<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OSAGE SYSTEMS GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-22808 95-4374983
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
</TABLE>
1661 EAST CAMELBACK ROAD
SUITE 245
PHOENIX, ARIZONA 85016
(Address of principal executive office)
(602) 274-1299
(Registrant's telephone number, including area code)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes X No
(2) Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's sole class of common stock,
as of August 10, 1998 was 8,495,958 shares.
Transitional Small Business Disclosure Format:
Yes No X
<PAGE> 2
OSAGE SYSTEMS GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION*
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998 (unaudited) and December 31,
1997 1
Unaudited Condensed Consolidated Statements of Operations for the Three and Six
Months ended June 30, 1998 and 1997 2
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended
June 30, 1998 and 1997 3
Notes to Unaudited Condensed Consolidated Financial Statements 4 - 8
Item 2. Management's Discussion and Analysis or Plan of Operation 8 - 18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 19 - 23
Item 4. Submission of Matters to a Vote of Security Holders 23 - 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25 - 26
</TABLE>
* The accompanying financial information is not covered by an Independent
Certified Public Accountant's Report.
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
OSAGE SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998
(UNAUDITED) DECEMBER 31, 1997
------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,249,070 $ 2,576,323
Accounts receivable - net of allowance for doubtful
accounts of $52,000 in 1998 and $15,000 in 1997 9,679,577 1,974,496
Inventories 578,600 6,672
Prepaid expenses and other current assets 235,833 25,728
Deferred income taxes 778,000 210,000
------------ ------------
Total current assets 12,521,080 4,793,219
------------ ------------
FURNITURE AND EQUIPMENT - net 724,649 86,881
GOODWILL, less accumulated amortization of $120,622 12,917,738
OTHER ASSETS 54,939
------------ ------------
TOTAL $ 26,218,406 $ 4,880,100
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 214,956
Accounts payable 8,570,893 $ 1,948,802
Accrued expenses 1,646,881 507,395
Deferred revenue 14,051
Income taxes payable 59,175 262,182
------------ ------------
Total current liabilities 10,505,956 2,718,379
------------ ------------
NOTES PAYABLE 247,388
OTHER 569,995
STOCKHOLDERS' EQUITY:
Series A Preferred, $100 stated value - authorized,
issued and outstanding, 10 shares in 1998 and 122
shares in 1997; total liquidation preference, $300,000
in 1998 and $3,660,000 in 1997 1,000 12,200
Series B Preferred, $100 stated value - authorized,
issued and outstanding, 50 shares; total liquidation
preference, $1,500,000 5,000 5,000
Series C Preferred, $50 stated value - authorized,
issued and outstanding, 75 shares; total liquidation
preference, $1,125,000 3,750
Common stock, $.01 par value - authorized, 50,000,000
shares; issued and outstanding, 8,682,188 shares in
1998 and 4,820,000 shares in 1997 86,821 48,200
Additional paid-in-capital 16,073,518 2,772,246
Retained earnings (1,275,022) (675,925)
------------ ------------
Total stockholders' equity 14,895,067 2,161,721
------------ ------------
TOTAL
$ 26,218,406 $ 4,880,100
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
1
<PAGE> 4
OSAGE SYSTEMS GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ----------------------------------
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 12,765,671 $ 2,688,703 $ 18,407,603 $ 4,928,481
COST OF SALES 10,566,735 2,117,907 15,146,745 3,863,262
------------ ------------ ------------ ------------
Gross profit 2,198,936 570,796 3,260,858 1,065,219
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling, general and administrative expenses 2,828,735 434,909 4,022,458 861,571
Depreciation and amortization 158,336 12,600 187,601 25,200
------------ ------------ ------------ ------------
Total operating expenses 2,987,071 447,509 4,210,059 886,771
------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME (788,135) 123,287 (949,201) 178,448
INTEREST - net (9,446) 359 26,104 2,662
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (797,581) 123,646 (923,097) 181,110
BENEFIT FOR INCOME TAXES (285,000) (324,000)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (512,581) $ 123,646 $ (599,097) $ 181,110
============ ============ ============ ============
(LOSS) INCOME PER COMMON SHARE -
BASIC AND DILUTED $ (0.07) $ 0.02 $ (0.10) $ 0.03
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 6,907,509 6,907,509 6,050,352 6,050,352
============ ============ ============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
<PAGE> 5
OSAGE SYSTEMS GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------
JUNE 30, 1998 JUNE 30, 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (599,097) $ 181,110
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Depreciation and amortization 187,601 25,200
Stock-based compensation 150,000
Loss on disposal of assets 1,500
Deferred income taxes (176,231) (55,000)
Changes in operating assets and liabilities:
Accounts receivable (3,470,907) (328,378)
Inventories (41,585) (66,409)
Prepaid expenses and other assets (57,401) 30,642
Accounts payable 3,053,642 342,583
Accrued expenses 514,666 120,815
Deferred revenue (11,080)
Income taxes payable (203,007)
----------- -----------
Net cash (used in) provided by operating activities (651,899) 250,563
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (209,853) (559)
Acquisition costs, net of cash received of $185,227 (5,246,032)
Investments (100,000)
----------- -----------
Net cash used in investing activities (5,455,885) (100,559)
----------- -----------
FINANCING ACTIVITIES:
Net repayments on notes payable (1,033,868) (25,451)
Net proceeds from sale of common stock 5,763,884
Net increase in note receivable 50,515
Purchase of treasury stock (93,692)
----------- -----------
Net cash provided by (used in) financing activities 4,780,531 (119,143)
----------- -----------
NET (DECREASE) INCREASE IN CASH (1,327,253) 30,861
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,576,323 564
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,249,070 $ 31,425
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE> 6
OSAGE SYSTEMS GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting
of normal recurring accruals) necessary to present fairly the financial
position of the Company and the results of its operations and its cash
flows for the periods reported. The results of operations for interim
periods are not necessarily indicative of the results to be expected
for the entire year. 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 as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The consolidated financial statements include the accounts of Osage
Systems Group, Inc. ("Osage") and its wholly-owned subsidiaries, Osage
Computer Group, Inc. ("Osage"), Solsource Computers, Inc.
("Solsource"), H.V. Jones, Inc. ("HV Jones"), Open System Technologies,
Inc. ("OST") and Open Business Systems, Inc. ("OBS"), (collectively,
the "Company"). All significant intercompany balances and transactions
have been eliminated in consolidation. Certain reclassifications have
been made to the prior financial statements to conform to the current
classifications.
The information presented within the accompanying unaudited
consolidated financial statements should be read in conjunction with
the Company's audited Financial Statements for the fiscal years ended
December 31, 1997 and 1996 and "Management's Discussion and Analysis or
Plan of Operation" from the 1997 Annual Report on Form 10-KSB.
2. Recent Acquisitions During Period.
On March 17, 1998, Osage acquired Solsource pursuant to the terms of an
Agreement and Plan of Merger. Upon closing, through a wholly-owned
subsidiary, Osage acquired 100% of the outstanding capital stock of
Solsource for merger consideration of $1.1 million; consisting of
$200,000 in cash and $900,000 in newly issued common shares priced at
$6.00 per share. In addition, the merger consideration included
earn-out incentive shares to be issued if Solsource achieves certain
performance targets.
4
<PAGE> 7
On March 17, 1998, Osage also completed the acquisition of HV Jones
pursuant to the terms of an Agreement and Plan of Merger dated February
27, 1998. Upon closing, through a wholly-owned subsidiary, Osage
acquired 100% of the outstanding capital stock of HV Jones for merger
consideration of $1,975,000; consisting of $395,000 in cash and $1.58
million (105.3 shares) in Series C Convertible Preferred Stock ("Series
C Shares") which convert into common stock during the four quarters
following the closing (commencing June 17, 1998) at a conversion rate
equal to the lower of $6.87 or a 33% premium over the average closing
price of the Company's common stock for the ten trading days prior to
each date of conversion. In addition, the merger consideration included
earn-out incentive shares to be issued if HV Jones achieves certain
performance targets.
On April 24, 1998, Osage completed the acquisition of 100% of the
outstanding capital stock of OST for merger consideration of
$5,000,000; consisting of $2,500,000 in cash, $2,000,000 in newly
issued common shares priced at $6.00 per share and $500,000 in a key
employee retention program.
On June 22, 1998, Osage completed the acquisition of 100% of the
outstanding capital stock of OBS for merger consideration of
$4,000,000; consisting of $2,000,000 in cash and $2,000,000 in newly
issued common shares priced at $5.52 per share. In addition, the merger
consideration included earn-out incentive shares to be issued if OBS
achieves certain performance targets.
The Solsource, HV Jones, OST and OBS acquisitions were accounted for
using the purchase method of accounting for business combinations. The
excess of assets acquired over liabilities assumed has been allocated
to goodwill and is being amortized over 20 years. Results of operations
of Solsource, HV Jones, OST and OBS have been included in the Company's
statement of operations from their respective acquisition dates.
3. Pro Forma Information.
The following pro forma summary presents the consolidated results of
operations of the Company as if the acquisitions completed during the
period had occurred as of January 1, 1998 and 1997, and do not purport
to be indicative of what would have occurred had the acquisitions been
made as of those dates or of results which may occur in the future. The
pro forma summary data for the six months ended June 30, 1998 and 1997
combines historical financial information of Osage, Solsource, HV
Jones, OST and OBS for the six months ended June 30, 1998 and 1997.
5
<PAGE> 8
PRO FORMA INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net Sales $ 29,348,481 $ 20,732,434
Net (loss) income $ (1,667,737) $ 462,035
Net (loss) income per share:
basic and diluted $ (0.28) $ 0.08
</TABLE>
4. Earnings Per Share.
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings
per Share ("SFAS 128"), which is effective for financial statements for
both interim and annual periods ending after December 15, 1997. The
Company has implemented this statement and, as required, has restated
earnings per share ("EPS") for all periods presented. This new standard
requires dual presentation of "basic" and "diluted" EPS on the face of
the statement of operations. Basic earnings per common share is
computed on the weighted average number of shares of common stock
outstanding during each period. Diluted earnings per common share is
computed on the weighted average number of shares of common stock
outstanding plus additional shares that would have been outstanding if
all dilutive potential common shares had been issued.
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding
during the period after giving effect to stock options and the
conversion of preferred shares considered to be dilutive. Because the
Company incurred a loss for the three and six month periods ended June
30, 1998, the effects of the potential dilutive securities are not
included in the calculations.
5. New Accounting Pronouncements.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income ("SFAS 130"), which is effective for financial statements for
periods beginning after December 15, 1997 and establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. The adoption of this statement on January 1, 1998
had no impact on the Company's financial statement presentation or
related disclosures.
In June 1997, the FASB issued SFAS No. 131, Disclosure about Segments
of an Enterprise and Related Information ("SFAS 131"), which is
effective for fiscal years
6
<PAGE> 9
beginning after December 15, 1997 and establishes standards for the way
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and major customers. The Company operates in one
business segment and does not believe that SFAS 131 will require
additional disclosures when adopted.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"), which is effective for
the Company in 2000. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. The standard also provides
specific guidance for accounting for derivatives designated as hedging
instruments. The Company is currently evaluating what impact this
standard will have on its financial statements.
6. Income Taxes.
The Company accounts for income taxes using the asset and liability
approach, which can result in recording tax provisions or benefits in
periods different than the periods in which such taxes are paid or
benefits realized. Deferred income taxes are recorded for the
difference between the book and tax basis of various assets and
liabilities which can provide for current recognition of expected tax
benefits from temporary differences that will result in deductible
amounts in future years.
The deferred income tax asset at June 30, 1998 is comprised of the
following:
<TABLE>
<S> <C>
Net operating loss carryforward $ 464,000
Use of cash basis of accounting for income tax purposes (51,000)
Allowance for doubtful accounts 21,000
Deferred compensation 320,000
Other 24,000
----------
Net current asset $ 778,000
==========
</TABLE>
7. Stock Options.
As part of the Company's original acquisition of Osage on December 22,
1997, options were granted to the former Osage stockholders at an
exercise price of $3.00, however, vesting was contingent upon the
future earnings of the Company and the Holders' continued employment by
the Company. Because these options were "performance-based", the
Company previously reported that it would have to record compensation
7
<PAGE> 10
expense in the future if the earnings of the Company achieved agreed
upon levels and other events occurred that would lead management to
believe that vesting of the options was a probable occurrence. The
expense, when recorded, could have had an adverse effect on the
Company's income for financial accounting purposes, as it would have
approximated the difference between the exercise price of the options
and the fair market value of the Company's Common Stock at that time.
In recognition of the potential charge upon the Company's earnings, and
for other consideration, during June 1998, the Company restructured the
options so as to increase the number of options granted, increase the
exercise price to $4.50 (fair market value when granted) and eliminate
any vesting conditions. As restructured, management does not believe
that the Company will record compensation expense in the future based
upon the grant of these options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Report on Form 10-QSB, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 regarding events, conditions and financial trends which may affect the
Company's future plans of operations, business strategy, operating results and
financial position. Such statements are not guarantees of future performance and
are subject to risks and uncertainties and actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors include, among others: (i) risks related to the Company's
acquisition strategy; (ii) the Company's ability to secure adequate financing to
implement its acquisition strategy; (iii) the Company's ability to acquire
profitable target companies; (iv) uncertainty as to whether the Company can
achieve integration of target companies in a manner intended to take advantage
of overall corporate synergies and result in an accretion to consolidated
earnings; (v) the uncertainty of future trading prices for the Company's Common
Stock and the impact such trading prices may have upon the Company's ability to
utilize its Common Stock to facilitate its acquisition strategy; (vi) the
uncertain effect of the additional dilution associated with the future issuance
of outstanding convertible securities, as well as, the dilution associated with
the Company's acquisition strategy; (vii) the Company's dependence on certain
large customers and suppliers; (viii) the Company's dependence on certain key
personnel; (ix) the competitive market for technical personnel and; (x) the
Company's ability to adapt to certain Year 2000 issues. Additional factors are
described in the Company's other public reports and filings with the Securities
and Exchange Commission. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date made. The
Company undertakes no obligation to publicly release the result of any revision
of these forward-looking statements to reflect events or circumstances after the
date they are made or to reflect the occurrence of unanticipated events.
8
<PAGE> 11
OVERVIEW
Osage Systems Group, Inc. (the "Company") was originally incorporated
as "Pacific Rim Entertainment, Inc." ("Pacific Rim") under the laws of Delaware
in 1992. From 1992 through 1996, Pacific Rim had been engaged principally in the
animated film production business. After several years of losses following its
initial public offering in 1993, Pacific Rim suspended its business operations
in 1996 and remained inactive while it sought to identify a strategic business
combination with a private operating company. In December 1997, Pacific Rim
acquired Osage Computer Group, Inc. ("Osage"), an Arizona corporation, which had
operated a computer systems integration business since 1989. The acquisition was
completed through a merger of Osage with and into a wholly-owned subsidiary of
Pacific Rim which became effective on December 22, 1997 (the "Merger").
Thereafter, Pacific Rim assumed the historic operations of Osage and on March
10, 1998, changed its name to Osage Systems Group, Inc. Since, as a result of
the Merger, the former stockholders of Osage acquired a controlling interest in
Pacific Rim, the Merger has been accounted for as a "reverse acquisition."
Accordingly, for financial statement presentation purposes, Osage is viewed as
the continuing entity and the related business combination is viewed as a
recapitalization of Osage, rather than an acquisition by Pacific Rim.
Through its operating subsidiaries, the Company markets a broad range
of information technology products and services intended to transform discrete
hardware and software components into an integrated system. The Company's
ability to deliver integrated solutions is principally attributable to its
technical expertise and its value-added reseller agreements with
industry-leading vendors of information technology products such as Sun
Microsystems, Oracle, Netscape, Cisco Systems, Hewlett Packard and Microsoft.
The Company has also established relationships with leading aggregators of
computer hardware and software products. These agreements enable the Company to
provide its clients with competitive product pricing, ready product availability
and services. To date, most of its net sales have been derived from the resale
of products from these vendors, however, the Company anticipates that as it
continues to increase the technical expertise of its service personnel and
broaden the geographic base of its marketing coverage, an increasing percentage
of its net sales in the future will be derived from the services and support
component of its business.
The Company's objective is to provide clients with comprehensive
information technology products, services and support. Management plans to
achieve this goal through a combination of external growth through acquisitions
as well as internal growth through expansion of operations. The Company is
currently pursuing an aggressive acquisition strategy to enhance its position in
its current markets and acquire operations in new markets. The focus of this
strategy is on acquiring candidates who management believes are likely to
benefit from the Company's long-term growth strategy and status as a public
company. Through its acquisition parameters, the Company is seeking to identify
target companies who have a proven record of delivering high-quality technical
services, a customer base of large and mid-sized companies and operations that
offer synergies with existing or anticipated segments of the
9
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Company's business.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
The following table sets forth for the periods indicated certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------- -------------------------------------
1998 1997
----------------------------- -------------------------------------
% OF % OF
AMOUNT NET SALES AMOUNT NET SALES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 12,765,671 100.0% $ 2,688,703 100.0%
COST OF SALES 10,566,735 82.8 2,117,907 78.8
------------ ------------ ------------ ------------
Gross profit 2,198,936 17.2 570,796 21.2
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling, general and administrative expenses 2,828,735 22.2 434,909 16.2
Depreciation and amortization 158,336 1.2 12,600 .4
------------ ------------ ------------ ------------
Total operating expenses
2,987,071 23.4 447,509 16.6
------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (788,135) (6.2) 123,287 4.6
INTEREST - NET (9,446) (.1) 359 --
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES (797,581) (6.3) 123,646 4.6
BENEFIT FOR INCOME TAXES (285,000) (2.3)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (512,581) (4.0%) $ 123,646 4.6%
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE:
Basic and Diluted $ (.07) $ .02
============ ============
</TABLE>
Revenues. Net sales increased by 375%, or $10.1 million to $12.8
million, for the three months ended June 30, 1998 as compared to $2.7 million
for the same prior year period. This increase in net sales was principally
attributable to the acquisitions of Solsource, HV Jones, OST and OBS during the
current period and increased product sales to new and existing customers as the
Company experienced favorable market acceptance of new products introduced by
the Company's major vendors combined with increased market penetration in the
Company's expanding territories. Net sales resulting from the acquisitions of
Solsource, HV Jones, OST and OBS amounted to $8.6 million for the three months
ended June 30, 1998. Consulting revenues increased by 810%, or $607,700, to
$682,700, for the three months ended June 30, 1998 as compared to $75,000 for
the same prior year period. This increase was primarily attributable to demand
for the Company's consulting services and technical support resulting from the
Company's increased focus on the service component of its revenue base coupled
with the acquisitions made during the year. Management expects that net sales
will continue to increase as
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<PAGE> 13
the Company further implements its acquisition strategy and more fully
recognizes the revenue contribution from its recently acquired companies (See
"Acquisition Strategy").
Gross Profit. The Company's cost of sales include primarily, in the
case of product sales, the cost to the Company of products acquired for resale,
and in the case of services and support revenue, salaries and related costs. The
Company's gross profit increased by 285% or $1.6 million to $2.2 million for the
three months ended June 30, 1998 as compared to $.6 million for the same prior
year period. Gross profit margin, however, decreased to 17.2% during the three
months ended June 30, 1998, as compared to 21.2% experienced during the same
prior year period. During the second half of 1997 and the first half of 1998,
the Company experienced an overall decrease in its gross profit margin. This
decrease was primarily due to cost reductions passed on to the Company's
customers from its major vendors as a result of an increase in demand for the
Company's products which occurred as certain customers increased their volume of
purchases. Management believes that in the long term it will be able to sustain
or improve its profit margin as a result of its focus on providing a broad
spectrum of products, services and support packages, and through a greater
emphasis on consulting and support services, which typically have a higher
profit margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries, commissions, employee
benefits, travel, promotion and related marketing costs. Selling, general and
administrative expenses increased by 550% or $2.4 million to $2.8 million for
the three months ended June 30, 1998 as compared to $.4 million for the same
prior year period. Also, during the three months ended June 30, 1998, as a
percent of net sales, selling, general and administrative expenses increased to
22.2%, from 16.2% experienced during the same prior year period. This increase
in expenses is primarily attributable to the expansion of the Company's
infrastructure as it became publicly held during the fourth quarter of 1997 and
implemented an aggressive growth strategy during 1998. This resulted in a
significant increase in the Company's administrative personnel and travel and
promotion expenses. Corresponding increases in legal and accounting fees were
also incurred by the Company in connection with its financing and acquisition
activities and for historical audits performed on assorted acquisition targets.
During the three months ended June 30, 1998, selling, general and administrative
expenses also included a non-cash charge of $75,000 associated with stock based
compensation to the Company's Executive Vice President.
Depreciation and Amortization. Depreciation and amortization increased 1,157%,
or $145,700, for the three months ended June 30, 1998 as compared to the same
prior year period. This increase was primarily due to the amortization of
goodwill and depreciation of assets acquired in connection with the acquisitions
that occurred during the year.
Net Income (Loss). During the three months ended June 30, 1998, the
Company incurred a net loss of $512,600 as compared to net income of $123,600
for the same prior year period. The net loss for the current period, however,
includes $233,300 of non-cash charges relating to depreciation and amortization
and stock based compensation. Such charges have resulted by virtue of the
Company's acquisition program and growth of its corporate infrastructure.
11
<PAGE> 14
Additional factors contributing to the Company's net loss consisted of
significant increases in the Company's overhead expenses as corporate
infrastructure was established in anticipation of future growth through the
Company's acquisition program. Management believes that as net sales continue to
increase, overhead costs associated with corporate infrastructure will be more
fully absorbed.
As part of the Company's original acquisition of Osage on December 22,
1997, options were granted to the former Osage stockholders at an exercise price
of $3.00, however, vesting was contingent upon the future earnings of the
Company and the Holders' continued employment by the Company. Because these
options were "performance-based", the Company previously reported that it would
have to record compensation expense in the future if the earnings of the Company
achieved agreed upon levels and other events occurred that would lead management
to believe that vesting of the options was a probable occurrence. The expense,
when recorded, could have had an adverse effect on the Company's income for
financial accounting purposes, as it would have approximated the difference
between the exercise price of the options and the fair market value of the
Company's Common Stock at that time. In recognition of the potential charge upon
the Company's earnings, and for other consideration, during June 1998, the
Company restructured the options so as to increase the number of options
granted, increase the exercise price to $4.50 (fair market value when granted)
and eliminate any vesting conditions. As restructured, management does not
believe that the Company will record compensation expense in the future based
upon the grant of these options.
12
<PAGE> 15
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
The following table sets forth for the periods indicated certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------
1998 1997
----------------------------- ---------------------------
% OF % OF
AMOUNT NET SALES AMOUNT NET SALES
<S> <C> <C> <C> <C>
NET SALES $ 18,407,603 100.0% $ 4,928,481 100.0%
COST OF SALES 15,146,745 82.3 3,863,262 78.4
------------ ----- ------------ -----
Gross profit 3,260,858 17.7 1,065,219 21.6
------------ ----- ------------ -----
OPERATING EXPENSES:
Selling, general and administrative expenses 4,022,458 21.9 861,571 17.5
Depreciation and amortization 187,601 1.0 25,200 .5
------------ ----- ------------ -----
Total operating expenses 4,210,059 22.9 886,771 18.0
------------ ----- ------------ -----
(LOSS) INCOME FROM OPERATIONS (949,201) (5.2) 178,448 3.6
INTEREST INCOME - NET 26,104 .2 2,662 .1
------------ ----- ------------ -----
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES (923,097) (5.0) 181,110 3.7
BENEFIT FOR INCOME TAXES (324,000) (1.7)
------------ ----- ------------ -----
NET (LOSS) INCOME $ (599,097) (3.3%) $ 181,110 3.7%
============ ===== ============ =====
NET (LOSS) INCOME PER SHARE:
Basic and Diluted $ (.10) $ .03
============ ============
</TABLE>
Revenues. Net sales increased by 273%, or $13.5 million to $18.4
million, for the six months ended June 30, 1998 as compared to $4.9 million for
the same prior year period. This increase in net sales was principally
attributable to the acquisitions of Solsource, HV Jones, OST and OBS during the
period and increased product sales to new and existing customers as the Company
experienced favorable market acceptance of new products introduced by the
Company's major vendors combined with increased market penetration in the
Company's expanding territories. Net sales resulting from the acquisitions of
Solsource, HV Jones, OST and OBS amounted to $9.0 for the six months ended June
30, 1998. Consulting revenues increased by 316%, or $605,600, to $797,100, for
the six months ended June 30, 1998 as compared to $191,500 for the same prior
year period. This increase was primarily attributable to demand for the
Company's consulting services and technical support resulting from the Company's
increased focus on the service component of its revenue base coupled with the
acquisitions made during the year. Management expects that net sales will
continue to increase as the Company further implements its acquisition strategy
and more fully recognizes the revenue contribution from its recently acquired
companies (See "Acquisition Strategy").
Gross Profit. The Company's cost of sales include primarily, in the
case of product sales, the cost to the Company of products acquired for resale,
and in the case of services and support revenue, salaries and related costs. The
Company's gross profit increased by 206% or $2.2
13
<PAGE> 16
million to $3.3 million for the six months ended June 30, 1998 as compared to
$1.1 million for the same prior year period. Gross profit margin, however,
decreased to 17.7% during the six months ended June 30, 1998, as compared to
21.6% experienced during the same prior year period. During the second half of
1997 and the first half of 1998, the Company experienced an overall decrease in
its gross profit margin. This decrease was primarily due to cost reductions
passed on to the Company's customers from its major vendors as a result of an
increase in demand for the Company's products which occurred as certain
customers increased their volume of purchases. Management believes that in the
long term it will be able to sustain or improve its profit margin as a result of
its focus on providing a broad spectrum of products, services and support
packages, and through a greater emphasis on consulting and support services,
which typically have a higher profit margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries, commissions, employee
benefits, travel, promotion and related marketing costs. Selling, general and
administrative expenses increased by 367% or $3.1 million to $4.0 million for
the six months ended June 30, 1998 as compared to $.9 million for the same prior
year period. Also, during the six months ended June 30, 1998, as a percent of
net sales, selling, general and administrative expenses increased to 21.9%, from
17.5% experienced during the same prior year period. This increase in expenses
is primarily attributable to the expansion of the Company's infrastructure as it
became publicly held during the fourth quarter of 1997 and implemented an
aggressive growth strategy during 1998. This resulted in a significant increase
in the Company's administrative personnel and travel and promotion expenses.
Corresponding increases in legal and accounting fees were also incurred by the
Company in connection with its financing and acquisition activities and for
historical audits performed on assorted acquisition targets. During the six
months ended June 30, 1998, selling, general and administrative expenses also
included a non-cash charge of $150,000 associated with stock based compensation
to the Company's Executive Vice President.
Depreciation and Amortization. Depreciation and amortization increased
644%, or $162,400, for the six months ended June 30, 1998 as compared to the
same prior year period. This increase was primarily due to the amortization of
goodwill and depreciation of assets acquired in connection with the acquisitions
that occurred during the year.
Net Income (Loss). During the six months ended June 30, 1998, the
Company incurred a net loss of $599,100 as compared to net income of $181,100
for the same prior year period. The net loss for the current period, however,
includes $337,600 of non-cash charges relating to depreciation and amortization
and stock based compensation. Such charges have resulted by virtue of the
Company's acquisition program and growth of its corporate infrastructure.
Additional factors contributing to the Company's net loss consisted of
significant increases in the Company's overhead expenses as corporate
infrastructure was established in anticipation of future growth through the
Company's acquisition program. Management believes that as net sales continue to
increase, overhead costs associated with corporate infrastructure will be more
fully absorbed.
14
<PAGE> 17
ACQUISITION STRATEGY
The Company's objective is to be one of the leading providers of
systems integration and related services throughout the United States. The
Company has developed an interrelated growth and operating strategy to achieve
this objective. A key element of the Company's growth strategy is an acquisition
program which is intended to take advantage of the highly fragmented composition
of the marketplace.
Since the beginning of 1998, the Company has executed upon its
acquisition strategy through the acquisition of Solsource (March 17, 1998), HV
Jones (March 17, 1998), OST (April 24, 1998) and OBS (June 22, 1998). These
acquisitions were accounted for under the purchase method of accounting for
business combinations. Accordingly, the Company's results of operations include
only the operations of each of these companies from the date of acquisition
through the end of the period reported. During the year ended December 31, 1997,
Solsource, HV Jones, OST and OBS realized net sales $7.3 million, $5.6 million,
$11.9 million and $9.2 million, respectively. On a proforma basis, the Company
would have realized net sales of approximately $48.2 million during the year
ended December 31, 1997 had all of these acquisitions occurred as of January 1,
1997.
The Company's net sales are expected to continue to increase during
1998 as the Company continues to execute upon its acquisition strategy. The
Company's acquisition strategy, however, relies primarily upon identifying
target companies that fit within its acquisition criteria and having sufficient
financing available to complete its acquisitions. Although the Company has
sufficient financing available to complete acquisitions that are presently being
considered, there can be no assurances that sufficient financing will be
available so as to facilitate the continuation of the Company's acquisition
program on a longer-term basis. The Company's inability to remain in compliance
with certain financial covenants under one of its line of credit facilities may
adversely effect the Company's ability to draw upon such financing. See
"Liquidity and Capital Resources".
Due to the early stages of the Company's acquisition program, there can
be no assurances as to the long-term impact of the Company's acquisition
strategy on the gross profits or net income of the Company. Through the second
quarter of 1998, the acquisition strategy may have contributed towards the net
loss of the Company in several respects. First, certain of the acquired
companies have continued to incur losses from operations, or have required
significant cash advances from the Company, which, in turn, has adversely
effected the Company's results of operations. Second, the acquisition strategy
has caused the Company to significantly increase its selling, general and
administrative expenses which have also contributed negatively toward the
Company's results of operations. As net sales continue to increase, however, the
Company's overhead will be spread over a larger revenue base which is expected
to have a positive impact on the Company's results of operations.
15
<PAGE> 18
VARIABLE OPERATING RESULTS
The Company's historical operating results have varied from quarter to
quarter, and the Company expects that they will continue to do so. Due to the
relatively fixed nature of certain of the Company's costs, including personnel
and facilities costs, a decline in revenue in any fiscal quarter would result in
lower profitability or increase the loss in that quarter. A variety of factors,
many of which are not within the Company's control, influence the Company's
quarterly revenues, including seasonal patterns of hardware and software capital
spending by customers, information technology outsourcing trends, the timing,
size and stage of projects, new service introductions by the Company or its
competitors, levels of market acceptance for the Company's products or services
or the hiring of additional staff. Operating results also may be impacted by the
timing of revenues and changes in the Company's utilization rates. The Company
believes, therefore, that past operating results and period-to-period
comparisons should not be relied upon as an indication of future performance.
The Company anticipates that its business will continue to be subject to such
seasonal variations.
BACKLOG
The Company normally ships systems promptly after receiving an order
and therefore does not customarily have a significant backlog.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its operations primarily from cash
generated by operations and, to a lesser extent, with funds from borrowings
under the Company's revolving line of credit. For the six months ended June 30,
1998, cash used in operating activities was ($651,900), compared to $250,600 of
cash provided by operating activities for the same prior year period. The
Company's cash flow from operations has been negatively affected primarily by
the increase in accounts receivable and significant costs invested in building
the Company's corporate infrastructure, offset by an increase in the level of
accounts payable and accrued expenses.
The Company's working capital was $2,015,100 at June 30, 1998, as
compared to $2,074,800 at December 31, 1997. The decrease in the Company's
working capital during the period is principally attributable to the Company
using the net proceeds received from assorted private placement transactions to
close the acquisitions of Solsource, HV Jones, OST and OBS. An additional
$1,700,000 was applied by the Company to support the operations and pay-off
short-term debt of Solsource, HV Jones and OST.
During the second quarter of 1998, the Company secured financing from
Bank of America ("BofA") and Finova Capital Corporation ("Finova") totaling
$12.5 million. The Company received a $5 million line of credit from B of A for
working capital needs along with a $7.5 million inventory financing line from
Finova. As of June 30, 1998, there were no outstanding borrowings under any of
the facilities. As of the date of this Report, the Company had drawn
approximately $750,000 under the line of credit facility. The inventory
financing
16
<PAGE> 19
allows the Company to procure a greater volume of product while enhancing the
cash flow of the Company due to the extended terms provided by the facility. The
availability of the working capital facility provides additional resources to
expand current operations.
The Company's line of credit with BofA contains customary financial
covenants requiring the maintenance of certain financial ratios. As of June 30,
1998, the Company was not in compliance with certain of its financial covenants
due primarily to the Company's acquisition strategy which caused it to increase
corporate infrastructure in anticipation of sales growth. As a result of its
growth strategy, management does not believe that the financial covenants are
accurate measures of the Company's financial health. Accordingly, management is
presently in negotiations with BofA in order to seek modifications to the loan
covenants which are more reflective of the Company's growth strategy. While
management is confident that these discussions will result in modified covenants
or appropriate waivers, there can be no assurances to that effect. If the
Company is unable to renegotiate the loan covenants, it may be caused to obtain
replacement financing, the availability of which cannot be assured. A disruption
in the availability of this, or a similar loan facility for more than the short
term, could adversely effect the Company's liquidity. This could have the effect
of reducing the scope of current operations and or delaying the Company's
acquisition program.
Subject to the foregoing, the Company believes that its current working
capital, available financing and the anticipated cash flow from operations will
be adequate to fund operations for the near term. However, the Company has
commenced an aggressive acquisition strategy which is likely to require
additional financing in the near term. The Company intends to finance these
acquisitions primarily through the use of cash, funds from debt facilities, if
and when available, and shares of its Common Stock or other securities. In the
event that the Company's Common Stock does not attain or maintain a sufficient
market value or potential acquisition candidates are otherwise unwilling to
accept the Company's securities as part of the purchase price for the sale of
their businesses, the Company may be required to utilize more of its cash
resources, if available, in order to continue its acquisition program. If the
Company does not have sufficient cash resources, through either operations or
from debt facilities, its growth could be limited unless it is able to obtain
such additional capital.
YEAR 2000 MATTERS
The Company is presently attempting to respond to Year 2000 issues.
Year 2000 issues are the result of computer programs being written using two
digits rather than four to define the applicable year associated with the
program or an associated computation. Any of the Company's computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in normal
business activities. Management expects to have substantially all of the systems
application changes completed within the next twelve months and believes that
its level of preparedness is appropriate.
17
<PAGE> 20
The total cost to the Company of these Year 2000 compliance issues is
not anticipated to be material to its financial position or results of
operations in any given year. These costs and the date on which the Company
plans to complete the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
assurances that these estimates will be achieved and actual results could differ
from those plans.
IMPACT OF INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, Reporting Comprehensive Income ("SFAS 130"), which is effective for
financial statements for periods beginning after December 15, 1997 and
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. . The adoption of this statement on
January 1, 1998 had no impact on the Company's financial statement presentation
or related disclosures.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, Disclosure about Segments of an Enterprise and Related Information ("SFAS
131"), which is effective for fiscal years beginning after December 15, 1997 and
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The Company operates in one business segment and does not believe
that SFAS 131 will require additional disclosures when adopted.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which is effective for the Company in 2000. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The standard also provides specific
guidance for accounting for derivatives designated as hedging instruments. The
Company is currently evaluating what impact this standard will have on its
financial statements.
18
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
MODIFICATION OF INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS OF THE COMPANY'S
COMMON STOCK.
On June 12, 1998, the Company held its Annual Meeting of
Stockholders (the "Meeting"). At the Meeting, the Company's stockholders
approved a number of amendments to the Company's Restated Certificate of
Incorporation (the "Certificate") which affected the rights of the holders of
the Company's Common Stock.. The amendments are attached hereto as an exhibit
and the description set forth below is qualified in its entirety by reference to
such exhibit. These amendments consisted of the following:
1. Classified Board. The Certificate was amended to provide
for the classification of the Board of Directors of the Company into three
separate classes, each to serve for three-year terms with one class to be
elected at each annual meeting of Stockholders after 1998. The amendment also
provides that directors may only be removed for cause and by the affirmative
vote of two-thirds of the Company's stockholders entitled to vote thereon. Prior
to the adoption of this amendment, the Company's stockholders were entitled to
elect the entire Board of Directors at each annual stockholders' meeting and
could remove a director for any reason upon the affirmative vote of a majority
of the stockholders entitled to vote thereon. This amendment will have the
effect of making it more difficult for stockholders to remove directors from
office and will require two annual meetings in order for stockholders to elect a
majority of the Board of Directors thereby making it more difficult for holders
of the Company's Common Stock to affect the composition of the Company's Board
of Directors in the short term. For these reasons, this amendment could have
certain anti-takeover effects by deterring unsolicited takeover attempts.
2. Increase in the Authorized Shares. The Company's
Certificate was amended to increase the number of shares of preferred stock
available for issuance from 1,000 to 10,000,000 and the number of shares of
common stock available for issuance from 10,000,000 to 50,000,000. These
increases in the number of authorized shares could result in substantial
dilution to the Company's existing stockholders and to the extent it provides
the Board of Directors with the flexibility to use authorized but unissued
common and preferred shares to frustrate persons seeking to effect a takeover or
otherwise gain control of the Company, these amendments could have possible
anti-takeover effects.
19
<PAGE> 22
3. Supermajority Voting Provision. The Company's Certificate
was also amended to require the affirmative vote of holders of two-thirds of the
Company's outstanding shares of capital stock entitled to vote thereon in order
to approve future amendments to the Company's Certificate unless the proposed
amendment was adopted by the affirmative vote of at least eighty percent (80%)
of the Board of Directors. Prior to this amendment, any and all amendments to
the Company's Certificate required the affirmative vote of a majority of the
outstanding shares of capital stock entitled to vote thereon. This amendment
will have the effect of making it more difficult for holders of the Company's
Common Stock to make further amendments to the Company's Certificate to affect
the management of the Company.
At the meeting of directors following the Meeting, the Board
of Directors of the Company adopted Amended and Restated By-laws. The Amended
and Restated Bylaws are attached hereto as an exhibit and the description set
forth below is qualified in its entirety by reference to such exhibit. The
following describes certain of these amendments which will affect the rights of
the holders of the Company's Common Stock:
1. Special Meeting of Stockholders. The Company's By-laws were
amended to provide that only the Board of Directors may call a special meeting
of stockholders. Previously, a majority of the stockholders had the right to
call a special stockholder meeting. This will have the effect of making it more
difficult for holders of the Company's Common Stock to affect the management of
the Company.
2. Advance Notice Provision. The Amended and Restated By-laws
require advance notice by stockholders with respect to any stockholder nominees
to the Board of Directors and any stockholder proposal to present any business
at any stockholder meeting. These provisions require that in order for
stockholders to present any business at any stockholder meeting or to nominate
any person to serve as a director of the Company, stockholders must deliver
written notice of such intent not less than fifty (50) nor more than
seventy-five (75) days prior to the meeting; provided, however, in the event
that less than sixty (60) days notice or prior public disclosure of the date of
the meeting is given, stockholders would then have ten (10) days from such date
to provide the required notice to the Company. In addition, stockholders must
also provide the Company with certain information regarding any nominees to the
Board including any and all information required to be disclosed in a
solicitation for proxies pursuant to the Securities Exchange Act of 1934, such
as the principal occupation or employment of such nominee and the number of
shares of capital stock of the Company owned by such nominee. This will have the
effect of making it more difficult for holders of the Company's Common Stock to
affect the management of the Company by nominating persons to serve on the
Company's Board of Directors or presenting business at any stockholder meeting.
CONVERSION OF SERIES B SHARES.
The Certificate of Designation of the Company's Series B
Convertible Preferred Stock (the "Series B Shares") provides that the holders of
the Series B Shares (the historic
20
<PAGE> 23
stockholders of Osage Computer Group, Inc.) are entitled to vote in the election
of directors by casting votes equal to the total number of shares of Common
Stock entitled to vote plus one. Accordingly, holders of the Series B Shares
were permitted to elect a majority of the Board of Directors. The holders of the
Series B Shares agreed to relinquish this right upon adoption of the amendment
to the Company's Certificate to provide for the classification of the Board of
Directors. In order to effectuate this agreement, the holders of the Series B
Shares have agreed to convert all such shares into shares of Common Stock which
has commenced and should be completed within the near future.
RECENT SALES OF UNREGISTERED SECURITIES.
1. On April 24, 1998, the Company issued 333,334 shares of Common Stock
to Mr. O. Jack Anderson in connection with the acquisition of 100% of the
outstanding capital stock of Open System Technologies, Inc ("OST"). In
conjunction with the acquisition, the Company agreed to issue 50,000 shares of
Common Stock to an investment banking advisor to the Company in consideration
for services provided in identifying OST as a target company and advising the
Company in connection with the acquisition. The issuance of these securities was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended (the "Act") and Rule 506 of Regulation D as an issuer transaction not
involving a public offering.
2. In May 1998, the Company issued 700,000 shares of Common Stock at a
purchase price of $3.50 per share to the accredited investors identified below
in a private placement transaction exempt from registration pursuant to Section
4(2) of the Act and Rule 506 of Regulation D as an issuer transaction not
involving a public offering. In connection with this transaction, the Company
realized gross proceeds of $ 2,450,000 and paid a brokerage fee consisting of a
cash commission of $147,000.
<TABLE>
<CAPTION>
Name Shares of Common Stock
---- ----------------------
<S> <C>
Lancer Partners L.P. .............. 200,000
Lancer Voyager Fund ............... 100,000
Lancer Offshore Inc. .............. 400,000
-------
TOTAL ............................. 700,000
</TABLE>
3. In May 1998, the Company issued 175,000 shares of Common Stock at a
purchase price of $4.25 per share to Will's Wei Corp., an accredited investor in
a private placement transaction exempt from registration pursuant to Section
4(2) of the Act and Rule 506 of Regulation D as an issuer transaction not
involving a public offering. In connection with this transaction, the Company
realized gross proceeds of $743,750 and paid a brokerage fee consisting of a
cash commission of $44,625 and warrants to purchase 25,000 shares of the
Company's Common Stock at an exercise price of $4.25 per share for a term of
three years.
21
<PAGE> 24
4. In May 1998, the Company issued 235,294 shares of Common Stock and
warrants to purchase 100,000 shares of Common Stock at an exercise price of
$4.25 per share for a term of three years, for an aggregate purchase price of
$1,000,000 to Founders Partners IV LLC, an accredited investor, in a private
placement transaction exempt from registration pursuant to Section 4(2) of the
Act and Rule 506 of Regulation D as an issuer transaction not involving a public
offering. In connection with this transaction, a brokerage fee was paid
consisting of a cash commission of $20,000 and warrants to purchase 50,000
shares of the Company's Common Stock at an exercise price of $4.25 per share for
a term of three years.
5. On June 12, 1998, the Company issued options to purchase 1,600,000
shares of its Common Stock (the "New Options") to the former shareholders of
Osage Computer Group, Inc. in exchange for the surrender by such shareholders of
options to purchase 800,000 shares of its Common Stock previously granted on
December 22, 1997 in connection with the Company's acquisition of Osage Computer
Group, Inc. The New Options are subject to an exercise price of $4.50 and expire
if not exercised by December 19, 2003. The New Options were not issued under the
Company's 1993 Amended and Restated Stock Option Plan (the "Plan"). The New
Options were granted to the following individuals in the following amounts:
<TABLE>
<CAPTION>
Name Number of Options
- ---- -----------------
<S> <C>
Jack R. Leadbeater 664,000
David S. Olson 664,000
Steve Rigby 80,000
Chris Donohue 80,000
Dale Van deVrede Family Trust 80,000
Rick Gunther 32,000
------------
1,600,000
</TABLE>
On June 12, 1998, the Company issued (also outside of the Plan) options
to purchase 635,000 shares of its Common Stock to the following individuals in
the following amounts:
<TABLE>
<CAPTION>
Name Number of Options
- ---- -----------------
<S> <C>
John Iorillo 50,000
Phil Carter 510,000
Michael Poncher 75,000
------------
635,000
</TABLE>
Mr. Iorillo's options are subject to an exercise price of $4.50 and
expire if not exercised by December 19, 2003. Messrs. Carter and Poncher's
options are subject to an exercise price of $4.50, may only be exercised to the
extent they remain employed by the Company for certain periods and expire if not
exercised by June 10, 2003.
22
<PAGE> 25
On June 12, 1998, the Company amended an option to purchase 100,000
shares of Common Stock granted to John Iorillo dated January 1, 1998. Pursuant
to the amendment, the option exercise price was reduced from $5.00 to $4.50 and
vesting conditions were eliminated.
The grants of the various options identified above were exempt from
registration by virtue of Section 4(2) of the Act as an issuer transaction not
involving a public offering.
6. On June 22, 1998, the Company issued 362,330 shares of Common Stock
in connection with the acquisition of 100% of the outstanding capital stock of
Open Business Systems, Inc. ("OBS"). The Company may have an obligation to issue
additional shares of Common Stock if certain performance criteria are met. In
connection with the acquisition, the Company agreed to issue 70,000 shares to an
investment banking advisor to the Company in consideration for services provided
in identifying OBS as a target company and advising the Company in connection
with the acquisition. The issuance of these securities was exempt from
registration pursuant to Section 4(2) of the Act and Rule 506 of Regulation D as
an issuer transaction not involving a public offering. The shares of the
Company's Common Stock were issued at the closing to the following shareholders
of OBS (the "OBS Shareholders"):
<TABLE>
<CAPTION>
Name Shares of Common Stock
- ---- ----------------------
<S> <C>
John Udelhofen 45,291
E. Michael Durbin 45,291
David R. Durbin 45,291
Brian Wolfe 45,291
In escrow for the benefit of
the OBS Shareholders 181,166
------------
362,330
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 12, 1998, the Company held the Meeting. At the
Meeting, Jack R. Leadbeater and David S. Olson were elected as directors of the
Company to serve until the 2001 Annual Meeting of Stockholders, John Iorillo was
elected as a director of the Company to serve until the 2000 Annual Meeting of
Stockholders and Andrew P. Panzo and Michael G. Glynn were elected as directors
of the Company to serve until the 1999 Annual Meeting of Stockholders. Holders
of the Company's Common Stock and Series B Preferred Stock voted together as a
single class with respect to the election of directors. The following table sets
forth the results of these elections:
<TABLE>
<CAPTION>
Common and Series B Common and Series B
Director Shares Voted For Shares Withheld
- -------- ---------------- ---------------
<S> <C> <C>
Jack R. Leadbeater 4,143,341.5 23
David S. Olson 4,143,341.5 23
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C> <C>
John Iorillo 4,143,341.5 23
Andrew P. Panzo 4,088,339 55,025.5
Michael G. Glynn 4,066,336.5 77,028
</TABLE>
At the Meeting, the holders of the Company's Common Stock and Series B
Preferred Stock voted as separate classes to approve each of the following
proposals:
1. An amendment to the Company's Restated Certificate of Incorporation
to provide for the classification of the Company's Board of Directors into three
separate classes each to serve for three-year terms with one class to be elected
at each annual meeting of stockholders after 1998. At the Meeting, 4,143,075
shares of Common Stock and 47.5 shares of Series B Preferred Stock were voted
for, 221 shares of Common Stock and no shares of Series B Preferred Stock were
voted against and 21 shares of Common Stock and no shares of Series B Preferred
Stock abstained with respect to this proposal.
2. An amendment to the Company's Restated Certificate of Incorporation
to require a supermajority vote of stockholders to approve amendments to the
Company's Certificate of Incorporation. At the Meeting, 4,140,694 shares of
Common Stock and 47.5 shares of Series B Preferred Stock were voted for, 2,603
shares of Common Stock and no shares of Series B Preferred Stock were voted
against and 20 shares of Common Stock and no shares of Series B Preferred Stock
abstained with respect to this proposal.
3. An amendment to the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 10,000,000 to
50,000,000. At the Meeting, 4,142,976 shares of Common Stock and 47.5 shares of
Series B Preferred Stock were voted for, 312 shares of Common Stock and no
shares of Series B Preferred Stock were voted against and 29 shares of Common
Stock and no shares of Series B Preferred Stock abstained with respect to this
proposal.
4. An amendment to the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of Preferred Stock from 1,000 to
10,000,000. At the Meeting, 4,142,991 shares of Common Stock and 47.5 shares of
Series B Preferred Stock were voted for, 289 shares of Common Stock and no
shares of Series B Preferred Stock were voted against and 37 shares of Common
Stock and no shares of Series B Preferred Stock abstained with respect to this
proposal.
5. An amendment to the Company's 1993 Stock Option Plan (the "Plan") to
increase the number of shares available for issuance pursuant to option grants
under the Plan from 100,000 to 2,000,000. At the Meeting, 4,142,924 shares of
Common Stock and 47.5 shares of Series B Preferred Stock were voted for, 359
shares of Common Stock and no shares of Series B Preferred Stock were voted
against and 34 shares of Common Stock and no shares of Series B Preferred Stock
abstained with respect to this proposal.
24
<PAGE> 27
6. The ratification of Deloitte & Touche to serve as the Company's
independent auditors for the fiscal year ending December 31, 1998. At the
Meeting, 4,143,279 shares of Common Stock and 47.5 shares of Series B Preferred
Stock were voted for, 17 shares of Common Stock and no shares of Series B
Preferred Stock were voted against and 21 shares of Common Stock and no shares
of Series B Preferred Stock abstained with respect to this proposal.
ITEM 5. OTHER INFORMATION.
On March 31, 1998, the Company filed a registration statement
("Registration Statement") on Form SB-2 with the Securities and Exchange
Commission relating to the resale to the public by certain selling security
holders of 4,351,982 shares, subject to adjustment, of common stock, $.01 par
value per share. On June 10, 1998 the Registration Statement was declared
effective by the Securities and Exchange Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
(REFERENCED TO
ITEM 601 OF DESCRIPTION METHOD OF FILING
REG. S-B)
<S> <C> <C>
3.9 Certificate of Amendment to the Certificate of Filed herewith
Incorporation of Osage Systems Group, Inc. dated
June 12, 1998
3.10 Amended and Restated Bylaws dated June 12, 1998 Filed herewith
9.2 Amendment to Voting Trust Agreement Filed herewith
10.1 Amended and Restated 1993 Stock Option Plan Filed herewith
10.23 Amendment to Employment Agreement of Jack R. Filed herewith
Leadbeater
10.24 Amendment to Employment Agreement of David S. Olson Filed herewith
10.25 Termination Benefits Agreement of Jack R. Filed herewith
Leadbeater
10.26 Termination Benefits Agreement of David S. Olson Filed herewith
</TABLE>
25
<PAGE> 28
<TABLE>
<S> <C> <C>
10.27 Option to purchase 664,000 shares granted to Jack R. Filed herewith
Leadbeater dated June 12, 1998
10.28 Option to purchase 664,000 shares granted to David Filed herewith
S. Olson dated June 12, 1998
10.29 Option to purchase 50,000 shares granted to John Filed herewith
Iorillo dated June 12, 1998
10.30 Option to purchase 100,000 shares granted to John Filed herewith
Iorillo dated January 1, 1998
10.31 Amendment to Option to purchase 100,000 shares Filed herewith
granted to John Iorillo dated June 12, 1998
27 Financial Data Schedule Filed herewith
</TABLE>
(b) Reports on Form 8-K:
(i) An Amendment to Form 8-K (Form 8-K/A) was filed with the
Securities and Exchange Commission on May 22, 1998 amending a previously filed
Form 8-K dated as of March 17, 1998 relative to the Company's acquisition of
Solsource Computers, Inc. and H.V. Jones, Inc. The Amendment contained the
historical "Financial Statements of Acquired Businesses" and "Pro Forma
Financial Information" required under Items 7(a) and 7(b) of Form 8-K.
(ii) An Amendment to Form 8-K (Form 8-K/A) was filed with the
Securities and Exchange Commission on June 8, 1998 amending a previously filed
Form 8-K dated as of April 24, 1998 relative to the Company's acquisition of
Open System Technologies, Inc. The Amendment contained the historical "Financial
Statements of Acquired Businesses" and "Pro Forma Financial Information"
required under Items 7(a) and 7(b) of Form 8-K.
(iii) A Report on Form 8-K was filed with the Securities and
Exchange Commission on July 7, 1998 relating to the Company's acquisition of
Open Business Systems, Inc. as of June 22, 1998. The Report omitted the
information required under Items 7(a) and 7(b) of Form 8-K which will be
provided by amendment in accordance with applicable Securities and Exchange
Commission rules.
26
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
OSAGE SYSTEMS GROUP, INC.
By:/s/ Jack R. Leadbeater Dated: August 14, 1998
----------------------
Jack R. Leadbeater
Chairman of the Board and
Chief Executive Officer
By:/s/ John Iorillo Dated: August 14, 1998
----------------
John Iorillo
Chief Financial Officer (Principal
Financial and Accounting Officer)
27
<PAGE> 30
EXHIBIT INDEX
EXHIBIT NUMBER
(REFERENCED TO ITEM DESCRIPTION
601 OF REG. S-B)
3.9 Certificate of Amendment to the Certificate of
Incorporation of Osage Systems Group, Inc.
dated June 12, 1998
3.10 Amended and Restated Bylaws dated June 12, 1998
9.2 Amendment to Voting Trust Agreement
10.1 Amended and Restated 1993 Stock Option Plan
10.23 Amendment to Employment Agreement of Jack R. Leadbeater
10.24 Amendment to Employment Agreement of David S. Olson
10.25 Termination Benefits Agreement of Jack R. Leadbeater
10.26 Termination Benefits Agreement of David S. Olson
10.27 Option to purchase 664,000 shares granted to Jack R.
Leadbeater dated June 12, 1998
10.28 Option to purchase 664,000 shares granted to David
S. Olson dated June 12, 1998
10.29 Option to purchase 50,000 shares granted to John
Iorillo dated June 12, 1998
10.30 Option to purchase 100,000 shares granted to John
Iorillo dated January 1, 1998
28
<PAGE> 31
10.31 Amendment to Option to purchase 100,000 shares
granted to John Iorillo dated June 12, 1998
27 Financial Data Schedule
29
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
OSAGE SYSTEMS GROUP, INC.
The undersigned, desiring to amend the Certificate of
Incorporation of Osage Systems Group, Inc., a Delaware corporation (the
"Corporation"), pursuant to Section 242 of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by unanimous
approval at a meeting of the directors, evidenced by board
resolutions and approval of the requisite vote of each class
of stockholders, has duly adopted the following resolution
proposing and declaring advisable the following amendment to
the Certificate of Incorporation:
RESOLVED, that Article Fourth of the Certificate of
Incorporation of the Corporation, as amended to
date, be restated in its entirety to read:
"Capital Stock." The total number of shares of stock
which the Corporation shall have authority to issue
is Sixty Million (60,000,000) shares, of which Fifty
Million (50,000,000) shares shall be Common Stock of
the par value of One Cent ($.01) per share
(hereinafter called "Common Stock") and of which Ten
Million (10,000,000) shares shall be Preferred Stock
of the par value of One Cent ($.01) per share
(hereinafter called "Preferred Stock").
RESOLVED, that Article Seventh of the Certificate of
Incorporation of the Corporation, as amended to
date, be restated in its entirety to read:
"Board of Directors and Bylaws." All corporate
powers shall be exercise by the Board of Directors,
except as otherwise provided by statute or by this
Certificate of Incorporation, or any amendment
thereof, or by this Certificate of Incorporation, or
any amendment thereof, or by the Bylaws. Directors
need not be elected by written ballot, unless in the
Bylaws of the Corporation. The Bylaws, may be
adopted, amended or repealed by the Board of
Directors of the Corporation, except as otherwise
provided by law, by any bylaw made by the Board of
Directors is subject to amendment and repeal by the
stockholders of the Corporation.
<PAGE> 2
(a) Numbers, Elections And Terms. Except as otherwise
fixed by or pursuant to provisions hereof relating to
the rights of the holders of any dividends or upon
liquidation to elect additional Directors under
specified circumstances, the number of Directors of
the Corporation shall be fixed from time to time by
affirmative vote of a majority of the Directors then
in office. The Directors, other than those who may be
elected by the holders of any classes or series of
stock having a preference over the common stock as to
dividends or upon liquidation, shall be classified,
with respect to the time for which they severally
hold office, into three class, as nearly equal in
number as possible, as shall be provided in the
manner specified in the Bylaws of the corporation,
one class to be originally elected for a term
expiring at the annual meeting of stockholders to be
held in 1999, another class to be originally elected
for a term expiring at the annual meeting of
stockholders to be held in 2000, and another class to
be originally elected for a term expiring at the
annual meeting of the stockholders to beheld in 2001,
with each class to hold office until its successors
elected and qualified. At each annual meeting of the
stockholders of the Corporation after fiscal year
1998, the successors of the class of Directors whose
term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of
stockholders held in the third year following the
year of their election.
(b) Newly Created Directorships And Vacancies. Except
as otherwise fixed by or pursuant to provisions
hereof relating to the rights of the holders of any
class or series of stock having a preference over
common stock as to dividends or upon liquidation to
elect additional Directors under specified
circumstances, newly created directorships resulting
from any increase in the number of directors and any
vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote
of a majority of the remaining Directors then in
office, even though less than a quorum of the Board
of Directors. Any Director elected in accordance with
the preceding sentence shall hold office for the
remainder of the full term of the class of Directors
in which the new directorship was created or the
vacancy occurred and until such Director's successor
shall have been elected and qualified. No decrease in
the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent
director.
(c) Removal. Except as otherwise fixed by or pursuant
to provisions hereof relating to the rights of the
holders of any class or series of stock having a
preference over common stock as to dividends or upon
liquidation to elect additional Directors under
specified circumstances, any Director may be removed
from office only for cause and only by the
affirmative vote of the holders of two-thirds of the
combined voting power of the then outstanding shares
of stock entitled to vote generally in the election
of Directors, voting together as a single class.
<PAGE> 3
(d) Amendment, Repeal, Etc. Notwithstanding anything
contained in this Certificate of Incorporation to the
contrary, the consent of the Board of Directors shall
be required to alter, amend, adopt any provisions
inconsistent with or repeal this Section Seventh.
RESOLVED, that Article Tenth of the Certificate of
Incorporation be included in its entirety to read as
follows:
"Amendments to Certificate of Incorporation."
Amendments to the Certificate of Incorporation of the
Corporation shall require the affirmative vote of
two-thirds of the holders of a majority of the
combined voting power of the then outstanding shares
of stock entitled to vote on any proposed amendment
to the Certificate of Incorporation. Notwithstanding
the foregoing, in the event that a resolution to
amend the Certificate of Incorporation of the
Corporation is adopted by the affirmative vote of at
lest eighty percent (80%) of the Board of Directors
approval of the amendment shall only require the
affirmative vote of the holders of a majority
combined voting power of the then outstanding shares
of the stock entitled to vote generally on such
amendment, voting together as a single class.
SECOND: That the aforesaid amendment has been duly adopted in
accordance with Section 242 of the Delaware General
Corporation Law.
THIRD: That this amendment shall become effective on June 12,, 1998.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by, Jack R. Leadbeater, its Chief Executive Officer, and
John Iorillo, its Chief Financial Officer this 12th day of June, 1998.
OSAGE SYSTEMS GROUP, INC.
By: /s/ Jack R. Leadbeater
Jack R. Leadbeater
Chief Executive Officer
By: /s/ John Iorillo
John Iorillo
Chief Financial Officer
<PAGE> 1
EXHIBIT 3.10
AS OF JUNE 12, 1998
AMENDED AND RESTATED BY-LAWS
OF
OSAGE SYSTEMS GROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
Meetings of Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
Osage Systems Group, Inc. (hereinafter, the "Corporation") for the election of
directors and for the transaction of such other proper business shall be held on
such date and at such time as may be fixed by the Board of Directors at such
place, and at such hour as shall be designated by the Board of Directors.
SECTION 2. Special Meetings. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called at any time by the Board
of Directors.
SECTION 3. Notice of Meetings. Written notice of each meeting of the
stockholders, which shall state the place, date and hour of the meeting and the
purpose or purposes for which it is called, shall be given not less than ten nor
more than sixty days before the date of such meeting to each stockholder
entitled to vote at such meeting, and, if mailed, it shall be deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation. Any such notice for any meeting
other than the annual meeting shall indicate that it is being issued at the
direction of the Board. Whenever notice is required to be given, a written
waiver thereof signed by the person entitled thereto, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person 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. When a meeting is adjourned to another time
or place, notice need not be given if the time and place thereof are announced
at the meeting at which the adjournment is taken. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 4. Quorum. At any meeting of the stockholders the holders of
the majority of the shares of each class, issued and outstanding and entitled to
vote, shall be present in person or represented by proxy in order to constitute
a quorum for the transaction of any business. In the absence of a quorum, the
holders of a majority of the shares present in person or represented by proxy
and entitled to vote may adjourn the meeting from time to time. At any such
adjourned meeting at which a quorum may be present, the Corporation may transact
any business which might have been transacted at the original meeting.
<PAGE> 2
SECTION 5. Organization. At each meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President or,
in his absence or inability to act, a Vice President or, in his absence of
inability to act, any person chosen by the majority of those stockholders
present in person or represented by proxy shall act as chairman of the meeting.
The Secretary or, in his absence or inability to act, any person appointed by
the chairman of the meeting shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 6. Notice of Business. At any meeting of the stockholders of
the Corporation, only such proper business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the board of directors
or (ii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Section 6, who shall be
entitled to vote at such meeting and who complies with the notice procedures set
forth in this Section 6. For business to be brought before a meeting of
stockholders by a stockholder, the stockholder shall have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 6. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 6, a stockholder shall also comply with all applicable requirements
of the Securities and Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder with respect to matters set forth in this
Section 6.
SECTION 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting. Unless otherwise provided in the Certificate of
Incorporation, and subject to statute, each stockholder shall be entitled to one
vote for each share of capital stock held by such stockholder:
- 2 -
<PAGE> 3
(a) on the date fixed pursuant to the provisions of Section 5
of Article V of these By-Laws as the record date for the determination
of the stockholders to be entitled to notice of or to vote at such
meeting; or
(b) if no record date is fixed, then at the close of business
on the day next preceding the day on which notice is given.
Each stockholder entitled to vote at any meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. Any such proxy
shall be delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. Except as
otherwise required by statute or by the Certificate of Incorporation, a majority
of the votes cast at a meeting of the stockholders shall be necessary to
authorize any corporate action to be taken by vote of the stockholders. Unless
required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question other than the election of directors need
not be by ballot. On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by his proxy if there be such proxy, and shall state the
number of shares voted.
SECTION 9. List of Stockholders Entitled to Vote. The officer of the
Corporation 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 entitled to vote at the meeting, 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 at a place within the city 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 lists shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, 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 chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as an inspector of an election of
directors. Inspectors need not be stockholders.
- 3 -
<PAGE> 4
SECTION 11. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 11 of this Article I or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors. The Board
may exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the Certificate of Incorporation
directed or required to be exercised or done by the stockholders.
SECTION 2. Numbers, Elections And Terms. Except as otherwise fixed by
or pursuant to provisions of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
common stock as to dividends or upon liquidation to elect additional Directors
under specified circumstances, the number of Directors of the Corporation shall
be fixed from time to time by affirmative vote of a majority of the Directors
then in office. The Directors, other than those who may be elected by the
holders of any classes or series of stock having a preference over the common
stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three class, as nearly equal
in number as possible, one class to be originally elected for a term expiring at
the annual meeting of stockholders to be held in 1999, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 2000, and another class to be originally elected for a term expiring
at the annual meeting of the stockholders to beheld in 2001, with each class to
hold office until its successors elected and qualified. At each annual meeting
of the stockholders of the Corporation after fiscal year 1998, the successors of
the class of Directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
SECTION 3. Newly Created Directorships And Vacancies. Except as
otherwise fixed by or pursuant to provisions of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over common stock as to dividends or upon liquidation to elect
additional Directors under specified circumstances, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of the Board
of Directors. Any Director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of Directors
in which the new directorship was created or the vacancy occurred and until such
Director's successor shall have been elected and qualified. No decrease in the
number of Directors constituting the Board of Directors shall shorten the term
of any incumbent director.
- 4 -
<PAGE> 5
SECTION 4. Removal and Resignation. Except as otherwise fixed by or
pursuant to provisions of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
common stock as to dividends or upon liquidation to elect additional Directors
under specified circumstances, any Director may be removed from office only for
cause and only by the affirmative vote of the holders of two-thirds of the
combined voting power of the then outstanding shares of stock entitled to vote
generally in the election of Directors, voting together as a single class. Any
director may resign at any time upon written notice to the corporation.
SECTION 5. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election by the
stockholders as directors of the Corporation. Nominations of persons for
election as directors of the Corporation may be made at a meeting of
stockholders (a) by or at the direction of the board of directors, (b) by any
nominating committee or persons appointed by the board of directors or (c) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 5. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive office of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary of the Corporation
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as now or hereafter amended; and (b)
as to the stockholder giving the notice, (i) the name and record address of such
stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election by the stockholders as a director of the Corporation
unless nominated in accordance with the procedures set forth herein. The
chairman of the meeting of the stockholders shall, if the facts warrant,
determine and declare to the meeting that nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
SECTION 6. Place of Meeting. The Board of Directors shall hold its
meetings at such place, within or without the State of Delaware, as it may from
time to time determine or as shall be specified in the notice of any such
meeting.
- 5 -
<PAGE> 6
SECTION 7. Annual Meeting. The Board shall meet for the purpose of
organization, the election of officers and the transaction of other business as
soon as practicable after each annual meeting of the stockholders, on the same
day and at the same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any other time or
place, within or without the State of Delaware, which shall be specified in a
notice thereof given as hereinafter provided in Section 7 of this Article II.
SECTION 8. Regular Meetings. Regular meetings of the Board shall be
held at such time as the Board may fix. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to be held, then the
meeting which would otherwise be held on that day shall be held at the same hour
on the next succeeding business day. Notice of regular meetings of the Board
need not be given except as otherwise required by statute or these By-Laws.
SECTION 9. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President or by a majority of the
entire Board.
SECTION 10. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary as hereinafter provided in this Section 7, in which
notice shall be stated the time and place of the meeting. Except as otherwise
required by these By-laws, such notice need not state the purposes of such
meeting. Notice of each such meeting shall be mailed, postage prepaid, to each
director, addressed to him at his residence or usual place of business, by
registered mail, return receipt requested delivered at least two (2) days before
the day on which such meeting is to be held, or shall be sent addressed to him
at such place by telegraph, telex, cable or wireless, or be delivered to him
personally, by facsimile or by telephone, at least 24 hours before the time at
which such meeting is to be held. A written waiver of notice, signed by the
director entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Notice of any such meeting need not be
given to any director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without protesting,
prior to or at its commencement, the lack of notice to him.
SECTION 11. Quorum and Manner of Acting. Except as hereinafter
provided, a majority of the entire Board shall be present in person or by means
of a conference telephone or similar communications equipment which allows all
persons participating in the meeting to hear each other at the same time at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting; and, except as otherwise required by statute or the
Certificate of Incorporation, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place. Notice of
the time and place of any such adjourned meeting shall be given to the directors
who were not present at the time of the adjournment and, unless such time and
place were announced at the meeting at which the adjournment was taken, to the
other directors. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no power as such.
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SECTION 12. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all members of the Board consent thereto in writing, and the writing
or writings are filed with the minutes of the Board.
SECTION 13. Telephonic Participation. Members of the Board of Directors
may participate in a meeting of the Board by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation in such a meeting
shall constitute presence in person at such meeting.
SECTION 14. Organization. At each meeting of the Board, the Chairman of
the Board or, in his absence or inability to act, the President or, in his
absence or inability to act, another director chosen by a majority of the
directors present shall act as chairman of the meeting and preside thereat. The
Secretary or, in his absence or inability to act, any person appointed by the
chairman shall act as secretary of the meeting and keep the minutes thereof.
SECTION 15. Resignations. Any director may resign at any time upon
written notice to the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 16. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in any capacity.
ARTICLE III
Executive and Other Committees
SECTION 1. Executive and Other Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two 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. Any such committee, to the extent provided in the resolution shall
have and may exercise the powers of the Board in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of 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 to act at the meeting in the place of any such
absent or disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such minutes to the Board when required. All such
proceedings shall be subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such revision or
alteration.
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SECTION 2. General. A majority of any committee may determine its
action and fix the time and place of its meetings, unless the Board shall
otherwise provide. Notice of such meeting shall be given to each member of the
committee in the manner provided for in Article II, Section 10. The Board shall
have any power at any time to fill vacancies in, to change the membership of, or
to dissolve any such committee. Nothing herein shall be deemed to prevent the
Board from appointing one or more committees consisting in whole or in part of
persons who are not directors of the Corporation; provided, however, that no
such committee shall have or may exercise any authority of the Board.
SECTION 3. Action Without a Meeting. Any action required or permitted
to be taken by any committee at a meeting may be taken without a meeting if all
of the members of the committee consent in writing to the adoption of the
resolutions authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.
SECTION 4. Telephone Participation. One or more members of a committee
may participate in a meeting by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV
Officers
SECTION 1. Number. The officers of the Corporation shall be elected by
the board of directors and shall consist of a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, a
Treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period that it may deem advisable unless
otherwise required by Delaware law.
SECTION 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The Chief Executive Officer shall appoint other officers to serve for
such terms as he or she deems desirable. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
SECTION 3. Resignations. Any officer may resign at any time upon
written notice to the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
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SECTION 4. Removal. Any officer or agent of the corporation may be
removed, either with or without cause, at any time, by the Board at any meeting
of the Board or, except in the case of an officer or agent elected or appointed
by the Board, by the Chairman of the Board or the President, but any such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
SECTION 5. Vacancies. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise, shall be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
SECTION 6. The Chairman of the Board. The Chairman of the Board shall
have the general and active supervision and direction over the other officers,
agents and employees and shall see that their duties are properly performed and
shall be the Chief Executive Officer. He shall, if present, preside at each
meeting of the stockholders and of the Board and shall be an ex officio member
of all committees of the Board. He shall perform all duties incident to the
office of Chairman of the Board and such other duties as may from time to time
be assigned to him by the Board.
SECTION 7. The President. The President shall be the Chief Operating
Officer of the Corporation and shall have general and active supervision and
direction over the business operations and affairs of the Corporation and over
its several officers, agents and employees, subject, however, to the direction
of the Chairman of the Board and the control of the Board of Directors. At the
request of the Chairman of the Board, or in the case of his absence or inability
to act, the President shall perform the duties of the Chairman of the Board and
when so acting shall have all the powers of, and be subject to all the
restrictions upon the Chairman of the Board. In general, the President shall
have such other powers and shall perform such other duties as usually pertain to
the office of President or as from time to time may be assigned to him by the
Board, the Chairman of the Board or these By-Laws.
SECTION 8. Vice Presidents. Each Vice President shall have such powers
and perform such duties as from time to time may be assigned to him by the
Board.
SECTION 9. The Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible
for, all the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all monies and other valuables to be
deposited to the credit of the Corporation in such
depositories as may be designated by the Board;
(d) receive, and give receipts for, monies due and
payable to the Corporation from any source whatsoever;
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<PAGE> 10
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or authorized
by the Board, taking proper vouchers therefor; and
(f) in general, have all the powers and perform all
the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the
Board, the Chairman of the Board or the President.
SECTION 10. The Secretary. The Secretary shall
(a) record the proceedings of the meetings of the
stockholders and directors in a minute book to be kept for
that purpose;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock
certificates of the Corporation (unless the seal of the
Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation
under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required by law
to be kept and filed are properly kept and filed; and
(e) in general, have all the powers and perform all
the duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the
Board, the Chairman of the Board or the President.
SECTION 11. Officers' Bonds or Other Security. The Board may secure the
fidelity of any or all of its officers or agents by bond or otherwise, in such
amount and with such surety or sureties as the Board may require.
SECTION 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board; provided, however, that the Board may delegate to the Chairman of
the Board or the President the power to fix the compensation of officers and
agents appointed by the Chairman of the Board or the President, as the case may
be. An officer of the Corporation shall not be prevented from receiving
compensation by reason of the fact that he is also a director of the
Corporation.
ARTICLE V
Shares of Stock
SECTION 1. Stock Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the
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Board or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 2. Books of Account and Record of Stockholders. The books and
records of the Corporation may be kept at such places, within or without the
State of Delaware, as the Board of Directors may from time to time determine.
The stock record books and the blank stock certificate books shall be kept by
the Secretary or by any other officer or agent designated by the Board of
Directors.
SECTION 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney "hereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation may hold any such stockholder of
record liable for calls and assessments and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof. Whenever any transfers of shares shall be made for
collateral security and not absolutely, and both the transferor and transferee
request the Corporation to do so, such fact shall be stated in the entry of the
transfer.
SECTION 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 5. Fixing of Record Date for Stockholder Meetings. 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 the close of business on the next
day 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
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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.
SECTION 6. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes 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 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.
SECTION 7. Lost, Stolen or Destroyed Stock Certificates. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Board may, in its discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the Corporation a bond sufficient, as the Board in its absolute
discretion shall determine, 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 such new certificate. Anything herein to
the contrary notwithstanding, the Board, in its absolute discretion, may refuse
to issue any such new certificate, except pursuant to judicial proceedings under
the laws of the State of Delaware.
ARTICLE VI
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Contracts. Except as otherwise required by
statute, the Certificate of Incorporation or these By-Laws, any contract or
other instrument may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant officer) of the
Corporation as the Board may from time to time direct. Such authority may be
general or confined to specific instances as the Board may determine. Unless
authorized by the Board or expressly permitted by these By-Laws, no officer or
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it pecuniary
liable for any purpose or to any amount.
SECTION 2. Loans. Unless the Board shall otherwise determine, the
President or any Vice-President may effect loans and advances at any time for
the Corporation from any bank, trust company or other institution, or from any
firm, corporation or individual, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, but no officer or officers shall mortgage,
pledge, hypothecate or transfer any securities or other property of the
Corporation other than in
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connection with the purchase of chattels for use in the Corporation's
operations, except when authorized by the Board.
SECTION 3. Checks, Drafts, Bank Accounts, etc. All checks, drafts,
bills of exchange or other orders for the payment of money out of the funds of
the Corporation, and all notes or other evidence of indebtedness of the
Corporation, shall be signed in the name and on behalf of the Corporation by
such persons and in such manner as shall from time to time be authorized by the
Board.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as the Board may from time
to time designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board. For the purpose of deposit and for the purpose of collection for
the account of the Corporation, checks, drafts and other orders for the payment
of money which are payable to the order of the Corporation may be endorsed,
assigned and delivered by any officer or agent of the Corporation.
SECTION 5. General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositaries as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated by the
Board. The Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent-with the provisions of these By-Laws, as it
may deem expedient.
ARTICLE VII
General Provisions
SECTION 1. Registered Office. The registered office and registered
agent of the Corporation will be as specified in the Certificate of
Incorporation of the Corporation.
SECTION 2. Other Offices. The Corporation may also have such offices,
both within or without the State of Delaware, as the Board of Directors may from
time to time determine or the business of the Corporation may require.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be so
determined by the Board of Directors.
SECTION 4. Seal. The seal of the Corporation shall be circular in form,
shall bear the name of the Corporation and shall include the words and numbers
"Corporate Seal", "Delaware" and the year of incorporation.
SECTION 5. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the Corporation shall be voted by the Chief
Executive Officer, unless the
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<PAGE> 14
Board of Directors specifically confers authority to vote with respect thereto,
which authority may be general or confined to specific instances, upon some
other person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
SECTION 6. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business.
SECTION 7. Section Headings. Section headings in these By-Laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
SECTION 8. Inconsistent Provisions. In the event that any provision of
these By-Laws is or becomes inconsistent with any provision of the Certificate
of Incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these By-Laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
Indemnification
SECTION 1. General. The Corporation shall 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, whether civil, criminal, administrative or
investigative, or by or in the right of the Corporation to procure a judgment in
its favor, by reason of the fact that he 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 corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, in accordance
with and to the full extent permitted by statute and by the Certificate of
Incorporation of the Corporation. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this section. The
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<PAGE> 15
indemnification provided by this section shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under these
By-Laws or any agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in his 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 and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 2. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who 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 corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of statute or of this section.
ARTICLE IX
Amendment
The By-Laws, may be adopted, amended or repealed by the Board of
Directors of the Corporation, except as otherwise provided by law, but any
By-Law made by the Board of Directors is subject to amendment and repeal by the
stockholders of the Corporation.
<PAGE> 1
EXHIBIT 9.2
AMENDMENT TO VOTING TRUST AGREEMENT
This Amendment ("Amendment") is entered into on June 12, 1998, by and
among Burton Bentley, as Trustee ("Trustee"), Jack R. Leadbeater, as the
Successor Trustee ("Successor Trustee"), Osage Systems Group, Inc., successor in
interest to Pacific Rim Entertainment, (the "Corporation"), the stockholders of
the Corporation as set forth on Schedule I attached hereto and made a part
hereof (the "Stockholders") and the holders of the Corporation's Series B $3.00
Preferred Stock (the "Series B Holders").
WHEREAS, the parties hereto entered into a Voting Trust Agreement dated
as of December 22, 1997 (the "Agreement") pursuant to an Agreement and Plan of
Merger by and among the Corporation, PR Acquisition Corp., Osage Computer Group,
Inc. ("Osage") and certain stockholders of Osage, dated as of November 5, 1997
(the "Merger Agreement"); and
WHEREAS, the parties desire to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto do
hereby bind themselves and their heirs, executors, administrators and permitted
assigns, and the Trustee does hereby bind himself, and agree as set forth below.
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Agreement.
1. Trust Shares. The aggregate number of Trust Shares subject to the
Agreement is hereby reduced from 1,500,000 to the lower of: (i) 500,000, or (ii)
whatever number of Trust Shares is deemed acceptable to the Successor Trustee,
which may consist of no Trust Shares. Accordingly, no less than 1,000,000 Trust
Shares are hereby released from the Agreement. The allocation of the Trust
Shares among the Stockholders is set forth on the revised Schedule I attached
hereto.
2. Change of Trustee. Burton Bentley as Trustee shall be replaced by
Jack R. Leadbeater as Successor Trustee effective as of the date of this
Amendment. Mr. Leadbeater shall be referred to as the "Successor Trustee". In
connection with his agreement to resign as Trustee, the Corporation hereby
reaffirms its agreement to indemnify and hold Mr. Bentley as the Trustee
harmless from any loss, expense or damages which he may incur by reason of any
lawful act undertaken or any omission to act under the Agreement except for any
loss, expense or damages resulting from willful misconduct and gross negligence.
Mr. Leadbeater as Successor Trustee shall be entitled to the indemnification
provided for under paragraph 7 of the Agreement.
3. Voting Trust Certificates. The Stockholders shall provide to the
Successor Trustee their respective stock certificates representing the number of
shares of the Corporation's Common Stock they have agreed to deposit into the
Voting Trust (the "Trust Shares") and, upon his receipt of such certificates,
the Successor Trustee shall issue to each of the Stockholders a Voting Trust
Certificate in the form attached hereto as Exhibit "A", for the number of Trust
Shares held by the Successor Trustee for the benefit of the Stockholders under
the terms and conditions of the Agreement.
<PAGE> 2
4. Release of Trust Shares. Section 6(b) of the Agreement is hereby
deleted in its entirety.
5. Amendment/Termination. The Successor Trustee has the power and
authority granted by the Series B Holders to amend, modify or terminate the
Voting Trust arrangements identified herein, for any reason whatsoever, in his
sole discretion.
6. Consent. The Series B Holders, by their execution at the end of this
Agreement, hereby evidence their consent and agreement to the terms herein
contained.
7. Miscellaneous.
(a) Except as amended hereby, all other terms of the
Agreement shall remain unamended and in full force
and effect.
(b) This Amendment shall be construed in accordance with
and governed by the laws of the State of Delaware,
without regard to conflict of laws principles.
(c) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an
original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
OSAGE SYSTEMS GROUP, INC.
By: /s/ Jack R. Leadbeater
----------------------------
Jack R. Leadbeater
Chief Executive Officer
TRUSTEE
By: /s/ Burton Bentley
----------------------------
Burton Bentley, Esquire
The undersigned hereby accepts his appointment as Successor Trustee
under the Agreement, as amended by this Amendment, and agrees to be bound by the
terms of the Agreement, as amended hereby.
SUCCESSOR TRUSTEE
/s/ Jack R. Leadbeater
-----------------------------
Jack R. Leadbeater
<PAGE> 3
SERIES B HOLDERS:
/s/ Jack R. Leadbeater /s/ Dale Van deVrede
- ------------------------------ --------------------------------
Jack R. Leadbeater Dale Van deVrede Family Trust
/s/ David S. Olson /s/ Chris Donahue
- ------------------------------ --------------------------------
David S. Olson Chris Donahue
/s/ Steve Rigby /s/ Rick Gunther
- ------------------------------ ---------------------------------
Steve Rigby Rick Gunther
SCHEDULE I
STOCKHOLDERS OF OSAGE SYSTEMS GROUP, INC.
DEPOSIT OF TRUST SHARES INTO VOTING TRUST
NAME # OF SHARES TO BE PLACED IN VOTING TRUST
- ------------------------ -------------------------
Signature
- ------------------------ -------------------------
Signature
- ------------------------ -------------------------
Signature
- ------------------------ -------------------------
Signature
- ------------------------ -------------------------
Signature
<PAGE> 4
EXHIBIT "A"
VOTING TRUST CERTIFICATE
OSAGE SYSTEMS GROUP, INC.
_________________________________ _______________________________
Voting Trust Certificate Number Number of Shares Represented
VOTING TRUST CERTIFICATE
THIS CERTIFIES THAT _______________________ is the legal and beneficial
owner of shares of the Common Stock of Osage Systems Group, Inc., a Delaware
corporate (the "Corporation"), said shares having been deposited with the
undersigned Trustee in accordance with a Voting Trust Agreement entered into by
certain Stockholders of the Corporation and the Trustee, dated as of December
22, 1997, as amended on June _____, 1998, copies of which are filed in the
registered office of the Corporation in the State of Delaware and in the
Corporation's principal offices at 1661 East Camelback Road, Suite 245, Phoenix,
Arizona 85016. This Voting Trust Certificate is issued in accordance with the
terms of the Voting Trust Agreement, as amended, and is subject to the
provisions thereof.
TRUSTEE
[ ]
___________________________
Dated:________________________ By:____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.1
THE AMENDED AND RESTATED 1993 STOCK OPTION PLAN OF
OSAGE SYSTEMS GROUP, INC.
1. PURPOSES
The Board of Directors of Osage Systems Group, Inc. (the
"Company") believes that it is in the best interests of the Company to maintain
an equity incentive program in the form of the Company's 1993 Stock Option Plan,
as amended (the "1993 Plan") which will provide a meaningful opportunity for
officers, employees and directors, including non-employee directors and
consultants, to acquire a substantial proprietary interest in the enterprise and
thereby encourage such individuals to remain in the Company's service and more
closely align their interests with those of the shareholders.
2. SCOPE AND DURATION
Options under the 1993 Plan may be granted in the form of
incentive stock options ("Incentive Options") as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or in the form of
nonqualified stock options ("Nonqualified Options"). (Unless otherwise
indicated, references in the 1993 Plan to "options" include Incentive Options
and Nonqualified Options.) The maximum aggregate number of shares as to which
options may be granted from time to time under the 1993 Plan is 2,000,000 shares
of the Company's common stock, $0.01 par value per share ("Common Stock"), which
shares may be, in whole or in part, authorized but unissued shares or shares
reacquired by the Company. If an option shall expire, terminate or be
surrendered for cancellation for any reason without having been exercised in
full, the shares represented by the option or portion thereof not so exercised
shall (unless the 1993 Plan shall have been terminated) become available for
subsequent option grants under the 1993 Plan. Unless terminated sooner pursuant
to paragraph 15, the 1993 Plan shall terminate on the tenth anniversary of the
effective date, and no option shall be granted hereunder after the date.
3. ADMINISTRATION
The 1993 Plan shall be administered by a committee of the
Board of Directors of the Company, or by the full Board of Directors (in either
case, the "Plan Administrator"). The Plan Administrator shall construe and
interpret the 1993 Plan and establish such rules as it deems necessary for the
proper administration of the 1993 Plan. The Plan Administrator has the authority
(subject to full Board review) to determine which eligible individuals are to
receive option grants, the number of shares to be covered by each grant, the
type of options (Incentive Options or Nonqualified Options) to be granted, the
date or dates on which the option is to become exercisable, the price of the
option, and to make all other determinations deemed necessary or advisable for
the administration of the 1993 Plan. The Plan Administrator may delegate to one
or more of its members, or to one or more agents, such administrative duties as
it may deem advisable, and the Plan Administrator (or any person to whom it has
delegated duties as aforesaid) may employ one or more persons to render advice
with respect to any responsibility that the Plan Administrator or such person
may have under the 1993 Plan.
<PAGE> 2
4. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING OPTIONS
Under the 1993 Plan, all full-time employees of the Company or
its subsidiaries (including those who are officers and directors), non-employee
directors and consultants are eligible to receive options pursuant to the 1993
Plan, if selected by the Plan Administrator.
Incentive Options shall be limited to persons who are
employees of the Company and its subsidiaries. In determining the employees to
whom Incentive Options shall be granted and the number of shares to be covered
by each Incentive Option, the Plan Administrator shall take into account the
nature of employees' duties, their present and potential contributions to the
success of the Company and such other factors as it shall deemed relevant in
connection with accomplishing the purposes of the 1993 Plan. A director of the
Company or of a subsidiary who is not also an employee shall not be eligible to
receive an Incentive Option. An employee who has been granted an option or
options under the 1993 Plan may be granted an additional option or options,
subject, in the case of Incentive Options, to such limitations as may be imposed
by the Code on such options.
A Nonqualified Option may be granted to employees of the
Company or any of its subsidiaries and to non-employee directors, independent
agents and consultants to the Company, in each case whom the Plan Administrator
believes has contributed, or will contribute, to the success of the Company.
5. OPTION PRICE
The purchase price of the Common Stock covered by each option
shall be determined by the Plan Administrator but, subject to paragraph 9(b), in
no event shall the purchase price of the Common Stock covered by any option be
less than 100% of the Fair Market Value (as defined in paragraph 16 below) of a
share of the Common Stock on the date on which the option is granted. The
purchase price with respect to any option granted shall be subject to adjustment
as provided in paragraph 13 below. The Plan Administrator shall determine the
date on which an option is granted. In the absence of such a determination, the
date on which the Board of Directors or the Plan Administrator, as the case may
be, adopts a resolution granting an option shall be considered the date on which
such option is granted.
6. TERM OF OPTIONS
Subject to paragraph 9(b), the term of each option shall be
not more than ten years from the date of grant subject to earlier termination as
provided in paragraphs 11 and 12 below.
7. EXERCISE OF OPTIONS
(a) The period during which any option granted under the 1993
Plan may be exercised shall be determined in each case by the Plan
Administrator. The Plan Administrator may, in its sole discretion, provide that
an option shall immediately become exercisable in full upon the happening of any
of the following events: (i) the first purchase of shares of Common Stock
pursuant to a tender offer or exchange offer (other than an offer by the
Company) for all, or any part of, the Common Stock, (ii) a change of control of
the Company, (iii) the approval by the
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<PAGE> 3
stockholders of the Company of an agreement for a merger in which the Company
will not survive as an independent, publicly owned corporation, (iv) a
consolidation, or a sale, exchange or other disposition of all or substantially
all of the Company's assets, or (v) with respect to an employee, on his 65th
birthday. In the event of a question or controversy as to whether or not any of
the events hereinabove described has taken place, a determination by the Plan
Administrator that such event has or has not occurred shall be conclusive and
binding upon the Company and participants in the 1993 Plan.
(b) An option may be exercised, at any time or from time to
time subject, in the case of Incentive Options, to such restrictions as may be
imposed by the Code, as to any or all full shares as to which the option is then
exercisable.
(c) The purchase price of the shares as to which an option is
exercised shall be paid in full at the time of exercise. Payment shall be made
in cash, which may be paid by check or other instrument acceptable to the
Company. In addition, subject to compliance with applicable laws and regulations
and such conditions as the Plan Administrator may impose, the Plan Administrator
in its sole discretion, may permit payment in shares of Common Stock of the
Company; provided, however, that shares of Common Stock used to pay the exercise
price must have been owned by the participant for a six-month period prior to
the exercise date, or such longer period as determined by the Plan
Administrator, and valued at the Fair Market Value thereof (as defined in
paragraph 17 below) on the date of exercise.
(d) Any amount necessary to satisfy any federal, state or
local tax withholding obligations of the Company shall be paid by the option
holder at the time of exercise of the option (or, if later, on the date the
amount of such tax is determined by the Company). An amount required to be
withheld under applicable tax withholding requirements may be paid (i) in cash;
(ii) in the sole discretion of the Plan Administrator, through the delivery to
the Company of previously-owned shares of Common Stock having an aggregate Fair
Market Value on the exercise date equal to the tax obligation (provided that the
previously-owned shares delivered in satisfaction of the withholding obligations
must have been held by the optionee for at least six (6) months; (iii) by
delivering to the Company a notice of exercise with an irrevocable direction to
a broker-dealer registered under the Act to sell a sufficient portion of the
shares and deliver the sale proceeds directly to the Company to pay the exercise
price; or (iv) in the discretion of the Plan Administrator, through a
combination of the procedures set forth in subsections (i), (ii) and (iii)
above.
(e) Except as provided in paragraphs 11 and 12 below, no
Incentive Option granted to an employee of the Company or any of its
subsidiaries may be exercised unless such employee is then an employee of the
Company or a subsidiary. The exercise of any Nonqualified Option shall be
governed by the stock option agreement pursuant to which it is granted.
(f) Upon the exercise of an option or portion thereof in
accordance with the 1993 Plan, the option agreement and such rules and
regulations as may be established by the Board of Directors or the Plan
Administrator, as the case may be, the holder thereof shall have the rights of a
stockholder with respect to the shares covered by such option or portion thereof
so exercised.
- 3 -
<PAGE> 4
8. SUBSTITUTION OF OPTIONS
During the term of the 1993 Plan, the Plan Administrator in
its discretion may offer one or more option holders the opportunity to surrender
any or all unexpired options for cancellation or replacement. If any options are
so surrendered, the Plan Administrator may then grant new Nonqualified or
Incentive Options to such holder for the same or different numbers of shares at
a higher or lower exercise price than the surrendered options. Such new options
may have a different term than the surrendered options but shall otherwise be
subject to the provisions of the 1993 Plan.
9. INCENTIVE OPTIONS
(a) The aggregate Fair Market Value (determined in accordance
with the provisions of paragraph 16 at the time the Incentive Option is granted)
of the Common Stock with respect to which Incentive Options are exercisable for
the first time by any employee during any calendar year (under all incentive
stock option plans of the Company and its parent and subsidiary corporations, as
those terms are defined in Section 424 of the Code) shall not exceed $100,000.
(b) No Incentive Option may be awarded to any employee who
immediately prior to the date of the granting of such Incentive Option owns more
than 10% of the combined voting power of all classes of stock of the Company or
any of its subsidiaries unless the exercise price under the Incentive Option is
at least 110% of the Fair Market Value and the option expires within five years
from the date of grant.
(c) In the event of amendments to the Code or applicable
regulations relating to Incentive Options subsequent to the date hereof, the
Company may amend the provisions of the 1993 Plan, and the Company and the
employees holding such options may agree to amend outstanding option agreements,
to conform to such amendments.
10. NON-TRANSFERABILITY OF OPTIONS
Options granted under the 1993 Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and such options
may be exercised during the lifetime of the employee only by the employee.
11. TERMINATION OTHER THAN BY DEATH
If an optionee shall cease to be either an employee, director
or consultant of the Company or its subsidiaries for any reason, other than
death, then within 30 days next succeeding such termination of employment, but
in any event not later than the expiration date of the option, the option holder
may exercise the option rights granted to the option holder under the option,
but only to the extent that the option holder was entitled to exercise the same
on the date of such termination of employment; provided, however, that any
option which is held by an employee whose employment is terminated for "Cause"
(as defined below) shall, to the extent not theretofore exercised, automatically
terminate as of the date of termination of employment. Incentive Options granted
to employees under the 1993 Plan shall not be affected by any change
- 4 -
<PAGE> 5
of duties or position so long as the holder continues to be an employee of the
Company or any of its subsidiaries.
Notwithstanding the foregoing, the Plan Administrator may, in
its discretion, extend the post-termination exercise period to a date not later
than the original expiration date of such option. Any option agreement or any
rules and regulations relating to the 1993 Plan may contain such provisions as
the Plan Administrator shall approve with reference to the determination of the
date employment terminates and the effect of leaves of absence. Nothing in the
1993 Plan or in any option granted pursuant to the 1993 Plan shall confer upon
any employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or any such
subsidiary to terminate such employment at any time.
For purposes of this Plan, the term "Cause" shall mean (a)
with respect to an individual who is party to a written agreement with the
Company which contains a definition of "cause" or "for cause" or words of
similar import for purposes of termination of employment thereunder by the
Company, "cause" or "for cause" as defined in such agreement; (b) in all other
cases (I) the willful commission by an employee of a criminal or other act that
causes substantial economic damage to the Company or substantial injury to the
business reputation of the Company; (II) the commission of an act of fraud in
the performance of such person's duties to or on behalf of the Company; or (III)
the continuing willful failure of a person to perform the duties of such person
to the Company (other than a failure to perform duties resulting from such
person's incapacity due to illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to cure
such failure are given to the person by the Board of Directors of the Company or
the Plan Administrator. For purposes of the Plan, no act, or failure to act, on
the part of any person shall be considered "willful" unless done or omitted to
be done by the person other than in good faith and without reasonable belief
that the person's action or omission was in the best interest of the Company.
12. DEATH
If the optionee to whom an option is granted shall cease to be
an employee, director or consultant of the Company or its subsidiaries by reason
of death, then within the six (6) months next succeeding such option holder's
death, but in any event not later than the expiration date of the option, the
option holder's executor, administrator, or any person or persons to whom the
option holder's rights under the option shall pass by testamentary transfer,
bequest or by the operation of the laws of descent and distribution, may
exercise the option rights granted to the option holder under the option, but
only to the extent that the option holder was entitled to exercise the same on
the date of such option holder's death. Notwithstanding the foregoing, the Plan
Administrator may, in its discretion, extend the post-death exercise period to a
date not later than the original expiration date of such option.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
Notwithstanding any other provisions of the 1993 Plan, the
Plan Administrator may at any time make or provide for such adjustments to the
1993 Plan, to the number and class
- 5 -
<PAGE> 6
of shares issuable thereunder or to any outstanding options as it shall deem
appropriate to prevent dilution or enlargement of rights, including adjustments
in the event of changes in the outstanding Common Stock by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares, separations, reorganizations, liquidations and the like.
In the event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Plan Administrator may make such adjustment as
it deems equitable in respect of outstanding options and rights, including in
its discretion revision of outstanding options and rights so that they may be
exercisable for the consideration payable in the acquisition transaction. Any
such determination by the Plan Administrator shall be conclusive. Any fractional
shares resulting from such adjustments shall be eliminated.
14. EFFECTIVE DATE
The 1993 Plan, as originally adopted, became effective as of
March 12, 1993 and was most recently amended and restated as of June 12, 1998.
15. TERMINATION AND AMENDMENT
Under the 1993 Plan, the Board of Directors may modify, amend,
or terminate the 1993 Plan at any time except that, to the extent then required
by applicable law, rule, or regulation, approval of the holders of a majority of
the Common Stock represented in person or by proxy at a meeting of the
shareholders will be required to increase the maximum number of shares of Common
Stock available for distribution under the 1993 Plan (other than increases due
to adjustments in accordance with the 1993 Plan). No modification, amendment, or
termination of the 1993 Plan shall adversely affect the rights of a participant
under a grant previously made to him without the consent of such participant.
16. MISCELLANEOUS
As said term is used in the 1993 Plan, the "Fair Market Value"
of a share of Common Stock on any day means: (a) if the principal market for the
Common Stock is a national securities exchange or the NASDAQ National Market
System, the closing sales price of the Common Stock on such day as reported by
such exchange or market system, or on a consolidated tape reflecting
transactions on such exchange or market system, or (b) if the principal market
for the Common Stock is not a national securities exchange or the NASDAQ
National Market System, and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the closing bid and the closing asked prices for the Common Stock on such day as
quoted on such system, or (c) if the principal market for the Common Stock is
not a national securities exchange or the NASDAQ National Market System, and the
Common Stock is not quoted on the National Association of Securities Dealers
Automated Quotations System, the mean between the highest bid and lowest asked
priced for the Common Stock on such day as reported by the National Quotation
Bureau, Inc.; provided 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
Plan Administrator by any method which it deems to be
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<PAGE> 7
appropriate. The determination of the Plan Administrator shall be conclusive as
to the Fair Market Value of the Common Stock.
The Plan Administrator may require, as a condition to the
exercise of any options granted under the 1993 Plan, that to the extent required
at the time of exercise (i) the shares of Common Stock reserved for purposes of
the 1993 Plan shall be duly listed, upon official notice of issuance, upon such
stock exchange(s) on which the Common Stock is listed, (ii) a registration
statement under the Securities Act of 1933 as amended, with respect to such
shares shall be effective, and/or (iii) the person exercising such option
deliver to the Company such documents, agreements and investment and other
representations as the Plan Administrator shall determine to be in the best
interests of the Company.
- 7 -
<PAGE> 1
EXHIBIT 10.23
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement is made and entered into
at Phoenix, Arizona, effective as of June 12, 1998 by and between Osage Systems
Group, Inc., a Delaware corporation (hereinafter referred to as "Employer") and
Jack Leadbeater, a resident of Maricopa County, Arizona (hereinafter referred to
as "Employee").
WHEREAS, Employer and Employee have entered into a certain Employment
Agreement effective as of December 22, 1997 (the "Employment Agreement")
covering various terms and conditions of Employer's employment of Employee; and
WHEREAS, the parties now wish to amend the Employment Agreement as set
forth below.
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and other valuable consideration, the parties agree as follows:
1. Paragraph 10 of the Employment Agreement shall be deleted in its
entirety and shall be of no further force and effect.
Other than as set forth above, all other provisions of the Employment
Agreement shall remain in effect.
IN WITNESS WHEREOF the parties hereto have duly executed this Amendment
No. 1 to Employment Agreement the day and year first above written.
EMPLOYER
OSAGE SYSTEMS GROUP, INC.
By: /s/ David S. Olson
---------------------------
Chief Operating Officer
EMPLOYEE:
BY: Jack Leadbeater
---------------------------
Jack Leadbeater
<PAGE> 1
EXHIBIT 10.24
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement is made and entered into
at Phoenix, Arizona, effective as of June 12, 1998 by and between Osage Systems
Group, Inc., a Delaware corporation (hereinafter referred to as "Employer") and
David Olson, a resident of Maricopa County, Arizona (hereinafter referred to as
"Employee").
WHEREAS, Employer and Employee have entered into a certain Employment
Agreement effective as of December 22, 1997 (the "Employment Agreement")
covering various terms and conditions of Employer's employment of Employee; and
WHEREAS, the parties now wish to amend the Employment Agreement as set
forth below.
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and other valuable consideration, the parties agree as follows:
1. Paragraph 10 of the Employment Agreement shall be deleted in its
entirety and shall be of no further force and effect.
Other than as set forth above, all other provisions of the Employment
Agreement shall remain in effect.
IN WITNESS WHEREOF the parties hereto have duly executed this Amendment
No. 1 to Employment Agreement the day and year first above written.
EMPLOYER
OSAGE SYSTEMS GROUP, INC.
By: /s/ David Olson
------------------------------
Chief Operating Officer
EMPLOYEE:
BY: /s/ David Olson
------------------------------
David Olson
<PAGE> 1
EXHIBIT 10.25
TERMINATION BENEFITS AGREEMENT
TERMINATION BENEFITS AGREEMENT made August 3, 1998, effective as of
June 12, 1998 (the "Effective Date"), by and between OSAGE SYSTEMS GROUP, INC.,
a Delaware corporation (the "Company") and Jack R. Leadbeater (the "Executive").
RECITALS
A. The Executive has served the Company as a key executive officer and
has helped guide the Company through the Company's merger with Osage Computer
Group, Inc. and its successful completion of other acquisitions.
B. The Executive is expected to continue to make a major contribution
to the profitability, growth and financial strength of the Company.
C. The Company considers the continued services of the Executive to be
in the best interest of the Company and its shareholders and desires to assure
the continued service of the Executive on behalf of the Company on an objective
and impartial basis and without distraction or conflict of interest in the event
of an attempt to obtain control of the Company.
D. The Executive is willing to remain in the employ of the Company upon
the understanding that the Company will provide income security upon the terms
and subject to the conditions contained herein if the Executive's employment is
terminated voluntarily for "good reason" following a Change in Control of the
Company or involuntarily by the Company without cause as provided in Section 5
of the Employment Agreement dated as of December 22, 1997 (as such agreement
currently exists or may be modified and as extended or replaced subsequent to
the date hereof, the "Employment Agreement").
NOW, THEREFORE, in consideration of the mutual promises herein
contained and intending to be legally bound hereby, the parties agree as
follows:
1. Simultaneously with a "Change in Control of the Company", as that
term is defined herein (a "Change in Control"), (i) the term of the Employment
Agreement then in force between the Company and the Executive, without any
further action on the part of either party, shall be deemed to have been
extended for a term of three (3) years, commencing with the date of the Change
In Control, on the same terms and conditions as existed immediately prior to the
Change in Control (the "Extended Term") and (ii) the provisions of Section 10 of
the Employment Agreement, as such section may be amended or superseded following
the date hereof, by any similar provision relating to termination (other than as
provided by the terms of Section 5 of the Employment Agreement on the date
hereof), shall be null and void and unenforceable and inapplicable as to the
Executive.
2. During the Extended Term, the Executive may terminate his employment
at any time for "good reason". As used herein, the term "good reason" shall
mean:
1
<PAGE> 2
(i) A failure by the Company to comply with any material
provision of the Employment Agreement, which failure has not been cured within
ten (10) days after notice of noncompliance has been given by Executive to the
Company;
(ii) Without Executive's written consent, the assignment to
Executive of any duties inconsistent with Executive's duties, responsibilities
and status with the Company immediately prior to the Change in Control;
(iii) Any change in (a) Executive's reporting
responsibilities, title or office in effect immediately prior to the Change in
Control of the Company, or (b) a change in geographic location of where
Executive's position is based that would reasonably require a relocation of his
personal residence;
(iv) Any removal from or any failure to reelect Executive to
the highest ranking executive position in the Company except in connection with
a termination of employment pursuant to Section 5 of Executive's Employment
Agreement or voluntary resignation or refusal to stand for re-election by
Executive;
(v) Any reduction by the Company in Executive's annual salary
in effect immediately prior to a Change in Control or as the same may be
increased from time to time; or
(vi) Any material reduction in the benefits provided to
Executive under any bonus, benefit or compensation plan, life insurance plan,
health and accident plan or disability plan in which Executive is participating
at the time of a Change in Control of the Company.
3. For purposes of this Agreement, a "Change in Control" shall be
determined in the manner established at Paragraph 7 hereafter. A Change in
Control shall mean a Change in Control of a nature that would be required to be
reported in response to item 6(e) of Schedule 14A of Regulation 14A, as in
effect on the date hereof, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such a
Change in Control shall be deemed to have occurred if:
(a) Any "Person" or "group of Persons" (as such terms are
defined hereafter), except for Executive, any affiliate of Executive, or any
group of Persons of which Executive is a participant, any employee benefit plan
of the Company or any subsidiary of the Company, or any entity holding voting
securities of the Company for or pursuant to the terms of any such plan (a
"Benefit Plan" or the "Benefit Plans"), is or becomes the "beneficial owner" (as
such term is defined hereafter), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities;
(b) There occurs a contested proxy solicitation of the
Company's shareholders with respect to the election of directors that results in
the contesting party electing a majority of members of the Company's Board of
Directors;
(c) There occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another entity,
except to an entity controlled directly or indirectly by the Company, or a
merger, consolidation or other reorganization of the Company in
2
<PAGE> 3
which the Company is not the surviving entity, or a plan of liquidation or
dissolution of the Company other than pursuant to bankruptcy or insolvency laws
is adopted; or
(d) During any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's shareholders, of
each new director was approved by a vote of at least two-thirds of the directors
(inclusive of Executive) then still in office who were directors at the
beginning of the period.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to have occurred for purposes of this Agreement: (i) if a "Person" acquires or
becomes the beneficial owner of securities representing 20% or more of the
combined voting power of the Company's then outstanding securities pursuant to a
private placement transaction or underwritten public offering of the Company's
Common Stock where such issuance of securities by the Company is approved by a
vote of at least two-thirds of the directors inclusive of the Executive; (ii) if
a transaction identified in subparagraph 3(c) above occurs and is approved by a
vote of at least two-thirds of the directors inclusive of the Executive; (iii)
in the event of a sale, exchange, transfer or other disposition of substantially
all of the assets of the Company to, or a merger, consolidation or other
reorganization involving the Company and, the Executive, alone or with other
officers of the Company, or any entity in which the Executive (alone or with
other officers) has, directly or indirectly, at least a 25% equity or ownership
interest; or (iv) in a transaction which includes the Executive as a principal
and control person and is otherwise commonly referred to as a "management
leveraged buy-out". For the purposes of subparagraph 3(a), a "Person" shall not
be deemed the beneficial owner of securities representing 20% or more of the
combined voting power of the Company's then outstanding securities if that
"Person" is an underwriter who has acquired shares for resale in connection with
an underwritten public offering of such shares.
Subparagraph 3(a) above to the contrary notwithstanding, a Change in
Control shall not be deemed to have occurred if a Person (i) is, on the date
hereof, the beneficial owner of 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities solely as
the result of an acquisition by the Company or any subsidiary of the Company of
voting securities of the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such person to 20% or more of the combined voting power of the Company's then
outstanding securities, provided, however, that if a Person currently is or
becomes the beneficial owner of 20% or more of the combined voting power of the
Company's then outstanding securities by reason of shares (y) beneficially owned
on the date hereof, or (z) purchased by the Company or any subsidiary of the
Company and shall thereafter become the beneficial owner, directly or
indirectly, of any additional voting securities of the Company, then a Change in
Control shall be deemed to have occurred with respect to such Person under
subparagraph 3(a) above. Notwithstanding the foregoing, in no event shall a
Change of Control be deemed to occur under subparagraph 3(a) above with respect
to the Benefit Plans.
3
<PAGE> 4
For the purposes of this paragraph 3, the terms "Person,"
"group of Persons", "beneficial owner" and "beneficial ownership" shall have the
meanings ascribed thereto under Sections 13(d) and 14(d) and Rule 13d
promulgated under the Securities Exchange Act.
4. Any termination of Executive's employment by the Executive shall be
communicated by written notice of termination to the Company. For purposes of
this Agreement, a "notice of termination" shall mean a dated notice which shall
(i) set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment; and (ii) specify a
date of termination, which shall be not less than thirty nor more than ninety
(90) days after such notice of termination.
5. If during the Extended Term following a Change in Control, Executive
terminates his Employment for good reason as described in subparagraphs (i) to
(vi) of paragraph 2 hereof, or if Executive is terminated by the Company other
than pursuant to Section 5 of Executive's Employment Agreement, then, in lieu of
any further salary payments to Executive for periods subsequent to the date of
termination:
(a) The Company shall pay as a liquidated amount to Executive
within thirty (30) days of such termination, a lump sum cash payment which is
equal to the remainder of any further salary and ascertainable bonus payments
that would have become due to Executive during the remainder of the Extended
Term; calculating the amount of such salary based upon the Executive's current
gross salary (for federal income tax purposes) and ascertainable bonus based
upon the bonus that was received by Executive during the Company's most recently
completed fiscal year;
(b) All options held by Executive, to the extent not vested
pursuant to the terms of any plan or agreement governing such option, shall
become fully vested and exercisable;
(c) The Company shall continue to pay or make available to
Executive for a period of two (2) years after the date of termination, all
Company benefits including all health, disability and life insurance plans
provided by or through the Company, including those provided in the Employment
Agreement; and
(d) The Company, within sixty (60) days of Executive's date of
termination, shall (i) pay to Executive an additional amount sufficient to
satisfy all of Executive's current or prospective liability to any taxing
authority for excise taxes, penalties or any other taxes assessed in excess of
normal income taxes imposed on salaries, incurred by reason of all benefits
provided to Executive under this Agreement and (ii) cause the Company's
independent auditors to determine, within sixty (60) days, the amount to be paid
to Executive pursuant to subparagraph 5(a) above and this subparagraph 5(d),
providing a copy to Executive of the auditors' detailed determination.
6. The Executive shall not be required to mitigate the amount of any
payment provided for under this Agreement by asking for other employment and
none of these payments may be reduced by any future salary that Executive may
earn.
4
<PAGE> 5
7. A Change in Control shall be determined within the reasonable
discretion of the Executive who shall within 90 days of such determination
provide written notice (the "Notice") to the Company identifying the Change in
Control, and, if possible, providing reference to the Item or Items constituting
the Change in Control identified in subparagraphs 3(a)-3(d) above. The Company
shall have 15 days in which to respond in writing. This response shall indicate
whether or not the Company adopts or disputes the conclusions set forth within
the Notice, and if the Company disputes the Notice, the Company's response shall
indicate with specificity the basis and grounds for such objection. In the
absence of a timely response, the Company shall be deemed to have adopted the
conclusions set forth within the Notice. The conclusions of the Executive set
forth within the Notice shall be deemed conclusive evidence of a Change in
Control. The Company shall bear the burden of proof of establishing that a
Change in Control has not occurred.
8. The Executive is aware that upon Notice of the occurrence of a
Change in Control, the Board of Directors or a shareholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute litigation seeking to have this Agreement
declared unenforceable, or may take or attempt to take other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement could be frustrated. It is the intent of the
Company that Executive not be required to incur the expenses associated with the
enforcement of any rights under this Agreement by litigation or other legal
action, nor be bound to negotiate any settlement of any rights hereunder,
because the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to Executive
hereunder. Accordingly, if following a Notice relative to a Change in Control it
should appear to Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from Executive the benefits intended to be provided to Executive, then
the Company irrevocably authorizes Executive to retain counsel of Executive's
choice, at the expense of the Company as provided in this paragraph 8, to
represent Executive in connection with the initiation or defense of any
litigation or other legal action, whether such action is by or against the
Company or any director, officer, shareholder, or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to Executive entering into an attorney-client relationship
with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The
reasonable fees and expenses of counsel selected from time to time by Executive
as hereinabove provided shall be paid in advance or reimbursed to Executive, at
the election of the Executive, by the Company on a regular, periodic basis upon
presentation by Executive of a statement or statements or customary retainer
letter prepared by such counsel in accordance with its customary practices. Any
legal expenses incurred by the Company by reason of any dispute between the
parties as to enforceability of or the terms contained in this Agreement,
notwithstanding the outcome of any such dispute, shall be the sole
responsibility of the Company, and the Company shall not take any action to seek
reimbursement from Executive for such expense.
5
<PAGE> 6
9. This Agreement is the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior or contemporaneous
negotiations or understandings relating hereto. This Agreement may be altered or
amended only by a writing signed by the parties hereto.
10. This Agreement shall be construed in accordance with the laws of
Arizona and shall be binding upon and inure to the benefit of the parties
hereto, their heirs, administrators, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this amendment the
day and year first above written.
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
-------------------------------
ATTEST: /s/ John Iorillo
----------------------------
/s/ Jack R. Leadbeater
-----------------------------------
JACK R. LEADBEATER
6
<PAGE> 1
EXHIBIT 10.26
TERMINATION BENEFITS AGREEMENT
TERMINATION BENEFITS AGREEMENT made August 3, 1998, effective as of
June 12, 1998 (the "Effective Date"), by and between OSAGE SYSTEMS GROUP, INC.,
a Delaware corporation (the "Company") and David S. Olson (the "Executive").
RECITALS
A. The Executive has served the Company as a key executive officer and
has helped guide the Company through the Company's merger with Osage Computer
Group, Inc. and its successful completion of other acquisitions.
B. The Executive is expected to continue to make a major contribution
to the profitability, growth and financial strength of the Company.
C. The Company considers the continued services of the Executive to be
in the best interest of the Company and its shareholders and desires to assure
the continued service of the Executive on behalf of the Company on an objective
and impartial basis and without distraction or conflict of interest in the event
of an attempt to obtain control of the Company.
D. The Executive is willing to remain in the employ of the Company upon
the understanding that the Company will provide income security upon the terms
and subject to the conditions contained herein if the Executive's employment is
terminated voluntarily for "good reason" following a Change in Control of the
Company or involuntarily by the Company without cause as provided in Section 5
of the Employment Agreement dated as of December 22, 1997 (as such agreement
currently exists or may be modified and as extended or replaced subsequent to
the date hereof, the "Employment Agreement").
NOW, THEREFORE, in consideration of the mutual promises herein
contained and intending to be legally bound hereby, the parties agree as
follows:
1. Simultaneously with a "Change in Control of the Company", as that
term is defined herein (a "Change in Control"), (i) the term of the Employment
Agreement then in force between the Company and the Executive, without any
further action on the part of either party, shall be deemed to have been
extended for a term of three (3) years, commencing with the date of the Change
In Control, on the same terms and conditions as existed immediately prior to the
Change in Control (the "Extended Term") and (ii) the provisions of Section 10 of
the Employment Agreement, as such section may be amended or superseded following
the date hereof, by any similar provision relating to termination (other than as
provided by the terms of Section 5 of the Employment Agreement on the date
hereof), shall be null and void and unenforceable and inapplicable as to the
Executive.
2. During the Extended Term, the Executive may terminate his employment
at any time for "good reason". As used herein, the term "good reason" shall
mean:
1
<PAGE> 2
(i) A failure by the Company to comply with any material
provision of the Employment Agreement, which failure has not been cured within
ten (10) days after notice of noncompliance has been given by Executive to the
Company;
(ii) Without Executive's written consent, the assignment to
Executive of any duties inconsistent with Executive's duties, responsibilities
and status with the Company immediately prior to the Change in Control;
(iii) Any change in (a) Executive's reporting
responsibilities, title or office in effect immediately prior to the Change in
Control of the Company, or (b) a change in geographic location of where
Executive's position is based that would reasonably require a relocation of his
personal residence;
(iv) Any removal from or any failure to reelect Executive to
the highest ranking executive position in the Company except in connection with
a termination of employment pursuant to Section 5 of Executive's Employment
Agreement or voluntary resignation or refusal to stand for re-election by
Executive;
(v) Any reduction by the Company in Executive's annual salary
in effect immediately prior to a Change in Control or as the same may be
increased from time to time; or
(vi) Any material reduction in the benefits provided to
Executive under any bonus, benefit or compensation plan, life insurance plan,
health and accident plan or disability plan in which Executive is participating
at the time of a Change in Control of the Company.
3. For purposes of this Agreement, a "Change in Control" shall be
determined in the manner established at Paragraph 7 hereafter. A Change in
Control shall mean a Change in Control of a nature that would be required to be
reported in response to item 6(e) of Schedule 14A of Regulation 14A, as in
effect on the date hereof, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such a
Change in Control shall be deemed to have occurred if:
(a) Any "Person" or "group of Persons" (as such terms are
defined hereafter), except for Executive, any affiliate of Executive, or any
group of Persons of which Executive is a participant, any employee benefit plan
of the Company or any subsidiary of the Company, or any entity holding voting
securities of the Company for or pursuant to the terms of any such plan (a
"Benefit Plan" or the "Benefit Plans"), is or becomes the "beneficial owner" (as
such term is defined hereafter), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities;
(b) There occurs a contested proxy solicitation of the
Company's shareholders with respect to the election of directors that results in
the contesting party electing a majority of members of the Company's Board of
Directors;
(c) There occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another entity,
except to an entity controlled directly or indirectly by the Company, or a
merger, consolidation or other reorganization of the Company in
2
<PAGE> 3
which the Company is not the surviving entity, or a plan of liquidation or
dissolution of the Company other than pursuant to bankruptcy or insolvency laws
is adopted; or
(d) During any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's shareholders, of
each new director was approved by a vote of at least two-thirds of the directors
(inclusive of Executive) then still in office who were directors at the
beginning of the period.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to have occurred for purposes of this Agreement: (i) if a "Person" acquires or
becomes the beneficial owner of securities representing 20% or more of the
combined voting power of the Company's then outstanding securities pursuant to a
private placement transaction or underwritten public offering of the Company's
Common Stock where such issuance of securities by the Company is approved by a
vote of at least two-thirds of the directors inclusive of the Executive; (ii) if
a transaction identified in subparagraph 3(c) above occurs and is approved by a
vote of at least two-thirds of the directors inclusive of the Executive; (iii)
in the event of a sale, exchange, transfer or other disposition of substantially
all of the assets of the Company to, or a merger, consolidation or other
reorganization involving the Company and, the Executive, alone or with other
officers of the Company, or any entity in which the Executive (alone or with
other officers) has, directly or indirectly, at least a 25% equity or ownership
interest; or (iv) in a transaction which includes the Executive as a principal
and control person and is otherwise commonly referred to as a "management
leveraged buy-out". For the purposes of subparagraph 3(a), a "Person" shall not
be deemed the beneficial owner of securities representing 20% or more of the
combined voting power of the Company's then outstanding securities if that
"Person" is an underwriter who has acquired shares for resale in connection with
an underwritten public offering of such shares.
Subparagraph 3(a) above to the contrary notwithstanding, a Change in
Control shall not be deemed to have occurred if a Person (i) is, on the date
hereof, the beneficial owner of 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities solely as
the result of an acquisition by the Company or any subsidiary of the Company of
voting securities of the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such person to 20% or more of the combined voting power of the Company's then
outstanding securities, provided, however, that if a Person currently is or
becomes the beneficial owner of 20% or more of the combined voting power of the
Company's then outstanding securities by reason of shares (y) beneficially owned
on the date hereof, or (z) purchased by the Company or any subsidiary of the
Company and shall thereafter become the beneficial owner, directly or
indirectly, of any additional voting securities of the Company, then a Change in
Control shall be deemed to have occurred with respect to such Person under
subparagraph 3(a) above. Notwithstanding the foregoing, in no event shall a
Change of Control be deemed to occur under subparagraph 3(a) above with respect
to the Benefit Plans.
3
<PAGE> 4
For the purposes of this paragraph 3, the terms "Person,"
"group of Persons", "beneficial owner" and "beneficial ownership" shall have the
meanings ascribed thereto under Sections 13(d) and 14(d) and Rule 13d
promulgated under the Securities Exchange Act.
4. Any termination of Executive's employment by the Executive shall be
communicated by written notice of termination to the Company. For purposes of
this Agreement, a "notice of termination" shall mean a dated notice which shall
(i) set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment; and (ii) specify a
date of termination, which shall be not less than thirty nor more than ninety
(90) days after such notice of termination.
5. If during the Extended Term following a Change in Control, Executive
terminates his Employment for good reason as described in subparagraphs (i) to
(vi) of paragraph 2 hereof, or if Executive is terminated by the Company other
than pursuant to Section 5 of Executive's Employment Agreement, then, in lieu of
any further salary payments to Executive for periods subsequent to the date of
termination:
(a) The Company shall pay as a liquidated amount to Executive
within thirty (30) days of such termination, a lump sum cash payment which is
equal to the remainder of any further salary and ascertainable bonus payments
that would have become due to Executive during the remainder of the Extended
Term; calculating the amount of such salary based upon the Executive's current
gross salary (for federal income tax purposes) and ascertainable bonus based
upon the bonus that was received by Executive during the Company's most recently
completed fiscal year;
(b) All options held by Executive, to the extent not vested
pursuant to the terms of any plan or agreement governing such option, shall
become fully vested and exercisable;
(c) The Company shall continue to pay or make available to
Executive for a period of two (2) years after the date of termination, all
Company benefits including all health, disability and life insurance plans
provided by or through the Company, including those provided in the Employment
Agreement; and
(d) The Company, within sixty (60) days of Executive's date of
termination, shall (i) pay to Executive an additional amount sufficient to
satisfy all of Executive's current or prospective liability to any taxing
authority for excise taxes, penalties or any other taxes assessed in excess of
normal income taxes imposed on salaries, incurred by reason of all benefits
provided to Executive under this Agreement and (ii) cause the Company's
independent auditors to determine, within sixty (60) days, the amount to be paid
to Executive pursuant to subparagraph 5(a) above and this subparagraph 5(d),
providing a copy to Executive of the auditors' detailed determination.
6. The Executive shall not be required to mitigate the amount of any
payment provided for under this Agreement by asking for other employment and
none of these payments may be reduced by any future salary that Executive may
earn.
4
<PAGE> 5
7. A Change in Control shall be determined within the reasonable
discretion of the Executive who shall within 90 days of such determination
provide written notice (the "Notice") to the Company identifying the Change in
Control, and, if possible, providing reference to the Item or Items constituting
the Change in Control identified in subparagraphs 3(a)-3(d) above. The Company
shall have 15 days in which to respond in writing. This response shall indicate
whether or not the Company adopts or disputes the conclusions set forth within
the Notice, and if the Company disputes the Notice, the Company's response shall
indicate with specificity the basis and grounds for such objection. In the
absence of a timely response, the Company shall be deemed to have adopted the
conclusions set forth within the Notice. The conclusions of the Executive set
forth within the Notice shall be deemed conclusive evidence of a Change in
Control. The Company shall bear the burden of proof of establishing that a
Change in Control has not occurred.
8. The Executive is aware that upon Notice of the occurrence of a
Change in Control, the Board of Directors or a shareholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute litigation seeking to have this Agreement
declared unenforceable, or may take or attempt to take other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement could be frustrated. It is the intent of the
Company that Executive not be required to incur the expenses associated with the
enforcement of any rights under this Agreement by litigation or other legal
action, nor be bound to negotiate any settlement of any rights hereunder,
because the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to Executive
hereunder. Accordingly, if following a Notice relative to a Change in Control it
should appear to Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from Executive the benefits intended to be provided to Executive, then
the Company irrevocably authorizes Executive to retain counsel of Executive's
choice, at the expense of the Company as provided in this paragraph 8, to
represent Executive in connection with the initiation or defense of any
litigation or other legal action, whether such action is by or against the
Company or any director, officer, shareholder, or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to Executive entering into an attorney-client relationship
with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The
reasonable fees and expenses of counsel selected from time to time by Executive
as hereinabove provided shall be paid in advance or reimbursed to Executive, at
the election of the Executive, by the Company on a regular, periodic basis upon
presentation by Executive of a statement or statements or customary retainer
letter prepared by such counsel in accordance with its customary practices. Any
legal expenses incurred by the Company by reason of any dispute between the
parties as to enforceability of or the terms contained in this Agreement,
notwithstanding the outcome of any such dispute, shall be the sole
responsibility of the Company, and the Company shall not take any action to seek
reimbursement from Executive for such expense.
5
<PAGE> 6
9. This Agreement is the entire agreement between the parties
concerning the subject matter hereof and supersedes all prior or contemporaneous
negotiations or understandings relating hereto. This Agreement may be altered or
amended only by a writing signed by the parties hereto.
10. This Agreement shall be construed in accordance with the laws of
Arizona and shall be binding upon and inure to the benefit of the parties
hereto, their heirs, administrators, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this amendment the
day and year first above written.
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
------------------------------
ATTEST: /s/ John Iorillo
--------------------------
/s/ David S. Olson
---------------------------------
DAVID S. OLSON
6
<PAGE> 1
EXHIBIT 10.27
Certificate No. 1998-3
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION."
OPTION TO PURCHASE COMMON STOCK
OF
OSAGE SYSTEMS GROUP, INC.
Void after December 19, 2003
This certifies that, for value received, Jack Leadbeater, ("Holder"),
is entitled, subject to the terms set forth below, to purchase from Osage
Systems Group, Inc. (the "Company"), a Delaware corporation, shares of the
Common Stock of the Company (the "Shares"), as constituted on the date hereof
(the "Option Issue Date"), with the Notice of Exercise attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United
States, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of the shares are subject to adjustment as provided
below.
1. TERM OF OPTION. Subject to compliance with the vesting
provisions identified at Paragraph 2.3 hereafter, this Option shall be
exercisable, in whole or in part, during the term commencing on the Option Issue
Date and ending at 5:00 p.m. on December 19, 2003, and shall be void thereafter.
2. EXERCISE PRICE, NUMBER OF SHARES AND VESTING PROVISIONS.
2.1 EXERCISE PRICE. The Exercise Price at which this Option,
or portion thereof, may be exercised shall be fixed at $4.50 per share, subject,
however, to adjustment pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of the Company's
Common Stock, $.01 par value per share ("Common Stock") which may be purchased
pursuant to this Option shall be 664,000 shares, subject, however, to adjustment
pursuant to Section 11 hereof.
2.4. DEATH OF HOLDER AND TERMINATION.
(a) If the Holder shall die while in the employ of the
Company, his estate, personal representatives, or beneficiary shall have the
right, subject to the provisions of this Paragraph 2 hereof, to exercise the
Option (only to the extent that the Holder would have been entitled to do so as
of the date of his death) at any time within twelve (12) months from the date of
his death.
(b) In the event: (i) Holder's employment by the Company
is terminated for "cause" (as "cause" is defined under paragraph 5(c) of
Holder's Employment
<PAGE> 2
Agreement with the Company dated December 22, 1997, or any amendment thereto);
or (ii) Holder voluntarily terminates his employment with the Company for other
than "good reason" (as "good reason" is defined under paragraph 2 of Holder's
Termination Benefits Agreement with the Company effective June 12, 1998, or any
amendment thereto), Holder shall have 30 days in which to exercise the Option
(only to the extent that the Holder would have been entitled to do so as of the
date of his termination) and thereafter, Holder's right in and to the Option
shall lapse and terminate.
3. EXERCISE OF OPTION.
(a) The Exercise Price shall either be payable in cash or by
bank or certified check; or by cashless exercise through: (i) the delivery by
the Holder to the Company of shares of the Company's Common Stock for which
Holder is the record and beneficial owner, which have been held for at least six
(6) months, or (ii) by delivering to the Company a notice of exercise together
with an irrevocable direction to a broker-dealer registered under the Securities
Exchange Act of 1934, to sell a sufficient portion of the Shares and deliver the
sales proceeds directly to the Company to pay the Exercise Price; or (iii) by
any combination thereof. If shares of common stock of the Company are tendered
as payment of the Exercise Price, the value of such shares shall be their
"market value" as of the trading date immediately preceding the date of
exercise. The "market value" shall be:
(i) If the Company's common stock is traded in the
over-the-counter market and not on any national securities exchange nor in the
NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
or if not so reported, the average of the closing bid and asked prices for a
share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's common stock is traded on a
national securities exchange or in the NASDAQ Reporting System, the market value
shall be either (1) the simple average of the high and low prices at which a
share of the Company's common stock traded, as quoted on the NASDAQ-NMS or its
other principal exchange, or (2) the price of the last sale of a share of common
stock as similarly quoted, whichever is higher, and rounding out such figure to
the next higher multiple of 12.5 cents (unless the figure is already a multiple
of 12.5 cents).
If such tender would result in an issuance of a whole number of shares and a
fractional share of Common Stock, the value of such fractional share shall be
paid to the Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are
exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Option and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company).
2
<PAGE> 3
(c) This Option shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Option
is exercised in part, the Company at its expense will execute and deliver a new
Option of like tenor exercisable for the number of shares for which this Option
may then be exercised.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. REPLACEMENT OF OPTION. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. RIGHTS OF STOCKHOLDER. Except as otherwise contemplated herein, the
Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised as
provided herein.
7. TRANSFER OF OPTION.
7.1. NON-TRANSFERABILITY. Prior to vesting in accordance with
paragraph 2 herein, the Option shall not be assigned, transferred, pledged or
hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
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<PAGE> 4
7.2. EXCHANGE OF OPTION UPON A TRANSFER. On surrender of this
Option for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new Option or Options of like tenor, in the
name of the Holder or as the Holder (on payment by the Holder of any applicable
transfer taxes) may direct, of the number of shares issuable upon exercise
hereof.
7.3. COMPLIANCE WITH SECURITIES LAWS; RESTRICTIONS ON
TRANSFERS.
(a) The Holder of this Option, by acceptance hereof,
acknowledges that this Option and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment (unless such shares are subject to resale
pursuant to an effective prospectus), and that the Holder will not offer, sell
or otherwise dispose of this Option or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Option, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment (unless such shares are subject to resale pursuant
to an effective prospectus), and not with a view toward distribution or resale.
(b) Neither this Option nor any share of Common Stock
issued upon exercise of this Option may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified under applicable state securities laws relating to
the offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
(d) Holder recognizes that investing in the Option and the
Common Stock involves a high degree of risk, and Holder is in a financial
position to hold the Option and the
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<PAGE> 5
Common Stock indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Option and the Common Stock. The Holder
is a sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Holder has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, has been given full and complete access to information concerning
the Company, and has utilized such access to its satisfaction for the purpose of
obtaining information or verifying information and has had the opportunity to
inspect the Company's operation. Holder has had the opportunity to ask questions
of, and receive answers from the management of the Company (and any person
acting on its behalf) concerning the Option and the Common Stock and the
agreements and transactions contemplated hereby, and to obtain any additional
information as Holder may have requested in making its investment decision.
(e) Holder acknowledges and represents: (i) that he has been
afforded the opportunity to review and is familiar with the quarterly, annual
and periodic reports of the Company and has based his decision to invest solely
on the information contained therein and has not been furnished with any other
literature, prospectus or other information except as included in such reports;
(ii) he is at least 21 years of age; (iii) he has adequate means of providing
for his current needs and personal contingencies; (iv) he has no need for
liquidity for his investment in the Option or Common Stock; (v) he maintains his
domicile and is not a transient or temporary resident at the address on the
books and records of the Company; (vi) all of his investments and commitments to
non-liquid assets and similar investments are, after his acquisition of the
Option and Common Stock, will be reasonable in relation to his net worth and
current needs; (vii) he understands that no federal or state agency has approved
or disapproved the Option or Common Stock or made any finding or determination
as to the fairness of the Option and Common Stock for investment; and (viii) he
recognizes that the Common Stock is presently eligible for trading on the
over-the-counter market, and that the Company has made no representations,
warranties, or assurances as to the future trading value of the Common Stock,
whether a public market will continue to exist for the resale of the Common
Stock, or whether the Common Stock can be sold at a price reflective of past
trading history at any time in the future.
8. RESERVATION AND ISSUANCE OF STOCK; PAYMENT OF TAXES.
(a) The Company covenants that during the term that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
shares upon the exercise of this Option, and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.
(b) The Company further covenants that all shares of Common
Stock issuable upon the due exercise of this Option will be free and clear from
all taxes or liens, charges and security interests created by the Company with
respect to the issuance thereof, however, the Company shall not be obligated or
liable for the payment of any taxes, liens or charges of Holder, or any other
party contemplated by paragraph 7, incurred in connection with the issuance of
this Option or the Common Stock upon the due exercise of this Option. The
Company agrees that its
5
<PAGE> 6
issuance of this Option shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the shares of Common Stock upon the exercise of this
Option. The Common Stock issuable upon the due exercise of this Option, will,
upon issuance in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have the
right to require the Optionee to remit to the Company an amount sufficient to
satisfy federal, state and local tax withholding requirements prior to the
delivery of any certificate for shares of Company Common Stock purchased
pursuant to the Option, if in the opinion of counsel to the Company such
withholding is required under applicable tax laws.
(d) An Optionee who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding requirements may pay
such amount (i) in cash; (ii) in the discretion of the Administrator, through
the delivery to the Company of previously-owned shares of Common Stock having an
aggregate Fair Market Value equal to the tax obligation provided that the
previously owned shares delivered in satisfaction of the withholding obligations
must have been held by the Optionee for at least six (6) months; (iii) in the
discretion of the Administrator, through the withholding of shares of Common
Stock otherwise issuable to the Optionee in connection with the Option exercise;
or (iv) in the discretion of the Administrator, through a combination of the
procedures set forth in subsections (i), (ii) and (iii) of this Paragraph 8(d).
9. NOTICES.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this Option
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
Osage Systems Group, Inc.
1661 East Camelback Road
Suite 345
Phoenix, AZ 85016
and to the Holder:
6
<PAGE> 7
at the address of the Holder appearing on the books of the
Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. AMENDMENTS.
(a) Any term of this Option may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Option, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. ADJUSTMENTS. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time
while this Option, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of shares of Common Stock or other
securities or property (including cash) otherwise receivable upon such
reorganization, merger, consolidation or sale or transfer by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Option immediately prior to such reorganization, merger, consolidation or
sale or transfer. The foregoing provisions of this Section 11.1 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Option. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Option with respect to the rights and interests of the
Holder after the transaction, to the end that
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<PAGE> 8
the provisions of this Option shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Option.
11.2. RECLASSIFICATION. If the Company, at any time while this
Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Option, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Option exist, into a different number of
securities of the same class, the Exercise Price and the number of shares
issuable upon exercise of this Option shall be proportionately adjusted.
11.4. ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES
OR PROPERTY. If while this Option, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which purchase rights under
this Option exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible Stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Option shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Option, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Option on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock, other
securities or property available by this Option as aforesaid during such period.
11.5 The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 11 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holders of this Option against impairment.
12. SEVERABILITY. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this
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<PAGE> 9
Option shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. GOVERNING LAW. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Option and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
14. JURISDICTION. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the City in which the headquarters of the Company is located,
which as of the date hereof is San Diego, California. Service of process on the
Company or the Holder in any action arising out of or relating to this Option
shall be effective if mailed to such party at the address listed in Section 9
hereof.
15. ARBITRATION. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in the City in which the headquarters of the Company is located, which as of the
date hereof is Phoenix, Arizona. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
16. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's certificate of incorporation or by-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
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<PAGE> 10
17. SUCCESSORS AND ASSIGNS. This Option shall inure to the benefit of
and be binding on the respective successors, assigns and legal representatives
of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
Dated: June 12, 1998
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
----------------------------------
Jack R. Leadbeater, Chief Executive Officer
Accepted and Acknowledged
/s/ Jack R. Leadbeater
- -------------------------
Jack R. Leadbeater
10
<PAGE> 11
NOTICE OF EXERCISE
TO: [ ]
(1) The undersigned hereby elects to purchase shares of Common
Stock of Osage Systems Group, Inc. pursuant to the terms of the attached Option,
and tenders herewith payment of the purchase price for such shares in full in
the following manner (please check one of the following choices):
/ / In Cash
/ / Cashless exercise through a broker; or
/ / Delivery of previously owned Shares.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
11
<PAGE> 1
EXHIBIT 10.28
Certificate No. 1998-4
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION."
OPTION TO PURCHASE COMMON STOCK
OF
OSAGE SYSTEMS GROUP, INC.
Void after December 19, 2003
This certifies that, for value received, David S. Olson, ("Holder"), is
entitled, subject to the terms set forth below, to purchase from Osage Systems
Group, Inc. (the "Company"), a Delaware corporation, shares of the Common Stock
of the Company (the "Shares"), as constituted on the date hereof (the "Option
Issue Date"), with the Notice of Exercise attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of the shares are subject to adjustment as provided below.
1. TERM OF OPTION. Subject to compliance with the vesting
provisions identified at Paragraph 2.3 hereafter, this Option shall be
exercisable, in whole or in part, during the term commencing on the Option Issue
Date and ending at 5:00 p.m. on December 19, 2003, and shall be void thereafter.
2. EXERCISE PRICE, NUMBER OF SHARES AND VESTING PROVISIONS.
2.1 EXERCISE PRICE. The Exercise Price at which this
Option, or portion thereof, may be exercised shall be fixed at $4.50 per share,
subject, however, to adjustment pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of the
Company's Common Stock, $.01 par value per share ("Common Stock") which may be
purchased pursuant to this Option shall be 664,000 shares, subject, however, to
adjustment pursuant to Section 11 hereof.
2.4. DEATH OF HOLDER AND TERMINATION.
(a) If the Holder shall die while in the employ
of the Company, his estate, personal representatives, or beneficiary shall have
the right, subject to the provisions of this Paragraph 2 hereof, to exercise the
Option (only to the extent that the Holder would have been entitled to do so as
of the date of his death) at any time within twelve (12) months from the date of
his death.
(b) In the event: (i) Holder's employment by the
Company is terminated for "cause" (as "cause" is defined under paragraph 5(c) of
Holder's Employment
<PAGE> 2
Agreement with the Company dated December 22, 1997, or any amendment thereto);
or (ii) Holder voluntarily terminates his employment with the Company for other
than "good reason" (as "good reason" is defined under paragraph 2 of Holder's
Termination Benefits Agreement with the Company effective June 12, 1998, or any
amendment thereto), Holder shall have 30 days in which to exercise the Option
(only to the extent that the Holder would have been entitled to do so as of the
date of his termination) and thereafter, Holder's right in and to the Option
shall lapse and terminate.
3. EXERCISE OF OPTION.
(a) The Exercise Price shall either be payable in cash
or by bank or certified check; or by cashless exercise through: (i) the delivery
by the Holder to the Company of shares of the Company's Common Stock for which
Holder is the record and beneficial owner, which have been held for at least six
(6) months, or (ii) by delivering to the Company a notice of exercise together
with an irrevocable direction to a broker-dealer registered under the Securities
Exchange Act of 1934, to sell a sufficient portion of the Shares and deliver the
sales proceeds directly to the Company to pay the Exercise Price; or (iii) by
any combination thereof. If shares of common stock of the Company are tendered
as payment of the Exercise Price, the value of such shares shall be their
"market value" as of the trading date immediately preceding the date of
exercise. The "market value" shall be:
(i) If the Company's common stock is traded in
the over-the-counter market and not on any national securities exchange nor in
the NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
or if not so reported, the average of the closing bid and asked prices for a
share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's common stock is traded on a
national securities exchange or in the NASDAQ Reporting System, the market value
shall be either (1) the simple average of the high and low prices at which a
share of the Company's common stock traded, as quoted on the NASDAQ-NMS or its
other principal exchange, or (2) the price of the last sale of a share of common
stock as similarly quoted, whichever is higher, and rounding out such figure to
the next higher multiple of 12.5 cents (unless the figure is already a multiple
of 12.5 cents).
If such tender would result in an issuance of a whole number of shares and a
fractional share of Common Stock, the value of such fractional share shall be
paid to the Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are
exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Option and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company).
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<PAGE> 3
(c) This Option shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Option
is exercised in part, the Company at its expense will execute and deliver a new
Option of like tenor exercisable for the number of shares for which this Option
may then be exercised.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. REPLACEMENT OF OPTION. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. RIGHTS OF STOCKHOLDER. Except as otherwise contemplated
herein, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Option shall have been
exercised as provided herein.
7. TRANSFER OF OPTION.
7.1. NON-TRANSFERABILITY. Prior to vesting in accordance
with paragraph 2 herein, the Option shall not be assigned, transferred, pledged
or hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
3
<PAGE> 4
7.2. EXCHANGE OF OPTION UPON A TRANSFER. On surrender of
this Option for exchange, properly endorsed, the Company at its expense shall
issue to or on the order of the Holder a new Option or Options of like tenor, in
the name of the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, of the number of shares issuable upon
exercise hereof.
7.3. COMPLIANCE WITH SECURITIES LAWS; RESTRICTIONS ON
TRANSFERS.
(a) The Holder of this Option, by acceptance
hereof, acknowledges that this Option and the Shares to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment (unless such shares are subject
to resale pursuant to an effective prospectus), and that the Holder will not
offer, sell or otherwise dispose of this Option or any Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of applicable federal and state securities laws. Upon exercise of this Option,
the Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment (unless such shares are subject to resale pursuant
to an effective prospectus), and not with a view toward distribution or resale.
(b) Neither this Option nor any share of Common
Stock issued upon exercise of this Option may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified under applicable state securities laws relating to
the offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall
be stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
(d) Holder recognizes that investing in the Option and
the Common Stock involves a high degree of risk, and Holder is in a financial
position to hold the Option and the
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<PAGE> 5
Common Stock indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Option and the Common Stock. The Holder
is a sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Holder has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, has been given full and complete access to information concerning
the Company, and has utilized such access to its satisfaction for the purpose of
obtaining information or verifying information and has had the opportunity to
inspect the Company's operation. Holder has had the opportunity to ask questions
of, and receive answers from the management of the Company (and any person
acting on its behalf) concerning the Option and the Common Stock and the
agreements and transactions contemplated hereby, and to obtain any additional
information as Holder may have requested in making its investment decision.
(e) Holder acknowledges and represents: (i) that he has
been afforded the opportunity to review and is familiar with the quarterly,
annual and periodic reports of the Company and has based his decision to invest
solely on the information contained therein and has not been furnished with any
other literature, prospectus or other information except as included in such
reports; (ii) he is at least 21 years of age; (iii) he has adequate means of
providing for his current needs and personal contingencies; (iv) he has no need
for liquidity for his investment in the Option or Common Stock; (v) he maintains
his domicile and is not a transient or temporary resident at the address on the
books and records of the Company; (vi) all of his investments and commitments to
non-liquid assets and similar investments are, after his acquisition of the
Option and Common Stock, will be reasonable in relation to his net worth and
current needs; (vii) he understands that no federal or state agency has approved
or disapproved the Option or Common Stock or made any finding or determination
as to the fairness of the Option and Common Stock for investment; and (viii) he
recognizes that the Common Stock is presently eligible for trading on the
over-the-counter market, and that the Company has made no representations,
warranties, or assurances as to the future trading value of the Common Stock,
whether a public market will continue to exist for the resale of the Common
Stock, or whether the Common Stock can be sold at a price reflective of past
trading history at any time in the future.
8. RESERVATION AND ISSUANCE OF STOCK; PAYMENT OF TAXES.
(a) The Company covenants that during the term that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
shares upon the exercise of this Option, and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.
(b) The Company further covenants that all shares of
Common Stock issuable upon the due exercise of this Option will be free and
clear from all taxes or liens, charges and security interests created by the
Company with respect to the issuance thereof, however, the Company shall not be
obligated or liable for the payment of any taxes, liens or charges of Holder, or
any other party contemplated by paragraph 7, incurred in connection with the
issuance of this Option or the Common Stock upon the due exercise of this
Option. The Company agrees that its
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<PAGE> 6
issuance of this Option shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the shares of Common Stock upon the exercise of this
Option. The Common Stock issuable upon the due exercise of this Option, will,
upon issuance in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have
the right to require the Optionee to remit to the Company an amount sufficient
to satisfy federal, state and local tax withholding requirements prior to the
delivery of any certificate for shares of Company Common Stock purchased
pursuant to the Option, if in the opinion of counsel to the Company such
withholding is required under applicable tax laws.
(d) An Optionee who is obligated to pay the Company an
amount required to be withheld under applicable tax withholding requirements may
pay such amount (i) in cash; (ii) in the discretion of the Administrator,
through the delivery to the Company of previously-owned shares of Common Stock
having an aggregate Fair Market Value equal to the tax obligation provided that
the previously owned shares delivered in satisfaction of the withholding
obligations must have been held by the Optionee for at least six (6) months;
(iii) in the discretion of the Administrator, through the withholding of shares
of Common Stock otherwise issuable to the Optionee in connection with the Option
exercise; or (iv) in the discretion of the Administrator, through a combination
of the procedures set forth in subsections (i), (ii) and (iii) of this Paragraph
8(d).
9. NOTICES.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this
Option shall be deemed to have been given, (i) in the case of personal delivery,
on the date of such delivery and (ii) in the case of mailing, on the third
business day following the date of such mailing, addressed as follows:
If to the Company:
Osage Systems Group, Inc.
1661 East Camelback Road
Suite 345
Phoenix, AZ 85016
and to the Holder:
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<PAGE> 7
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. AMENDMENTS.
(a) Any term of this Option may be amended with the
written consent of the Company and the Holder. Any amendment effected in
accordance with this Section 10 shall be binding upon the Holder, each future
holder and the Company.
(b) No waivers of, or exceptions to, any term, condition
or provision of this Option, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
11. ADJUSTMENTS. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time while this Option, or any portion thereof, is outstanding and unexpired
there shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of shares of Common Stock or other
securities or property (including cash) otherwise receivable upon such
reorganization, merger, consolidation or sale or transfer by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Option immediately prior to such reorganization, merger, consolidation or
sale or transfer. The foregoing provisions of this Section 11.1 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Option. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Option with respect to the rights and interests of the
Holder after the transaction, to the end that
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<PAGE> 8
the provisions of this Option shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Option.
11.2. RECLASSIFICATION. If the Company, at any time while
this Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Option, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Option exist, into a different number of
securities of the same class, the Exercise Price and the number of shares
issuable upon exercise of this Option shall be proportionately adjusted.
11.4. ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER
SECURITIES OR PROPERTY. If while this Option, or any portion hereof, remains
outstanding and unexpired the holders of the securities as to which purchase
rights under this Option exist at the time shall have received, or, on or after
the record date fixed for the determination of eligible Stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
or other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Option shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Option, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Option on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock, other
securities or property available by this Option as aforesaid during such period.
11.5 The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Option against impairment.
12. SEVERABILITY. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this
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<PAGE> 9
Option shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, interpretation and enforceability of this Option and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
14. JURISDICTION. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the City in which the headquarters of the Company is located,
which as of the date hereof is San Diego, California. Service of process on the
Company or the Holder in any action arising out of or relating to this Option
shall be effective if mailed to such party at the address listed in Section 9
hereof.
15. ARBITRATION. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in the City in which the headquarters of the Company is located, which as of the
date hereof is Phoenix, Arizona. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
16. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's certificate of incorporation or by-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
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<PAGE> 10
17. SUCCESSORS AND ASSIGNS. This Option shall inure to the benefit
of and be binding on the respective successors, assigns and legal
representatives of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
Dated: June 12, 1998
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
---------------------------------------
Jack R. Leadbeater, Chief Executive Officer
Accepted and Acknowledged
/s/ David S. Olson
- -------------------------
David S. Olson
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<PAGE> 11
NOTICE OF EXERCISE
TO: [ ]
(1) The undersigned hereby elects to purchase shares of
Common Stock of Osage Systems Group, Inc. pursuant to the terms of the attached
Option, and tenders herewith payment of the purchase price for such shares in
full in the following manner (please check one of the following choices):
/ / In Cash
/ / Cashless exercise through a broker; or
/ / Delivery of previously owned Shares.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
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<PAGE> 1
EXHIBIT 10.29
Certificate No. 1998-9
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION."
OPTION TO PURCHASE COMMON STOCK
OF
OSAGE SYSTEMS GROUP, INC.
Void after December 19, 2003
This certifies that, for value received, John Iorillo, ("Holder"), is
entitled, subject to the terms set forth below, to purchase from Osage Systems
Group, Inc. (the "Company"), a Delaware corporation, shares of the Common Stock
of the Company (the "Shares"), as constituted on the date hereof (the "Option
Issue Date"), with the Notice of Exercise attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of the shares are subject to adjustment as provided below.
1. TERM OF OPTION. Subject to compliance with the vesting
provisions identified at Paragraph 2.3 hereafter, this Option shall be
exercisable, in whole or in part, during the term commencing on the Option Issue
Date and ending at 5:00 p.m. on December 19, 2003, and shall be void thereafter.
2. EXERCISE PRICE, NUMBER OF SHARES AND VESTING PROVISIONS.
2.1 EXERCISE PRICE. The Exercise Price at which this
Option, or portion thereof, may be exercised shall be fixed at $4.50 per share,
subject, however, to adjustment pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of the
Company's Common Stock, $.01 par value per share ("Common Stock") which may be
purchased pursuant to this Option shall be 50,000 shares, subject, however, to
adjustment pursuant to Section 11 hereof.
2.4. DEATH OF HOLDER AND TERMINATION.
(a) If the Holder shall die while in the employ
of the Company, his estate, personal representatives, or beneficiary shall have
the right, subject to the provisions of this Paragraph 2 hereof, to exercise the
Option (only to the extent that the Holder would have been entitled to do so as
of the date of his death) at any time within twelve (12) months from the date of
his death.
<PAGE> 2
(b) In the event Holder's employment by the
Company is terminated or Holder voluntarily terminates his employment with the
Company, Holder shall have 30 days in which to exercise the Option (only to the
extent that the Holder would have been entitled to do so as of the date of his
termination) and thereafter, Holder's right in and to the Option shall lapse and
terminate.
3. EXERCISE OF OPTION.
(a) The Exercise Price shall either be payable in cash or
by bank or certified check; or by cashless exercise through: (i) the delivery by
the Holder to the Company of shares of the Company's Common Stock for which
Holder is the record and beneficial owner, which have been held for at least six
(6) months, or (ii) by delivering to the Company a notice of exercise together
with an irrevocable direction to a broker-dealer registered under the Securities
Exchange Act of 1934, to sell a sufficient portion of the Shares and deliver the
sales proceeds directly to the Company to pay the Exercise Price; or (iii) by
any combination thereof. If shares of common stock of the Company are tendered
as payment of the Exercise Price, the value of such shares shall be their
"market value" as of the trading date immediately preceding the date of
exercise. The "market value" shall be:
(i) If the Company's common stock is traded in
the over-the-counter market and not on any national securities exchange nor in
the NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
or if not so reported, the average of the closing bid and asked prices for a
share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's common stock is traded on a
national securities exchange or in the NASDAQ Reporting System, the market value
shall be either (1) the simple average of the high and low prices at which a
share of the Company's common stock traded, as quoted on the NASDAQ-NMS or its
other principal exchange, or (2) the price of the last sale of a share of common
stock as similarly quoted, whichever is higher, and rounding out such figure to
the next higher multiple of 12.5 cents (unless the figure is already a multiple
of 12.5 cents).
If such tender would result in an issuance of a whole number of shares and a
fractional share of Common Stock, the value of such fractional share shall be
paid to the Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are
exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Option and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company).
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<PAGE> 3
(c) This Option shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Option
is exercised in part, the Company at its expense will execute and deliver a new
Option of like tenor exercisable for the number of shares for which this Option
may then be exercised.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. REPLACEMENT OF OPTION. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. RIGHTS OF STOCKHOLDER. Except as otherwise contemplated
herein, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Option shall have been
exercised as provided herein.
7. TRANSFER OF OPTION.
7.1. NON-TRANSFERABILITY. Prior to vesting in accordance
with paragraph 2 herein, the Option shall not be assigned, transferred, pledged
or hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
3
<PAGE> 4
7.2. EXCHANGE OF OPTION UPON A TRANSFER. On surrender of
this Option for exchange, properly endorsed, the Company at its expense shall
issue to or on the order of the Holder a new Option or Options of like tenor, in
the name of the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, of the number of shares issuable upon
exercise hereof.
7.3. COMPLIANCE WITH SECURITIES LAWS; RESTRICTIONS ON
TRANSFERS.
(a) The Holder of this Option, by acceptance
hereof, acknowledges that this Option and the Shares to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment (unless such shares are subject
to resale pursuant to an effective prospectus), and that the Holder will not
offer, sell or otherwise dispose of this Option or any Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of applicable federal and state securities laws. Upon exercise of this Option,
the Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment (unless such shares are subject to resale pursuant
to an effective prospectus), and not with a view toward distribution or resale.
(b) Neither this Option nor any share of Common
Stock issued upon exercise of this Option may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified under applicable state securities laws relating to
the offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall
be stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
(d) Holder recognizes that investing in the Option and
the Common Stock involves a high degree of risk, and Holder is in a financial
position to hold the Option and the
4
<PAGE> 5
Common Stock indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Option and the Common Stock. The Holder
is a sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Holder has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, has been given full and complete access to information concerning
the Company, and has utilized such access to its satisfaction for the purpose of
obtaining information or verifying information and has had the opportunity to
inspect the Company's operation. Holder has had the opportunity to ask questions
of, and receive answers from the management of the Company (and any person
acting on its behalf) concerning the Option and the Common Stock and the
agreements and transactions contemplated hereby, and to obtain any additional
information as Holder may have requested in making its investment decision.
(e) Holder acknowledges and represents: (i) that he has
been afforded the opportunity to review and is familiar with the quarterly,
annual and periodic reports of the Company and has based his decision to invest
solely on the information contained therein and has not been furnished with any
other literature, prospectus or other information except as included in such
reports; (ii) he is at least 21 years of age; (iii) he has adequate means of
providing for his current needs and personal contingencies; (iv) he has no need
for liquidity for his investment in the Option or Common Stock; (v) he maintains
his domicile and is not a transient or temporary resident at the address on the
books and records of the Company; (vi) all of his investments and commitments to
non-liquid assets and similar investments are, after his acquisition of the
Option and Common Stock, will be reasonable in relation to his net worth and
current needs; (vii) he understands that no federal or state agency has approved
or disapproved the Option or Common Stock or made any finding or determination
as to the fairness of the Option and Common Stock for investment; and (viii) he
recognizes that the Common Stock is presently eligible for trading on the
over-the-counter market, and that the Company has made no representations,
warranties, or assurances as to the future trading value of the Common Stock,
whether a public market will continue to exist for the resale of the Common
Stock, or whether the Common Stock can be sold at a price reflective of past
trading history at any time in the future.
8. RESERVATION AND ISSUANCE OF STOCK; PAYMENT OF TAXES.
(a) The Company covenants that during the term that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
shares upon the exercise of this Option, and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.
(b) The Company further covenants that all shares of
Common Stock issuable upon the due exercise of this Option will be free and
clear from all taxes or liens, charges and security interests created by the
Company with respect to the issuance thereof, however, the Company shall not be
obligated or liable for the payment of any taxes, liens or charges of Holder, or
any other party contemplated by paragraph 7, incurred in connection with the
issuance of this Option or the Common Stock upon the due exercise of this
Option. The Company agrees that its
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<PAGE> 6
issuance of this Option shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the shares of Common Stock upon the exercise of this
Option. The Common Stock issuable upon the due exercise of this Option, will,
upon issuance in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have
the right to require the Optionee to remit to the Company an amount sufficient
to satisfy federal, state and local tax withholding requirements prior to the
delivery of any certificate for shares of Company Common Stock purchased
pursuant to the Option, if in the opinion of counsel to the Company such
withholding is required under applicable tax laws.
(d) An Optionee who is obligated to pay the Company an
amount required to be withheld under applicable tax withholding requirements may
pay such amount (i) in cash; (ii) in the discretion of the Administrator,
through the delivery to the Company of previously-owned shares of Common Stock
having an aggregate Fair Market Value equal to the tax obligation provided that
the previously owned shares delivered in satisfaction of the withholding
obligations must have been held by the Optionee for at least six (6) months;
(iii) in the discretion of the Administrator, through the withholding of shares
of Common Stock otherwise issuable to the Optionee in connection with the Option
exercise; or (iv) in the discretion of the Administrator, through a combination
of the procedures set forth in subsections (i), (ii) and (iii) of this Paragraph
8(d).
9. NOTICES.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this
Option shall be deemed to have been given, (i) in the case of personal delivery,
on the date of such delivery and (ii) in the case of mailing, on the third
business day following the date of such mailing, addressed as follows:
If to the Company:
Osage Systems Group, Inc.
1661 East Camelback Road
Suite 345
Phoenix, AZ 85016
and to the Holder:
6
<PAGE> 7
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. AMENDMENTS.
(a) Any term of this Option may be amended with the
written consent of the Company and the Holder. Any amendment effected in
accordance with this Section 10 shall be binding upon the Holder, each future
holder and the Company.
(b) No waivers of, or exceptions to, any term, condition
or provision of this Option, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
11. ADJUSTMENTS. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time while this Option, or any portion thereof, is outstanding and unexpired
there shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of shares of Common Stock or other
securities or property (including cash) otherwise receivable upon such
reorganization, merger, consolidation or sale or transfer by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Option immediately prior to such reorganization, merger, consolidation or
sale or transfer. The foregoing provisions of this Section 11.1 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Option. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Option with respect to the rights and interests of the
Holder after the transaction, to the end that
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<PAGE> 8
the provisions of this Option shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Option.
11.2. RECLASSIFICATION. If the Company, at any time while
this Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Option, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Option exist, into a different number of
securities of the same class, the Exercise Price and the number of shares
issuable upon exercise of this Option shall be proportionately adjusted.
11.4. ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER
SECURITIES OR PROPERTY. If while this Option, or any portion hereof, remains
outstanding and unexpired the holders of the securities as to which purchase
rights under this Option exist at the time shall have received, or, on or after
the record date fixed for the determination of eligible Stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
or other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Option shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Option, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Option on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock, other
securities or property available by this Option as aforesaid during such period.
11.5 The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Option against impairment.
12. SEVERABILITY. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this
8
<PAGE> 9
Option shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, interpretation and enforceability of this Option and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
14. JURISDICTION. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the City in which the headquarters of the Company is located,
which as of the date hereof is San Diego, California. Service of process on the
Company or the Holder in any action arising out of or relating to this Option
shall be effective if mailed to such party at the address listed in Section 9
hereof.
15. ARBITRATION. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in the City in which the headquarters of the Company is located, which as of the
date hereof is Phoenix, Arizona. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
16. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's certificate of incorporation or by-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
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<PAGE> 10
17. SUCCESSORS AND ASSIGNS. This Option shall inure to the benefit
of and be binding on the respective successors, assigns and legal
representatives of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
Dated: June 12, 1998
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
---------------------------------------
Jack R. Leadbeater, Chief Executive Officer
Accepted and Acknowledged
/S/ John Iorillo
- -------------------------
John Iorillo
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<PAGE> 11
NOTICE OF EXERCISE
TO: [ ]
(1) The undersigned hereby elects to purchase shares of
Common Stock of Osage Systems Group, Inc. pursuant to the terms of the attached
Option, and tenders herewith payment of the purchase price for such shares in
full in the following manner (please check one of the following choices):
/ / In Cash
/ / Cashless exercise through a broker; or
/ / Delivery of previously owned Shares.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
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<PAGE> 1
EXHIBIT 10.30
Certificate No. 1998-1
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION."
OPTION TO PURCHASE COMMON STOCK
OF
PACIFIC RIM ENTERTAINMENT, INC.
Void after January 1, 2002
This certifies that, for value received, John C. Iorillo ("Holder"), is
entitled, subject to the terms set forth below, to purchase from Pacific Rim
Entertainment, Inc. (the "Company"), a Delaware corporation, shares of the
Common Stock of the Company (the "Shares"), as constituted on the date hereof
(the "Option Issue Date"), with the Notice of Exercise attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United
States, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of the shares are subject to adjustment as provided
below.
1. TERM OF OPTION. Subject to compliance with the vesting
provisions identified at Paragraph 2.3 hereafter, this Option shall be
exercisable, in whole or in part, during the term commencing on the Option Issue
Date and ending at 5:00 p.m. on January 1, 2002, and shall be void thereafter.
2. EXERCISE PRICE, NUMBER OF SHARES AND VESTING PROVISIONS.
2.1 EXERCISE PRICE. The Exercise Price at which this
Option, or portion thereof, may be exercised shall be fixed $5.00 per share, as
adjusted pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of the
Company's Common Stock, $.01 par value per share ("Common Stock") which may be
purchased pursuant to this Option shall be 100,000 shares, as adjusted pursuant
to Section 11 hereof.
2.3 VESTING. The Options granted hereunder shall vest
upon the earlier of:
(i) January 1, 2001, provided Holder remains
continuously employed by the Company from the Option Issue Date through
January 1, 2001;
(ii) 50% of the Options, however, shall vest on
such earlier date that the Company's audited financial statements
reflect annual earnings for the preceding year of no less than $.20 per
share, provided that the Holder has remained continuously employed by
the Company from the Option Issue Date through the date of such
vesting; or
<PAGE> 2
(iii) 100% of the Options, however, shall vest on
such earlier date that the Company's audited financial statements
reflect annual earnings for the preceding year of no less than $.30 per
share, provided that the Holder has remained continuously employed by
the Company from the Option Issue Date through the date of such
vesting."
2.4. DEATH OF HOLDER AND TERMINATION.
(a) If the Holder shall die while in the employ
of the Company, his estate, personal representatives, or beneficiary shall have
the right, subject to the provisions of this Paragraph 2 hereof, to exercise the
Option (only to the extent that the Holder would have been entitled to do so as
of the date of his death) at any time within twelve (12) months from the date of
his death.
(b) In the event Holder's employment by the
Company is terminated or Holder voluntarily terminates his employment with the
Company, Holder shall have 30 days in which to exercise the Option (only to the
extent that the Holder would have been entitled to do so as of the date of his
termination) and thereafter, Holder's right in and to the Option shall lapse and
terminate.
3. EXERCISE OF OPTION.
(a) The Exercise Price shall either be payable in cash or
by bank or certified check; or by cashless exercise through the delivery by the
Holder to the Company of shares of the Company's Common Stock for which Holder
is the record and beneficial owner, or a withholding by the Company of shares of
Common Stock that Holder is otherwise entitled to receive upon exercise of the
Option or by any combination thereof. If shares of common stock of the Company
are tendered or withheld as payment of the Exercise Price, the value of such
shares shall be their "market value" as of the trading date immediately
preceding the date of exercise. The "market value" shall be:
(i) If the Company's common stock is traded in
the over-the-counter market and not on any national securities exchange nor in
the NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
or if not so reported, the average of the closing bid and asked prices for a
share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's common stock is traded on a
national securities exchange or in the NASDAQ Reporting System, the market value
shall be either (1) the simple average of the high and low prices at which a
share of the Company's common stock traded, as quoted on the NASDAQ-NMS or its
other principal exchange, or (2) the price of the last sale of a share of common
stock as similarly quoted, whichever is higher, and rounding out such figure to
the next higher multiple of 12.5 cents (unless the figure is already a multiple
of 12.5 cents).
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<PAGE> 3
If such tender would result in an issuance of a whole number of shares and a
fractional share of Common Stock, the value of such fractional share shall be
paid to the Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are
exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Option and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company).
(c) This Option shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Option
is exercised in part, the Company at its expense will execute and deliver a new
Option of like tenor exercisable for the number of shares for which this Option
may then be exercised.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. REPLACEMENT OF OPTION. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. RIGHTS OF STOCKHOLDER. Except as otherwise contemplated
herein, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Option shall have been
exercised as provided herein.
7. TRANSFER OF OPTION.
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<PAGE> 4
7.1. NON-TRANSFERABILITY. Prior to vesting in accordance
with paragraph 2 herein, the Option shall not be assigned, transferred, pledged
or hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
7.2. EXCHANGE OF OPTION UPON A TRANSFER. On surrender of
this Option for exchange, properly endorsed, the Company at its expense shall
issue to or on the order of the Holder a new Option or Options of like tenor, in
the name of the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, of the number of shares issuable upon
exercise hereof.
7.3. COMPLIANCE WITH SECURITIES LAWS; RESTRICTIONS ON
TRANSFERS.
(a) The Holder of this Option, by acceptance
hereof, acknowledges that this Option and the Shares to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment (unless such shares are subject
to resale pursuant to an effective prospectus), and that the Holder will not
offer, sell or otherwise dispose of this Option or any Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of applicable federal and state securities laws. Upon exercise of this Option,
the Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment (unless such shares are subject to resale pursuant
to an effective prospectus), and not with a view toward distribution or resale.
(b) Neither this Option nor any share of Common
Stock issued upon exercise of this Option may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), unless (i) such security has been registered for sale under the 1933 Act
and registered or qualified under applicable state securities laws relating to
the offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall
be stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
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<PAGE> 5
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
(d) Holder recognizes that investing in the Option and
the Common Stock involves a high degree of risk, and Holder is in a financial
position to hold the Option and the Common Stock indefinitely and is able to
bear the economic risk and withstand a complete loss of its investment in the
Option and the Common Stock. The Holder is a sophisticated investor and is
capable of evaluating the merits and risks of investing in the Company. The
Holder has had an opportunity to discuss the Company's business, management and
financial affairs with the Company's management, has been given full and
complete access to information concerning the Company, and has utilized such
access to its satisfaction for the purpose of obtaining information or verifying
information and has had the opportunity to inspect the Company's operation.
Holder has had the opportunity to ask questions of, and receive answers from the
management of the Company (and any person acting on its behalf) concerning the
Option and the Common Stock and the agreements and transactions contemplated
hereby, and to obtain any additional information as Holder may have requested in
making its investment decision.
(e) Holder acknowledges and represents: (i) that he has
been afforded the opportunity to review and is familiar with the quarterly,
annual and periodic reports of the Company and has based his decision to invest
solely on the information contained therein and has not been furnished with any
other literature, prospectus or other information except as included in such
reports; (ii) he is at least 21 years of age; (iii) he has adequate means of
providing for his current needs and personal contingencies; (iv) he has no need
for liquidity for his investment in the Option or Common Stock; (v) he maintains
his domicile and is not a transient or temporary resident at the address on the
books and records of the Company; (vi) all of his investments and commitments to
non-liquid assets and similar investments are, after his acquisition of the
Option and Common Stock, will be reasonable in relation to his net worth and
current needs; (vii) he understands that no federal or state agency has approved
or disapproved the Option or Common Stock or made any finding or determination
as to the fairness of the Option and Common Stock for investment; and (viii) he
recognizes that the Common Stock is presently eligible for trading on the
over-the-counter market, and that the Company has made no representations,
warranties, or assurances as to the future trading value of the Common Stock,
whether a public market will continue to exist for the resale of the Common
Stock, or whether the Common Stock can be sold at a price reflective of past
trading history at any time in the future.
5
<PAGE> 6
8. RESERVATION AND ISSUANCE OF STOCK.
(a) The Company covenants that during the term that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
shares upon the exercise of this Option, and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.
(b) The Company further covenants that all shares of
Common Stock issuable upon the due exercise of this Option will be free and
clear from all taxes or liens, charges and security interests created by the
Company with respect to the issuance thereof, however, the Company shall not be
obligated or liable for the payment of any taxes, liens or charges of Holder, or
any other party contemplated by paragraph 7, incurred in connection with the
issuance of this Option or the Common Stock upon the due exercise of this
Option. The Company agrees that its issuance of this Option shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares of
Common Stock upon the exercise of this Option. The Common Stock issuable upon
the due exercise of this Option, will, upon issuance in accordance with the
terms hereof, be duly authorized, validly issued, fully paid and non-assessable.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this
Option shall be deemed to have been given, (i) in the case of personal delivery,
on the date of such delivery and (ii) in the case of mailing, on the third
business day following the date of such mailing, addressed as follows:
If to the Company:
Pacific Rim Entertainment, Inc.
1661 East Camelback Road
Suite 345
Phoenix, AZ 85016
and to the Holder:
6
<PAGE> 7
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. AMENDMENTS.
(a) Any term of this Option may be amended with the
written consent of the Company and the Holder. Any amendment effected in
accordance with this Section 10 shall be binding upon the Holder, each future
holder and the Company.
(b) No waivers of, or exceptions to, any term, condition
or provision of this Option, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
11. ADJUSTMENTS. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time while this Option, or any portion thereof, is outstanding and unexpired
there shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of shares of Common Stock or other
securities or property (including cash) otherwise receivable upon such
reorganization, merger, consolidation or sale or transfer by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Option immediately prior to such reorganization, merger, consolidation or
sale or transfer. The foregoing provisions of this Section 11.1 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Option. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Option with respect to the rights and interests of the
Holder after the transaction, to the end that
7
<PAGE> 8
the provisions of this Option shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Option.
11.2. RECLASSIFICATION. If the Company, at any time while
this Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Option, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Option exist, into a different number of
securities of the same class, the Exercise Price and the number of shares
issuable upon exercise of this Option shall be proportionately adjusted.
11.4. ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER
SECURITIES OR PROPERTY. If while this Option, or any portion hereof, remains
outstanding and unexpired the holders of the securities as to which purchase
rights under this Option exist at the time shall have received, or, on or after
the record date fixed for the determination of eligible Stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
or other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Option shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Option, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Option on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock, other
securities or property available by this Option as aforesaid during such period.
11.5 The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Option against impairment.
12. SEVERABILITY. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this
8
<PAGE> 9
Option shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, interpretation and enforceability of this Option and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
14. JURISDICTION. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the City in which the headquarters of the Company is located,
which as of the date hereof is San Diego, California. Service of process on the
Company or the Holder in any action arising out of or relating to this Option
shall be effective if mailed to such party at the address listed in Section 9
hereof.
15. ARBITRATION. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in the City in which the headquarters of the Company is located, which as of the
date hereof is Phoenix, Arizona. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
16. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's certificate of incorporation or by-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
17. SUCCESSORS AND ASSIGNS. This Option shall inure to the benefit
of and be binding on the respective successors, assigns and legal
representatives of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
9
<PAGE> 10
Dated: January 1, 1998
PACIFIC RIM ENTERTAINMENT, INC.
By: /s/ Jack R. Leadbeater
-------------------------------------
Jack Leadbeater, Chief Executive Officer
Accepted and Acknowledged
OPTION HOLDER
By: /s/ John C. Iorillo
-------------------------------
John C. Iorillo
10
<PAGE> 11
NOTICE OF EXERCISE
TO: [ ]
(1) The undersigned hereby elects to purchase shares of
Common Stock of Pacific Rim Entertainment, Inc. pursuant to the terms of the
attached Option, and tenders herewith payment of the purchase price for such
shares in full.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
11
<PAGE> 1
EXHIBIT 10.31
AMENDMENT TO OPTION TO PURCHASE COMMON STOCK AGREEMENT
This Amendment to the Option to Purchase Common Stock of Osage Systems
Group, Inc. ("Amendment") is made effective as of the 12th day of June, 1998, by
and between Osage Systems Group, Inc., a Delaware corporation (the "Company"),
and John Iorillo ("Holder"). Capitalized terms used but not otherwise defined
herein shall have the meaning ascribed to them in the Option Agreement (as such
term is defined below).
W I T N E S S E T H :
WHEREAS, the Company and Holder have entered into that certain Option
to Purchase Common Stock of Osage Systems Group, Inc., dated January 1, 1998
(the "Option Agreement"); and
WHEREAS, Company and Holder wish to amend the Option Agreement to more
accurately reflect the intended economic benefit of the options in accordance
with Section 10 thereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound hereby, do
agree as follows:
1. Section 2 of the Option Agreement is amended and restated in its
entirety to read as follows:
"2. EXERCISE PRICE, NUMBER OF SHARES AND VESTING PROVISIONS.
2.1 EXERCISE PRICE. The Exercise Price at which this
Option, or portion thereof, may be exercised shall be $4.50 per share,
as adjusted pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of the
Company's Common Stock, $.01 par value per share ("Common Stock") which
may be purchased pursuant to this Option shall be 100,000 shares, as
adjusted pursuant to Section 11 hereof.
2.3 VESTING. The Options granted hereunder shall fully
vest upon the date hereof.
2. Except as otherwise set forth herein, the terms of the Option Agreement
shall remain in full force and effect.
3. This Amendment shall be construed in accordance with the laws of the
State of Delaware without giving effect to conflicts of law principles.
<PAGE> 2
4. This Amendment is made and entered into effective as of the date first
above written. This Amendment may be executed in one or more
counterparts, each of which shall be an original and which together
shall constitute one and the same document.
5. This Amendment constitutes the entire agreement between the parties
with respect to the subject matter hereof. This Amendment supersedes
any and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, Company and Holder have caused this Amendment to be
duly executed as of the day and year first above written.
Dated: June 12, 1998
OSAGE SYSTEMS GROUP, INC.
BY: /s/ Jack R. Leadbeater
----------------------------------------
Jack R. Leadbeater, Chief Executive Officer
Accepted and Acknowledged
/s/ John Iorillo
- -----------------------------
John Iorillo
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,249,070
<SECURITIES> 0
<RECEIVABLES> 9,731,577
<ALLOWANCES> 52,000
<INVENTORY> 578,600
<CURRENT-ASSETS> 12,521,080
<PP&E> 1,435,031
<DEPRECIATION> 710,382
<TOTAL-ASSETS> 26,218,406
<CURRENT-LIABILITIES> 10,505,956
<BONDS> 0
0
9,750
<COMMON> 86,821
<OTHER-SE> 14,798,496
<TOTAL-LIABILITY-AND-EQUITY> 26,218,406
<SALES> 18,407,608
<TOTAL-REVENUES> 18,407,603
<CGS> 15,146,745
<TOTAL-COSTS> 15,146,745
<OTHER-EXPENSES> 4,210,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,104
<INCOME-PRETAX> (923,097)
<INCOME-TAX> (324,000)
<INCOME-CONTINUING> (599,097)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (599,097)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
