be fixed by the Board.
c. CALL. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President or a majority of the directors in office.
d. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
e. QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall
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constitute at least one-third of the whole Board. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as herein otherwise provided, and except as otherwise
provided by the General Corporation Law, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board. The quorum and voting provisions herein stated shall not be construed
as conflicting with any provisions of the General Corporation Law and these
Bylaws which govern a meeting of directors held to fill vacancies and newly
created directorships in the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
f. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and
if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise powers and authority of the Board of Directors in the management of
the business and affairs of the corporation with the exception of any authority
the delegation of which is prohibited by Section 141 of the General Corporation
Law, and may authorize the seal of the corporation to be affixed to all papers
which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
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<PAGE>
ARTICLE III
OFFICERS
a. The officers of the corporation shall consist of two Co Chief
Executive Officers, a Chairman, a President, a Secretary, a Treasurer, and, if
deemed necessary, expedient or desirable by the Board of Directors, a
Vice-Chairman of the Board, an Executive Vice-President, one or more other
Vice-Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers with such titles as the resolution of the
Board of Directors choosing them shall designate. Except as may otherwise be
provided in the resolution of the Board of Directors choosing him, no officer
other than the Chairman or Vice-Chairman of the Board, if any, need be a
director. Any number of offices may be held by the same person, as the directors
may determine.
b. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
c. CHAIRMAN. The chairman, if one be elected, shall preside at
all meetings of the stockholders and at all meetings of the Board of Directors,
and shall have such other power and authority and perform such other duties as
may be prescribed by these By-laws or as may be assigned from time to time by
the Board of Directors.
d. VICE-CHAIRMAN. The vice-chairman, if one be elected, shall, in
the absence or disability of the chairman, preside at all meetings of the
stockholders and at all meetings of the Board of Directors, and shall have such
other power and authority and perform such other duties as may be prescribed by
these By-laws or as may be assigned from time to time by the Board of Directors
or the chairman.
e. CHIEF EXECUTIVE OFFICER. The chief executive officer, if one
be elected, shall, in the absence or disability of the chairman and
vice-chairman, preside at all meetings of the stockholders and at all meetings
of the Board of Directors, and shall have general supervision, direction and
control of the business and affairs of the corporation subject to the
authorization and control of the Board of Directors, and shall have such other
power and authority and perform such other duties as may be prescribed by these
By-laws or as may be assigned from time to time by the Board of Directors.
In the absence or disability of the chief executive officer, the
president, if available, and if the president is not available the chief
operating officer, if available, shall have the authority, and shall perform the
duties, of the chief executive officer.
f. PRESIDENT. The president shall, in the absence or disability
of the chairman, vice-chairman and chief executive officer, preside at all
meetings of the stockholders and at all
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<PAGE>
meetings of the Board of Directors, and shall have such other power and
authority and perform such other duties as may be prescribed by these By-laws or
as may be assigned from time to time by the Board of Directors or the chief
executive officer.
In the absence or disability of the chief executive officer, the
president, if available, shall have the authority, and shall perform the duties,
of the chief executive officer.
g. CHIEF OPERATING OFFICER. The chief operating officer, if one
be elected, shall have such power and authority and perform such duties as may
be prescribed by these By-laws or as may be assigned from time to time by the
Board of Directors.
In the absence or disability of the president, the chief operating
officer, if available, shall have the authority, and shall perform the duties,
of the president. In addition, in the absence or disability of the chief
executive officer and the president, the chief operating officer, if available,
shall have the authority and perform the duties of the chief executive officer.
h. VICE-PRESIDENT. Each vice-president shall have such power and
authority and perform such duties as may be prescribed by these By-laws or as
may be assigned from time to time by the Board of Directors or the chief
executive officer.
The Board of Directors may designate one or more vice- presidents, in
such order of priority as shall be specified by the Board of Directors, to have
the authority, and to perform the duties, of the chief executive officer in the
absence or disability of the chief executive officer, the president and the
chief operating officer; provided, however, that no vice-president shall have
such authority or perform such duties unless specifically designated for that
purpose by the Board of Directors.
i. TREASURER. The treasurer shall have the custody of the
corporate funds and securities, shall keep full and accurate account of receipts
and disbursements in books belonging to the corporation and shall deposit all
moneys and other valuables in the name and to the credit of the corporation in
such depositaries as may be designated by the Board of Directors.
The treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the chief executive officer, taking proper
vouchers for such disbursements. He shall render to the chief executive officer
and Board of Directors at the regular meetings of the Board of Directors, or
whenever they may request it, an account of all his transactions as treasurer
and of the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board of Directors shall
prescribe.
j. SECRETARY. The secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person
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<PAGE>
thereunto directed by the chief executive officer, the president, the chairman,
the vice-chairman or by the Board of Directors or stockholders, upon whose
requisition the meeting is called as provided in these By-laws.
The secretary shall record all the proceedings of the meetings of the
corporation and of the directors in a book to be kept for that purpose, and
shall perform such other duties as may be assigned to him by the chief executive
officer or the Board of Directors. He shall have custody of the seal of the
corporation and shall affix the same to all instruments requiring it, when
authorized by the chief executive officer or the Board of Directors, and attest
the same.
k. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
treasurers, if any shall be elected, shall, in the absence of the treasurer,
have the authority, and perform the duties, of the treasurer, and shall have
such other power and authority and perform such other duties as may be
prescribed by these By-laws or as may be assigned from time to time by the Board
of Directors or the chief executive officer.
Assistant secretaries, if any shall be elected, shall, in the absence
of the secretary, have the authority, and perform the duties, of the secretary,
and shall have such other power and authority and perform such other duties as
may be prescribed by these By-laws or as may be assigned from time to time by
the Board of Directors or the chief executive officer.
ARTICLE IV
MISCELLANEOUS
1. CERTIFICATES OF STOCK. Certificates of stock, signed by the
chairman or vice chairman of the Board of Directors, if they be elected,
president or vice-president, and the treasurer or an assistant treasurer, or
secretary or an assistant secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation. Any or all the
signatures may be facsimiles.
2. LOST CERTIFICATES. A new certificate of stock may be issued in the
place of any certificate theretofore issued by the corporation, alleged to have
been lost or destroyed, and the directors may, in their discretion, require the
owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against any claim
that may be made against it on account of the alleged loss of the certificate,
or the issuance of the new certificate.
3. TRANSFER OF SHARES. The shares of stock of the corporation shall
be transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon transfer the old
certificates shall be surrendered to the corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers, or to such
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other person as the directors may designate, by whom they shall be canceled, and
new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
a. Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
Board of Directors following the next annual meeting of stockholders and until
his successor shall have been chosen and qualified.
b. All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation as shall
be prescribed in the resolutions of the Board of Directors designating and
choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except
to the extent that such resolutions may be inconsistent therewith. The Secretary
or an Assistant Secretary of the corporation shall record all of the proceedings
of all meetings and actions in writing of stockholders, directors and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
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OBJECTSOFT CORPORATION,
a Delaware corporation,
RENAISSANCE FINANCIAL SECURITIES CORPORATION
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Section Page
1. Appointment of Warrant Agent...........................................6
2. Form of Class A Warrant................................................6
3. Countersignature and Registration......................................7
4. Transfers and Exchanges................................................8
5. Exercise of Class A Warrants; Payment of Warrant Solicitation Fee......9
6. Payment of Taxes......................................................12
7. Mutilated or Missing Class A Warrants.................................13
8. Reservation of Common Stock...........................................13
9. Adjustments of Exercise Price and Number of Securities................14
10. Fractional Interests..................................................24
11. Notices to Warrantholders.............................................24
12. Disposition of Proceeds on Exercise of Class A Warrants...............26
13. Redemption of Class A Warrants........................................26
14. Merger or Consolidation or Change of Name of Warrant Agent............27
15. Duties of Warrant Agent...............................................28
16. Change of Warrant Agent...............................................30
17. Identity of Transfer Agent............................................31
18. Notices...............................................................32
19. Supplements and Amendments............................................33
20. New York Contract.....................................................33
21. Benefits of this Agreement............................................33
22. Successors............................................................34
i
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WARRANT AGREEMENT, dated as of September ___, 1996, among OBJECTSOFT
CORPORATION, a Delaware corporation (the "Company"), RENAISSANCE FINANCIAL
SECURITIES CORPORATION ("Renaissance"), and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as warrant agent (the "Warrant Agent").
The Company proposes to issue and sell through an initial public
offering (the "IPO") underwritten by certain underwriters (the "Underwriters"),
of which Renaissance is the representative (the "Representative"), an aggregate
of ____________ units (the "Units"), each Unit consisting of one (1) share (the
"Shares") of common stock, par value $.0001 per share, of the Company ("Common
Stock"), and one (1) redeemable Class A Common Stock purchase warrant ("Class A
Warrants") and, pursuant to the Representative's overallotment option (the
"Overallotment Option"), up to an additional _______ Units;
Each Class A Warrant will entitle the registered holder thereof (the
"Holder") to purchase one (1) share of Common Stock;
In connection with the IPO, the Company proposes to sell to the
Representative a Unit purchase option (the "Representative's Unit Purchase
Option") to purchase up to _______ Units, which Units shall be identical to the
Units sold in the IPO, except that the Class A Warrants included in such Units
shall not be redeemable;
The Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Class A Warrants;
THEREFORE, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the
<PAGE>
Warrant Agent to act as Warrant Agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Upon the execution of this Agreement, certificates representing
_________ Class A Warrants to purchase an aggregate of _________ shares of
Common Stock (subject to modification and adjustment as provided in Section 9
hereof) shall be executed by the Company and delivered to the Warrant Agent.
Upon the exercise of the Overallotment Option, certificates
representing up to _______ Class A Warrants to purchase up to an aggregate of
_______ shares of Common Stock (subject to modification and adjustment as
provided in Section 9 hereof) shall be executed by the Company and delivered to
the Warrant Agent.
Upon exercise of the Representative's Unit Purchase Option as
provided therein, certificates representing up to _______ Class A Warrants to
purchase up to an aggregate of _______ shares of Common Stock (subject to
modification and adjustment as provided in Section 9 hereof) shall be executed
by the Company and delivered to the Warrant Agent.
Section 2. Form of Class A Warrant. The text of the Class A Warrants
and the form of election to purchase Common Stock to be printed on the reverse
thereof shall be substantially as set forth in Exhibit A attached hereto (the
provisions of which are hereby incorporated herein) . All of the certificates
for the Class A Warrants 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
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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 may
be listed, or to conform to usage. Each Class A Warrant shall initially entitle
the registered holder thereof to purchase one share of Common Stock at a
purchase price of ______________________________ ($____) (as adjusted as
hereinafter provided, the "Exercise Price"), at any time during the period (the
"Exercise Period") commencing on _______________ 1997, the first anniversary of
the date of the Company's prospectus (the "Prospectus") pursuant to which the
Class A Warrants are being sold in the IPO) and expiring at 5:00 p.m. New York
time, on ____________, 2001 (the fifth anniversary of the date of the
Prospectus). The Exercise Price and the number of shares of Common Stock
issuable upon exercise of the Class A Warrants are subject to adjustment upon
the occurrence of certain events, all as hereinafter provided. The Class A
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future President or Vice President of the
Company, and attested to by the manual or facsimile signature of the present or
any future Secretary or Assistant Secretary of the Company.
Class A Warrants shall be dated as of the date of issuance by the
Warrant Agent either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Class A Warrants
falls on a day that is not a business day, then the Class A Warrants shall
expire at 5:00 p.m. New York time on the next succeeding business day. For
purposes hereof, the term "business day" shall mean any day other than a
Saturday, Sunday or day on which banking institutions in New York City, New
York, are authorized or obligated by law to be closed.
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Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of the Class A Warrants. Upon
the initial issuance of the Class A Warrants, the Warrant Agent shall issue and
register the Class A Warrants in the names of the respective holders thereof.
The Class A Warrants shall be countersigned manually or by facsimile by the
Warrant Agent (or by any successor to the Warrant Agent then acting as warrant
agent under this Agreement) and shall not be valid for any purpose unless so
countersigned. The Class A Warrants may, however, be so countersigned by the
Warrant Agent (or by its successor as Warrant Agent) and be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall transfer,
from time to time, any outstanding Class A Warrants upon the books to be
maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Class A Warrant shall be issued to the
transferee and the surrendered Class A Warrant shall be canceled by the Warrant
Agent. Class A Warrants so cancelled shall be delivered by the Warrant Agent to
the Company from time to time upon request. Class A Warrants may be exchanged at
the option of the holder thereof, when surrendered at the office of the Warrant
Agent, for another Class A Warrant, or other Class A Warrants of different
denominations of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock. No certificates for Class A
Warrants shall be issued except for (i) Class A Warrants initially issued
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hereunder in accordance with Section 1 hereof, (ii) Class A Warrants issued upon
any transfer or exchange of Class A Warrants, (iii) Class A Warrants issued in
replacement of lost, stolen, destroyed or mutilated certificates for Class A
Warrants pursuant to Section 7 hereof, and (iv) at the option of the Board of
Directors of the Company, Class A Warrants in such form as may be approved by
its Board of Directors, to reflect any adjustment or change in the Exercise
Price or the number of shares of Common Stock purchasable upon exercise of the
Class A Warrants made pursuant to Section 9 hereof.
Section 5. Exercise of Class A Warrants; Payment of Warrant
Solicitation Fee.
Subject to the provisions of this Agreement, each registered holder
of Class A Warrants shall have the right, at any time during the Exercise
Period, to exercise such Class A Warrants and purchase the number of fully paid
and non-assessable shares of Common Stock specified in such Class A Warrants
upon presentation and surrender of such Class A Warrants to the Company at the
corporate office of the Warrant Agent, with the exercise form on the reverse
thereof duly executed, and upon payment to the Company of the Exercise Price,
determined in accordance with the provisions of Sections 2, 9 and 10 of this
Agreement, for the number of shares of Common Stock in respect of which such
Class A Warrants are then exercised. Payment of such Exercise Price shall be
made in cash or by certified or bank check payable to the Company. Subject to
Section 6 hereof, upon such surrender of Class A Warrants and payment of the
Exercise Price, the Warrant Agent on behalf of the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the registered holder of such Class A Warrants and in such name or names as
such registered holder may designate, a certificate or certificates for the
number of full shares of Common Stock so
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purchased upon the exercise of such Class A Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares of Common Stock immediately prior to the close of business on the date of
the surrender of such Class A Warrants and payment of the Exercise Price as
aforesaid. The rights of purchase represented by the Class A Warrants shall be
exercisable during the Exercise Period, at the election of the registered
holders thereof, either as an entirety or from time to time for a portion of the
shares specified therein and, in the event that any Class A Warrant is exercised
in respect of less than all of the shares of Common Stock specified therein at
any time prior to the date of expiration of the Class A Warrants, a new Class A
Warrant or Class A Warrants will be issued to the registered holder for the
remaining number of shares of Common Stock specified in the Class A Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Class A Warrants pursuant to the
provisions of this Section and of Section 3 of this Agreement and the Company,
whenever requested by the Warrant Agent, will supply the Warrant Agent with
Class A Warrants duly executed on behalf of the Company for such purpose. Upon
the exercise of any one or more Class A Warrants, the Warrant Agent shall
promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to the provisions below,
shall cause all payments of an amount, in cash or by check made payable to the
order of the Company, equal to the aggregate Exercise Price for such Class A
Warrants, less any amounts payable to the Representative, as provided in Section
5(b) hereof, to be deposited promptly in the Company's bank account. The Company
and Warrant Agent shall determine, in their sole and absolute discretion,
whether a
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Class A Warrant certificate has been properly completed for exercise by the
registered holder thereof.
Anything in the foregoing to the contrary notwithstanding, no Class A
Warrant will be exercisable, and the Company shall not be obligated to deliver
any securities pursuant to the exercise of any Class A Warrant, unless at the
time of exercise the Company has filed with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933 (the
"Act"), covering the securities issuable upon exercise of such Class A Warrant
and such registration statement shall have been declared and shall remain
effective and shall be current, and such shares have been registered or
qualified or be exempt under the securities laws of the state or other
jurisdiction of residence of the holder of such Class A Warrant and the exercise
of such Class A Warrant in any such state or other jurisdiction shall not
otherwise be unlawful. During the Exercise Period, the Company shall use its
best efforts to have a current registration statement on file with the
Securities and Exchange Commission covering the issuance of the shares of Common
Stock underlying the Class A Warrants so as to permit the Company to deliver to
each person exercising a Class A Warrant a prospectus meeting the requirements
of Section 10(a)(3) of the Act and otherwise complying therewith, and will
deliver such prospectus to each such person. During the Exercise Period, the
Company shall also use its best efforts to effect appropriate qualifications of
the Common Stock underlying the Class A Warrants under the laws and regulations
of the states and other jurisdictions in which the Units are sold by the
Underwriter in the IPO in order to comply with applicable laws in connection
with the exercise of the Class A Warrants.
(a) If at the time of exercise of any Class A Warrant (i) the market
price of
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the Common Stock is equal to or greater than the then exercise price of the
Class A Warrant, (ii) the exercise of the Class A Warrant is solicited by the
Representative at such time as it is a member of the National Association of
Securities Dealers, Inc. ("NASD") , (iii) the Class A Warrant is not held in a
discretionary account, (iv) disclosure of the compensation arrangement is made
in documents provided to the holders of the Class A Warrants, and (v) the
solicitation of the exercise of the Class A Warrant is not in violation of Rule
10b-6 (as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities Exchange Act of 1934 then the
Representative shall be entitled to receive from the Company following exercise
of each of the Class A Warrants so exercised a fee of five percent (5%) of the
aggregate exercise price of the Class A Warrants so exercised (the "Solicitation
Fee") The procedures for payment of the Solicitation Fee are set forth in
Section 5(b) below.
(b) (i) Within five (5) days after the last day of each month
commencing with __________________, 1996, the Warrant Agent will notify the
Representative of each Class A Warrant certificate which has been properly
completed for exercise by holders of Class A Warrants during the last month. The
Warrant Agent will provide the Representative with such information, in
connection with the exercise of each Class A Warrant, as the Representative
shall reasonably request.
(ii) The Company hereby authorizes and instructs the Warrant Agent
to deliver to the Representative the Solicitation Fee, if payable, in respect of
each exercise of Class A Warrants, promptly after receipt by the Warrant Agent
from the Company of a check payable to the order of the Representative in the
amount of such Solicitation Fee. In the event that an Solicitation Fee is paid
to the Representative with respect to a Class A Warrant which
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<PAGE>
the Company or the Warrant Agent determines is not properly completed for
exercise or in respect of which the Representative is not entitled to an
Solicitation Fee, the Representative will return such Solicitation Fee to the
Warrant Agent which shall forthwith return such fee to the Company.
The Representative and the Company may at any time during business
hours examine the records of the Warrant Agent, including its ledger of original
Class A Warrant certificates returned to the Warrant Agent upon exercise of
Class A Warrants. Notwithstanding any provision to the contrary, the provisions
of Sections 5 (a) and 5 (b) may not be modified, amended or deleted without the
prior written consent of the Representative.
Section 6. Payment of Taxes. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Common Stock issuable upon
the exercise of Class A Warrants; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock in a name other than that of the registered holder of Class A Warrants in
respect of which such shares are issued, and in such case neither the Company
nor the Warrant Agent shall be required to issue or deliver any certificate for
shares of Common Stock or any Class A Warrant until the person requesting the
same has paid to the Company the amount of such tax or has established to the
Company's satisfaction that such tax has been paid or that no such tax is
required to be paid.
Section 7. Mutilated or Missing Class A Warrants. In case any of the
Class A Warrants shall be mutilated, lost, stolen or destroyed, the Company may,
in its discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon
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cancellation of the mutilated Class A Warrant, or in lieu of and in substitution
for the Class A Warrant lost, stolen or destroyed, a new Class A Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company and the Warrant Agent of such loss, theft
or destruction and, in case of a lost, stolen or destroyed Class A Warrant,
indemnity, if requested, also satisfactory to them. Applicants for such
substitute Class A Warrants shall also comply with such other reasonable
regulations and pay such reasonable charges as the Company or the Warrant Agent
may prescribe.
Section 8. Reservation of Common Stock. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the Class A Warrants, and the
transfer agent for the shares of Common Stock and every subsequent transfer
agent for any shares of Common Stock issuable upon the exercise of any of the
aforesaid rights of purchase are irrevocably authorized and directed at all
times to reserve such number of authorized shares of Common Stock as shall be
required for such purpose. The Company agrees that all shares of Common Stock
issued upon exercise of the Class A Warrants shall be, at the time of delivery
of the certificates for such shares against payment of the Exercise Price
therefor, validly issued, fully paid and nonassessable and listed on any
national securities exchange or included in any interdealer automated quotation
system upon or in which the other shares of outstanding Common Stock are then
listed or included. The Company will keep a copy of this Agreement on file with
the transfer agent for the shares of Common Stock (which may be the Warrant
Agent) and with every subsequent transfer agent for any shares of Common Stock
issuable upon the exercise of the rights of
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purchase represented by the Class A Warrants. The Warrant Agent is irrevocably
authorized to requisition from time to time from such transfer agent stock
certificates required to honor outstanding Class A Warrants. The Company will
supply such transfer agent with duly executed stock certificates for that
purpose. All Class A Warrants surrendered in the exercise of the rights thereby
evidenced shall be cancelled by the Warrant Agent and shall thereafter be
delivered to the Company, and such cancelled Class A Warrants shall constitute
sufficient evidence of the number of shares of Common Stock which have been
issued upon the exercise of such Class A Warrants. Promptly after the date of
expiration of the Class A Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Class A Warrants then outstanding, and
thereafter no shares of Common Stock shall be subject to reservation in respect
of such Class A Warrants which shall have expired.
Section 9. Adjustments of Exercise Price and Number of Securities.
(a) Subdivision and Combination. In case the Company shall
at any time after the Closing Date subdivide or combine the outstanding shares
of Common Stock, the Exercise Price shall forthwith be proportionately decreased
in the case of subdivision or increased in the case of combination. (b)
Adjustment in Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of Section 9(a), the number of shares of Common Stock
issuable upon the exercise of the Class A Warrants shall be adjusted to the
nearest full whole number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of the Class A Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
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(c) Reclassification, Consolidation, Merger, etc. In case
of any reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding shares of Common Stock, except a
change as a result of a subdivision or combination of such shares or a change in
par value, as aforesaid), or in the case of a sale or conveyance to another
corporation of the property of the Company as an entirety, the Holder shall
thereafter have the right to purchase the kind and number of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
shares of Common Stock underlying the Class A Warrants immediately prior to any
such events at a price equal to the product of (x) the number of shares issuable
upon exercise of the Class A Warrants and (y) the Exercise Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Class A Warrant.
(d) Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time after
the Closing Date and prior to the exercise or expiration of all Class A Warrants
declare a dividend (other than a dividend consisting solely of shares of Common
Stock or a cash dividend or distribution payable out of current or retained
earnings) or otherwise distribute to the holders of Common Stock any
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monies, assets, property, rights, evidences of indebtedness, securities (other
than such a cash dividend or distribution or dividend consisting solely of
shares of Common Stock), whether issued by the Company or by another person or
entity, or any other thing of value, the Holders of the unexercised Class A
Warrants shall thereafter be entitled, in addition to the shares of Common Stock
or other securities receivable upon the exercise thereof, to receive, upon the
exercise of such Class A Warrants, the same monies, property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such dividend or distribution
as if the Holders were the owners of the shares of Common Stock underlying such
Class A Warrants. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 9(d).
(e) Notice in Event of Dissolution. In case of the
dissolution, liquidation or winding-up of the Company, all rights under the
Class A Warrants shall terminate on a date fixed by the Company, such date to be
no earlier than ten (10) days prior to the effectiveness of such dissolution,
liquidation or winding-up and not later than five (5) days prior to such
effectiveness. Notice of such termination of purchase rights shall be given to
Holder of the Class A Warrants, as the same shall appear on the books of the
Company maintained by the Warrant Agent, by registered mail at least thirty (30)
days prior to such termination date.
(f) Computations. The Company may retain a firm of
independent public accountants (who may be any such firm regularly employed by
the Company) to make any computation required under this Section 9, and any
certificate setting forth such computation signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 9.
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Section 10. Fractional Interests. The Class A Warrants may only be
exercised to purchase full shares of Common Stock and the Company shall not be
required to issue fractions of shares of Common Stock on the exercise of Class A
Warrants. However, if a Holder exercises all Class A Warrants then owned of
record by him and such exercise would result in the issuance of a fractional
share, the Company will pay to such Holder, in lieu of the issuance of any
fractional share otherwise issuable, an amount of cash based on the Market Price
on the last trading day prior to the exercise date. As used herein, the phrase
"Market Price" at any date shall be deemed to be the average of the last
reported sale price, or, in case no such reported sale takes place on such day,
the average of the last reported sale prices for the last three trading days, in
either case as officially reported by the principal securities exchange on which
the Common Stock is listed or admitted to trading or as reported in the Nasdaq
SmallCap Market, or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq SmallCap Market, the
closing bid quotation as furnished by the National Association of Securities
Dealers, Inc. through Nasdaq or a similar organization if Nasdaq is no longer
reporting such information, or if the Common Stock is not quoted on Nasdaq, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it for the day immediately preceding
such issuance or sale, the day of such issuance or sale and the day immediately
after such issuance or sale. If the Common Stock is listed or admitted to
trading on a national securities exchange and also quoted on the Nasdaq SmallCap
Market, the Market Price shall be determined as hereinabove provided by
reference to the prices reported in the Nasdaq SmallCap Market; provided that if
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<PAGE>
the Common Stock is listed or admitted to trading on the New York Stock
Exchange, the Market Price shall be determined as hereinabove provided by
reference to the prices reported by such exchange.
Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Exercise Price and the
number of shares of Common Stock issuable upon exercise of a Class A Warrant,
then and in each such case, the Company shall give written notice thereof to the
Warrant Agent, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of a Class A Warrant, setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company shall also mail such notice to the Holders of
the Class A Warrants at their respective addresses appearing in the Class A
Warrant register. Failure to give or mail such notice, or any defect therein,
shall not affect the validity of the adjustments.
(b) In case at any time after the Closing Date:
(i) the Company shall pay dividends payable in
stock upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Company shall offer for subscription
pro rata to all of the holders of Common Stock any additional shares of stock of
any class or other rights; or
(iii) there shall be any capital reorganization
or reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of substantially all of its assets to
another corporation; or
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(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then in any one or more of such cases, the Company shall give written
notice to the Warrant Agent and the Holders of the Class A Warrants in the
manner set forth in Section 11(a) of the date on which (A) a record shall be
taken for such dividend, distribution or subscription rights, or (B) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or windingup, as the case may be. Such
notice shall be given at least ten (10) days prior to the action in question and
not less than ten (10) days prior to the record date in respect thereof. Failure
to give such notice, or any defect therein, shall not affect the legality or
validity of any of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial
statements and reports, proxy statements and other documents that are sent to
its stockholders to be sent by first-class mail, postage prepaid, on the date of
mailing to such stockholders, to each Holder of Class A Warrants at his address
appearing in the Class A Warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Class A Warrants.
(a) The Warrant Agent shall promptly forward to the
Company all monies
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received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of these Class A Warrants.
Section 13. Redemption of Class A Warrants. The Class A Warrants are
redeemable by the Company commencing on the first anniversary of the date of the
Prospectus, in whole or in part, on not less than thirty (30) days' prior
written notice at a redemption price of $.10 per Class A Warrant (or earlier
with the prior consent of Renaissance), provided the average closing bid
quotation of the Common Stock as reported on the Nasdaq SmallCap Market, if
traded thereon, or if not traded thereon, the average closing sale price if
listed on a national securities exchange (or other reporting system that
provides last sale prices), has been at least 130% of the then current Exercise
Price of the Class A Warrants, for a period of 20 consecutive trading days
ending within 15 days of the date on which the Company gives notice of
redemption. Any redemption in part shall be made pro rata to all Warrant
Holders. The redemption notice shall be mailed to the Holders of the Class A
Warrants at their respective addresses appearing in the Class A Warrant
register. Any such notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given in accordance with this Agreement
whether or not the registered Holder receives such notice. 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
of a Class A Warrant (i) to whom notice was not mailed or (ii) whose notice was
defective. An affidavit of the Warrant Agent or the Secretary or Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. In the
event of a redemption prior to the first anniversary of the date of the
Prospectus, the Class A
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Warrants shall be exercisable commencing on the date of the notice of
redemption. Holders of the Class A Warrants will have exercise rights until the
close of business on the day immediately preceding the date fixed for
redemption.
Section 14. Merger or Consolidation or Change of Name of Warrant
Agent. Any corporation or company which may succeed to the corporate trust
business of the Warrant Agent by any merger or consolidation or otherwise shall
be the successor to the Warrant Agent hereunder without the execution or filing
of any paper or any further act on the part of any of the parties hereto;
provided, that such corporation would be eligible for appointment as a successor
Warrant Agent under the provisions of Section 16 of this Agreement. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement any of the Class A Warrants shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Class A Warrants
so countersigned.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Class A Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Class A Warrants so countersigned. In all such cases such Class
A Warrants shall have the full force provided in the Class A Warrants and in
this Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of Class A Warrants, by
their acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein
and in the Class A
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Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Class A
Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants in this Agreement or
in the Class A Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Class A Warrant in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder of any Class A Warrant for any
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate or other instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant
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Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more Holders of Class A
Warrants shall furnish the Warrant Agent with reasonable security and indemnity
for any costs and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as the Warrant Agent
may consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Class A Warrants may
be enforced by the Warrant Agent without the possession of any of the Class A
Warrants or the production thereof at any trial or other proceeding. Any such
action, suit or proceeding instituted by the Warrant Agent shall be brought in
its name as Warrant Agent, and any recovery of judgment shall be for the ratable
benefit of the Holders of the Class A Warrants, as their respective rights and
interests may appear.
(g) The Warrant Agent and any stockholder, director,
officer, partner or employee of the Warrant Agent may buy, sell or deal in any
of the Class A Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent
and its duties shall be determined solely by the provisions hereof.
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(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any such attorneys, agents or employees or
for any loss to the Company resulting from such neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(j) Any request, direction, election, order or demand of
the Company shall be sufficiently evidenced by an instrument signed in the name
of the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
notice in writing, and to the Holders of the Class A Warrants notice by mailing
such notice to the Holders at their respective addresses appearing on the Class
A Warrant register, of such resignation, specifying a date when such resignation
shall take effect. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company and the like mailing of notice to the Holders of
the Class A Warrants. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of action, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such
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<PAGE>
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or after the Company
has received such notice from a Holder of a Class A Warrant (who shall, with
such notice, submit his Class A Warrant for inspection by the Company), then the
Holder of any Class A Warrant may apply to any court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Any successor Warrant
Agent, whether appointed by the Company or by such a court, shall be a bank or
trust company, in good standing, incorporated under New York or federal law.
After appointment, the successor Warrant Agent shall be vested with the same
powers, rights, duties and responsibility as if it had been originally named as
Warrant Agent without further act or deed and the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent all canceled Class A
Warrants, records and property at the time held by it hereunder, and execute and
deliver any further assurance or conveyance necessary for this purpose. Failure
to file or mail any notice provided for in this Section, however, or any defect
therein, shall not affect the validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case may
be.
Section 17. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent (other than Continental Stock Transfer & Trust
Company) for the shares of Common Stock or of any subsequent transfer agent for
the shares of Common Stock, the Company will file with the Warrant Agent a
statement setting forth the name and address of such transfer agent.
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<PAGE>
Section 18. Notices. Any notice pursuant to this Agreement to be
given by the Warrant Agent or the Holder of any Class A Warrant to the Company,
shall be sufficiently given if sent by first-class mail, postage prepaid,
addressed (until another is filed in writing by the Company with the Warrant
Agent) as follows:
ObjectSoft Corporation
Continental Plaza - Bldg. 3
433 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: President
and a copy thereof to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Melvin Weinberg, Esq.
Any notice pursuant to this Agreement to be given by the Company or
the Holder of any Class A Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Executive Vice President
Any notice pursuant to this Agreement to be given by the Warrant
Agent or the Company to the Representative shall be sufficiently given if sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Warrant Agent) as follows:
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Renaissance Financial Securities Corporation
200 Old Country Road
Mineola, New York 11501
Attention: President
and a copy thereof to:
Stursberg & Veith
405 Lexington Avenue
New York, New York 10174-4902
Attention: C. Walter Stursberg, Esq.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Class A Warrants and which shall
not materially adversely affect the interest of the Holders of Class A Warrants;
and in addition the Company and the Warrant Agent may modify, supplement or
alter this Agreement with the consent in writing of the Holders of the Class A
Warrants representing not less than a majority of the Class A Warrants then
outstanding.
The Warrant Agent shall keep copies of this Agreement available for
inspection by Holders of Class A Warrants during normal business hours.
Section 20. New York Contract. This Agreement and each Class A
Warrant issued hereunder shall be deemed to be a contract made under the laws of
the State of New York and shall be construed in accordance with the laws of New
York without regard to the conflicts of law principles thereof.
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<PAGE>
Section 21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the Holders of the Class A Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the Holders of
the Class A Warrants.
Section 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
OBJECTSOFT CORPORATION
By: ________________________________
CONTINENTAL STOCK TRANSFER &
` TRUST COMPANY
By: ________________________________
RENAISSANCE FINANCIAL SECURITIES
CORPORATION
By: ________________________________
25
<PAGE>
No. W_________________ VOID AFTER_____________, 2001
CLASS A WARRANTS
REDEEMABLE CLASS A WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
OBJECTSOFT CORPORATION
CUSIP [ ]
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Class A Warrants (the "Class A Warrants") specified above. Each Class
A Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
par value $.0001 per share (the "Common Stock"), of ObjectSoft Corporation, a
Delaware corporation (the "Company"), at any time from ______________, 1997 (the
"Initial Warrant Exercise Date") , and prior to the Expiration Date (as
hereinafter defined) upon the presentation and surrender of this Class A Warrant
Certificate with the Exercise Form on the reverse hereof duly executed, at the
corporate office of Continental Stock Transfer & Trust Company, 2 Broadway, New
York, New York 10004, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $____, subject to adjustment (the "Exercise Price"),
in lawful money of the United States of America in cash or by certified or bank
check made payable to the Company.
This Class A 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 in the Warrant Agreement, dated as of _______________, 1996
(the "Warrant Agreement"), among the Company, Renaissance Financial Securities
Corporation ("Renaissance") and the Warrant Agent.
A-1
<PAGE>
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock 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 will be issued. In the case
of the exercise of less than all the Class A Warrants represented hereby, the
Company shall cancel this Class A Warrant Certificate upon the surrender hereof
and shall execute and deliver a new Class A Warrant Certificate or Class A
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
__________, 2001 [the date which is the fifth anniversary of the Initial Warrant
Exercise Date]; provided, that if such date is not a business day, it shall mean
5:00 p.m., New York City time, on the next following business day. For purposes
hereof, the term "business day" shall mean any day other than a Saturday, Sunday
or day on which banking institutions in New York City, New York, are authorized
or obligated by law to be closed.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class A Warrants represented hereby unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 (the "Act") covering the
securities issuable upon exercise of the Class A Warrants represented hereby and
such registration statement has been declared and shall remain effective and
shall be current, and such securities have been registered or qualified or be
exempt under the securities laws of the state or other jurisdiction of residence
of the Registered Holder and the exercise of the Class A Warrants represented
hereby in any such state or other jurisdiction shall not otherwise be unlawful.
This Class A Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Class A Warrant Certificate or Class A Warrant Certificates of like
tenor representing an equal aggregate number of Class A Warrants, each of such
new Class A 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 the presentment and payment of any tax or other charge imposed in
connection therewith or incident thereto for registration of transfer of this
Class A Warrant Certificate at such office, a new Class A Warrant Certificate or
Class A 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, as such, 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
A-2
<PAGE>
Warrant Agreement.
Subject to the provisions of the Warrant Agreement, the Class A
Warrants represented hereby may be redeemed, in whole or in part, at the option
of the Company, at a redemption price of $.10 per Class A Warrant, at any time
commencing ________________, 1997 [the first anniversary of the date of the
Prospectus] (or earlier with the consent of Renaissance), provided that the
average closing bid quotation of the Common Stock as reported on The Nasdaq
SmallCap Market, if traded thereon, or is not traded thereon, the average
closing sale price if listed on national exchange (or other reporting system
that provides last sale prices), shall have for a period of 20 consecutive days
on which such market is open for trading ending within 15 days of the date on
which the Company gives the Notice of Redemption (as defined below) equaled or
exceeded 130% of the then current Exercise Price. Notice of redemption (the
"Notice of Redemption") shall be given by the Company no less than thirty days
before the date fixed for redemption, all as provided in the Warrant Agreement.
If the date for redemption of the Class A Warrants is prior to _________, 1997,
then, as to the Class A Warrants being redeemed, the Initial Warrant Exercise
Date shall be the date of the Notice of Redemption. On and after the date fixed
for redemption, the Registered Holder shall have no right with respect to the
Class A Warrants represented hereby except to receive the $.10 per Class A
Warrant upon surrender of this Certificate.
Under certain circumstances described in the Warrant Agreement,
Renaissance shall be entitled to receive as a solicitation fee an aggregate of
five percent (5%) of the Exercise Price of the Class A Warrants represented
hereby.
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, except as
provided in the Warrant Agreement.
This Class A Warrant Certificate shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
This Class A Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Class A 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.
Dated September ____, 1996
SEAL OBJECTSOFT CORPORATION
By: ___________________________
President
A-3
<PAGE>
By: ___________________________
Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: __________________________________
Authorized Officer
A-4
<PAGE>
EXERCISE FORM
To Be Executed by the Registered Holder
in order to Exercise Class A Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise _________ Class A Warrants represented by this Class A 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 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 Class A 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.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Class A Warrant was solicited by
Renaissance Financial Securities Corporation, please check
the following box. |_|
2. The exercise of this Class A Warrant was solicited by
----------------------------------------------------------
A-5
<PAGE>
3. If the exercise of this Class A Warrant was not solicited,
please check the following box. |_|
Dated: _______________________ X_________________________________
__________________________________
__________________________________
Address
__________________________________
Social Security or Taxpayer
Identification Number
__________________________________
Signature Guaranteed
A-6
<PAGE>
ASSIGNMENT
----------
To be Executed by the Registered Holder
in Order to Assign Class A 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 Class A
Warrant Certificate, and hereby irrevocably constitutes and appoints
______________________________________ as its/his/her attorney-in-fact to
transfer this Class A 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 EXERCISE FORM MUST CORRESPOND TO THE NAME
AS WRITTEN UPON THE FACE OF THIS CLASS A WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST
BE GUARANTEED BY A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR
OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM.
A-7
1996 STOCK OPTION PLAN
of
OBJECTSOFT CORPORATION
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and advisors and directors
who are not employees of ObjectSoft Corporation, a Delaware corporation (the
"Company"), or its present and future Subsidiaries or a Parent (as each such
term is defined in Paragraph 19), and to offer an additional inducement in
obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of common stock, $.0001 par value per share,
of the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 250,000. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. Subject to the provisions
of Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable shall again become available for the granting of
options under the Plan. The Company shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors consisting of not less than two directors
(the "Committee"). During such time as the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
each member of the Committee shall be (a) a "disinterested person" within the
meaning of Rule 16b-3 promulgated under such act until such time as the
amendments to Rule 16b-3 adopted by the Securities and Exchange Commission on
May 30, 1996 in Release No. 34-37260 become effective with respect to the Plan
(the "New Rule Date") and (b) from and after the New Rule Date, a "Non-Employee
Director" within the meaning of Rule 16b-3 (as the same may be in effect and
interpreted from time to time, "Rule 16b-3"). A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, with respect to Employee Options and
Consultant Options (as
<PAGE>
defined in Paragraph 19): to determine the key employees who shall be granted
Employee Options and the consultants who shall be granted Consultant Options;
the times when options shall be granted; whether an Employee Option shall be an
ISO or a NQSO; the number of shares of Common Stock to be subject to each
option; the term of each option; the date each option shall become exercisable;
whether an option shall be exercisable in whole, in part or in installments and,
if in installments, the number of shares of Common Stock to be subject to each
installment, whether the installments shall be cumulative, the date each
installment shall become exercisable and the term of each installment; whether
to accelerate the date of exercise of any option or installment; whether shares
of Common Stock may be issued upon the exercise of an option as partly paid and,
if so, the dates when future installments of the exercise price shall become due
and the amounts of such installments; the exercise price of each option; the
form of payment of the exercise price; whether to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of an
option and, if so, whether to waive any such restriction; whether to subject the
exercise of all or any portion of an option to the fulfillment of contingencies
as specified in the contract referred to in Paragraph 11 (the "Contract"),
including without limitation, contingencies relating to entering into a covenant
not to compete with the Company, any of its Subsidiaries or a Parent (as defined
in Paragraph 19), to financial objectives for the Company, any of its
Subsidiaries or a Parent, a division of any of the foregoing, a product line or
other category, and/or the period of continued employment of the optionee with
the Company, any of its Subsidiaries or a Parent, and to determine whether such
contingencies have been met; whether an optionee is Disabled (as defined in
Paragraph 19); and with respect to Employee Options, Consultant Options and,
subject prior to the New Rule Date to the limitations with respect to formula
plans under Rule 16b-3, Non-Employee Director Options (as defined in Paragraph
19): the amount, if any, necessary to satisfy the obligation of the Company, a
Subsidiary or a Parent to withhold taxes or other amounts; the fair market value
of a share of Common Stock; to construe the respective Contracts and the Plan;
with the consent of the optionee, to cancel or modify an option, provided, that
the modified provision is permitted to be included in an option granted under
the Plan on the date of the modification, and further, provided, that in the
case of a modification (within the meaning of Section 424(h) of the Code) of an
ISO, such option as modified would be permitted to be granted on the date of
such modification under the terms of the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; from and after the New Rule Date, to
approve any provision which under Rule 16b-3 requires approval by the Board of
Directors, a committee of Non-Employee Directors or the stockholders to be
exempt (unless otherwise specifically provided herein); and to make all other
determinations necessary or advisable for administering the Plan. Any
controversy or claim arising out of or relating to the Plan, any option granted
under the Plan or any Contract shall be determined unilaterally by the Committee
in its sole discretion. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive and binding on the parties.
No member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted hereunder. In addition to any other rights of indemnification
they may have as directors or as members or former members of the Committee,
each such member and former member shall be indemnified
-2-
<PAGE>
and held harmless by the Company from and against any reasonable expenses
(including reasonable attorneys' fees) actually and necessarily incurred in
connection with the defense, of any claim, action, suit, proceeding or appeal
(collectively, "Case") to which he is a party by reason of an action or failure
to act under or in connection with the Plan or any option granted hereunder, and
against all amounts paid by him in settlement of such Case (provided such
settlement is approved by the Company) or paid in satisfaction of a judgment in
such Case; provided, however, that such member or former member shall not be
entitled to indemnification (a) if he did not within 60 days after the
institution of such Case offer to the Company in writing the opportunity to
handle and defend the Case at its own expense, or (b) to the extend the Case
resulted from his gross negligence or willful misconduct.
4. ELIGIBILITY; GRANTS. The Committee may from time to time, in its
sole discretion, consistent with the purposes of the Plan, grant Employee
Options to key employees (including officers and directors who are key
employees) of, and Consultant Options to consultants and advisors to, the
Company or any of its Subsidiaries or a Parent. Such options granted shall cover
such number of shares of Common Stock as the Committee may determine, in its
sole discretion; provided, however, that [the maximum number of shares subject
to Employee Options that may be granted to any individual during any calendar
year under the Plan (the "162(m) Maximum") shall not exceed 50,000 shares; and
further, provided, that the aggregate market value (determined at the time the
option is granted in accordance with Paragraph 5) of the shares of Common Stock
for which any eligible employee may be granted ISOs under the Plan or any other
plan of the Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such optionee during any calendar year shall
not exceed $100,000. Such limitation shall be applied by taking ISOs into
account in the order in which they were granted. Any option (or the portion
thereof) granted in excess of such amount shall be treated as a NQSO.
Every individual who, on the date the Plan is adopted, is a
Non-Employee Director (as defined in Paragraph 19) shall be granted on such date
a Non-Employee Director Option to purchase 10,000 shares of Common Stock.
Thereafter, on the date an individual first becomes a Non-Employee Director, he
shall be granted an option to purchase 10,000 shares of Common Stock. In
addition, immediately following each annual meeting of stockholders at which
directors are elected, every individual who, at such time, is a Non-Employee
Director (whether or not elected at such meeting) shall be granted at such time
a Non-Employee Director Option to purchase 5,000 shares of Common Stock. In the
event the remaining shares available for grant under the Plan are not sufficient
to grant the Non-Employee Director Options to each such Non-Employee Director at
any time, the number of shares subject to the Non-Employee Director Options to
be granted at such time shall be reduced proportionately. The Committee shall
not have any discretion with respect to the selection of directors to receive
Non-Employee Director Options or the amount, the price or the timing with
respect thereto.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each Employee Option and Consultant Option shall be determined by the
Committee in its
-3-
<PAGE>
sole discretion; provided, however, that the exercise price of an ISO shall not
be less than the fair market value of the Common Stock subject to such option on
the date of grant; and further, provided, that if, at the time an ISO is
granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
exercise price of such ISO shall not be less than 110% of the fair market value
of the Common Stock subject to such ISO on the date of grant. The exercise price
of the shares of Common Stock under each Non-Employee Director Option shall be
equal to the fair market value of the Common Stock subject to such option on the
date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average between the high and low sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on The
Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price information is
available with respect to the Common Stock, the average between the high and low
sales prices per share of Common Stock on such day on Nasdaq, or (ii) if such
information is not available, the average between the highest bid and lowest
asked prices per share of Common Stock on such day on Nasdaq, or (c) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on Nasdaq, the average between the highest bid
and lowest asked prices per share of Common Stock on such day as reported on the
OTC Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable, or if no trades have been made or no quotes are
available for such day, the fair market value of the Common Stock shall be
determined by the Board by any method consistent with applicable regulations
adopted by the Treasury Department relating to stock options. The determination
of the Committee shall be exclusive in determining the fair market value of the
stock.
6. TERM. The term of each Employee Option and Consultant Option
granted pursuant to the Plan shall be such term as is established by the
Committee, in its sole discretion; provided, however, that the term of each ISO
granted pursuant to the Plan shall be for a period not exceeding 10 years from
the date of grant thereof; and further, provided, that if, at the time an ISO is
granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
term of the ISO shall be for a period not exceeding five years from the date of
grant. Employee Options and Consultant Options shall be subject to earlier
termination as hereinafter provided. Subject to earlier termination as
hereinafter provided, each Non-Employee Director Option shall be exercisable for
a term of five years commencing on the date of grant.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office
-4-
<PAGE>
(at present 50 East Palisade Avenue, Suite 411, Englewood, New Jersey 07631)
stating which ISO or NQSO is being exercised, specifying the number of shares of
Common Stock as to which such option is being exercised and accompanied by
payment in full of the aggregate exercise price therefor (or the amount due on
exercise if the Contract with respect to an Employee Option permits installment
payments) (a) in cash or by certified check or (b) in the case of an Employee
Option or a Consultant Option, if the applicable Contract permits, with
previously acquired shares of Common Stock having an aggregate fair market value
on the date of exercise (determined in accordance with Paragraph 5) equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash, certified check or shares of Common Stock. The Committee may, in its
sole discretion, permit payment of the exercise price of an option by delivery
by the optionee of a properly executed notice, together with a copy of his
irrevocable instructions to a broker acceptable to the Committee to deliver
promptly to the Company the amount of sale or loan proceeds sufficient to pay
such exercise price. In connection therewith, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries [as an employee, a consultant or an advisor] has terminated for any
reason other than in the case of an individual optionee his death or Disability
(as defined in Paragraph 19) may exercise such option, to the extent exercisable
on the date of such termination, at any time within three months after the date
of termination, but not thereafter and in no event after the date the option
would otherwise have expired; provided, however, that if such relationship is
terminated either (a) for cause, or (b) without the consent of the Company, such
option shall terminate immediately. Except as may otherwise be expressly
provided in the applicable Contract, Employee Options and Consultant Options
granted under the Plan shall not be affected by any change in the status of the
optionee so long as the optionee continues to be an employee of, or a consultant
or an advisor to, the Company, or any of the Subsidiaries or a Parent
(regardless of having changed from one to the other or having been transferred
from one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an
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<PAGE>
individual on military, sick leave or other bona fide leave of absence shall
continue to be consid ered an employee for purposes of the Plan during such
leave if the period of the leave does not exceed 90 days, or, if longer, so long
as the individual's right to reemployment with the Company (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
The holder of a Consultant Option whose consulting or advisory
relationship with the Company (and its Parent and Subsidiaries) has terminated
for any reason may exercise such option to the extent exercisable on the date of
such termination, but not thereafter and in no event after the date the option
would otherwise have expired; provided, however, that if such relationship was
terminated either (a) for cause or (b) without the consent of the Company (other
than as a result of the death or Disability of the holder or a key employee of
the holder) the option shall terminate immediately.
Except as provided below, a Non-Employee Director Option may be
exercised at any time during its five year term. The Non-Employee Director
Option shall not be affected by the optionee ceasing to be a director of the
Company or becoming an employee of the Company, any of its Subsidiaries or a
Parent; provided, however, that if he is terminated for cause, such option shall
terminate immediately.
Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, or as a
consultant or advisor to, the Company, any of its Subsidiaries or a Parent, or
as a director of the Company, or interfere in any way with any right of the
Company, any of its Subsidiaries or a Parent to terminate the optionee's
relation ship at any time for any reason whatsoever without liability to the
Company, any of its Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant or advisor to, the Company, any of its
Subsidiaries or a Parent, (b) within three months after the termination of such
relationship (unless such termination was for cause or without the consent of
the Company) or (c) within one year following the termination of such
relationship by reason of his Disability, his Employee Option or Consultant
Option may be exercised, to the extent exercisable on the date of his death, by
his Legal Representative (as defined in Paragraph 19) at any time within one
year after death, but not thereafter and in no event after the date the option
would otherwise have expired.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee of, or consultant or
advisor to, the Company, its Parent and Subsidiaries has terminated by reason of
such optionee's Disability may exercise his Employee Option or Consultant
Option, to the extent exercisable upon the effective date of such
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<PAGE>
termination, at any time within one year after such date, but not thereafter and
in no event after the date the option would otherwise have expired.
The term of a Non-Employee Director Option shall not be affected by
the death or Disability of the optionee. If an optionee holding a Non-Employee
Director Option dies during the term of such option, the option may be exercised
at any time during its term by his Legal Representative.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in
its sole discretion, as a condition to the exercise of any option that either
(a) a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
The Committee may require, in its sole discretion, as a condition to
the exercise of any option that the optionee execute and deliver to the Company
his representations and warranties, in form, substance and scope satisfactory to
the Committee, that (a) the shares of Common Stock to be issued upon the
exercise of the option are being acquired by the optionee for his own account,
for investment only and not with a view to the resale or distribution thereof,
and (b) any subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (i) a Registration Statement under the
Securities Act which is effective and current with respect to the shares of
Common Stock being sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the optionee
shall prior to any offer of sale or sale of such shares of Common Stock provide
the Company with a favorable written opinion of counsel satisfactory to the
Company, in form, substance and scope satisfactory to the Company, as to the
applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine, in its
sole discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall
-7-
<PAGE>
contain such terms, provisions and conditions not inconsistent herewith as may
be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger in which
the Company is the surviving corporation, split-up, combination or exchange of
shares or the like, the aggregate number and kind of shares subject to the Plan,
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company, or
(b) a merger in which the Company is not the surviving corporation or a
consolidation, any outstanding options shall terminate upon the earliest of any
such event, unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on March 15, 1996. No ISO may be granted under the Plan
after March 14, 2006. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3, Section 162(m) of the Code, or any change in
applicable law, regulations, rulings or interpretations of administrative
agencies; provided, however, that no amendment shall be effective without the
requisite prior or subsequent stockholder approval which would (a) except as
contemplated in Paragraph 12, increase the maximum number of shares of Common
Stock for which options may be granted under the Plan or the 162(m) Maximum, (b)
prior to the New Rule Date, materially increase the benefits accruing to
participants under the Plan or (c) change the eligibility requirements to
receive options hereunder. Notwithstanding the foregoing, prior to the New Rule
Date, the provisions regarding the selection of directors for participation in,
and the amount, the price or the timing of, Non-Employee Director Options shall
not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act or the rules
thereunder. No termination, suspension or amendment of the Plan shall, without
the consent of the holder of an existing and outstanding option affected
thereby, adversely affect his rights under such option. The power of the
Committee to construe and administer any options granted under the Plan prior to
the termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred,
-8-
<PAGE>
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect.
15. WITHHOLDING TAXES. The Company (and/or its Subsidiary or Parent,
as applicable) may withhold (a) cash, (b) subject to any limitations under Rule
16b-3, shares of Common Stock to be issued with respect thereto having an
aggregate fair market value on the exercise date (determined in accordance with
Paragraph 5), or (c) any combination thereof, in an amount equal to the amount
which the Committee determines is necessary to satisfy the obligation of the
Company, a Subsidiary or a Parent to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company (or to
the Subsidiary or Parent) such amount, in cash, promptly upon demand. The
Company shall not be required to issue any shares of Common Stock pursuant to
any such option until all required payments have been made. Fair market value of
the shares of Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend
or legends upon the certificates for shares of Common Stock issued upon exercise
of an option under the Plan and may issue such "stop transfer" instructions to
its transfer agent in respect of such shares as it determines, in its
discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
and any applicable state securities laws, (b) implement the provisions of the
Plan or any agreement between the Company and the optionee with respect to such
shares of Common Stock, or (c) permit the Company to determine the occurrence of
a "disqualifying disposition," as described in Section 421(b) of the Code, of
the shares of Common Stock issued or transferred upon the exercise of an ISO
granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
-9-
<PAGE>
19. DEFINITIONS. For purposes of the Plan, the following terms shall
be defined as set forth below:
(a) Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, any of its
Subsidiaries or a Parent in a transaction to which Section 424(a) of the Code
applies (or would apply if the option assumed or substituted were an ISO), or
any Parent or any Subsidiary of such corporation.
(b) Consultant Option. The term "Consultant Option" shall mean a
NQSO granted pursuant to the Plan to a person who, at the time of grant, is a
consultant to the Company or a Subsidiary of the Company, and at such time is
neither a common law employee of the Company or any of its Subsidiaries nor a
director of the Company.
(c) Disability. The term "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code.
(d) Employee Option. The term "Employee Option" shall mean an
option granted pursuant to the Plan to an individual who, at the time of grant,
is a key employee of the Company or any of its Subsidiaries.
(e) Legal Representative. The term "Legal Representative" shall
mean the executor, administrator or other person who at the time is entitled by
law to exercise the rights of a deceased or incapacitated optionee with respect
to an option granted under the Plan.
(f) Non-Employee Director. The term "Non-Employee Director" shall
mean a person who is a director of the Company, but is not a common law employee
of the Company, any of its Subsidiaries or a Parent.
(g) Non-Employee Director Option. The term "Non-Employee Director
Option" shall mean a NQSO granted pursuant to the Plan to a person who, at the
time of the grant, is a Non-Employee Director.
(h) Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
(i) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be
granted hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
-10-
<PAGE>
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan or any Contract shall not affect
the validity, legality or enforceability of any other provision, all of which
shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy at the next duly held
meeting of the Company's stockholders at which a quorum is present. No options
granted hereunder may be exercised prior to such approval; provided, however,
that the date of grant of any option shall be determined as if the Plan had not
been subject to such approval. Notwithstanding the foregoing, if the Plan is not
approved by a vote of the stockholders of the Company on or before March 14,
1997, the Plan and any options granted hereunder shall terminate.
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FORM OF
CORPORATE PROMISSORY NOTE
$ ,000.00 , 1996
FOR VALUE RECEIVED, the undersigned, OBJECTSOFT CORPORATION, a
Delaware corporation ("MAKER"), promises to pay to the order of ("HOLDER"), the
following:
1.0 PRINCIPAL, INTEREST AND PAYMENT
-------------------------------
1.1 The principal sum of Dollars and no cents ($ ,000.00), along with
all accrued interest as provided in this Note, which shall be payable in full
upon the occurrence of either of the following events, whichever is sooner:
(a) within fourteen (14) days of deposit in Maker's
corporate account of the net proceeds of an Initial Public Offering in excess of
the principal amount of all the notes issued pursuant to the Company's private
placement as described in its Confidential Placement Memorandum dated March 22,
1996, or
(b) no later than 5:00 p.m. (eastern standard time) on
September 30, 1997.
1.2 Compound Interest Rate. MAKER promises to pay interest on the
unpaid principal balance from and including the date of this NOTE semi-annually
commencing on December 31, 1996. Any unpaid accrued interest shall be paid when
the principal balance is fully paid. Interest shall be paid at the rate of seven
percent (7%) per annum.
1.3 Prepayment. MAKER shall have the right to prepay all or any
portion of the debt. Payments shall be lawful money of the United States of
America.
2.0 DEFAULT
-------
Time is of the essence of this NOTE. A default shall occur if:
2.1 Failure to Make Payments. MAKER fails to make any payment of
interest or principal under this NOTE on the date due;
2.2 Bankruptcy. MAKER is declared insolvent by a court of competent
jurisdiction, a receiver is appointed, and such appointment has not been
dismissed within sixty (60) days, to take possession of all or a substantial
part of MAKER's properties, MAKER makes an assignment for the
<PAGE>
benefit of creditors or files a voluntary petition in bankruptcy , or MAKER is
the subject of an involuntary petition in bankruptcy.
3.0 REMEDIES
--------
3.1 In the event of a default, HOLDER may declare the entire unpaid
principal balance of the debt, including interest, payable.
4.0 ATTORNEYS' FEES AND COLLECTION COSTS
------------------------------------
In the event litigation is commenced by one of the parties to enforce
or interpret a provision of this NOTE, or to collect any amounts due, the
prevailing party in litigation shall be entitled to receive, in addition to all
other sums and relief, its reasonable costs and attorneys' fees, incurred both
at and in preparation for trial and appeal.
5.0 GOVERNING LAW, SEVERABILITY
---------------------------
5.1 Governing Law; Venue. This NOTE has been executed under and shall
be construed and enforced in accordance with the laws of the State of New York.
Exclusive venue for any legal action taken in connection with the enforcement or
interpretation of this Note shall be in New York County, New York.
5.2 Severability. If a provision of this NOTE is found by a court of
competent jurisdiction to be invalid or enforceable as written, then the parties
intend and desire that
(a) the provision be enforceable to the full extent
permitted by law, and
(b) the invalidity or unenforceability of the provision
shall not effect the validity and enforceability of the remainder of this NOTE.
6.0 AMENDMENT
---------
6.1 This NOTE may not be amended, modified or changed, nor shall a
provision of this NOTE be deemed waived, except only by an instrument in writing
signed by a party against whom enforcement of a waiver, amendment, change, or
modification is sought.
7.0 WAIVERS
-------
7.1 MAKER, without affecting their liability
(a) waives diligence, presentment, protest and demand,
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<PAGE>
(b) waives notice of protest, of demand, of nonpayment of
dishonor and of maturity; and
8.0 BINDING AGREEMENT; NON-ASSIGNMENT
8.1 This NOTE shall be binding upon the successors and assigns of
MAKER. Neither this Note nor any rights therein shall be assigned to any third
party or entity without the prior written consent of MAKER.
9.0 ACKNOWLEDGMENT
9.1 IN WITNESS WHEREOF, this NOTE has been executed as of the date
and year first above written.
OBJECTSOFT CORPORATION
By: _____________________________
David E.Y. Sarna, Chairman
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FORM OF WARRANT
<PAGE>
FORM OF
WARRANT AND WARRANT AGREEMENT TO PURCHASE COMMON STOCK
OF
OBJECTSOFT CORPORATION
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
OBJECTSOFT CORPORATION (the "Company") has agreed to issue
to_____________ ("Holder") this warrant to acquire either (i) if the Company
completes an initial public offering of its securities ("IPO") on or before
September 30, 1997, ______ Thousand (______) shares of common stock ("Common
Stock") or other securities offered at seventy (70%) percent of the per share or
other security offering price in the IPO (the "IPO Securities") exercisable for
three (3) years from the date of issuance, which exercise period shall be
extended for a period equal to the time that lapses between September 30, 1996
and the date of completion of the IPO but in no event shall such extension be
for more than one (1) year (the "Extension Date") or (ii) if the Company does
not complete an IPO on or before September 30, 1997, ______ Thousand (______)
shares of Common Stock at $3.50 per share, exercisable until September 30, 1999
(the "Shares") pursuant to the terms provided in this Warrant and Warrant
Agreement. (This Warrant and Warrant Agreement is hereafter referred to as the
"Warrant".)
Accordingly, the Company and the Holder agree as follows:
1. Issuance. The Company hereby issues to the Holder the right to
purchase, subject to the provisions of this Warrant, either (i) ______ Thousand
(______) IPO Securities, at a price of seventy (70%) percent of the purchase
price of the IPO Securities offered to the public pursuant to the IPO, as
adjusted in accordance with the terms hereof, at any time during the period from
the date of this Warrant through and including 5:00 P.M., New York City time, on
April _, 1999 unless extended to the Extension Date (the "First Exercise
Period") or (ii) ______ Thousand (______) Shares, at a price of $3.50 per Share,
at any time during the period from and after September 30, 1997 until September
30, 1999 (the "Second Exercise Period") at which time, as the case may be with
respect to whether this Warrant is exercisable for either the purchase of IPO
Securities or Shares, this Warrant shall expire and become void on the
expiration of the First Exercise Period and the Second Exercise Period. The
number of IPO Securities or Shares, as the case may be, to be received upon the
exercise of this Warrant and the price to be paid for each may be adjusted from
time to time as
<PAGE>
herein set forth. The securities deliverable pursuant to this Warrant as they
may be adjusted from time to time are herein referred to as "Warrant Securities"
and the exercise price for the underlying securities in effect at any time and
as adjusted from time to time is herein referred to as the "Exercise Price".
2. Exercise of Warrants. This Warrant may be exercised as a whole or
in part at any time during the Exercise Period by presentation and surrender
hereof to the Company at its executive offices with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price. If this
Warrant is exercised in part, the Company will issue to the Holder a new warrant
representing the right of the Holder to purchase the remaining number of Warrant
Securities and otherwise on identical terms hereto.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant and the exercise of any
convertible securities issuable upon the exercise hereof.
4. Assignment or Loss of Warrant. (a) This Warrant is not assignable
or transferable without the written consent of the Company, except by operation
of law or as provided in (b) below. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
(b) This Warrant shall not be transferable by Holder other than to a
"Permitted Transferee" (as defined below), or a financial institution as
collateral to secure a pledge from the Holder to the financial institution in
connection with a loan from such financial institution to the Holder; provided,
that any Permitted Transferee shall be absolutely prohibited from transferring
all or any portion of this Warrant other than to Holder or another Permitted
Transferee of Holder; and provided further, that if Holder dies or becomes
incapacitated, this Warrant may be exercised by Holder's estate, legal
representative or beneficiary, as the case may be, subject to all other terms
and conditions contained in this Warrant.
(c) For purposes of this Agreement, Permitted Transferees shall
include only the members of the "immediate family" (which shall be limited to
his spouse, children, parents and siblings) of Holder, and to trusts for such
person's own benefit and/or for the benefit of members of his immediate family;
provided, that such Permitted Transferees must agree in writing to be bound by
all of the terms of this Agreement to the same extent as Holder hereunder, in
form acceptable to counsel to the Company, including but not limited to
restrictions on the exercise of this Warrant and on transfers of IPO Securities
or Shares, as the case may be, following exercise of this Warrant, such that any
IPO Securities or Shares so acquired shall be held subject to the terms of this
Agreement. IPO Securities or Shares held by any Permitted Transferee shall be
aggregated with those held by the Permitted
<PAGE>
Transferee's transferor in order to determine the number of IPO Securities or
Shares subject to the provisions of this Agreement.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 If at any time and from time to time the Company shall (i)
declare a dividend or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock or (iv) otherwise effect a recapitalization of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a greater or lesser number of shares of Common Stock, then the
Exercise Price in effect on the record date of such dividend or distribution or
the effective date of such subdivision, combination or reclassification
(individually an "Event" and collectively the "Events") shall be adjusted, or
further adjusted, to a price (to the nearest cent) determined by multiplying (i)
the Exercise Price in effect immediately prior to such Event by (ii) a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Event, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such Event. Upon
each adjustment in the Exercise Price resulting from an Event, the number of
Warrant Securities shall be adjusted (to the nearest one-thousandth share) by
multiplying (i) the number of Warrant Securities for which the Warrant was
exercisable immediately prior to such Event by (ii) a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to such Event, and
the denominator of which shall be the Exercise Price in effect immediately after
such Event. Notice of each such adjustment and each such readjustment shall be
forthwith mailed to the Holder setting forth such adjustments or readjustments
and the facts and calculations thereof in reasonable detail. Any dividend paid
or distributed upon the Common Stock in stock of any other class of securities
convertible into shares of Common Stock shall be treated as a dividend paid in
Common Stock to the extent that shares of Common Stock are issuable upon the
conversion thereof.
6.2 In case: (i) a distribution in the form of stock or other
securities of any other corporation or other entity shall be made or paid by the
Company on, or with respect to, the then outstanding shares of Common Stock,
(ii) the Company shall effect a recapitalization of such character that the
shares of Common Stock will be changed into or become exchangeable for shares of
Common Stock with a different par value or no par value, (iii) the Company (or a
successor corporation) shall be consolidated or merged with or into another
corporation or entity or shall 'sell, lease or convey all or substantially all
of its assets in exchange for stock or property (including cash) with the view
of distributing such stock or property to its shareholders, or (iv) the Board of
Directors of the Company shall declare any dividend or other distribution in
cash or any evidence of the Company's indebtedness (other than convertible
securities) with respect to the shares of Common Stock, each IPO Security or
Share, as the case may be, issuable upon exercise of this Warrant shall be
replaced by, - and/or shall include, as the case may be, for the purposes
hereof, the stock, property,
<PAGE>
cash or evidence of indebtedness issued or distributed in respect of each share
of Common Stock upon such recapitalization, reclassification, merger, sale,
lease, conveyance or distribution as the Holder would have been entitled to had
the Holder exercised this Warrant and any underlying convertible security
immediately prior to any such occurrence, and adequate provision to that effect
shall be made at the time thereof.
6.3 In case:
6.3.1 of any classification, reclassification or other reorganization
of the ca ital stock of the Company, consolidation or merger of the Company with
or into another corporation, or the sale, lease or conveyance of all or
substantially all of the assets of the Company; or
6.3.2 of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, and in any such case, the Company shall mail to
the Holder, at least 15 days prior thereto, a notice stating the date or
expected date on which a record is to be taken. Such notice shall also specify
the date or expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such classification,
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation, winding up or any other appropriate action, as the
case may be.
7. Transfer to Comply with the Securities Act. This Warrant has not
been registered under the Securities Act of 1933, as amended (the "Act") and has
been issued to the Holder for investment and not with a view to the distribution
of either the Warrant or the Warrant Securities. Neither this Warrant nor any of
the Warrant Securities or any other security issued or issuable upon exercise of
this Warrant may be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Act relating to such security or
an opinion of counsel satisfactory to the Company that registration is not
required under the Act. Each certificate for the Warrant, the Warrant Securities
and any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section.
8. Registration Rights. (i) If at any time or from time to time
following the date hereof, the Company shall determine to register any
distribution of its securities with the Securities and Exchange Commission,
either for its own account or the account of a security holder or holders, in a
registration statement covering the sale of shares of Common Stock or other
securities to the general public pursuant to a public offering in compliance
with the Act (except with respect to any registration filed on Form S-4 or such
other form which does not include substantially the same information as would be
included in a registration statement covering the sale of shares of Common Stock
to the general public) , the Company will: (a) give to Holder written notice
thereof at least 30 days before the initial filing of such registration
statement (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and (b) include in such registration (and any
related qualification under blue sky laws) and in any underwriting involved
therein, all the IPO Securities and securities underlying the IPO Securities or
Shares, as the case may be, specified in a written request,
<PAGE>
made within 30 days after receipt of such written notice from the Company, by
Holder, except as set forth in subparagraphs (ii) or (iii) below.
(ii) If the distribution is to be underwritten, the right of Holder
to registration pursuant to this Section 8 shall be conditioned upon Holder's
participation in the underwriting and the inclusion of Holder's IPO Securities
and securities underlying the IPO securities or Shares, as the case may be, in
the underwriting to the extent provided herein. Holder shall (together with the
Company) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Holder shall furnish to the Company such written information concerning Holder
and the distribution proposed by Holder as the Company may reasonably request.
(iii) Notwithstanding any other provision of this Section 8, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, and such determination is made by such underwriter
in writing and in good faith, then the underwriter may limit the number of
Holder's IPO Securities and securities underlying the IPO securities or Shares,
as the case may be, to be included in the registration and underwriting, or may
exclude Holder's IPO Securities and securities underlying the IPO securities or
Shares entirely from such underwriting, provided that the underwriter limits all
proposed selling shareholders on a pro-rata basis.
(iv) Holder agrees that the underwriter or the Company shall each
have the right, in their sole discretion, to prohibit the sale of all or any
portion of the IPO Securities and securities underlying the IPO Securities or
Shares for a period not to exceed eighteen (18) months from the closing of a
public offering of the Company's securities (the "Lock-up") . All Holder's IPO
Securities and securities underlying the IPO Securities or Shares shall be
included in the Company's registration statement and the Company keeps such
registration statement effective as provided in Section 8(iv) below.
(v) At any time commencing one (1) year after the completion of an
IPO if the Warrants and the IPO Securities and the securities underlying the IPO
Securities or the Shares, as the case may be, have not been included in a
registration statement pursuant to which they may be sold, the Holders of more
than fifty (50%) percent of the Warrants shall have the right (which right is in
addition to the registration rights set forth elsewhere in this Section 8,
exercisable by written notice to the Company, to have the Company prepare and
file with the Commission, on one occasion, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
counsel for the Company, in order to comply with the provisions of the Act, so
as to permit a public offering and sale of their respective Warrant Securities
(and any underlying securities) for one (1) year by such Holders and any other
Holders of the Warrants and/or Warrant Securities who notify the Company within
ten (10) days after receiving notice from the Company of such request. The
Company covenants and agrees to give written notice of any registration request
under this Section 8 by any Holder or Holders to all other registered Holders of
the Warrants and the Warrant Securities within ten (10) days from the date of
the receipt of any such registration request.
(vi) All expenses incurred in connection with any registration or
qualification pursuant to this Agreement, including, without limitation, all
registration, filing and qualification fees, printing
<PAGE>
expenses, fees and disbursements of counsel for the Company, and expenses and
fees of any special audits incidental to or required by. such registration,
shall be borne by the Company; provided, however, that the Company in any event
shall not be required to pay the fees of Holder's legal counsel, brokerage fees,
or underwriters' discounts or commissions relating to Holder's IPO Securities
and securities underlying any IPO Securities or Shares (such legal fees,
brokerage fees, and underwriters, discounts or commissions to be borne by
Holder).
(vii) In the case of each registration effected by the Company
pursuant to this Agreement, the Company will: (i) keep such registration or
qualification pursuant to this Section 8 effective for a period of not less than
one year from the expiration of the Lock-Up or until Holder has completed the
distribution described in the registration statement relating thereto, whichever
first occurs, and (ii) furnish such number of prospectuses and other documents
incident thereto as Holder from time to time may reasonably request.
(viii) The registration rights granted to Holder pursuant to this
Section 8 are assignable solely to his Estate and his Permitted Transferees in
connection with a transfer of any Shares to such persons.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
OBJECTSOFT CORPORATION
50 East Palisade Avenue
Englewood, New Jersey 07631
Attention: David E. Y. Sarna, Chairman
(ii) if to the Holder, to:
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented or any provision hereof waived only by an instrument in
writing signed by the Company and the Holders of more than fifty (50%) percent
of the Warrants. Any amendment or supplement or waiver approved by more than
fifty (50%) percent of the Warrants shall be binding on all the Holders thereof.
This Warrant contains the full understanding of the parties hereto with
<PAGE>
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York and f or all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the __ day of _________, 1996.
OBJECTSOFT CORPORATION
By: ___________________________
George J. Febish, President
___________________________
Holder
WARRANT AND WARRANT AGREEMENT TO PURCHASE COMMON STOCK
OF
OBJECTSOFT CORPORATION
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
OBJECTSOFT CORPORATION (the "Company") has agreed to issue to
RENAISSANCE FINANCIAL SECURITIES CORPORATION ("Holder") this warrant to acquire
either (i) if the Company completes an initial public offering of its securities
("IPO") on or before September 30, 1997, ________________Thousand (______)
shares of common stock ("Common Stock") or other securities offered at
ninety-one (91%) percent of the per share or other security offering price in
the IPO (the "IPO Securities") exercisable for five (5) years from the date of
issuance, or (ii) if the Company does not complete an IPO on or before September
30, 1997, _______ Thousand (______) shares of Common Stock at $4.55 per share,
exercisable for five (5) years from the date of issuance (the "Shares") pursuant
to the terms provided in this Warrant and Warrant Agreement. (This Warrant and
Warrant Agreement is hereafter referred to as the "Warrant" .) The Warrant
issued to Renaissance Financial Securities Corporation, as placement agent,
pursuant to the Placement Agent Agreement dated as of March 21, 1996 between the
Company and Renaissance is hereafter referred to as the "Warrant" or
collectively the "Warrants," and all holders of the Warrants initially issuable
to Renaissance as a Holder are hereafter referred to collectively as the
"Holders."
Accordingly, the Company and the Holder agree as follows:
1. Issuance. The Company hereby issues to the Holder the right to
purchase, subject to the provisions of this Warrant, either (i) if the Company
completes an IPO on or before September 30, 1997, _________ Thousand (_______)
IPO Securities, at a price of ninety-one (91%) percent of the purchase price of
the IPO Securities offered to the public pursuant to the IPO, as adjusted in
accordance with the terms hereof, at any time during the period from the date of
this Warrant through and including 5:00 P.M., New York City time, on April 11,
2001 or (ii) if the Company does not complete an IPO on or before September 30,
1997, _________ Thousand (______) Shares, at a price of $4.55 per Share, at any
time during the period from and after September 30, 1997 until April 11, 2001 at
which time, as the case may be with respect to whether this Warrant is
exercisable for either the purchase of IPO Securities or Shares, this Warrant
shall expire and become null and void. The number of IPO Securities or Shares,
as the case may be, to be
<PAGE>
received upon the exercise of this Warrant and the price to be paid for each may
be adjusted from time to time as herein set forth. The securities deliverable
pursuant to this Warrant as they may be adjusted from time to time are herein
referred to as "Warrant Securities" and the exercise price for the underlying
securities in effect at any time and as adjusted from time to time is herein
referred to as the "Exercise Price". Notwithstanding anything to the contrary
contained herein, in the event this Warrant is exercisable for IPO securities,
if such IPO Securities offered to the public include a warrant or other security
which is redeemable, such warrant or other security issuable to Holder pursuant
hereto shall not be subject to redemption.
2. Exercise of Warrants. This Warrant may be exercised as a whole or
in part at any time during the Exercise Period by presentation and surrender
hereof to the Company at its executive offices with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price. If this
Warrant is exercised in part, the Company will issue to the Holder a new warrant
representing the right of the Holder to purchase the remaining number of Warrant
Securities and otherwise on identical terms hereto.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this warrant and the exercise of any
convertible securities issuable upon the exercise hereof.
4. Assignment or Loss of Warrant. (a) This Warrant is not assignable
or transferable without the written consent of the Company, except by operation
of law or as provided in (b) below. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
(b) This Warrant shall not be transferable by Holder other than
to a "Permitted Transferee" (as defined below), or a financial institution as
collateral to secure a pledge from the Holder to the financial institution in
connection with a loan from such financial institution to the Holder; provided,
that any Permitted Transferee shall be absolutely prohibited from transferring
all or any portion of this Warrant other than to Holder or another Permitted
Transferee of Holder; and provided further, that if Holder becomes insolvent, is
liquidated, dies or becomes incapacitated, this Warrant may be exercised by
Holder's trustee, estate, other legal representative or beneficiary, as the case
may be, subject to all other terms and conditions contained in this Warrant.
(c) For purposes of this Agreement, Permitted Transferees shall
include employees who are registered representatives, officers, directors and
principal shareholders of Holder, and to trusts for each such person's own
benefit and/or for the benefit of members of his immediate family; provided,
that such Permitted Transferees must agree in writing to be bound by all of the
terms of this Agreement to the same extent as Holder hereunder, in form
reasonably acceptable to
- 2 -
<PAGE>
counsel to the Company, including but not limited to restrictions on the
exercise of this Warrant and on transfers of IPO Securities or Shares, as the
case may be, following exercise of this Warrant, such that any IPO Securities or
Shares so acquired shall be held subject to the terms of this Agreement. IPO
Securities or Shares held by any Permitted Transferee shall be aggregated with
those held by the Permitted Transferee's transferor in order to determine the
number of IPO Securities or Shares subject to the provisions of this Agreement.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 If at any time and from time to time the Company shall (i)
declare a dividend or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock or (iv) otherwise effect a recapitalization of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a greater or lesser number of shares of Common Stock, then the
Exercise Price in effect on the record date of such dividend or distribution or
the effective date of such subdivision, combination or reclassification
(individually an "Event" and collectively the "Events") shall be adjusted, or
further adjusted, to a price (to the nearest cent) determined by multiplying (i)
the Exercise Price in effect immediately prior to such Event by (ii) a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Event, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such Event. Upon-
each adjustment in the Exercise Price resulting from an Event, the number of
Warrant Securities shall be adjusted (to the nearest one-thousandth share) by
multiplying (i) the number of Warrant Securities for which the Warrant was
exercisable immediately prior to such Event by (ii) a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to such Event, and
the denominator of which shall be the Exercise Price in effect immediately after
such Event. Notice of each such adjustment and each such readjustment shall be
forthwith mailed to the Holder setting forth such adjustments or readjustments
and the facts and calculations thereof in reasonable detail. Any dividend paid
or distributed upon the Common Stock in stock of any other class of securities
convertible into shares of Common Stock shall be treated as a dividend paid in
Common Stock to the extent that shares of Common Stock are issuable upon the
conversion thereof.
6.2 In case: (i) a distribution in the form of stock or other
securities of any other corporation or other entity shall be made or-paid by the
Company on, or with respect to, the then outstanding shares of Common Stock,
(ii) the Company shall effect a recapitalization of such character that the
shares of Common Stock will be changed into or become exchangeable for shares of
Common Stock with a different par value or no par value, (iii) the Company (or a
successor corporation) shall be consolidated or merged with or into another
corporation or entity or shall sell, lease or convey all or substantially all of
its assets in exchange for stock or property (including cash)
- 3 -
<PAGE>
with the view of distributing such stock or property to its shareholders, or
(iv) the Board of Directors of the Company shall declare any dividend or other
distribution in cash or any evidence of the Company's indebtedness (other than
convertible securities) with respect to the shares of Common Stock, each IPO
Security or Share, as the case may be, issuable upon exercise of this Warrant
shall be replaced by, and/or shall include, as the case may be, for the purposes
hereof, the stock, property, cash or evidence of indebtedness issued or
distributed in respect of each share of Common Stock upon such recapitalization,
reclassification, merger, sale, lease, conveyance or distribution as the Holder
would have been entitled to had the Holder exercised this Warrant and any
underlying convertible security immediately prior to any such occurrence, and
adequate provision to that effect shall be made. at the time thereof.
6.3 In case:
6.3.1 of any classification, reclassification or other
reorganization of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, or the sale, lease or conveyance
of all or substantially all of the assets of the Company; or
6.3.2 of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, and in any such case, the Company shall mail to the Holder, at least 15
days prior thereto, a notice stating the date or expected date on which a record
is to be taken. Such notice shall also specify the date or expected date, if any
is to be fixed, as of which holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, winding up or any
other appropriate action, as the case may be.
7. Transfer to Comply with the Securities Act. This Warrant has
not been registered under the Securities Act of 1933, as amended (the "Act") and
has been issued to the Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Securities. Neither this
Warrant nor any of the Warrant Securities or any other security issued or
issuable upon exercise of this Warrant may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the Act
relating to such security or an opinion of counsel satisfactory to the Company
that registration is not required under the Act. Each certificate for the
Warrant, the Warrant Securities and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
8. Registration Rights. If at any time or from time to time
following the date hereof, the Company shall determine to register any
distribution of its securities with the Securities and Exchange Commission,
either for its own account or the account of a security holder or holders, in a
registration statement covering the sale of shares of Common Stock or other
securities to the
- 4 -
<PAGE>
general public pursuant to a public offering in compliance with the Act (except
with respect to any registration filed on Form S-4 or such other form which does
not include substantially the same information as would be included in a
registration statement covering the sale of shares of Common Stock to the
general public) , the Company will: (a) give to Holder written notice thereof at
least 30 days before the initial filing of such registration statement (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws) ; and (b) include in such registration (and any related
qualification under blue sky laws) and in any underwriting involved therein, all
the IPO Securities and securities underlying the IPO Securities or Shares, as
the case may be, specified in a written request, made within 30 days after
receipt of such written notice from the Company, by Holder, except as set forth
in subparagraphs (ii) or (iii) below.
(ii) If the distribution is to be underwritten, the right of
Holder to registration pursuant to this Section 8 shall be conditioned upon
Holder's participation in the underwriting and the inclusion of Holder's IPO
Securities and securities underlying the IPO securities or Shares, as the case
may be, in the underwriting to the extent provided herein. Holder shall
(together with the Company) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Holder shall furnish to the Company such written information concerning
Holder and the distribution proposed by Holder as the Company may reasonably
request.
(iii) Notwithstanding any other provision of this Section 8, if
the underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, and such determination is made by such
underwriter in writing and in good faith, then the underwriter may limit the
number of Holder's IPO Securities and securities underlying the IPO securities
or Shares, as the case may be, to be included in the registration and
underwriting, or may exclude Holder's IPO Securities and securities underlying
the IPO securities or Shares entirely from such underwriting, provided that the
underwriter limits all proposed selling shareholders on a pro-rata basis.
(iv) All Holder's IPO Securities and securities underlying the
IPO Securities or Shares shall be included in the Company's registration
statement for the IPO and the Company shall keep such registration statement
effective as provided in Section 8(v) below.
(v) At any time commencing one (1) year after the completion of
an IPO if the Warrants and the IPO Securities and the securities underlying the
IPO Securities or the Shares, as the case may be, have not been included in a
registration statement pursuant to which they may be sold, the Holders of more
than fifty (50%) percent of the Warrants (i.e. the Warrants initially issuable
to Renaissance, as placement agent) shall have the right (which right is in
addition to the registration rights set forth elsewhere in this Section 8. and
is distinct and separate from any rights accorded to holders of warrants
pursuant to the bridge financing with respect to which Renaissance Financial
Securities Corporation is acting as placement agent), exercisable by written
notice to the Company,
- 5 -
<PAGE>
to have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of counsel for the Company, in order to comply with
the provisions of the Act, so as to permit a public offering and sale of their
respective Warrant Securities (and any underlying securities) for one (1) year
by such Holders and any other Holders of the Warrants and/or Warrant Securities
who notify the Company within ten (10) days after receiving notice from the
Company of such request. The Company covenants and agrees to give written notice
of any registration request under this Section 8. by any Holder or Holders to
all other registered Holders of the Warrants and the Warrant Securities within
ten (10) days from the date of the receipt of any such registration request.
(vi) All expenses incurred in connection with any registration or
qualification pursuant to this Agreement, including, without limitation, all
registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company, and expenses and fees of any special
audits incidental to or required by such registration, shall be borne by the
Company; provided, however, that the Company in any event shall not be required
to pay the fees of Holder's legal counsel, brokerage fees, or underwriters,
discounts or commissions relating to Holder's IPO Securities and securities
underlying any IP.0 Securities or Shares (such legal fees, brokerage fees, and
underwriters, discounts or commissions to be borne by Holder).
(vii) In the case of each registration effected by the Company
pursuant to this Agreement, the Company will: (i) keep such registration or
qualification pursuant to this Section a. effective for a period of not less
than one year from the expiration of any restriction on the sale of the Warrant
Securities registered or until Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs, and (ii)
furnish such number of prospectuses and other documents incident thereto as
Holder from time to time may reasonably request.
(viii) The registration rights granted to Holder pursuant to this
Section 8. are assignable to its Permitted Transferees in connection with a
transfer of any IPO Securities and securities underlying any IPO Securities or
Shares, as the case may be, to such persons.
9. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
<PAGE>
(i) if to the Company, to:
OBJECTSOFT CORPORATION
50 East Palisade Avenue
Englewood, New Jersey 07631
Attention: David E. Y. Sarna, Chairman
(ii) if to the Holder, to:
RENAISSANCE FINANCIAL SECURITIES CORP.
200 Old Country Road
Suite 400 Mineola, NY 11501
Attention: Todd M. Spehler, President
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
10. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented or any provision hereof waived only by an instrument in
writing signed by the Company and the Holders of more than fifty (50%.) percent
of the Warrants. Any amendment or supplement or waiver approved in writing by
the Holders of more than fifty (50%) percent of the Warrants shall be binding on
all Holders. This Warrant contains the full understanding of the parties hereto
with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
- 7 -
<PAGE>
13. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the ____ day of _____, 1996.
OBJECTSOFT CORPORATION
By: ________________________________
David E. Y. Sarna
RENAISSANCE FINANCIAL SECURITIES
CORPORATION
By: ________________________________
Todd M. Spehler, President
- 8 -
SUBSCRIPTION AGREEMENT AND INVESTMENT
REPRESENTATION OF INVESTOR
ObjectSoft Company
50 East Palisade Avenue
Englewood, New Jersey 07631
Gentlemen:
1. Subject to the terms and conditions hereof, the undersigned,
intending to be legally bound, hereby irrevocably subscribes for and agrees to
purchase from ObjectSoft Corporation, a Delaware corporation (the "Company"),
the number of units ("Units") set forth on the signature page of this Agreement;
each Unit consisting of one (1) share (the "Shares") of the common stock, par
value $.0001 per share (the "Common Stock"), of the Company and one (1) warrant
(the "Warrants") to purchase two-thirds (2/3) of a share of Common Stock at any
time commencing on issuance until a date that is three years after the date of
issuance, which exercise period shall be extended for a period equal to the time
that lapses between September 30, 1996 and the date of completion of the
Company's initial public offering ("IPO") of securities (but in no event later
than September 30, 2000).
2. The undersigned herewith tenders to the Company the undersigned's
check representing, subject to collection, 100% of the purchase price of the
Units herein subscribed for at the rate of $3.50 per Unit, payable to the order
of ObjectSoft Corporation.
3. In order to induce the Company to accept the subscription made
hereby, the undersigned hereby represents and warrants to the Company as
follows:
(a) The undersigned, if a company or other entity, is
incorporated or organized under the laws of the jurisdiction set forth beneath
the signature made on its behalf below and has no present intention of altering
the jurisdiction of its organization or incorporation.
(b) The undersigned understands that the Units being subscribed
for by it will have been issued to it in reliance upon, among other things, the
representations, warranties and statements made by it herein, and its
acknowledgment (evidenced by the execution of this Agreement) that the Units
will not have been registered under the Securities Act of 1933 (the "Act") and
are being offered and sold under an exemption from registration provided by the
Act;
<PAGE>
(c) The Units hereby subscribed for are being acquired by it
solely for its own account, for investment purposes only, and are not being
purchased with a view to, or in connection with, any resale, distribution,
subdivision or fractionalization thereof; it has no agreement or other
arrangement, formal or informal, with any person to sell, transfer or pledge any
part of the Units subscribed for or which would guarantee it any profit or
prevent any loss with respect to such Units; it has no plans to enter into any
such agreement or arrangement; and, consequently, it understands that it must
bear the economic risk of the investment for an indefinite period of time
because the Units cannot be resold or otherwise transferred unless they are
subsequently registered under the Act or an exemption from such registration is
available, and, in any event, unless they are transferred in compliance with
this Agreement. The undersigned has been advised that the Company has no
obligation to cause the Units to be registered under the Act or to comply with
any exemption under the Act, including but not limited to that set forth in Rule
144 promulgated under the Act, which would permit the Units to be sold by the
undersigned. The undersigned understands that it is not anticipated that there
will be any market for resale of the Units, the Shares or the Warrants and that
it may not be possible for the undersigned to liquidate an investment in the
Units;
(d) It understands that no federal or state agency has passed on
or made any recommendation or endorsement of the Units;
(e) It has such knowledge and experience in financial and
business affairs, including the business and operations of the Company, that it
is capable of evaluating the merits and risks involved in acquiring the Units
and of making an informed business decision, and is able to bear the economic
risk involved in acquiring the Units, to hold the Units for an indefinite period
of time and to afford a complete loss of its investment;
(f) The Company has provided it with a copy of the following
documents ("Company Documents"): (i) audited financial statements of the Company
for the years ended December 31, 1995 and December 31, 1994 and unaudited
financial statements of the Company for the six month periods ended June 30,
1996 and 1995; (ii) a draft, dated July 25, 1996, of a Registration Statement on
Form SB-2 ("Draft Form SB-2") for a proposed IPO of the Company's securities,
and (iii) the form of the Warrant and Warrant Agreement to Purchase Common Stock
for the Warrants (the "Warrant Agreement"). The undersigned represents that it
has reviewed the Company Documents, especially the discussion of risk factors
contained in the Draft Form SB-2. The undersigned understands that the Draft
Form SB-2 is in preliminary form and may be subject to changes as to form and
substance. The undersigned also understands that the results for the six month
period ended June 30, 1996 may not be indicative of the results for the year
ending December 31, 1996. The undersigned further understands that there can be
no assurance that the proposed IPO will be completed in the near future or at
all and that, even if completed, the structure of the IPO, the use of proceeds
and the plan of operation of the Company, among other things, may substantially
differ from that set forth in the Draft Form SB-2.
2
<PAGE>
(g) The undersigned acknowledges that the sale of the Units is
part of an offering by the Company (the "Offering") to "accredited investors,"
as that term is defined in Regulation D, promulgated under the Act ("Regulation
D"). It is currently anticipated that the Offering will comprise approximately
150,000 Units for an aggregate of $525,000. However, the undersigned understands
that there is no assurance that 150,000 Units will be sold, that the actual
number of Units sold may be less than or greater than 150,000, and that
acceptance of the undersigned's subscription is not dependent upon any minimum
or maximum number of Units being sold in the Offering. The undersigned
acknowledges that the Company will pay the expenses of the Offering, including
the commissions and fees described in Paragraph 3(r) of this Agreement, and that
of the net proceeds of the Offering, $125,000 will be used to redeem the
convertible Series B Preferred Stock owned by a principal stockholder of the
Company (who will also receive warrants to purchase 20,000 shares of the Common
Stock of the Company at an exercise price of $7.00 per share in connection with
such redemption), which stockholder is affiliated with Win Capital Corporation,
the placement agent for the Offering, and the balance will be used for working
capital and general purposes, including a payment of an amount not to exceed an
aggregate of $100,000 for unpaid salaries owed to two persons who are executive
officers and principal stockholders of the Company;
(h) The Company has offered to furnish information to the
undersigned and has offered to have the Company and persons acting on its behalf
answer questions of the undersigned concerning the Company. All such questions
have been answered to the full satisfaction of the undersigned;
(i) The undersigned is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D by reason of one of the following
statements ( The undersigned must initial at least one of the following
statements):
____ (i) The undersigned certifies that it is a bank as defined in
section 3(a)(2) of the Act, or any savings and loan association
or other institution as defined in section 3(a)(8)(A) of the
Act, whether acting in its individual or fiduciary capacity.
____ (ii) The undersigned certifies that it is an insurance company
as defined in section 2(13) of the Act.
____ (iii) The undersigned certifies that it is a broker/dealer
registered pursuant to the Securities Exchange Act of 1934.
____ (iv) The undersigned certifies that it is an investment company
registered under the Investment Company Act of 1940, or business
development company as defined in section 2(a)(48) of such act.
3
<PAGE>
____ (v) The undersigned certifies that it is a Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958.
____ (vi) The undersigned certifies that it is an employee benefit
plan within the meaning of Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and either (i) the
investment decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company or registered investment adviser,
(ii) the employee benefit plan has total assets in excess of
$5,000,000, or (iii) if a self-directed plan, investment
decisions are made solely by persons that are "accredited
investors" as defined in Rule 501(a) of Regulation D.
____ (vii) The undersigned certifies that it is a private business
development company as defined in section 202(a)(22) of the
Investment Advisors Act of 1940.
____ (viii) The undersigned certifies that it is an organization
described in section 501(c)(3) of the Internal Revenue Code,
company, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of $5,000,000.
____ (ix) The undersigned certifies that he/she is a director or
executive officer of the Company.
____ (x) The undersigned certifies that he/she is a natural person
whose individual net worth, or joint net worth with his/her
spouse, at the time of his/her purchase of the Units exceeds
$1,000,000 (inclusive of the value of his/her home, home
furnishings and automobiles).
____ (xi) The undersigned certifies that he/she is a natural person
who has an individual income in excess of $200,000 in each of
the two most recent years or joint income with his/her spouse in
excess of $300,000 in each of those years, and has a reasonable
expectation of reaching the same income level in the current
year.
____ (xii) The undersigned certifies that it is a trust with total
assets of in excess of $5,000,000, not formed for the specific
purpose of acquiring the Units, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D.
____ (xiii) The undersigned certifies that it is an entity in which
all of the equity owners are "accredited investors" as defined
in Rule 501(a) of Regulation D. If the undersigned checks this
item, a separate Confidential Purchaser Questionnaire must be
completed and signed on behalf of each equity owner.
4
<PAGE>
(j) The undersigned has reviewed the merits of an investment in
the Units with tax and legal counsel and with an investment advisor to the
extent the undersigned deemed advisable;
(k) The undersigned understands that the agreements relating to
compensation of the executive officers of the Company and agreements with the
stockholders or affiliates of the stockholders are not the result of arm's
length negotiations, and that potential conflicts of interest exist between the
Company, on the one hand, and executive officers and stockholders of the Company
and their respective affiliates, on the other hand;
(l) In making its decision to purchase the Units herein
subscribed for, the undersigned is not subscribing pursuant hereto for any Units
as a result of or subsequent to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio; or (ii) any seminar or meeting whose attendees,
including the undersigned, had been invited as a result of, subsequent to, or
pursuant to any of the foregoing;
(m) The undersigned is not acquiring the Units with a view to
realizing any benefits under United States federal income tax laws, and no
representations have been made to the undersigned that any such benefits will be
available as a result of the undersigned's acquisition, ownership, or
disposition of the Units;
(n) Each representation and warranty of the undersigned contained
herein and all information furnished by the undersigned to the Company is true,
correct and complete in all respects;
(o) The undersigned undertakes to (i) notify the Company
immediately of any change in any representation, warranty or other information
relating to the undersigned set forth herein, and (ii) supply the Company with
such additional information concerning the undersigned as the Company deems
necessary or appropriate;
(p) The undersigned further represents and warrants that (i) if
the undersigned is a corporation or other entity, the individual executing this
Agreement has full power and authority to execute and deliver this Agreement on
behalf of the undersigned, and if the undersigned is a natural person, he/she
has full power and authority to execute and deliver this Agreement, and (ii) the
undersigned has full right and power to perform its obligations pursuant to the
provisions hereof and to become a stockholder in the Company;
(q) All representations and warranties set forth above or in any
other written statement or document delivered by the undersigned in connection
with the transactions contemplated hereby will be true, correct and complete in
all respects on and as of the date of the issuance of the Units by the Company;
and
5
<PAGE>
(r) The undersigned has been informed and agrees that Win Capital
Corporation ("Win Capital") will receive the following as compensation for
acting as placement agent in the Offering in June and July 1996 (as the Offering
may be extended by the Company): (i) a commission equal to ten percent (10%) of
the aggregate purchase price of the subscriptions placed by Win Capital in the
Offering and accepted by the Company; (ii) a non-accountable allowance for
expenses incurred in the Offering equal to three percent (3%) of the aggregate
purchase price of the subscriptions placed by Win Capital in the Offering and
accepted by the Company; and (iii) placement agent warrants to purchase a number
of Units equal to ten percent (10%) of the aggregate number of Units placed by
Win Capital in the Offering and accepted by the Company.
4. The Company represents, warrants and covenants as follows:
(i) This Agreement has been duly and validly authorized by
the Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that the enforceability hereof
or thereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect and affecting the rights
of creditors generally, (b) limitations upon the power of the court to grant
specific performance or any other equitable remedy, and (c) a finding by a court
of competent jurisdiction that the indemnification provisions herein are in
violation of public policy. The Shares and the Warrants comprising the Units
(the "Unit Securities") to be issued and sold by the Company pursuant to this
Agreement, and the shares of Common Stock issuable upon the exercise of the
Warrants (the "Warrant Shares") have been duly authorized and, when issued and
paid for in accordance with this Agreement will be validly issued, fully paid
and, with respect to the Shares and the Warrant Shares, non-assessable; the
holders thereof are not and will not be subject to personal liability solely by
reason of being such holders; the Unit Securities and the Warrant Shares are not
and will not be subject to the preemptive rights of any stockholder of the
Company; and all corporate action required to be taken for the authorization,
issuance and sale of the foregoing securities has been duly and validly taken by
the Company.
(ii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission or preemptive
rights with respect thereto and are not subject to personal liability solely by
reason of being such holders.
(iii) The financial statements of the Company included in
the Company Documents fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principals, consistently applied throughout the periods
involved.
6
<PAGE>
(iv) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of its state of
incorporation. The Company has no subsidiaries. The Company is duly qualified or
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing and where failure to so
qualify would have a material adverse effect on the Company. The Company has all
requisite corporate power and authority, and all material and necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its businesses as described in the Company Documents, and
the Company is doing business in strict compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and all Federal, state,
local and applicable foreign laws, rules and regulations concerning the business
in which it is engaged, except where the failure so to do business in strict
compliance would not have a materially adverse impact on the business of the
Company.
(v) There has been no material adverse change in the
condition or, to the best of the Company's knowledge, prospects for
commercialization of the Company, financial or otherwise, from that on the
latest dates as of which such condition or prospects, respectively, are set
forth in the Company Documents.
(vi) The Company is not in violation of its Articles of
Incorporation or By-Laws. Neither the execution and delivery of this Agreement,
nor the issue and sale of the Units or the Warrant Shares nor the consummation
of any of the transactions contemplated herein, nor the compliance by the
Company with the terms and provisions hereof or thereof, has conflicted with or
will conflict with, or has resulted in or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any indenture, mortgage, deed or trust, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company may be bound or
to which any of the property or assets of the Company is subject; nor will such
action result in any violation of the provisions of the Articles of
Incorporation of the By-Laws of the Company.
(vii) To the best knowledge of the Company, the Company
Documents do not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5. Each certificate representing the Unit Securities owned by the
undersigned shall bear the following legend:
"The _________ evidenced by this certificate have been
acquired for investment and have not been registered under
the Securities
7
<PAGE>
Act of 1933 and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until
registered under the Securities Act of 1933, or unless, in
the opinion of counsel satisfactory to the Company, in
form and substance satisfactory to the Company and its
counsel, such offer, sale, transfer, pledge or
hypothecation is exempt from registration or is otherwise
in compliance with such Act. In addition, the Units
evidenced by this certificate are subject to the provision
of an agreement dated as of _____________, 1996, by and
between the Company and [the undersigned] and may not be
offered, sold or otherwise transferred, pledged or
hypothecated except in accordance therewith. A copy of
said agreement is on file at the offices of the Company."
6. The undersigned together with the holders of all the Units sold in
the Offering (collectively, the "Holders"), shall have registration rights with
regard to the Shares and the Warrant Shares (collectively, the "Registrable
Securities"), as follows:
(i) If at any time or from time to time following the date
hereof, the Company shall determine to register any of its securities with the
Securities and Exchange Commission (the "Commission"), either for its own
account or the account of a security holder or holders, in a registration
statement covering the sale of Common Stock to the general public pursuant to an
public offering in compliance with the Act (except with respect to any
registration filed on Form S-8, Form S-4 or such other form which does not
include substantially the same information as would be included in a
registration statement covering the sale of Common Stock to the public), the
Company will: (a) give to the Holders written notice thereof at least 15 days
before the initial filing of such registration statement (which shall include a
list of the jurisdictions in which the Company intends to attempt to qualify
such securities under the applicable blue sky or other state securities laws);
and (b) use its best efforts to include in such registration (and any related
qualification under blue sky laws) and in any underwriting involved therein, all
the Registrable Securities specified in a written request made within 15 days
after receipt of such written notice from the Company, by the Holder, except as
set forth in Paragraph 6 (ii) or 6 (iii) below. The "piggyback rights" provided
in this Paragraph 6(i) shall not apply to the initial public offering of the
securities of the Company (the "IPO").
(ii) If the sale of Registrable Securities being
registered is an underwritten offering, the right of the Holder to registration
pursuant to this Paragraph 6 shall be conditioned upon the Holder's
participation in the underwriting and the inclusion of the Holder's Registrable
Securities in the underwriting to the extent provided herein. The Holder shall
(together with the Company) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. The Holder shall furnish to the Company such written information
concerning the Holder and the distribution proposed by the holders as the
Company may reasonably request.
8
<PAGE>
(iii) Notwithstanding any other provision of this
Paragraph 6, if the underwriter (or the representative of the underwriters, as
the case may be) determines that marketing factors require a limitation of the
number of Registrable Securities to be underwritten, and such determination is
made by such underwriter in writing and in good faith, then the underwriter may
limit the number of the Holder's Registrable Securities to be included in the
registration and underwriting.
(iv) Holder agrees that the underwriter or the Company
shall each have the right, in their sole discretion, to prohibit the sale,
without prior written consent, of all or any portion of the Registrable
Securities for a period not to exceed 12 months from the closing of a public
offering of the Company's securities (the "Lock-up"). The provisions of this
Paragraph 6(iv) shall apply to any public offering of the Company's securities,
regardless of whether any Registrable Securities are included in or registered
concurrently with such offering. In connection with the IPO, any determination
relating to the Lock-up shall be made by the underwriter of the IPO. The Lock-up
shall be in addition to the restrictions on transfer set forth in the Warrant
Agreement.
(v) All expenses incurred in connection with any
registration or qualification pursuant to this Agreement, including, without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company, and expenses and fees of any
special audits incidental to or required by such registration, shall be borne by
the Company; provided, however, that the Company in any event shall not be
required to pay the fees of the Holder's legal counsel, brokerage fees, or
underwriters' fees, discounts or commissions relating to the Holder's
Registrable Securities (such legal fees, brokerage fees, and underwriters' fees,
discounts or commissions to be borne by the Holder).
(vi) In the case of a registration effected by the Company
pursuant to this Agreement, the Company will: (a) keep such registration or
qualification pursuant to this Paragraph 6 effective for a period of not less
than one (1) year from the expiration or termination of the Lock-up or until the
Holders have completed the distribution described in the registration statement
relating thereto, whichever first occurs, and (b) furnish such number of
prospectuses and other documents incident thereto as the Holders from time to
time may reasonably request.
7. The undersigned understands the meanings and legal consequences of
the representations and warranties contained in this Agreement and agrees to
indemnify and hold harmless the Company and each officer and director from and
against any and all loss, damage or liability due to or arising out of a breach
of any representation or warranty of the undersigned, whether contained in this
Agreement or any other subscription document, or any failure by the undersigned
to fulfill any covenants or agreements set forth herein or therein or arising
out of the sale or distributions by the undersigned of any Units or Unit
Securities in violation of the Act or any other applicable state securities or
"blue sky" laws.
9
<PAGE>
8. This Agreement shall be binding upon the undersigned, and its
legal representatives, successors, and assigns, and shall not be assignable.
9. This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with, the
laws of the State of New York without giving effect to principles and provisions
thereof relating to conflict or choice of laws.
10. All pronouns contained herein and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identify of the parties hereto may require.
11. This Agreement or any term hereof may not be changed, waived,
discharged or terminated except with the written consent of the undersigned and
the Company; provided, however that the provisions of Paragraph 6 may be amended
or waived by Holders holding 51% in interest of the aggregate number of the
Registrable Securities owned by all the Holders.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and agrees to be
bound by this Subscription Agreement and Investment Representation.
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Print Name
- --------------------------------------------------------------------------------
Print jurisdiction of organization or incorporation (for corporations or other
entities)
- --------------------------------------------------------------------------------
Print address
- ---------------------------------------
S.S./Tax I.D. Number
Units
- ---------------------------------------
Insert number of Units subscribed for
$
---------------------------------------
Insert purchase price ($3.50 per Unit)
Date: , 1996
------------
AGREED TO AND ACCEPTED this day , 1996:
---- -----------
OBJECTSOFT CORPORATION
By:
------------------------------------
11
FORM OF
WARRANT AND WARRANT AGREEMENT TO PURCHASE COMMON STOCK
OF
OBJECTSOFT CORPORATION
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE
SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
OBJECTSOFT CORPORATION (the "Company") has agreed to issue to
__________________ ("Holder") this Warrant to acquire __________________
(______) shares (the "Shares") of the Company's common stock, par value $.0001
per share ("Common Stock"), exercisable for three (3) years from the date of
issuance, which exercise period shall be extended for a period equal to the time
that lapses between September 30, 1996 and the date of completion of the
Company's initial public offering of its securities (the "IPO"), but in no event
shall such extension be for more than one (1) year (the "Extension Date"),
pursuant to the terms provided in this Warrant and Warrant Agreement. This
Warrant and Warrant Agreement is hereafter referred to as the "Warrant." This
Warrant is one of a series of Warrants issued by the Company in an offering by
the Company pursuant to Regulation D, promulgated under the Act of units (the
"Offering"), each unit consisting of one (1) share of Common Stock and one (1)
Warrant to purchase two-thirds (2/3) of a share of Common Stock. The Warrants
contained in such Units are hereinafter sometimes collectively referred to as
the "Unit Warrants."
Accordingly, the Company and the Holder agree as follows:
1. Issuance. The Company hereby issues to the Holder the right to
purchase, subject to the provisions of this Warrant, _______ ___________
(______) Shares, at a purchase price of $4.50 per Share, as adjusted in
accordance with the terms hereof, at any time during the period from the date of
this Warrant through and including 5:00 P.M., New York City time, on _________
_, 1999 unless extended to the Extension Date (the "Exercise Period") at which
time this Warrant shall expire and become void on the expiration of the Exercise
Period. The number of Shares to be received upon the exercise of this Warrant
and the price to be paid for each may be adjusted from time to time as herein
set forth. The Shares deliverable pursuant to this Warrant as they may be
adjusted from time to time are herein referred to as "Warrant Securities" and
the exercise price for the Shares in effect at any time and as adjusted from
time to time is herein referred to as the "Exercise Price."
<PAGE>
2. Exercise of Warrants. This Warrant may be exercised as a whole or
in part at any time during the Exercise Period by presentation and surrender
hereof to the Company at its executive offices with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price. If this
Warrant is exercised in part, the Company will issue to the Holder a new warrant
representing the right of the Holder to purchase the remaining number of Warrant
Securities and otherwise on identical terms hereto.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant.
4. Assignment or Loss of Warrant. (a) This Warrant is not assignable
or transferable without the written consent of the Company, except by operation
of law or as provided in (b) below. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
(b) This Warrant shall not be transferable by Holder other than to a
"Permitted Transferee" (as defined below), or a financial institution as
collateral to secure a pledge from the Holder to the financial institution in
connection with a loan from such financial institution to the Holder; provided,
that any Permitted Transferee shall be absolutely prohibited from transferring
all or any portion of this Warrant other than to Holder or another Permitted
Transferee of Holder; and provided further, that if Holder dies or becomes
incapacitated, this Warrant may be exercised by Holder's estate, legal
representative or beneficiary, as the case may be, subject to all other terms
and conditions contained in this Warrant.
(c) For purposes of this Warrant, Permitted Transferees shall include
only the members of the "immediate family" (which shall be limited to his
spouse, children, parents and siblings) of Holder, and to trusts for such
person's own benefit and/or for the benefit of members of his immediate family;
provided, that such Permitted Transferees must agree in writing to be bound by
all of the terms of this Agreement to the same extent as Holder hereunder, in
form acceptable to counsel to the Company, including but not limited to
restrictions on the exercise of this Warrant and on transfers of Shares, as the
case may be, following exercise of this Warrant, such that any Shares so
acquired shall be held subject to the terms of this Agreement. Shares held by
any Permitted Transferee shall be aggregated with those held by the Permitted
Transferee's transferor in order to determine the number of Shares subject to
the provisions of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
-2-
<PAGE>
6. Protection Against Dilution.
(a) If at any time and from time to time the Company shall (i)
declare a dividend or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock or (iv) otherwise effect a recapitalization of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a greater or lesser number of shares of Common Stock, then the
Exercise Price in effect on the record date of such dividend or distribution or
the effective date of such subdivision, combination or reclassification
(individually an "Event" and collectively the "Events") shall be adjusted, or
further adjusted, to a price (to the nearest cent) determined by multiplying (i)
the Exercise Price in effect immediately prior to such Event by (ii) a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Event, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such Event. Upon
each adjustment in the Exercise Price resulting from an Event, the number of
Warrant Securities shall be adjusted (to the nearest one-thousandth share) by
multiplying (i) the number of Warrant Securities for which the Warrant was
exercisable immediately prior to such Event by (ii) a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to such Event, and
the denominator of which shall be the Exercise Price in effect immediately after
such Event. Notice of each such adjustment and each such readjustment shall be
forthwith mailed to the Holder setting forth such adjustments or readjustments
and the facts and calculations thereof in reasonable detail. Any dividend paid
or distributed upon the Common Stock in stock of any other class of securities
convertible into shares of Common Stock shall be treated as a dividend paid in
Common Stock to the extent that shares of Common Stock are issuable upon the
conversion thereof.
(b) In case: (i) a distribution in the form of stock or other
securities of any other corporation or other entity shall be made or paid by the
Company on, or with respect to, the then outstanding shares of Common Stock,
(ii) the Company shall effect a recapitalization of such character that the
shares of Common Stock will be changed into or become exchangeable for shares of
Common Stock with a different par value or no par value, (iii) the Company (or a
successor corporation) shall be consolidated or merged with or into another
corporation or entity or shall sell, lease or convey all or substantially all of
its assets in exchange for stock or property (including cash) with the view of
distributing such stock or property to its shareholders, or (iv) the Board of
Directors of the Company shall declare any dividend or other distribution in
cash or any evidence of the Company's indebtedness (other than convertible
securities) with respect to the shares of Common Stock, each Share issuable upon
exercise of this Warrant shall be replaced by, for the purposes hereof, the
stock, property, cash or evidence of indebtedness issued or distributed in
respect of each share of Common Stock upon such recapitalization,
reclassification, merger, sale, lease, conveyance or distribution as the Holder
would have been entitled to had the Holder exercised this Warrant and any
underlying convertible security immediately prior to any such occurrence, and
adequate provision to that effect shall be made at the time thereof.
-3-
<PAGE>
(c) In case:
(i) of any classification, reclassification or
other reorganization of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, or the sale, lease or
conveyance of all or substantially all of the assets of the Company; or
(ii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in any such case, the Company shall mail to the Holder, at least 15
days prior thereto, a notice stating the date or expected date on which a record
is to be taken. Such notice shall also specify the date or expected date, if any
is to be fixed, as of which holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, winding up or any
other appropriate action, as the case may be.
7. Transfer to Comply with the Securities Act. This Warrant has not
been registered under the Securities Act of 1933 (the "Act") and has been issued
to the Holder for investment and not with a view to the distribution of either
the Warrant or the Warrant Securities. Neither this Warrant nor any of the
Warrant Securities or any other security issued or issuable upon exercise of
this Warrant may be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Act relating to such security or
an opinion of counsel satisfactory to the Company that registration is not
required under the Act. Each certificate for the Warrant, the Warrant Securities
and any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
OBJECTSOFT CORPORATION
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: David E. Y. Sarna, Chairman
-4-
<PAGE>
(ii) if to the Holder, to:
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented or any provision hereof waived only by an instrument in
writing signed by the Company and the Holders of more than 50% of the Unit
Warrants. Any amendment or supplement or waiver approved by more than 50% of the
Unit Warrants shall be binding on all the Holders thereof. This Warrant contains
the full understanding of the parties hereto with respect to the subject matter
hereof and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York and f or all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
-5-
<PAGE>
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as
of the ___day of ______, 1996.
OBJECTSOFT CORPORATION
By: __________________________________
George J. Febish, President
HOLDER:
______________________________________
Print Name
______________________________________
Signature
-6-
<PAGE>
PURCHASE FORM
-------------
To Be Executed by the Holder
in order to Exercise the Warrant
The undersigned Holder hereby irrevocably elects to exercise the
Warrant represented by this Warrant and Warrant Agreement to purchase _________
securities issuable upon the exercise of such Warrant, and requests that
certificates for such securities shall be issued in 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 securities shall not be all the securities issuable upon
the exercise of the Warrant evidenced by the Warrant and Warrant Agreement, that
a new Warrant and Warrant Agreement for representing a Warrant for the balance
of such securities be registered in the name of, and delivered to, the Holder at
the address stated below.
Dated: _________________ X__________________________________
___________________________________
___________________________________
Address
___________________________________
Social Security or Taxpayer
Identification Number
-7-
WARRANT AND WARRANT AGREEMENT TO PURCHASE COMMON STOCK
OF
OBJECTSOFT CORPORATION
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE
SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
OBJECTSOFT CORPORATION (the "Company") has agreed to issue to WIN
CAPITAL CORPORATION ("Holder") this Warrant to acquire, at any time commencing
on the date of issuance until a date that is three years after the date of
issuance and pursuant to the terms provided in this Warrant and Warrant
Agreement, __________________ (______) units (the "Units"), each Unit consisting
of one (1) share (the "Shares") of the common stock, par value $.0001 per share
(the "Common Stock"), of the Company and one (1) warrant (the "Unit Warrants")
to purchase two-thirds (2/3) of a share of Common Stock at any time commencing
on issuance until a date that is three years after the date of issuance, which
exercise period shall be extended for a period equal to the time that lapses
between September 30, 1996 and the date of completion of the Company's initial
public offering ("IPO") of securities (but in no event later than September 30,
2000).
Accordingly, the Company and the Holder agree as follows:
1. Issuance. The Company hereby issues to the Holder the right to
purchase, subject to the provisions of this Warrant, _______ ___________
(______) Units, at a purchase price of $4.50 per Unit, as adjusted in accordance
with the terms hereof, at any time during the period from the date of this
Warrant through and including 5:00 P.M., New York City time, on _________ _,
1999, at which time this Warrant shall expire and become void (the "Exercise
Period"). The number of Units to be received upon the exercise of this Warrant
and the price to be paid for each may be adjusted from time to time as herein
set forth. The Units deliverable pursuant to this Warrant as they may be
adjusted from time to time are herein referred to as "Warrant Securities" and
the exercise price for the Units in effect at any time and as adjusted from time
to time is herein referred to as the "Exercise Price."
2. Exercise of Warrants. This Warrant may be exercised as a whole or
in part at any time during the Exercise Period by presentation and surrender
hereof to the Company at its executive offices with the Purchase Form annexed
hereto duly executed and accompanied by payment of the
<PAGE>
Exercise Price. If this Warrant is exercised in part, the Company will issue to
the Holder a new warrant representing the right of the Holder to purchase the
remaining number of Warrant Securities and otherwise on identical terms hereto.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant.
4. Assignment or Loss of Warrant. (a) This Warrant is not assignable
or transferable without the written consent of the Company, except by operation
of law or as provided in (b) below. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
(b) This Warrant shall not be transferable by Holder other than to a
"Permitted Transferee" (as defined below), or a financial institution as
collateral to secure a pledge from the Holder to the financial institution in
connection with a loan from such financial institution to the Holder; provided,
that any Permitted Transferee shall be absolutely prohibited from transferring
all or any portion of this Warrant other than to Holder or another Permitted
Transferee of Holder; and provided further, that if Holder dies or becomes
incapacitated, this Warrant may be exercised by Holder's estate, legal
representative or beneficiary, as the case may be, subject to all other terms
and conditions contained in this Warrant.
(c) For purposes of this Warrant, Permitted Transferees shall include
only the members of the "immediate family" (which shall be limited to his
spouse, children, parents and siblings) of Holder, and to trusts for such
person's own benefit and/or for the benefit of members of his immediate family;
provided, that such Permitted Transferees must agree in writing to be bound by
all of the terms of this Agreement to the same extent as Holder hereunder, in
form acceptable to counsel to the Company, including but not limited to
restrictions on the exercise of this Warrant and on transfers of Units, as the
case may be, following exercise of this Warrant, such that any Units so acquired
shall be held subject to the terms of this Agreement. Units held by any
Permitted Transferee shall be aggregated with those held by the Permitted
Transferee's transferor in order to determine the number of Units subject to the
provisions of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
-2-
<PAGE>
6. Protection Against Dilution.
(a) If at any time and from time to time the Company shall (i)
declare a dividend or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock or (iv) otherwise effect a recapitalization of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a greater or lesser number of shares of Common Stock, then the
Exercise Price in effect on the record date of such dividend or distribution or
the effective date of such subdivision, combination or reclassification
(individually an "Event" and collectively the "Events") shall be adjusted, or
further adjusted, to a price (to the nearest cent) determined by multiplying (i)
the Exercise Price in effect immediately prior to such Event by (ii) a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Event, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such Event. Upon
each adjustment in the Exercise Price resulting from an Event, the number of
Shares issuable upon the exercise of the Warrant shall be adjusted (to the
nearest one-thousandth share) by multiplying (i) the number of Shares for which
the Warrant was exercisable immediately prior to such Event by (ii) a fraction,
the numerator of which shall be the Exercise Price in effect immediately prior
to such Event, and the denominator of which shall be the Exercise Price in
effect immediately after such Event. Notice of each such adjustment and each
such readjustment shall be forthwith mailed to the Holder setting forth such
adjustments or readjustments and the facts and calculations thereof in
reasonable detail. Any dividend paid or distributed upon the Common Stock in
stock of any other class of securities convertible into shares of Common Stock
shall be treated as a dividend paid in Common Stock to the extent that shares of
Common Stock are issuable upon the conversion thereof.
(b) In case: (i) a distribution in the form of stock or other
securities of any other corporation or other entity shall be made or paid by the
Company on, or with respect to, the then outstanding shares of Common Stock,
(ii) the Company shall effect a recapitalization of such character that the
shares of Common Stock will be changed into or become exchangeable for shares of
Common Stock with a different par value or no par value, (iii) the Company (or a
successor corporation) shall be consolidated or merged with or into another
corporation or entity or shall sell, lease or convey all or substantially all of
its assets in exchange for stock or property (including cash) with the view of
distributing such stock or property to its shareholders, or (iv) the Board of
Directors of the Company shall declare any dividend or other distribution in
cash or any evidence of the Company's indebtedness (other than convertible
securities) with respect to the shares of Common Stock, each Share issuable upon
exercise of this Warrant shall be replaced by, for the purposes hereof, the
stock, property, cash or evidence of indebtedness issued or distributed in
respect of each share of Common Stock upon such recapitalization,
reclassification, merger, sale, lease, conveyance or distribution as the Holder
would have been entitled to had the Holder exercised this Warrant and any
underlying convertible security immediately prior to any such occurrence, and
adequate provision to that effect shall be made at the time thereof.
-3-
<PAGE>
(c) In case:
(i) of any classification, reclassification or other
reorganization of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, or the sale, lease or conveyance
of all or substantially all of the assets of the Company; or
(ii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in any such case, the Company shall mail to the Holder, at least 15
days prior thereto, a notice stating the date or expected date on which a record
is to be taken. Such notice shall also specify the date or expected date, if any
is to be fixed, as of which holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, winding up or any
other appropriate action, as the case may be.
7. Transfer to Comply with the Securities Act. This Warrant has not
been registered under the Securities Act of 1933 (the "Act") and has been issued
to the Holder for investment and not with a view to the distribution of either
the Warrant or the Warrant Securities. Neither this Warrant nor any of the
Warrant Securities or any other security issued or issuable upon exercise of
this Warrant may be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Act relating to such security or
an opinion of counsel satisfactory to the Company that registration is not
required under the Act. Each certificate for the Warrant, the Warrant Securities
and any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
OBJECTSOFT CORPORATION
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: David E. Y. Sarna, Chairman
-4-
<PAGE>
(ii) if to the Holder, to:
Win Capital Corporation
26 Ludlam Avenue
Bayville, New York 11709
Attention: Steven Bayern, President
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented or any provision hereof waived only by an instrument in
writing signed by the Company and the Holders of more than 50% in interest of
the Warrant. Any amendment or supplement or waiver approved by more than 50% in
interest of the Warrant shall be binding on all the Holders thereof. This
Warrant contains the full understanding of the parties hereto with respect to
the subject matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly contained herein
and therein.
10. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York and f or all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
-5-
<PAGE>
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as
of the ___day of ______, 1996.
OBJECTSOFT CORPORATION
By: _________________________________
George J. Febish, President
WIN CAPITAL CORPORATION
By: _________________________________
Steven Bayern, President
-6-
<PAGE>
PURCHASE FORM
To Be Executed by the Holder
in order to Exercise the Warrant
The undersigned Holder hereby irrevocably elects to exercise the
Warrant represented by this Warrant and Warrant Agreement to purchase _________
securities issuable upon the exercise of such Warrant, and requests that
certificates for such securities shall be issued in 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 securities shall not be all the securities issuable upon
the exercise of the Warrant evidenced by the Warrant and Warrant Agreement, that
a new Warrant and Warrant Agreement for representing a Warrant for the balance
of such securities be registered in the name of, and delivered to, the Holder at
the address stated below.
Dated: ____________________ X______________________________
_______________________________
_______________________________
Address
_______________________________
Social Security or Taxpayer
Identification Number
-7-
INTERACTIVE KIOSK DEMONSTRATION PROJECT
As of February 5, 1996
CONTRACT
Between
THE CITY OF NEW YORK
and
ObjectSoft Corporation
CAPITAL REGISTRATION NUMBER
9692915
EXPENSE REGISTRATION NUMBER
9692923
Submitted By
THE DEPARTMENT OF INFORMATION
TECHNOLOGY AND TELECOMMUNICATIONS
(DoITT)
(CONTRACTOR DOCUMENT)
<PAGE>
AGREEMENT
AGREEMENT made this 11th day of January, 1996, by and between The
City of New York (hereinafter referred to as "CITY"), acting by and through its
Department of Information Technology and Telecommunications which has an office
at 11 MetroTech Center, Third Floor, Brooklyn, New York II 201 (hereinafter
referred to as "DoITT"), and ObjectSoft Corporation, a corporation organized and
existing under the laws of the State of New Jersey and having an office at 50
East Palisade Ave., Englewood, NJ 07631 (hereinafter referred to as "VENDOR" or
"CONTRACTOR").
W I T N E S S E T H:
WHEREAS, CITY desires to purchase and/or lease, have installed. and
maintained software and hardware equipment in furtherance of a project to bring
CITY government services and information to its citizenry through the use of
computerized installations known as Kiosks; and
WHEREAS, CITY issued a Request for Information for Kiosk Technology
(hereinafter referred to as "RFI") dated April 18, 1994; and
WHEREAS, VENDOR responded with information and a proposal to provide
a solution consisting of kiosk equipment, services and software; and
WHEREAS, VENDOR has presented a proposal which has been determined by
CITY to be responsive and cost-effective and one which best addresses CITY's
needs for conducting a Kiosk Demonstration Project; and
WHEREAS, CITY published a Notice of Intent to Enter into Negotiations
with VENDOR on March 9, 1995, pursuant to CITY's Procurement Policy Board Rule
3-12 entitled "Demonstration Projects for Innovative Products, Approaches or
Technologies",
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, the parties hereto agree as follows:
1. TERM.
1.1. This Agreement shall become effective upon its
registration by the Office of the Comptroller of The City
of New York, a body empowered to register encumbrances of
monies subsequent to the signature of the parties, and
shall extend for a period of Three Hundred Sixty-Five
(365) calendar days from the date VENDOR has installed and
has made fully functional the last of all of the kiosks
VENDOR is required to install and operate pursuant to this
Agreement. Written notification of registration shall be
sent to VENDOR by CITY subsequent to the
<PAGE>
registration of this Agreement, and VENDOR shall send
written notification to CITY of the date on which the last
of all the kiosks, identified by location, was installed
and became fully functional.
1.2. In order to permit CITY to contract for and make an
orderly transition in the installation of permanently
functioning kiosk facilities if the CITY's Kiosk
Demonstration Project is successful, CITY shall have the
unilateral right to extend and renew this Agreement for an
additional period of not less than six (6) nor more than
twenty four (24) months upon the same terms and conditions
as shall exist at the termination of the initial term of
this Agreement, provided CITY gives written notice to
VENDOR of such extension and renewal and the length
thereof at least three (3) months prior to the end of the
initial term of this Agreement.
2. DEFINITIONS.
The following terms shall have the following definitions:
"Agency" shall be defined as the third party within this Agreement,
charged with providing specific services to the public; such services
as described in Exhibit F to be provided by the VENDOR through kiosk
technology.
"Application software" or "software" shall be defined as the all
inclusive end product displayed to the User.
"Chargeback" shall be defined as the cost a vendor incurred to
perform credit card authorization and any other fees associated with
expediting a transaction that has subsequently been cancelled.
"City" shall be defined as the City of New York, its departments and
political subdivisions.
"Customized application" or "customized software application" shall
be first defined as 1) the subject of acquisition by the CITY and 2)
that which is developed by the VENDOR to provide the service(s) as
specified in Exhibit F.
"Deinstall" shall be defined as the disconnection of all cabling and
wiring associated with previous Kiosk installation work and vacating
the Kiosk from the premises.
"Kiosk" shall be defined as 1) the subject of a monthly lease by the
CITY and 2) a free standing interactive information input-output
device, accessible by the general public, used to provide selected
City services.
"Full deployment" shall be defined as the total number of kiosks
agreed to in Exhibit A to be installed and made fully functional.
-2-
<PAGE>
"Full functionality" or "fully functional" shall be defined as a
kiosk offering the complete suite of applications which provides the
intended service to the User as detailed in Exhibit F.
"Inoperable condition" shall be defined as any break, disconnect,
fracture or failure which disallows full functionality.
"Service process" shall be defined as the completion, or part
thereof, of the customized application outcome.
"User" shall be defined as the individual accessing a service
process.
3. SUBJECT MATTER OF ACQUISITION.
3.1. For the term of this Agreement and any renewal thereof,
CITY agrees to lease from VENDOR and VENDOR agrees to
lease to CITY, install, manage and provide maintenance to
CITY for the kiosk structures or portions thereof and
kiosk equipment, including accessories and supplies
therefor, set forth and described in Exhibit A attached to
and hereby made a part of this Agreement, and a telephone
assistance "hot line", which said structures and equipment
shall be installed, managed and maintained at kiosk
locations.
3.2. CITY agrees to pay for the development of and, in return,
receive a nonexclusive, perpetual, royalty-free CITY-wide
site license from VENDOR to use and VENDOR agrees to
develop or have developed, and grant to CITY a non-
exclusive, perpetual, royalty-free CITY-wide site license
for, provide management and maintenance and install upon
completion of the milestone described in Section 3.2.2.3
of this Agreement and deinstall kiosks at the conclusion
of the lease as specified in Section 1. I and 1.2 of the
Agreement and any extension and renewal thereof, the
customized applications software set forth and described
in Exhibit C attached hereto and hereby made la part of
this Agreement, and VENDOR'S use of the customized
applications software for purposes of the Kiosk
Demonstration Project and thereafter, and the customized
applications software capabilities shall be as set forth
in Exhibit C and as required elsewhere in the Agreement
and the Exhibits thereto. Upon completion of the
customized applications software, VENDOR shall deliver to
CITY a copy of each piece of the software developed and
shall thereafter throughout the term of this Agreement and
any extension or renewal thereof, VENDOR shall provide
CITY with all fixes and updates of the customized
applications software. VENDOR agrees, in addition, at
CITY's option exercisable during the term of this
Agreement and any renewal or extension thereof, to grant
to a designee or designees of CITY a nonexclusive,
royalty-free, CITY-wide site license for a period of five
(5) years, which period shall commence
-3-
<PAGE>
upon the date next following the termination of this
Agreement and/or any renewal or extension thereof. Both
the perpetual and five-year term licenses herein provided
for shall permit CITY and its said designee(s) to use said
customized applications software in, on and with any
number of Kiosks located within the City of New York that
CITY shall desire at any time and from time to time during
the license periods states herein; and VENDOR agrees to
provide installation and maintenance support at its then
current standard hourly rates for such support, as
authorized by a valid purchase order from the City, for
the customized applications software as forth in Exhibit
C.
3.3. The kiosks, kiosk equipment, including accessories and
supplies, and software provided by VENDOR to CITY pursuant
to this Agreement shall perform in accordance with the
specifications set forth in Exhibit D attached hereto and
hereby made a part of this Agreement.
3.4. VENDOR shall (i) establish all necessary communications
links between the leased kiosks and the CITY units and
agencies participating in the Kiosk Demonstration Project;
(ii) provide means for kiosk users to obtain CITY
products, information and services; and (iii) provide
technical consulting services and raw data and other
reporting services to CITY in the form or forms requested
by CITY to assist CITY in determining such matters as how,
for what purposes, when and where people use kiosks for
the delivery of CITY services made available to them, as
more fully described in Exhibit E and in Exhibit F, both
of which are attached hereto and hereby made a part of
this Agreement.
3.5. VENDOR hereby grants an option to CITY or CITY'S designee
for a period of five years from the date this Agreement
becomes effective as set forth in Paragraph 1.1.,
exercisable in CITY's sole judgment, to purchase a
non-exclusive, non- transferable perpetual site license or
licenses for the use of all of the software, however
described or named (e.g. toolkit software, underlying
software, media engine, operating software), required to
operate the customized applications software and hardware
environment for which it is developed pursuant to this
Agreement, and VENDOR shall provide software maintenance
services for such software licenses under the same or
better terms and conditions and at the same or lower
price(s) VENDOR charges its other licensees as such terms,
conditions and prices shall be in effect at the time or
times, if any, that CITY exercises its said option; and if
VENDOR is not the proprietor of any or all of the software
required to operate CITY's said customized applications
software, then VENDOR shall facilitate the licensing by
and the provision of maintenance for CITY and CITY's
designee(s) under the same terms and conditions such owner
offers to all of its other customers.
-4-
<PAGE>
4. PRICE; PAYMENT SCHEDULE.
4.1. CITY will pay VENDOR, pursuant to the terms and conditions
of this Agreement, a total sum of money not to exceed Six
Hundred Sixty One Thousand One Hundred Dollars and No
Cents ($661,100) which sum includes:
4.1.1. The total cost of monthly lease payments,
during the initial term of this Agreement for
the kiosk structures or portions thereof and
the kiosk equipment including accessories and
supplies thereof referred to in Paragraph 3. 1.
of this Agreement, including the cost of VENDOR
management and maintenance of and for them;
4.1.2. The purchase price of the customized kiosk
applications software referred to in Paragraph
3.2. of this Agreement, including development,
transportation, delivery, unpacking,
installation and deinstallation in the leased
kiosk equipment in all locations, software
management and maintenance and the licensing of
all other software during the term of this
Agreement and including all extensions;
4.1.3. Site preparation and technical facilities work;
kiosk equipment connections to CITYNET, CITY's
wide area network and all labor and associated
materials required for the installation and
deinstallation of the kiosks and kiosk
equipment; equipment and software testing and
acceptance periods operation;
4.1.4. Installation and operation of a telephone
assistance "hot line" in each kiosk
installation; and data communications links
between the leased kiosks and the CITY units
and agencies participating in the Kiosk
Demonstration Project where needed;
4.1.5. Technical consulting services in the design,
operation, presentation, monitoring and
tracking of the Kiosk Demonstration Project,
and the provision of both raw data and
specialized data and information reporting
services in the form and types and for the
purposes set forth in Exhibits E and F of this
Agreement; and
4.1.6. The option to obtain a perpetual license(s) or
sublicense(s) and maintenance as set forth in
Paragraph 3.5.
4.2. Partial payments to VENDOR of the total sum described in
Paragraph 3. I. shall be made by CITY as follows:
4.2.1. Upon installation of the last fully functional
kiosk to be installed pursuant
-5-
<PAGE>
to this Agreement, CITY shall pay to Vendor the
sum of Six Thousand Eighteen Dollars and No
Cents ($6,018.00) per calendar month per Kiosk,
prorated for any portion thereof, during the
term of this Agreement, jointly and severally
for each fully operational kiosk structure or
portion thereof which is a part of the Kiosk
Demonstration Project, including site
preparation and technical facilities work,
kiosk equipment connections to CITYNET(sm),
CITY's wide area network, establishment of
communications links between the leased kiosks
and the CITY units and agencies participating
in the Kiosk Demonstration Project, and all
labor and associated materials required for the
installation of the kiosks and kiosk equipment;
the kiosk equipment, including accessories and
supplies therefor referred to in Paragraph 3.
1. of this Agreement, used in or as part of and
in connection with said kiosk or portion
thereof, equipment and software testing and
acceptance periods operation; VENDOR's
management and maintenance of and for said
kiosk or portion thereof, installation and
operation of a telephone assistance "hot line"
in each kiosk installation; technical
consulting services in the design, operation,
presentation, monitoring and tracking of the
Kiosk Demonstration project; and the provision
of both raw data and specialized data and
information reporting services in the form and
types and for the purposes set forth in Exhibit
E and Exhibit F of this Agreement.
4.2.2. Three Hundred Thousand Dollars and No Cents
($300,000.00) for the customized kiosk
applications software development,
transportation, delivery, unpacking and
installation in the leased kiosk equipment in
all leased locations; software management and
maintenance, and the option for a license(s) or
sublicense(s) and software maintenance referred
to in Paragraph 3.5 of this Agreement, payable
as follows:
4.2.2.1. FIFTEEN PER CENT (15%) of the sum
set forth in Paragraph 4.2.2.,
above, upon VENDOR'S completion of
the Systems Analysis and Detailed
Design, as specified in Section 1.
1.2 of Exhibit E, and DoITT's final
acceptance in writing thereof,
4.2.2.2. FIFTEEN PER CENT (15%) of the sum
set forth in Paragraph 4.2.2.,
above, upon the last of the
following to occur: Software
Acceptance Test Plan, as specified
in Section 1. 1.3 of Exhibit E, for
application software performance
accepted in writing by DoITT AND
VENDOR'S development of and DoITT's
acceptance and sign-off in writing
on all Multimedia Scripts and Media
Production Specifications, as
specified in Section 1. 1.4 of
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<PAGE>
Exhibit E, for the multimedia
software to be developed and used to
effectuate this Agreement. The
Acceptance Test Plan, Multimedia
Scripts and Media Production
specifications shall apply. to
applications software delivered as'
part of "Phase I" and "Phase 11"
deliverables.
"Phase I" applications: shall
comprise a)"Key to City Hall" b)
on-line access and associated
payment for functions provided. by:
Department of Buildings' BIS
systems, referred to in Exhibit P,
Section III, c) Department of Health
applications pertaining to General
Department and Health Awareness
Information, Birth Certificates,
Death Certificates and Dog Licenses,
all as described in Exhibit F,
Section II.
"Phase II" applications shall
comprise: a) Help Assistance
functions to the "Key to City Hall"
and b) Department of Health
application for Health Academy
Courses as described in Exhibit F,
Section II.
4.2.2.3. THIRTY PER CENT (30%) of the sum set
forth in Paragraph 4.2.2., above,
upon the completion of Functional
Integration Testing, as specified in
Section 2.1 of Exhibit E, which, in
the reasonable judgement of DoITT is
acceptable and is so noticed in
writing to the VENDOR;
4.2.2.4. TWENTY-FIVE (25%) of the sum set
forth in Paragraph 4.2.2., above,
upon completion of Initial
Acceptance Testing of All Kiosks, as
specified in Section 2.2 of Exhibit
E, for Phase I applications as
defined in 4.2.2.2, directed and
accepted in writing by DoITT, which
testing shall be completed prior to
the commencement of the said Three
Hundred Sixty-Five (365) day period
referred to in Paragraph 1.1. of
this Agreement; and
4.2.2.5. FIFTEEN PER CENT (I 5%) of the sum
set forth in Paragraph 4.2.2.,
above, upon the last of the
following to occur: completion and
acceptance in writing by DoITT of
Final Acceptance Testing, after all
the Kiosks have been fully
operational with Phase I functions
by the User for a period of three
(3)months and Final Acceptance
Testing after all Kiosks have been
fully operational with Phase H
functions by the User for a period
of one (1) month.
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<PAGE>
5. CREDIT CARD USAGE.
5.1. VENDOR shall provide for payment of services as detailed
in Exhibit E, Section 8, if any, at the kiosk by debit
card and credit card. CITY and VENDOR agree to take all
actions necessary to ensure that all legal requirements
are followed to enable payment by debit card and credit
card. In addition, in the event that payment is accepted
by debit card or credit card then CITY and VENDOR agree
that (i) the vendor convenience and/or bank transaction or
service charge, if any, will be in addition to the cost of
the underlying transaction charged by the City; (H) the
service charge, if any, will be paid directly by the
consumer; and (iii) the following language will be
expressly stated at the kiosk in textual or audio form (or
both) for each transaction. Any changes to the following
shall be approved by DoITT.
(AUDIO/TEXT/BOTH) - YOU HAVE A CHOICE, YOU CAN ORDER (PAY
FOR) YOUR _________ BY (TAKING SOME ACTION AS HITTING A
BUTTON) AND RECEIVING A FORM TO TAKE HOME, COMPLETE AND
MAIL IN WITH YOUR CHECK OR MONEY ORDER TO (NAME OF THE
CITY AGENCY). THIS WAY YOU PAY ONLY THE ACTUAL COST
(AMOUNT DUE), PLUS POSTAGE.
-OR-
YOU CAN ORDER (PAY FOR) YOUR __________ BY USING YOUR
(AMEX/VISA/ MASTERCARD) CREDIT CARD OR (NAME OF BANKS)
DEBIT CARD FOR THE COST (AMOUNT) OF THE ___________ PLUS
PAYMENT OF AN ADDITIONAL $___________ KIOSK CONVENIENCE
FEE TO COVER THE COSTS OF PROCESSING. TO PAY BY CARD, JUST
PUSH BUTTON __________ IN THE FORM AND FOLLOW THE
INSTRUCTIONS FOR PROVIDING YOUR CREDIT/DEBIT CARD
INFORMATION. YOU WILL RECEIVE A COPY OF THE FORM YOU
COMPLETE, PLUS A RECEIPT FOR YOUR CARD USE. THE COST OF
THE TRANSACTION AND THE PROCESSING FEE WILL APPEAR ON YOUR
NEXT CREDIT/DEBIT CARD STATEMENT.
5.2. This signed Agreement shall be authorization to merchant
banks and credit card companies that the City has approved
the Vendor to act on its behalf in providing the required
financial services related to credit and debit cards and
electronic money orders, if applicable, that delivers the
appropriate agency service as described in Exhibit F.
-8-
<PAGE>
6. ADVERTISING AND JOINT TENANCY REVENUE SHARING.
6.1. VENDOR shall have the right to allow advertising (i)
physically on the kiosk machine itself or (ii) screen
based as an interruptible attract loop. In no event shall
VENDOR advertise any substance which contains tobacco,
including but not limited to cigarettes, cigars, pipe
tobacco and chewing tobacco. The City shall approve all
advertising prior to display. VENDOR shall pay to CITY 50%
of the gross advertising revenues collected by the Vendor.
In addition, VENDOR shall pay to City 50% of gross
revenues paid to VENDOR by other tenants on the kiosks. If
additional Kiosks are deployed at Vendor's expense, the
Vendor shall pay the City 15% of advertising revenue.
6.2. VENDOR shall make such payments to CITY's Department of
Finance quarterly, within thirty (30) days after the
expiration of each calendar quarter, except in the case of
the last payment which shall be paid within thirty (30)
days after the termination, cancellation or expiration of
this contract. Each payment shall be based on the quarter
immediately preceding the date of payment. A copy of each
payment shall be sent to the Program Manager at DoITT.
7. LIQUIDATED DAMAGES.
7.1. After final acceptance testing of kiosks, as described in
section 2.3 of Exhibit E, liquidated damages may be
assessed at a rate of $100.00 per day each Kiosk remains
in an inoperable state past the two business days from the
time the problem becomes known to the Vendor.
7.2. Notwithstanding the foregoing, no damages may be assessed
if the cause of the Kiosk inoperability is in whole
attributable to the actions of the City or in the case of
force majeure.
8. NON-FUNDING CLAUSE.
8.1. Each payment obligation of CITY created by this Agreement,
or any Exhibit attached hereto to be satisfies in any
fiscal year other than the current fiscal year ending June
30, 1996, is conditioned upon the availability of CITY
funds which are appropriated or allocated for the payment
of such an obligation.
9. CHANGE ORDER PROVISIONS.
9.1. This Agreement may be modified in writing by the parties
from time to time to provide for the provision of
facilities and/or the performance of services and/or work
(hereinafter singly and collectively referred to as "Extra
Work") in addition to those presently stated or implied to
be provided and/or performed pursuant to
-9-
<PAGE>
the terms and conditions of this Agreement, or for the
omission of facilities, services or work previously
provide for, in order to carry out and complete more fully
and perfectly this Agreement. VENDOR and CITY understand
and agree that in no event shall the cost of any Extra
Work have the effect of increasing the total amount
payable by CITY to VENDOR pursuant to this Agreement by an
amount in excess of Ten Per Cent (10%) of the maximum
amount first set forth in Paragraph 4. 1. of this
Agreement, unless such additional cost is authorized by
any governmental body or bodies of The City of New York
authorized to approve CITY's expenditure of monies. An
order for Extra Work shall designate the method for timely
payment therefor, and shall be valid only if issued in
writing and signed by the Commissioner of DoITT or his
duly authorized representative. The Commissioner or his
said representative and VENDOR shall consult with regard
to the amount of time, facilities and services required
for performance of the Extra Work beyond that stipulated
in this Agreement for the completion of the work to be
performed or provided pursuant to this Agreement. Extra
Work must be performed by gr under the supervision of the
VENDOR.
10. GOVERNING LAW; VENUE.
10.1. This Agreement shall be deemed to be executed in the City
of New York, State of New York, regardless of the domicile
of the Vendor and shall be governed by and construed in
accordance with the laws of the State of New York.
11. INCORPORATION OF APPENDIX A; ORDER OF PRECEDENCE.
11.1. "General Provisions Governing Contracts for Consultants,
Professional and Technical Services" is attached hereto as
Appendix A and hereby incorporated herein and made a part
of this Agreement.
11.2. In the event there is a conflict among and between the
provisions of this Agreement, the Exhibits, and/or
Appendix A, the controlling order shall be as follows: the
Agreement; Appendix A; the Exhibits F, Exhibit C, Exhibit
E, Exhibit D, Exhibit A, Exhibit B.
12. PROJECT MANAGEMENT.
12.1. All notices required or permitted under this Agreement
shall be in writing and shall be given, made or served by
mailing the same by Registered or Certified Mail, Return
Receipt Requested, or delivered by hand delivery, as
follows:
(a) to VENDOR:
ObjectSoft Corp.
50 East Palisade Ave.,
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<PAGE>
Englewood, NJ 07631
Att: David Sama
(b) to CITY:
Department of Information Technology and
Telecommunications
11 Metrotech Center
Brooklyn, NY 11201
Att: Douglas Levine
or at such other address(es) as such parties shall, from
time to time designate by notice given to the other as
hereinabove provided.
12.2. Other terms of Project Management are set forth in Exhibit
E.
13. MISCELLANEOUS.
13.1. If VENDOR's performance under this Agreement, or of any
obligation hereunder, is interfered with by reason of any
circumstances beyond VENDOR's reasonable control,
including, fire, explosion, commercial power failure, acts
of God, war, revolution, ordinance, or requirement of any
government or legal body, then the time within which
VENDOR is required to perform any other obligation
hereunder, will be extended one (1) day for each day that
VENDOR is unable to perform work under this Agreement
because of any circumstance beyond VENDOR's reasonable
control as described above.
13.2. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed to be an
original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one
such counterpart.
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<PAGE>
October 25, 1995-OBJECTSOFT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives on the date first written
above.
ObjectSoft Corporation
(VENDOR)
By: /s/ David E. Y. Sarna
------------------------
Title: Chairman
Date:12/13/95
The City of New York
(CITY)
By: /s/ Suellen Schulman
------------------------
Agency Chief Contracting Officer,
Department of Information,
Technology and Telecommunications
Date: January 11, 1996
Approved as to Form and
Certified as to Legal Authority:
/s/
- ------------------------
Acting Corporation Counsel
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<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 11th day of January, 1996 before me personally came SUELLEN
SCHULMAN to me known to be the Assistant Commissioner of the Department of
Information Technology and Telecommunications of the City of New York, the
person described as such in and who as such executed the foregoing AGREEMENT as
Assistant Commissioner for the purposes therein mentioned.
/s/ Eric S. Serlin
------------------
Notary Public, State of New York
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 13th day of December, 1995 before me personally came DAVID E.
Y. SARNA who being duly sworn, did depose and say that (s)he resides in the City
of Teaneck, State of New Jersey, that (s)he is the Chairman of ObjectSoft
Corporation, the corporation described in and which executed the foregoing
AGREEMENT, that (s)he knows the seal of said corporation; that the seal affixed
to the said instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation; and that (s)he signed his name
thereto by like order.
/s/Eric S. Serlin
-----------------
Notary Public, State of New York
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<PAGE>
EXHIBIT A
Page l of 2
COMPUTER HARDWARE, SOFTWARE and ACCESSORIES
OBJECTSOFT CORPORATION
OBJECTSOFT will provide 5 fully integrated & operational kiosks each of
which shall consist of the following:
Kiosk cabinet with approximate dimensions of 72" in height, 54"
wide and 48" deep,
Pentium PC with P90 processor and 16MB memory, I GB disk, 16 bit
sound card, double-speed CD ROM, Ethernet card, MiniRouter and
communications interface,
4 PPM laser printer with large capacity, 81/2" x 11" 20 lb. paper,
DEC 2GB hard drive, or equal
2 dual receipt printers
17" or larger touch screen monitor,
Keyboard,
Credit Card Swipe,
Microsoft Windows 95 or Windows NT 3.51 or later.
Server Components Configuration:
Dual Pentium P90 processor or better, 32 MB memory, and Dual power
supply and 31/2" floppy drive,
Extended keyboard, 15" or larger monitor,
4 page per minute laser printer,
3GB Disk storage, arranged in a RAID 5 array, SCSI adapter,
DAT tape backup unit,
<PAGE>
EXHIBIT A
Page 2 of 2
Minimum: double-speed CD ROM,
System software, Microsoft Windows NT Server, 3.51 or later.
Microsoft Back office, including SQL Server NT, SNA Server, and
System Management Server,
14.4K Modem or better.
Note: All specifications subject to change provided, however, that no change
shall interfere with the operation of CITY's software or the provision of
services required.
OBJECTSOFT will provide the following proprietary and/or licensed
(third-party) Software:
Development Tools, Object & Program Software, Multimedia Authoring
Software, Device Drivers, Multimedia Presentation software, File and/or
Database software, Management software, Communications software, and Data
Gathering software.
<PAGE>
EXHIBIT B
SITE SELECTION AND LOCATION DESIGNATION
1.0 Decision
DoITT will work with participating Agencies and the Vendor regarding site
selection. The locations of the kiosks shall be mutually agreed upon by all
parties provided, however, that upon failure to reach an agreement, the Mayor's
Office of the City of New York's decision shall be final.
2.0 Placement Criteria
Kiosk placements will be based on user and equipment security, foot traffic,
positioning within a location, site hours, facility maintenance, site
accessibility to public transportation, and community demographics which suggest
the demand for the government services to be offered. Locations shall conform
with Federal ADA requirements. Kiosks will be placed in indoor locations with
accessible electrical hook ups.
3.0 Location Change
Should it become necessary to relocate a kiosk, such site changes shall be
treated as a change order to the contract.
4.0 Additional Kiosk Deployment
Additional kiosk deployment, over and above the number of kiosks agreed upon
within this contract, shall be done so at the Vendor's own expense and risk.
However, site selection shall be subject to the approval of the CITY.
1
<PAGE>
EXHIBIT C
OBJECTSOFT
1
THE CITY OF NEW YORK
AND
OBJECTSOFT CORPORATION
CUSTOMIZED APPLICATION SOFTWARE
1. ObjectSoft Corporation (VENDOR) shall design, develop, customize and produce
software, together with detailed documentation therefor, which offers general
information regarding The City of New York (CITY) and its government and which
is to be entitled and be the "KEY TO CITY HALL(tm)" software described in
Exhibit E to the Agreement (hereinafter "Agreement") to which this exhibit is
Exhibit C, and application software, together with the detailed documentation
therefor, for CITY'S Department of Buildings (DOB) and for CITY's Department of
Health (DOH) applications and their components set forth, referred to and
described in Exhibit F of the Agreement there being, at minimum, a total of
eight (8) of said applications, as follows: DOB Buildings' Information, DOB
Properties' Maintenance Composite Information; DOH General Information; DOH
Health Awareness Information; DOH Birth Certificate Information and
Applications; DOH Death Certificate Information and Applications; DOH Dog
License Information and Applications; DOH Health Academy Courses Information and
Applications. (The said KEY TO CITY HALL(tm) software and the said applications
software are herein jointly and severally referred to as "customized
applications software".)
2. All copyrights in and to the work(s) produced hereunder, including, without
limitation, renewal rights, if any, shall be owned solely by VENDOR as author
within the meaning of Title 17 of the United States Code ("Copyright Act"),
including any amendments thereto.
3. VENDOR shall use the customized applications software in The City of New York
during the said Kiosk Demonstration Project which is the subject of the
Agreement but VENDOR shall not use said software in The City of New York
thereafter without the express consent in writing of CITY.
4. The customized applications software developed hereunder, when licensed as
provided in Paragraph 3.2 of the Agreement, shall, as delivered by VENDOR to
CITY and to CITY's designee(s), provide the same application functionality as
set forth described and defined in the design specifications approved by CITY
pursuant to this Agreement, provided, a) that the customized applications
software is installed in an environment which mirrors the one in which the
customized applications software was installed during said Kiosk Demonstration
Project and 2) that the environment in which the customized applications
software is installed is identical in hardware and software, including version
and release levels, and installation options to that used by VENDOR in said
Kiosk Demonstration Project; and provided further, VENDOR shall provide detailed
documentation regarding installation and script for installation of the
customized
<PAGE>
EXHIBIT C
OBJECTSOFT
2
applications software, and 3) that the customized applications software is used
on and with the same hardware and software configurations used by VENDOR during
the said Kiosk Demonstration Project; and VENDOR shall provide technical
assistance, without charge for up to twenty (20) hours to CITY and its designees
for the installation and support of the customized applications software, as and
when requested by CITY and/or CITY's designees.
5. VENDOR shall regard as confidential and proprietary all of the information
communicated to it by CITY and its agencies and departments in connection with
the Agreement and agrees that such information shall at all times be the
property of CITY. VENDOR shall not, without CITY's prior written consent at any
time (a) use such information for any purpose other than in connection with the
Kiosk Demonstration Project which is the subject of said Agreement or (b)
disclose any portion of such information to third parties. Upon the termination
of the Agreement VENDOR shall comply in fall with the provisions of Paragraph
II.E. of said Exhibit F of said Agreement regarding Department of Buildings CITY
information and Paragraph II.G. regarding Department of Health CITY information.
Notwithstanding the foregoing, the informational shall not be regarded as
confidential or proprietary if it was previously known to the VENDOR or is
placed into or becomes part of the public domain.
6. VENDOR warrants and represents that no material contributed by it or its
employees to the customized applications software produced hereunder shall
infringe, without limitation, any copyright, trademark, rights of privacy or
rights of publicity.
7. Each CITY Department application shall contain interactive programming
capabilities which, at kiosk user request, effects the display or query, as
appropriate, and printing of Department information stored locally in databases
on the kiosk computer system or which is located on the Department's or DoITT's
computer mainframe and is accessed through CITY's CITYNET (sm) network.
8. In all applications and in the KEY TO CITYHALL(tm) software, CITY indicia,
such as the CITY Seal, shall be the first display which appears on a monitor
screen, together with the ownership legend referred to in Paragraphs II.D. and
II.F regarding DOB and DOH applications, respectively, of said Exhibit F to said
Agreement and both shall again be invoked on the last screen after kiosk user
completion of a session.
9. Immediately following application invocation, the screen shall offer
assistance to the kiosk user regarding locations of other kiosks being operated
by all vendors partaking in the said Kiosk Demonstration Project and the CITY
agency and department services being offered thereon.
10. Immediately upon session termination, the screen shall query and permit user
response to questions regarding both ease of use and effectiveness of the
service offering(s).
<PAGE>
EXHIBIT C
OBJECTSOFT
3
11. In order to facilitate ordinary system recovery and restart, each
application developed shall have a restart capability.
12. The customized applications software is further defined as(a)application
source and object code that is not part of VENDOR's proprietary or licensed
software (b) any multimedia not part of a proprietary toolset and consisting of
bit streams including, but not limited to video, audio, and graphics, together
with the script and subsequent code, if any, that initiates the visual and/or
audio production of media on the kiosks, except that such software shall not
include: CITY's information as that term is defined in Exhibit F to the
Agreement, CITY's graphics, CITY's database information (whether provided
electronically, on diskette or in hard copy), and CITY's seal and other indicia
of The City of New York, all of which are provided to VENDOR for purposes of
effectuating the said Kiosk Demonstration Project, whether any or all of such
information, graphics or indicia are edited or not by VENDOR, and including all
modifications generated or derived from any one or all of them.
13. VENDOR warrants that all of the applications software and the KEY TO
CITYHALL(tm) software shall be free of defects in material, workmanship and
content and shall meet CITY's specifications set forth in writing in said
Agreement including all Exhibits thereto. Contractor shall not be liable for any
incidental, special or consequential damages of any nature whatsoever.
14. VENDOR shall have the right to use the customized applications software
developed hereunder in VENDOR's kiosks used for the said Kiosk Demonstration
Project, for a term coexistent and co-terminus with the Agreement and any
renewal or extension thereof, but not thereafter within The City of New York
without the express consent in writing of CITY.
15. CITY hereby grants a non-exclusive, non-transferable, royalty-free license
to VENDOR to use CITY's trademark "KEY TO CITY HALL" during the term of said
Kiosk Demonstration Project in connection with VENDOR's software application
used in VENDOR'S kiosks used in said Kiosks Demonstration Project, which
application offers general information regarding CITY and its government;
provided however, that the following statement and CITY indicia, such as the
CITY Seal, shall appear in the first display which appears on a monitor screen
when the application is invoked: "'KEY TO CITY HALL' is a trademark of The City
of New York".
<PAGE>
EXHIBIT D
Page 1 of 4
KIOSK HARDWARE AND SOFTWARE
GENERAL PERFORMANCE AND DESIGN SPECIFICATIONS.
1 KIOSK CONFIGURATION
1.1 Structural Requirements
The Kiosk must be constructed of highly durable and wear resistant
material, capable of sustained use in an indoor public environment.
The Kiosk shall, to the best extent possible, be constructed to deter
and discourage theft vandalism such as insertions and spillage and
facilitate in the cleaning of graffiti. The front of the Kiosk may
have an electronic sign capable of attracting the eye at a distance
and which can continuously scroll/flash/roll a series of messages
that are remotely programmable. There shall be a visual indicator
displayed on each Kiosk identifying it as a New York City service
provider. Such emblem shall be provided by DoITT.
All Kiosks will incorporate real time diagnostics for self-test-and
fault isolation for all critical hardware components required. As
listed in Exhibit A, the Kiosks shall have a touch screen display
presenting video segments, text and graphics and which also shall be
constructed to deter and discourage vandalism (e.g. graffiti,
insertions, spillage, etc.) Each Kiosk shall include a sound system
for audio playback segments, a card reader to expedite transaction
processing, when appropriate, and a method of printing both hardcopy
documents and, if applicable, receipts.
1.2 ADA Compliance
All Kiosks shall be in compliance with the Americans with
Disabilities Act of 1990 for height and reach and any other
compliance requirements not noted within this agreement which are
applicable to the Kiosks and their useage. If a User's impairments
are such that Kiosk interaction is virtually impossible, there shall
be a clear indication as to how the User may apply for help in
obtaining the information sought on the Kiosk. Kiosks should have
easy to use mechanisms for adjustment of sound volume level and
text/icon clarity if and where appropriate and feasible.
2 KIOSK APPLICATION SOFTWARE DESIGN AND PERFORMANCE
2.1 General Description
The Vendor will implement application software in a turnkey fashion,
so that it appears to the client as a transparent component of the
Kiosk system. The software shall be easily
<PAGE>
EXHIBIT D
Page 2 of 4
understood and quickly grasped by people who have little or no
familiarity with computers. It must incorporate a user navigation
capability such that a person unfamiliar with the Kiosk can find
information and programs without prior training. The design will make
use of icons or photograph "on" buttons, as well as form filling
techniques, to effect the automatic entry of system provided
information into the Agency application forms presented.
The Vendor is highly encouraged to handle color vision
deficiencies/color blindness in terms of the color schemes developed.
The screen should be capable of adjustment by a color deficient
person in order to maintain visual clarity. The use of color as a
determining factor in a User's selection of services shall be backed
up by a second form of selection identifier (such as audio or icons)
to confirm choices.
The software shall provide Spanish translations, pursuant to Section
1. 1.5 in Exhibit E, except for those prompts that are obtained from
existing on-line database services. The software will provide for the
integration of full-motion digital video, animation or video
animation effects accompanied by digital audio synchronized into a
presentation.
The software will provide capability to develop scripts as a
front-end to each host application and, at a minimum, must maintain
the same security that exists for the transaction applications in
their native system environment. The system must insure that the User
can access only the target application requested by the User and no
other. Most importantly, the software shall facilitate the easy
integration of additional agencies' applications.
2.2 Application Types
Multimedia application development shall be performed for the
following five categories, as appropriate, including but not limited
to, the parameters associated with each as detailed below:
2.2.1 Attract Loop
The Vendor shall develop an attract loop to run at all
times when the user is not interacting with the Kiosk
application. This will include a two dimensional logo
defined and implemented by the Vendor and approved by
DoITT.
<PAGE>
EXHIBIT D
Page 3 of 4
2.2.2 Informational Applications
These provide information to the User concerning an Agency
Application without requiring the User to supply any
information. Print facilities will be provided to support
form and document preparation/generation as well as receipt
generation.
2.2.3 Query Applications
In query applications the User will interact with the Kiosk
and may be required to supply information on-line. Some
examples of how information is provided by the user
include: responses to questions through alpha-numeric data
entry or through single or multiple selections in response
to multiple choice options. Such applications must have the
capability to collect data and make it available to a
remote host. The application may 'involve PC transactions
where files are updated on a daily basis by the host
system. There are no on-line transactions to the host.
2.2.4 On-Line Applications Without Financial Transactions
These applications involve on-line transactions with a
host. The User must supply information as part of the
application. In this case, a print facility is usually
necessary and will be provided.
2.2.5 On-Line Applications With Financial Transactions
These applications, if applicable to the Vendor as per the
Agreement involve on-line transactions with a host where
the end-user executes a transaction with a debit or credit
card or an electronic money order. Once again the client
must supply information as part of the transaction. A
receipt printer is necessary here and will be provided. It
is assumed that a debit or credit card will be used for
each transaction and the response time will be minimized by
the Vendor up to the time interval for card approval (from
time data credit/debit card is entered to time financial
transaction is approved or rejected). All time directly or
indirectly under Vendor control should be minimized.
2.3 Search Facilities
Efficient information searching techniques for the User of a Kiosk
will-be among the most critical items developed and employed in each
Kiosk service application. Lengthy searches must be eliminated by
whatever methods are deemed necessary, to prevent the development of
long lines and customer dissatisfaction.
<PAGE>
EXHIBIT D
Page 4 of 4
2.3.1 Agency Searches and/or People Searches
The number of steps in all searches should be minimized.
Agency searches and/or people searches may best be handled
by developing very clear high-level City and Agency
hierarchical diagrams and maps for these two important
areas.
2.3.2 Map Searches
Maps should be developed that are close to language
independent. With such maps, any user will either get their
questions answered or receive suggestions for further
inquiry that can be handled either at the Kiosk or
elsewhere (to be specifically indicated at the completion
of a Kiosk session.) The general search through a City map
should be reduced to at most three steps.
2.4 ACCESS AND RESPONSE TIME
2.4.1 Response Times
Wherever a Vendor is in full control of a transaction, the
time to effect the response should not exceed two seconds.
Remote queries and financial transactions should take a
maximum of ten seconds beyond the response time provided by
the City's computers to the Kiosk server.
2.4.2 Fast Pathing
Fast pathing is for those who, through the use of a Kiosk
brochure or from previous Kiosk experience, already know
what Kiosk service they want. All Kiosks should have
provisions for users to "fast-path" to topics they are
already familiar with. This should be based on both
language keywords and universally recognizable icons, as
well as location codes provided-in the context of a "Where
Am I?" question accompanied by a "You Are Here" flag
supplied in Kiosk response on prior screens viewed by the
user during a Kiosk session operation.
2.4.3 Minimizing Kiosk Customers Line Lengths
Each Vendor shall actively address the issue of long lines
of customers waiting for Kiosk services. Each Vendor shall
also address the amount of time a customer spends on any
one interactive session before they must relinquish control
to the next person in line.
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EXHIBIT E
SCOPE OF WORK
1. SOFTWARE DEVELOPMENT
1.1. Vendor Implementation Plan
1.1.1. Project Schedule Plan
Within a week from contract registration, the Vendor shall
submit to the Project Manager a schedule of when all
deliverables, up to the time of deployment of the first
kiosk, shall be submitted for review.
1.1.2. Systems Analysis and Detailed Design
The Vendor shall produce a document specifying the flow of
information and control between the kiosk and the server,
if applicable, and any external systems of the City or
other party that facilitates each of the agency application
functions described in Exhibit F. This document shall also
specify the applications and the associated communications
subsystem designs necessary to support the functions. The
document will indicate how data on the kiosk's hard disk
can be updated, how the kiosk hardware subsystems can be
monitored remotely from a central site, and how the kiosks
can perform transactions against data on host computers.
DoITT shall review this document and the Vendor shall make
any necessary revisions. This-deliverable is a
pre-requisite to payment as described in Section 4.2.2.1 of
the Agreement.
Thereafter the Vendor's technical staff shall configure
software to support PC host communications as needed. The
Vendor's technical staff shall write custom programs to
implement any applications portions of the system that are
outside the capabilities of the multi-media authoring
software. They shall also develop Software to support
credit card applications, if applicable.
1.1.3. Software Acceptance Plan
The Vendor shall produce a software acceptance testing
document. This document shall provide a testing procedure
for each software component of the system and offer test
cases for each of the application functions, including "Key
to City Hall" as described in Section 6 of this Exhibit. It
shall also describe how all software components will be
integrated and test procedures for the integrated software.
DoITT shall review this document in its entirety and the
Vendor shall make all required revisions. These testing
procedures and associated test scripts shall serve as the
basis for the satisfactory completion of a) Functional
Integration Testing and associated payment milestone as
described in Section 4.2.2.3 of the Agreement, b)
Acceptance Testing of all kiosks and associated milestone
payment
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EXHIBIT E
as described in Section 4.2.2.4 of the Agreement and c)
Final Acceptance Testing and the associated milestone
payment as described in Section 4.2.2.5 of the Agreement.
1.1.4. Multimedia Scripts and Media Production
Upon approval of the Analysis and Detailed Design Document,
the Vendor shall begin to develop the required multimedia
scripts. These scripts will indicate in detail the video,
audio, graphics, and the text content of the application
programs as well as the branching logic associated with the
User's selections. Concurrent with script development, the
Vendor shall design the production specifications
associated with the specific media cited in the multimedia
scripts and also provide sample graphic screens, all
subject to DoITT's evaluation and approval. The media
production specifications shall indicate where the media
comprises the Vendor's preexisting materials or whether the
media was provided directly or indirectly by the City. The
multimedia scripts, production media and graphic screens
that DoITT approves shall be used as a basis for developing
graphics in the corresponding application programs. These
deliverables are pre-requisites for the achievement of the
milestone and associated payment as described in Section
4.2.2.2 of the Agreement.
1.1.5. Translation, Audio/Video
After the script has been adopted, all translations into
Spanish will be made. The Agency shall be responsible for
translation whether providing these services to the Vendor
or providing a translated script. Multimedia development
will then take place. The video and. audio portions will be
edited, digitized, and integrated into the program.
2. ACCEPTANCE
2.1. Functional Integration Testing
Prior to installment in the kiosk, all software developed shall go
through a period of functional integration testing to ensure
conformance with the Software Acceptance Plan as developed by the
Vendor pursuant to Section 1. 1.3 of this Exhibit. The successful
completion of functional integration testing and DoITT's approval
comprises completion of milestone three and effects the associated
payment as detailed in Section 4.2.2.3 of the Agreement.
2.2. Initial Acceptance Testing of all Kiosks
As each kiosk is deployed, complete with developed and working
software as approved in the functional integration test the kiosk
shall be evaluated and tested by DoITT for full functionality. The
successful completion of this testing effects payment as defined in
Section 4.2.2.4 of the Agreement. Upon acceptance by DoITT of all
kiosks contracted
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EXHIBIT E
for, the demonstration period of 365 days shall begin.
2.3. Final Acceptance Testing
Upon full deployment, the Vendor shall have installed on the
designated sites (see Exhibit B) the number of kiosks contracted for
as fully functional. Each kiosk shall be capable of providing the
services as specified in Exhibit F.
For a period of three months from the date of acceptance as specified
in 2.2 above, DoITT shall review the operation of the Vendor's
kiosks. This period will be used to monitor and evaluate kiosk useage
and to possibly modify User navigation paths in order to reduce User
session time. This final testing phase is pre-requisite to the
Payment Schedule as defined in Section 4.2.2.5 of The Agreement.
All applicable source code, object code, multimedia scripts and
documentation being purchased or licensed, as applicable per the
Agreement, by the City are to be delivered to the City in electronic
form (diskettes or tapes) at the time of final deployment and again
within thirty (30) days of any changes to same throughout the term of
this agreement.
3. STATISTICAL ANALYSIS REQUIREMENTS
DoITT shall measure performance level of the demonstration project through
analysis of statistical data provided by the Vendor. The Vendor shall provide
data as described in Sections 3.1, 3.2 and 3.3 pertaining to each service
process initiated by the User. There should be no unreported time intervals
regarding any kiosk usage. Vendor shall provide service process data on a
diskette submitted to the DoITT every Tuesday for information gathered the
previous week or DoITT may have on-line access to the Vendor's kiosk service
process database. All data must be delivered undiluted from its original
collection content. The data format must be either in ASCH or SQL format.
3.1. Kiosk Service Process Statistics
Each kiosk service process shall have (as applicable) data items and
associated sub-items (denoted in 3.1.1 - 3.1.7) captured
electronically and stored on a database to be provided (on-line or
physically forwarded on a weekly basis) to DoITT for statistical
evaluation.
3.1.1. Service Process Number
A specific number that DoITT will provide unique to each
service process.
3.1.2. Service Process Number Subtype
(reserved for certain General Information service
processes)
3.1.3. Service Process Status
The outcome status of a service process interaction
1 -OK
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EXHIBIT E
2 - timed out (user did not respond within x seconds)
3 - user exited (explicitly ended service process session)
4 - system error
5 - application error
6 - financial transaction denied
3.1.4. Language Used
E - English
S - Spanish
3.1.5. Service Process Date/Time Stamps
(to the nearest tenth of a second)
3.1.5.1. Service process initiation
When service process interaction is initiated.
3.1.5.2. Service process execution request
When user action initiates execution of service
process request
3.1.5.3. Service process completion
When execution of service process is completed
(i.e., when response/screen display completes)
3.1.6. Kiosk Location
A unique identifier for each kiosk location. It will
comprise eight characters, concatenating the borough (MH,
BK, BX, QU, SI), area location (two characters), site
number (1 character - defaults to '1') and a unique Vendor
ID. Example: QUFH2VEN - kiosk #2 in Forest Hills, Queens
for vendor "VEN".
3.1.7. Financial Transaction Information (if applicable
as per the Agreement) Dollar amounts to be stored as text
in format $xx,xx.xx
3.1.7.1. Type of payment mechanism
C - credit card
D - debit card
M - electronic money order (if applicable)
3.1.7.2. Transaction base cost
Amount that City charges for transaction and will
be credited to appropriate City account.
3.1.7.3. Bank surcharge
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EXHIBIT E
Total charges incurred by Vendor from merchant
bank, authorizer, financial processor, etc.
3.1.7.4. Vendor convenience fee
Amount received by Vendor to process transaction.
3.1.7.5. User transaction charge
Actual amount charged to User
3.1.8. Survey Upon Completion of User's Final Service
Process At the end of each service process, if the User
does not desire to initiate any additional service
processes, then the system will ask the User if he/she
wishes to answer the first or both parts of an on-line
questionnaire. The first part comprises (3.1.8.1 -
3.1.8.5). The second part comprises (3.1.8.6 3.1.8.8). At
any time within the questionnaire, a User will be able to
skip over a question or exit the questionnaire through a
pre-specified key touch.
3.1.8.1. "Did the kiosk save you a trip or
a phone call?" ('Y/N').
3.1.8.2. "Has this kiosk helped to service
your request?" ('Y/N').
3.1.8.3. "Would you recommend using the
kiosk to family or friends?"
('Y/N').
3.1.8.4. "Do you plan to use the kiosks
again?" ('Y/N')
3.1.8.5. "How would you rate the kiosk
performance ("Poor", "Fair",
"Good", Very Good", "Excellent")
3.1.8.6. "How did you find out about the
kiosks?" ("Brochure", "Newspaper/
Magazine","Friend/Family",
"Passing By", "TV/Radio")
3.1.8.7. "Did you find the Kiosk easy to
use?" ('Y/N')
3.1.8.8. "Did someone assist you to use
the kiosk?" ('Y/N')
3.1.8.9. "Did the kiosk give you a quick
response?" ('Y/N')
3.1.8.10. "What service improvements or
additions would you like to
see?" ( User can enter up to two
lines of text).
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<PAGE>
EXHIBIT E
3.2. Phone Use
Pursuant to Section 7 in this Exhibit, all kiosk phone usage, if
applicable as specified in The Agreement, should be logged and time
stamped and produced in hard copy upon request.
4. PROJECT MANAGEMENT
Throughout the project, the Vendor will perform periodic internal reviews of its
project progress. These reviews will be valuable in detecting and resolving any
problems early in the process. Findings from these reviews will be reported to
DoITT as part of the normal review and status update process.
DoITT reserves the right to conduct informal timely review meetings concerning
Vendor and Agency progress with respect to each of the kiosks being developed
for City deployment. The nature of these reviews will typically be one-to-one
between DoITT's human factors specialist, an Agency technical representative,
and a Vendor designer, developer or implementor of Vendor kiosk technology.
These reviews may be attended by the Agency designated representative only if
deemed necessary by the parties involved in such meetings and shall not be
mandatory on the Agencies involved.
4.1. Bi-Weekly Meetings
The Vendor shall meet with DoITT on a bi-weekly basis and provide
DoITT with the information outlined above. Information gathered and
presented will be used to:
* Measure and evaluate project progress against established project
work plans
* Note and resolve deviations from project schedule
* Report potential bottlenecks
* Produce useful project status reports
* Provide for effective and timely project change control
4.2. Project Change Control Procedure
Subject to paragraph 8 of the Agreement a formal, written process for
managing change is necessary. All changes to the initial statement of
work must be investigated and their impact evaluated before being
approved or disapproved. A rigorous, effective change control
procedure is necessary to reduce risk and the resulting impact on
project costs and duration. It must describe the change, the
rationale for the change, and the effect the change win have on the
project, the pricing, and the schedule. Changes requested by either
the City or any Kiosk Vendor regarding project scope, deliverables,
schedule, or any other matter will be accompanied by a project change
request. The designated project manager of the change-requesting
party will review the proposed change and determine whether to submit
the request to the other party. The project manager of the other
party will review the proposed change and either approve it for
further evaluation or reject it.
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EXHIBIT E
Such further evaluation will determine the effect that the
implementation of the project change request will have. For a given
change, written change authorization must then be signed by both
parties to authorize implementation of the investigated change.
5. SYSTEM AND FACILITY MAINTENANCE
5.1. System Maintenance
The Vendor shall be responsible for providing maintenance on the
system's software, hardware, accessories, when appropriate. Software
maintenance shall be performed on the kiosk systems as needed. If the
kiosk becomes inoperable, the Vendor shall assess and assure the
kiosk is fully functional within two business days from the time the
problem becomes known to the Vendor. For each business day beyond the
repair time deadline of two business days, the City may assess the
Vendor liquidated damages in the amount of $100 per business day
until a fully functional kiosk is in place.
5.2. Custodial Maintenance
The Vendor shall also be responsible for providing custodial
maintenance which includes cleaning the exterior and interior of the
kiosk, clearing paper jams, refilling the printer with paper,
performing preventative maintenance and providing waste receptacles
for paper disposal.
6. THE "KEY TO CITY HALL" APPLICATION
The Vendor shall develop a general "Key to City Hall" application. This
application shall provide the User with, at minimum, an Introduction to the City
by the Mayor and easy access to specific information concerning elected City
Officials, Government Offices and their locations (including all Boroughs),
navigable map access to the City (Street, Subway, Bus) and an easily navigated
map/index of City agencies and their services (which features current Agency
services offered on the kiosk and a prominently displayed note that this is a
kiosk involved in a demonstration project). The application shall make available
at all times a direct path to primary kiosk Agency services.
7. USER ASSISTANCE TELEPHONE - "HOT-LINE"
If applicable pursuant to the Agreement, the Vendor shall provide each kiosk
with a telephone to enable a User to report any malfunction, whether software,
hardware, mechanical or electrical in nature, to a Vendor representative at
their central site. The phone shall be clearly labeled and either automatically
dial the Vendor site or provide the telephone number to the User. Ms service
shall be provided during normal business hours. If Kiosk availability extends
beyond normal business hours the Vendor shall notify the unavailability of User
assistance through a sign placed near the phone. The Vendor shall log the
problem and immediately proceed to diagnose and correct the problem such that
full service is restored to the kiosk. The problem log will be presented to
DoITT on a monthly basis as well as on an as needed basis.
8. FINANCIAL TRANSACTION CAPABILITY
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EXHIBIT E
If applicable, pursuant to the Agreement, the Vendor shall have the ability to
process credit and debit card payments and electronic money orders. The full
cost of the transaction shall be paid by the User. Within a week of contract
registration, the Vendor shall provide DoITT with the bank's surcharge amount
and the Vendor's convenience fee (collectively referred to as the transaction
service charge).
8.1. Authorization and Settlement
The Vendor shall provide electronic authorization with a response
time of no more than fifteen (15) seconds. The settlement of funds
shall occur through data capture methods that involve a simultaneous
authorization and capture of funds. As authorization is occurring,
the funds in the. User's account will be held, awaiting transfer to
the appropriate City bank account.
8.2. Deposit
Depository services shall be provided only by banks that are
designated by the New York City Banking Commission. The Vendor shall
deposit collected funds into the City's bank account (details of
which shall be provided to the Vendor by DoITT), on the day following
the transaction date.
8.3. Chargebacks
In the event of a cancelled transaction, the City shall be held
harmless against all chargebacks.
8.4. Database
If applicable within the Agreement pursuant to providing financial
transaction capability, the Vendor shall maintain a database
containing the following data elements: Card type; card company; card
number; card expiration data; cardholder name; dollar amount paid;
date and time paid; agency paid; site ; authorization number; and
unique agency generated transaction identifer. The database, to be
maintained for a year from the last transaction, will be used to
facilitate research required to process payment claims and answer
inquiries made by cardholders. The Vendor shall furnish DoITT and the
Department of Finance with on-line access to this database.
8.5. Reporting
The Vendor shall provide DoITT no later than five days following the
close of every month, three hardcopy sets of a financial transaction
activity report to include, but not limited to, the following
information: the cardholder name, dollar amount paid, a listing of
transaction surcharge fees, and declined authorizations.
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<PAGE>
EXHIBIT F Page 1 of 5
OBJECTSOFT CORPORATION
AGENCY-SPECIFIC SERVICE REQUIREMENTS
NEW YORK CITY DEPARTMENT OF BUILDINGS
I. New York City Department of Buildings (DOB) CITY Information
A. DOB will provide CITY Information directly to VENDOR's kiosks
users through real-time access to DOB's Buildings Information System located on
DoITT's computer mainframe in ADABAS/NATURAL format, which provides the
following, continuously updated information:
1. Information by building address regarding status of
applications and items needed to close a construction, repair or reconstruction
job, permits granted, complaints and description of all work performed in the
past five years.
2. A composite of Department of City Planning and Department of
Finance information and requirements regarding property work and maintenance,
including matters relating to electrical inspections and permit, license and
insurance requirements.
B. DOB will provide VENDOR with sufficient CITY information, in a
format to be agreed to between DOB and VENDOR, to enable VENDOR to prepare
front-end, pass-through application software to lead a kiosk user swiftly and
accurately to real-time access to DOB's said System.
II. ObjectSoft Corporation (VENDOR) Use of DOB CITY Information
A. VENDOR shall prepare front-end, pass-through application software,
as set forth in Exhibit C to the Agreement to which this is Exhibit F, for each
of the types of information being directly accessed as set forth in Paragraph
I.A. of this Exhibit F regarding DOB CITY information.
B. The front-end, pass-through application software being developed
shall have the capability of 1) displaying or evoking the display on each of
VENDOR's kiosk color monitors of a narrative description of the information
referred to in Paragraph I.A., above; and 2) causing the printing out, by means
of a laser printer, on 8.5" x 11" paper, such of the said information as users
of VENDOR's kiosk desire.
C. The front-end, pass-through application software shall bear, on
the frontispiece, in the lower left hand corner, the month and year the
application was developed; such date shall be
<PAGE>
EXHIBIT F Page 2 of 5
updated whenever the application software is rewritten, if ever.
D. Each application shall in its initial display on vendors monitors,
show the corporate seal of The City of New York followed by an asterisk and at
the bottom of the screen in letters three-eighths inch (3/8") in height, an
asterisk followed by the following ownership legend: "THE CORPORATE SEAL OF THE
CITY OF NEW YORK - used within the permission of The City of New York."
E. On or before termination of the Agreement to which this Exhibit F
is an exhibit, VENDOR shall turn over to and certify in writing that it has
turned over to DoITT all copies of the CITY information, licensed application
software, including program codes, documentation, manuals and enhancements,
provided to or developed by VENDOR pursuant to this Exhibit F and Exhibit C of
said Agreement; and VENDOR shall certify in writing further that it does not
retain any copies of such application software, materials, enhancements and/or
CITY information.
F. VENDOR will access DOB's system in terminal emulation mode, and
shall have no direct access to CITY databases, nor shall VENDOR make or be
required to make any modifications to CITY application software.
<PAGE>
EXHIBIT F Page 3 of 5
OBJECTSOFT CORPORATION
AGENCY-SPECIFIC SERVICE REQUIREMENTS
NEW YORK CITY DEPARTMENT OF HEALTH
I. New York City Department of Health (DOH) Information
A. DOH will provide CITY information to VENDOR as follows:
1. General Department and Health Awareness information
will be provided electronically in "HTML" or "Word" format, as well as in video,
graphics, and other formats where appropriate.
2. Birth Certificate general information and application
form will be provided electronically in "WordPerfect" or "Word" format; Birth
Certificate information regarding a tentative match to a particular persons
certificate will be provided to the kiosk resident program (which will then
provide an-appropriate response to the user); this access will be accomplished
through real time access to DoITT's Vital Records System located on DoITT's
computer mainframe.
3. Death Certificate general information and application
form will be provided electronically in "WordPerfect" or "Word' format; Death
Certificate information regarding existence on file of a particular person's
certificate will be provided directly to VENDOR's kiosks users through real-time
access to DOH's Vital Records System located on DoITT's computer mainframe.
4. Dog License application form will be provided
electronically in "WordPerfect" format; Dog License general information will be
provided directly to VENDOR's kiosks users.
5. Health Academy Courses information in the form of
course requirements and fees, and an application form for requesting schedules,
will be provided electronically in HTML on "Word" format.
II. ObjectSoft Corporation (VENDOR) Use of DOH CITY Information
A. VENDOR shall prepare application software, as set forth in Exhibit
C to the Agreement to which this is Exhibit F, for each of the DOH programs and
services referred to and set forth in Paragraph I.A. this Exhibit F regarding
DOH CITY information.
B. Each piece of application software prepared to provide DOH General
Department
<PAGE>
EXHIBIT F Page 4 of 5
and Health Awareness information shall have the capability of: 1) displaying on
each of VENDOR's kiosk color monitors a narrative description as well as
appropriate graphics and video of each discrete piece of information being
provided to kiosk users; and 2) printing out, by means of a receipt laser
printer, on either receipt size or 8.5" X 11" paper, as appropriate to the
material being printed and at the option of VENDOR, such referral slips from
General Department information and Health Awareness information as a user of
VENDOR's kiosk shall desire.
C. Each piece of application software prepared to provide Birth and
Death Certificate information, respectively, and the respective application
forms for obtaining each, shall have the capability of: 1) querying information
in Birth and Death Certificate Vital Records, respectively, located on the DoITT
computer mainframe; 2) displaying query responses, general information and
application forms for certificates on each of VENDOR's kiosk color monitors; 3)
permitting on-line completion' of application forms for Birth and Death
Certificates; 4) permitting on-line transmittal of a completed application form
to DOH; 5) responding to prompts for payment by means of credit and debit cards,
and card acceptance; and 6) printing out receipt size credit and debit card
receipts following card usage and copies by means of a laser printer, on 8.5" x
11" paper, of application forms for Birth and Death Certificates which have been
or need to be completed.
D. Each piece of application software prepared to provide Dog License
and Health Academy Courses schedules and requirements information, respectively,
and the respective application forms for obtaining or renewing a Dog License and
making application for taking specific Academy Courses shall have the capability
of: 1) displaying Health Academy course requirements and fees, and application
forms for new and renewal Dog Licenses and Health Academy enrollments; 2)
permitting on-line completion of application forms for new and renewal Dog
Licenses and for Health Academy course(s) enrollment; 3) permitting on-line
transmittal of a completed application form to DOH; 4) responding to prompts for
payment by means of credit and debit cards, and card acceptance; and 5) printing
out receipt size credit and debit card receipts following card usage and copies
by means of a laser printer, on 8.5" x 11" paper, of applications forms for Dog
Licenses and License renewals, Health Academy Courses schedules, requirements
and course enrollment applications.
E. Each application displayed and all course descriptions,
eligibility requirements, application forms, and DOH general and health
awareness information printed shall bear, in the lower left hand corner, the
month and year the application was developed and such date shall be updated
whenever the information to be displayed and/or printed is updated.
F. Each application shall in its initial display on vendor's
monitors, show the corporate seal of The City of New York followed by an
asterisk and at the bottom of the screen in letters three-eights inch (3/8") in
height, an asterisk followed by the following ownership legend: "THE CORPORATE
SEAL OF THE CITY OF NEW YORK - used within the permission of The City of New
York."
<PAGE>
EXHIBIT F Page 5 of 5
G. On or before termination of the Agreement to which this Exhibit F
is an exhibit, VENDOR shall turn over to and certify in writing that it has
turned over to DoITT all copies of the CITY information, licensed applications
software, including program codes, documentation, manuals and enhancements,
provided to or developed by VENDOR pursuant to this Exhibit F and Exhibit C of
said Agreement; and VENDOR shall certify in writing further that it does not
retain any copies of such applications software, materials enhancements and/or
CITY information.
H. VENDOR will access DOH's systems in terminal emulation mode, and
shall have no direct access to CITY databases, nor shall VENDOR make or be
required to make any modifications to CITY application software.
<PAGE>
APPENDIX A
General Provisions Governing Contracts for Consultants, Professional and
Technical Services
-------------------------------------
Not included herewith
RICHARD EISNER & COMPANY, LLP
Letterhead
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form
SB-2 of our report dated March 2, 1996 (with respect to Note M August 15, 1996),
on the financial statements of ObjectSoft Corporation as at December 31, 1995
and for the two years then ended. We also consent to the reference to our firm
under the captions "Selected Financial Data" and "Experts."
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
August 19, 1996
