<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ACCENT COLOR SCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CONNECTICUT 3577 06-1380314
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CONNECTICUT 06108
(860) 610-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
NORMAN L. MILLIARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACCENT COLOR SCIENCES, INC.
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CONNECTICUT 06108 (860) 610-4000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
<TABLE>
<CAPTION>
COPIES TO:
<S> <C>
WILLARD F. PINNEY, JR., ESQ. MARK H. BURNETT, ESQ.
MURTHA, CULLINA, RICHTER AND PINNEY TESTA, HURWITZ & THIBEAULT, LLP
CITYPLACE I HIGH STREET TOWER
185 ASYLUM STREET 125 HIGH STREET
HARTFORD, CONNECTICUT 06103-3469 BOSTON, MASSACHUSSETTS 02110
(860) 240-6000 (617) 248-7000
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, no par value ............. $37,950,000 $13,086.21
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
List of Photos/Images
Inside Front cover
- ------------------
1. Background Photo - Accent Color Sciences Truecolor 135
2. Image: Accent Color Sciences, Inc. Logo
3. Photo: Accent Color Truecolor 390 connected to IBM 3900
a) Caption: "The Accent Color Truecolor system integrated with the IBM
3900"
4. Photo: Accent Color Truecolor 135 connected to Xerox 4635
a) Caption: "The Accent Color Truecolor system integrated with the Xerox
4635"
5. Heading: "The Product"
a) Photo: Touchscreen control on system
b) Bullet: "Flexibility"
i) Caption: "Accent Color System handles a wide variety of paper stocks
and types"
c) Photo: Accent Color Printhead
d) Bullet: "Technology"
i) Caption: "Reliable ink jet printheads deliver colors to accent any
information"
e) Image: World map
f) Bullet: "International"
i) Caption: "Accent Color has entered into worldwide sales and service
agreements with IBM and Xerox"
6. Heading: "The Process"
a) Bullet: "Capabilities"
i) Caption: "High speed processors print variable data at rated speeds
and multiple colors in a single pass"
b) Photo: Printed circuit board
c) Bullet: "Color"
i) Caption: "Prints color from a large standard palette and matches
custom colors"
d) Image: Accent Color color palette
e) Bullet: "High Speed"
i) Caption: "Accent Color Truecolor System prints over 300 pages per
minute"
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (SUBJECT TO COMPLETION)
DATED OCTOBER , 1996
3,000,000 Shares
(LOGO)
ACCENT COLOR SCIENCES, INC.
COMMON STOCK
--------------
All of the 3,000,000 shares of Common Stock offered hereby are being sold by
Accent Color Sciences, Inc.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "ACLR."
--------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 OF THIS PROSPECTUS.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses, estimated to be $800,000, payable by the
Company.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 450,000
additional shares of Common Stock at the Price to Public less Underwriting
Discounts and Commissions to cover over-allotments, if any. If all such
additional shares are purchased, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
--------------
The Common Stock is being offered by the several Underwriters named herein
when, as and if received and accepted by them, and subject to their right to
reject orders in whole or in part and subject to certain other conditions. It
is expected that delivery of certificates for such shares will be made at the
offices of Cowen & Company, New York, New York on or about , 1996.
--------------
COWEN & COMPANY
JANNEY MONTGOMERY SCOTT INC.
, 1996
<PAGE>
(ART)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information in this Prospectus gives effect to (i) a 3-for-1
Common Stock split which was effected on October 8, 1996, (ii) the conversion
of all outstanding shares of Series A Convertible Voting Preferred Stock (the
"Series A Preferred Stock") of Accent Color Sciences, Inc. ("Accent Color" or
the "Company") into 1,362,312 shares of Common Stock as of the date of this
Prospectus and (iii) the conversion of the Company's outstanding 8.00%
Convertible Subordinated Debentures (the "Series III Debentures"), including
accrued interest thereon, into approximately 604,746 shares of Common Stock
upon the closing of this offering. Unless otherwise indicated, all information
contained in this Prospectus assumes no exercise of the Underwriters' over-
allotment option. An investment in the shares of Common Stock offered hereby
involves a high degree of risk. See "Risk Factors."
THE COMPANY
Accent Color designs, manufactures and sells innovative, high-speed, spot
color printing systems ("Truecolor Systems") for integration with digital,
high-speed, black-on-white printers and sells related consumables. Spot color
printing involves the use of color to enhance traditional black-on-white
documents by accenting critical information, such as a balance due on a billing
statement, or by printing graphics, such as a company logo. The Company
believes its Truecolor Systems are the first, and only, printers capable of
cost-effectively printing or highlighting variable data (text or graphics which
may vary from page to page) in multiple standard and custom colors with the
speed and functionality of existing high-speed (more than 80 pages per minute),
black-on-white printers. Truecolor Systems are designed to address what the
Company believes is a substantial, unfulfilled demand for spot color printing
in the production printing and production publishing segments of the digital
printing market. Accent Color's strategy is to rapidly penetrate these global
markets through strategic relationships with major original equipment
manufacturers ("OEMs"), including Xerox Corporation ("Xerox"), International
Business Machines Corporation ("IBM") and Oce Printing Systems USA, Inc.
("Oce").
Truecolor Systems are designed to print spot color in high-speed, high-volume
applications at a low incremental cost per page without diminishing the speed
or performance of the high-speed, black-on-white host printer or affecting the
end user's existing operational methods. Truecolor Systems are capable of
printing up to 310 pages per minute, simultaneously utilizing up to eight
different colors, including custom colors, to print or highlight fixed or
variable data. Truecolor Systems combine the Company's proprietary paper
handling technology with patented ink jet technology from Spectra, Inc.
("Spectra"). The Company holds an exclusive right to supply products which
include Spectra printheads to print color on the black-on-white output from
specified high-speed printers from Xerox, IBM, Oce and certain other parties
through the year 2002. In connection with their arrangements with the Company,
Xerox and IBM are adapting their existing high-speed, black-on-white printers
for integration with the Company's Truecolor Systems.
The Company intends to market its Truecolor Systems to OEMs of high-speed,
black-on-white printers. According to CAP Ventures, Inc. ("CAP Ventures"), a
printing industry market research firm, the 1995 year-end installed base of
digital, high-speed, black-on-white printers in the U.S. was approximately
22,400 and the installed base of these printers is projected to grow at a five-
year compounded annual growth rate ("CAGR") of approximately 11% to 37,100
systems by the year 2000. In addition, approximately 4,800 digital, high-speed,
black-on-white printers were sold in the U.S. in 1995. Revenue from new system
sales, supplies and service exceeded $3.6 billion in 1995 and is expected to
grow at a five-year CAGR of approximately 12% to $6.4 billion by the year 2000.
This growth is further driven by the number of pages printed per year which is
projected to grow at a five-year CAGR of approximately 13% by the year 2000.
3
<PAGE>
To facilitate access to its target markets, the Company has entered into
agreements with Xerox and IBM, and has entered into a memorandum of
understanding with Oce which the Company expects to result in an agreement
during late 1996. Xerox, IBM and Oce intend to market, sell and service
Truecolor Systems under their respective corporate logos and product
identifications. Accent Color expects to substantially reduce or eliminate the
cost and time required to develop and maintain a direct sales and service
organization or distribution channel of its own by using the existing sales and
distribution channels of Xerox, IBM and Oce. According to Dataquest, a market
research firm, Xerox (excluding its DocuTech systems), IBM and Oce accounted
for approximately 80% of the high-speed, black-on-white printing systems sold
in the U.S. during 1994 and 1995. In addition, according to Xerox, there are
over 10,000 DocuTech printers installed with which Truecolor Systems are
designed to be integrated. See "Business--Strategic Relationships."
The Company also sells consumables comprised of standard and custom color
wax-based inks, as well as spare parts used with Truecolor Systems. The Company
expects that consumables will generate recurring revenue which the Company
believes will increase as the installed base and usage of Truecolor Systems
increase. According to CAP Ventures, typical high-speed, black-on-white
printers servicing the production printing and production publishing market
segments produce approximately 1.7 million and 975,000 pages per month,
respectively.
The Company was incorporated in Connecticut in May 1993. The Company's
principal executive offices are located at 800 Connecticut Boulevard, East
Hartford, Connecticut 06108, and its telephone number is (860) 610-4000. The
Company's internet address is www.accentcolor.com. The information contained in
the Company's World Wide Web site should not be considered a part of this
Prospectus.
INTERIM FINANCING
On October 11, 1996, the Company sold an aggregate principal amount of $3.45
million of its 8.70% notes (the "Interim Notes"), together with warrants to
purchase 45,000 shares of Common Stock (the "Interim Financing"). The net
proceeds to the Company in the amount of approximately $2.8 million will be
used for working capital and general corporate purposes. The Interim Notes will
be fully repaid with a portion of the proceeds from this offering.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.............. 3,000,000 shares
Common Stock to be outstanding
after this offering.............. 9,686,898 shares(1)
Use of proceeds................... For (i) the repayment of the Interim Notes
and (ii) working capital and other general
corporate purposes, including the expansion
of the Company's manufacturing,
development, engineering and customer
support capabilities, the commercial
production of additional Truecolor Systems,
the further enhancement of the Company's
products and possible further debt
reduction.
Proposed Nasdaq National Market
symbol........................... ACLR
</TABLE>
- --------
(1) Excludes as of October 11, 1996 (i) 1,145,868 shares of Common Stock
issuable upon the exercise of outstanding warrants, with a weighted average
exercise price of $3.52 per share, all of which are currently exercisable,
(ii) 45,000 shares of Common Stock issuable upon the exercise of
outstanding warrants issued in connection with the Interim Financing
exercisable at the lesser of $10.00 per share or the initial public
offering price set forth on the cover page hereof and (iii) 1,293,600
shares of Common Stock issuable upon the exercise of stock options
outstanding under the Company's 1995 Stock Incentive Plan, with a weighted
average exercise price of $3.54 per share, of which options to purchase
398,750 shares are currently exercisable. See "Management--1995 Stock
Incentive Plan," "Description of Capital Stock," and Notes 5 and 6 of Notes
to Financial Statements.
5
<PAGE>
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
INCEPTION FOR THE FOR THE INCEPTION
(MAY 21, 1993) YEAR ENDED SIX MONTHS ENDED (MAY 21, 1993)
THROUGH DECEMBER 31, JUNE 30, THROUGH
DECEMBER 31, ---------------------- ---------------------- JUNE 30,
1993 1994 1995 1995 1996 1996
-------------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $ -- $ -- $ -- $ -- $ -- $ --
Costs and expenses:
Research and
development........... 19 805 3,051 1,137 3,473 7,347
Marketing, general and
administrative........ 26 239 757 262 1,491 2,514
Related party
administrative
expense(1)............ -- 98 326 144 -- 424
Interest expense, net.. -- 12 83 9 177 272
----------- ---------- ---------- ---------- ---------- ----------
Net loss................ $ (45) $ (1,154) $ (4,217) $ (1,553) $ (5,141) $ (10,557)
=========== ========== ========== ========== ========== ==========
Pro forma net loss per
common share(2)........ $ (.62) $ (.71)
========== ==========
Pro forma weighted
average common shares
outstanding(2)......... 6,628,312 7,037,986
========== ==========
OTHER DATA:
Number of prototype
units shipped.......... -- -- 3 -- 4 7
Units in backlog
(as of period end)(3).. -- -- -- -- 29 29
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------ ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $5,146 $ 7,901 $
Working capital............................. 3,734 3,857
Total assets................................ 8,958 11,958
Short-term debt............................. 402 3,279
Long-term debt, less current portion........ 4,360 4,360
Total shareholders' equity.................. 1,418 1,541
</TABLE>
- --------
(1) See Note 10 of Notes to Financial Statements for information concerning
related party transactions.
(2) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per common share.
(3) See "Business--Backlog."
(4) Gives pro forma effect to the Interim Financing completed on October 11,
1996.
(5) Pro forma as adjusted to give effect to (i) the conversion of all
outstanding shares of the Series A Preferred Stock into 1,362,312 shares of
Common Stock, (ii) the conversion of the Company's outstanding Series III
Debentures, including accrued interest thereon, into 604,746 shares of
Common Stock and (iii) the sale of 3,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share, less
estimated underwriting discounts and commissions and offering expenses, and
the application of the net proceeds for repayment of the Interim Notes. See
"Use of Proceeds" and "Capitalization."
----------------
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in "Risk
Factors."
Accent Color(TM) and Truecolor(TM) are trademarks of the Company. All other
trademarks or trade names referred to in this Prospectus are the property of
their respective owners.
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. This Prospectus contains certain forward-looking statements.
Actual results could differ materially from those projected in the forward-
looking statements as a result of certain of the risk factors set forth below
and elsewhere in this Prospectus. In addition to the other information in this
Prospectus, prospective investors should carefully consider the following risk
factors in evaluating an investment in the Company and its business before
purchasing any shares of Common Stock offered hereby.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES; UNCERTAINTY OF FUTURE FINANCIAL
RESULTS; AUDITORS' GOING CONCERN OPINION
The Company was formed in May 1993 and is a development stage company with a
limited operating history. The Company incurred net losses of $45,000,
$1,154,000, $4,217,000 and $5,141,000 for the period from inception to
December 31, 1993, the years ended December 31, 1994 and 1995 and the six
months ended June 30, 1996, respectively. These losses primarily were due to
the substantial research and development costs associated with the development
of Truecolor Systems, all of which costs were expensed as incurred. Through
June 30, 1996, no revenue had been recognized from the sale of its products.
As a result of these losses, as of June 30, 1996, the Company had an
accumulated deficit of $10,557,000 and total shareholders' equity of
$1,418,000. It is expected that quarterly net losses will continue through at
least the third quarter of 1997 and that the Company will incur a net loss for
1997. There can be no assurance that the Company will be profitable thereafter
or that profitability, if achieved, will be sustained. In order to support the
anticipated growth of its business, the Company expects to expand its
manufacturing and administrative capabilities, technical and other customer
support functions, and research and product development activities. The
anticipated increase in the Company's operating expenses caused by this
expansion could have a material adverse effect on the Company's operating
results if revenue does not increase at an equal or greater rate. Also, the
Company's expenses for these and other activities are based in significant
part on its expectations regarding future revenue and are fixed to a large
extent in the short term. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfalls.
The Company's independent accountants have included in their report an
explanatory paragraph relating to the Company's ability to continue as a going
concern. This explanatory paragraph includes the following language: "The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to Financial
Statements, the Company is a development stage company and has a net working
capital and shareholders' deficit due to recurring net losses which raises
substantial doubt about the Company's ability to continue as a going concern."
There can be no assurance regarding the Company's ability to continue as a
going concern. The report of the Company's independent accountants on the
Company's financial statements for the year ending December 31, 1996 may also
contain an explanatory paragraph relating to the Company's ability to continue
as a going concern. See "Potential Need for Additional Funding For Operating
and Capital Requirements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements.
UNCERTAINTY OF MARKET DEVELOPMENT; ACCEPTANCE OF ACCENT COLOR'S PRODUCTS
The digital, high-speed printing market has traditionally relied mainly on
black-on-white print. There can be no assurance that a market for high-speed,
variable data color printing will develop or achieve significant growth. The
failure of such market to develop or achieve significant growth would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's products are currently designed for the digital, high-speed
production printing and production publishing market segments. There can be no
assurance that the Company will be successful in developing or marketing its
existing or future products or that, if any such products achieve market
acceptance, such acceptance will be sustained. The Company also plans to
further enhance its products and is investing substantial capital and other
resources in the development of such enhancements. The Company plans to devote
7
<PAGE>
substantial resource to improve technology in the areas of ink jet printhead
width and higher print resolution. In addition, the Company's customers have
requested advanced paper handling functionality, particularly duplex printing
(the ability to print on both sides of a page). There can be no assurance that
the Company's Truecolor Systems or enhancements will be a preferable
alternative to existing products or that they will not be rendered obsolete or
noncompetitive by products offered by other companies. Any quality, durability
or reliability problems with the Company's products, regardless of
materiality, or any other actual or perceived problems with any Company
products, could have a material adverse effect on market acceptance of such
products. There can be no assurance that such problems or perceived problems
will not arise or that, even in the absence of such problems, the Company's
products will achieve market acceptance. A failure of any of the Company's
products to achieve market acceptance for any reason could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the announcement by the Company or its OEM customers
or competitors of new products and technologies could cause customers to defer
purchases of the Company's existing products, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business."
DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS; REVENUE CONCENTRATION
The Company anticipates that sales of its Truecolor Systems and consumables
to a limited number of customers will account for substantially all of the
Company's revenue. As of September 30, 1996, the Company had contracts with
only two customers, Xerox and IBM, and was negotiating a contract with Oce.
Generally, the Company's customers are required to provide non-binding
forecasts of future orders. There can be no assurance that these customers
will purchase a significant volume of the Company's products. A substantial
difference between forecast orders and actual orders by any one of its
customers, or the failure of its customers to purchase a significant volume of
the Company's products, could have a material adverse effect on the business,
financial condition and results of operations of the Company. There can be no
assurance that the Company's OEM customers, including Xerox, IBM and Oce will
not compete with the Company in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Marketing, Product Support, Service and Training."
DEPENDENCE ON THIRD PARTY MARKETING; DISTRIBUTION AND SUPPORT
A significant element of the Company's marketing strategy is to form
alliances with third parties for the marketing and distribution of its
products. To this end, the Company has recently entered into multi-year
agreements with Xerox (the "Xerox Agreement") and IBM (the "IBM Agreement"),
and is currently negotiating an agreement with Oce, for the marketing,
distribution and support of the Company's products. The Company's contracts
with Xerox and IBM are for terms of three years with each of Xerox and IBM
having the right to terminate its contract in certain circumstances, such as a
material breach of the contract by Accent Color or the Company's bankruptcy or
insolvency. For a further description of the terms of these contracts, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Strategic Relationships." There can be no
assurance that (i) the Company will be successful in maintaining such
alliances or forming and maintaining other alliances, (ii) the Company will be
able to satisfy its contractual obligations with its OEM customers or (iii)
the Company's OEM customers will devote adequate resources to market and
distribute the Company's products successfully. Any disruption in the
Company's relationships with Xerox, IBM or Oce, or any future customer of the
Company, may have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business--Accent Color's
Strategy," "--Strategic Relationships" and "--Marketing Product Support,
Service and Training."
As a result of its relationships with its OEM customers, the Company's
ability to interact with end users of Truecolor Systems and observe their
experience with the Company's products may be limited. The Company also does
not have control over the marketing, distribution and support efforts of its
OEM customers. This may result in a delay by the Company in the recognition
and correction of any problems experienced by the OEM customers or the end
users. Failure of the Company to respond to customer and end-user preferences
or
8
<PAGE>
experience with its products, or a failure by the Company's OEM customers to
market and support the Company's products successfully, could have a material
adverse effect on the business, financial condition and results of operations
of the Company. In addition, the Company's OEM customers will control the
timing of the introduction of the Company's products, including its existing
products. Consequently, the timing of the introduction of the Company's
products may be delayed for reasons unrelated to the Company and its products,
such as delays in the introduction of products offered by the OEM customers
with which the Company's products are integrated. Delays in the introduction
of the Company's products could have a significant adverse effect on the
Company's business, financial condition and results of operations. Further,
third-party distribution provides the Company with less information regarding
the amount of inventory that is in the process of distribution. This lack of
information may reduce the Company's ability to predict fluctuations in
revenue resulting from a surplus or a shortage in its distribution channels
and contribute to volatility in the Company's financial results, cash flow and
inventory. See "Business--Marketing, Product Support, Service and Training."
DEPENDENCE ON SPECTRA
The Company is dependent on Spectra, a wholly owned subsidiary of Markem,
Inc. ("Markem"), as its sole source supplier of ink jet printheads and the hot
melt, wax-based inks included in and used by Truecolor Systems. Spectra has
agreed to supply the Company with ink jet printheads and wax-based inks under
a supply agreement, subject to a number of conditions. The Company's reliance
on Spectra involves several risks, including a potential inability to obtain
an adequate supply of required printheads or inks, and reduced control over
the quality, pricing and timing of delivery of these items. Because the
production of printheads is specialized and requires long lead times, there
can be no assurance that delays or shortages of printheads will not occur. To
date, Spectra has only produced a limited number of ink jet printheads.
Accordingly, there can be no assurance that Spectra will be able to provide a
stable source of supply of these components. As the Company increases the
production of Truecolor Systems, it will become more reliant upon Spectra's
ability to manufacture and deliver ink jet printheads as required. In May
1996, Spectra was acquired by Markem, a manufacturer and marketer of printing
systems, some of which utilize Spectra printheads, for use in industrial
marking applications. There can be no assurance that Markem's requirements for
Spectra printheads will not materially interfere with the Company's ability to
obtain Spectra printheads. Any interruption in the Company's ability to obtain
Spectra printheads could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, the Company
and Spectra are devoting substantial resources to improve technology in the
areas of ink jet printhead width and print resolution. There can be no
assurance that, if such improvements are made, Spectra will be able to produce
printheads embodying such improvements for the Company in sufficient
quantities at an acceptable price, or at all. Any inability to incorporate
such improvements or produce printheads embodying them could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Spectra, itself, is also reliant upon licenses granted to it by third
parties. The Spectra agreement allows, in certain instances, the Company to
utilize Spectra's technology to either manufacture wax-based inks or ink jet
printheads itself or arrange for their manufacture by third parties utilizing
such technology. There can be no assurance, however, that, if necessary, the
Company would be able to manufacture ink jet printheads and wax-based inks
itself or negotiate with third parties for the timely manufacture of ink jet
printheads or supply of wax-based inks on acceptable terms or at all.
Furthermore, the use of Spectra's technology may require the consent of
certain other licensors to Spectra, and there is no assurance that the Company
will be able to obtain any such consents on acceptable terms or at all.
Spectra has granted the Company the exclusive right to supply products
including Spectra printheads in the worldwide market for printing color on the
output from specified high-speed, black-on-white printers from Xerox, IBM, Oce
and certain other parties through December 31, 2002. To maintain such
exclusive rights, the Company is required to purchase a minimum number of ink
jet printheads each year, to continue to purchase its wax-based ink
requirements from Spectra and to make certain payments. There can be no
assurance that the Company will be able to meet the minimum purchase
requirements or make these payments. The Company's agreement with Spectra
requires quarterly payments of $250,000 through 1997 to maintain the
exclusivity rights.
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These specified payments, together with similar payments from other Spectra
customers (which vary in amount from customer to customer), are used by
Spectra to fund ink jet printhead development, the results of which are
available to participating customers. After 1997, the Company must make
additional quarterly payments of $250,000 to continue to benefit from the
development efforts funded by Spectra's customers. There is no assurance that
the Company will be able to continue such required payments or that the
research and development will be beneficial to the Company. The Company is
also negotiating an agreement with Spectra to aid in the funding of the
expansion of Spectra's manufacturing of ink jet printheads for the Company.
Any disruption in the Company's relationship with Spectra, or in Spectra's
relationship with its licensors, may have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Manufacturing and Assembly" and "--Subcontractor and Supplier
Arrangements."
DEPENDENCE ON MAJOR SUBCONTRACTORS AND SUPPLIERS
The Company relies on subcontractors and suppliers to manufacture,
subassemble and perform certain testing of some modules and parts of Truecolor
Systems. Currently, the Company's ink jet printheads are manufactured solely
by Spectra. The Company currently performs the final assembly and testing of
various Truecolor System components and of each complete Truecolor System. The
Company plans to eventually outsource the full assembly and testing of
Truecolor Systems. The inability to develop relationships with, or the loss
of, subcontractors or suppliers, or the failure of its subcontractors or
suppliers to meet the Company's price, quality, quantity and delivery
requirements, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Dependence on Spectra,"
"Business--Manufacturing and Assembly" and "--Subcontractor and Supplier
Arrangements."
DEVELOPMENT RISKS
The Company is at an early stage of development. The Company's products are
in various stages of development, and no revenue has been recognized from the
sale of its products. The Company has developed and plans to market new
products and new applications of technology and, accordingly, is subject to
risks associated with such ventures. The Company has delivered prototype and
pre-production Truecolor Systems and is entering the production phase for
these systems. The probability of success of the Company must be considered in
light of the expenses and delays frequently encountered in connection with the
operation of a new business and the development of practical production
techniques for the products. See "Limited History of Product Manufacturing"
and "Business--Manufacturing and Assembly."
The Company considers the enhancement of its present products to be the
Company's first development priority. Many of these enhancements are
contemplated in the Company's contracts with Xerox and IBM. The Company plans
to devote substantial resources to improve its technology in the areas of
printhead width and print resolution. In addition, the Company's customers
have requested advanced paper handling functionality, particularly duplex
printing (the ability to print on both sides of a page). There can be no
assurance, however, that the Company will be successful in developing
enhancements for its products or that these enhancements will prove to be
desirable to end users or that the Company will be able to obtain the
necessary components for contemplated product enhancements. Failure to develop
enhancements to its existing products, particularly the enhancements
contemplated by the agreements with Xerox and IBM, could have a material
adverse effect on the market acceptance of the Company's products and could
result in the termination of the Company's relationship with Xerox or IBM. As
a result, any such failures could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Accent Color's Strategy."
LIMITED HISTORY OF PRODUCT MANUFACTURING
To date, the Company has manufactured only limited quantities of Truecolor
Systems for evaluation in commercial applications. To be profitable, the
Company's products must be manufactured in sufficient quantities and at
acceptable costs. Future production in sufficient quantities may pose
technical and financial challenges for the Company. The Company has limited
manufacturing history, and no assurance can be given that the Company
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will be able to make a successful transition to high-volume production. The
failure to make a successful transition could have a material adverse effect
on the business, financial condition and results of operations of the Company.
See "Dependence on Major Subcontractors and Suppliers" and "Business--
Manufacturing and Assembly."
SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results are likely to vary significantly
in the future based upon a number of factors, including the volume, timing,
delivery and acceptance of customer orders, the introduction and market
acceptance of new products offered by the Company and its OEM customers or
competitors, changes in the pricing policies of the Company or its OEM
customers or competitors, the level of product and price competition, the
relative proportion of printer and consumables sales, the timely availability
of sufficient volume of sole source components, fluctuations in research and
development expenditures, the availability of financing arrangements for
certain of the Company's customers, general economic conditions, as well as
other factors. Additionally, because the purchase of a printing system and
peripherals involves a significant capital commitment, the sales cycle for the
Company's products is susceptible to delays and lengthy acceptance procedures
associated with large capital expenditures. Historically, there has existed
seasonality in the purchase of major equipment such as the Company's Truecolor
Systems, with many companies experiencing higher sales in the fourth calendar
quarter. The Company expects such seasonality to apply to the purchase of its
systems and has already seen such seasonality reflected in forecasts provided
by Xerox and IBM. Furthermore, due to the Company's high average sales price
and low unit volume, a delay in the sale of, or the recognition of revenue
from the sale of, a few units could have a material adverse effect on the
results of operations for a fiscal quarter.
Quarterly revenue and operating results depend primarily on the volume,
timing, shipping and acceptance of orders during the quarter, which are
difficult to forecast due to the length of the sales cycle. To date, the
Company has not recognized any revenue from the sale of its products. The
Company also has not produced or shipped any production versions of its
Truecolor Systems. Consequently, the Company has no experience with the rate
of customer and end-user acceptance of its products or the volume or nature of
warranty claims relating to its products. The Company's current policy is to
recognize revenue upon customer acceptance. Until such time that the Company
gains sufficient experience regarding customer acceptance of, and warranty
claims regarding, its products, the Company intends to recognize revenue at
the expiration of, the applicable warranty periods. As a result, the Company
expects a difference between timing of shipments and the recognition of
related revenue, which may be substantial and inconsistent. There can be no
assurance that the timing of revenue recognition will not result in
significant fluctuations in the Company's quarterly operating results. A
significant portion of the Company's operating expenses are relatively fixed
in the short term, and planned expenditures are based on sales forecasts.
Sales forecasts by the Company's customers are generally not binding. If
revenue levels are below expectations, operating results may be
disproportionately affected because only a small portion of the Company's
expenses vary with revenue in the short term, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will experience or
sustain any revenue growth or profitability. Further, it is possible that in
some future quarter the Company's revenue or operating results will be below
the expectations of securities analysts and investors. In such event, the
price of the Common Stock could be materially adversely affected.
POTENTIAL NEED FOR ADDITIONAL FUNDING FOR OPERATING AND CAPITAL REQUIREMENTS
The Company's currently anticipated levels of revenue and cash flow are
subject to many uncertainties and cannot be assured. Further, the Company's
business plan may change, or unforeseen events may occur, requiring the
Company to raise additional funds. The amount of funds required by the Company
will depend on many factors, including the extent and timing of the sale of
Truecolor Systems, the timing and cost associated with the expansion of the
Company's manufacturing, development, engineering and customer support
capabilities, the amount of funds raised in this offering and the Company's
operating results. There can be no assurance that, if and when needed,
additional financing will be available, or available on acceptable terms. The
inability to obtain additional financing or generate sufficient cash from
operations could require the Company to reduce or eliminate
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expenditures for research and development, production or marketing of its
products, or otherwise to curtail or discontinue its operations, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, if the Company raises funds through
the sale of equity securities, the Common Stock offered hereby may be further
diluted. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
PRODUCT WARRANTY; LIMIT ON PRICES FOR SPARE PARTS
The Company warrants its Truecolor Systems to be free of defects in
workmanship and materials for 90 days from installation at the location of the
end user. Furthermore, under the IBM Agreement, the Company has agreed to
provide spare parts for its products to IBM at prices which will yield a
monthly parts cost per Truecolor System not to exceed a specified amount.
There can be no assurance that the Company will not experience warranty claims
or parts failure rates in excess of those which it has assumed in pricing its
products and spare parts. Any such excess warranty claims or spare parts
failure rates could have a material adverse effect on the Company's business,
financial condition or results of operations. Moreover, pursuant to the terms
of the Xerox Agreement, the Company is obligated to repurchase from Xerox any
Xerox inventory of spare parts and consumables which become obsolete as a
result of changes to Truecolor Systems. There can be no assurance that the
Company's obligations to repurchase such obsolete inventory will not have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company has not produced or shipped any production
versions of its Truecolor Systems. Consequently, the Company currently has no
experience with the volume or nature of warranty claims relating to its
products. See "Significant Fluctuations in Quarterly Results" and "Business--
Strategic Relationships."
DEPENDENCE ON A SINGLE PRODUCT LINE
The Company anticipates that it will derive substantially all of its revenue
in the foreseeable future from sales of Truecolor Systems, related consumables
and spare parts. If the Company is unable to generate sufficient sales of
Truecolor Systems due to market conditions, manufacturing difficulties or
other reasons, it may not be able to continue its business. Similarly, if
purchasers of Truecolor Systems were to purchase wax-based ink or spare parts
from suppliers other than the Company, the Company's business, results of
operations and financial condition could be materially adversely affected.
Dependence on a single product line makes the Company particularly vulnerable
to the successful introduction of competitive products. See "Rapid
Technological Change Requires Ongoing Product Development Efforts" and
"Business--Competition."
RAPID TECHNOLOGICAL CHANGE REQUIRES ONGOING PRODUCT DEVELOPMENT EFFORTS
The high-speed printer industry is characterized by evolving technology and
changing market requirements. The Company's future success will depend on a
number of factors, including its ability to continue to develop and
manufacture new products and to enhance existing products. Consequently, the
Company considers the enhancement of its products to be a development
priority. Certain enhancements of its existing products are required by the
Company's contracts with Xerox and IBM. Additionally, in a new and evolving
market, customer preferences can change rapidly and new technology could
render existing technology obsolete. Failure by the Company to respond
adequately to changes in its target market, to develop or acquire new
technology or to successfully conform to market preferences could have a
material adverse effect on the business, financial condition and results of
operations of the Company. The failure by the Company to anticipate or respond
adequately to competitive and technological changes could have a material
adverse effect on the business, financial condition and results of operations
of the Company. See "Business--Research and Development" and "--Competition."
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LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY AND RISKS OF THIRD-PARTY CLAIMS
The Company's ability to compete effectively will depend, in part, on the
ability of the Company to maintain the proprietary nature of its technology.
The Company relies, in part, on proprietary technology, know-how and trade
secrets related to certain aspects of its principal products and operations
but there can be no assurance that others, including the Company's OEM
customers, may not independently develop the same or similar technology or
otherwise obtain access to the Company's proprietary technology. To protect
its rights in these areas, the Company generally requires its OEM customers,
suppliers, employees and independent contractors to enter into nondisclosure
agreements. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's trade secrets, know-how or
other proprietary information. If the Company is unable to maintain the
proprietary nature of its products through nondisclosure agreements or other
protection, its business could be materially adversely affected. The U.S.
Patent and Trademark Office has filed a Notice of Allowance with respect to an
initial patent application filed by the Company related to the Company's color
printing apparatus. In addition, the Company has filed an application for a
second patent related to certain enhancements of the Truecolor Systems. There
can be no assurance, however, as to the degree of protection offered by this
notice, or as to the likelihood that pending patent applications will be
issued. There can be no assurance that potential competitors, many of which
may have substantially greater resources than the Company and may have made
substantial investments in competing technologies, do not currently have or
will not obtain patents that will prevent, limit or interfere with the
Company's ability to make, use or sell its products or will not intentionally
infringe on the Company's patents if and when issued. Moreover, no assurance
can be given that Accent Color's technology does not conflict with existing
enforceable patents. Although patents may be issued to Accent Color as a
result of patent applications it has filed, Accent Color's technology may fall
within the scope of existing enforceable patents. There can be no assurance
that the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or independent
development by others of similar technology. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to the same
extent as do the laws of the U.S. There can be no assurance that these
protections will be adequate.
The Company has an exclusive right to supply products including Spectra's
ink jet printheads in the worldwide market for printing color on the output
from specified high-speed, black-on-white printers marketed by Xerox, IBM, Oce
and certain other parties through December 31, 2002. To the extent that wax-
based inks and ink jet printheads purchased from Spectra are covered under
patents or licenses, the Company relies on Spectra's rights under such patents
and licenses and Spectra's willingness and ability to enforce its patents and
maintain its licenses. There can be no assurance that Spectra will be willing
or able to enforce its patents and maintain its licenses and any such
unwillingness or inability could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Dependence on Spectra."
Although the Company believes that its products and technology do not
infringe any existing proprietary rights of others, there can be no assurance
that third parties will not assert such claims against the Company in the
future or that such future claims will not be successful. The Company could
incur substantial costs and diversion of management resources with respect to
the defense of any claims relating to proprietary rights, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, parties making such claims could secure a
judgment awarding substantial damages, as well as injunctive or other
equitable relief, which could effectively block the Company's ability to make,
use, sell, distribute or market its products and services in the U.S. or
abroad. Such a judgment could have a material adverse effect on the Company's
business, financial condition and results of operations. In the event a claim
relating to proprietary technology or information is asserted against the
Company, the Company may seek licenses to such intellectual property. There
can be no assurance, however, that such a license could be obtained on
commercially reasonable terms, if at all, or that the terms of any offered
licenses will be acceptable to the Company. The failure to obtain the
necessary licenses or other rights could preclude the sale, manufacture or
distribution of the Company's products and, therefore, could have a material
adverse effect on the Company's business, financial condition and results of
operations. The cost of responding to any such claim may be material, whether
or not the assertion of such claim is valid. See "Business--Intellectual
Property."
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DIFFICULTIES IN MANAGING RAPID GROWTH
Since inception, the Company has experienced rapid growth, which has placed
a significant strain on the Company's (i) administrative, operational and
financial personnel, (ii) management information systems, (iii) manufacturing
operations and (iv) other resources. Certain of the Company's senior managers
have recently joined the Company, and the Company may increase the number of
its senior managers. In addition, the Company's future development plans
anticipate additional management, operating and financial resources. For
example, the Company intends to significantly increase production capacity,
create new marketing programs, hire additional personnel and develop further
enhancements to the Company's products. The Company has recently hired
additional accounting and finance personnel and has made improvements to its
operating, accounting, financial control and reporting systems. However,
further improvements in these systems are needed and will continue to be
needed in order to manage anticipated growth in revenue and assets, including
receivables and inventories. There can be no assurance that the Company will
be able to successfully implement its business strategy, that operations will
generate sufficient cash flow, or that adequate financing will be available on
acceptable terms to fund continuing growth, or that management will
successfully manage continued growth. The failure to manage growth effectively
may have a material adverse effect on the Company's business, financial
condition and results of operations. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Accent Color's Strategy."
DEPENDENCE ON KEY PERSONNEL
The business of the Company is substantially dependent on the capabilities
and services of a number of key technical and managerial personnel, including
Richard J. Coburn, its Chairman, and Norman L. Milliard, its President and
Chief Executive Officer. Mr. Coburn has an employment agreement with the
Company which has a term that expires in 1998. Mr. Milliard entered into a
three-year contract with the Company in 1994 which is automatically extended
each year for one year unless Mr. Milliard or the Company gives notice prior
to the year end. Both Mr. Coburn and Mr. Milliard may terminate the employment
relationship with the Company at any time with no penalty other than the loss
of future compensation. The loss of the services of Messrs. Coburn or Milliard
or other key personnel could have a material adverse effect upon the business
of the Company. The Company has keyman life insurance on Messrs. Coburn and
Milliard in the amount of $1,000,000 each. There can be no assurance, however,
that the Company will continue such insurance coverage or that such amount is
sufficient. The Company's future success will further depend on both its
ability to retain key personnel and its ability to attract qualified
personnel. Competition for qualified personnel is intense, and there can be no
assurance that the Company will be successful in hiring or retaining them. The
inability of the Company to retain key personnel or attract qualified
personnel may have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Personnel" and
"Management."
COMPETITION
The Company expects to encounter varying degrees of competition in the
markets in which it intends to compete. The Company competes, in significant
part, on the basis of advanced proprietary technology in the areas of paper
handling, ink jet color printing and interface software which allows the
Company's products to print variable data, in multiple standard and custom
colors at high speeds.
Competition to supply color printing is fragmented. The Xerox 4890 (a
similar product is also marketed by Xerox as the DocuTech 390HC) is a spot
color printer which prints in black and one color per job (out of a limited
palette). It is capable of printing 92 pages per minute but does not offer
custom colors. BESTE Bunch Systems markets a color offset press used as a
downstream add-on to an Oce or IBM high-speed, black-on-white printer. While
providing color logos and fixed data, it does not offer variable data,
requires longer time to set up, and is more labor intensive. It also requires
additional processes of negative production and plate making. There are
production full process color printers available which have relatively high
per page print costs and operate at much lower speeds than those required by
typical production printing, making them impractical for high-speed print
jobs. In addition, many of the companies that may compete with the Company in
the future have longer
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operating histories and significantly greater financial, technical, sales,
marketing and other resources, as well as greater name recognition than the
Company.
In addition to direct competition from other firms utilizing high-speed
color technologies, there exists potential direct competition from firms
improving technologies used in low-speed to medium-speed color printers and
indirect competition from firms producing pre-printed forms.
Products or product improvements based on new technologies could be
introduced by other companies with little or no advance notice. Manufacturers
of high-speed, black-on-white printers may also, in time, develop comparable
or more effective color capability within their own products which may render
the Company's products obsolete. There can be no assurance that the Company
will be able to compete against future competitors successfully or that
competitive pressures faced by the Company will not have a material adverse
effect upon its business, financial condition and results of operations. See
"Business--Competition."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop or
be sustained after this offering or that purchasers of the Common Stock will
be able to resell their Common Stock at prices equal to or greater than the
initial public offering price. The initial public offering price of the Common
Stock will be determined through negotiations between the Company and the
Representatives of the Underwriters and may not be indicative of market prices
of the Common Stock after this offering. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. The trading price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results and other factors,
including quarterly variations in operating results, announcements of
technological innovations or new products by the Company or its OEM customers
or competitors, changes in general economic conditions or financial estimates
by securities analysts and other events or factors. In addition, the stock
market has experienced large price and volume fluctuations that often have
been unrelated to the operating performance of specific companies or market
sectors. These broad market fluctuations may adversely affect the market price
of the Common Stock. See "Underwriting."
IMMEDIATE AND FUTURE DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in net tangible book value per share of the Common Stock
from the initial public offering price. Additional dilution will occur upon
the exercise of outstanding stock options and warrants. Furthermore, the
Company may issue additional shares of its capital stock from time to time in
such amounts and for such consideration as it deems appropriate. Such issuance
could also be dilutive to investors in the Common Stock offered hereby. See
"Dilution" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE
Sales of a substantial number of shares of Common Stock into the public
market following this offering could adversely affect the prevailing market
price of the Common Stock and the Company's ability to raise capital in the
future. Upon completion of this offering, the Company will have a total of
9,686,898 shares of Common Stock outstanding, of which the 3,000,000 shares
offered hereby will be freely tradeable without restriction under the
Securities Act of 1933 (the "Securities Act") by persons other than
"affiliates" of the Company, as defined under the Securities Act. The
remaining 6,686,898 shares of Common Stock outstanding are "restricted
securities" as that term is defined by Rule 144 and Rule 701 as promulgated
under the Securities Act (the "Restricted Shares"). Of the 6,686,898
Restricted Shares, 144,000 shares may be currently sold under Rule 144 (k). An
additional 2,081,527 shares will become eligible for sale 90 days after
completion of this offering pursuant to Rule 144. The remaining 4,461,371
shares will be eligible for sale upon the expiration of their respective two-
year holding periods subject to the conditions of Rule 144. The Securities and
Exchange Commission has proposed certain amendments to Rule 144 that would
reduce by one year the holding periods
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required for shares subject to Rule 144 to become eligible for resale in the
public market. This proposal, if adopted, would permit earlier resale of
shares of Common Stock currently subject to holding periods under Rule 144. No
assurance can be given concerning whether or when the proposal will be
adopted. Furthermore, substantially all of the 6,686,898 Restricted Shares are
subject to lock-up agreements expiring 180 days following the date of this
Prospectus. Such agreements provide that Cowen & Company may, in its sole
discretion and at any time without notice, release all or a portion of the
shares subject to these lock-up agreements. Upon the expiration of the lock-up
agreements, 3,294,648 of the 6,686,898 Restricted Shares may be sold pursuant
to Rule 144, subject in some cases to certain volume restrictions imposed
thereby. Certain existing stockholders have rights to include shares of Common
Stock owned by them in future registrations by the Company for the sale of
Common Stock or to request that the Company register their shares under the
Securities Act. On a date after 180 days following the date of this
Prospectus, the Company intends to register on one or more registration
statements on Form S-8 approximately 1,500,000 shares of Common Stock issued
or issuable under its 1995 Stock Incentive Plan. Of the 1,500,000 shares
issuable under its 1995 Stock Incentive Plan, 1,293,600 shares were subject to
outstanding options as of October 11, 1996, of which 584,000 options were
exercisable within 180 days following the date of this Prospectus. Shares
covered by such registration statements will be eligible for sale in the
public market after the effective date of such registration. See "Management--
1995 Stock Incentive Plan" and "Shares Eligible for Future Sale."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The principal purposes of this offering are to repay certain indebtedness,
to increase the Company's equity capital, to create a public market for the
Common Stock and to facilitate future access by the Company to public equity
markets. As of the date of this Prospectus, the Company has no specific plans
for the use of a substantial portion of the net proceeds of this offering. The
Company expects to use such unallocated proceeds for working capital and other
general corporate purposes. Consequently, the Board of Directors and
management of the Company will have significant flexibility in applying the
net proceeds of this offering. See "Use of Proceeds."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company intends to have its products marketed worldwide and therefore
may enter into contracts with foreign companies. International sales are
subject to certain inherent risks, including unexpected changes in regulatory
requirements, tariffs and other trade barriers, fluctuations in exchange
rates, credit risks, government controls, political instability, longer
payment cycles, increased difficulties in collecting accounts receivable and
potentially adverse tax consequences. There can be no assurance that these
factors will not have a material adverse effect on the Company's business,
financial condition and results of operations.
ENVIRONMENTAL REGULATION
The Company is subject to regulation under various federal, state and local
laws relating to the environment and to employee safety and health. These
environmental regulations relate to the generation, storage, transportation,
disposal and emission of various substances into the environment. The Company
cannot predict the environmental legislation or regulations that may be
enacted in the future or how existing or future laws or regulations will be
administered or interpreted. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretation of existing laws, may require additional
expenditures by the Company, some or all of which may be material.
POTENTIAL ADVERSE IMPACT OF ANTI-TAKEOVER PROVISIONS ON MARKET PRICE OF SHARES
The Company's Restated Certificate of Incorporation contains provisions that
could discourage a proxy contest or make more difficult the acquisition of a
substantial block of the Company's Common Stock. The Restated Certificate of
Incorporation provides for a classified Board of Directors, and members of the
Board of Directors may be removed only upon the affirmative vote of holders of
at least two-thirds of the shares of capital stock of the Company issued and
outstanding and entitled to vote. In addition, the Board of Directors is
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<PAGE>
authorized to issue shares of Common Stock and Preferred Stock which, if
issued, could dilute and adversely affect various rights of the holders of
shares of Common Stock and, in addition, could be used to discourage an
unsolicited attempt to acquire control of the Company.
The Company is subject to the Connecticut Stock Corporation Act (the
"Connecticut Act"), some provisions of which prohibit a publicly held
Connecticut corporation from engaging in a "business combination" (including
the issuance of equity securities which have an aggregate market value of 5%
or more of the total market value of the outstanding shares of the Company)
with an "interested shareholder" (as defined in the Connecticut Act) for a
period of five years from the date of the shareholder's purchase of stock
unless approved in a prescribed manner. The application of this statute could
prevent a change of control of the Company. Generally, approval is required by
the Board of Directors and by a majority of the non-employee directors of the
Company and by 80% of the outstanding shares of the Company and two-thirds of
the voting power of shares other than shares held by the interested
shareholder. There can be no assurance that these provisions will not prevent
the Company from entering into a business combination that otherwise would be
beneficial to the Company. The Connecticut Act also requires that any action
of the stockholders of the Company taken by written consent without a meeting
must be unanimous. See "Description of Capital Stock."
DIFFICULTY OF SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENT
A director of the Company who does not reside in the U.S. may not be subject
to service of process within the U.S. Furthermore, since many of the assets of
this director are located outside the U.S., any judgment obtained against him
in the U.S. may not be enforceable outside the U.S.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby, after deducting estimated underwriting discounts
and commissions and offering expenses, are estimated to be approximately $
million ($ million if the Underwriters' over-allotment option is exercised
in full), based on an assumed initial public offering price of $ per share.
The principal purposes of this offering are to repay certain indebtedness, to
increase the Company's equity capital, to create a public market for the
Common Stock and to facilitate future access by the Company to the public
equity markets.
The Company intends to use approximately $3.5 million to repay all of the
indebtedness outstanding under its Interim Notes, which were issued in the
Interim Financing. These notes bear interest at the rate of 8.70% per annum
(excluding any debt discount) and are required to be repaid upon the closing
of this offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
The Company intends to use the remainder of the net proceeds from this
offering for working capital and general corporate purposes, including the
expansion of the Company's manufacturing, development, engineering and
customer support capabilities, the commercial production of additional
Truecolor Systems and the further development and enhancement of the Company's
products, including enhancements in the areas of printhead width, print
resolution and paper handling capabilities. The Company may also use a portion
of the remaining net proceeds to further repay outstanding indebtedness.
Pending applications of the proceeds as described above, the Company intends
to invest the net proceeds from this offering in short-term, investment-grade,
interest bearing securities.
DIVIDEND POLICY
The Company has never declared nor paid any cash dividends on its Common
Stock or Preferred Stock. The Company currently intends to retain all earnings
to finance operations and therefore does not anticipate declaring or paying
cash dividends in the foreseeable future.
18
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1996, the capitalization of
the Company (i) on an actual basis, (ii) on a pro forma basis to give effect
to the Interim Financing and (iii) on a pro forma as adjusted basis to give
effect to the conversion of all outstanding shares of Series A Preferred Stock
into 1,362,312 shares of Common Stock, the conversion of the Company's
outstanding Series III Debentures, including accrued interest thereon, into
604,746 shares of Common Stock and the sale of 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $ per
share, less estimated underwriting discounts and commissions and offering
expenses, and the application of the net proceeds for repayment of the Interim
Notes. This table should be read in conjunction with the Financial Statements
of the Company and the Notes, appearing elsewhere herein.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt, net of debt discount of $3 and
$576............................................ $ 402 $ 3,279 $
------- ------- -------
Long-term debt, less current portion............. 4,360 4,360
------- ------- -------
Shareholders' equity:
Preferred Stock, no par value, 500,000 shares
authorized, 324,360 (actual), 324,360 (pro
forma) and 0 (pro forma as adjusted) shares
issued and outstanding........................ 1,431 1,431 --
Common Stock, no par value, 25,000,000 shares
authorized, 4,719,840 (actual), 4,719,840 (pro
forma), and 9,668,805
(pro forma as adjusted) shares issued and
outstanding(1)................................ 10,544 10,667
Accumulated deficit.............................. (10,557) (10,557)
------- ------- -------
Total shareholders' equity....................... 1,418 1,541
------- ------- -------
Total capitalization............................. $ 6,180 $ 9,180 $
======= ======= =======
</TABLE>
- --------
(1) Excludes as of June 30, 1996 (i) 1,145,868 shares of Common Stock issuable
upon the exercise of outstanding warrants, all of which are currently
exercisable, and (ii) 1,137,750 shares of Common Stock issuable upon the
exercise of stock options outstanding under the Company's 1995 Stock
Incentive Plan, of which options to purchase 388,750 shares are currently
exercisable. Also excludes (i) 45,000 shares of Common Stock issuable upon
the exercise of outstanding warrants issued in connection with the Interim
Financing exercisable at the lesser or $10.00 per share or the initial
public offering price set forth on the cover page hereof and (ii) 157,350
shares of Common Stock issuable upon the exercise of stock options
outstanding granted under the Company's 1995 Stock Incentive Plan after
June 30, 1996, with a weighted average exercise price of $4.00 per share.
See "Management--1995 Stock Incentive Plan," "Description of Capital
Stock," and Notes 5 and 6 of Notes to Financial Statements.
19
<PAGE>
DILUTION
The Company had a net negative tangible book value of ($181,000), or ($0.04)
per share of Common Stock, as of June 30, 1996. Net tangible book value per
share is defined as the amount of total tangible assets less total
liabilities, less the carrying value of the Series A Preferred Stock, divided
by the number of shares of Common Stock outstanding. Without taking into
account any changes in net tangible book value after June 30, 1996, other than
to give effect to (i) this offering (assuming an initial public offering price
of $ per share), after deduction of the estimated underwriting discounts and
commissions and offering expenses, (ii) the conversion of all outstanding
shares of the Series A Preferred Stock into Common Stock and (iii) the
conversion of the Series III Debentures, including accrued interest thereon,
into Common Stock, the adjusted net tangible book value per share after this
offering as of June 30, 1996 would have been $ , or $ per share. This amount
represents an increase in net tangible book value of $ per share to existing
shareholders and dilution of $ per share to new investors. Dilution is
determined by subtracting adjusted net tangible book value per share after
this offering from the amount of cash paid by a new investor for a share of
Common Stock in this offering. The following table illustrates this per share
dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Net negative negative tangible book value per common share as of
June 30, 1996................................................... ($0.04)
Increase attributable to the conversion of Series A Preferred
Stock and the conversion of Series III Debentures, including
accrued interest thereon........................................
Increase per common share attributable to this offering..........
------
Adjusted net tangible book value per common share after this
offering..........................................................
---
Dilution per share to new investors................................ $
===
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of June
30, 1996, the number of shares of Common Stock purchased from the Company
(after giving effect to the conversion of all outstanding shares of the Series
A Preferred Stock into Common Stock and the conversion of the Series III
Debentures, including accrued interest thereon, into Common Stock), the total
consideration paid, and the average price per share paid by existing
shareholders and to be paid by the new investors, at the assumed initial
public offering price of $ per share, before deducting the estimated
underwriting discounts and commissions and offering expenses payable by the
Company.
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
----------------- ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 6,668,805 69% $15,019,000 $2.25
New investors..................... 3,000,000 31
--------- --- ----------- ---
Total........................... 9,668,805 100% $ 100%
========= === =========== ===
</TABLE>
The foregoing computations exclude (i) 1,145,868 shares of Common Stock
issuable upon the exercise of outstanding warrants, with a weighted average
exercise price of $3.52 per share, all of which are currently exercisable,
(ii) 45,000 shares of Common Stock issuable upon the exercise of outstanding
warrants issued in connection with the Interim Financing exercisable at the
lesser of $10.00 per share or the initial public offering price set forth on
the cover page hereof and (iii) 1,293,600 shares of Common Stock issuable upon
the exercise of outstanding stock options under the Company's 1995 Stock
Incentive Plan with a weighted average exercise price of $3.54 per share, of
which options to purchase 398,750 shares are currently exercisable. To the
extent that such options and warrants are exercised in the future, there will
be further dilution to new investors. See "Management--1995 Stock Incentive
Plan," "Description of Capital Stock" and Note 6 of Notes to Financial
Statements.
20
<PAGE>
The issuance of any additional shares of Common Stock or other securities of
the Company would have a dilutive effect upon the percentage security
ownership in the Company which any holder of shares of Common Stock has
currently or could attain by purchase of shares in this offering. Depending
upon the consideration received by the Company for issuance of any additional
securities, such issuance also may have a dilutive effect on the shareholders'
equity in the Company.
21
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected financial data of the Company. The
data should be read in conjunction with the Financial Statements of the
Company, including the Notes thereto, and other financial information included
herein. The statements of operations data for the period ended December 31,
1993 and the years ended December 31, 1994 and December 31, 1995 and the
related balance sheet data are derived from the audited financial statements
of the Company, which financial statements have been audited and reported upon
by Price Waterhouse LLP, independent accountants. The statements of operations
data for the six months ended June 30, 1995 and 1996 and the June 30, 1996
balance sheet data are derived from unaudited financial statements, which in
the opinion of the Company's management reflect all the adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Earnings per share data are
presented on a pro forma basis only.
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
INCEPTION FOR THE FOR THE INCEPTION
(MAY 21, 1993) YEAR ENDED SIX MONTHS ENDED (MAY 21, 1993)
THROUGH DECEMBER 31, JUNE 30, THROUGH
DECEMBER 31, ---------------------- ---------------------- JUNE 30,
1993 1994 1995 1995 1996 1996
-------------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $ -- $ -- $ -- $ -- $ -- $ --
Costs and expenses:
Research and
development........... 19 805 3,051 1,137 3,473 7,347
Marketing, general and
administrative........ 26 239 757 263 1,491 2,514
Related party
administrative
expense(1)............ -- 98 326 144 -- 424
----------- ---------- ---------- ---------- ---------- ----------
45 1,142 4,134 1,544 4,964 10,285
----------- ---------- ---------- ---------- ---------- ----------
Other (income) expense:
Interest expense....... -- 12 83 9 199 294
Interest income........ -- -- -- -- (22) (22)
----------- ---------- ---------- ---------- ---------- ----------
-- 12 83 9 177 272
----------- ---------- ---------- ---------- ---------- ----------
Net loss................ $ (45) $ (1,154) $ (4,217) $ (1,553) $ (5,141) $ (10,557)
=========== ========== ========== ========== ========== ==========
Pro forma net loss per
common share(2)........ $ (.62) $ (.71)
========== ==========
Pro forma weighted
average common shares
outstanding(2)......... 6,628,312 7,037,986
========== ==========
OTHER DATA:
Number of prototype
units shipped.......... -- -- 3 -- 4 7
Units in backlog
(as of period end)(3).. -- -- -- -- 29 29
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1993 1994 1995 1996
---- ---- ------ --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $-- $165 $ 1 $5,146
Working capital
(deficit)............. (24) (133) (1,862) 3,734
Total assets........... 1 246 728 8,958
Short-term debt........ -- -- 50 402
Long-term debt, less
current portion....... -- -- 2,020 4,360
Total shareholders'
(deficit) equity...... (24) (57) (3,164) 1,418
</TABLE>
- --------
(1) See Note 10 of Notes to Financial Statements for information concerning
related party transactions.
(2) See Note 2 of Notes to Financial Statements for the computation of pro
forma net loss per common share.
(3) See "Business--Backlog."
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. The discussion in this
Prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
whenever they appear in this Prospectus. This Company's actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors" as
well as those discussed elsewhere herein.
OVERVIEW
Accent Color was formed in 1993 initially to develop a high-speed, color
printer to attach to a Xerox 4135 or Xerox 4635 cut sheet, high-speed, black-
on-white production printer. Development and testing of a prototype began in
January 1994 and was first announced at the On-Demand Trade Show (a major
printing industry trade show) in May 1994. In November 1994, a "proof-of-
concept" Truecolor System was shown at the Xplor International Global
Electronic Document Systems Conference ("Xplor") (the primary production
printing industry trade show). After Xplor in November 1994, IBM approached
the Company and requested that the Company develop a version of its Truecolor
System to work in conjunction with the IBM 3900 continuous form production
printing system.
During 1995, the Company began negotiations with Xerox, IBM and Siemens
Nixdorf Printing Systems (which was acquired by an affiliate of Oce in 1996)
to enter into formal development relationships. During the same period, the
Company accelerated its engineering and development activities as its efforts
were focused on designing and building the next generation prototypes which
were demonstrated at Xplor in November 1995 in the Xerox, IBM and Accent Color
exhibits and in the Xerox DocuTech Print Center. In March 1995, the Company
and IBM entered into a letter of intent for the purchase of three prototype
systems, which were delivered in September 1995 (one system) and February 1996
(two systems). Subsequently, the Company agreed to upgrade two of the
prototypes at no additional cost to IBM. One of the upgraded prototypes was
delivered during the three months ended September 30, 1996 and, the second
upgraded prototype is currently anticipated to be delivered in the fourth
quarter of 1996. In August 1995, the Company and Xerox entered into a
memorandum of understanding for the purchase of two prototype systems, which
were delivered in October and November 1995. In November 1995, the Company and
Oce (then Siemens Nixdorf Printing Systems USA, Inc.) entered into a
memorandum of understanding for the purchase of two prototype systems which
were delivered in June 1996. Through June 30, 1996, the Company had received
$1.3 million from the delivery of seven prototype systems to Xerox, IBM and
Oce. Through June 30, 1996, $914,000 had been offset against research and
development expense, with respect to such prototype systems.
During 1996, the Company has focused on refining the Truecolor System design
and preparing for the commencement of commercial production in the fourth
quarter of this year. In February 1996, a Product Development and Distribution
Agreement was signed with Xerox, and in April 1996, the Company entered into a
Product Purchase Agreement with IBM. During the three months ended September
30, 1996, the Company shipped eight pre-production systems to its customers,
two of which were upgrades of prior prototypes. At Xplor in October 1996, the
Company expects to demonstrate its Truecolor Systems, as well as certain
enhancements planned for production in 1997.
Pursuant to the Xerox Agreement and IBM Agreement, Xerox and IBM are
expected to submit purchase orders for shipments of production systems
approximately four to six months prior to the expected shipment date. The
Company expects most orders will be shipped within four months of the receipt
of purchase orders. As a result, the Company does not expect to use backlog as
a primary basis for long-term management planning. Revenue is expected to be
recognized upon customer acceptance. Through June 30, 1996, the Company had
received approximately $812,000 in deposits from Xerox and IBM for future
deliveries of Truecolor Systems.
23
<PAGE>
Accent Color also sells related consumables and spare parts. Currently, the
only consumables sold by the Company are wax-based inks, which it acquires
from Spectra. The sale of consumables is expected to generate recurring
revenue which the Company believes will continue to increase as the installed
base and usage of Truecolor Systems increase. Accent Color does not expect to
derive significant revenue from maintenance of installed Truecolor Systems
because maintenance typically will be provided by its OEM customers. See "Risk
Factors--Uncertainty of Market Development; Acceptance of Accent Color's
Products," "--Dependence on Spectra" and "--Competition."
Through June 30, 1996, Accent Color expensed all research and development
costs as they were incurred, including costs associated with the manufacture
of prototypes. Accent Color produced the proof-of-concept and prototype
Truecolor Systems principally during 1994, 1995 and the first six months of
1996, which resulted in significant research and development expenses for
those periods. In July 1996, the Company began manufacturing pre-production
Truecolor Systems for delivery to customers. As a result, it began to allocate
to cost of production the manufacturing and other expenses associated with the
production of pre-production Truecolor Systems. Accent Color expects increases
in research and development expenses due to further enhancements to current
and new products, although such increases will be offset during the remainder
of 1996 and 1997 by the absence of costs associated with the manufacture of
prototype and pre-production systems which had previously been expensed. See
"Business--Research and Development."
Accent Color's marketing, general and administrative expenses have increased
to support the Company's anticipated revenue growth and manufacturing
activities. In 1996, in anticipation of the production and sale of Truecolor
Systems, the Company expanded its accounting and other administrative
functions to support its manufacturing activities. The Company's strategy is
to distribute its products solely through its OEM customers. Accordingly,
marketing expense is attributable primarily to the development and support of
the OEM customers and is anticipated to be lower, in both dollar amounts and
as a percentage of revenue, than it would be if the Company established and
maintained a direct sales force. The Company incurs marketing expenses in
connection with product promotional activities and certain indirect marketing
activities in conjunction with its OEM customers. As a result, the Company
believes that marketing, general and administrative expenses will continue to
increase.
As of December 31, 1995, the Company had $5.1 million in federal net
operating loss carryforwards which may be utilized by the Company to offset
any taxable profits in future periods. These carryforwards expire in years
2008 through 2010. In December 1994, a change in ownership of the Company
occurred which limits the amount of certain federal net operating loss
carryforwards which may be used by the Company. The change in ownership of the
Company that may result from this offering may further limit the Company's
ability to use its net operating loss carryforwards. See Note 8 of Notes to
Financial Statements.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
The Company recognized no revenue for the six months ended June 30, 1996
(the "1996 Period") and for the six months ended June 30, 1995 (the "1995
Period"). During both periods, the Company's efforts were directed at
designing, developing, testing and manufacturing prototype systems.
Research and development expenses primarily consist of the cost of personnel
and equipment needed to conduct the Company's research and development
efforts, including manufacturing prototype systems. Research and development
expenses for the 1996 Period increased by $2.3 million, or approximately 205%,
to $3.5 million from $1.1 million for the 1995 Period. This increase in
research and development expenses reflects additional expenses associated with
the development, manufacturing and testing of prototype systems, the increase
in engineering and production personnel, and purchases of components for pre-
production systems. Research and development expenses were offset by $300,000
and $0 for the 1996 Period and the 1995 Period, respectively, which resulted
from customer payments for the delivery of prototype systems.
24
<PAGE>
Marketing, general and administrative expenses primarily consist of (i) the
marketing cost in connection with product promotional activities and certain
indirect marketing activities in conjunction with the Company's OEM customers
and (ii) general and administrative costs related to the salaries of the
Company's executive, administrative and financial personnel, and associated
costs. Marketing, general and administrative expenses for the 1996 Period
increased by $1.2 million to $1.5 million from $262,000 for the 1995 Period.
This increase in marketing, general and administrative expenses was primarily
attributable to the hiring of additional service, marketing and administrative
personnel to support the Company's anticipated revenue growth and
manufacturing activities.
Related party administrative expense consists of financial advisory fees
paid to an investment banker who was then a director of the Company. The
Company had $0 and $144,000 for the 1996 Period and for the 1995 Period,
respectively.
Interest expense for the 1996 Period increased by $190,000 to $199,000 from
$9,000 for the 1995 Period. This increase in interest expense for the 1996
Period was primarily attributable to increased indebtedness outstanding in the
1996 Period resulting from the issuance of the Series III Debentures in
October 1995 and the 8.00% Subordinated Debentures (the "Series IV
Debentures") in February 1996 and borrowings under the Xerox Loan beginning in
1996. See "Liquidity and Capital Resources." Interest income for the 1996
Period was $22,000, and the Company had no interest income for the 1995
Period.
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December
31, 1994
The Company generated no revenue for 1995 and 1994.
Research and development expenses for 1995 increased by $2.2 million to $3.0
million from $805,000 for 1994. This increase in research and development
expenses for 1995 primarily reflects additional expense associated with the
development, manufacturing and testing of prototype systems and the related
increase in research and development personnel. Research and development
expenses were offset by $614,000 and $0 for 1995 and 1994, respectively,
resulting from customer payments for the delivery of prototype units.
Marketing, general and administrative expenses for 1995 increased by
$519,000 or approximately 217% to $757,000 from $238,000 for 1994. This
increase in marketing, general and administrative expenses was primarily the
result of adding personnel as the Company expanded overall operations and
support functions.
Related party administrative expense for 1995 increased by $228,000 to
$326,000 from $98,000 for 1994 due to financial advisory fees associated with
the issuance of the Series III Debentures.
Interest expense for 1995 increased by $71,000 to $83,000 from $12,000 for
1994. Interest expense in 1995 related to the Series III Debentures. Interest
expense in 1994 related to the Series I and Series II Debentures. See
"Liquidity and Capital Resources." The Company had no interest income for 1995
and 1994.
Fiscal Year Ended December 31, 1994 Compared to the Period Ended December 31,
1993
The Company generated no revenue for 1994 and for the period from inception
of the Company on May 21, 1993 through December 31, 1993 (the "1993 Period").
Research and development expenses for 1994 increased by $786,000 to $805,000
from $19,000 for the 1993 Period. This increase in research and development
expenses for 1994 primarily reflects additional expense associated with the
increase in the number of research and development personnel as the Company's
efforts to design and develop its prototype systems increased. The 1993 Period
research and development expenses were primarily due to the purchases of molds
and components for prototype systems.
25
<PAGE>
Marketing, general and administrative expenses for 1994 increased by
$212,000 to $238,000 from $26,000 for the 1993 Period. This increase in
marketing, general and administrative expenses was primarily attributable to
the hiring of additional personnel to support the Company's expanded
development and marketing operations.
Related party administrative expense for 1994 was $98,000, and the Company
had no related party administrative expense for the 1993 Period.
Interest expense for 1994 was $12,000 and the Company had no interest
expense for the 1993 Period. The Company had no interest income for 1994 and
for the 1993 Period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the design,
development and production of "proof-of-concept," prototype and pre-production
models of the Truecolor System. The Company's primary sources of funding have
been private placements of equity and debt securities, borrowings and customer
sponsored research and development payments.
In January 1994, the Company issued approximately $360,000 in principal
amount of 8.00% Convertible Subordinated Debentures (the "1994 Debentures").
The 1994 Debentures bore interest at the annual rate of 8.00% (excluding debt
discount).
Between September 1994 and February 1995, the Company sold 235,000 shares of
its Series A Preferred Stock for an aggregate purchase price of $1,175,000. In
September 1994, at the time of the first closing of the private placement of
Series A Preferred Stock, all 1994 Debentures, including accrued interest
thereon, were converted into shares of Series A Preferred Stock.
Between April 1995 and October 1995, the Company sold the Series III
Debentures, together with warrants to purchase an aggregate of 530,919 shares
of Common Stock, for gross proceeds of $1,946,600. The Series III Debentures
have a term of two years and bear interest at the annual rate of 8.00%
(excluding debt discount). At the closing of this offering, the Series III
Debentures, including accrued interest thereon, will convert automatically
into shares of Common Stock.
In February 1996, the Company sold 8.00% Convertible Subordinated Debentures
(the "Series IV Debentures"), together with warrants to purchase 110,454
shares of Common Stock, for total proceeds of $405,000. The Series IV
Debentures had a term of six months and bore interest at the annual rate of
8.00% (excluding debt discount). On August 29, 1996, the Company repaid all
principal of and accrued interest on the Series IV Debentures.
In March 1996, the Company entered into a loan and security agreement (the
"Xerox Loan") with Xerox pursuant to which Xerox agreed to lend the Company up
to $3,000,000 (including $500,000 advanced in January 1996 under a short term
promissory note). Borrowing availability under the Xerox Loan is based on the
Company's achievement of certain development and manufacturing milestones. The
Xerox Loan bears interest at the annual rate of 8.00%, with interest payable
quarterly, and terminates on April 1, 1998. As part of the Xerox Loan, Xerox
received warrants to purchase 375,000 shares of Common Stock. As of June 30,
1996, the Company had borrowed $2,350,000 under the Xerox Loan, the maximum
amount then available. The Xerox Loan is required to be repaid in installments
of $500,000 on July 1, 1997, $500,000 on October 1, 1997, $1,000,000 on
January 2, 1998 and $1,000,000 on April 1, 1998. See "Business--Strategic
Relationships."
From April through June 1996, the Company sold an aggregate of 2,625,000
shares of Common Stock for gross proceeds of $10,500,000.
As of June 30, 1996, the Company had $5,146,000 in cash and cash equivalents
and working capital of $3,734,000. The Company invests cash in excess of its
short-term requirements in short-term, investment-grade, interest bearing
securities.
26
<PAGE>
On October 11, 1996, the Company sold an aggregate principal amount of $3.45
million of its 8.70% notes (the "Interim Notes"), together with warrants to
purchase 45,000 shares of Common Stock (the "Interim Financing"). The net
proceeds to the Company of approximately $2.8 million will be used for working
capital and general corporate purposes. The Interim Notes will be repaid with
a portion of the proceeds from this offering.
Under the Spectra Agreement, the Company is obligated to pay $250,000 per
calendar quarter through 1997 in order to maintain certain exclusive rights.
After 1997, the Company must continue to make quarterly payments to continue
to benefit from the development efforts funded by Spectra's customers. The
Company currently anticipates making such payments over the term of the
Spectra Agreement. See "Business--Subcontractor and Supplier Arrangements."
The Company's capital expenditures for the six months ended June 30, 1996
were approximately $1.5 million. The Company has currently budgeted
approximately $2.0 and $6.3 million for capital expenditures for the last six
months of 1996 and for the fiscal year ending December 31, 1997, respectively.
The Company's currently planned capital expenditures are primarily for
expansion of the Company's manufacturing capabilities.
The Company believes that the net proceeds from the sale of the Common Stock
offered hereby, together with its existing cash resources and cash from
operations, will be sufficient to finance its operations and capital
expenditures through at least 1997. Based on the Company's current operating
plan, the Company's primary requirements for cash through 1997 will be for the
repayment of indebtedness, the expansion of its manufacturing, development,
engineering and customer support capabilities, the commercial production of
additional Truecolor Systems and the further development and enhancement of
the Company's products. As part of its expansion, the Company currently
expects (i) to hire approximately 50 additional manufacturing, development,
engineering and customer support employees, (ii) to acquire inventories of
modules, components and wax-based inks for Truecolor Systems and (iii) to
invest in additional printhead manufacturing capacity. The Company's currently
planned research and development activities are focused on developing, (i)
wider ink jet printheads for greater color coverage per page, (ii) advanced
paper handling functionality particularly duplex printing (the ability to
print on both sides of the page) and (iii) higher resolution ink jet
printheads. There can be no assurance, however, that the Company will be
successful in developing enhancements for its products or that these
enhancements will prove to be desirable to end users. Failure to develop
enhancements to its existing products, particularly the enhancements
contemplated by the agreements with Xerox and IBM, could have a material
adverse effect on the market acceptance of the Company's products and could
result in the termination of the Company's relationship with Xerox or IBM. As
a result, any such failures could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Accent Color's Strategy."
The Company's currently anticipated levels of revenue and cash flow are
subject to many uncertainties and cannot be assured. Further, the Company's
business plan may change, or unforeseen events may occur, requiring the
Company to raise additional funds. The amount of funds required by the Company
will depend on many factors, including the extent and timing of sales of
Truecolor Systems, the timing and cost associated with the expansion of the
Company's manufacturing, development, engineering and customer support
capabilities, the amount of funds raised in this offering and the Company's
operating results. There can be no assurance that, if and when needed,
additional financing will be available, or available on acceptable terms. The
inability to obtain additional financing or generate sufficient cash from
operations could require the Company to reduce or eliminate expenditures for
research and development, production or marketing of its products, or
otherwise to curtail or discontinue its operations, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, if the Company raises funds through the
sale of equity securities, the Common Stock offered hereby may be further
diluted. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
INFLATION
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial results to date.
27
<PAGE>
BUSINESS
THE COMPANY
Accent Color designs, manufactures and sells innovative, high-speed, spot
color printing systems ("Truecolor Systems") for integration with digital,
high-speed, black-on-white printers and sells related consumables. Spot color
printing involves the use of color to enhance traditional black-on-white
documents by accenting critical information, such as a balance due on a
billing statement, or by printing graphics, such as a company logo. The
Company believes its Truecolor Systems are the first, and only, printers
capable of cost-effectively printing or highlighting variable data in multiple
standard and custom colors with the speed and functionality of existing high-
speed, black-on-white printers. Truecolor Systems are designed to address what
the Company believes is a substantial, unfulfilled demand for spot color
printing in the production printing and production publishing segments of the
digital printing market. Accent Color's strategy is to rapidly penetrate these
global markets through strategic relationships with major OEMs, including
Xerox, IBM and Oce.
Truecolor Systems are designed to print spot color in high-speed, high-
volume applications at a low incremental cost per page without diminishing the
speed or performance of the high-speed, black-on-white host printer or
affecting the end user's existing operational methods. Truecolor Systems are
capable of printing up to 310 pages per minute, simultaneously utilizing up to
eight different colors, including custom colors, to print or highlight fixed
or variable data. Truecolor Systems combine the Company's proprietary paper
handling technology with patented ink jet technology from Spectra. The Company
holds an exclusive right to supply products which include Spectra printheads
to print color on the black-on-white output from specified high-speed printers
from Xerox, IBM, Oce and certain other parties through the year 2002. In
connection with their arrangements with the Company, Xerox and IBM are
adapting their existing high-speed, black-on-white printers for integration
with the Company's Truecolor Systems.
The Company intends to market its Truecolor Systems to OEMs of high-speed,
black-on-white printers. According to CAP Ventures, a printing industry market
research firm, the 1995 year-end installed base of digital, high-speed, black-
on-white printers in the U.S. was approximately 22,400 and the installed base
of these printers is projected to grow at a five-year CAGR of approximately
11% to 37,100 systems by the year 2000. In addition, approximately 4,800
digital, high-speed, black-on-white printers were sold in the U.S. in 1995.
Revenue from new system sales, supplies and service exceeded $3.6 billion in
1995 and is expected to grow at a five-year CAGR of approximately 12% to $6.4
billion by the year 2000. This growth is further driven by the number of pages
printed per year which is projected to grow at a five-year CAGR of
approximately 13% by the year 2000.
To facilitate access to its target markets, the Company has entered into
agreements with Xerox and IBM, and has entered into a memorandum of
understanding with Oce which the Company expects to result in an agreement
during late 1996. Xerox, IBM and Oce intend to market, sell and service
Truecolor Systems under their respective corporate logos and product
identifications. Accent Color expects to substantially reduce or eliminate the
cost and time required to develop and maintain a direct sales and service
organization or distribution channel of its own by using the existing sales
and distribution channels of Xerox, IBM and Oce. According to Dataquest, a
market research firm, Xerox (excluding its DocuTech systems), IBM and Oce
accounted for approximately 80% of the high-speed, black-on-white printing
systems sold in the U.S. during 1994 and 1995. In addition, according to
Xerox, there are over 10,000 DocuTech printers installed with which Truecolor
Systems are designed to be integrated. See "Strategic Relationships."
The Company also sells consumables comprised of standard and custom color
wax-based inks, as well as spare parts used with Truecolor Systems. The
Company expects that consumables will generate recurring revenue which the
Company believes will increase as the installed base and usage of Truecolor
Systems increase. According to CAP Ventures, typical high-speed, black-on-
white printers servicing the production printing and production publishing
market segments produce approximately 1.7 million and 975,000 pages per month,
respectively.
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<PAGE>
INDUSTRY OVERVIEW
The proliferation of computer technology and information in digital form
continues to be the primary driver behind the growing market for digital,
high-speed printing systems. Convenient, flexible and cost-efficient, digital
printing systems receive textual and graphical computer-generated images,
including information that may vary from page to page, and print those images
directly without any of the pre-production steps associated with conventional
printing technologies.
Speed of printed output and color capabilities segment the digital printing
systems market. According to CAP Ventures, the 1995 year-end installed base of
digital, high-speed (more than 80 pages per minute), black-on-white printers
in the U.S. was approximately 22,400 and the installed base of those printers
is projected to grow at a five-year CAGR of approximately 11% to approximately
37,100 systems by the year 2000. In addition, approximately 4,800 digital,
high-speed, black-on-white printers were sold in the U.S. in 1995. Revenue
from new system sales, supplies and service exceeded $3.6 billion in 1995 and
is expected to grow at a five-year CAGR of approximately 12% to $6.4 billion
by the year 2000. Total pages printed by high-speed, black-on-white printers
in the U.S. was 366 billion in 1995 and is projected to grow at a five-year
CAGR of approximately 13% to 687 billion by the year 2000.
Digital, high-speed, black-on-white printing systems are generally used in
the production printing and production publishing market segments. CAP
Ventures estimates the installed base of digital, high-speed, black-on-white
printing systems and new printer sales with respect to these market segments
were as follows:
<TABLE>
<CAPTION>
U.S. INSTALLED U.S. NEW U.S. PAGES
BASE SALES PRINTED
(DECEMBER 1995) (1995) (1995)(1)
--------------- -------- ----------
(UNITS) (UNITS) (BILLIONS)
<S> <C> <C> <C>
High-Speed, Black-on-White Systems
Production Printing................... 13,168 3,251 265.3
Production Publishing................. 9,270 1,594 100.7
------ ----- -----
Total................................... 22,438 4,845 366.0
====== ===== =====
</TABLE>
- --------
(1) One page equals one 8 1/2^ x 11^ image.
The production printing segment is characterized by corporate data centers
and commercial printers which process large print runs from computer database
applications. Production printing customers are typically grouped by
application such as (i) billing (banks, credit card companies, utilities,
telecommunications companies), (ii) statements and policy documents (insurance
companies, banks, financial institutions) and (iii) marketing documents
(direct mail houses, commercial printers, quick printers). A typical
installation will have several high-speed, black-on-white printers connected
to a mainframe or a networked system of computers. According to CAP Ventures,
the typical high-speed, black-on-white printer servicing this segment produces
approximately 1.7 million pages per month. In addition to high-speed and high-
volume printing capability, low cost per page is a key driver for this
segment. The Company believes that this segment is dominated by the Xerox
4635, the IBM 3900 and the Oce Pagestream printing systems.
Production publishing systems are widely located in industrial, educational
and commercial organizations, as well as in commercial printing firms and
"quick printers," all of which require traditional publishing capabilities
combined with quick turnaround time for lower volume applications. Production
publishing systems are able to print, collate and assemble complete documents
and are used for producing short-run periodicals, journals, booklets and
reports without the delay and set-up costs associated with traditional offset
printing. According to CAP Ventures, the typical high-speed, black-on-white
printer servicing this segment produces approximately 975,000 pages per month.
Print-on-demand, characterized by fast response, cost effectiveness and
limited run lengths, is a key driver for this segment. The Company believes
that the Xerox DocuTech has a major portion of this market segment.
29
<PAGE>
Research has shown that the use of color in printed communications can lead
to substantial benefits including increased response rates (direct mail),
shorter response times (billing) and reduced error rates (billing). Color
helps organize and differentiate information, resulting in better recognition,
retention and recall. This often results in reduced service calls and a higher
level of customer satisfaction for end users employing color in documents. To
obtain these benefits, spot color typically is used for logos, highlight bars,
signatures, personalization and identifying critical data, such as the amount
owed and due date on a billing statement. Today, pre-printed forms are used to
provide some of these document features. However, there is an associated cost,
inflexibility and inconvenience related to the procurement, storage, handling
and use of pre-printed forms.
Despite the potential benefits of color in these applications and the
general trend toward increased color usage on lower-speed printers in the
overall market for digital printing systems, CAP Ventures estimates that less
than 10% of these production markets are currently served by solutions
offering spot color printing capability of any kind. The Company believes that
this is due primarily to the lack of existing solutions which meet the
requirements of both cost and performance, including the ability to add
variable color data, provide custom color capability and use multiple colors
per print run. Existing spot color solutions are limited by one or more of the
following factors: (i) the ability to print only a single color per print run,
(ii) the lack of custom color capability, (iii) slow print speed, (iv) the
lack of variable data capability, (v) the high cost per page and (vi) large
physical space requirements. As a result, the Company believes that there is a
substantial, unfulfilled demand for spot color printing in a wide range of
applications for both high-speed production printing systems and high-speed
production publishing systems.
THE ACCENT COLOR SOLUTION
Accent Color develops and manufactures its Truecolor Systems for integration
with high-speed, black-on-white printers. Truecolor Systems are designed to
address the spot color printing needs of the high-speed production printing
and production publishing markets. The Company believes its Truecolor Systems
are the first, and only, printers capable of cost-effectively adding variable
data in multiple standard or custom colors with the speed and functionality of
existing high-speed, black-on-white printers. Key benefits of Truecolor
Systems include:
High Performance. High-speed, black-on-white printers currently utilized in
the production printing and production publishing markets operate at speeds
generally more than 80 pages per minute and in many cases exceeding 300 pages
per minute. The Company's proprietary paper handling system enables Truecolor
Systems to operate at or above the operating speed of the printers with which
they are integrated. Truecolor Systems are designed to operate in demanding
printing environments which typically require high reliability, high speeds
and high volumes over long periods of time.
Integration with Major OEM Systems. Truecolor Systems are designed to be
integrated with existing high-speed, black-on-white printing systems. In
connection with their arrangements with the Company, Xerox and IBM are
adapting their existing high-speed, black-on-white printers for integration
with the Company's Truecolor Systems. The Company currently expects that its
arrangement with Oce will require similar adaptations to Oce's printing
systems. According to Dataquest, Xerox (excluding its DocuTech systems), IBM
and Oce accounted for approximately 80% of the high-speed, black-on-white
printing systems sold in the U.S. during 1994 and 1995. In addition, according
to Xerox, there are over 10,000 DocuTech printers installed with which
Truecolor Systems are designed to be integrated.
Variable Data Capability. Truecolor Systems are designed to print or
highlight text and print graphics either of which may vary from page to page
(variable data), such as names, numerical data, dates or other critical
information, in up to eight standard or custom colors per page. This variable
data color capability has the potential added benefit of reducing or
eliminating the cost and inconvenience associated with the procurement,
storage, handling and use of pre-printed forms.
Low Incremental Cost. The Company estimates that the incremental cost to the
end user of a Truecolor System, including equipment cost, consumables and
service, will be approximately $0.005 per page, assuming
30
<PAGE>
approximately 1.4 square inches of color coverage per page. Truecolor Systems
also provide the potential benefit of reducing or eliminating the cost and
inconvenience associated with the procurement, storage, handling and use of
pre-printed forms. Moreover, Truecolor Systems are designed to accept a wide
range of standard print media, including inexpensive papers chosen from a
range of weights (and some labels), without adversely affecting print quality.
Standard and Custom Color Capability. The Company believes that its ability
to provide the end user with a palette of 14 standard colors and a wide
spectrum of user specified custom colors to match the end-user's logo and
other color requirements will address a largely unfulfilled demand in the
digital, high-speed production printing and production publishing market
segments.
Wax-based Ink Advantages. Each Truecolor System incorporates eight drop-on-
demand, ink jet printheads which use hot melt, wax-based inks. The use of wax-
based inks is an important feature of Accent Color's solution in that the
print quality of wax-based inks does not vary with paper absorbency or other
paper characteristics. In contrast, the print quality of printers using water-
based and oil-based inks may vary with different paper characteristics.
Moreover, wax-based inks used in Truecolor Systems are sold in blocks which
are non-toxic and easy to handle.
ACCENT COLOR'S STRATEGY
The Company's objective is to become the leading provider of spot color
printing solutions to the digital, high-speed production printing and
production publishing market segments. The Company believes there is a
substantial, unfulfilled demand for spot color printing in a wide range of
applications for both production market segments. The Company's strategy
combines the following key elements:
Leverage Strategic Relationships. A cornerstone of the Company's strategy is
to establish relationships with the principal OEMs in the Company's target
markets. The goals of these relationships are to (i) rapidly penetrate the
market represented by both the existing installed base and new sales of high-
speed, black-on-white printers, (ii) substantially reduce or eliminate the
cost and time required for the Company to develop and maintain a direct sales
and service organization of its own, (iii) quickly gain credibility and market
acceptance by meeting the technical requirements set by Xerox, IBM, Oce and
other OEM customers and (iv) integrate the Company's Truecolor Systems with
certain hardware and supporting software marketed by these OEMs. To that end,
the Company has entered into agreements with Xerox and IBM and has entered
into a memorandum of understanding with Oce for the resale and service of
Truecolor Systems and related products. According to Dataquest, Xerox
(excluding its DocuTech systems), IBM and Oce accounted for approximately 80%
of the high-speed, black-on-white printing systems sold in the U.S. during
1994 and 1995. In addition, according to Xerox, there are over 10,000
installed DocuTech printers with which Truecolor Systems are designed to be
integrated. See "Strategic Relationships."
Capitalize on Technology. The Company has identified patented, ink jet
technology developed or licensed by Spectra as being capable of providing
critical performance characteristics for its high-speed, spot color solution.
The Company has an exclusive right to supply products which include Spectra
ink jet printheads to print color on the black-on-white output from specified
high-speed printers marketed by Xerox, IBM, Oce and certain other OEM
customers through the year 2002. Truecolor Systems also incorporate the
Company's proprietary paper handling technology and proprietary communications
software developed by the Company in conjunction with Xerox and IBM. See
"Business--Subcontractor and Supplier Arrangements--Spectra."
Continue Product Innovation. The Company intends to strengthen its
competitive position by continually enhancing the capabilities of its
products, focusing primarily on (i) increasing color coverage on a page using
wider ink jet printheads, (ii) enhancing dots-per-inch image resolution and
(iii) providing duplex printing (the ability to print on both sides of a
page). These enhancements are designed to address identified end-user demand
for systems that enable the development of applications that incorporate more
color on a page. In addition, the
31
<PAGE>
Company intends to leverage its technological expertise to expand the breadth
of applications of its color printing process and to develop new product
offerings.
Generate Recurring Revenue from the Installed Base of Truecolor Systems. A
key element of the Company's strategy is to generate revenue from the sale of
consumables, principally wax-based ink, and spare parts for Truecolor Systems.
The Company expects that consumables will generate recurring revenue which the
Company believes will increase as the installed base and usage of Truecolor
Systems increase. In addition, the Company expects that routine service and
maintenance provided by OEM customers will result in sales of spare parts for
Truecolor Systems. Accent Color expects that such consumables and spare parts
will be purchased exclusively through the Company.
Leverage Manufacturing Expertise. The Company intends to leverage
manufacturing expertise by combining the benefits of outsourcing with the
quality assurance of internal final assembly and testing. The Company intends
to utilize subcontractors and suppliers to subassemble and perform certain
testing of major modules of Truecolor Systems. The Company currently performs
final assembly and testing to complete the manufacturing process, including
extensive print quality testing on a variety of papers and applications. The
Company plans to eventually outsource the full assembly and testing of
Truecolor Systems. This strategy will allow the Company to rapidly increase
production while reducing the cost of large capital investments and hiring
additional skilled labor.
TRUECOLOR SYSTEMS
Truecolor Systems are designed to provide spot color printing capability in
high-speed, high-volume applications at a low incremental cost per page without
diminishing the speed or performance of the high-speed, black-on-white host
printer or affecting the end user's existing operational methods. The Company
has approached spot color printing as a post-processing step to the existing
high-speed, black-on-white printing systems. Working together with each of
Xerox and IBM, the Company designed its Truecolor Systems to be integrated with
Xerox and IBM printers. Both Xerox and IBM are adapting their existing high-
speed, black-on-white printers for integration with the Company's Truecolor
Systems.
Truecolor Systems are designed to attach to the output side of high-speed,
black-on-white printers and to connect via interface hardware and software
being jointly developed by Accent Color and each of its OEM customers. These
interfaces will allow the host printer to control all print job operations,
including the processing of images ultimately printed by Truecolor Systems.
32
<PAGE>
Shown below are graphical illustrations of typical configurations for both
cut sheet and continuous form versions of the Truecolor Systems attached to
the respective high-speed, black-on-white host printers. The Truecolor 135 is
a cut sheet system that attaches directly to either the Xerox 4635 production
printing system or the DocuTech 135 production publishing system. Shown below
is the Truecolor 135 attached to the DocuTech 135 Production Publisher.
(ART)
[PICTURE OF TRUECOLOR 135 ATTACHED TO THE DOCUTECH 135 PRODUCTION PUBLISHER]
The Truecolor 390 is a continuous form system that attaches directly to the
IBM 3900 printing system:
(ART)
[PICTURE OF TRUECOLOR 390 ATTACHED TO THE IBM 3900 PRINTER]
The Company's Truecolor Systems consist of a proprietary paper handling
system, ink jet printhead assemblies utilizing standard and custom color wax-
based inks, ink reservoirs and a control system. Accent Color has designed and
developed most of the hardware and interface software for Truecolor Systems.
33
<PAGE>
Paper Handling System. The paper handling system is a critical component of
Truecolor Systems. The system receives cut sheet pages or continuous form
paper from the high-speed, black-on-white printer, registers and aligns the
pages or forms in the transport and, after printing, forwards color accented
pages to appropriate finishing equipment. An advanced capability of the paper
handling system used in a Truecolor System is the ability to move and position
continuous form paper at high printing speeds without using tractor holes to
constrain the paper. Truecolor Systems are currently able to print faster than
the high-speed, black-on-white printers with which they are integrated.
(ART)
[PICTURE OF PAPER PATH THROUGH A TRUECOLOR 135]
[PICTURE OF PAPER PATH THROUGH A TRUECOLOR 390]
Ink Jet Printheads. Truecolor Systems contain eight drop-on-demand, ink jet
printheads. These printheads have the ability to accurately place hot melt,
wax-based ink droplets onto specified locations on paper at densities of 240
or 300 dots per inch. Each printhead is supplied by an off-head ink reservoir
module containing one color of ink which is maintained at a precise
temperature. The ink jet printheads are positioned automatically by commands
from the host printer at the start of a job. Printheads may be aligned to
print larger images.
Currently, Truecolor ink jet printheads are each capable of printing color
up to a width of 0.4 inches, allowing the system's eight ink jet printheads to
cover up to 29% of a page. At Xplor in October 1996, Accent Color expects to
demonstrate ink jet printheads each capable of printing color up to a width of
approximately 1.1 inches allowing the system to cover up to 78% of a page.
34
<PAGE>
Wax-based Inks. The ink jet printheads in Truecolor Systems use hot melt,
wax-based inks, which offer three primary advantages over water-based or oil-
based inks. First, wax-based inks do not dry, but rather immediately change
from a liquid to a solid state without emitting by-products into the air. In
contrast, water-based or oil-based inks, which have relatively long drying
times, are generally less suitable for high-speed printing. Second, wax-based
inks do not distort the paper, while water-based and oil-based inks sometimes
dry differently, distorting the paper, particularly when there is significant
ink coverage. Third, the print quality of wax-based inks does not vary with
paper characteristics (such as absorbency), while print quality using water-
based and oil-based inks may vary.
Ink Reservoirs. Truecolor Systems, in their standard configuration, contain
four wax-based ink reservoirs. Each reservoir contains only one standard or
custom color wax-based ink. A single reservoir can supply up to four ink jet
printheads and is designed to hold enough wax-based ink for eight hours of
normal operation. If a sensor detects a low level of ink, the operator is
notified and is able to refill the reservoir while the Truecolor System
continues to operate, thus minimizing downtime. The number of reservoirs
within the system may optionally be increased to eight. Larger configurations
are feasible with external reservoir modules.
Paper Options and Print Quality. Truecolor Systems are designed to accept a
wide range of print media, including standard and inexpensive papers and some
labels, chosen from a range of weights without adversely affecting print
quality. In contrast, many process color digital printing systems require
relatively expensive special papers. Current versions of Truecolor Systems
print at 240 or 300 dots per inch to provide compatibility with existing high-
speed, black-on-white printers and their supporting software systems.
The Control System. The control system consists of three integrated
computers which use software developed by Accent Color. The first computer
operates the user interface. The second computer receives image data from the
high-speed, black-on-white printer, and prepares this data for printing. The
third computer controls the paper handling system, manages the temperature
control and the position of the ink jet printheads and receives data from all
system sensors.
The Truecolor System's control system is directly linked to and operates in
coordination with a computer within the host high-speed, black-on-white
printer. The control system receives image data and control signals from the
host printer which initiate the print cycle and regulate paper motion and
image positioning. The Truecolor/host printer software interface enables
Truecolor Systems to accurately print fixed and variable, color text and
graphic images at speeds up to 310 pages per minute.
TRUECOLOR PRODUCT LINE
The Company offers both cut sheet and continuous form versions of Truecolor
Systems which are currently expected to be marketed under the corporate logos
and product identifications of the Company's customers. The current versions
of Truecolor Systems include the Truecolor 135 and the Truecolor 390. The
Company expects that Truecolor Systems will be priced to the Company's OEM
customers in the range of $75,000 to $105,000, depending on model and options.
The Truecolor 135 attaches directly to either the Xerox 4635 cut sheet
production printing system or the Xerox DocuTech 135 production publishing
system. Although the Truecolor 135 is designed to print at higher speeds, it
is currently configured to print at the speed of the Xerox 4635 and DocuTech
135 (up to 135 pages per minute) in as many as eight colors simultaneously at
300 dots per inch resolution. The Truecolor 135 is designed to print up to
3,240,000 pages per month and can handle paper sizes from 7.0 to 14.0 inches
wide, 6.0 to 17.0 inches long and paper weights from 16 to 42 pound bond.
The Truecolor 390 attaches directly to the IBM 3900 continuous form
production printing system. Although the Truecolor 390 is designed to print at
higher speeds, it is currently configured to print at the speed of the IBM
3900 (up to 310 pages per minute) in as many as eight colors simultaneously at
240 dots per inch resolution.
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<PAGE>
The Truecolor 390 is designed to print up to 5,600,000 pages per month and can
handle paper sizes from 6.5 to 18.0 inches wide, 6.0 to 17.0 inches long and
paper weights from 16 to 42 pound bond.
TRUECOLOR SYSTEM FEATURES
<TABLE>
<CAPTION>
FEATURES TRUECOLOR 135 TRUECOLOR 390
---------------------------------------------------------------------------
<S> <C> <C>
Host
printer Xerox 4635 or IBM 3900
Xerox DocuTech 135
Paper
Handling Cut sheet Continuous form
Speed 135 pages per minute 310 pages per minute
Resolution 300 dots per inch 240 dots per inch
Ink
Reservoirs 4 standard, 8 optional 4 standard, 8 optional
Paper Width 7.0 to 14.0 inches 6.5 to 18.0 inches
Paper
Length 6.0 to 17.0 inches 6.0 to 17.0 inches
Paper
Weights 16 to 42 pound bond 16 to 42 pound bond
Paper Type Pre-printed or blank sheets, Pre-printed or blank, fanfold
some labels or roll-fed forms, some labels
Maximum
Usage 3.2 million pages per month 5.6 million pages per month
</TABLE>
CONSUMABLES AND SPARE PARTS
The Company's product offering includes consumables, such as standard and
custom color wax-based ink, and spare parts. Spot color printing with
Truecolor Systems requires the consumption of significant quantities of wax-
based ink and the replacement of certain parts that are subject to normal wear
and tear. The Company expects that sales of consumables will generate
recurring revenues which the Company believes will increase as the installed
base and usage of Truecolor Systems increase.
Consumables. The wax-based ink used in the Truecolor Systems is sold in six
kilogram packages containing 60 individual wax-based ink blocks to the
Company's OEM customers. The Company purchases its wax-based ink from Spectra.
As long as the Company purchases its wax-based inks exclusively from Spectra,
Spectra is prohibited, through its agreement with the Company, from knowingly
supplying the wax-based ink directly to the Company's customers. Similarly,
Xerox and IBM are currently prohibited from purchasing wax-based ink from
sources other than the Company, subject to certain conditions, such as the
Company's inability to supply the necessary amount of wax-based ink or
maintain competitive pricing. See "Strategic Relationships."
Spare Parts. The Company expects that periodic preventive maintenance and
repair will need to be performed on Truecolor Systems and will include the
replacement of damaged or worn parts which are expected to be supplied
exclusively by Accent Color to the OEM customer. These replacement parts are
produced by subcontractors and suppliers according to the Company's design
specifications. See "Manufacturing and Assembly" and "Subcontractor and
Supplier Arrangements."
STRATEGIC RELATIONSHIPS
The Company has entered into agreements with Xerox, covering both Xerox's
High End Systems Printing Group and its Production Publishing Systems Group
(which markets the DocuTech family of products), and with IBM. The Company has
also entered into a memorandum of understanding with Oce. Under these
arrangements, Xerox, IBM and Oce intend to market, distribute and support
Truecolor Systems under their respective brand names. These agreements are
significant in several respects. First, according to Dataquest, Xerox
(excluding its DocuTech systems), IBM and Oce accounted for approximately 80%
of the high-speed, black-on-white printers sold in the U.S. during 1994 and
1995. Second, the Company's products are designed to be fully integrated with
36
<PAGE>
certain hardware and supporting software products marketed by Xerox, IBM and
Oce. Third, Accent Color expects that market acceptance of its Truecolor
Systems will be accelerated since sales and service will be provided by the
large, well-established sales and service organizations of Xerox, IBM and Oce.
Xerox Corporation. In February 1996, the Company and Xerox, on behalf of
itself and its international affiliates, Rank Xerox Limited, Fuji Xerox Co.,
Ltd. and Xerox Canada, Inc., entered into a Product Development and
Distribution Agreement. The Xerox Agreement has a three-year term with
successive 12-month renewals unless one party gives six months notice not to
renew. The Xerox Agreement will allow the Company to leverage what it believes
is the largest sales and service operation in the digital printing industry.
Xerox's High End System Printing Group has a major market position for cut
sheet, high-speed printers. The Company has been informed that Xerox's
Production Publishing Systems Printing Group intends to utilize Truecolor
Systems to provide spot color printing to the Production Publishing market
segment. During the initial term of the agreement, Xerox is obligated to
purchase all of its requirements for consumables (standard and custom color
wax-based inks) and spare parts from the Company. If the Company is unable to
perform its obligations under the agreement, after a cure period, the Xerox
Agreement affords Xerox certain backup manufacturing rights, including the
right to have Truecolor Systems manufactured by a third party using the
Company's intellectual property and know-how, provided that, once the Xerox
Loan has been paid in full, Xerox would be required to pay a royalty to the
Company for the right to manufacture the systems. The Xerox Agreement also
requires the Company to warrant its products against manufacturing defects for
90 days after initial installation.
In addition to the Xerox Agreement, the Company has entered into a loan
agreement with Xerox which provides for advancements of up to $3.0 million
based on the achievement of certain milestones and subject to certain
conditions, of which approximately $2.5 million was outstanding as of June 30,
1996. The Xerox Agreement contains clauses imposing limitations on the
Company's right to develop cut sheet systems for a third party as long as the
Xerox Loan is outstanding. In addition, as long as the Xerox Loan is
outstanding, Xerox will enjoy certain exclusive distribution rights with
respect to the sale of the Truecolor 135 and any other cut sheet Truecolor
Systems for use with printers with speeds of 30 pages per minute or more, or
copiers with speeds of 50 copies per minute or more. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and Note 5 of Notes to Financial Statements.
International Business Machines Corporation. IBM's products are used in
corporate data centers and other high-speed printing applications. In April
1996, the Company and IBM entered into the IBM Agreement. This agreement is for
a term of three years with IBM having the right to renew it for two additional
one-year terms. The Company has been informed that Truecolor Systems will be
IBM's first product targeted at spot color applications in high-speed printing.
The integration of color into IBM's AFP (Advanced Function Printing) protocol
and the use of the Truecolor System as an integrated post-processing device
attached to the IBM 3900 high-speed, black-on-white printer are expected to be
marketed worldwide by IBM's international operations.
Under the IBM Agreement, IBM has committed to purchase consumables from the
Company for one year from the date of general availability of Truecolor Systems
to IBM customers and, if certain conditions concerning competitive pricing are
met, thereafter as well. The IBM Agreement also requires the Company to warrant
its products against manufacturing defects for 90 days after initial
installation. Furthermore, under the IBM Agreement, the Company has agreed to
provide spare parts for its products to IBM at prices which will yield a
monthly parts cost per Truecolor System not to exceed a specified amount. There
can be no assurance that the Company will not experience warranty claims or
parts failure rates in excess of those which it has assumed in pricing its
products and spare parts. Any such excess warranty claims or spare parts
failure rates could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Risk Factors--Product
Warranty; Limit on Prices for Spare Parts." If the Company is unable to perform
its obligations under the agreement, after a cure period, the IBM Agreement
affords IBM certain backup manufacturing rights, including the right to
manufacture, or have a third party manufacture, the Company's Truecolor
Systems. This right to manufacture is limited to the specific types of units
not properly delivered and may be terminated if the Company is thereafter able
to deliver the units in question in compliance with the terms
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of the IBM Agreement. In consideration of favorable payment terms, including
the payment of a 10% deposit upon orders, the Company has granted to IBM a
second priority lien against the Company's inventory in an amount not to
exceed the total deposits received.
Oce Printing Systems USA, Inc. In 1996, Oce van der Grinten N.V., purchased
the high-speed printing systems business from Siemens Nixdorf
Informationssysteme AG. At that time, the Company had already established an
initial relationship with Siemens Nixdorf Printing Systems L.P. to provide
Truecolor Systems for Siemens' high-speed printing products. In October 1996,
the Company entered into a memorandum of understanding with Oce. The Company
is currently negotiating a definitive contract for the development and
production of Truecolor Systems to be integrated with Oce's Printing Systems.
There can be no assurance that a definitive contract will be executed or that
Oce will become a customer. See "Risk Factors--Dependence on a Limited Number
of Customers; Revenue Concentration."
MARKETING, PRODUCT SUPPORT, SERVICE AND TRAINING
Accent Color has adopted a third-party distribution strategy that employs
OEM customers to address the global market. OEM customers purchase Truecolor
Systems for integration with their high-speed, black-on-white printing systems
and currently expect to market them for both installed printers and new
printers under their corporate logos and product identifications. The goals of
these relationships are to (i) rapidly penetrate the market represented by
both the existing installed base and new sales of high-speed, black-on-white
printers, (ii) substantially reduce or eliminate the cost and time required
for the Company to develop a direct sales and service organization of its own,
(iii) quickly gain credibility and market acceptance by meeting the technical
requirements set by Xerox, IBM, Oce and other OEM customers and (iv) integrate
the Company's Truecolor Systems with certain hardware and supporting software
marketed by these OEM customers. The Company may enter into relationships with
other OEM customers covering additional segments of the digital, high-speed
printing market.
The Company generally expects to receive monthly or quarterly, non-binding,
rolling forecasts of future orders for its products from its OEM customers.
The forecasts will usually cover the subsequent 12 months. The Company will
plan its future activities, in part, on the basis of these forecasts, but
there can be no assurance that the OEM customers will, in fact, place orders
corresponding to these forecasts. OEM customers are expected to place actual
orders by submitting purchase orders, generally on a monthly basis, which
cover product requirements from four to six months from the date of the
purchase order.
Accent Color intends to provide support for the sales and marketing
activities of its OEM customers including Xerox, IBM and Oce. This will
include technical advice, as required, regarding the optimal use of Truecolor
Systems in demanding applications, and participation in the formulation of
marketing initiatives to position and promote Accent Color's products against
any perceived or emerging competitors. The Company expects to benefit from
this interaction by receiving timely feedback on end-user needs and desires
which will drive product enhancement and new product development. Xerox and
IBM will also distribute wax-based inks provided by Accent Color through their
existing supply channels. Accent Color currently expects to provide sales
support to meet the end user requests to create custom colors using the
Company's wax-based inks.
Xerox and IBM will also distribute spare parts provided by Accent Color for
Truecolor Systems and will provide field service through their established
service organizations. This will provide end users with the first three levels
of customer support coverage, consisting of on site field service for
installation and maintenance, central technical support at a national and
international level and extensive stocking of spare parts to ensure adequate
responsiveness. In exceptional circumstances, Accent Color's technical support
group will assist Xerox and IBM to resolve unusual maintenance situations,
should the need arise via 7-day/24-hour telephone coverage. In addition, Xerox
and IBM will also provide training for their internal organizations and end
users. To support this activity, Accent Color has undertaken training course
development and will provide a limited number of initial training classes to
the education and training organizations of Xerox and IBM.
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MANUFACTURING AND ASSEMBLY
The Company's manufacturing strategy has been to design a product based upon
a relatively small number of discrete modules that can be subassembled and
tested by other parties. Other than the patented ink jet printheads supplied
by Spectra, the Company believes these modules can be readily procured on
competitive terms. Approximately 75% of these modules are common across the
continuous form and cut sheet versions of Truecolor Systems in order to
achieve economies of scale while reducing design time, expediting time-to-
market and minimizing support requirements. Initially, final assembly and
testing, including extensive print quality testing on a variety of papers and
applications, will be done by the Company prior to shipment until the product
reaches full production. The Company's strategy is to begin to subcontract the
full assembly and final testing to turnkey manufacturers once full production
is reached.
The Company is currently negotiating with two large manufacturing companies
to be the primary turnkey manufacturers of the Truecolor Systems. The Company
believes that these companies have both the manufacturing and quality
assurance capabilities to satisfy the Company's supplier qualification process
which initially qualifies and monitors ongoing performance to the Company's
cost, quality and schedule requirements. The Company expects to implement a
formal quality control program to inspect parts received from subcontractors
to determine whether they comply with Company specifications. The Company
intends to monitor adherence to these procedures through site visits and
direct supervision.
The Company has made product assurance and quality a priority in its
business strategy. In pursuit of this goal, the Company intends to apply for
ISO 9001 registration in 1997. In preparation for this, the Company has
adopted a formal approach to documentation control, manufacturing and business
process definition and is implementing an integrated business system software
package to manage key processes. Accent Color also subjects the component
modules and each complete Truecolor System to extensive testing during
assembly. An important part of the testing involves printing tests in which
the Company uses a variety of paper grades and test patterns designed to
verify accuracy, color and other quality characteristics.
SUBCONTRACTOR AND SUPPLIER ARRANGEMENTS
The Company has many suppliers, subcontractors and subassemblers who
participate in the manufacture, subassembly and testing of various parts and
modules of Truecolor Systems. Accent Color's arrangements with its
subcontractors and suppliers generally provide for the purchase of modules or
parts on a purchase order basis with the provision of purchase forecasts by
the Company. The Company believes that, with the exception of the ink jet
printheads, alternative subcontractors and suppliers are available for the
manufacture and supply of the components of Truecolor Systems. The Company's
principal criteria for the selection of subcontractors includes product
quality, production and testing capacity, and cost. Accent Color also
considers the financial strength, size and experience of potential
subcontractors.
Spectra. The Company has contracted with Spectra for its supply of ink jet
printheads, associated equipment and wax-based ink for use in Truecolor
Systems. Spectra currently supplies and licenses hot melt, wax-based ink jet
printing products to several companies for different applications in non-
competing discrete markets. Spectra has granted the Company an exclusive right
to supply products which include Spectra printheads to print color on the
black-on-white output from specified high-speed printers marketed by Xerox,
IBM, Oce and certain other OEM customers. Spectra, in turn, holds licenses for
the use of certain related patented technology. The Spectra agreement allows
the Company, in certain instances, to utilize Spectra's technology to either
manufacture wax-based inks or ink jet printheads itself or arrange for their
manufacture by third parties utilizing such technology. There can be no
assurance, however, that, if necessary, the Company would be able to
manufacture ink jet printheads and wax-based inks itself or negotiate with
third parties for the timely manufacture of ink jet printheads or supply of
wax-based inks on acceptable terms or at all. Furthermore, the use of
Spectra's technology may require the consent of certain other licensors to
Spectra, and there is no assurance that the Company will be able to obtain any
such consents on acceptable terms or at all.
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The Company's agreement with Spectra establishes the terms for the
development and supply of Spectra's ink jet printheads and associated
equipment for use in the Company's products. This agreement restricts Spectra
from knowingly selling wax-based inks or ink jet printheads to customers of
the Company for use in the Company's products and from knowingly working with
any other company on the development of a color printing module for the
markets in which the Company operates. This agreement expires December 2002,
with the Company holding an option to renew for an additional seven years. To
maintain the exclusive rights to such products which include Spectra
printheads, the Company is required to purchase a minimum number of ink jet
printheads each year, to continue to purchase its wax-based ink requirements
from Spectra and to make certain payments. There is no assurance that the
Company will be able to meet the minimum purchase requirements or make these
payments. The Company's agreement with Spectra requires quarterly payments of
$250,000 through 1997 to maintain the exclusivity rights. These specified
payments, together with similar payments from other Spectra customers (which
vary in amount from customer to customer), are used by Spectra to fund ink jet
printhead development, the results of which are available to participating
customers. After 1997, the Company must make additional quarterly payments of
$250,000 to continue to benefit from the development efforts funded by
Spectra's customers. There is no assurance that the Company will be able to
continue such required payments or that the research and development will be
beneficial to the Company. The Company is also negotiating an agreement with
Spectra to aid in the funding of the expansion of Spectra's manufacturing of
ink jet printheads for the Company. Any disruption in the Company's
relationship with Spectra, or in Spectra's relationship with its licensors,
may have a material adverse effect on the Company's business, financial
condition and results of operations.
RESEARCH AND DEVELOPMENT
The Company considers the enhancement of its present products to be its
research and development priority. Consequently, the Company currently devotes
a significant portion of its resources to product development. The Company
plans to commit substantial resources to enhance its technology in the areas
of (i) wider ink jet printheads for greater color coverage per page, (ii)
advanced paper handling functionality, particularly duplex printing (the
ability to print on both sides of a page) and (iii) higher resolution ink jet
printheads. Certain enhancements are required under the Company's contracts
with Xerox and IBM. The Company also plans to devote resources to assure the
quality and performance of its Truecolor Systems. The Company anticipates it
will need to increase its research and development spending and hire
additional personnel as the Company's business expands in the future.
Accent Color considers its on-going efforts in engineering, research and
development to be a key component of its strategy. The Company believes that
its future success will depend in part on its ability to continue to enhance
its existing products and to develop new products. The Company's research and
development activities consist of both long-term efforts to develop and
enhance products and services and short-term projects to make modifications to
respond to the immediate needs of its OEM customers.
The Company spent approximately $800,000, $3.1 million and $3.5 million on
engineering, research and development in the years ended December 31, 1994 and
1995 and the six months ended June 30, 1996, respectively. As of September 30,
1996, Accent Color had 42 employees engaged in engineering, research and
development.
BACKLOG
The Company measures backlog based on purchase orders for Truecolor Systems
that have not yet been shipped. A substantial amount of the Company's backlog
can be modified or cancelled prior to 30 days before shipment without penalty,
except for the recovery of the Company's actual costs. Any failure of the
Company to meet an agreed-upon schedule could lead to the cancellation of the
related order. The timing of purchase orders and modifications to such
purchase orders may result in substantial fluctuations in backlog from period
to period. Accordingly, the Company believes that backlog cannot be considered
a meaningful indicator of future financial performance.
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As of June 30, 1996, the Company's backlog was approximately $3.1 million.
Approximately 80% of the Company's backlog is expected to be shipped to OEM
customers during the current fiscal year. As of June 30, 1995, the Company had
no backlog.
COMPETITION
The Company believes there is no other product currently marketed that is
capable of cost-effectively printing variable data in multiple standard or
custom colors with the functionality of existing high-speed, black-on-white
printers. At the present time, there exist digital, low-speed color printers,
offset color presses and high-speed printers that can print in only one color
at a time.
Suppliers to the market compete on the basis of speed, print quality,
functionality, reliability, cost per page and color variety. The Company
competes, in significant part, on the basis of advanced proprietary technology
in the areas of paper handling, ink jet color printing and interface software
which allows the Company's products to print variable data, in multiple
standard or custom colors at high speeds. Products or product improvements
based on new technologies could be introduced by other companies with little
or no advance notice.
Competition to supply color printing is fragmented. The Xerox 4890 (a
similar product is also marketed by Xerox as the DocuTech 390HC) is a spot
color printer which prints in black and one color per job (out of a limited
palette). It is capable of printing 92 pages per minute but does not offer
custom colors. BESTE Bunch Systems markets a color offset press used as a
downstream add-on to Oce or IBM high-speed, black-on-white printers. While it
is capable of providing color logos, it does not print variable data, requires
a longer time to set up and requires specialized skills. The use of this
offset press also requires additional processes of negative production and
plate making. Fully installed, the footprint can exceed 30 square feet, making
it impractical for many existing data center installations. In addition, there
are production full process color systems available which operate at print
speeds of up to 70 pages per minute, including the Xeikon DCP-1 and the Xerox
DocuColor 40. These systems have relatively high print costs per page and
operate at much lower speeds than typical production printing requires, making
them impractical for high-speed print jobs.
In addition to direct competition from other firms utilizing high-speed
color technologies, there exists potential direct competition from firms
improving technologies used in low-speed to medium-speed color printers and
indirect competition from firms producing pre-printed forms. Manufacturers of
high-speed, black-on-white printers may also, in time, develop comparable or
more effective color capability within their own products which may render the
Company's products obsolete.
INTELLECTUAL PROPERTY
The Company's ability to compete effectively will depend, in part, on the
ability of the Company to maintain the proprietary nature of its technology.
The Company relies, in part, on proprietary technology, know-how and trade
secrets related to certain aspects of its principal products and operations,
but there can be no assurance that others, including the Company's OEM
customers, may not independently develop the same or similar technology or
otherwise obtain access to the Company's proprietary technology. To protect
its rights in these areas, the Company generally requires its OEM customers,
its suppliers and its employees to enter into nondisclosure agreements. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information. If the Company is unable to maintain the proprietary nature of
its products through nondisclosure agreements or other protection, its
business could be materially adversely affected. The U.S. Patent and Trademark
Office has filed a Notice of Allowance with respect to an initial patent
application relative to the Company's color printing apparatus. In addition,
the Company has filed an application for a second patent relative to certain
enhancements of Truecolor Systems. There can be no assurance, however, as to
the degree of protection offered by this notice, or as to the likelihood that
pending patent applications will be issued. There can be no assurance that
potential competitors, many of which may have substantially greater resources
than the Company and may have made substantial investments in competing
technologies, do not currently have or will not obtain patents that will
prevent, limit or
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interfere with the Company's ability to make and sell its products or will not
intentionally infringe on the Company's patents if and when issued. Moreover,
no assurance can be given that Accent Color's technology does not conflict
with existing enforceable patents. Although patents may issue to Accent Color
as a result of patent applications it has filed, Accent Color's technology may
fall within the scope of existing enforceable patents. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of its technology or
independent development by others of similar technology. In addition, the laws
of some foreign countries do not protect the Company's proprietary rights to
the same extent as do the laws of the U.S. There can be no assurance that
these protections will be adequate.
The Company has an exclusive right to supply products which include
Spectra's ink jet printheads to print color on the black-on-white output from
specified high-speed printers marketed by Xerox, IBM, Oce and certain other
parties. There can be no assurance that Spectra will be willing or able to
enforce its patents or maintain licenses pertaining to such technology. To the
extent that wax-based inks and ink jet printheads purchased from Spectra are
covered under patents or licenses, the Company relies on Spectra's rights
under such patents and licenses and Spectra's willingness and ability to
enforce its patents and maintain its licenses. There can be no assurance that
Spectra will be willing or able to enforce its patents and maintain its
licenses and any such unwillingness or inability could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Although the Company believes that its products and technology do not
infringe on any existing proprietary rights of others, there can be no
assurance that third parties will not assert such claims against the Company
in the future or that such future claims will not be successful. The Company
could incur substantial costs and
diversion of management resources with respect to the defense of any claims
relating to proprietary rights, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, parties making such claims could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief, which
could effectively block the Company's ability to make, use, sell, distribute
or market its products and services in the U.S. or abroad. Such a judgement
could have a material adverse effect on the Company's business, financial
condition and results of operations. In the event a claim relating to
proprietary technology or information is asserted against the Company, the
Company may seek licenses to such intellectual property. There can be no
assurance, however, that such a license could be obtained on commercially
reasonable terms, if at all, or that the terms of any offered licenses will be
acceptable to the Company. The failure to obtain the necessary licenses or
other rights could preclude the sale, manufacture or distribution of the
Company's products and, therefore, could have a material adverse effect on the
Company's business, financial condition and results of operations. The cost of
responding to any such claim may be material, whether or not the assertion of
such claim is valid. See "Business--Intellectual Property."
FACILITIES
The Company's facilities are located at 800 Connecticut Boulevard in East
Hartford, Connecticut and presently consist of approximately 51,000 square
feet. The Company presently intends to exercise an option to lease an
additional 15,000 square feet at this facility. The Company believes that,
with the exercise of this option, these facilities will meet the Company's
needs for the next 12 months. The Company leases this facility under a lease
that expires in 2000.
PERSONNEL
As of September 30, 1996, the Company employed 114 individuals, of whom 42
employees were engaged in engineering and research, 28 employees in
manufacturing and operations, 12 employees in marketing and sales efforts, 13
employees in quality assurance, and 19 employees were working in an
administrative capacity. In addition, the Company had also engaged 14
independent contractors, of which three were engaged in engineering and
research, nine in manufacturing and operations and two in administration. The
Company's employees are not represented by a collective bargaining
organization, and the Company has never experienced a work stoppage. The
Company believes that its relationship with its employees is good.
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The Company's future success will further depend on both its ability to
retain key personnel and its ability to attract qualified personnel.
Competition for qualified personnel is intense and there can be no assurance
that the Company will be successful in hiring or retaining them. The inability
of the Company to retain key personnel or attract qualified personnel may have
an adverse effect on the Company's business financing conditions and results
of operations. See "Risk Factors--Dependence on Key Personnel."
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings. The Company
has received a claim asserted by a former investment banker for the Company
for compensation in the form of commissions and warrants to purchase Common
Stock. The Company estimates that its liability regarding this matter would
not exceed approximately $125,000 and warrants to purchase approximately
35,000 shares of Common Stock at an exercise price of $4.00 per share. While
the Company intends to contest certain aspects of this claim, it does not, in
any event, believe that this claim will have any material adverse effect on
its financial position.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS(1)
---- --- -------- --------
<S> <C> <C> <C>
Richard J. Coburn.............. 64 Chairman of the Board 3
Norman L. Milliard............. 54 President, Chief Executive 3
Officer and Director
Stephen K. Henn................ 33 Vice President, Chief Financial
Officer and Treasurer
Martyn R. Jones................ 40 Vice President
Richard Hodgson(2)............. 79 Director 2
Willard F. Pinney, Jr.(3)...... 53 Secretary and Director 3
Raymond N. Smith(2)............ 66 Director 2
Robert H. Steele(2)(3)......... 57 Director 1
Peter Teufel(3)................ 46 Director 1
</TABLE>
- --------
(1) The Company's Board of Directors is divided into three classes. One class
of directors is elected each year at the annual meeting of stockholders
for a term of office expiring after three years. Each director will serve
until the expiration of his term and thereafter until his successor is
duly elected and qualified.
(2) Member of the Audit Committee.
(3) Member of the Executive Compensation Committee.
Richard J. Coburn has been Chairman of the Board since May 1996 and is a co-
founder of the Company. Mr. Coburn served as President of the Company from May
1993 until May 1996 and served as Chief Executive Officer of the Company from
May 1993 until August 1996. From 1991 until 1993, Mr. Coburn worked as an
independent consultant to development stage companies. Mr. Coburn was a co-
founder of KCR Technology, Inc., a manufacturer of high-speed, black-on-white
printers, and served in various roles, both consulting and managerial,
including President from 1977 to 1991. Mr. Coburn was also the founder of
Coburn Technology, Inc., a developer of a xerographic printer product for word
processing, the rights to which were sold to Wang Laboratories, Inc., and
served as its President from 1974 to 1977. From 1968 to 1974, Mr. Coburn was
President of Scan-Optics, Inc., a manufacturer of data capture equipment.
Prior to 1968, Mr. Coburn had served in various engineering management
positions in aerospace over a 14 year period. Mr. Coburn is also a director
and co-founder of Scan-Optics, Inc. Mr. Coburn received his degree in
engineering from Yale University.
Norman L. Milliard has been President of the Company since May 1996, has
been Chief Executive Officer of the Company since August 1996 and was elected
a director of the Company in 1995. Mr. Milliard served as Vice President of
the Company from January 1994 until May 1996. From 1988 through 1993, Mr.
Milliard served as head of the Special Product Group at AEG Schneider
Automation, Inc. (formerly Modicon, Inc.), an industrial automation company,
and as the Director of Engineering and Operations for KCR Technology, a
manufacturer of high-speed printers, from 1982 to 1988. Mr. Milliard founded
two companies in the electronic music field and holds a number of patents in
both the printing and electronic music fields. Mr. Milliard received his
degree in physics, with honors, from The Citadel, the Military College of
South Carolina.
Stephen K. Henn has been Chief Financial Officer and Treasurer of the
Company since September 1995 and has been Vice President since May 1996. From
1993 to 1995, Mr. Henn was an attorney at Murtha, Cullina, Richter and Pinney.
From 1992 to 1993, Mr. Henn was Chief Financial Officer and Manager of Finance
and Administration at Chester Precision Company, a precision parts
manufacturer for the auto industry. From 1991 to 1992, Mr. Henn was
Controller, Treasurer and Chief Financial Officer of the Schiavone
Corporation, a real estate and transportation firm. From 1988 to 1991, Mr.
Henn served as Vice President and Treasurer of CompuDyne Corporation, an
engineering services company, and Treasurer of Corcap, Inc., a diversified
holding company and the parent corporation of CompuDyne. Mr. Henn was a member
of the Board of Directors of
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Corcap, Inc. from 1989 to 1994. Mr. Henn received his degree in economics from
the University of Chicago and his JD from the University of Connecticut.
Martyn R. Jones has been Vice President of the Company in charge of Sales,
Marketing and Service since May 1996. He served as Director of Marketing from
November 1995 to May 1996. From 1993 to 1995, Mr. Jones served as Director of
Strategic Planning and Industry Marketing for AEG Schneider Automation, Inc.,
an industrial automation company. Mr. Jones held a variety of marketing and
sales support positions within AEG Schneider's U.S. and European operations
from 1984 to 1992. Mr. Jones received his degree in electrical engineering and
electronics from the University of Manchester Institute of Science and
Technology (UK).
Richard Hodgson became a director of the Company in 1996 and is Chairman of
the Audit Committee. Since 1980, Mr. Hodgson has been a director of McCowan
Associates, Inc., an investment management firm, where he is currently in
charge of technology investment strategies. Mr. Hodgson had previously been
Corporate Senior Vice President of ITT Corporation, a hotels, gaming,
entertainment and information publishing company, where he was worldwide
Product Group Manager for the Engineered Products Group. Prior to joining ITT
in 1968, Mr. Hodgson was President and CEO of Fairchild Camera, where he
initiated Fairchild's entry into the semiconductor industry. Mr. Hodgson is a
co-founder and a Director Emeriti (not active) of Intel Corporation, a
manufacturer of microprocessor, communications and semiconductor products, and
is also a director of IBIS Technology Corp., I-Stat Corp., the Aegis Fund and
Continental Capital Corp. Mr. Hodgson received his degree in engineering from
Stanford University and his MBA from Harvard University.
Willard F. Pinney, Jr. has been Secretary of the Company since December 1993
and became a director of the Company in 1996. Mr. Pinney has been a partner
since 1973 in the Connecticut law firm of Murtha, Cullina, Richter and Pinney,
which serves as counsel to the Company. He received his degree in political
science from Yale University and his JD, with honors, from the University of
Michigan Law School.
Raymond N. Smith, a co-founder of the Company, has been a director since its
inception and was Chairman from its inception through April 1996. Mr. Smith,
currently retired, was involved in a variety of sales and management roles in
various real estate development concerns from 1971 to 1992. Mr. Smith was
President of FMS Properties of Naples, Florida, a developer and builder of
retirement communities, from 1983 to 1992. From 1966 to 1970, Mr. Smith was
National Sales Manager, Large Scale Systems for Control Data Systems, Inc., a
global systems integrator, and from 1960 to 1965, was an account manager for
IBM. Mr. Smith attended the United States Military Academy at West Point and
the Executive MBA Program at the University of Chicago.
Robert H. Steele became a director of the Company in 1996 and is Chairman of
the Executive Compensation Committee. Since 1992, Mr. Steele has been Senior
Vice President of John Ryan Company, a banking services company, and director
of Merlin Retail Banking Center since 1992. Mr. Steele was President of RHS
Consulting, Inc., a business consulting firm, in 1991. From 1985 to 1990, Mr.
Steele was Chairman and Chief Executive Officer of Dollar Dry Dock Bank of New
York, for which a receiver was appointed in 1992. Mr. Steele also served as
President and CEO of Norwich Savings Society. Mr. Steele is a former U.S.
Congressman from the State of Connecticut and currently serves as a director
of Moore Medical Corp., a pharmaceutical distributor, Scan-Optics, Inc., a
manufacturer of data capture equipment and NLC Insurance Companies. Mr. Steele
received his undergraduate degree from Amherst College and his Master's Degree
from Columbia University and holds an honorary Doctor of Laws from Sacred
Heart University.
Peter Teufel became a director of the Company in 1994. Mr. Teufel is
Managing Director of The Kaizen Institute of Europe, a management consulting
firm, which he co-founded in 1992. From 1979 through 1992, Mr. Teufel was
employed with Canon Inc., a manufacturer of cameras, business machines and
precision optical equipment, where he served as Vice President from 1989 to
1992. Mr. Teufel is a mechanical engineering graduate of the Technical
Institute at Giessen and an industrial engineering graduate of the Technical
Institute at Darmstadt.
The Board of Directors has appointed a Compensation Committee, which
provides recommendations concerning salaries and incentive compensation for
executive officers of the Company, and an Audit Committee,
45
<PAGE>
which reviews the results and scope of any audits and other services provided
by the Company's independent auditors.
Executive officers of the Company are elected annually by the Board of
Directors and serve at its discretion or until their successors are duly
elected and qualified.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of Messrs. Pinney,
Steele and Teufel. Decisions concerning executive compensation are made by the
Board of Directors, primarily upon the recommendation of the Compensation
Committee. During the year ended December 31, 1995, none of the executive
officers of the Company served on the compensation committee of any other
entity. There are no family relationships among executive officer or directors
of the Company. Messrs. Pinney, Smith and Teufel have been parties to certain
transactions with the Company. See "Certain Transactions."
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities to the Company for the fiscal year
ended December 31, 1995 of (i) the chief executive officer and (ii) the
Company's other most highly compensated executive officers whose total salary
and bonus for the year ended December 31, 1995 exceeded $100,000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
--------------- -------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR(2) SALARY ($) OPTIONS/ SARS (#)
--------------------------- ------- --------------- -------------------
<S> <C> <C> <C>
Richard J. Coburn................... 1995 108,958 --
Chairman 1994 71,042 --
1993 -- --
Norman L. Milliard.................. 1995 133,958 120,000
President and Chief 1994 86,042 --
Executive Officer 1993 -- --
Raymond N. Smith(3)................. 1995 108,958 --
1994 71,042 --
1993 -- --
</TABLE>
- --------
(1) The aggregate amount of Other Annual Compensation in the form of
perquisites and other personal benefits for each of the Named Executive
Officers did not equal or exceed the lesser of $50,000 or 10% of such
individual's total salary and bonus for the fiscal year.
(2) The Company was formed in May 1993 and commenced operations in January
1994. Messrs. Coburn and Smith received no salary in 1993. Mr. Milliard
joined the Company in January 1994.
(3) Until April 30, 1996, Mr. Smith was Chairman of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in fiscal 1995. No stock
appreciation rights were granted during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
-------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ------------------
GRANTED FISCAL YEAR BASE PRICE(1) DATE 5%($) 10%($)
---------- ------------ ------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Coburn....... -- 0% $ -- -- -- --
Norman L. Milliard...... 75,000(3) 18% 1.19 2/28/05 56,129 142,242
45,000(4) 11% 3.67 10/9/00 45,586 100,734
Raymond N. Smith........ -- 0% -- -- -- --
</TABLE>
46
<PAGE>
- --------
(1) All options were granted at the fair market value on the date of grant as
determined by the Board of Directors.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
reflect the Company's estimates or projections of future Common Stock
prices. There can be no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price
appreciation over the term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
(3) Represents incentive stock options that vest ratably on each of February
28, 1996, 1997 and 1998.
(4) Represents non-qualified stock options which are currently exercisable.
AGGREGATE OPTION EXERCISE IN LAST FISCAL YEAR AND OPTION VALUES AS OF DECEMBER
31, 1995
None of the Named Executive Officers exercised stock options during the year
ended December 31, 1995. The following table provides information regarding
the number of shares underlying both exercisable and unexercisable stock
options as of December 31, 1995 and the values of unexercised "in-the-money"
options as of that date. An option is "in-the-money" if the per share fair
market value of the underlying share exceeds the option exercise price per
share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard J. Coburn........... -- -- $-- $--
Norman L. Milliard.......... 70,000 50,000 -- --
Raymond N. Smith............ -- -- -- --
</TABLE>
- --------
(1) There was no public market for the Common Stock at December 31, 1995.
Accordingly, these values have been calculated based on the assumed
initial offering price of $ , less the applicable exercise price.
DIRECTORS' REMUNERATION; ATTENDANCE
Members of the Board of Directors of the Company received no compensation
for their service as directors in 1995. The Company adopted a directors'
compensation package in May 1996, whereby all outside directors receive a
monthly retainer of $500 and a per meeting fee of $500 for each meeting of the
Board of Directors and any committee meetings attended in person by such
director. The Company also reimburses directors for reasonable travel expenses
incurred in order to attend meetings.
Under its 1995 Stock Incentive Plan, the Company established a stock
incentive program for non-employee directors, whereby each received an initial
option to purchase 30,000 shares of Common Stock and will receive an option to
purchase an additional 5,000 shares of Common Stock on the date of the annual
meeting of the Board each year for four years beginning in 1997 as long as the
director remains in office. These options are exercisable at the fair market
value of the shares on the date of grant. Under this program, on May 3, 1996,
the following directors each received options to purchase 30,000 shares at an
exercise price of $4.00 per share: Richard Hodgson, Willard F. Pinney, Jr.,
Raymond N. Smith, Robert H. Steele and Peter Teufel.
The Board of Directors met two times during the previous fiscal year and
acted by the unanimous written consent of its members on three occasions. No
director attended fewer than 75% of the total number of meetings of the Board.
EMPLOYMENT AGREEMENTS
Richard J. Coburn and Norman L. Milliard have entered into employment
agreements (the "Employment Agreements") with the Company effective January
1994. Mr. Coburn's agreement has a five-year term that
47
<PAGE>
expires at the end of 1998. Mr. Milliard's agreement has a three-year term
which is automatically extended each year for an additional one year, subject
to termination before the extension by either party. If the Employment
Agreements are terminated by the Company without "cause" as defined therein,
Mr. Coburn would be entitled to receive his base salary and payment of health
benefits for a period of one year and Mr. Milliard would be entitled to
receive his base salary and payment of health benefits for a period of two
years and would become fully vested in any outstanding options. Mr. Coburn's
current base salary is $120,000, and Mr. Milliard's current base salary is
$140,000.
The Employment Agreements restrict Messrs. Coburn and Milliard from directly
or indirectly competing with the Company through the participation in the
development of any product related to the Company's product or processes
during the term of the agreement and for a period of two years thereafter. The
Employment Agreements do not otherwise restrict Messrs. Coburn and Milliard
from pursuing other business interests that do not directly compete with the
Company.
1995 STOCK INCENTIVE PLAN
In January 1995, the Board of Directors and shareholders of the Company
adopted the 1995 Stock Incentive Plan (the "Stock Plan"). Pursuant to the
Stock Plan, the Board of Directors or a committee thereof may grant options or
other awards for up to 1,500,000 shares of Common Stock. The Stock Plan is
designed to give directors, officers and employees of the Company and other
persons an expanded opportunity to acquire Common Stock in the Company or
receive other long-term incentive remuneration in order that they may
participate in the Company's growth and be motivated to remain with the
Company and promote its further development and success.
The Plan includes provisions for granting both "incentive stock options"
intended to qualify for certain federal tax advantages and "non-statutory
options" which do not qualify for such tax advantages. Qualified incentive
stock options may be granted only to eligible persons who are full-time
employees of the Company while non-statutory options may be granted to any
persons, including directors, consultants and advisors of the Company who, in
the sole opinion of the Board of Directors or a committee thereof are, from
time to time, responsible for the management or growth of all or part of the
business of the Company.
The purchase price under each incentive stock option shall be as determined
by the Board of Directors or a committee thereof but shall not be less than
100% of the fair market value of the shares subject to such option on the date
of grant, provided that such option price shall not be less than 110% of such
fair market value in the case of any stock option granted to a principal
shareholder. The purchase price per share of Common Stock deliverable upon the
exercise of non-statutory options shall be determined by the Committee, but
shall not be less than 85% of the fair market value of the Common Stock on the
date of grant.
Each option granted under the Stock Plan shall become exercisable on such
date or dates and in such amount or amounts as the Board of Directors or a
committee thereof shall determine. To date, all options granted to employees
are exercisable with respect to not more than one-third of the shares subject
thereto after the expiration of one year following the date of its grant, and
are exercisable as to an additional one-third of such shares after the
expiration of each of the succeeding two years, on a cumulative basis, so that
such option, or any unexercised portion thereof, shall be fully exercisable on
the third anniversary of the date of its grant.
As of October 11, 1996, incentive stock options to purchase 946,350 shares
of Common Stock and non-statutory options to purchase 347,250 shares of Common
Stock have been granted. All such options have been granted to full-time
employees of the Company, except for (i) options granted to non-employee
directors, as described above, (ii) an option granted in January 1995 to
Murtha, Cullina, Richter and Pinney, counsel to the Company, entitling it to
purchase 30,000 shares of the Company's Common Stock for a period of five
years at an exercise price of $1.19 per share (the fair market value per
share) and (iii) an option granted in May 1996 to a consultant of the Company
entitling him to purchase 2,250 shares of Common Stock of the Company for five
years at an exercise price of $4.00.
48
<PAGE>
CERTAIN TRANSACTIONS
On May 1, 1996, Raymond N. Smith, a director of the Company, entered into a
consulting agreement with the Company under which he will perform services for
the Company in consideration for a quarterly retainer of $21,250. The
consulting agreement requires, among other things, that Mr. Smith be available
for up to 25 hours per month to provide general business and management
advice. In addition to general advisory services, the Company anticipates
using Mr. Smith in certain sales and marketing capacities.
Willard F. Pinney, Jr. is a partner at the law firm of Murtha, Cullina,
Richter and Pinney. Mr. Pinney is also Secretary, director and a shareholder
of the Company. Murtha, Cullina, Richter and Pinney received an option to
purchase 30,000 shares of Common Stock of the Company in 1995 prior to Mr.
Pinney becoming a director. This option was granted to Murtha, Cullina,
Richter and Pinney in recognition of its willingness to modify its traditional
billing practices in order to accommodate the Company's ability to pay for
legal services provided during its formative stage.
Walter R. Keay served as a director of the Company from 1993 through 1995.
Mr. Keay is a principal in the investment banking firm of Knickerbocker
Securities, Inc. ("Knickerbocker"). The Company and Knickerbocker entered into
a Letter Agreement dated January 11, 1994 and a Sales Agency Agreement in
April 1994, both relating to a private offering of Preferred Stock of the
Company. The Company also entered into a Corporate Finance Consulting
Agreement with Knickerbocker in September 1994 and a Sales Agency Agreement
relating to the Company's Series III Debentures. Lastly, the Company entered
into a Termination Agreement dated March 29, 1996 which terminated all of the
above agreements. In 1995, Knickerbocker received a warrant to purchase 15,500
shares of the Company's Series A Preferred Stock exercisable at $5.50 per
share, which will be converted into a warrant to purchase 65,100 shares of
Common Stock at $1.31 per share. In 1996, Knickerbocker received $275,000 and
a warrant to purchase 15,000 shares of the Company's Common Stock, exercisable
at $3.67 per share, pursuant to the above relationships.
During February 1996, the Company completed a private placement of 8.00%
subordinated debentures (the "Series IV Debentures") for net proceeds of
$405,000, of which $240,000 was issued to Peter Teufel. The Series IV
Debentures are non-convertible and bear interest at 8.00% (excluding debt
discount), due August 31, 1996. In addition, each holder received detachable
warrants (the "Series IV Warrants") to purchase Common Stock equal to the
Series IV Debentures' principal amount divided by $3.67. The Series IV
Warrants issued to Mr. Teufel are exercisable into 65,454 shares of Common
Stock at an exercise price of $3.67 per share and expire on February 28, 2001.
Richard Hodgson, a director of the Company, invested $250,000 in the Interim
Financing, for which he received a note in the aggregate principal amount of
$287,500 and a warrant to purchase 3,750 shares of Common Stock.
Elizabeth Steele, the wife of Robert H. Steele, a director of the Company,
invested $100,000 in the Interim Financing and received a note in the
aggregate principal amount of $115,000 and a warrant to purchase 1,500 shares
of Common Stock.
49
<PAGE>
PRINCIPAL SHAREHOLDERS AND KEY PERSONNEL
The following table sets forth certain information as of October 11, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) each
person (or group of affiliated persons) known by the Company to own more than
5% of the outstanding shares of Common Stock, (ii) each of the directors of
the Company, (iii) each of the Named Executive Officers and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES ------------------
BENEFICIALLY PRIOR TO AFTER THE
NAME AND ADDRESS(1) OWNED(2) OFFERING OFFERING
------------------- ------------ -------- ---------
<S> <C> <C> <C>
Peter Teufel(3)(4)............................ 661,617 9.75% 6.76%
Raymond N. Smith(3)........................... 615,969 9.17% 6.34%
Dr. Klaus Werding(5).......................... 585,507 8.56% 5.95%
73 Langasse Strasse
Wetzlar, Germany 6330
Richard J. Coburn............................. 441,969 6.61% 4.56%
Orbis Pension Trustees, Ltd................... 375,000 5.61% 3.87%
1 Connaught Place
London, W2 2DY, England
Norman L. Milliard(6)......................... 205,000 3.03% 2.10%
Willard F. Pinney, Jr.(3)(7).................. 74,787 1.11% *
Robert H. Steele(3)(8)........................ 47,076 * *
Richard Hodgson(3)............................ 30,000 * *
All directors and officers of the Company as a
group (9 persons)(9)......................... 2,161,418 30.50% 21.43%
</TABLE>
- --------
* Less than 1%.
(1) The address of all persons who are executive officers or directors of the
Company is in care of the Company, 800 Connecticut Boulevard, East
Hartford, Connecticut 06108.
(2) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares, subject to
community property laws where applicable. Shares not outstanding but
deemed beneficially owned by virtue of the right of a person or group to
acquire them within 60 days of October 11, 1996 ("currently exercisable
options") are treated as outstanding only for purposes of determining the
amount and percent owned by such person or group. The number of shares of
Common Stock deemed outstanding prior to this offering consists of (i)
4,719,840 shares of Common Stock outstanding as of October 11, 1996, (ii)
1,362,312 shares of Common Stock issuable upon the conversion of all
outstanding shares of Series A Preferred Stock as of the date of this
Prospectus and (iii) 604,746 shares of Common Stock issuable upon the
conversion of the Company's outstanding Series III Debentures upon the
closing of this offering.
(3) Includes 30,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(4) Includes 65,454 shares of Common Stock subject to currently exercisable
warrants.
(5) Includes 156,003 shares of Common Stock subject to currently exercisable
warrants.
(6) Includes 70,000 shares of Common Stock subject currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(7) Includes 30,000 shares of Common Stock subject to currently exercisable
options granted to Murtha, Cullina, Richter and Pinney, counsel to the
Company, of which Mr. Pinney is a partner.
(8) Includes 8,184 shares of Common Stock owned by Mr. Steele's spouse, as to
which he disclaims beneficial ownership.
(9) Includes 335,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan and 65,454
shares of Common Stock subject to currently exercisable warrants.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, no par value, and 500,000 shares of Preferred Stock, no par
value. The following statements are brief descriptions of the securities of
the Company, including summaries of certain provisions in the Company's
Restated Certificate of Incorporation, its Bylaws and the laws of the State of
Connecticut and are qualified in their entirety by reference to such
documents, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
COMMON STOCK
As of October 11, 1996 there are 6,686,898 shares of Common Stock
outstanding (including 1,362,312 shares of Common Stock issuable upon the
automatic conversion of 324,360 outstanding shares of Series A Preferred Stock
as of the date of this Prospectus and 604,746 shares of Common Stock issuable
upon the automatic conversion of outstanding Series III Debentures and accrued
interest thereon as of the closing of this offering). In addition, 1,190,868
shares of Common Stock are reserved for issuance upon exercise of certain
outstanding warrants, all of which are currently exercisable, and 1,293,600
shares of Common Stock are reserved for issuance upon exercise of stock
options granted under the Company's 1995 Stock Incentive Plan.
Holders of Common Stock are entitled to receive ratably such dividends as
may be declared on the Common Stock by the Company's Board of Directors out of
funds legally available therefor, subject to the prior rights of holders of
Preferred Stock. See "Dividend Policy." All of the outstanding shares of
Common Stock are, and the shares to be issued pursuant to this offering will
be, when issued, fully paid and non-assessable. Holders of Common Stock are
entitled to one vote for each share held of record with respect to the
election of directors and other matters submitted for a vote of shareholders.
Holders of shares of Common Stock are not entitled to cumulative voting. In
the event that any shares of Preferred Stock are issued and outstanding,
holders of Preferred Stock are entitled to one vote for each share of Common
Stock into which such Preferred Stock may be convertible and such holders of
Preferred Stock vote together with holders of Common Stock as a single class
on the election of directors and all other matters submitted for a vote of
shareholders, except as otherwise provided by law. Accordingly, subject to the
voting rights of holders of Preferred Stock, as such rights may exist from
time to time, shareholders casting a plurality of the votes cast by
shareholders entitled to vote in an election of directors may elect all of the
directors standing for election.
Upon the liquidation, dissolution or winding up of the Company, the
shareholders of Common Stock are entitled to receive ratably the net assets of
the Company available after the payment of all debts and other liabilities and
subject to the prior rights of any class of Preferred Stock outstanding from
time to time. Shareholders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
shareholders of Common Stock are subject to the rights of the shareholders of
Preferred Stock.
PREFERRED STOCK
There are no shares of Preferred Stock outstanding as of the date of this
prospectus and no outstanding rights to acquire shares of Preferred Stock. All
shares of Preferred Stock previously issued by the Company have been converted
automatically upon the date hereof into shares of Common Stock and any
previously outstanding rights to acquire Preferred Stock shall, hereafter,
constitute rights to purchase only shares of Common Stock. All such converted
shares of Preferred Stock are deemed to be authorized and unissued and may be
reissued. Consequently, the Board of Directors is authorized to issue up to
500,000 shares of Preferred Stock in one or more series and to fix the rights,
preferences, voting rights, privileges and restrictions of each such series,
including dividend rights, conversion rights, redemption rights and
liquidation preferences, all without further vote or action by the
stockholders of the Company. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the Company
without further action by the shareholders and may adversely affect the voting
and other rights of holders of Common Stock. Holders of
51
<PAGE>
any series of Preferred Stock which shall have the right to convert into
shares of Common Stock, shall have as many votes for each share of Preferred
Stock held as the number of shares of Common Stock into which such share of
Preferred Stock may be converted with respect to all matters submitted to
shareholders. Such holders shall vote together with the holders of Common
Stock, as a single class, except as otherwise provided by law. Pursuant to
Connecticut law, the holders of Preferred Stock and the holders of Common
Stock are entitled to vote as separate classes with respect to certain
mergers, sales of all or substantially all of the assets of the Company and
certain amendments to the Restated Certificate of Incorporation of the Company
which affect or are detrimental to the particular class.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation contains provisions that
could discourage a proxy contest or make more difficult the acquisition of a
substantial block of the Company's Common Stock. The Restated Certificate of
Incorporation provides for a classified Board of Directors, and members of the
Board of Directors may be removed only upon the affirmative vote of holders of
at least two-thirds of the shares of capital stock of the Company issued and
outstanding and entitled to vote. In addition, since the Board of Directors is
authorized to issue shares of Common Stock and Preferred Stock any such
issuance could dilute and adversely affect various rights of the holders of
shares of Common Stock and, in addition, could be used to discourage an
unsolicited attempt to acquire control of the Company.
The Company is subject to the Connecticut Stock Corporation Act (the
"Connecticut Act"), some provisions of which prohibit a publicly held
Connecticut corporation from engaging in a "business combination" (including
the issuance of equity securities which have an aggregate market value of 5%
or more of the total market value of the outstanding shares of the Company)
with an "interested shareholder" (as defined in the Connecticut Act) for a
period of five years from the date of the shareholder's purchase of stock
unless approved in a prescribed manner. The application of this section could
prevent a change of control of the Company. Generally, approval is required by
the Board of Directors and by a majority of the non-employee directors of the
Company and by 80% of the outstanding shares of the Company and two-thirds of
the voting power of shares other than shares held by the interested
shareholder. There can be no assurance that these provisions will not prevent
the Company from entering into a business combination that otherwise would be
beneficial to the Company. The Connecticut Act also requires that any action
of the stockholders of the Company taken by written consent without a meeting
must be unanimous.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.
52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 9,686,898 shares of
Common Stock outstanding. Of these shares, the 3,000,000 shares to be sold in
this offering will be freely tradeable in the public market without
restriction under the Securities Act, unless they are purchased by an
"affiliate" of the Company, as that term is defined in Rule 144 promulgated
under the Securities Act.
SALES OF RESTRICTED SHARES
The remaining 6,686,898 shares are "restricted securities" as defined by
Rules 144 or 701 (the "Restricted Shares"). Restricted securities may be sold
in the public market only if they are registered under the Securities Act or
if they qualify for an exemption from registration under Rules 144, 144(k) or
701 under the Securities Act. Substantially all of the Restricted Shares are
subject to the lock-up agreements described below. Upon the expiration of the
lock-up agreements, 3,294,648 of the Restricted Shares may be sold pursuant to
Rule 144, subject in some cases to certain volume restrictions imposed
thereby. Subject to Rules 144 and 144(k) and to the lock-up agreements,
additional shares will be available for sale in the public market as follows
(i) 144,000 shares will be eligible for resale in the public market
immediately following the completion of this offering pursuant to Rule 144(k),
(ii) 2,081,527 shares will become eligible for sale during the 90 days
following the date of this Prospectus pursuant to Rule 144, and (iii)
4,461,371 shares will be eligible for sale upon expiration of their respective
two-year holding periods, subject to the restrictions and conditions of Rule
144.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), who has beneficially owned restricted securities
for at least two years is entitled to sell, within any three-month period, a
number of such securities that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 96,869 shares, based on the
number of shares to be outstanding after this offering) or the average weekly
trading volume in the public market during the four calendar weeks preceding
the filing of the seller's Form 144, provided certain requirements regarding
availability of public information concerning the Company, manner of sale and
notice of sale are satisfied. A person who is not an affiliate, has not been
an affiliate within three months prior to the sale and has beneficially owned
the restricted securities for at least three years is entitled to sell such
shares under Rule 144(k) without regard to any of the limitations described
above. Rule 144 also provides that affiliates who are selling shares that are
not restricted securities must nonetheless comply with the same restrictions
applicable to restricted securities with the exception of the holding period
requirement. The two- and three-year holding periods described above do not
begin to run until the full purchase price or other consideration is paid by
the person acquiring the restricted securities from the issuer or an affiliate
of the issuer and may include the holding period of a prior owner who is not
an affiliate of the issuer. The Commission has proposed certain amendments to
Rule 144 that would reduce by one year the holding periods required for shares
subject to Rule 144 to become eligible for resale in the public market. This
proposal, if adopted, would increase the number of shares of Common Stock
eligible for immediate resale following expiration of the lock-up agreements
described below. No assurance can be given concerning whether or when the
proposal will be adopted by the Securities and Exchange Commission.
Securities issued in reliance on Rule 701 are also Restricted Shares and,
beginning approximately 90 days after the date of this Prospectus, may be
resold by persons other than affiliates of the Company subject only to the
manner of sale provisions of Rule 144 and may be resold by affiliates under
Rule 144 without compliance with its two-year holding period requirement.
Outstanding options to purchase 398,750 shares of Common Stock were fully
vested as of October 11, 1996, substantially all of which are subject to 180-
day lock-up agreements.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock issued or
issuable under the Stock Plan. The registration statements are expected to be
filed as soon as practicable after the period ending 180 days after the date
of this Prospectus and will become effective immediately upon filing. Shares
covered by the registration statements will be eligible for resale in the
public market after the effective date of the registration statements.
53
<PAGE>
As of the consummation of this offering, holders of 4,889,898 shares of
Common Stock will have rights to require the Company in certain circumstances
to register such shares for sale under the Securities Act. See "--Registration
Rights."
Prior to this offering there has been no public market for the Common Stock
of the Company and no prediction can be made as to the effect, if any, that
market sales or the availability for sale of such shares will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of substantial numbers of shares in the public market could adversely
affect the market price of the Common Stock and could impair the Company's
ability to raise capital through a sale of its equity securities. See "Risk
Factors--No Prior Public Market; Possible Volatility of Stock Price."
LOCK-UP AGREEMENTS
The executive officers and directors of the Company and certain stockholders
and option holders, who, upon the closing of this offering, will beneficially
own an aggregate of 6,686,898 shares of Common Stock and options and warrants
to purchase 2,484,468 shares of Common Stock have agreed that they will not,
without the prior written consent of Cowen & Company, sell, offer, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable for any shares of Common Stock for a period
of 180 days after the date of this Prospectus.
REGISTRATION RIGHTS
The Company has granted several registration rights applicable, as of the
date hereof, to an aggregate of 4,889,898 shares of Common Stock. These rights
apply to (i) shares of Common Stock received by former holders of Preferred
Stock on the automatic conversion of their shares of Preferred Stock on the
date of this Prospectus, (ii) shares of Common Stock held by former holders of
the Company's Series III Debentures converted automatically upon the closing
of this offering, (iii) shares of Common Stock received upon the exercise of
warrants initially issued to the holders of Series III Debentures, the holders
of Series IV Debentures, former placement agents to the Company and the
holders of the Interim Notes, (iv) shares of Common Stock which may be
acquired by Xerox Corporation upon the exercise of its warrant to purchase
Common Stock and (v) shares of Common Stock sold by the Company to certain
investors. In general, each of these registration rights is set forth in and
governed by a registration rights agreement which provides the holders of such
rights with the opportunity to require the Company, on one occasion, (and for
certain shareholders, two occasions) to register their shares for public sale
(a "required registration right"). However, no registration is permitted for
at least six months following this offering or within six months of any other
registration of shares for sale by the Company or its stockholders. These
registration rights agreements also provide for certain incidental or "piggy-
back" rights entitling holders of such rights to request the registration of
their shares for public sale together with shares of Common Stock for which
the Company may elect to file a registration statement. Each required
registration right may only be exercised by holders of a majority of the
shares then entitled to registration pursuant to such right and the Company
would then be required to use its best efforts to effect any such
registration. In addition, if the Company proposes to register any of its
Common Stock either for its own account or for the account of other
shareholders, the Company is required to notify the holders of piggy-back
rights and, subject to certain limitations, to include in such registration
shares of Common Stock requested to be included therein by such holders. The
Company is generally obligated to bear the expenses, other than underwriting
discounts and sales commissions, of all of these registrations.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Cowen & Company and Janney Montgomery Scott Inc.
are acting as representatives (the "Representatives"), has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Cowen & Company.................................................
Janney Montgomery Scott Inc. ...................................
---------
Total......................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
closing certificates, opinions and letters from the Company and its counsel
and independent auditors. The nature of the Underwriters' obligations is such
that they are committed to purchase all of the shares of Common Stock being
offered hereby (other than those covered by the over-allotment option
described below) if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may re-allow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for up to 30
days after the date of this Prospectus to purchase up to an aggregate of
450,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them as shown in the foregoing table bears to the 3,000,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the 3,000,000 shares of
Common Stock offered hereby.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company, the Company's executive officers and directors and certain
other stockholders and option holders of the Company have agreed that they
will not, without the prior written consent of Cowen & Company, sell, offer,
contract to sell, or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for any shares of Common Stock for
a period of 180 days after the date of this Prospectus. See "Shares Eligible
for Future Sale--Lock-up Agreements."
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of the shares offered hereby to any account over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiation among the Company and the Representatives. Among
55
<PAGE>
the factors to be considered in such negotiations are the prevailing market
conditions, the market prices of securities of publicly traded companies
engaged in activities similar to those of the Company, the Company's financial
and operating history and condition, estimates of the business potential of
the Company, the present state of the Company's development, and other factors
deemed relevant. The estimated initial public offering range set forth on the
cover hereof is subject to change as a result of market conditions and other
factors.
LEGAL MATTERS
The validity of the shares offered hereby and certain other legal matters
will be passed upon for the Company by Murtha, Cullina, Richter and Pinney of
Hartford and New Haven, Connecticut. Certain legal matters will be passed upon
for the Underwriters by Testa, Hurwitz and Thibeault, LLP of Boston,
Massachusetts.
Willard F. Pinney, Jr., a partner of Murtha, Cullina, Richter and Pinney, is
Secretary and director and a shareholder of the Company. Mr. Pinney holds
14,787 shares of Common Stock of the Company and, as a director of the
Company, options to purchase 30,000 shares of Common Stock. Murtha, Cullina,
Richter and Pinney holds an option to purchase 30,000 shares of Common Stock
of the Company. See "Certain Transactions" for a description of each of these
options.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994 and
for the two years ended December 31, 1995 and 1994 and for the period from
inception (May 21, 1993) through December 31, 1993 included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (together with all
amendments, exhibits, annexes and schedules thereto, the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made. For
further information with respect to the Company and such Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed as part of the Registration Statement. Statements contained in
this Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance
to the copy of such contract or document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by
such reference to such exhibits. The Registration Statement, including
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies also may be obtained from the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company intends to furnish to its shareholders annual reports containing
consolidated Financial Statements audited by an independent public accounting
firm.
56
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheets as of December 31, 1994, 1995 and June 30, 1996 (unaudited)
and pro forma June 30, 1996 (unaudited).................................. F-3
Statements of Operations for the period from inception (May 21, 1993)
through December 31, 1993 and for the years ended December 31, 1994 and
1995, and for the period from inception (May 21, 1993) through December
31, 1995, for the six months ended June 30, 1995 and 1996 (unaudited),
and for the period from inception (May 21, 1993) through June 30, 1996
(unaudited).............................................................. F-4
Statements of Cash Flows for the period from inception (May 21, 1993)
through December 31, 1993 and for the years ended December 31, 1994 and
1995, and for the period from inception (May 21, 1993) through December
31, 1995, for the six months ended June 30, 1995 and 1996 (unaudited),
and for the period from inception (May 21, 1993) through June 30, 1996
(unaudited).............................................................. F-5
Statement of Changes in Shareholders' (Deficit) Equity for the period from
inception (May 21, 1993) through December 31, 1995 and for the six months
ended June 30, 1996 (unaudited).......................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Accent Color Sciences, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in shareholders' (deficit) equity
present fairly, in all material respects, the financial position of Accent
Color Sciences, Inc. (a development stage company) at December 31, 1995 and
1994, and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, the period from inception (May 21, 1993) through
December 31, 1993, and for the period from inception (May 21, 1993) through
December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a development stage company and has a net
working capital and shareholders' deficit due to recurring net losses which
raises substantial doubt about the Company's ability to continue as a going
concern. The Company's plans in regard to these matters are also described in
Note 1. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Price Waterhouse LLP
Hartford, CT
April 5, 1996, except as to Note 13,
which is as of October 8, 1996.
F-2
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
---------------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.. $ 164,881 $ 967 $ 5,146,401 $ 5,146,401
Accounts receivable........ -- -- 366,671 366,671
Due from employee (Note
10)....................... -- -- 25,000 25,000
Inventories (Notes 2 and
4)........................ -- -- 867,335 867,335
Prepaid expenses and other
assets.................... 5,126 8,857 364,589 364,589
---------- ---------- ----------- -----------
Total current assets..... 170,007 9,824 6,769,996 6,769,996
Fixed assets, net (Notes 2
and 3)...................... 25,306 488,060 2,019,029 2,019,029
Other assets, net (Note 2)... 50,524 230,231 168,955 12,491
---------- ---------- ----------- -----------
Total assets............. $ 245,837 $ 728,115 $ 8,957,980 $ 8,801,516
========== ========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
Current liabilities:
Notes payable (Note 5)..... $ -- $ 50,000 $ 161,634 $ 161,634
Note payable to related
party (Note 5)............ -- -- 240,000 240,000
Accounts payable........... 123,638 916,517 970,594 970,594
Accrued expenses........... 156,188 334,820 34,081 34,081
Due to officers (Note 10).. 23,068 20,711 -- --
Obligation under capital
lease (Note 7)............ -- -- 50,812 50,812
Customer advances and de-
posits (Note 2)........... -- 550,000 1,578,800 1,578,800
---------- ---------- ----------- -----------
Total current liabili-
ties.................... 302,894 1,872,048 3,035,921 3,035,921
---------- ---------- ----------- -----------
Obligation under capital
lease (Note 7).............. -- -- 143,515 143,515
Notes payable, net of dis-
count (Note 5).............. -- -- 2,245,517 2,245,517
Series III Debentures, net of
discount (Note 5)........... -- 1,945,117 1,960,562 --
Accrued interest (Note 5).... -- 74,911 154,338 --
---------- ---------- ----------- -----------
Total non-current liabil-
ities................... -- 2,020,028 4,503,932 2,389,032
---------- ---------- ----------- -----------
Commitments and contingencies
(Notes 7, 10, 11 and 12)
Shareholders' (deficit) eq-
uity (Note 6):
Series A Preferred stock,
no par value, 500,000
shares authorized,
249,360, 324,360, 324,360
and 0 shares issued and
outstanding............... 1,090,574 1,430,634 1,430,634 --
Common stock, no par value,
25,000,000 shares autho-
rized, 1,797,000,
2,094,840, 4,719,840 and
6,668,805 shares issued
and outstanding........... 51,300 821,291 10,544,367 13,933,437
Deficit accumulated during
the development stage..... (1,198,931) (5,415,886) (10,556,874) (10,556,874)
---------- ---------- ----------- -----------
Total shareholders' (def-
icit) equity............ (57,057) (3,163,961) 1,418,127 3,376,563
---------- ---------- ----------- -----------
Total liabilities and
shareholders' (deficit)
equity.................. $ 245,837 $ 728,115 $ 8,957,980 $ 8,801,516
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION FOR THE PERIOD
(MAY 21, 1993) FOR THE YEAR (MAY 21, 1993) FOR THE SIX MONTHS FROM INCEPTION
THROUGH ENDED DECEMBER 31, THROUGH ENDED JUNE 30, (MAY 21, 1993)
DECEMBER 31, ------------------------ DECEMBER 31, ------------------------ THROUGH
1993 1994 1995 1995 1995 1996 JUNE 30, 1996
-------------- ----------- ----------- -------------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Costs and expenses:
Research and
development.......... 19,000 805,357 3,050,534 3,874,891 1,137,047 3,472,592 7,347,483
Marketing, general
and administrative... 26,398 238,368 757,493 1,022,259 262,171 1,491,329 2,513,588
Related party
administrative
expense (Note 10).... -- 98,000 325,636 423,636 144,386 -- 423,636
-------- ----------- ----------- ----------- ----------- ----------- ------------
45,398 1,141,725 4,133,663 5,320,786 1,543,604 4,963,921 10,284,707
-------- ----------- ----------- ----------- ----------- ----------- ------------
Other (income)
expense:
Interest expense...... -- 11,808 83,292 95,100 9,330 198,680 293,780
Interest income....... -- -- -- -- -- (21,613) (21,613)
-------- ----------- ----------- ----------- ----------- ----------- ------------
-- 11,808 83,292 95,100 9,330 177,067 272,167
-------- ----------- ----------- ----------- ----------- ----------- ------------
Net loss............... $(45,398) $(1,153,533) $(4,216,955) $(5,415,886) $(1,552,934) $(5,140,988) $(10,556,874)
======== =========== =========== =========== =========== =========== ============
Unaudited pro forma net
loss per common share
(Note 2).............. $ (.62) $ (.71)
=========== ===========
Unaudited pro forma
weighted average
common shares
outstanding (Note 2).. 6,628,312 7,037,986
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(MAY 21, (MAY 21,
1993) FOR THE YEAR ENDED 1993)
THROUGH DECEMBER 31, THROUGH
DECEMBER 31, ------------------------ DECEMBER 31,
1993 1994 1995 1995
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss................... $(45,398) $(1,153,533) $(4,216,955) $(5,415,886)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization.............. 72 3,116 111,127 114,315
Write-off of deferred
offering costs............ -- -- 47,264 47,264
Options granted for
services.................. -- -- 18,400 18,400
Debenture issued for
services.................. -- -- 50,000 50,000
Loss on disposal of fixed
assets.................... -- -- 9,378 9,378
CHANGES IN ASSETS AND
LIABILITIES:
Accounts receivable and
amount due from employee.. -- -- -- --
Inventories................ -- -- -- --
Prepaid expenses and other
assets.................... -- (5,126) (3,731) (8,857)
Accounts payable and
accrued expenses.......... 18,269 261,557 793,990 1,073,816
Due to officers............ 6,082 16,986 (2,357) 20,711
Customer advances and
deposits.................. -- -- 550,000 550,000
Accrued interest........... -- -- 74,911 74,911
-------- ----------- ----------- -----------
Net cash used in operating
activities................ (20,975) (877,000) (2,567,973) (3,465,948)
-------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of fixed
assets.................... -- -- -- --
Purchases of fixed assets.. (538) (27,857) (525,718) (554,113)
Cost of patent............. -- (3,359) (1,207) (4,566)
-------- ----------- ----------- -----------
Net cash used in investing
activities................ (538) (31,216) (526,925) (558,679)
-------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment of capital lease
obligations............... -- -- -- --
Proceeds from issuance of
debentures................ -- -- 1,789,333 1,789,333
Proceeds from issuance of
warrants.................. -- -- 56,631 56,631
Proceeds from issuance of
common stock.............. 21,800 29,500 -- 51,300
Proceeds from exercise of
warrants.................. -- -- 694,960 694,960
Net proceeds from issuance
of preferred stock through
offerings and conversion
of debt................... -- 1,090,574 340,060 1,430,634
Increase in notes payable.. -- -- 50,000 50,000
Deferred offering costs.... -- (47,264) -- (47,264)
-------- ----------- ----------- -----------
Net cash provided by
financing activities...... 21,800 1,072,810 2,930,984 4,025,594
-------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash
equivalents............... 287 164,594 (163,914) 967
Cash and cash equivalents
at beginning of period.... -- 287 164,881 --
-------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.......... $ 287 $ 164,881 $ 967 $ 967
======== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE
CASH PAID FOR:
Interest................... $ -- $ -- $ -- $ --
Income taxes............... -- 250 250 500
NON-CASH INVESTING
ACTIVITIES:
Capital lease obligations of $243,129 (unaudited)
were incurred during the six months ended
<CAPTION>June 30, 1996, when the
Company FOR THE
entered into new equipment PERIOD FROM
leases INCEPTION
(MAY 21,
FOR THE SIX MONTHS ENDED 1993)
JUNE 30, THROUGH
--------------------------- JUNE 30,
1995 1996 1996
------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss................... $ (1,552,934) $ (5,140,988) $(10,556,874)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization.............. 9,627 292,685 407,000
Write-off of deferred
offering costs............ 47,264 -- 47,264
Options granted for
services.................. 18,400 -- 18,400
Debenture issued for
services.................. -- -- 50,000
Loss on disposal of fixed
assets.................... -- 72,566 81,944
CHANGES IN ASSETS AND
LIABILITIES:
Accounts receivable and
amount due from employee.. -- (391,671) (391,671)
Inventories................ -- (867,335) (867,335)
Prepaid expenses and other
assets.................... (6,707) (355,732) (364,589)
Accounts payable and
accrued expenses.......... 215,549 (255,059) 818,757
Due to officers............ (2,357) (20,711) --
Customer advances and
deposits.................. 150,000 1,028,800 1,578,800
Accrued interest........... 9,340 79,427 154,338
------------- ------------- -------------
Net cash used in operating
activities................ (1,111,818) (5,558,018) (9,023,966)
------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of fixed
assets.................... -- 5,524 5,524
Purchases of fixed assets.. (138,061) (1,543,314) (2,097,427)
Cost of patent............. (1,207) -- (4,566)
------------- ------------- -------------
Net cash used in investing
activities................ (139,268) (1,537,790) (2,096,469)
------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment of capital lease
obligations............... -- (48,802) (48,802)
Proceeds from issuance of
debentures................ 830,838 393,218 2,182,551
Proceeds from issuance of
warrants.................. 27,276 138,032 194,663
Proceeds from issuance of
common stock.............. -- 9,585,044 9,636,344
Proceeds from exercise of
warrants.................. -- -- 694,960
Net proceeds from issuance
of preferred stock through
offerings and conversion
of debt................... 340,060 -- 1,430,634
Increase in notes payable.. 50,000 2,173,750 2,223,750
Deferred offering costs.... -- -- (47,264)
------------- ------------- -------------
Net cash provided by
financing activities...... 1,248,174 12,241,242 16,266,836
------------- ------------- -------------
Net increase (decrease) in
cash and cash
equivalents............... (2,912) 5,145,434 5,146,401
Cash and cash equivalents
at beginning of period.... 164,881 967 --
------------- ------------- -------------
Cash and cash equivalents
at end of period.......... $ 161,969 $ 5,146,401 $ 5,146,401
============= ============= =============
SUPPLEMENTAL DISCLOSURE
CASH PAID FOR:
Interest................... $ -- $ 62,971 $ 62,971
Income taxes............... 250 250 750
NON-CASH INVESTING
ACTIVITIES:
Capital lease obligations of $243,129 (unaudited)
were incurred during the six months ended
June 30, 1996, when the
Company
entered into new equipment
leases
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING
COMMON STOCK PREFERRED STOCK THE
--------------------- ------------------ DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE TOTAL
--------- ----------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from sale...... 3,900 $ 21,800 -- $ -- $ -- $ 21,800
Net loss................ -- -- -- -- (45,398) (45,398)
--------- ----------- ------- ---------- ------------ -----------
December 31, 1993....... 3,900 21,800 -- -- (45,398) (23,598)
Stock split (Note 6).... 1,751,100 -- -- -- -- --
Conversion of debentures
(Note 5)............... -- -- 74,360 371,804 -- 371,804
Proceeds from sale...... -- -- 160,000 643,770 -- 643,770
Conversion of promissory
notes (Note 10)........ 42,000 50,000 -- -- -- 50,000
Reclassification........ -- (20,500) -- -- -- (20,500)
Shares issued for
services (Note 6)...... -- -- 15,000 75,000 -- 75,000
Net loss................ -- -- -- -- (1,153,533) (1,153,533)
--------- ----------- ------- ---------- ------------ -----------
December 31, 1994....... 1,797,000 51,300 249,360 1,090,574 (1,198,931) (57,057)
Proceeds from sale (Note
6)..................... -- -- 75,000 340,060 -- 340,060
Exercise of warrants
(Note 5)............... 297,840 694,960 -- -- -- 694,960
Options granted to
service provider....... -- 18,400 -- -- -- 18,400
Warrants issued with
debt (Note 5).......... -- 56,631 -- -- -- 56,631
Net loss................ -- -- -- -- (4,216,955) (4,216,955)
--------- ----------- ------- ---------- ------------ -----------
December 31, 1995....... 2,094,840 821,291 324,360 1,430,634 (5,415,886) (3,163,961)
Warrants issued with
debt (Note 5).......... -- 138,032 -- -- -- 138,032
Proceeds from sale (Note
6)..................... 2,625,000 9,585,044 -- -- -- 9,585,044
Net loss................ -- -- -- -- (5,140,988) (5,140,988)
--------- ----------- ------- ---------- ------------ -----------
June 30, 1996
(unaudited)............ 4,719,840 $10,544,367 324,360 $1,430,634 $(10,556,874) $ 1,418,127
========= =========== ======= ========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND OPERATIONS OF THE COMPANY
Accent Color Sciences, Inc. (the "Company") was incorporated in Connecticut
in May 1993. The Company was initially formed to design, develop, test and
manufacture high-speed, color printers to attach to high-speed, black-on-white
printers. The Company is considered a development stage company as defined in
Statement of Financial Accounting Standards No. 7.
, Development and testing of a prototype began in January 1994, with a
"proof-of-concept" system developed in November 1994. During 1995, the Company
began negotiations with major original equipment manufacturers ("OEMs") to
enter into formal development relationships. At the same time, the Company
accelerated its engineering and development activities as its efforts were
focused on designing and building the next generation prototypes which were
completed in 1995. Also in 1995, the Company and IBM entered into a letter of
intent for the development of three prototype systems, and in August 1995, the
Company and Xerox entered into a memorandum of understanding for the
development of two prototype systems. In November 1995, the Company and Oce
(then Siemens Nixdorf Printing Systems) executed a memorandum of understanding
for the development of two prototype systems. Through June 30, 1996, the
Company had received $1.3 million (unaudited) for the delivery of prototype
machines. Through June 30, 1996, $914,000 (unaudited) had been offset against
research and development expense.
Management's plans for funding future operations include a loan facility
from one of the OEMs (see Note 5), a planned private placement offering of
common stock in 1996 (see Note 6), additional advances from the OEMs and a
planned initial public offering of common stock. Additionally, in 1996 the
Company believes it will be successful in the sale of production units to the
OEMs. The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is a development
stage company and has a net working capital and shareholders' deficit due to
recurring net losses which raises substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed in the preparation of these
financial statements are as follows:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit with banks, as well as
investments with original maturities of less than ninety days.
Inventories
Costs of materials purchased for specific research and development projects
have been charged to research and development expense as incurred. Inventories
purchased for the production of printer systems which will be sold to
customers have been capitalized. Inventories are carried at the lower of cost
or market, determined by the first-in, first-out method.
F-7
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Fixed Assets
Fixed assets are stated at cost and are depreciated on a straight-line basis
over the estimated useful lives of the assets, which are between 3 and 5
years. Leasehold improvements are amortized over the shorter of the term of
the lease or the useful life of the asset.
Patent
Patent costs of $3,359, $4,566 and $4,566 (unaudited) at December 31, 1994,
1995 and June 30, 1996, respectively, are capitalized as incurred and are
amortized on a straight-line basis over the shorter of the legal term or
estimated useful life. Accumulated amortization was $99, $338 and $472
(unaudited) at December 31, 1994, 1995 and June 30, 1996, respectively.
Deferred Offering Costs
At December 31, 1994, $47,264 of offering costs were deferred in
contemplation of a common stock offering. The offering was not completed and
such costs were expensed in 1995.
Deferred Debt Issuance Costs
Included in other assets are deferred debt issuance costs of $0, $278,157
and $278,157 (unaudited) at December 31, 1994, 1995 and June 30, 1996,
respectively, which are being amortized using the effective interest method
over the term of the related debt. Accumulated amortization was $0 and $52,154
at December 31, 1994 and 1995, respectively, and $121,693 (unaudited) at June
30, 1996.
Income Taxes
The Company uses the liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Research and Development Expenditures
Research and development expenditures are charged to expense as incurred.
Customer Advances and Deposits
Customer Advances Under Research and Development Agreements
Amounts advanced pursuant to customer sponsored research and development
agreements are recognized as a liability until certain obligations (as
defined in the agreements, including delivery and acceptance of certain
test units) under the agreements have been met. When the obligations are
met, the amounts are offset against research and development expense.
Amounts offset against research and development expense were $0, $0 and
$614,000 for the period ended December 31, 1993 and for the years ended
December 31, 1994 and 1995, respectively, and $0 (unaudited) and $300,000
(unaudited) for the six months ended June 30, 1995 and 1996, respectively.
Customer Deposits
Based on the Company's sales contracts with certain customers, the
Company is entitled to 20% of the sales price upon receipt of a firm
purchase order. Customer deposits of $0, $550,000 and $1,578,800
F-8
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(unaudited) have been deferred as a liability as of December 31, 1994, 1995
and June 30, 1996, respectively. Customer deposits will be recorded as
income upon the shipment and acceptance of the related product.
Unaudited Pro Forma Financial Data
The outstanding 8.00% Convertible Subordinated Debentures (the "Series III
Debentures"), including accrued interest (see Note 5), will convert upon the
closing of a planned initial public offering of Common Stock and the Series A
Convertible Voting Preferred Stock (the "Series A Preferred Stock," see Note 6
) will convert to Common Stock upon the effectiveness of a planned initial
public offering of Common Stock. The unaudited pro forma net loss per common
share data included in the statements of operations for the year ended
December 31, 1995 and for the six months ended June 30, 1996 (unaudited) give
effect to this conversion as if the shares were outstanding at the beginning
of the respective periods, and as if the interest, amortization of discount
and amortization of deferred debt financing expenses associated with the
Series III Debentures were not incurred.
In determining pro forma weighted average common shares outstanding, common
share equivalents are excluded from the computation as their effect is anti-
dilutive, except that, pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, Common Stock options and warrants issued and
Common Stock, convertible debt and convertible preferred stock sold in the
twelve months preceding the initial filing date of the public offering and
through the effective date have been included in the calculation as if
outstanding for all periods presented using the treasury stock method and at
the assumed initial public offering price of $10 per share.
The unaudited pro forma balance sheet as of June 30, 1996 includes the
conversion of the outstanding Series III Debentures, including accrued
interest and the conversion of the Series A Preferred Stock and the following:
(i) reduction in Common Stock carrying value for the amount of discount
included in the carrying value of the Series III Debentures, and (ii)
reduction of Common Stock carrying value for the write-off of the unamortized
portion of the deferred debt issuance costs.
Interim Financial Statements
The interim financial statements included herein are unaudited. In the
opinion of management of the Company, all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of such
financial statements have been included. The results of operations for the six
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the year ending December 31, 1996.
3. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment..................................... $11,177 $172,160 $ 374,019
Computers..................................... 9,873 164,435 511,837
Furniture and fixtures........................ 6,498 95,850 317,375
Leasehold improvements........................ 742 54,563 514,054
Purchased software............................ 105 57,725 276,646
Capital leases--equipment..................... -- -- 243,129
------- -------- ----------
28,395 544,733 2,237,060
Less: accumulated depreciation and
amortization................................. 3,089 56,673 218,031
------- -------- ----------
$25,306 $488,060 $2,019,029
======= ======== ==========
</TABLE>
F-9
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Amortization expense for capital leases amounted to $0, $0 and $0 for the
period ended December 31, 1993 and for the years ended December 31, 1994 and
1995, respectively, and $0 (unaudited) and $11,118 (unaudited) for the six
months ended June 30, 1995 and 1996, respectively.
Depreciation expense was $72, $3,017 and $53,586 for the period ended
December 31, 1993 and for the years ended December 31, 1994 and 1995,
respectively, and $9,627 (unaudited) and $177,383 (unaudited) for the six
months ended June 30, 1995 and 1996, respectively.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C>
Raw materials and components................................... $867,335
Work-in-process................................................ --
Finished goods................................................. --
--------
$867,335
========
</TABLE>
No inventories were on hand at December 31, 1993, 1994 and 1995.
5. DEBT
Convertible Subordinated Debentures
On January 25, 1994, the Company issued $200,030 of 8.00% convertible
subordinated debentures (the "Series I Debentures"). On August 15, 1994, the
Company issued an additional $160,000 of the 8.00% convertible subordinated
debentures (the "Series II Debentures"). On September 20, 1994, all of the
debentures, including accrued interest of $11,774, were converted into 74,360
shares of the Company's Series A Preferred Stock at a rate of $5.00 per share.
Notes Payable
The Company issued a $50,000 note payable in May 1995. The note, which was
due in July 1995, was deferred and paid in January 1996. Interest on the note
accrued at 10.00%.
Series III Debentures
On October 31, 1995, the Company completed an offering of Series III
Debentures for gross proceeds of $1,946,600. The entire principal balance and
accrued interest is payable on August 15, 1997. The Series III Debentures are
convertible into Common Stock at a rate of $3.67 per share, subject to
adjustment pursuant to a Common Stock offering at a lower price. The Series
III Debentures are subject to mandatory conversion upon (i) the closing of an
initial public offering provided such offering provides minimum net proceeds
of $5,000,000 and the price at which the shares are offered is not less than
1.5 times the conversion rate, or (ii) the cumulative conversion of 70% of the
outstanding debentures into Common Stock. Each holder of a Series III
Debenture received a detachable warrant (the "Series III Warrants") to
purchase Common Stock for an amount of shares equal to the Series III
Debentures' principal amount divided by the conversion rate. Total Series III
Warrants issued are exercisable into 530,919 common shares at an exercise
price of $3.67 per share and expire on August
F-10
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
15, 1997. The Series III Warrants were valued at $0.11 per warrant.
Accordingly, $56,631 was allocated to Common Stock with an equivalent discount
recorded on the Series III Debentures. The discount is being amortized over
the term of the debentures and amounted to $51,483 and $36,038 (unaudited) as
of December 31, 1995 and June 30, 1996, respectively.
In early December 1995, in order to raise cash for operations, the Company
reduced the exercise price of the Series III warrants from $3.67 per share to
$2.33 per share for a limited period of time (through December 15, 1995).
Warrant holders exercised 297,840 shares of Common Stock for $694,960.
During 1995, the Company converted $50,000 of accounts payable, which arose
in 1995, to Series III Debentures.
Series IV Debentures
During February 1996, the Company completed a private placement of 8.00%
subordinated debentures (the "Series IV Debentures") for net proceeds of
$405,000, of which $240,000 was issued to a director of the Company. The
Series IV Debentures are non-convertible and bear interest at 8.00%, due
August 31, 1996, which the Company repaid on August 29, 1996 (unaudited). In
addition, each holder received detachable warrants (the "Series IV Warrants")
to purchase Common Stock equal to the Series IV Debentures' principal amount
divided by $3.67. The Series IV Warrants were valued at $0.11 per warrant.
Accordingly, $11,782 (unaudited) was allocated to Common Stock, with an
equivalent discount recorded on the Series IV Debentures. The Series IV
Warrants issued are exercisable into 110,454 shares of Common Stock at an
exercise price of $3.67 per share and expire on February 28, 2001.
Xerox Loan
In December 1995, the Company received a commitment from a customer to lend
the Company up to $3,000,000 subject to the successful completion of an OEM
production agreement and satisfactory negotiations of loan terms. On January
2, 1996, the Company received $500,000 under this commitment. On February 16,
1996, the Company and the customer executed an OEM production agreement and on
February 28, 1996, the Company and the customer finalized the terms of the
loan. The loan provides for a maximum commitment of $3,000,000 through April
1, 1998, at an annual interest rate of 8.00%. As part of the inducement to
extend such commitment, the Company agreed to issue detachable warrants up to
a maximum of 375,000 shares of Common Stock at an exercise price of $3.67 per
share which expire on February 28, 1999.
As of June 30, 1996, the Company has received $2,350,000 (unaudited) in loan
proceeds and issued detachable warrants for 375,000 shares (unaudited) of
Common Stock. Accordingly, $126,250 (unaudited) was allocated to Common Stock
with an equivalent discount recorded on the note.
F-11
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the Company's debt:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, (NOTE 2)
------------------ JUNE 30, JUNE 30,
1994 1995 1996 1996
------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Notes payable................... $ -- $ 50,000 $ -- $ --
Series III Debentures, net of
unamortized discount of $51,483
and $36,038.................... -- 1,945,117 1,960,562 --
Series IV Debentures, net of
unamortized discount of
$3,366......................... -- -- 401,634 401,634
Note payable, net of unamortized
discount of $104,483........... -- -- 2,245,517 2,245,517
------- ---------- ---------- ----------
-- 1,995,117 4,607,713 2,647,151
------- ---------- ---------- ----------
Less: current portion......... -- 50,000 401,634 401,634
------- ---------- ---------- ----------
$ -- $1,945,117 $4,206,079 $2,245,517
======= ========== ========== ==========
</TABLE>
Private Financing (unaudited)
On October 11, 1996, the Company completed a private financing (the "Interim
Financing") resulting in gross proceeds to the Company of $3.0 million
(unaudited) upon the issuance of the Company's discounted notes in an
aggregate principal amount of $3.45 million (unaudited) bearing interest at a
rate of 8.70% (unaudited) per annum (excluding debt discount). Holders of the
Interim Financing also received warrants to purchase an aggregate of 45,000
shares (unaudited) of Common Stock at an exercise price which is the lesser of
$10.00 per share (unaudited) or the initial public offering price per share of
the Common Stock offered in a planned initial public offering. The Interim
Financing is repayable upon the closing of the offering contemplated hereby or
otherwise on June 30, 1997. See "Use of Proceeds."
6. SHAREHOLDERS' EQUITY
Capital Stock Transactions
On September 15, 1994, the following changes in the Company's capital
structure occurred: (i) the Company's Board of Directors declared a 450-for-1
split of the Common Stock, effective upon the amendment of the Company's
Certificate of Incorporation, (ii) the authorized number of common shares was
increased to 1,000,000 (unadjusted for 1996 stock split--see Note 13) and
(iii) the par value of the Common Stock was changed from $.01 to no par value.
In January 1995, the Company's Board of Directors amended the articles of
incorporation to increase the authorized shares of Common Stock from 1,000,000
to 2,000,000. In April 1996, under the consent of the Board of Directors, the
number of authorized shares of Common Stock was increased from 2,000,000
shares to 25,000,000 shares (unaudited) and the authorized shares of Series A
Preferred Stock was increased from 350,000 shares to 500,000 shares
(unaudited).
Series A Preferred Stock
From a class of preferred stock with 500,000 authorized shares, the
Company's Board of Directors designated a series consisting of 300,000 of such
shares as Series A Preferred Stock. In 1994, pursuant to a
F-12
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
private placement offering (the "Preferred Stock Offering"), the Company
issued 160,000 shares of Series A Preferred Stock, with net proceeds of
$643,770. In February 1995, the Board of Directors increased the authorized
shares of Series A Preferred Stock from 300,000 shares to 350,000 shares. In
1995 the Company issued an additional 75,000 shares of Series A Preferred
Stock, with net proceeds of $340,060. (See Note 5)
In September 1994, the Company issued to a third party vendor 15,000 shares
of Series A Preferred Stock as partial payment for services rendered pursuant
to a development agreement between the third party vendor and the Company. The
fair market value of the stock was recorded as $75,000.
The Series A Preferred Stock is nonredeemable, convertible and voting, with
no par value. The holders shall be entitled to receive noncumulative cash
dividends when and as declared by the Board of Directors. In the event of any
voluntary or involuntary liquidation of the Company, the preferred
shareholders shall be entitled to all unpaid dividends at the time of
liquidation and $5.00 per share as a liquidating distribution prior to any
liquidating distribution to the common shareholders. At the option of the
preferred shareholders, their shares may be converted at any time to Common
Stock at the rate of 4.2 Common Stock shares for one share of Series A
Preferred Stock. The holdings of the preferred shareholders shall
automatically convert into shares of Common Stock upon the affirmative vote of
70% or more of the preferred shareholders or upon the effectiveness of a
registration statement registering the sale by the Company of shares of Common
Stock pursuant to which the Common Stock is offered publicly at a price of at
least $5.00 per share and the gross proceeds to the Company and/or selling
shareholders are at least $5 million.
Warrants
As of December 31, 1995, the Company had outstanding Common Stock purchase
warrants for an aggregate of 345,579 shares. Stock purchase warrants for
112,500 common shares expiring 5 years from date of grant are held by
employees of the Company and stock purchase warrants for 233,079 common shares
expiring August 15, 1997 are held by the Series III Debenture holders
(warrants issued to employees are exercisable at the Common Stock fair market
value at the time of grant). Stock purchase warrants for 110,454 (unaudited)
common shares expiring February 28, 2001 are held by the Series IV Debenture
holders. A stock purchase warrant for 375,000 (unaudited) shares of Common
Stock expiring on February 28, 1999, is held by a noteholder. The following
summarizes the activity of outstanding warrants:
<TABLE>
<CAPTION>
SHARES EXERCISE
UNDER PRICE WARRANTS
WARRANT (PER SHARE) EXERCISABLE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31, 1994........ -- $ -- --
- ------------------------------------------------------------------------------
Granted to employees.................. 112,500 3.67
Granted to Series III Debenture hold-
ers.................................. 530,919 3.67
Exercised (Note 5).................... (297,840) 2.33
- ------------------------------------------------------------------------------
Outstanding at December 31, 1995........ 345,579 $3.67 345,579
- ------------------------------------------------------------------------------
Granted to Series IV Debenture hold-
ers.................................. 110,454 3.67
Granted to noteholder................. 375,000 3.67
Granted to service providers.......... 28,635 3.67
Granted to placement agent............ 300,000 4.00
Warrants surrendered.................. (112,500) 3.67
- ------------------------------------------------------------------------------
Outstanding at June 30, 1996 (unau-
dited)................................. 1,047,168 $3.67-$4.00 1,047,168
- ------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additionally, there are outstanding and exercisable stock purchase warrants
for 16,000, 23,500 and 23,500 shares (unaudited) of Series A Preferred Stock
at December 31, 1994 and 1995 and June 30, 1996, respectively, expiring
September 2000.
Stock Incentive Plan
In January 1995, the Company's Board of Directors adopted and approved the
1995 Stock Incentive Plan (the "Plan") for directors, officers, key employees
and other persons. The Plan permits the granting of incentive stock options,
non-statutory stock options, stock appreciation rights and restricted stock
awards to purchase up to 300,000 shares of Common Stock. In April 1996, the
number of shares increased to 1,500,000, subject to approval of the
shareholders of the Company. These shares have been authorized and reserved.
Stock option activity is as follows:
<TABLE>
<CAPTION>
EXERCISE
PRICE OPTIONS
OPTION (PER SHARE) EXERCISABLE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31, 1994....... -- $ -- --
- ------------------------------------------------------------------------------
Options granted...................... 328,500 1.19-3.67
Options canceled..................... (27,000) 1.19
- ------------------------------------------------------------------------------
Outstanding at December 31, 1995....... 301,500 $1.19-$ 3.67 --
- ------------------------------------------------------------------------------
Options granted...................... 849,000 3.67-4.00
Options canceled..................... (12,750) 3.67
- ------------------------------------------------------------------------------
Outstanding at June 30, 1996 (unau-
dited)................................ 1,137,750 $1.19-$ 4.00 388,750
- ------------------------------------------------------------------------------
</TABLE>
Options have been granted with an exercise price no less than the fair
market value of the Common Stock at the date of grant. Initially, options
vested 20% each year, so that the options, or any unexercised portion thereof,
would be fully exercisable after a period of five years following the date of
their grant. Pursuant to the April 9, 1996 Board of Directors meeting, the
original vesting period of five years was modified to three years with options
vesting 33% each year following the date of their grant. All options
previously granted are subject to this modification. Certain options granted
in 1996 were exercisable immediately upon their issuance.
On August 29, 1996, the Company issued stock options covering 157,350 shares
(unaudited) to various employees. The options have an exercise price of $4.00
per share (unaudited) and vest ratably over three years.
Common Stock
The Company has reserved shares of Common Stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Conversion of Series III Debentures, including
accrued interest................................ 564,958 586,653
Conversion of Series A Preferred Stock........... 1,362,312 1,362,312
Exercise of Common Stock warrants................ 345,579 1,047,168
Exercise of Series A Preferred Stock warrants.... 98,700 98,700
Exercise of options.............................. 750,000 1,500,000
--------- ---------
3,121,549 4,594,833
========= =========
</TABLE>
F-14
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In June 1996, pursuant to a private placement offering, the Company issued
2,625,000 (unaudited) shares of Common Stock for $4 (unaudited) per share.
This offering resulted in net proceeds of $9,585,044 (unaudited) to the
Company. In connection with this private placement offering, the Company
issued warrants to purchase 300,000 shares (unaudited) of the Company's Common
Stock at an exercise price of $4 per share (unaudited). The warrants expire
April 1, 2001 through June 28, 2001.
7. LEASES
At December 31, 1995, the Company was committed under operating leases for
equipment, vehicles and office space with initial terms of more than one year
which extend through September 1998. The vehicle lease contains a fair value
purchase option at the end of the lease term.
Minimum lease payments under the noncancelable leases are as follows:
<TABLE>
<S> <C>
1996............................................................. $149,226
1997............................................................. 149,094
1998............................................................. 49,212
1999............................................................. --
2000............................................................. --
--------
Total minimum obligations........................................ $347,532
========
</TABLE>
In April 1996, the Company amended the lease agreement terms related to its
previously occupied facility. Under the terms of the amended agreement, future
minimum lease payments are $73,818 (unaudited) and $48,012 (unaudited) for the
six months ended December 31, 1996 and the year ended December 31, 1997,
respectively.
Rent expense was $0 for the period from inception (May 21, 1993) through
December 31, 1993, $11,315 in 1994, $108,800 in 1995 and $33,799 (unaudited)
and $165,986 (unaudited) for the six months ended June 30, 1995 and 1996,
respectively.
In February 1996, the Company entered into a new facilities lease commencing
June 1, 1996 and ending on July 31, 2000. The lease agreement provides for
escalation of the lease payments over the term of the lease, however, rent
expense is recognized under the straight-line method. Annual rent payments
under this lease will be approximately $395,000 per year for the first two
years and $598,000 per year for the balance of the term.
During 1996, the Company entered into capital leases for a phone mail system
and a network cable system. The phone mail lease commenced April 15, 1996 and
the network cable lease commenced June 1, 1996 with both leases extending over
a 48 month period. Future minimum lease payments on these leases are $30,859
(unaudited) during the six months ended December 31, 1996, $58,307 (unaudited)
in 1997, $56,693 (unaudited) in 1998, $56,693 (unaudited) in 1999 and $18,206
(unaudited) in 2000. Further, the Company entered into a 36 month capital
lease for office equipment. Future minimum lease payments under this agreement
are $4,509 (unaudited) during the six months ended December 31, 1996, $9,019
(unaudited) in 1997, $9,019 (unaudited) in 1998 and $3,006 (unaudited) in
1999.
F-15
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- -----------
<S> <C> <C>
Gross deferred tax assets:
Carryforwards:
Research tax credits............................. $ 60,154 $ 156,813
Net operating losses............................. 502,650 2,133,386
Other.............................................. 14,799 55,182
--------- -----------
Gross deferred tax assets........................ 577,603 2,345,381
--------- -----------
Gross deferred tax liabilities....................... -- (8,397)
--------- -----------
Valuation allowance.................................. (577,603) (2,336,984)
--------- -----------
$ -- $ --
========= ===========
</TABLE>
The Company has provided a valuation allowance for the full amount of
deferred tax assets in excess of deferred tax liabilities since the
realization of these future benefits cannot be reasonably assured as of the
end of each related year. If the Company achieves profitability, the deferred
tax assets may be available to offset future income taxes.
At December 31, 1995, the Company had $5,121,891 of federal net operating
loss carryforwards that expire in years 2008 through 2010, $5,278,704 of state
net operating loss carryforwards that expire in years 1998 through 2000 and
research and development tax credit carryforwards of $156,813 that expire in
years 2009 through 2010.
As defined in the Internal Revenue Code, certain ownership changes limit the
annual utilization of net operating loss and tax credit carryforwards. The
Company has experienced an ownership change in December 1994 which limits the
amount of net operating loss carryforwards and research tax credits that can
be utilized in any one taxable year as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE RESEARCH APPROXIMATE SECTION 382
LOSS CARRYFORWARD TAX CREDIT CARRYFORWARD ANNUAL LIMITATION
----------------- ----------------------- -----------------------
<S> <C> <C>
$1,100,000 $60,000 $225,000
</TABLE>
9. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, prepaid expenses, current notes payable,
accounts payable, accrued expenses, accrued interest, the amount due to
officers and customer advances and deposits approximates fair value because of
the short-term nature of those instruments.
The fair value of long-term debt is estimated based upon the current
interest rates that would be offered to the Company on similar debt. The
estimated fair value of the Company's debt (see Note 5) is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Series III Debentures............................... $1,945,117 $1,945,117
</TABLE>
F-16
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. RELATED PARTY TRANSACTIONS
Pursuant to the debt and equity offerings described in Notes 5 and 6, the
Company engaged Knickerbocker Securities, Inc. ("Knickerbocker"), whose
president is a shareholder and was a director of the Company during 1994 and a
portion of 1995, as their investment banker. Amounts incurred by the Company
in 1993, 1994 and 1995 for Knickerbocker's services were $0, $98,000 and
$325,636, respectively. Amounts incurred by the Company for the six months
ended June 30, 1995 and 1996 amounted to $144,386 (unaudited) and $0
(unaudited), respectively.
The Company entered into an agreement with Knickerbocker on September 20,
1994, in which Knickerbocker would advise the Company with regard to financial
matters and methods of financing for a three year period commencing on January
1, 1996 for a fee of $1,000 per month. In March 1996, the Company terminated
this agreement as well as all previous agreements with Knickerbocker. The
Company has estimated and accrued for amounts due Knickerbocker relating to
these agreements. Total accrued expenses due Knickerbocker at December 31,
1994 and 1995 and June 30, 1996 were $52,000, $250,000 and $0 (unaudited),
respectively.
On July 31, 1994, two officers of the Company loaned $50,000 to the Company
in exchange for promissory notes. The notes were convertible into 42,000
shares of the Company's Common Stock. The officers converted the promissory
notes on December 16, 1994.
Amounts recorded as "Due to officers" on the accompanying balance sheets
represent compensation owed to officers for services rendered to the Company.
Amounts recorded as "Due from employee" represent an advance for relocation
costs.
A member of the Company's Board of Directors is a partner at the Company's
primary legal counsel.
In connection with the Interim Financing (Note 5), a director and a
director's spouse purchased $250,000 (unaudited) and $100,000 (unaudited) of
the discounted Notes and received 3,750 and 1,500 of the related warrants,
respectively.
11. COMMITMENTS AND CONTINGENCIES
In May 1994, the Company entered into an agreement with a vendor to design
and develop a paper transport system and to subsequently deliver to the
Company all information and material necessary to permit the Company to use,
repair and manufacture the paper transport system. The agreement provided for
the vendor to receive a percentage of the Company's future revenues up to a
specified amount if the vendor performed under the agreement. During 1994, the
Company issued 15,000 shares of the Company's Series A Preferred Stock in
satisfaction of the Company's obligation to the vendor (see Note 6). In
January 1995, the Company terminated the agreement. Although the Company
believes it has paid the vendor for all work completed through the date of
termination, it is negotiating with the vendor to repurchase the 15,000 shares
of Series A Preferred Stock held by the vendor. Under the terms of a proposed
offer by the Company, such repurchase is contingent upon the completion of a
future equity private placement. The two parties have not reached an agreement
as of December 31, 1995, however, management does not believe that the costs
associated with the resolution of this matter will have a material adverse
effect on the Company's financial position.
On January 8, 1996, the Company signed a seven year agreement with a vendor
for the supply of inks and printheads. The agreement provides the Company with
worldwide rights, as defined. The Company must pay the vendor royalties and
license fees upon achieving certain volume purchase levels. The agreement also
includes certain exclusivity features which benefit the Company. To maintain
the exclusivity rights, quarterly payments of $250,000 are required beginning
January 1, 1996 and ending on October 1, 1997, and the Company must purchase
all ink and printhead requirements from the vendor and purchase specified
minimum amounts each
F-17
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
year. The Company has the option to terminate the exclusive rights leaving all
other aspects of the agreement unchanged. Currently, it is the Company's
intent to maintain the rights.
Effective January 1994, the Company entered into employment agreements with
two of its executive officers reflecting a five-year term and a three-year
term with an automatic three year renewal period, respectively. These
agreements are subject to termination by either party, and provide for salary
continuation and benefits for a specified period under certain circumstances
including a change in control (as defined) of the Company. As of December 31,
1995 and June 30, 1996, if all of the employees under contract were to be
terminated by the Company without cause (as defined), the Company's liability
would be approximately $440,000 and $400,000 (unaudited), respectively.
During 1996, the Company negotiated a product purchase agreement with a
major customer. In consideration of favorable payment terms, including the
payment of a 20% deposit upon orders, the Company has granted a second
priority lien against its inventory up to an amount equal to deposits
received.
12. LITIGATION (UNAUDITED)
In August 1996, the Company was notified of a claim by a former advisor of
the Company for compensation in the form of cash and warrants. While the
Company believes it has meritorious defenses against certain aspects of the
claim, the ultimate resolution of the matter could result in a maximum
liability of $125,000 and the issuance of warrants to purchase 35,000 shares
of Common Stock at a exercise price of $4.00 per share. Management is
evaluating this claim and expects to accrue for the probable liability, if
any, in the three months ended September 30, 1996.
13. STOCK SPLIT
On October 8, 1996 as authorized by the Board of Directors, the Company
split its Common Stock 3-for-1. All shares and per share conversion amounts
(unless otherwise indicated) in the accompanying financial statements have
been restated to reflect the 3-for-1 split.
F-18
<PAGE>
Inside Back Cover
- -----------------
1. Title: "The Value of Color in Documents..."
2. Image: Sample billing statement
3. Text: Callouts describing color attributes on billing statement
a) Text: "Maintain corporate identity with custom color"
b) Text: "Highlight key points"
c) Text: "Clarification of instructions"
d) Text: "Critical information in color"
e) Text: "Important marketing messages"
f) Text: "Reinforce call to action"
4. Caption: "Because it's not a black and white world"
5. Image: Accent Color Sciences, Inc. Logo
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
OR ANY OF THE UNDERWRITERS SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Summary Financial Data................................................... 6
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 28
Management............................................................... 44
Certain Transactions..................................................... 49
Principal Shareholders and Key Personnel................................. 50
Description of Capital Stock............................................. 51
Shares Eligible for Future Sale.......................................... 53
Underwriting............................................................. 55
Legal Matters............................................................ 56
Experts.................................................................. 56
Additional Information................................................... 56
Index to Financial Statements............................................ F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,000,000 Shares
[PASTE UP LOGO]
ACCENT COLOR SCIENCES, INC.
COMMON STOCK
------------------
PROSPECTUS
------------------
COWEN & COMPANY
JANNEY MONTGOMERY SCOTT INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Registration Fees--Securities and Exchange Commission............... $13,086.21
Filing Fee--National Association of Securities Dealers.............. 4,295
Transfer Agent Fees................................................. 10,000*
Cost of Printing and Engraving...................................... 150,000*
Legal Fees and Expenses............................................. 300,000*
Accounting Fees and Expenses........................................ 250,000*
Blue Sky Fees and Expenses.......................................... 30,000*
Miscellaneous....................................................... 42,618.79
----------
TOTAL............................................................. $ 800,000
==========
</TABLE>
*Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Connecticut corporation. Section 33-320a of the Connecticut
Stock Corporation Act ("Section 33-320a") provides that a corporation shall
indemnify any director or officer of the corporation against expenses
(including judgments, fines, penalties and amounts paid in settlement)
incurred by him in connection with any action, suit or proceeding other than
an action by or in the right of the corporation in which he is made or is
threatened to be made a party by reason of having been a director or officer
of the corporation, subject to certain limitations.
For example, the corporation shall not so indemnify any person made a party
to any proceeding by reason of the fact that he, or the person whose legal
representative he is, is or was a shareholder, director, officer, employee or
agent of the corporation, unless (1) such person, and the person whose legal
representative he is, was successful on the merits in the defense of any
proceeding referred to in Section 33-320a, or (2) it shall be concluded as
provided in subsection (d) of Section 33-320a that such person, and the person
whose legal representative he is, acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation or, in the
case of a person serving as a fiduciary of an employee benefit plan or trust,
either in the best interests of the corporation or in the best interest of the
participants and beneficiaries of such employee benefit plan or trust and
consistent with the provisions of such employee benefit plan or trust and,
with respect to any criminal action or proceeding, that he had no reasonable
cause to believe his conduct was unlawful, or (3) the court, on application as
provided in subsection (e) of Section 33-320a shall have determined that in
view of all the circumstances such person is fairly and reasonably entitled to
be indemnified and then for such amount as the court shall determine; except
that in connection with an alleged claim based upon his purchase or sale of
securities of the corporation or of another enterprise, which he serves or
served at the request of the corporation, the corporation shall only indemnify
such person after the court shall have determined on application as provided
in subsection (e) of Section 33-320a, that in view of all the circumstances
such person is fairly and reasonably entitled to be indemnified, and then for
such amount as the court shall determine. The termination of any proceeding by
judgment, order settlement, conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself create a presumption that the person did
not act in good faith or in a manner which he did not reasonably believe to be
in the best interests of the corporation of the participants and beneficiaries
of such employee benefit plan or trust and consistent with the provisions of
such employee benefit plan or trust, or, with respect to any criminal action
or proceeding that he had reasonable cause to believe that this conduct was
unlawful.
Except as otherwise provided in Section 33-320a, a corporation shall
indemnify any person made a party to any proceeding, by or in the right of the
corporation, to procure a judgment in its favor by reason of the fact that he,
or the person whose legal representative he is, is or was a shareholder,
director, officer, employee or agent of the corporation, or an eligible
outside party, against reasonable expenses actually incurred by him in
connection
II-1
<PAGE>
with such proceeding in relation to matters as to which such person, or the
person whose legal representative he is, is finally adjudged not to have
breached his duty to the corporation, or where the court, on application as
provided in subsection (e) of Section 33-320a shall have determined that in
view of all the circumstances such person is fairly and reasonably entitled to
be indemnified, and that for such amounts the court shall determine. The
corporation shall not so indemnify any such person for amounts paid to the
corporation, to a plaintiff or to counsel for a plaintiff in settling or
otherwise disposing of a proceeding, with or without court approval; or for
expenses incurred in defending a proceeding which is settled or otherwise
disposed of without court approval.
The Certificate of Incorporation of the Company includes a provision
limiting the personal liability of a director to the Company or its
shareholders for monetary damages for breach of duty as a director, to an
amount equal to the amount of compensation received by the Director for
serving the Company during the calendar year in which the violation occurred,
subject to a number of exceptions, including violations involving a knowing
and culpable violation of law, a breach of duty which enables a director or an
associate to receive an improper personal gain, conduct showing a lack of good
faith and conscious disregard of duty to the Company, a sustained and
unexcused pattern of inattention, or the approval of an illegal distribution
of assets of the Company to its shareholders. An associate of a director, in
terms of improper personal gains, is defined as (A) any corporation or
organization of which a Company director is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent or more of any
class of voting stock, (B) any trust or other estate in which a Company
director has at least ten percent beneficial interest or as to which a Company
director serves as trustee or in a similar fiduciary capacity and (C) any
relative or spouse of a Company director, or any relative of such spouse who
has the same name as the Company director. In addition, the Company also
maintains a directors' and officers' insurance and reimbursement policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Described below is information regarding all unregistered securities of the
Company sold by the Company within the last three years.
(a) In December 1993, prior to the commencement of its operations, the
Company issued 300 shares of its original Common Stock (now 405,000 shares of
Common Stock) to three individuals who participated in the organization of the
Company for aggregate consideration of $300.
(b) In January 1994, the Company issued $200,030 of 8.00% Convertible
Subordinated Debentures (the "Series I Debentures") to five individuals, four
of whom were directors of the Company. The Series I Debentures bore an
interest rate of 8% (excluding debt discount), compounded annually, and, in
September 1994, were converted into shares of the Company's Series A
Convertible Voting Preferred Stock ("Series A Preferred Stock") at the rate of
one share of Series A Preferred Stock for each $5 principal amount of Series I
Debentures.
(c) In August 1994, the Company issued an additional $160,000 of 8.00%
Convertible Subordinated Debentures (the "Series II Debentures") to two
individuals, under the same terms as the Series I Debentures. In September
1994, all Series II Debentures were also converted into shares of Series A
Preferred Stock at the rate of one share of Series A Preferred Stock for each
$5 principal amount of Series II Debentures.
(d) In February 1995, the Company completed an offering of Series A
Preferred Stock resulting in the issuance of 250,000 shares of Series A
Preferred Stock for aggregate gross proceeds of $1,250,000 or $5 per share.
Knickerbocker Securities, Inc. served as placement agent with respect to this
offering and received commissions in the amount of $105,705 of such gross
proceeds and warrants to purchase an aggregate of 23,500 shares of Series A
Preferred Stock at an exercise price of $5.50 per share.
In connection with the offering described in the within Prospectus, all
outstanding shares of Series A Preferred Stock will be automatically converted
into shares of Common Stock at the rate of 4.2 shares of Common Stock for each
share of Series A Preferred Stock upon the effective date of this Registration
Statement and such warrants to purchase shares of Series A Preferred Stock
will become warrants to purchase an aggregate of 98,700 shares of Common Stock
at a price of $1.31 per share.
II-2
<PAGE>
(e) In October 1995, the Company completed an offering of Series III
Debentures maturing in two years with interest at the annual rate of 8.00%.
The Series III Debentures are convertible into Common Stock at the rate of
$3.67 per share, together with accrued interest thereon, and all such
Debentures and accrued interest thereon will be converted automatically into
Common Stock at such rate upon the closing of the offering described in the
within Prospectus. An aggregate of approximately $1.9 million in principal
amount of Series III Debentures were sold through Knickerbocker Securities,
Inc., as placement agent, which received commissions in the amount of $275,000
and a warrant to purchase 15,000 shares of the Company's Common Stock at a
price of $3.67 per share. Each purchaser of a Series III Debenture also
received a warrant to purchase a number of shares of Common Stock equal to the
principal amount of such Debenture divided by $3.67, subject to adjustment.
Such warrants are exercisable for a period of two years, however, in order to
induce earlier exercise, the Company offered the holders of such warrants the
opportunity to exercise their warrants at a reduced price of $2.33 per share
for a limited period in December 1995, and warrants were exercised in response
to such offer with respect to 297,840 shares of Common Stock for proceeds to
the Company in the aggregate amount of $694,960.
(f) In February 1996, the Company issued 8.00% Subordinated Debentures (the
"Series IV Debentures") to two individuals. The Series IV Debentures had a
term of six months with interest at the annual rate of 8.00% per annum
(excluding debt discount) and were repaid in August 1996. Each holder of
Series IV Debentures also received a warrant to purchase shares of Common
Stock in an amount equal to the face value of his Series IV Debenture divided
by $3.67, subject to adjustment at an exercise price per share of $3.67. The
Company received gross proceeds from the sale of Series IV Debentures in the
amount of $405,000.
(g) In March 1996, the Company entered into a loan facility with Xerox
Corporation pursuant to which Xerox may lend the Company up to $3,000,000. The
outstanding principal balance of such loan as of the date of this Registration
Statement is $2,350,000. In connection with this facility, Xerox Corporation
received a warrant to purchase 375,000 shares of Common Stock at an exercise
price of $3.67 per share, subject to adjustment, during a period of 3 years.
(h) In June 1996, the Company completed an offering of 2,625,000 shares of
Common Stock for gross proceeds of $10,500,000 or $4.00 per share.
Pennsylvania Merchant Group Ltd. served as placement agent with respect to
such offering and received commissions of $840,000. In addition, the Company
issued warrants to Pennsylvania Merchant Group Ltd. entitling it to purchase
131,250 shares of Common Stock for a period of five years at an exercise price
of $4.00 per share. The Company issued an additional warrant for 168,750
shares of its Common Stock to Pennsylvania Merchant Group Ltd. in relation to
the termination of these agreements in 1996.
(i) In October 1996, the Company completed an offering of discounted notes
in the aggregate principal amount of $3.45 million bearing interest at 8.70%
per annum (excluding debt discount) with warrants to purchase 45,000 shares of
Common Stock for gross proceeds of $3.0 million. Pennsylvania Merchant Group
Ltd., served as placement agent for this offering and received commissions of
$195,000.
(j) Pursuant to the Company's 1995 Stock Incentive Plan, options have been
issued to purchase an aggregate of 1,293,600 shares of Common Stock of the
Corporation at exercise prices ranging from $1.19 to $4.00 per share.
Exemption from registration pursuant to the registration requirements under
the Securities Act of 1933, as amended, with respect to each of the
transactions described in the preceding paragraphs is claimed pursuant to
Section 4(2) of the Securities Act of 1933, as amended and Regulation D and
Rule 701 promulgated thereunder. In addition, exemption with respect to the
offer and sale of certain Series I Debentures described in paragraph (a)
above, Series II Debentures described in paragraph (b) and Series IV
Debentures described in paragraph (f) above is claimed pursuant to Regulation
S under such Act.
II-3
<PAGE>
The Company is relying upon the following facts with respect to the
availability of such exemptions:
The transactions described in paragraphs (a) through (i) above involve the
issuance of securities to persons which the Company believed, in each case,
to be "accredited investors" as defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended. The transactions described in
paragraphs (a), (b) and (f) involved the issuance of debt securities, with
Common Stock purchase warrants, to directors of the Company and one other
person associated with one of the Company's directors. Such director and
his associate are non-US citizens, as certified to the Company and they
were the only participants in the transactions described in paragraphs (b)
and (f) above. The transactions described in paragraphs (c), (d) and (h)
above were conducted in accordance with Rule 506 of Regulation D under the
Securities Act of 1933, as amended. The transactions described in paragraph
(j) above involve full-time employees, non-employee directors and
consultants and advisors to the Company and were compensatory in nature.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits constituting part of this Registration Statement are as follows:
1 Form of Underwriting Agreement.
3.1, 4.1 Restated Certificate of Incorporation of the Company.
3.2, 4.2 Bylaws of the Company, as amended.
4.3* Specimen of Stock Certificate.
5 Opinion of Murtha, Cullina, Richter and Pinney concerning legality of
shares being registered pursuant to this Registration Statement.
10.1* Product Development and Distribution Agreement dated February 16, 1996
between the Company and Xerox Corporation.
10.2 Letter of Understanding dated July 2, 1996 between the Company and
Xerox Corporation supplementing the Product Development and
Distribution Agreement.
10.3 Amendment to Product Development and Distribution Agreement between
the Company and Xerox Corporation dated February 29, 1996.
10.4 Loan Agreement Promissory Note dated February 29, 1996 between the
Company and Xerox Corporation.
10.5* Product Purchase Agreement dated April 16, 1996 between the Company
and International Business Machines Corporation.
10.6 Letter Agreement supplementing Product Purchase Agreement between the
company and International Business Machines Corporation dated February
23, 1996.
10.7 OEM Supply Agreement dated January 8, 1996 between the Company and
Spectra, Inc.
10.8 Amendment No. 1 to the OEM Supply Agreement dated July 12, 1996
between the Company and Spectra, Inc.
10.9 Lease Agreement dated February 16, 1996 between the Company John
Hancock Mutual Life Insurance Company.
10.10 Memorandum of Understanding dated October 10, 1996 between the Company
and Oce van der Grinten, NV.
10.11 Accent Color Sciences, Inc. 1995 Stock Incentive Plan.
10.12 Employment Agreement dated December 14, 1993 between the Company and
Norman L. Milliard.
II-4
<PAGE>
10.13 Amendment No. 1 to Employment Agreement between the Company and Norman
L. Milliard dated as of January 1, 1995.
10.14 Employment Agreement dated December 14, 1993 between the Company and
Richard J. Coburn.
10.15 Consulting Agreement dated August 2, 1994 between the Company and
Peter Teufel.
10.16 Consulting Agreement dated May 3, 1996 between the Company and Raymond
N. Smith.
10.17 Consulting Agreement Dated August 2, 1994 between the Company and
Klaus Werding.
10.18 Letter Agreement dated February 28, 1996 between the Company and
Pennsylvania Merchant Group Ltd.
10.19 Letter Agreement dated May 6, 1996 between the Company and
Pennsylvania Merchant Group Ltd.
10.20 Termination Agreement dated August 20, 1996 between the Company and
Pennsylvania Merchant Group Ltd.
10.21 Termination Agreement dated March 29, 1996 between the Company and
Knickerbocker Securities, Inc.
10.22 Form of nondisclosure agreement between the Company and its employees.
10.23 Form of Registration Rights Agreement Relating to sale of Preferred
Stock of the Company.
10.24 Form of Registration Rights Agreement Relating to sale of Series III
Debentures of the Company.
10.25 Form of registration Rights Agreement Relating to warrants issued in
connection with Series III Debentures of the Company.
10.26 Form of Registration Rights Agreement Relating to Warrants issued in
connection with Series IV Debentures of the Company.
10.27* Form of Registration Rights Agreement Relating to sale of Common Stock
of the Company.
10.28 Registration Rights Agreement Relating to Warrants issued by the
Company to Xerox Corporation.
10.29* Form of Registration Rights Agreement Relating to Warrants issued
pursuant to sale of Interim Notes.
11 Statement re: computation of per share earnings.
15 Letters re: unaudited interim financial information.
23.1 Consent of Price Waterhouse LLP.
23.2 The consent of Messrs. Murtha, Cullina, Richter and Pinney, counsel
for the Company, to the reference to their firm in the Prospectus
forming a part of this Registration Statement and to the use of their
opinion as Exhibit 5 to this Registration Statement is included in
said opinion.
24 Power of Attorney pursuant to which this Registration Statement has
been signed on behalf of certain Directors.
27 Financial Data Schedule
- --------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The Undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
II-5
<PAGE>
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a Director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF EAST HARTFORD, STATE OF
CONNECTICUT ON THE 11TH DAY OF OCTOBER 1996.
Accent Color Sciences, Inc.
(Registrant)
By: /s/ Norman L. Milliard
--------------------------------
NORMAN L. MILLIARD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Norman L. Milliard President, Chief October 11, 1996
- ------------------------------------- Executive Officer
NORMAN L. MILLIARD (Principal
Executive Officer)
and Director
/s/ Stephen K. Henn Vice President, October 11, 1996
- ------------------------------------- Chief Financial
STEPHEN K. HENN Officer and
Treasurer
(Principal
Financial and
Accounting Officer)
* Director October 11, 1996
- -------------------------------------
RICHARD J. COBURN
* Director
- -------------------------------------
RICHARD HODGSON
* Director
- -------------------------------------
WILLARD F. PINNEY, JR.
* Director
- -------------------------------------
RAYMOND N. SMITH
* Director
- -------------------------------------
ROBERT H. STEELE
* Director
- -------------------------------------
PETER TEUFEL
/s/ Norman L. Milliard October 11, 1996
- -------------------------------------
NORMAN L. MILLIARD, ATTORNEY-IN-FACT
II-7
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CALCULATION OF PRO FORMA EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Pro forma net loss (4)........................ $(4,083,000) $(4,977,000)
Calculation of pro forma weighted average com-
mon shares outstanding (1):
Common Stock................................ 1,813,320 2,808,144
Cheap Stock (2)............................. 2,887,722 2,281,443
Conversion of Series A Preferred Stock...... 1,362,312 1,362,312
Conversion of Series III Debentures, includ-
ing accrued interest (3)................... 564,958 586,087
----------- -----------
Total..................................... 6,628,312 7,037,986
=========== ===========
Pro forma net loss per share................ $ (.62) $ (.71)
=========== ===========
</TABLE>
- --------
(1) Common share equivalents (stock options and warrants) are excluded from
the computation as their effect is anti-dilutive, except that, pursuant to
Securities and Exchange Common Staff Accounting Bulletin No. 83, common
stock options and warrants issued and common stock and convertible debt
and convertible preferred stock sold in the twelve months preceding the
Offering date have been included in the calculation as if outstanding for
all periods presented using the treasury stock method and the assumed
public offering price of $10.00 per share.
(2) See attached calculation.
(3) Included as if the conversion of the Series III Debentures occurred at the
beginning of the period, including shares issued for settlement of accrued
interest.
(4) Adjusted to give effect to the conversion of Series III Debentures at the
beginning of the period, as if the interest, the amortization of the
discount and the amortization of other financing expenses were not
incurred.
<PAGE>
ACCENT COLOR SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CALCULATION OF CHEAP STOCK
<TABLE>
<CAPTION>
SHARES PRICE TOTAL
--------- ----- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Common Stock purchased--private placement.......... 2,625,000 $4.00 $10,500,000
Options Issued..................................... 605,250 3.67 2,219,250
Options Issued..................................... 647,850 4.00 2,591,400
Warrants issued (net of exercised)................. 569,505 3.67 2,088,185
Warrants issued.................................... 75,000 10.00 750,000
Placement Agent Warrants Issued.................... 300,000 4.00 1,200,000
--------- -----------
Total............................................ 4,822,605 $19,348,835
========= ===========
Initial public offering price...................... $ 10
===========
Shares assumed repurchased......................... 1,934,883
Less: shares assumed issued........................ 4,822,605
-----------
Cheap stock........................................ 2,887,722
===========
SIX MONTHS ENDED JUNE 30, 1996
Common stock purchased--private placement.......... 1,911,696 $4.00 $ 7,646,784
Options issued..................................... 605,250 3.67 2,219,250
Options issued..................................... 647,850 4.00 2,591,400
Warrants issued (net of exercised)................. 287,985 3.67 1,055,945
Warrants issued.................................... 75,000 10.00 750,000
Placement Agent Warrants issued.................... 300,000 4.00 1,200,000
--------- -----------
3,827,781 $15,463,379
========= ===========
Initial public offering price...................... $ 10
-----------
Shares assumed repurchased......................... 1,546,338
Less: shares assumed issued........................ 3,827,781
-----------
Cheap stock........................................ 2,281,443
===========
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
1 Form of Underwriting Agreement.
Restated Certificate of Incorporation of the
3.1, 4.1 Registrant.
3.2, 4.2 By-laws of the Registrant, as amended.
Specimen certificates for shares of the Registrant's
4.3* Common Stock.
5 Opinion of Murtha, Cullina, Richter and Pinney.
10.1* Product Development and Distribution Agreement dated
February 16, 1996 between the Company and Xerox
Corporation.
10.2 Letter of Understanding dated July 2, 1996 between the
Company and Xerox Corporation supplementing the
Product Development and Distribution Agreement.
10.3 Amendment to Product Development and Distribution
Agreement between the Company and Xerox Corporation
dated February 29, 1996.
10.4 Loan Agreement and Promissory Note dated February 29,
1996 between the Company and Xerox Corporation.
10.5* Product Purchase Agreement dated April 16, 1996 between
the Company and International Business Machines
Corporation.
10.6* Letter Agreement supplementing Product Purchase
Agreement between the Company and International
Business Machines Corporation dated February 23, 1996.
10.7* OEM Supply Agreement dated January 8, 1996 between the
Company and Spectra, Inc.
10.8 Amendment No. 1 to the OEM Supply Agreement dated July
12, 1996 between the Company and Spectra, Inc.
10.9 Lease Agreement dated February 16, 1996 between the
Company and John Hancock Mutual Life Insurance
Company.
10.10 Memorandum of Understanding dated October 10, 1996
between the Company and Oce van der Grinten, NV.
10.11 Accent Color Sciences, Inc. 1995 Stock Incentive Plan.
10.12 Employment Agreement dated December 14, 1993 between
the Company and Norman L. Milliard.
10.13 Amendment No. 1 to Employment Agreement between the
Company and Norman L. Milliard dated as of January 1,
1995.
10.14 Employment Agreement dated December 14, 1993 between
the Company and Richard J. Coburn.
10.15 Consulting Agreement dated August 2, 1994 between the
Company and Peter Teufel.
10.16 Consulting Agreement dated May 3, 1996 between the
Company and Raymond N. Smith.
10.17 Consulting Agreement dated August 2, 1994 between the
Company and Klaus Werding.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
10.18 Letter Agreement dated February 28, 1996 between the
Company and Pennsylvania Merchant Group Ltd.
10.19 Letter Agreement dated May 6, 1996 between the Company
and Pennsylvania Merchant Group Ltd.
10.20 Termination Agreement dated August 20, 1996 between the
Company and Pennsylvania Merchant Group Ltd.
10.21 Termination Agreement dated March 29, 1996 between the
Company and Knickerbocker Securities, Inc.
10.22 Form of nondisclosure agreement between the Company and
its employees.
10.23 Form of Registration Rights Agreement Relating to sale
of Preferred Stock of the Company.
10.24 Form of Registration Rights Agreement Relating to sale
of Series III Debentures of the Company.
10.25 Form of Registration Rights Agreement Relating to
warrants issued in connection with Series III
Debentures of the Company.
10.26 Form of Registration Rights Agreement Relating to
Warrants issued in connection with Series IV
Debentures of the Company.
10.27* Form of Registration Rights Agreement Relating to sale
of Common Stock of the Company.
10.28 Registration Rights Agreement Relating to Warrants
issued by the Company to Xerox Corporation.
10.29* Form of Registration Rights Agreement Relating to
Warrants issued pursuant to sale of notes.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Murtha, Cullina, Richter and Pinney (see
Exhibit 5 above).
24 Power of Attorney pursuant to which this Registration
Statement has been signed on behalf of certain
Directors.
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
DRAFT
10/3/96
EXHIBIT 1
3,000,000/1/ Shares
Accent Color Sciences, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
______________ __, 1996
COWEN & COMPANY
Janney Montgomery Scott Inc.
As Representatives of the Several Underwriters
c/o Cowen & Company
Financial Square
New York, New York 10005
Dear Sirs:
1. Introductory. Accent Color Sciences, Inc., a Connecticut
------------
corporation (the "Company"), proposes to sell, pursuant to the terms of this
Agreement, to the several underwriters named in Schedule A hereto (the
"Underwriters," or, each, an "Underwriter"), an aggregate of 3,000,000 shares of
Common Stock, no par value (the "Common Stock") of the Company. The aggregate
of 3,000,000 shares so proposed to be sold is hereinafter referred to as the
"Firm Stock". The Company also proposes to sell to the Underwriters, upon the
terms and conditions set forth in Section 3 hereof, up to an additional 450,000
shares of Common Stock (the "Optional Stock"). The Firm Stock and the Optional
Stock are hereinafter collectively referred to as the "Stock". Cowen & Company
("Cowen") and Janney Montgomery Scott Inc. are acting as representatives of the
several Underwriters and in such capacity are hereinafter referred to as the
"Representatives".
2. Representations and Warranties of the Company. The Company
----------------------------------------------
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-___) in the
form in which it became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become effective
with respect to the Stock, including any preeffective prospectuses included
as part of the registration statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to Rule
- ------------------
/1/ Plus an option to purchase up to 450,000 additional shares from the
Company to cover over-allotments.
<PAGE>
424 under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, copies of
which have heretofore been delivered to you, has been carefully prepared by
the Company in conformity with the requirements of the Securities Act and
has been filed with the Commission under the Securities Act; one or more
amendments to such registration statement, including in each case an
amended preeffective prospectus, copies of which amendments have heretofore
been delivered to you, have been so prepared and filed. If it is
contemplated, at the time this Agreement is executed, that a post-effective
amendment to the registration statement will be filed and must be declared
effective before the offering of the Stock may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. The term
"Registration Statement" as used in this Agreement shall also include any
registration statement relating to the Stock that is filed and declared
effective pursuant to Rule 462(b) under the Securities Act. All copies of
Registration Statements that have been delivered to you are identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to the Commission's Electronic Data Gathering Analysis and
Retrieval System ("EDGAR"), except to the extent permitted by Regulation S-
T. The term "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement, or, (A) if the prospectus
included in the Registration Statement omits information in reliance on
Rule 430A under the Securities Act and such information is included in a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b) and (B) if
prospectuses that meet the requirements of Section 10(a) of the Securities
Act are delivered pursuant to Rule 434 under the Securities Act, then (i)
the term "Prospectus" as used in this Agreement means the "prospectus
subject to completion" (as such term is defined in Rule 434(g) under the
Securities Act) as supplemented by (a) the addition of Rule 430A
information or other information contained in the form of prospectus
delivered pursuant to Rule 434(b)(2) under the Securities Act or (b) the
information contained in the term sheets described in Rule 434(b)(3) under
the Securities Act, and (ii) the date of such prospectuses shall be deemed
to be the date of the term sheets. The term "Preeffective Prospectus" as
used in this Agreement means the prospectus subject to completion in the
form included in the Registration Statement at the time of the initial
filing of the Registration Statement with the Commission, and as such
prospectus shall have been amended from time to time prior to the date of
the Prospectus. For purposes of this Agreement, all references to the
Registration Statement, any Preeffective Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing shall be deemed to include
the respective copies thereof filed with the Commission pursuant to EDGAR.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Preeffective Prospectus, and, at
its date of issue, each Preeffective Prospectus conformed in all material
respects with the requirements of the Securities Act and did not include
any untrue statement of a material fact or omit to state a
-2-
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and, when the Registration Statement becomes
effective and at all times subsequent thereto up to and including the
Closing Date, the Registration Statement and the Prospectus and any
amendments or supplements thereto contained and will contain all material
statements and information required to be included therein by the
Securities Act and conformed and will conform in all material respects to
the requirements of the Securities Act and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing
representations, warranties and agreements shall not apply to information
contained in or omitted from any Preeffective Prospectus or the
Registration Statement or the Prospectus or any such amendment or
supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter,
directly or through you, specifically for use in the preparation thereof;
there is no franchise, lease, contract, agreement or document required to
be described in the Registration Statement or Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed
therein as required; and all descriptions of any such franchises, leases,
contracts, agreements or documents contained in the Registration Statement
are accurate and complete descriptions of such documents in all material
respects.
(c) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as set forth
or contemplated in the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, nor entered into any
transactions not in the ordinary course of business, and there has not been
any material adverse change in the condition (financial or otherwise),
properties, business, management, prospects, net worth or results of
operations of the Company or any change in the capital stock, short-term or
long-term debt of the Company.
(d) The financial statements, together with the related notes and
schedules, set forth in the Prospectus and elsewhere in the Registration
Statement fairly present, on the basis stated in the Registration
Statement, the financial position and the results of operations and changes
in financial position of the Company at the respective dates or for the
respective periods therein specified. Such statements and related notes
and schedules have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis except as may be set
forth in the Prospectus. The selected financial and statistical data set
forth in the Prospectus under the caption "Selected Financial Data" fairly
present, on the basis stated in the Registration Statement, the information
set forth therein.
(e) Price Waterhouse LLP, who have expressed their opinions on the
audited financial statements and related schedules included in the
Registration Statement and the Prospectus are independent public
accountants as required by the Securities Act and the Rules and
Regulations.
-3-
<PAGE>
(f) The Company has been duly organized and is validly existing and in
good standing as a corporation under the laws of its jurisdiction of
organization, with power and authority (corporate and other) to own or
lease its properties and to conduct its business as described in the
Prospectus; the Company is in possession of and operating in compliance
with all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates and orders required for the conduct of its business,
all of which are valid and in full force and effect; and the Company is
duly qualified to do business and in good standing as a foreign corporation
in all other jurisdictions where its ownership or leasing of properties or
the conduct of its business requires such qualification. The Company has
all requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
of and from all public regulatory or governmental agencies and bodies to
own, lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially
burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus. The Company does not own or control,
directly or indirectly, any corporation, association or other entity.
(g) The Company's authorized and outstanding capital stock is on the
date hereof, and will be on the Closing Date, as set forth under the
heading "Capitalization" in the Prospectus; the outstanding shares of
common stock of the Company conform to the description thereof in the
Prospectus and have been duly authorized and validly issued and are fully
paid and nonassessable and have been issued in compliance with all federal
and state securities laws and were not issued in violation of or subject to
any preemptive rights or similar rights to subscribe for or purchase
securities and conform to the description thereof contained in the
Prospectus. Except as disclosed in and or contemplated by the Prospectus
and the financial statements of the Company and related notes thereto
included in the Prospectus, the Company does not have outstanding any
options or warrants to purchase, or any preemptive rights or other rights
to subscribe for or to purchase any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations, except for options granted subsequent to the date of
information provided in the Prospectus pursuant to the Company's employee
and stock option plans as disclosed in the Prospectus. The description of
the Company's stock option and other stock plans or arrangements, and the
options or other rights granted or exercised thereunder, as set forth in
the Prospectus, accurately and fairly presents the information required to
be shown with respect to such plans, arrangements, options and rights.
(h) The Stock to be issued and sold by the Company to the Underwriters
hereunder has been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights and will conform to the description thereof in the
Prospectus.
-4-
<PAGE>
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any executive
officers or directors are a party or of which any property of the Company
or any executive officers or directors are subject, which, if determined
adversely to the Company or any executive officers or directors, might
individually or in the aggregate (i) prevent or adversely affect the
transactions contemplated by this Agreement, (ii) suspend the effectiveness
of the Registration Statement, (iii) prevent or suspend the use of the
Preeffective Prospectus in any jurisdiction or (iv) result in a material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of the
Company; and to the best of the Company's knowledge no such proceedings are
threatened or contemplated against the Company by governmental authorities
or others. The Company is not a party nor subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory
body or other governmental agency or body. The description of the
Company's litigation under the heading "Legal Proceedings" in the
Prospectus is true and correct and complies with the Rules and Regulations.
(j) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of or constitute a
default under any indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which the Company is a party or by which
it or any of its properties is or may be bound, the Certificate of
Incorporation, By-laws or other organizational documents of the Company, or
any law, order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or will
result in the creation of a lien.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated by this Agreement, except such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or under the Securities Act or the securities or "Blue Sky" laws of
any jurisdiction in connection with the purchase and distribution of the
Stock by the Underwriters.
(l) The Company has the full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder (including to
issue, sell and deliver the Stock), and this Agreement has been duly and
validly authorized, executed and delivered by the Company and is a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that rights to indemnity
and contribution hereunder may be limited by federal or state securities
laws or the public policy underlying such laws.
(m) The Company is in all material respects in compliance with, and
conducts its business in conformity with, all applicable federal, state,
local and foreign laws, rules and regulations or any court or governmental
agency or body; to the knowledge of the Company, otherwise than as set
forth in the Registration Statement and the Prospectus, no prospective
change in any of such federal or state laws, rules or regulations has been
-5-
<PAGE>
adopted which, when made effective, would have a material adverse effect on
the operations of the Company.
(n) The Company has filed all necessary federal, state, local and
foreign income, payroll, franchise and other tax returns and has paid all
taxes shown as due thereon or with respect to any of its properties, and
there is no tax deficiency that has been, or to the knowledge of the
Company is likely to be, asserted against the Company or any of its
properties or assets that would adversely affect the financial position,
business or operations of the Company.
(o) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement or otherwise, except
for persons and entities who have expressly waived such right or who have
been given proper notice and have failed to exercise such right within the
time or times required under the terms and conditions of such right.
(p) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(q) The Company has provided you with all financial statements since
inception to the date hereof that are available to the officers of the
Company, including financial statements for the nine months ended September
30, 1996.
(r) The Company owns or possesses all patents, trademarks, trademark
registrations, service marks, service mark registrations, tradenames,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by it or necessary for the conduct of its
business, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company with respect to
the foregoing. The Company's business as now conducted and as proposed to
be conducted does not and will not infringe or conflict with in any
material respect patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other intellectual property or
franchise rights of any person. Except as described in the Prospectus, no
claim has been made against the Company alleging the infringement by the
Company of any patent, trademark, service mark, tradename, copyright, trade
secret, license in or other intellectual property right or franchise right
of any person.
(s) The Company has performed all material obligations required to be
performed by it under all contracts required by Item 601(b)(10) of
Regulation S-K under the Securities Act to be filed as exhibits to the
Registration Statement, and neither the Company nor any other party to such
contract is in default under or in breach of any such obligations. The
Company has not received any notice of such default or breach.
-6-
<PAGE>
(t) The Company is not involved in any labor dispute nor is any such
dispute threatened. The Company is not aware that (A) any executive, key
employee or significant group of employees of the Company plans to
terminate employment with the Company or (B) any such executive or key
employee is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement that would be violated by the
present or proposed business activities of the Company. The Company does
not have or expect to have any liability for any prohibited transaction or
funding deficiency or any complete or partial withdrawal liability with
respect to any pension, profit sharing or other plan which is subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
to which the Company makes or ever has made a contribution and in which any
employee of the Company is or has ever been a participant. With respect to
such plans, the Company is in compliance in all material respects with all
applicable provisions of ERISA.
(u) The Company has, and the Company as of the Closing Date will have,
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned or proposed to be owned by
it which is material to the business of the Company, in each case free and
clear of all liens, encumbrances and defects except such as are described
in the Prospectus or such as would not have a material adverse effect on
the Company; and any real property and buildings held under lease by the
Company or proposed to be held after giving effect to the transactions
described in the Prospectus are, or will be as of the Closing Date, held by
it under valid, subsisting and enforceable leases with such exceptions as
would not have a material adverse effect on the Company, in each case
except as described in or contemplated by the Prospectus.
(v) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which it is engaged; and the Company does
not have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations
of the Company, except as described in or contemplated by the Prospectus.
(w) Other than as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company any
brokerage or finder's fee or other fee or commission as a result of any of
the transactions contemplated by this Agreement.
(x) The Company has complied with all provisions of Section 517.075
Florida Statutes (Chapter 92-198; Laws of Florida).
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary
-7-
<PAGE>
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) To the Company's knowledge, neither the Company nor any employee
or agent of the Company has made any payment of funds of the Company or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to
be disclosed in the Prospectus.
(aa) The Company is not and will not become an "investment company" or
an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended, after the closing of the
offering and the application of the proceeds therefrom.
(bb) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company as to the matters
covered thereby.
3. Purchase by, and Sale and Delivery to, Underwriters-Closing Dates.
-----------------------------------------------------------------
The Company agrees to sell to the Underwriters the Firm Stock, and on the basis
of the representations, warranties, covenants and agreements herein contained,
but subject to the terms and conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase the Firm Stock from the Company,
the number of shares of Firm Stock to be purchased by each Underwriter being set
opposite its name in Schedule A, subject to adjustment in accordance with
Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be $ ______ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York Time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as Cowen may
designate (solely for the purpose of administrative convenience) and in such
denominations as Cowen may determine, against payment of the aggregate Purchase
Price therefor by wire transfer (same day funds), payable to the order of the
Company, all at the offices of Murtha, Cullina, Richter and Pinney, CityPlace 1,
185 Asylum Street, Hartford, Connecticut 06103. The time and date of the
delivery and closing shall be at 10:00 A.M., New York Time, on _______________,
1996, in accordance with Rule 15c6-1 of the Exchange Act. The time and date of
such payment and delivery are herein referred to as the "First Closing Date".
The Closing Date and the location of delivery of, and the form of payment for,
the Firm Stock may be varied by agreement between the Company and Cowen. The
Closing Date may be postponed pursuant to the provisions of Section 12.
-8-
<PAGE>
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York Time, on the business day preceding the First Closing Date
at the offices of Cowen & Company, Financial Square, New York, New York 10005.
It is understood that Cowen or Janney Montgomery Scott Inc., individually
and not as Representatives of the several Underwriters, may (but shall not be
obligated to) make payment to the Company on behalf of any Underwriter or
Underwriters, for the Stock to be purchased by such Underwriter or Underwriters.
Any such payment by Cowen or Janney Montgomery Scott Inc. shall not relieve such
Underwriter or Underwriters from any of its or their other obligations
hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price as soon after the effectiveness
of the Registration Statement as in their judgment is advisable. The
Representatives shall promptly advise the Company of the making of the initial
public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, up to 450,000 shares of Optional Stock. The price per share to be
paid for the Optional Stock shall be the Purchase Price. The option granted
hereby may be exercised as to all or any part of the Optional Stock at any time,
and from time to time, not more than thirty (30) days subsequent to the
effective date of this Agreement. No Optional Stock shall be sold and delivered
unless the Firm Stock previously has been, or simultaneously is, sold and
delivered. The right to purchase the Optional Stock or any portion thereof may
be surrendered and terminated at any time upon notice by the Underwriters to the
Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from Cowen to the Company setting forth the number of shares of
the Optional Stock to be purchased by them and the date and time for delivery of
and payment for the Optional Stock. Each date and time for delivery of and
payment for the Optional Stock (which may be the First Closing Date, but not
earlier) is herein called the "Option Closing Date" and shall in no event be
earlier than two (2) business days nor later than ten (10) business days after
written notice is given. (The Option Closing Date and the First Closing Date
are herein called individually a "Closing Date" and collectively the "Closing
Dates".) All purchases of Optional Stock from the Company shall be made on a
pro rata basis. Optional Stock shall be purchased for the account of each
Underwriter in the same proportion as the number of shares of Firm Stock set
forth opposite such Underwriter's name in Schedule B hereto bears to the total
number of shares of Firm Stock (subject to adjustment by the Underwriters to
eliminate odd lots). Upon exercise of the option by the Underwriters, the
Company agrees to sell to the Underwriters the number of shares of Optional
Stock set forth in the written notice of exercise and the Underwriters agree,
severally and not jointly and subject to the terms and conditions herein set
forth, to purchase the number of such shares determined as aforesaid.
-9-
<PAGE>
The Company will deliver the Optional Stock to the Underwriters (in the
form of definitive certificates, issued in such names and in such denominations
as the Representatives may direct by notice in writing to the Company given at
or prior to 12:00 Noon, New York Time, on the second full business day preceding
the Option Closing Date or, if no such direction is received, in the names of
the respective Underwriters or in such other names as Cowen may designate
(solely for the purpose of administrative convenience) and in such denominations
as Cowen may determine, against payment of the aggregate Purchase Price therefor
by wire transfer (same day funds), payable to the order of the Company all at
the offices of Murtha, Cullina, Richter and Pinney, CityPlace 1, 185 Asylum
Street, Hartford, Connecticut 06103. The Company shall make the certificates
for the Optional Stock available to the Underwriters for examination not later
than 10:00 A.M., New York Time, on the business day preceding the Option Closing
Date at the offices of Cowen & Company, Financial Square, New York, New York
10005. The Option Closing Date and the location of delivery of, and the form of
payment for, the Optional Stock may be varied by agreement between the Company
and Cowen. The Option Closing Date may be postponed pursuant to the provisions
of Section 12.
4. Covenants and Agreements of the Company. The Company covenants and
---------------------------------------
agrees with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A, use its best efforts to
cause the Registration Statement to become effective, (ii) if the Company
and the Representatives have determined to proceed pursuant to Rule 430A,
use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to Rule 430A and Rule 424 of
the Rules and Regulations and (iii) if the Company and the Representatives
have determined to deliver Prospectuses pursuant to Rule 434 of the Rules
and Regulations, to use its best efforts to comply with all the applicable
provisions thereof. The Company will advise the Representatives promptly
as to the time at which the Registration Statement becomes effective, will
advise the Representatives promptly of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the institution of any proceedings for that purpose, and will use its
best efforts to prevent the issuance of any such stop order and to obtain
as soon as possible the lifting thereof, if issued. The Company will
advise the Representatives promptly of the receipt of any comments of the
Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information and will not at any time file any amendment to the
Registration Statement or supplement to the Prospectus which shall not
previously have been submitted to the Representatives a reasonable time
prior to the proposed filing thereof or which the Representatives shall not
have previously approved in writing (such approval not to be unreasonably
withheld or delayed) or which is not in compliance with the Securities Act
and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to
the Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary
-10-
<PAGE>
to enable the several Underwriters to continue the distribution of the
Stock and will use its best efforts to cause the same to become effective
as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be
delivered under the Securities Act any event relating to or affecting the
Company occurs as a result of which the Prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend the Prospectus to comply with
the Securities Act, the Company will promptly notify the Representatives
thereof and will prepare an amended or supplemented prospectus which will
correct such statement or omission; and in case any Underwriter is required
to deliver a prospectus relating to the Stock nine (9) months or more after
the effective date of the Registration Statement, the Company upon the
request of the Representatives and at the expense of such Underwriter will
prepare promptly such prospectus or prospectuses as may be necessary to
permit compliance with the requirements of Section 10(a)(3) of the
Securities Act.
(d) The Company will deliver to the Representatives, at or before the
Closing Dates, signed copies of the Registration Statement, as originally
filed with the Commission, and all amendments thereto including all
financial statements and exhibits thereto, and will deliver to the
Representatives such number of copies of the Registration Statement,
including such financial statements but without exhibits, and all
amendments thereto, as the Representatives may reasonably request. The
Company will deliver or mail to or upon the order of the Representatives,
from time to time until the effective date of the Registration Statement,
as many copies of the Preeffective Prospectus as the Representatives may
reasonably request. The Company will deliver or mail to or upon the order
of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the Stock is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided,
however, that the expense of the preparation and delivery of any prospectus
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its shareholders as
soon as practicable, but not later than fifteen (15) months after the
effective date of the Registration Statement, an earnings statement which
will be in reasonable detail (but which need not be audited) and which will
comply with Section 11(a) of the Securities Act, covering a period of at
least twelve (12) months beginning after the "effective date" (as defined
in Rule 158 under the Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the
Underwriters and by dealers under the securities laws of such jurisdictions
as the Representatives may designate and at the request
-11-
<PAGE>
of the Representatives will make such applications and furnish such
consents to service of process or other documents as may be required of it
as the issuer of the Stock for that purpose; provided, however, that the
-------- -------
Company shall not be required to qualify to do business or to file a
general consent (other than that arising out of the offering or sale of the
Stock) to service of process in any such jurisdiction where it is not now
so subject. The Company will, from time to time, prepare and file such
statements and reports as are or may be required of it as the issuer of the
Stock to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for the distribution of the Stock.
The Company will advise the Representatives promptly after the Company
becomes aware of the suspension of the qualifications or registration of
(or any such exception relating to) the Common Stock of the Company for
offering, sale or trading in any jurisdiction or of any initiation or
threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Representatives
use its best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its shareholders annual reports
containing financial statements certified by independent public accountants
and with quarterly summary financial information in reasonable detail which
may be unaudited. During the period of five (5) years from the date
hereof, the Company will deliver to the Representatives and, upon request,
to each of the other Underwriters, as soon as they are available, copies of
each annual report of the Company and each other report furnished by the
Company to its shareholders and will deliver to the Representatives, (i) as
soon as they are available, copies of any other reports (financial or
other) which the Company shall publish or otherwise make available to any
of its shareholders as such, (ii) as soon as they are available, copies of
any reports and financial statements furnished to or filed with the
Commission or any national securities exchange and (iii) from time to time
such other information concerning the Company as you may request.
(h) The Company will use its best efforts to list the Stock on the
Nasdaq National Market.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) Prior to filing its quarterly statements on Form 10-Q, the Company
will have its independent auditors perform a limited quarterly review of
its quarterly numbers.
(k) The Company will not offer, sell, assign, transfer, encumber,
contract to sell, grant an option to purchase or otherwise dispose of any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock (including, without limitation, Common Stock
of the Company which may be deemed to be beneficially owned by the
undersigned in accordance with the Rules and Regulations) during the 180
days following the date on which the price of the Common Stock to be
purchased by the Underwriters is set (except with prior written consent of
each of the
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<PAGE>
Representatives), other than the Company's sale of Common Stock
hereunder and the Company's issuance of Common Stock upon the exercise of
warrants and stock options which are presently outstanding and described in
the Prospectus.
(l) The Company will apply the net proceeds from the sale of the Stock
as set forth in the description under "Use of Proceeds" in the Prospectus,
which description complies in all respects with the requirements of Item
504 of Regulation S-K.
(m) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection
with the registration of the Stock under the Securities Act and the
Exchange Act.
(n) Prior to the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company for any periods subsequent
to the periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.
(o) Prior to the Closing Dates the Company will issue no press release
or other communications directly or indirectly and hold no press conference
with respect to the Company, the financial condition, results of operation,
business, prospects, assets or liabilities of the Company, or the offering
of the Stock, without your prior written consent. For a period of twelve
(12) months following the Closing Date, the Company will use its best
efforts to provide to you copies of each press release or other public
communications with respect to the financial condition, results of
operations, business, prospects, assets or liabilities of the Company at
least twenty-four (24) hours prior to the public issuance thereof or such
longer advance period as may reasonably be practicable.
(p) During the period of five (5) years hereafter, the Company will
furnish to the Representatives, and upon request of the Representatives, to
each of the Underwriters: (i) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholder's equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Report on Form 8-K or other report filed by the Company with the
Commission, or the NASD or any securities exchange; (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock; and (iv) from time to time, such
other information concerning the Company as you may reasonably request.
(q) The Company has not distributed and, prior to the later of (i) the
Closing Date and (ii) the completion of the distribution of the Stock, will
not distribute any offering material in connection with the offering and
sale of the Stock other than the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or other materials, if any, permitted by the Act.
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<PAGE>
5. Payment of Expenses.
-------------------
(a) The Company will pay (directly or by reimbursement) all costs,
fees and expenses incurred in connection with expenses incident to the
performance of its obligations under this Agreement and in connection with
the transactions contemplated hereby, including but not limited to (i) all
expenses and taxes incident to the issuance and delivery of the Stock to
the Representatives; (ii) all expenses incident to the registration of the
Stock under the Securities Act; (iii) the costs of preparing stock
certificates (including printing and engraving costs); (iv) all fees and
expenses of the registrar and transfer agent of the Stock; (v) all
necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Stock to the Underwriters; (vi) fees and expenses
of the Company's counsel and the Company's independent accountants; (vii)
all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement,
each Preeffective Prospectus and the Prospectus (including all exhibits and
financial statements) and all amendments and supplements provided for
herein, the "Agreement Among Underwriters" between the Representatives and
the Underwriters, the Master Selected Dealers' Agreement, the Underwriters'
Questionnaire and the Blue Sky memoranda and this Agreement; (viii) all
filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with exemptions from the qualifying or
registering (or obtaining qualification or registration of) all or any part
of the Stock for offer and sale and determination of its eligibility for
investment under the Blue Sky or other securities laws of such
jurisdictions as the Representatives may designate; (ix) all fees and
expenses paid or incurred in connection with filings made with the NASD;
and (x) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
this Section.
(b) In addition to its other obligations under Section 6(a) hereof,
the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon (i) any statement or omission or any alleged statement or
omission or (ii) any breach or inaccuracy in its representations and
warranties, it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced from
time to time by Chemical Bank, New York, New York (the "Prime Rate"). Any
such interim reimbursement payments which are not made to an Underwriter in
a timely manner as provided below shall bear interest at the Prime Rate
from the due date for such reimbursement. This expense
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<PAGE>
reimbursement agreement will be in addition to any other liability which
the Company may otherwise have. The request for reimbursement will be sent
to the Company.
(c) In addition to its other obligations under Section 6(b) hereof,
each Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, described in Section 6(b) hereof which relates to
information furnished by the Underwriters to the Company, directly or
through the Representatives, it will reimburse the Company (and, to the
extent applicable, each officer, director or controlling person) on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses
and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
(and, to the extent applicable, each officer, director or controlling
person) shall promptly return it to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments which are not made to the Company
within thirty (30) days of a request for reimbursement shall bear interest
at the Prime Rate from the date of such request. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.
(d) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in paragraph (b) and/or
(c) of this Section 5, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled by
arbitration conducted under the provisions of and pursuant to the
arbitration procedures of the National Association of Securities Dealers,
Inc. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in
such demand or notice, then the party responding to said demand or notice
is authorized to do so. Such an arbitration would be limited to the
operation of the interim reimbursement provisions contained in paragraph
(b) and/or (c) of this Section 5 and would not resolve the ultimate
propriety or enforceability of the obligation to reimburse expenses which
is created by the provisions of Section 6.
6. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls such Underwriter within the meaning
of the Securities Act and the respective officers, directors, partners,
employees, representatives and agents of each of such Underwriter
(collectively, the "Underwriter Indemnified Parties" and, each, an
"Underwriter Indemnified Party"), against any losses, claims, damages,
liabilities or
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<PAGE>
expenses (including the reasonable cost of investigating and defending
against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which may be based upon the Securities Act,
the Exchange Act or any other statute or at common law, on the ground or
alleged ground that any Preeffective Prospectus, the Registration Statement
or the Prospectus (or any Preeffective Prospectus, the Registration
Statement or the Prospectus as from time to time amended or supplemented)
includes or allegedly includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter, directly or
through the Representatives, specifically for use in the preparation
thereof. The Company will be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but if the Company elects to assume the
defense, such defense shall be conducted by counsel chosen by it. In the
event the Company elects to assume the defense of any such suit and retain
such counsel, any Underwriter Indemnified Parties, defendant or defendants
in the suit, may retain additional counsel but shall bear the fees and
expenses of such counsel unless (i) the Company shall have specifically
authorized the retaining of such counsel or (ii) the parties to such suit
include any such Underwriter Indemnified Parties, and the Company and such
Underwriter Indemnified Parties at law or in equity have been advised by
counsel to the Underwriters that one or more legal defenses may be
available to it or them which may not be available to the Company, in which
case the Company shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such
counsel. This indemnity agreement is not exclusive and will be in addition
to any liability which the Company might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity
to each Underwriter Indemnified Party.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act (collectively, the
"Company Indemnified Parties") against any losses, claims, damages,
liabilities or expenses (including, unless the Underwriter or Underwriters
elect to assume the defense, the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which arise out of or are based in
whole or in part upon the Securities Act, the Exchange Act or any other
federal, state, local or foreign statute or regulation, or at common law,
on the ground or alleged ground that any Preeffective Prospectus, the
Registration Statement or the Prospectus (or any Preeffective Prospectus,
the Registration Statement or the Prospectus, as from time to time amended
and supplemented) includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading, but only insofar as any such
statement or omission was made in reliance upon, and in conformity with,
written information furnished to the Company by such Underwriter, directly
or through the Representatives, specifically for use in the preparation
thereof; provided, however, that in no case is such Underwriter to be
liable with respect to any
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<PAGE>
claims made against any Company Indemnified Party against whom the action
is brought unless such Company Indemnified Party shall have notified such
Underwriter in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon the Company Indemnified Party, but failure to notify
such Underwriter of such claim shall not relieve it from any liability
which it may have to any Company Indemnified Party otherwise than on
account of its indemnity agreement contained in this paragraph. Such
Underwriter shall be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if such Underwriter elects to assume the
defense, such defense shall be conducted by counsel chosen by it. In the
event that any Underwriter elects to assume the defense of any such suit
and retain such counsel, the Company Indemnified Parties and any other
Underwriter or Underwriters or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, respectively. The Underwriter against whom
indemnity may be sought shall not be liable to indemnify any person for any
settlement of any such claim effected without such Underwriter's consent.
This indemnity agreement is not exclusive and will be in addition to any
liability which such Underwriter might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity
to any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein,
then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion
as is appropriate to reflect the relative benefits received by the Company
on the one hand and the Underwriters on the other from the offering of the
Stock. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party
shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company and the Underwriters agree that it would not be
just and equitable if contribution were determined by pro rata allocation
(even if the
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<PAGE>
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities
or expenses (or actions in respect thereof) referred to above shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, defending, settling or
compromising any such claim. Notwithstanding the provisions of this
subsection (c), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the shares of the
Stock underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Underwriters' obligations to
contribute are several in proportion to their respective underwriting
obligations and not joint. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Survival of Indemnities, Representations, Warranties, etc. The
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respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective
---------------------------------------
obligations of the several Underwriters hereunder shall be subject to the
accuracy, at and (except as otherwise stated herein) as of the date hereof and
at and as of the Closing Dates, of the representations and warranties made
herein by the Company, to compliance at and as of the Closing Dates by the
Company with its covenants and agreements herein contained and other provisions
hereof to be satisfied at or prior to the Closing Dates, and to the following
additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been made in the manner and within the time period
required by Rule 424(b) and Rule 434 of the Rules and Regulations, as the
case may be.
(b) The Representatives shall have been satisfied that there shall not
have occurred any change prior to the Closing Dates in the condition
(financial or otherwise), properties, business, management, prospects, net
worth or results of operations of the Company, or any change in the capital
stock, short-term or long-term debt of the Company,
-18-
<PAGE>
such that (i) the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact
which, in the opinion of the Representatives, is material, or omits to
state a fact which, in the opinion of the Representatives, is required to
be stated therein or is necessary to make the statements therein not
misleading, or (ii) it is unpracticable in the reasonable judgment of the
Representatives to proceed with the public offering or purchase the Stock
as contemplated hereby.
(c) The Representatives shall be satisfied that no legal or
governmental action, suit or proceeding affecting the Company which is
material and adverse to the Company or which affects or may affect the
Company's ability to perform its obligations under this Agreement shall
have been instituted or threatened and there shall have occurred no
material adverse development in any existing such action, suit or
proceeding.
(d) At the time of execution of this Agreement, the Representatives
shall have received from Price Waterhouse LLP, independent certified public
accountants, a letter, dated the date hereof, in form and substance
satisfactory to the Underwriters.
(e) The Representatives shall have received from Price Waterhouse
LLP, independent certified public accountants, a letter, dated the Closing
Dates, to the effect that such accountants reaffirm, as of the Closing
Dates, and as though made on the Closing Dates, the statements made in the
letter furnished by such accountants pursuant to paragraph (d) of this
Section 8.
(f) The Representatives shall have received from Murtha, Cullina,
Richter and Pinney, counsel for the Company, an opinion, dated the Closing
Date, to the effect set forth in Exhibit I hereto.
(g) The Representatives shall have received from Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters, their opinion or opinions
dated the Closing Date with respect to the incorporation of the Company,
the validity of the Stock, the Registration Statement and the Prospectus
and such other related matters as it may reasonably request, and the
Company shall have furnished to such counsel such documents as they may
request for the purpose of enabling them to pass upon such matters.
(h) The Representatives shall have received a certificate, dated the
Closing Dates, of the chief executive officer or the President and the
chief financial or accounting officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of the
knowledge of the signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act;
(ii) Neither any Preeffective Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement
-19-
<PAGE>
thereto, as of the time when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of
such certificate, included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
and except as set forth or contemplated in the Prospectus, the Company
has not incurred any material liabilities or obligations, direct or
contingent, nor entered into any material transactions not in the
ordinary course of business and there has not been any material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of
the Company, or any change in the capital stock, short-term or long-
term debt of the Company;
(iv) The representations and warranties of the Company in
this Agreement are true and correct at and as of the Closing Date, and
the Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date; and
(v) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, (i) there has not been
any material adverse change or a development involving a material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of
the Company; (ii) the business and operations conducted by the Company
and its subsidiaries have not sustained a loss by strike, fire, flood,
accident or other calamity (whether or not insured) of such a
character as to interfere materially with the conduct of the business
and operations of the Company; (iii) no legal or governmental action,
suit or proceeding is pending or threatened against the Company which
is material to the Company, whether or not arising from transactions
in the ordinary course of business, or which may materially and
adversely affect the transactions contemplated by this Agreement; (iv)
since such dates and except as so disclosed, the Company has not
incurred any material liability or obligation, direct, contingent or
indirect, made any change in its capital stock (except pursuant to its
stock plans), made any material change in its short-term or funded
debt or repurchased or otherwise acquired any of the Company's capital
stock; and (v) the Company has not declared or paid any dividend, or
made any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the Closing Date.
(i) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the Closing Date, of the
representations and warranties made herein by it and as to
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<PAGE>
compliance at and as of the Closing Date by it with its covenants and
agreements herein contained and other provisions hereof to be satisfied at
or prior to the Closing Date, and as to satisfaction of the other
conditions to the obligations of the Underwriters hereunder.
(j) Cowen shall have received the written agreements of the
officers, directors and holders of Common Stock listed in Schedule C that
each will not offer, sell, assign, transfer, encumber, contract to sell,
grant an option to purchase or otherwise dispose of any shares of Common
Stock (including, without limitation, Common Stock of the Company which may
be deemed to be beneficially owned by the undersigned in accordance with
the Rules and Regulations) during the 180 days following the date of the
final Prospectus.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in form
and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters and
other documents as the Representatives shall reasonably request. If any of the
conditions hereinabove provided for in this Section shall not have been
satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representatives by notifying the Company of such termination
in writing or by telegram at or prior to the Closing Date, but Cowen shall be
entitled to waive any of such conditions.
9. Effective Date. This Agreement shall become effective immediately as
--------------
to Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 17 and, as to all other
provisions, at 11:00 a.m. New York City time on the first full business day
following the effectiveness of the Registration Statement or at such earlier
time after the Registration Statement becomes effective as the Representatives
may determine on and by notice to the Company or by release of any of the Stock
for sale to the public. For the purposes of this Section 9, the Stock shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Stock or upon the release by you of
telegrams (i) advising Underwriters that the shares of Stock are released for
public offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
10. Termination. This Agreement (except for the provisions of Section 5)
-----------
may be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Representatives and may be terminated
by the Representatives at any time before it becomes effective in accordance
with Section 9 by notice to the Company. In the event of any termination of
this Agreement under this or any other provision of this Agreement, there shall
be no liability of any party to this Agreement to any other party, other than as
provided in Sections 5, 6 and 11 and other than as provided in Section 12 as to
the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to the First Closing
Date or the Option Closing Date trading in securities on any of the New York
Stock Exchange, American Stock Exchange, or the Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been established on
any such exchange or market, or a banking moratorium shall have been declared by
New York or United States authorities; (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) if at or prior to the First
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<PAGE>
Closing Date or the Option Closing Date there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power or of
any other insurrection or armed conflict involving the United States or (B) any
change in financial markets or any calamity or crisis which, in the judgment of
the Representatives, makes it impractical or inadvisable to offer or sell the
Firm Stock or Optional Stock, as applicable, on the terms contemplated by the
Prospectus; (iv) if there shall have been any development or prospective
development involving particularly the business or properties or securities of
the Company or the transactions contemplated by this Agreement, which, in the
judgment of the Representatives, makes it impracticable or inadvisable to offer
or deliver the Firm Stock or the Optional Stock, as applicable, on the terms
contemplated by the Prospectus; (v) if there shall be any litigation or
proceeding, pending or threatened, which, in the judgment of the
Representatives, makes it impracticable or inadvisable to offer or deliver the
Firm Stock or Optional Stock, as applicable, on the terms contemplated by the
Prospectus; or (vi) if there shall have occurred any of the events specified in
the immediately preceding clauses (i) - (v) together with any other such event
that makes it, in the judgment of the Representatives, impractical or
inadvisable to offer or deliver the Firm Stock or Optional Stock, as applicable,
on the terms contemplated by the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other provisions
-----------------------------
hereof, if this Agreement shall not become effective by reason of any election
of the Company pursuant to the first paragraph of Section 10 or shall be
terminated by the Representatives under Section 8 or Section 10, the Company
will bear and pay the expenses specified in Section 5 hereof and, in addition to
its obligations pursuant to Section 6 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase of the Stock, and
promptly upon demand the Company will pay such amounts to you as
Representatives.
12. Substitution of Underwriters. If any Underwriter or Underwriters
----------------------------
shall default in its or their obligations to purchase shares of Stock hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent (10%) of
the total number of shares underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of shares with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of shares underwritten and
arrangements satisfactory to the Representatives and the Company for the
purchase of such shares by other persons are not made within forty-eight (48)
hours after such default, this Agreement shall terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 12, (i) the Company
shall have the right to postpone the Closing Date for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the
-22-
<PAGE>
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of shares to be purchased by the
remaining Underwriters or substituted Underwriters shall be taken as the basis
of their underwriting obligation for all purposes of this Agreement. Nothing
herein contained shall relieve any defaulting Underwriter of its liability to
the Company or the other Underwriters for damages occasioned by its default
hereunder. Any termination of this Agreement pursuant to this Section 12 shall
be without liability on the part of any non-defaulting Underwriter or the
Company, except for expenses to be paid or reimbursed pursuant to Section 5 and
except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in writing and, if
-------
sent to the Underwriters shall be mailed, delivered or telegraphed and confirmed
to you, as their Representatives c/o Cowen & Company at Financial Square, New
York, New York 10005 except that notices given to an Underwriter pursuant to
Section 6 hereof shall be sent to such Underwriter at the address furnished by
the Representatives or, if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed at Accent Color Sciences, Inc., 800 Connecticut
Boulevard, East Hartford, CT 06108.
14. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and the indemnities of the several
Underwriters shall also be for the benefit of each director of the Company, each
of its officers who has signed the Registration Statement and the person or
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.
15. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York.
16. Authority of the Representatives. In connection with this Agreement,
--------------------------------
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by Cowen, as Representative, will be binding on all the
Underwriters.
17. Partial Unenforceability. The invalidity or unenforceability of any
------------------------
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
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<PAGE>
18. General. This Agreement constitutes the entire agreement of the
-------
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
19. Counterparts. This Agreement may be signed in two (2) or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[Balance of Page Intentionally Left Blank]
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<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
ACCENT COLOR SCIENCES, INC.
By:
------------------------------------
Name:
Title:
Accepted and delivered in
New York, New York as of
the date first above written.
COWEN & COMPANY
JANNEY MONTGOMERY SCOTT INC.
Acting on their own behalf
and as Representatives of several
Underwriters referred to in the
foregoing Agreement.
By: Cowen Incorporated,
its general partner
By:
-------------------------------
Name:
Title:
-25-
<PAGE>
SCHEDULE A
Number Number of
of Firm Optional
Shares Shares
to be to be
Name Purchased Purchased
---- --------- ---------
Cowen & Company ...................................
Janney Montgomery Scott Inc........................
Total ...........................................
----------- -----------
=========== ===========
<PAGE>
EXHIBIT I
---------
FORM OF OPINION TO BE DELIVERED BY COUNSEL TO COMPANY
-----------------------------------------------------
1. The Company has been duly organized and is validly existing and in
good standing as a corporation under the laws of its jurisdiction of
organization, with corporate power and authority to own or lease its properties
and conduct its businesses as described in the Prospectus. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where its ownership or leasing of properties on the conduct of
its business requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company. The Company does not own or control, directly or
indirectly, any corporation, association or other entity.
2. On the date hereof, the authorized capital stock of the Company
consists of _________ shares of Common Stock, $.01 par value, and ________
shares of undesignated Preferred Stock, $.01 par value. The outstanding shares
of the capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, conform to the description thereof
contained in the Prospectus in all material respects and, to such counsel's
knowledge, have not been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right.
3. The Stock to be issued by the Company has been duly and validly
authorized and, upon issuance, delivery and payment therefor as described in the
Underwriting Agreement, will be validly issued, fully paid and nonassessable and
free and clear of any preemptive or similar rights and will conform to the
description thereof in the Prospectus in all material respects. The
certificates representing the Stock are in proper form under the Delaware
General Corporation Law assuming conformance with the specimen certificate filed
as an Exhibit to the Registration Statement.
4. The authorized capital stock of the Company conforms in all
material respects to the description thereof set forth in the Prospectus under
the caption "Description of Capital Stock."
5. The Registration Statement has become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the Prospectus is
in effect and no proceedings for that purpose have been instituted or are
pending by the Commission.
6. The Registration Statement and the Prospectus comply as to form in
all material respects with the requirements of the Securities Act and with the
Rules and Regulations, except as to the financial statements, the notes thereto
and the related schedules and other financial data contained therein, as to
which such counsel need not express an opinion.
<PAGE>
7. To such counsel's knowledge after due inquiry, the Company has not
received notice of any claim or challenge regarding the ownership of any
patents, trademarks, service marks, trade names, licenses, inventions or any
other rights described in the Prospectus. To such counsel's knowledge after due
inquiry (i) no claim has been made against the Company alleging infringement by
the Company of any patent, trademark, service mark, trade names, trade secret,
license in or other intellectual property or franchise rights of any person,
(ii) no legal or governmental proceedings are pending relating to the foregoing,
other than review of pending patent applications, and (iii) no such proceedings
are currently threatened by governmental authorities or others.
8. The statements under the captions "Risk Factors", "Business -
Proprietary Rights", "Business - Legal Proceedings", "Management - Benefit
Plans", "Certain Transactions", "Principal and Selling Stockholders" and
"Description of Capital Stock" [sections subject to change] in the Prospectus,
only to the extent that such statements constitute a summary of documents
referred to therein or matters of law, are accurate summaries in all material
respects and fairly present the information called for by the Securities Act and
the Rules and Regulations with respect to such documents and matters. Such
counsel does not know of any laws, rules or regulations or legal or governmental
proceedings applicable to the business of the Company required to be described
in the Registration Statement or the Prospectus that are not described as
required.
9. Such counsel knows of no franchise, lease, contract, agreement or
document, which is required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed therein.
10. To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company of a character required to
be disclosed in the Registration Statement or the Prospectus by the Act or the
Rules and Regulations.
11. The Company has the corporate power and authority to enter into
the Underwriting Agreement and to perform its obligations thereunder (including
to issue, sell and deliver the Stock to be issued and sold by it), and the
Underwriting Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company.
12. The execution and delivery of the Underwriting Agreement and the
issue and sale of the Stock will not result in a breach or violation of any of
the terms or provisions of or constitute a default under or violate or conflict
with the Certificate of Incorporation or Bylaws of the Company or any material
provision of any material contract or instrument to which the Company is a party
or by which the Company is bound or any law of the United States or the State of
Connecticut, any rule or regulation of any governmental authority or regulatory
body of the United States or the State of Connecticut, or any judgment, order or
decree known to us and applicable to the Company or any of its properties of any
court, governmental authority or arbitrator or will result in the creation of a
lien.
-2-
<PAGE>
13. To such counsel's knowledge, no person or entity has the right to
require registration of shares of Common Stock or other securities of the
Company because of the filing or effectiveness of the Registration Statement or
otherwise.
14. No consent, approval, authorization or order of, and no notice to
or filing with, any court or governmental agency or body is required to be
obtained or made by the Company for the issue and sale of the Stock pursuant to
the Underwriting Agreement, except such as have been obtained or made and such
as may be required under state securities or blue sky laws or by the National
Association of Securities Dealers, Inc., as to which such counsel's expresses no
opinion.
15. To such counsel's knowledge, no material default exists on the
part of the Company in the performance of any provision contained in any of the
contracts filed as exhibits to the Registration Statement.
16. The Company is not, and will not be as a result of the
consummation of the transactions contemplated by the Underwriting Agreement, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
17. Nothing came to such counsel's attention during the preparation
of the Registration Statement that led it to believe that the Registration
Statement, as of the date it was declared effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date or on the date hereof, contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(provided that such counsel shall not be required to express a view with respect
to the financial statements, the notes thereto and the related schedules and
other financial data included in the Registration Statement or the Prospectus).
-3-
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ACCENT COLOR SCIENCES, INC.
FIRST. The name of the corporation is Accent Color Sciences, Inc.
-----
SECOND. The nature of the business to be transacted, or the purposes to
------
be promoted or carried out by the corporation, are as follows:
To have and exercise all of the powers now or hereafter conferred by
the laws of the State of Connecticut upon a corporation organized pursuant
to the Connecticut Stock Corporation Act, and any and all acts amending
said Act, in substitution therefor or supplementing such Act.
THIRD. The designation of each class of shares, the authorized number of
-----
shares of each such class, and the par value of each share thereof, are as
follows:
The corporation shall have one (1) class of stock designated as Common
Stock and consisting of Twenty Five Million (25,000,000) authorized shares.
Each share of common stock shall be without par value.
The corporation shall have one (1) class of stock designated as
Preferred Stock and consisting of Five Hundred Thousand (500,000)
authorized shares. Each share of preferred stock shall be without par
value.
FOURTH. The terms, limitations and relative rights and preferences of
------
each class of shares and series thereof, or an express grant of authority to the
Board of Directors pursuant to Section 33-341(b) of the Connecticut Stock
Corporation Act are as follows:
A. AUTHORITY OF THE BOARD OF DIRECTORS
The Board of Directors may, before their issuance, fix and determine
the terms, limitations or relative rights or preferences of Preferred
Stock, or establish series of such shares and fix and determine the
variations as among such series, to the extent the certificate of
incorporation has not or does not in the future do so.
<PAGE>
B. COMMON STOCK
1. Dividends. Subject to the prior and superior right of the
---------
Preferred Stock, the holders of outstanding shares of Common Stock ("Common
Stock Holders") shall be entitled to receive dividends as, when and in the
amount declared by the Board of Directors, out of any funds legally
available therefor.
2. Liquidation, Dissolution and Winding Up. Subject to the prior and
---------------------------------------
superior right of the Preferred Stock, in the event of any liquidation,
dissolution or winding up of the affairs of the corporation, whether
voluntary or involuntary, the Common Stock Holders shall be entitled to
receive, out of the net assets of the corporation, after payment or
provision for payment of the debts and other liabilities of the
corporation, that portion of the remaining funds to be distributed. Such
funds shall be paid to the Common Stock Holders on the basis of the number
of shares of Common Stock held by each of them. Neither the consolidation
nor merger of the corporation into or with any other corporation nor the
sale or transfer by the corporation of all or any part of its assets shall
be deemed a liquidation, dissolution or winding up of the affairs of the
corporation within the meaning of the provisions of this subparagraph 2.
3. Voting. Each share of Common Stock shall entitle the holder
------
thereof to one vote, in person or by proxy, on any matter on which action
of the shareholders is sought.
C. PREFERRED STOCK
1. Series. The shares of Preferred Stock may be divided into and
------
issued in one or more series, and each series shall be so designated so as
to distinguish the shares thereof from the shares of all other series. All
shares of Preferred Stock shall be identical except in respect of
particulars which may be fixed by the Board of Directors as hereinafter
provided pursuant to authority which is hereby expressly vested in the
Board of Directors. Each share of a series shall be identical in all
respects with all other shares of such series, except as to the date from
which dividends thereon shall be cumulative on any series as to which
dividends are cumulative. Shares of Preferred Stock of any series which
have been retired in any manner, including shares redeemed or reacquired by
the corporation and shares which have been converted into or exchanged for
shares of any other class, or any series of the same or any other class
shall have the status of authorized but unissued shares of Preferred Stock
and may be reissued as shares of the series of which they were
-2-
<PAGE>
originally a part or may be issued as shares of a new series or any other
series of the same class.
2. Voting Rights. Shares of Preferred Stock shall not entitle the
-------------
holder thereof to any voting rights except that with respect to all shares
of Preferred Stock which may be convertible into shares of Common Stock,
the holder thereof shall be entitled to as many votes with respect to all
matters brought before the shareholders of the corporation as such
Preferred Stockholder would have been entitled had such holder converted
his or her shares of Preferred Stock into Common Stock immediately prior to
the record date for determining shareholders entitled to vote on any such
matter. All such voting rights of any Preferred Stock shall be exercised
together with the voting rights of all holders of Common Stock as a single
class and no holders of Preferred Stock shall have any separate voting
rights with respect to the class of Preferred Stock or any series thereof,
except as otherwise provided by law.
3. Provisions. Before any shares of Preferred Stock of any series
----------
shall be issued, the Board of Directors, pursuant to authority hereby
expressly vested in it, shall fix by resolution or resolutions the
following provisions in respect of the shares of each such series so far as
the same are not inconsistent with the provisions of this Article Fourth
applicable to all series of Preferred Stock:
(a) the distinctive designations of such series and the number
of shares which shall constitute such series, which number may be increased
(except where otherwise provided by the Board of Directors in creating such
series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(b) the annual rate or amount of dividends, if any, payable on
shares of such series (which dividends would be payable in preference to
any dividends on Common Stock), whether such dividends shall be cumulative
or non-cumulative and the conditions upon which and/or the dates when such
dividends shall be payable;
(c) whether the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the time or
times when and the price or prices at which shares of such series may be
redeemed;
(d) the amount, if any, payable on shares of such series in the
event of liquidation of the corporation;
-3-
<PAGE>
(e) whether the shares of such series shall be convertible into
or exchangeable for shares of any other class, or any series of the same or
any other class, and, if so, the terms and conditions thereof, including
the date or dates when such shares shall be convertible into or
exchangeable for shares of any other class, or any series of the same or
any other class, the price or prices or the rate or rates at which shares
of such series shall be so convertible or exchangeable, and the adjustments
which shall be made, and the circumstances in which such adjustments shall
be made, in such conversion or exchange prices or rates; and
(f) any other preferences and relative, participating, optional
or other special rights, and any qualifications, limitations and
restrictions thereof.
D. SERIES A PREFERRED STOCK
1. Designation. There is hereby created a series of the Preferred
-----------
Stock consisting of 350,000 shares having the designation, voting powers,
preferences, relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof as are set forth
in this Paragraph D. This series is designated "Series A Convertible
Voting Preferred Stock" (hereinafter called "Series A Stock");
2. Cash Dividend.
-------------
(a) The record holders of the outstanding shares of Series A
Stock ("Series A Holders") shall be entitled to receive noncumulative cash
dividends when and as declared by the Board of Directors.
(b) Upon the payment or setting apart for payment of any
dividends upon the outstanding shares of Series A Stock, the Board of
Directors may declare and pay dividends upon the Common Stock up to an
amount with respect to each share of Common Stock equal to the amount paid
or set aside for payment with respect to each share of Series A Stock
divided by the number of shares of Common Stock into which each such share
of Preferred Stock shall then be convertible.
3. Redemption. The Series A Stock may not be redeemed, in whole or
----------
in part.
4. Liquidation.
-----------
(a) In the event of any voluntary or involuntary liquidation of
the corporation, the Series A Holders shall
-4-
<PAGE>
be entitled to be paid an amount equal to all dividends thereon remaining
unpaid up to the date of such liquidation whether or not at such times the
corporation shall have surplus available for the payment of dividends.
(b) After payment to the Series A Holders of the amounts payable
under subpart (a) above, the Series A Holders shall be entitled to be paid
as a liquidating distribution Five Dollars ($5.00) per share (the
"Liquidation Preference") prior to any liquidating distribution to the
Common Stock Holders but shall not participate further in any liquidating
distributions to such Common Stock Holders.
5. Conversion.
----------
(a) Conversion Option. At the option of the Series A Holders,
-----------------
their holdings of such Series A Stock shall be convertible into shares of
Common Stock and cash in lieu of fractional shares upon the terms and
conditions of subparagraph (c) below.
(b) Mandatory Conversion. The holdings of the Series A Holders
--------------------
shall automatically convert into shares of Common Stock and cash in lieu of
fractional shares upon the terms and conditions of subparagraph (c) below
(1) upon the affirmative vote of 70% or more of the Series A Holders or (2)
upon the effectiveness of a registration statement registering the sale by
the Company of shares of Common Stock to the public pursuant to which (A)
Common Stock is offered to the public at a price of at least 1.4 times the
conversion price (which may be adjusted downward at the discretion of the
Board of Directors) and (B) the gross proceeds to the Company and/or the
selling stockholders are at least $5,000,000.
(c) Conversion Rate.
---------------
(i) The shares shall be convertible from and after the
date of their issuance under the terms and conditions outlined in
subparagraphs (a) and (b) above at the office of any Transfer Agent for the
Series A Stock (or such other place as may be designated by the
corporation) into fully paid and nonassessable shares of Common Stock (as
such Common Stock shall then be constituted) at the rate of 1.4 shares of
Common Stock for each one (1) share of Series A Stock but such rate shall
be adjusted to the extent provided in subpart (b) of this subparagraph 5.
(ii) In order to convert shares of Series A Stock into
Common Stock, the holder thereof shall surrender the certificate or
certificates for Series A Stock, duly
-5-
<PAGE>
endorsed to the corporation or in blank, at the office of any Transfer
Agent for the Series A Stock (or such other place as may be designated by
the corporation), and shall give written notice to the corporation at said
office that he elects to convert the same and shall state in writing
therein the name or names in which he wishes the certificate or
certificates for Common Stock to be issued. The corporation will, as soon
as practicable thereafter, deliver at said office to such holder of shares
of the Series A Stock or to his nominee or nominees, a certificate or
certificates for the number of full shares of Common Stock to which he
shall be entitled as aforesaid. Shares of the Series A Stock shall be
deemed to have been converted as of the date of the surrender of such
certificate or certificates for conversion as provided above, and the
person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
(d) Conversion Adjustment Provisions. The conversion rate
--------------------------------
provided in subpart (a)(i) above shall be subject to adjustment to the
extent provided below:
(i) Stock Dividends, Subdivisions and Combinations. In
----------------------------------------------
the event the corporation shall
(a) pay a dividend of Common Stock, or of any
capital stock convertible into Common Stock, on its outstanding Common
Stock;
(b) subdivide its outstanding Common Stock into a
larger number of shares of Common Stock by reclassification or otherwise;
or
(c) combine its outstanding Common Stock into a
smaller number of shares of Common Stock by reclassification or otherwise;
the conversion rate in effect immediately prior thereto shall be
proportionately adjusted so that the holder of any Series A Stock
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock (and, in the case of a dividend payable in
capital stock convertible into Common Stock, the number of shares of such
capital stock) which he would have owned or have been entitled to receive
after the happening of any of the events described above had such Series A
Stock been converted immediately prior to the happening of such event.
Such adjustment shall be made whenever any of the events described above
shall occur. In the case of a dividend, any such adjustment shall be made
as of the record date thereof
-6-
<PAGE>
and in the case of a subdivision or combination, any such adjustment shall
be made as of the effective date thereof.
(ii) Issuance of Additional Securities. In the event that
---------------------------------
the corporation shall issue shares of Common Stock (other than Excluded
Securities) or other securities convertible into or exchangeable for shares
of Common Stock (other than Excluded Securities) at a price per share in
the case of issuances of Common Stock less than the conversion rate then in
effect or at a price per share in the case of securities other than Common
Stock which, when divided by the number of shares of Common Stock into
which each such share of such other securities is convertible or
exchangeable, is less than the conversion rate then in effect, the
conversion rate shall be reduced to the result obtained by multiplying the
conversion rate in effect immediately prior to such issuance by a fraction,
the numerator of which is equal to the number of outstanding shares of
Common Stock and shares of Common Stock issuable pursuant to then existing
conversion or exchange rights multiplied by the conversion rate then in
effect plus the total consideration received for the Common Stock or other
securities issued and the denominator of which is the total number of
shares of Common Stock and shares of Common Stock issuable pursuant to all
rights of conversion or exchange immediately following such issuance. For
purposes of the preceding sentence, the term "Excluded Securities" means
Common Stock or other securities issued to employees, consultants,
directors and officers of the corporation, securities issued as a dividend
or distribution on the Preferred Stock and securities issued in the event
of a stock split, reverse stock split, Common Stock dividend on Common
Stock or other subdivision or consolidation or reclassification of the
Common Stock.
(iii) Minimum Adjustment. Notwithstanding the provisions
------------------
of (i) or (ii) of this subpart (b), no adjustment in the conversion rate
shall be required unless such adjustment would require an increase or
decrease of at least 2% of such rate; provided, however, that any such
adjustments which are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations required
by any provision of this subpart (b) shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be.
(e) Fractional Shares. No fraction of a share of Common Stock
-----------------
shall be issued upon any conversion of Series A Stock but, in lieu thereof,
there shall be paid an amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For such purpose, the market
value of a share of Common Stock shall be the prevailing
-7-
<PAGE>
market value or other as determined by the Board in the open market, as
conclusively determined by the corporation.
(f) Reservation of Common Stock. The corporation shall at all
---------------------------
times reserve and keep available out of its authorized but unissued Common
Stock solely for the purposes of effecting the conversion of the shares of
the Series A Stock, the full number of shares of Common Stock then
deliverable upon the conversion of all shares of Series A Stock at the time
outstanding.
FIFTH. The minimum amount of stated capital with which the corporation
-----
shall commence business is One Thousand Dollars.
SIXTH.
-----
A. The personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty as a director shall be
limited to an amount that is equal to the compensation received by the director
for serving the corporation during the year of the violation if such breach did
not (A) involve a knowing and culpable violation of law by the director, (B)
enable the director, or an associated, as defined in subdivision (3) of section
33-374d of the Connecticut General Statutes, to receive an improper personal
economic gain, (C) show a lack of good faith and conscious disregard for the
duty of the director to the corporation under the circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk of
serious injury to the corporation, (D) constitute a sustained or unexcused
pattern of inattention that amounted to an abdication of the director's duty to
the corporation, or (E) create liability under section 33-321 of the Connecticut
General Statutes. Nothing herein shall limit or preclude the liability of a
director for any act or omission occurring prior to the effective date of this
provision.
B. As permitted by Section 33-343(f) of the Connecticut Stock Corporation
Act, all preemptive rights of shareholders are hereby denied, and no holder of
any shares of stock of the corporation shall be entitled as a matter of right to
subscribe for, purchase or receive any shares of stock of the corporation (or
any obligation convertible into, or warrant or other instrument entitling the
holder to purchase, any stock of the corporation) which the corporation may
issue or sell, whether out of the number of shares of stock now authorized, or
whenever authorized, or out of shares of stock of the corporation acquired by it
after issuance.
C. The terms of the directors shall be staggered by dividing the total
number of directors into three classes, with each class comprising as nearly as
possible the same percentage
-8-
<PAGE>
of the total as each other class. The classes shall be formally referenced as
Class 1, Class 2 and Class 3. The terms of the directors in Class 1 expire at
the first annual shareholders' meeting after their election, the terms of the
directors in Class 2 expire at the second annual shareholders' meeting after
their election, and the terms of the directors of Class 3 expire at the third
annual shareholders' meeting after their election. At each annual shareholders'
meeting following the annual meeting at which directors are first elected to
such three classes, directors shall be elected for terms of three years to
succeed those whose terms expire at such annual meeting. If the number of
directorships is changed, any increase or decrease in directors shall be
apportioned among the classes so that each class comprises as nearly as possible
the same percentage of the total as each other class. Upon a change in the
number of directorships, the term of any newly elected director or any director
reallocated to a different class shall be for the period until such class stands
for election. Notwithstanding the preceding sentence, no decrease in the number
of directorships shall shorten the term of any director. Any director elected
to fill a vacancy not resulting from an increase in the number of directorships
shall have the same remaining term as that of his or her predecessor. No
director shall be removed except by the affirmative vote of two-thirds (2/3) or
more of the issued and outstanding shares of capital stock of the corporation
entitled to vote for the election of directors generally.
-9-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ACCENT COLOR SCIENCES, INC.
Adopted May 21, 1993, as amended
through August 29, 1996
<PAGE>
INDEX TO BYLAWS
---------------
ARTICLE I - Name and Location
- -----------------------------
Section 1.1 - Name
Section 1.2 - Principal Office
Section 1.3 - Change of Office
ARTICLE II - Meetings of Stockholders
- ------------ ------------------------
Section 2.1 - Place and Notice
Section 2.2 - Annual Meetings
Section 2.3 - Special Meetings
Section 2.4 - Quorum
Section 2.5 - Voting
Section 2.6 - Order of Business
Section 2.7 - Consents
ARTICLE III Board of Directors
- ----------- ------------------
Section 3.1 - Number, Election and Term of Office
Section 3.2 - Directors' Meetings
Section 3.3 - Notice of Meetings
Section 3.4 - Consents
Section 3.5 - Quorum
Section 3.6 - Voting
Section 3.7 - Compensation
Section 3.8 - Vacancies
Section 3.9 - Removal of Directors
ARTICLE IV - Officers
- ------------ --------
Section 4.1 - Officers and Qualifications
Section 4.2 - Chairman
Section 4.3 - President
Section 4.4 - Vice President
Section 4.5 - Treasurer
Section 4.6 - Assistant Treasurer
Section 4.7 - Secretary
Section 4.8 - Assistant Secretary
Section 4.9 - Term of Office
Section 4.10 - Compensation
ARTICLE V - Seal
- ----------------
Section 5.1 - Seal
ARTICLE VI - Certificates of Stock
- ----------------------------------
Section 6.1 - Description of Stock Certificates
Section 6.2 - Transfer of Stock
<PAGE>
ARTICLE VII - Dividends
- -----------------------
Section 7.1 - When Declared
ARTICLE VIII - Bills, Notes, Etc.
- --------------------------------
Section 8.1 - How Made
ARTICLE IX - Contract in Which Directors Have an Interest
- ---------------------------------------------------------
Section 9.1 - Validity of Contracts and Liability of
Directors
ARTICLE X - Waiver of Notice
- ----------------------------
Section 10.1 - Authority to Waive Notice
ARTICLE XI - Books and Records; Fiscal Year
- -------------------------------------------
Section 11.1 - Books and Records
Section 11.2 - Power to Establish Fiscal Year
ARTICLE XII - Amendments
- ------------------------
Section 12.1 - Amendments
ARTICLE XIII - Committees
- -------------------------
Section 13.1 - Committees
<PAGE>
BYLAWS OF
ACCENT COLOR SCIENCES, INC.
ARTICLE I
---------
Name and Location
-----------------
Section 1.1 - Name. The name of the corporation shall be ACCENT COLOR
------------------
SCIENCES, INC.
Section 1.2 - Principal Office. The principal office of the corporation
------------------------------
shall be at such place in the Town of East Hartford in the State of Connecticut
as the Board of Directors shall from time to time designate. The corporation may
have such other offices within or without the State of Connecticut as the Board
of Directors may from time to time determine.
Section 1.3 - Change of Office. The Board of Directors may, from time to
------------------------------
time, designate such other place or places as the principal office and for the
transaction of corporate business as it may determine.
ARTICLE II
----------
Meetings of Shareholders
------------------------
Section 2.1 - Place and Notice. All meetings of Shareholders shall be held
------------------------------
either at the principal office of the corporation or at such other place, either
within or without the State of Connecticut, as may be designated by the
Directors. The Secretary shall serve personally or by mail a written notice, not
less than three (3) days nor more than fifty (50) days before such meeting,
addressed to each Shareholder at the Shareholder's address as it appears on the
stock book; but at any meeting at which all Shareholders shall be present and at
which no Shareholder objects to the lack of notice, or at any meeting where all
not present have waived notice in writing, the notice requirement shall be
waived.
Section 2.2 - Annual Meetings. The Annual Meeting of Shareholders of the
-----------------------------
corporation shall be held in May of each year, or in such other month and at
such time and place as the Directors shall determine.
Section 2.3 - Special Meetings. Special meetings of the Shareholders other
------------------------------
than those regulated by Statute may be called at any time by a majority of the
Directors or by the President and must be called by the President upon written
request of the holders of not less than one-tenth (1/10) of the voting power of
all shares entitled to vote at such special meeting. Notice of such meeting
shall be given as provided in Section 2.1. The purpose for which
<PAGE>
such meeting is called shall be stated in the notice and no business other than
that specified in the call for the meeting shall be transacted at any special
meeting of the Shareholders.
Section 2.4 - Quorum. The presence, in person or by proxy, of the holders
--------------------
of fifty-one percent (51%) of the voting power of all shares entitled to vote
shall be necessary to constitute a quorum for the transaction of business,
provided, however, if a quorum is not present a majority of the voting power of
the shares entitled to vote represented at the meeting may adjourn to some
future time, not less than three (3) days later, and the Secretary shall give at
least two (2) days' notice by mail to each Shareholder entitled to vote who was
absent from such meeting.
Section 2.5 - Voting. At all meetings of the Shareholders, all questions,
--------------------
unless specifically regulated by Statute or controlled by a written agreement
binding the corporation, shall be determined by a vote of shareholders (who may
be present in person or by proxy) holding at least fifty-one percent (51%) of
the total issued and outstanding shares of common stock of the corporation. Any
qualified voter may demand a stock vote, in which case each Shareholder present,
in person or by proxy, shall be entitled to cast one vote for each share of
stock owned or represented by him or her. All voting shall be oral, except that
a stock vote shall be by ballot, each of which shall state the name of the
Shareholder voting and the number of shares owned by such Shareholder and, in
addition, if such ballot be cast by proxy, the name of the proxy shall be
stated.
Section 2.6 - Order of Business. The order of business at all meetings of
-------------------------------
the Shareholders (unless otherwise specified in the notice of meeting or
determined by the Directors) shall be as follows:
1. Roll call
2. Proof of notice of meeting or waiver of notice
3. Reading of minutes of preceding meeting
4. Reports of officers
5. Reports of committees
6. Ratification
7. Election of Directors
8. Unfinished Business
9. New Business
Section 2.7 - Consents. Whenever the vote of Shareholders is required to
----------------------
be taken at a meeting in connection with any corporate action, the meeting and
the vote of Shareholders may be dispensed with if all the Shareholders who would
have been entitled to vote upon the action, if such meeting were held, shall
consent in writing to such corporate actions being taken.
-2-
<PAGE>
ARTICLE III
-----------
Board of Directors
------------------
Section 3.1 - Number, Election and Term of Office. The property, business
-------------------------------------------------
and affairs of the corporation shall be managed by or under the direction of a
Board of Directors comprising not less than three (3) nor more than fifteen (15)
directorships in number, except that if the corporation shall at any time have
less than three (3) shareholders, the number of directorships may be decreased
to a number not less than the number of shareholders. The actual number of
directorships shall be fixed from time to time by resolution of the shareholders
or the directors or, in the absence thereof, shall be the number of directors
elected at the preceding annual meeting of shareholders. Directors standing for
election shall be elected by the shareholders at the annual meeting, and it
shall not be a qualification of office that the directors be shareholders or
residents of the State of Connecticut. Each director shall hold office for the
term for which he or she is elected and until his or her successor has been
elected and qualified, except that a director shall cease to be in office upon
his or her death, resignation, lawful removal or court order decreeing that he
or she is no longer a director in office.
Section 3.2 - Directors' Meetings. An Annual Meeting of the Board of
---------------------------------
Directors shall be held immediately following the Annual Meeting of
Shareholders. Regular meetings may be held at such intervals as the Board of
Directors may determine. Special meetings of the Board of Directors may be
called by the Chairman of the Board and/or the President at any time and shall
be called by the President or Secretary upon the written request of one (1)
Director.
Section 3.3 - Notice of Meetings. Notice of meetings other than the Annual
--------------------------------
Meetings shall be given by service upon each Director in person or by mailing to
such Director, at his or her last known post office address, at least three (3)
days before the date designated for such meeting, including the day of mailing,
a written or printed notice specifying the time and place of such meeting and
the business to be brought before the meeting; and no business other than that
specified in such notice shall be transacted at any such special meeting. At
any meeting at which every member of the Board of Directors shall be present and
at which no Director objects to the lack of notice, or at which Directors not
present have waived notice in writing, the notice requirement shall be waived,
and any business may be transacted which might have been transacted if the
meeting had been duly called.
Section 3.4 - Consents. Whenever the vote of Directors is required to be
----------------------
taken at a meeting in connection with any corporate action, the meeting and the
vote of Directors may be dispensed with
-3-
<PAGE>
if all the Directors who would have been entitled to vote upon the action, if
such meeting were held, shall consent in writing to such corporate actions being
taken.
Section 3.5 - Quorum. At any meeting of the Board of Directors, a majority
--------------------
of the then current Directors shall constitute a quorum for the transaction of
business, but in the event of a quorum not being present, a lesser number may
adjourn the meeting to some future time, not more than ten (10) days later.
Section 3.6 - Voting. At all meetings of the Board of Directors, each
--------------------
Director is to have one vote, irrespective of the number of shares of stock held
by that Director. At all meetings of the Board of Directors, all questions, the
determination of which is not specifically regulated by statute, shall be
decided by a majority vote of the total number of Directorships of the
corporation.
Section 3.7 - Compensation. Each Director shall be entitled to receive,
--------------------------
for attendance at each meeting of the Board or of any duly constituted committee
of the Board such fee as is fixed by the Board from time to time.
Section 3.8 - Vacancies. A vacancy on the Board occurring between Annual
-----------------------
Meetings may be filled for the unexpired portion of the term by an individual
elected by a majority of the remaining Directors, or the sole remaining
Director.
Section 3.9 - Removal of Directors. No Director shall be removed except by
----------------------------------
the affirmative vote of two-thirds (2/3) or more of the issued and outstanding
shares of capital stock of the corporation entitled to vote for the election of
directors generally.
ARTICLE IV
----------
Officers
--------
Section 4.1 - Officers and Qualifications. The directors shall elect a
-----------------------------------------
Chairman, a President, and a Secretary, and such other officers as the Board of
Directors may from time to time appoint, which may include one or more Vice
Presidents, a Treasurer, and Assistant Treasurers and Assistant Secretaries.
Any two or more offices may be held by the same person except the offices of
President and Secretary. The duties of officers of the corporation shall be
such as are prescribed by these Bylaws and as may be prescribed by the
directors.
Section 4.2 - Chairman. The Chairman shall preside at all meetings of the
----------------------
directors and of the stockholders and unless the directors otherwise determine,
he or she shall be the chief
-4-
<PAGE>
executive officer of the corporation. As chief executive officer, he or she
shall have general control and management of the corporation's business and
affairs, subject to the direction of the Board of Directors. He or she shall
consult with and advise the President concerning the operations of the
corporation. The Chairman shall perform such additional duties as may be
assigned to him or her from time to time by the Board of Directors.
Section 4.3 - President. The President shall perform all duties incident
-----------------------
to the office of President and shall have full authority and responsibility for
the operation of the business of the corporation, subject to the direction of
the Board of Director and the chief executive officer. In the event of the
absence or disability of the Chairman, the President shall perform the duties
and have the power of the Chairman. The President shall perform such additional
duties as may be assigned to him or her from time to time by the Board of
Directors or the chief executive officer.
Section 4.4 - Vice President. Each Vice President, if any, shall assist
----------------------------
the President in the performance of his or her duties and shall perform such
duties as may from time to time be assigned to him or her by the Board of
Directors or delegated to him by the President. In case of the death,
disability or absence of the President, the Vice President, if any, or, if there
shall be more than one, the Vice Presidents, in the order of seniority or in any
other order determined by the Board, shall perform the duties and exercise the
powers of the President.
Section 4.5 - Treasurer. The Treasurer, if any, shall have charge and
-----------------------
custody of and be responsible for all funds and securities of the corporation,
keep full and accurate accounts of receipts and disbursements and other
customary financial records of the corporation, deposit all moneys and valuable
effects in the name and to the credit of the corporation in depositories
designated by the Board of Directors and, in general, perform such other duties
as may from time to time be assigned to him or her by the Board of Directors or
by the Chief Executive Officer or as are incident to the office of Treasurer.
Section 4.6 - Assistant Treasurer. The Assistant Treasurer, if any, shall
---------------------------------
assist the Treasurer in the performance of the Treasurer's duties and shall
carry out the duties of the Treasurer whenever the Treasurer is unable to
perform such duties. There may be more than one Assistant Treasurer.
Section 4.7 - Secretary. The Secretary shall keep a book of minutes of all
-----------------------
meetings of shareholders and the Board of Directors and shall issue all notices
required by law or by these bylaws, and he or she shall discharge all other
duties required of a corporate secretary by law or imposed from time to time by
the Board of Directors or by the chief executive officer or as are incident to
the office of Secretary. He or she shall have the custody of the
-5-
<PAGE>
seal of the corporation and all books, records and papers of the corporation,
except such as shall be in the charge of the Treasurer or of some other person
authorized to have custody and possession thereof by a resolution of the Board
of Directors.
Section 4.8 - Assistant Secretary. The Assistant Secretary, if any, shall
---------------------------------
assist the Secretary in the performance of the Secretary's duties and shall
carry out the duties of the Secretary whenever the Secretary is unable to
perform such duties. There may be more than one Assistant Secretary.
Section 4.9 - Term of Office. Each of such officers shall serve for the
----------------------------
term of one year and until his or her successor is duly appointed and qualified,
but any officer may be removed by the Board of Directors at any time with or
without cause. Vacancies among the officers by reason of death, resignation or
other causes shall be filled by the Board of Directors.
Section 4.10 - Compensation. The compensation of all officers shall be
---------------------------
fixed by the Board of Directors, and may be changed from time to time by a
majority vote of the Board.
ARTICLE V
---------
Seal
----
Section 5.1 - Seal. The seal of the corporation shall be the name of the
------------------
corporation encircled about the words "Seal" and "Connecticut," in such form as
adopted by the Board of Directors.
ARTICLE VI
----------
Certificates of Stock
---------------------
Section 6.1 - Description of Stock Certificates. The certificates of stock
-----------------------------------------------
shall be bound in a book and shall be numbered, registered and issued in
consecutive order. There shall be entered the names and addresses of the
persons owning the shares thereby represented, with the number of shares and the
date of issue. Such certificates shall exhibit the name of the corporation, a
statement that the corporation is organized under the laws of Connecticut, the
holder's name, the number, class and designation of series of shares, the date
of issue and the par value of such shares or a notation that they are without
par value. They shall be signed by the President or Vice President and
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer and sealed
with the seal of the corporation.
Section 6.2 - Transfer of Stock. The stock of the corporation shall be
-------------------------------
assignable and transferable on the books of the
-6-
<PAGE>
corporation only by the person in whose name it appears on said books or his
legal representatives. In case of transfer by attorney, the power of attorney,
duly executed and acknowledged, shall be deposited with the Secretary. In all
cases of transfer, the former certificates must be surrendered up and cancelled
before the new certificate may be issued, unless the transferor files a sworn
affidavit with the Secretary of the corporation stating that any missing
certificates have been mislaid or lost and agrees that he will indemnify the
corporation from loss should it issue a new certificate based upon such
affidavit. No transfer shall be made upon the books of the corporation within
ten (10) days next preceding the Annual Meeting of Shareholders.
ARTICLE VII
-----------
Dividends
---------
Section 7.1 - When Declared. The Board of Directors, in its discretion,
---------------------------
may by vote declare and pay dividends out of unreserved and unrestricted earned
surplus of the corporation.
ARTICLE VIII
------------
Bills, Notes, Etc.
-----------------
Section 8.1 - How Made. All bills payable, notes, checks or other
----------------------
negotiable instruments of the corporation shall be made in the name of the
corporation and shall be signed by those persons designated by resolution of the
Board of Directors. No officer, either singly or jointly with others, shall
have the power to make any bills payable, notes, checks, drafts or warrants or
other negotiable instruments or endorse the same in the name of the corporation
or contract or cause to be contracted any debt or liability in the name or in
behalf of the corporation, unless expressly authorized by resolution of the
Board of Directors.
ARTICLE IX
----------
Contracts in Which Directors Have an Interest
---------------------------------------------
Section 9.1 - Validity of Contracts and Liability of Directors. A contract
--------------------------------------------------------------
or transaction between a corporation and a Director or a member of his immediate
family or between the corporation and another corporation or organization in
which a Director and his immediate family have a substantial interest, or
between the corporation and another corporation having common Directors or
officers, shall not be voidable and such Director shall not incur any liability
merely because of the Director's
-7-
<PAGE>
interest, family relationship, or position as a Director or officer in the
contracting corporation if
(a) such interest, family relationship, or position is fully disclosed,
the contract or transaction is not unfair to the corporation and the
contract or transaction is authorized by all of the Directors not having an
interest in the transaction; or
(b) such interest is fully disclosed and the contract or transaction is
approved by a majority of the voting power of the shares entitled to vote
thereon; or
(c) the contract or transaction is not with the Director or a member of
his immediate family, personally, and the contract or transaction is not
unfair to the corporation or it has been approved by a majority of the
voting power of the shares entitled to vote thereon; or
(d) the contract or transaction is fair to the corporation.
ARTICLE X
---------
Waiver of Notice
----------------
Section 10.1 - Authority to Waive Notice. Whenever under the provisions of
----------------------------------------
these Bylaws or of any Statute, any Shareholder or Director is entitled to
notice of any regular or special meeting or of any action to be taken by the
corporation, such meeting may be held or such action may be taken without the
giving of such notice, provided every Shareholder or Director entitled to such
notice waives such notice. The attendance of any person at a meeting without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice shall be deemed to be a waiver of notice of such meeting.
ARTICLE XI
----------
Books and Records; Fiscal Year
------------------------------
Section 11.1 - Books and Records. There shall be kept correct and complete
--------------------------------
books and records of account and minutes of the proceedings of the corporation's
incorporators, Shareholders, and committees of Directors. There shall also be
maintained at the principal office of the corporation, a record of the
corporation's Shareholders, giving the names and addresses of all Shareholders
and the number and class of shares held by each.
-8-
<PAGE>
Section 11.2 - Power to Establish Fiscal Year. The Board of Directors
---------------------------------------------
shall have power to fix and from time to time to change the fiscal year of the
corporation.
ARTICLE XII
-----------
Amendments
----------
Section 12.1 - Amendments. The bylaws of the corporation may be altered,
-------------------------
amended or repealed at any validly called and convened meeting of the Board of
Directors by the affirmative vote of directors holding a majority of the number
of directorships at the time, or at any validly called and convened meeting of
the shareholders by the affirmative vote of the holders of a majority of the
voting power of shares entitled to vote thereon, or by the unanimous written
consent of the Board of Directors, or by the unanimous written consent of the
holders of the shares entitled to vote thereon. Any notice of a meeting of
shareholder or the Board of Directors at which bylaws are to be adopted, amended
or repealed shall include notice of such proposed action.
ARTICLE XIII
------------
Committees
----------
Section 13.1 - Committees. The Board of Directors may, by resolution
-------------------------
adopted by the affirmative vote of directors holding a majority of the
directorships, at a meeting at which a quorum is present, designate two or more
directors to constitute an Executive Committee or other committees, and may
designate one or more directors as alternate members of any such committees, who
may replace any absent or disqualified member at any meeting of the committee.
Any such committee shall have and may exercise all such authority of the Board
of Directors as shall be delegated to it in such resolution or thereafter by
similar resolution.
-9-
<PAGE>
Exhibit 5
October 11, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Accent Color Sciences, Inc.
---------------------------
Ladies and Gentlemen:
We have acted as counsel for Accent Color Sciences, Inc., a Connecticut
Corporation ("the Company"), in connection with the proposed issuance by the
Company of up to an aggregate of 3,450,000 shares of the Company's Common Stock,
without par value (the "Common Stock") pursuant to the Company's initial public
offering of such Common Stock (the "Offering") as described in the Company's
Registration Statement on Form S-1 (the "Registration Statement") being filed
this date under the Securities Act of 1933, as amended.
In connection with the following opinion, we have reviewed the Registration
Statement and the Underwriting Agreement filed as an exhibit thereto. We are
familiar with the action taken by the Company to date with respect to the
approval and authorization of the Offering. We have examined original, or copies
certified or otherwise authenticated to our satisfaction, of such corporate
records of the Company, agreements and other instruments, certificates of public
officials, officers and representatives of the Company and such other documents
as we have deemed necessary as a basis for the opinion hereinafter expressed. We
are furnishing this opinion in connection with the filing of the Registration
Statement.
Based upon the foregoing, we are of the opinion that, upon the
effectiveness of the Registration Statement, the shares of the Common Stock
proposed to be issued by the Company under the Registration Statement will, when
issued, be validly issued, fully paid and non-assessable.
We hereby consent to the inclusion of this opinion as an exhibit in the
Registration Statement and to reference to our firm under the caption "Legal
Matters" in the prospectus constituting a part of the Registration Statement.
Very truly yours,
MURTHA, CULLINA, RICHTER AND PINNEY
By /s/ Willard F. Pinney, Jr.
-----------------------------------
Willard F. Pinney, Jr.
A Partner
<PAGE>
EXHIBIT 10.2
2 July, 1996
Mr. Norman L. Milliard
President and Chief Operating Officer
Accent Color Sciences
800 Connecticut Blvd.
East Hartford, CT 06108
Letter of Understanding
-----------------------
Dear Norman:
This letter agreement is an amendment to that certain agreement between the
parties effective February 16, 1996 styled a Product Development and
Distribution Agreement ("Agreement") and relates to ACS performing certain
additional development and testing work as more specifically described herein
and shall be effective on the date the last party hereto countersigns this
letter below (the "Effective Date").
1.WORK TO BE PERFORMED BY ACS. ACS will use its best efforts and at no
---------------------------
charge to Xerox or Colorbus to (a) deliver to Colorbus no later than July 1,
1996 an interface specification (including updates) which enables a digital
front end to be developed by Colorbus for Xerox under separate agreement by and
between Colorbus and Xerox to be interoperable and compatible with the ACS 135
Spot Printer; (b) software, together with appropriate documentation respecting
the integration logic to the ACS 135 Spot Printer which software has features
and functionality and in a format permitting the aforesaid digital front end
development, and (c) promptly after alpha and beta test units of such digital
front end are delivered to it by Colorbus or Xerox, test such Colorbus digital
front end for interoperability and compatibility with the ACS 135 Spot Printer.
2.AVAILABILITY OF ACS TECHNICAL SUPPORT. ACS will provide to Xerox and
-------------------------------------
Colorbus the following technical support: (a) ACS 135 Spot Printer installation,
(b) ACS 135 Spot Printer operator training, (c) ACS 135 Spot Printer service
at least in the United States and (d) on-site and telephone technical
consultation, as required to support the identified BO installations. In
addition, ACS will provide technical support services as described in paragraph
10.02 of the "Agreement".
<PAGE>
3.CONFIDENTIALITY. In the event one of the parties must disclose to the
---------------
other confidential information for the purpose of enabling either party to
perform its obligations thereunder, the disclosure and use of such information
shall be governed by that certain agreement between the parties styled a
"Confidential Disclosure Agreement" and signed by a representative of Xerox on
February 15, 1996.
4.PUBLICITY. Except as required by law, no party hereto will issue any
---------
public statement concerning this letter agreement, or otherwise make this
letter agreement public without the prior written consent of the other party.
5. EXPENSES. Each party will bear its own expenses in connection with the
--------
development and other work to be performed thereunder.
6.FORECASTS. Xerox shall provide to ACS forecasts per paragraph 4.07 of
---------
the Agreement. The first forecast for ACS units to be used in conjunction with
DocuTech is to be provided on or before September 1, 1996.
7.ENTIRE AGREEMENT. This letter agreement, its attached exhibits (Exhibit
----------------
"A" entitled "The Toucan Systems Requirements Overview", Exhibit "B" entitled
"Key Mileposts for Product Delivery From Accent Color Sciences to Xerox", and
Exhibit "C", entitled "Transfer Costs from Accent Color Sciences to Xerox") and
the Agreement contain the entire understandings of the parties with respect to
the subject matter hereof and supersedes any prior or contemporaneous written
instruments or oral agreements and may only be amended by a written instrument
signed by representatives of both parties. In the event of any inconsistency
between the terms contained in this letter agreement and those contained in the
Agreement, the former shall control.
<PAGE>
If the foregoing accurately sets forth our understanding with respect to
the subject matter hereof, kindly countersign this letter agreement where
indicated below and return such executed copy to the undersigned.
Very truly yours,
By:
--------------------
James A. Contino
Strategic Alliance Manager
Xerox Production Systems Group
AGREED AND ACCEPTED AS
OF THE DATE FIRST WRITTEN
ABOVE:
ACCENT COLOR SCIENCES
By:
------------------------------
Mr. Norman L. Milliard
President and Chief Operating Officer
Accent Color Sciences
------------------------------
Date
XEROX CORPORATION
By: ------------------------------
Steve Graham
Vice President and General Manager
Xerox Production Publishing Solutions
------------------------------
<PAGE>
Exhibit 10.3
PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT
AMENDMENT
This Amendment is made and entered into between Accent Color Sciences Inc., a
corporation organized under the laws of the State of Connecticut, U. S. A., with
an office in East Hartford, Connecticut (hereinafter referred to as "ACS"), and
Xerox Corporation, a corporation organized under the laws of the State of New
York, U.S.A., with an office in El Segundo, California (hereinafter "Xerox") and
amends that certain agreement between the parties effective February 16, 1996
styled a Product Development and Distribution Agreement ("Agreement") , and
shall be effective as of the date the last signature is affixed hereto. The
Agreement is amended as follows:
1. Notwithstanding any term or condition to the contrary contained in the
Agreement or in the letter dated February 14, 1996 from Richard Coburn of ACS
to Gerhard Moll of Xerox , the duration of Xerox' exclusive rights as set
forth in paragraphs 2.08(c) and 4.12 of the Agreement shall be coextensive
with the period of time that any amounts owed by ACS to Xerox under the Loan
Agreement and Promissory Note dated February 29, 1996 remain outstanding or,
subject to Xerox purchasing reasonable quantities of Products from ACS under
the Agreement, the initial term of this Agreement, whichever is last to
occur.
2. The parties agree that the phrase "exclusive use" as contained in the
letter dated February 14, 1996 from Richard Coburn of ACS to Gerhard Moll of
Xerox encompasses the exclusive right of Xerox to distribute the applicable
future ACS products.
3. In all other respects the terms of the Agreement remain in full force and
effect.
IN WITNESS WHEREOF, authorized representatives of the parties have affixed their
signatures as of the Effective Date.
XEROX CORPORATION ACCENT COLOR SCIENC INC.
<PAGE>
By: _________________________ By: __________________________
Name Name
_________________________ __________________________
Title Title
Date: ________________________ Date: _________________________
<PAGE>
EXHIBIT 10.4
LOAN AGREEMENT AND PROMISSORY NOTE
UP TO THREE MILLION ($3,000,000) DOLLARS Dated: February,2 9 1996
FOR VALUE RECEIVED, the undersigned, ACCENT COLOR SCIENCES, INC., a Connecticut
corporation (the "Company"), HEREBY PROMISES TO PAY to the order of XEROX
CORPORATION, a New York corporation (the "Payee"), the principal amount of the
amounts loaned to Company by Payee or otherwise owed hereunder to Payee by
Company, together with accrued interest.
1. (a) Payee has previously loaned the sum of five hundred thousand ($500,000)
dollars to Company as evidenced by a Promissory Note dated January 2, 1996.
Under the January 2, 1996 Promissory Note Company had agreed to repay to
Payee the principal sum of five hundred thousand ($500,000) dollars in full
on or before April 2, 1996. Company has not repaid any part of such
principal sum or any interest accruing thereon. The parties agree that the
Promissory Note dated January 2, 1996 is extinguished and that the amount
of outstanding and unpaid principal payable thereunder and accrued interest
payable thereon shall be made subject to this Promissory Note (the
"Refinanced Debt");
(b)Payee hereby agrees to loan Company up to an additional two and one-half
million ($2,500,000) dollars (for a total of up to $3,000,000 including the
principal included in the Refinanced Debt). Payee shall release to Company
the following sums provided Company timely completes the milestones set
forth in Exhibit A hereto (each a "Milestone") (and which are more
particularly described in the Product Development and Distribution
Agreement between the parties that has an effective date of February 16,
--
1996) ("Development Agreement"):
<TABLE>
<CAPTION>
Approximate
Milestone No. Amount to be released Achievement Date
- ------------- --------------------- ----------------
<S> <C> <C>
December MOU
Advancement $500,000 January 2, 1996
Milestone 1 500,000 Upon Execution
Milestone 2 600,000 March 1, 1996
Milestone 3* 400,000 April 15, 1996
Milestone 4 350,000 May 1, 1996
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Milestone 5 150,000 June 17, 1996
Milestone 6 200,000 July 1, 1996
Milestone 7 200,000 August 1, 1996
Milestone 8 100,000 September 1, 1996
</TABLE>
*Upon the achievement of Milestone 3 and prior to the release of any further
amounts hereunder, Company will deliver to Payee a warrant to purchase 50,000
shares of Company's common stock as more particularly described in Section 13(g)
hereof.
2. Interest shall accrue at the rate of eight percent (8%) per annum on all
principal amounts remaining unpaid and outstanding hereunder (including
without limitation the principal amount included in the Refinanced Debt).
Interest on the principal amount included in the Refinanced Debt accrued
from January 2, 1996 through the date hereof at an annual rate of seven
percent (7%) but shall hereafter accrue at the rate eight percent (8%).
3. (a) Unless sooner repaid in accordance with this Loan Agreement and
Promissory Note , the principal balance hereunder, including the principal
included in the Refinanced Debt, shall be repaid by Company in four
installments as follows: (i) $500,000 on July], 1997;(ii) $500,000 on
October 1, 1997; (iii) $1,000,000 on January 2, 1998; and (iv) $1,000,000 on
April 1, 1998. In the event that less than all of the $3,000,000 maximum is
borrowed hereunder any difference will be deducted from the principal
payments due in the inverse order of their maturity (i.e. first from the
payment due April 1, 1998).
(b) Interest as provided above shall accrue until April 1, 1996 , at which time
all interest accrued to date (including all interest included in the
Refinanced Debt) will be paid, and accrued interest thereafter shall be paid
on the first (1st) day of each July, October, January and April thereafter
to and including April 1, 1998 when the entire unpaid principal balance
together with any unpaid accrued interest and all other sums due hereunder
shall become due and payable.
4. If any payment is due hereunder on a date which is not a business day, such
payment shall be made on the next succeeding business day. Payments made
hereunder shall be made in United States currency or by electronic wire
<PAGE>
transfer of same day settlement funds, at such location or other address as
the Payee or other holder of this Note shall have notified the Company in
writing. As used herein, the term "business day" shall mean any day on which
banks are not required or authorized by law to close in New York, New York.
5. At any time upon not fewer than two business days' notice to the Payee or
other holder of this Note, the Company may prepay, in whole or part, the
principal amount then outstanding hereon, together with interest accrued
hereon without penalty or premium. Any such prepayments shall be first
applied against any accrued unpaid interest due to Payee under this Loan
Agreement and Promissory Note and thereafter against the payments of the
principal balance due hereunder in the inverse order of their maturity.
6. If one or more of the events of default set forth below (each an "Event of
Default") shall occur and be continuing, the Payee may, by notice to the
Company, declare the outstanding principal amount hereof, together with
interest accrued thereon, to be immediately due and payable, all without
diligence, presentment, demand of payment, protest or notice of any kind,
which are expressly waived by the Company. Each of the following events
shall constitute an event of Default:
a) Default in the payment of any sum owed under this Loan Agreement and
Promissory Note when due and the failure to cure such default within ten
(10) days;
b) The breach in any material respect by Company of any covenant,
representation or warranty in this Loan Agreement and Promissory Note and
the failure to cure such breach within thirty (30) days;
c) The breach in any material respect by Company of any covenant,
representation, or warranty in the Development Agreement or the Security
Agreement between the parties of even date herewith;
d) The institution by Company of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by Company to institution of bankruptcy or
insolvency proceedings against it or the filing by Company of a petition or
answer or consent seeking reorganization or release under the Federal
Bankruptcy Act, or any other applicable federal or state law, or the
consent
<PAGE>
by Company to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, or other similar official of
Company or of any substantial part of its property, or the making by
Company of an assignment for the benefit of creditors, or the admission in
writing by Company of its inability to pay its debts generally as they
become due or the taking of corporate action by Company in furtherance of
any such action; or
e) If, within 60 days after the commencement of an action against Company
seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of Company
stayed, or if the stay of any such order or proceeding shall thereafter be
set aside; or if within 60 days after the appointment without the consent
or acquiescence of Company of any trustee, receiver or liquidator or
similar official of Company, or of all or any substantial part of the
property of Company, such appointment shall not have been vacated;
f) Company fails to make when due and payable any payment required to be made
by it pursuant to the terms of any contract for borrowed money, or fails
duly and punctually to perform or observe any other covenant, condition or
agreement contained in any such contract, and the effect of such failure is
to cause, or where such failure upon notice or lapse of time would, under
terms of such contract, cause, the indebtedness due and owing under such
contract to become due prior to its stated or scheduled maturity unless any
such failure is cured within the cure period.
7. Any notice or demand which by a provision of this Loan Agreement and
Promissory Note is required or permitted to be given shall be in writing,
hand-delivered or sent by Registered mail, postage prepaid, receipt
requested, and addressed as follows:
The Company: Accent Color Sciences, Inc.
Riverview Square
East River Drive
East Hartford, CT 06108
ATTENTION: Stephen K. Henn, Chief Financial Officer
<PAGE>
The Payee: Xerox Corporation
Box 1600
Long Ridge Road
Stamford, CT 06904
ATTENTION: Richard S. Palmer Director, Corporate Business
Development
With a Copy to: Xerox Corporation
Box 1600
800 Long Ridge Road
Stamford, CT 06904
ATTENTION: Senior Vice President and General Counsel
or to such address as the Company, on the one hand, or the Payee or other holder
of this Loan Agreement and Promissory Note, on the other, shall have notified
the other in accordance with the provisions of this paragraph. All such notices
shall be effective upon receipt.
8. This Loan Agreement and Promissory Note and any covenants and agreements of
the Company herein shall be binding upon and enforceable against the
Company and its successors and assigns, whether or not so expressed. This
Loan Agreement and Promissory Note shall not be assignable by the Company
without the consent of the Payee. This Loan Agreement and Promissory Note
shall be freely assignable by the Payee.
9. Neither the Payee nor any subsequent holder of this Loan Agreement and
Promissory Note shall be required to post any bond if the Loan Agreement
and Promissory Note is lost, stolen or mutilated and the Company shall
execute and deliver in lieu thereof a new Note, dated the date hereof, in
the same principal amount provided that reasonable satisfactory indemnity
to the Company with respect thereto is provided.
10. This note and the rights and obligations of the parties hereunder shall be
construed in accordance with and be governed by the laws of the State of
New York (without giving effect to the principles thereof relating to
conflicts of law).
<PAGE>
11. Representations and Warranties of Company. Company represents and warrants
-----------------------------------------
to Payee that:
a) Company is a corporation duly organized, validly existing and in good
standing under the laws of Connecticut, has the necessary authority and
power to transact the business in which it is engaged, is duly qualified to
do business in each jurisdiction in which the conduct of its business or
the ownership of its assets requires such qualification;
b) Company has full power, authority and legal right to execute and deliver
this Loan Agreement and Promissory Note and to perform its obligations
hereunder;
c) this Loan Agreement and Promissory Note is a legal, valid and binding
obligation of Company enforceable in accordance with its terms;
d) no consent of any other party and no consent, license, approval or other
action or filing with any governmental instrumentality is required in
connection with the execution, delivery or performance by Company of, or
the validity or enforceability of, this Loan Agreement and Promissory Note;
e) the execution, delivery and performance by Company of this Loan Agreement
and Promissory Note do not and will not violate any provision of any
applicable law or regulation or of any judgment, order, or the like of any
court or governmental instrumentality, do not and will not violate any
provision of, or cause a default under any loan agreement, indenture,
contract, agreement or judgment to which Company is a party or which is
binding upon Company or any of its assets; and do not and will not result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the Company's property or assets;
f) except with respect to Payee, it has not granted any currently existing
security interests in, and to the best of its knowledge and belief, there
are no outstanding liens or other encumbrances with respect to, its
tangible or intangible assets;
g) there are no lawsuits or proceedings to which it is a party, or which are
threatened, with respect to which a result adverse to Company would
<PAGE>
prejudice Company's ability to perform its obligations under, or affect
the validity of, this Loan Agreement and Promissory Note.
12. Covenants of Company. Company covenants and agrees that from and after the
--------------------
date hereof and until such time as all amounts of principal and interest
payable hereunder have been indefeasibility paid in full, Company shall:
a) promptly give written notice to Payee of the occurrence of any Event of
Default, of the commencement or threat of any material litigation or
proceedings affecting Company, or of any dispute between Company and any
governmental regulatory body;
b) observe all requirements of any governmental authorities relating to the
conduct of its business, to the performance of its obligations hereunder;
maintain its existence as a legal entity; and obtain and keep in full force
and effect all rights, franchises, licenses and permits which are necessary
to the proper conduct of its business;
c) pen-nit Payee or its authorized representative at any reasonable time and
upon reasonable notice to inspect the books and records of Company;
d) keep proper Company books of record and account in which full, true and
correct entries in accordance with generally accepted accounting principles
will be made of all dealings or transactions in relation to its business
and activities;
---
e) (i) deliver to Payee as soon as available and in any event within thirty
(30) days after the end of each calendar quarter, a balance sheet as of the
end of each such period, statements of income and retained earnings for the
periods then ending, and a statement of cash flows all in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the previous year and all prepared in
accordance with generally accepted accounting principles consistently
applied and (ii) deliver to Payee as soon as available and in any event
within ninety (90) days after the end of each fiscal year, a balance sheet
as of the end of each such period, statements of income and retained
earnings for the periods then ending, and a statement of cash flows all in
reasonable detail and stating in comparative form the respective figures
for the corresponding date and
<PAGE>
period in the previous year and all prepared in accordance with generally
accepted accounting principles consistently applied and audited by a
nationally recognized public accounting firm;
f) not effect a recapitalization, or merger or effect a combination with
another entity, or dissolve, liquidate, or wind up without the written
consent of Payee;
g) not pay any dividend or distribution of cash or assets with respect to any
shares of its capital stock, nor repurchase any capital stock.
13. Miscellaneous Provisions
------------------------
a) Remedies, Non-Waiver. No failure or delay by Payee or Company in
--------------------
exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. No
right or remedy in this Loan Agreement and Promissory Note is intended
to be exclusive but each shall be cumulative and in addition to any
other remedy referred to herein or otherwise available to Payee at law
or in equity; and the exercise by Payee of any one or more of such
remedies shall not preclude the simultaneous or late exercise by Payee
of any or all such other remedies. No express or implied waiver by
Payee of an Event of Default shall in any way be, or be construed to
be, a waiver of any other or subsequent Event of Default. The
acceptance by Payee of any regular installment payment or any other
sum owing under this Loan Agreement and Promissory Note shall not
constitute a waiver of any Event of Default in existence at the time
of such acceptance.
b) Survival of Representations and Warranties. All representations and
------------------------------------------
warranties in this Loan Agreement and Promissory Note shall survive
the execution and delivery hereof.
c) Amendment, Modification. This Loan Agreement and Promissory Note may
-----------------------
be amended or modified only by a written agreement of the parties
hereto specifically referring to this Note.
<PAGE>
d) Binding Provisions. Except for those provisions hereof which are
------------------
expressly deemed non-binding, this shall be binding upon and inure to
the benefit of Company and Payee and their respective successors and
assigns.
e) Titles. Headings of sections are for convenience only, are not part of
------
this Loan Agreement and Promissory Note and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.
f) Severable Provisions. Any provision of this Loan Agreement and
--------------------
Promissory Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such
provision in any other jurisdiction.
g) Warrants. To induce Payee to enter into this Loan Agreement and
--------
Promissory Note, Company has agreed to issue to Payee warrants to
purchase up to 125,000 shares of Company's common stock. Such warrants
will be issued in two steps, the first for 75,000 shares will issued
in connection with the execution and delivery of this Loan Agreement
and Promissory Note (Milestone 1), and the second for 50,000 shares
will be issued upon the achievement of Milestone 3 and simultaneously
with the release of the funds called for upon the achievement of such
Milestone 3. Such warrants will be issued pursuant to Warrant
Agreements in the form of Exhibit B hereto.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Loan
Agreement and Promissory Note as of the date first written above.
ACCENT COLOR SCIENCES, INC.
By: _______________________________
Title: ____________________________
<PAGE>
XEROX CORPORATION
By: _______________________________
Title: ____________________________
<PAGE>
EXHIBIT A
MILESTONE / LOAN TAKE DOWN SCHEDULE
-----------------------------------
<TABLE>
<CAPTION>
MILESTONE DATE TASK LOAN TAKE
- --------- ---- ----
DOWN
---------
<S> <C> <C> <C>
1 Loan Shipment of Alpha Software development $500K
Agreement unit; All Product Performance Specification
Execution Complete
2 3/1/96 BO design review complete. Preliminary $600K
documentation available
3 4/15/96 Program self assessment review completed, $400K
assembly underway, SCSI Protocol S/W available
4 5/1/96 B0-1 assembly complete $350K
5 6/17/96 B0-4 Unit installed at Xerox $150K
6 7/1/96 ACS Manufacturing Facility Functional $200K
7 8/1/96 ACS Manufacturing B1-1 Build Complete $200K
8 9/1/96 B1 production units available. Customer $100K
engagement go / wait review
completed
</TABLE>
<PAGE>
Exhibit B
EXERCISABLE AT ANY TIME
AFTER THE OPENING OF BUSINESS ON _________________, 1996 AND
PRIOR TO THE CLOSE OF BUSINESS ON _________________, 1999
VOID AFTER __________________, 1999 [3 YEARS FROM DATE OF ISSUE]
For the Purchase
of XX,OOO Shares
WARRANT TO PURCHASE COMMON STOCK
OF
ACCENT COLOR SCIENCES, INC.
THIS SECURITY AND ALL SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933,AS AMENDED,OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED,SOLD OR
OTHERWISE TRANSFERRED,PLEDGE OR HYPOTHECATED
UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED
UNDER SUCH ACT ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
THEREFROM.
WHEREAS, Accent Color Sciences, Inc. (the "Company") and Xerox
Corporation, a New York corporation having its principal office at 800 Long
Ridge Road, Stamford, Connecticut 06904 ("Xerox) have entered into a certain
Loan Agreement and Promissory Note dated as of February __, 1996 (the "Loan
Agreement"), pursuant to which Xerox has agreed to loan the Company up to
$3,000,000, and the Company has agreed to grant stock purchase warrants
entitling Xerox or any such other person or persons who become the registered
holder thereof to purchase an aggregate of up to One Hundred Twenty-Five
Thousand (1 25,000) shares of the Common Stock of the Company, no par value (the
"Common Stock");
<PAGE>
NOW, THEREFORE:
Section 1. (a) The Company, in consideration of funds advanced pursuant to
-------
the Loan Agreement by Xerox, hereby agrees and certifies that Xerox or any such
other person or persons who become the registered holder hereof ("the Warrant
Holder) is entitled, in accordance with the terms hereof, to purchase up to
XX,000 shares [75,000 FOR THE FIRST, 50,000 FOR THE SECOND] of Common Stock (as
adjusted from time to time as provided herein, the "Warrant Shares") of the
Company at a price of $11.00 per share subject to adjustment as provided herein
(the "Exercise Price").
(b) Subject to the conditions set forth in this Warrant to Purchase Common
Stock (this "Warrant"), this Warrant may be exercised by the execution of the
purchase form attached hereto and the delivery of the executed purchase form
together with (i) a certified or bank check, (ii) a wire transfer, (iii) as
described below and at the sole discretion of Xerox, a letter as evidence of the
cancellation of debt owing under the Loan Agreement, or (iv) other form of
payment acceptable to the Company, or any combination of the foregoing, in the
amount of the Exercise Price of the Warrant Shares being purchased to the
Company, 99 East River Drive, East Hartford, Connecticut 06108, at any time
after the opening of business on the date hereof and prior to the close of
business on [THREE YEARS FROM DATE OF ISSUE] -, 1999 (the "Expiration Date").
This Warrant is exercisable at the option of the Warrant Holder, at any time or
from time to time, up to the Expiration Date for all and any part of the Warrant
Shares (but not for a fraction of a share) which may be purchased hereunder. The
Company agrees that the Warrant Shares purchased under this Warrant shall be and
are deemed to be issued to the Warrant Holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares. Certificates for the Warrant
Shares purchased, together with any other securities or property to which the
Warrant Holder is entitled upon such exercise, shall be delivered to the Warrant
Holder by the Company at the Company's expense as promptly as practicable after
the rights represented by this Warrant have been so exercised. In case of a
purchase of less than all the Warrant Shares, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the Warrant Shares to the Warrant Holder as promptly as practicable.
Each stock certificate so delivered shall be in such denominations of Common
Stock as may be requested by the Warrant Holder and shall be registered in the
name of such Warrant Holder
<PAGE>
or such other name as shall be designated by such Warrant Holder. In the sole
discretion of Xerox, all or a portion of the Exercise Price for any Warrant
Shares may be paid by cancelling an equal portion of the principal and accrued,
unpaid interest owed by the Company to Xerox under the Loan Agreement.
Common Stock shall include the Company's authorized Common Stock as such
class existed on the date of execution of this Document, (ii) any other stock,
securities or property as to which this Warrant becomes exercisable pursuant to
Section 3 and (iii) for purposes of Section 3, stock of the Company of any class
thereafter authorized which ranks, or is entitled to a participation as to
assets or dividends, substantially on a parity with such Common Stock.
Section 2. This Warrant may not be sold, transferred, assigned or hypothecated
- ---------
except with the written consent of the Company, which consent shall not be
unreasonably withheld.
Section 3. The Exercise Price and the number of Warrant Shares shall be subject
- ---------
to adjustment from time to time upon the occurrence of certain events described
in this Section 3. Upon each adjustment of the Exercise Price, the Warrant
Holder shall thereafter be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares hereunder immediately prior to such adjustment, and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(a) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the Company
shall be combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
(b) If at any time or from time to time the holders of Common Stock (or
any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled
to receive, without payment therefor, (i) Common Stock or any shares
of stock or other securities which are at any time directly or
indirectly convertible into or exchangeable for Common Stock, or any
rights or
<PAGE>
options to subscribe for, purchase or otherwise acquire any of the
foregoing by way of dividend or other distribution, (ii) any cash
paid or payable otherwise than as a cash dividend, or (iii) Common
Stock or additional stock or other securities or property (including
cash) by way of spinoff, split-up reclassification, combination of
shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split, adjustments in respect of
which shall be covered by the terms of Section 3(a) above), then and
in each such case, the Warrant Holder shall, upon the exercise of
this Warrant, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of
any additional consideration therefore, the amount of stock and
other securities and property (including cash in the cases referred
to in clauses (ii) and (iii) above) which such Warrant Holder would
hold on the date of such exercise had he been the holder of record
of such Common Stock as the date on which holders of Common Stock
received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
(c) If any capital reorganization of the capital stock of the Company,
or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stocky securities or assets with respect
to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrant Holder shall
thereafter have the right to purchase and receive (in lieu of the shares of
the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares
of stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Stock equal to
the number of outstanding shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby. In any such case, appropriate provision shall be made with respect
to the rights and interests of the Warrant Holder to the end that the
provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable,
<PAGE>
as nearly as may be, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise hereof. The Company will
not effect any such consolidation, merger or sale unless, prior to the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or delivered to the
registered holder hereof at the last address of such holder appearing on
the books of the Company, the obligation to deliver to such holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
(d) If the Company shall at any time or from time to time issue or sell
any of its Common Stock, or securities convertible into its Common Stock, or
options or warrants to purchase Common Stock or securities convertible into
Common Stock, for a consideration per share of Common Stock less than the
Exercise Price in effect immediately prior to the time of such issue or sale,
the Exercise Price then in effect and then applicable for any subsequent
period or periods shall be decreased to an amount equal to the consideration
per share of Common Stock received upon such issuance or sale.
(e) Upon any adjustment of the Exercise Price, and/or any increase or
decrease in the number of Warrant Shares the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial
officer and shall state the Exercise Price resulting from such adjustment and
the increase or decrease, if any, in the number of Warrant Shares purchasable
at such price, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
(f) If any change in the outstanding Common Stock of the Company or any
other event occurs as to which the other provisions of this Section 3 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Warrant Holder in accordance with the essential intent
and principles of such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Exercise Price and/or the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
<PAGE>
The adjustment shall be such as will give the Warrant Holder upon exercise for
the same aggregate Exercise Price the pro rata share, class and kind of shares
as he would have owned had the Warrant been exercised prior to the event and had
he continued to hold such shares until after the event requiring adjustment.
(g) In case at any time the total number of shares of Common Stock
obtainable upon exercise of this Warrant shall be increased or decreased
pursuant to this Section 3, such total number of shares issuable shall be
rounded to the nearest full share and no adjustment shall be made with respect
to any fractional share of Common Stock which otherwise would be obtainable as a
result of any computation made pursuant to this Section 3.
Section 4. The Company and the Warrant Holder expressly agree and
---------
acknowledge that any and all rights of the Warrant Holder to registration of the
Warrant Shares are contained in a certain Registration Rights Agreement, a copy
of which is attached as Exhibit 1.
Section 5. The Warrant Shares which may be transferred to the Warrant
---------
Holder pursuant to this Warrant shall not have been registered under the
Securities Act of 1933 or any similar state law and the Warrant Holder has no
right to receive Warrant Shares so registered, nor does it have any right to
compel the Company to register any Warrant Shares transferred pursuant hereto,
(except as set forth in Section 4 above). All Warrant Shares transferred
pursuant to this Warrant may be "restricted securities" as defined in Rule 144
under the Securities Act of 1933. The Warrant Holder for himself and his
permitted assignees agrees with the Company that any Warrant Shares obtained
upon the exercise of this Warrant shall be so obtained for investment and
without any view to the distribution thereof and shall not be sold, transferred,
assigned or hypothecated except in compliance with the registration requirements
of applicable federal and state securities laws or pursuant to an applicable
exemption therefrom. The Company covenants and agrees that all Warrant Shares
will, upon issuance, be duly authorized, validly issued, fully paid and non-
assessable and free from all preemptive rights of any shareholder and free of
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that the Company has at the date hereof, and during
the period within which the rights represented by this Warrant may be exercised
the Company will at all times have, authorized and reserved, for the purpose of
issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of shares of authorized but
<PAGE>
unissued Common Stock when and as required to provide for the exercise of the
rights represented by this Warrant. The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed. The Company will not take any action which would result in any
adjustment of the Exercise Price if the total number of shares of Common Stock
issuable after such action upon exercise of all outstanding warrants, together
with all shares of Common Stock then outstanding and all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's Articles of Incorporation.
Section 6. Nothing contained in this Warrant shall be construed as
---------
conferring upon the Warrant Holder the right to vote or to consent or to receive
notice as a shareholder in respect of the meetings of shareholders or the
election of Directors of the Company or any other matter, or any rights
whatsoever as a shareholder of the Company, provided that if:
(i) the Company shall take action to make any dividend (whether in
cash, stock or in kind) or other distribution to the holders of
Common Stock;
(ii) the Company shall take action to offer for subscription pro-rata
to the holders of Common Stock any additional shares of stock of any
class or other rights;
(iii) the Company shall take action to accomplish any capital
reorganization, or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of
all or substantially all of its assets to, another corporation; or
(iv) the Company shall take action looking to a voluntary or
involuntary dissolution, liquidation or winding up of the Company;
<PAGE>
then, in any one or more of such cases, the Company shall (1) at least 20 days
prior to the date on which the books of the Company shall close or a record
shall be taken for such distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause
written notice thereof to be sent to the Warrant Holder as provided in Section 7
hereof, and (2) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, cause at
least 20 days prior written notice of the date when the same shall take place to
be given to the Warrant Holder in the same manner. Such notice in accordance
with the foregoing clause (1) shall also specify, in case of any such
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (2) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Section 7. All communications hereunder shall be in writing and, if sent to
---------
the Warrant Holder or the registered holder hereof, will be mailed, delivered
or telecopied and confirmed to him at his address as set forth above, or if
sent to the Company, shall be mailed, delivered or telecopied and confirmed to
the Company at the Company's address set forth above, subject in any case, to
such notification of change of address as either the Warrant Holder or the
Company may give to the other from time to time.
Section 8. The issuance of certificates for shares of Common Stock upon
---------
the exercise of the Warrant shall be made without charge to the Warrant Holder
for any issue tax in respect thereof; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the then Warrant Holder.
Section 9. The Company will at no time close its transfer books against
---------
the transfer of any warrant or of any shares of Common Stock issued or issuable
upon the exercise of any warrant in any manner which interferes with the timely
exercise of this Warrant.
<PAGE>
Section 10. This Warrant and any provision hereof may be changed, waived,
----------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
Section 11. The Company represents and warrants to the Warrant Holder that
----------
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant or stock certificate and, in
the case of any such loss, theft or destruction, upon receipt of any indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant or stock certificate, the
Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
Section 12. The provisions contained herein will inure to the benefit of
----------
and be binding upon the Warrant Holder and the Warrant Holder's executors,
administrators and permitted assigns and the Company and the Company's
executors, administrators and assigns.
Section 13. The provisions hereof shall for all purposes be construed in
----------
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company has executed this Warrant this ___ day of
_______________, 1996.
ACCENT COLOR SCIENCES, INC.
By: _______________________
Its: President
<PAGE>
Exhibit I
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this _____ day of
------------
February 1996, by ACCENT COLOR SCIENCES, INC., a Connecticut corporation (the
"Company") for the benefit of XEROX CORPORATION, a New York corporation
- --------
("Xerox"), and each other Purchaser (individually a "Purchaser"
---------
and collectively, the "Purchasers") entering into a Warrant Purchase Agreement
----------
(the "Warrant Agreement").
-----------------
1. Securities Laws Representations and Covenants of purchaser.
----------------------------------------------------------
The registration rights granted pursuant to Sections 2.2 and 2.3 of this
Agreement shall have no force or effect until such time as the Company has
otherwise become obligated to file periodic or other reports pursuant to Section
13 of the Securities Exchange Act of 1 934, as amended (the "1934 Act").
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
------------
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Stock" shall mean the common stock, no par value, of
the Company.
(c) "Form S1, Form SB-1, Form S-2 Form SB-2 and Form S-3" shall
---------------------------------------------------
mean Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively,
promulgated by the Commission or any substantially similar or successor form
then in effect.
(d) The terms "Register", "Registered" and "Registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a Registration Statement in
<PAGE>
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares until such time
----------------------
as such shares become eligible for sale under subparagraph (k) of Rule 144 or
any successor thereto.
(f) "Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with Section 2, including, without limitation, all federal
and state registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses audits
incident to or required by any such Registration and the reasonable fees and
disbursements of counsel for the Selling Shareholders, as selling shareholders.
(g) "Registration Statement" shall mean Form S-1, Form SB-1, Form
----------------------
S-2, Form SB-2 or Form S-3, whichever is applicable.
(h) "Restriction Termination Date" shall mean, with respect to any
----------------------------
Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been rendered to the effect that any restrictive legend placed upon the
Registrable Securities under the Securities Act can be properly removed and such
legend shall have been removed.
(i) "Rule 144" shall mean Rule 144 promulgated by the Commission
pursuant to the Securities Act and any successor rules thereto.
(j) "Purchasers" shall mean, collectively, the Purchasers (including
Xerox), their assignees and transferees, and individually, a
Purchaser (including Xerox) and any transferee or assignee of
such Purchaser.
<PAGE>
(k) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
(l) "Selling Shareholders" shall mean all underwriting discounts
--------------------
and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement.
(m) "Selling Shareholders" shall mean a holder of Registrable
--------------------
Securities who requests Registration under Section 2 herein.
(n) "Shares" shall mean the Common Stock issued to the
------
Purchasers pursuant to various Warrant agreements regardless
of whether such Warrant Agreements have been or in the future
are entered into between the Company and any Purchaser.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Warrant Agreement.
2.2 Required Registration. If the Company shall be requested by holders of
---------------------
at least a majority of the outstanding Shares to effect the Registration of
Registrable Securities, then the Company shall promptly give written notice of
such proposed Registration to all holders of Shares, and thereupon the Company
shall promptly use its best efforts to effect the Registration of the
Registrable Securities that the Company has been requested to Register for
disposition as described in the request of such holders of Shares and in any
response received from any of the holders of Shares within ten (10) days or such
longer period as shall be set forth in the notice, after the giving of the
written notice by the Company; provided however, that the Company shall not be
----------------
obligated to effect any Registration except in accordance with the following
provisions:
(a) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 22.
(b) Notwithstanding the foregoing, the Company may include in each
such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by
<PAGE>
others, provided however, that, if the number of shares of Common Stock so
included pursuant to this clause (b) exceeds the number of Registrable
Securities requested by the holders of Shares requesting such Registration, then
such Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2.3; and provided further however that the inclusion of such
previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Shares requesting such Registration from
registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration
statement pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under "Excluded Forms," as defined in
Section 2.3 (a) below) or (ii) for six (6) months after the request for
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
2.3 Piggyback Registration
----------------------
(a) Each time that the Company proposesd to register a public
offering solely of its Common Stock (not including an offering of Common Stock
issuable upon conversion or exercise of other securities), other than pursuant
to a Registration Statement on Form S-4 or Form S-8 or similar or successor
forms (collectively, "Excluded Forms"), the Company shall promptly give notice
of such proposed Registration to all holders of Shares, which shall offer such
holders the right to request inclusion of any Registrable Securities in the
proposed Registration.
(b) Each holder of Shares shall have ten (10) days or such longer
period as shall be set forth in the notice from the receipt of such notice to
deliver to the Company a written request specifying the number of shares of
Registrable Securities such holder intends to sell and the holder's intended
plan of disposition.
<PAGE>
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2.3 (b) may specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares of
Common Stock, if any, otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section 2.3 (b),
the Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary-, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata based on the number of shares of Registrable Securities each
--------
such holder proposed to include.
(f) All Shares that are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 12 months following a public offering, that the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such Shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to
<PAGE>
effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become and remain effective in accordance with
Section 2.4 (b) hereof, keeping each Selling Shareholder advised as to the
initiation, progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of any
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Selling Shareholder may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided
--------
however that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as-a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.3 (b) hereof, notify each Selling
Shareholder of the happening of any event as a result of which the prospectus
included in such Registration, as then in effect, includes an untrue statement
of a
<PAGE>
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and, at the request of such seller, prepare, file
and furnish to such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement there in not misleading in
the light of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses incurred
--------
by the Company in complying with this Section 2; provided however that all
----------------
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to section 2.2 hereof
shall be borne by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be-a condition
----------------------------------
precedent to the Company's obligations under this Agreement as to any Selling
Shareholder that each Selling Shareholder furnish to the Company in writing such
information regarding such Selling Shareholder and the distribution proposed by
such Selling Shareholder as the Company may reasonably request.
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company shall
---------------------------------------
indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent partners, and each person who controls such underwriter, against all
claims, losses, damages or liabilities (or actions in respect thereof) suffered
or incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to
<PAGE>
actions or inaction required of the Company in connection with any such
Registration; and the Company will reimburse each such Selling Shareholder, each
such underwriter, each of their officers, directors and constituent partners and
each person who controls any such Selling Shareholder or underwriter, for any
legal and any other expenses as reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided however that the indemnity contained in this Section 2.7.1 shall not
- ----------------
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if settlement is effected without the consent of the Company (which
consent shall not unreasonably be withheld); and provided however, that the
----------------
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based upon any untrue
statement or omission based upon written information furnished to the Company by
such Selling Shareholder, underwriter, controlling -person or other indemnified
person and stated to be for use in connection with the offering of securities of
the Company.
2.7.2 Selling Shareholder's lndemnification of Company. Each Selling
------------------------------------------------
Shareholder shall indemnify the Company, each of its directors and officers,
each underwriter, if any, of the Company's Registrable Securities covered by a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other Selling Shareholder,
each of its officers, directors and constituent partners and each person
controlling such other Selling Shareholder, against all claims, losses, damages
and liabilities (or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in such Registration Statement or
related prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by such Selling Shareholder of any rule
or regulation promulgated under the Securities Act applicable to such Selling
Shareholder and relating to actions or inaction required of such Selling
Shareholder in connection with the Registration of the Registrable Securities
pursuant to such Registration Statement; and will reimburse the Company, such
other Selling Shareholders, such directors, officers, partners, persons,
underwriters and controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; such
<PAGE>
indemnification and reimbursement shall be to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such Registration Statement or prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Selling Shareholder and stated to be specifically for use in
connection with the offering of Registrable Securities. Anything in the
foregoing to the contrary notwithstanding, in no event shall the aggregate
obligations of a Selling Shareholder under this Section 2.7.2 to all parties
that may be entitled to indemnification hereunder exceed the amount of proceeds
received by such Selling Shareholder in connection with such offering of
Registrable Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an indemnified
-------------------------
party under this Section 2.7 of notice of any commencement of any action which
may give rise to a claim for indemnification hereunder, such indemnified party
will,- if a claim in respect thereof is to be made against an indemnifying party
under this Section 2.7, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action. The indemnifying
party shall have the right to participate in and to assume the defense of such
claim, and shall be entitled to select counsel for the defense of such claim
with the approval of any parties entitled to indemnification, which approval
shall not be unreasonably withheld. Notwithstanding the foregoing, the parties
entitled to indemnification shall have the right to employ separate counsel
(reasonably satisfactory to the indemnifying party) to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified parties unless the named parties to such action or
proceedings include both the indemnifying party and the indemnified parties and
the indemnifying party or such indemnified parties shall have been advised by
counsel that there are one or more legal defenses available to the indemnified
parties which are different from or additional to those available to the
indemnifying party (in which case, if the indemnified parties notify the
indemnifying party in writing that they elect to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action or proceeding on behalf of
the indemnified parties, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding or separate or
substantially similar or related action or proceeding in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate counsel at any time
<PAGE>
for all indemnified parties, which counsel shall be designated in writing by the
Purchasers of a majority of the Registrable Securities).
2.7.4 Contribution. If the indemnification provided for in this Section
------------
2.7 from an indemnifying party is unavailable to an indemnified party hereunder
in respect to any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the statements or omissions which
result in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party and the
parties' relative intent, knowledge, access to information supplied by such
indemnifying party or indemnified party and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action, suit,
proceeding or claim.
3. Covenants of the Company. The Company agrees to:
------------------------
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
<PAGE>
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company, after it has become obligated to file periodic or other reports
pursuant to Section 13 of the 1934 Act agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder of
Shares owns any Shares, forthwith upon written request (a) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (b) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (c) such other information as may be
reasonably requested and as is publicly available in availing the holders of
Shares of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
(e) Prior to the filing of the Registration Statement or any
amendment thereto (whether pre-effective or post-effective), and prior to the
filing of any prospectus or prospectus supplement related thereto, the Company
will provide each Selling Shareholder with copies of all pages thereto, if any,
which reference such Selling
<PAGE>
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences, Inc., 99 East River Drive, East Hartford, CT
06108 and (ii) if to a Purchaser, at the address set forth in his Warrant
Agreement, or at such other address as each such party furnishes by notice given
in accordance with this Section 4 (a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut, as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law.
Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
<PAGE>
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
IN WITNESS WHEREOF, the Company has executed this Agreement for the
benefit of the Purchasers by its duly authorized officer as of the date first
above written.
ACCENT COLOR SCIENCES, INC.
By: _______________________________
Richard J. Coburn, President
and Chief Executive Officer
Agreed and Accepted this
_____ day of _______________, 1996
XEROX CORPORATION
By: ___________________________
Name:
Title:
<PAGE>
EXHIBIT II
PURCHASE FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of the Warrant to' Purchase Common Stock
executed by Accent Color Sciences, Inc. irrevocably exercises the Warrant and
purchases _________ of the number of shares of Common Stock of Accent Color
Sciences, Inc. purchasable with the Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated: _________________, 19___
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip)
<PAGE>
EXHIBIT 10.8
AMENDMENT NO. I
TO THE OEM SUPPLY AGREEMENT
DATED JANUARY 8, 1996
Accent Color Sciences Inc. and Spectra, Inc. hereby agree to amend Section 9.2.2
of the OEM Supply Agreement dated January 8, 1996 as follows:
The minimum volumes for Printheads (units) and Inks (kilograms) in 1996
shall be changed from 1,250 to 300 Printheads and from 2,500 to 1,500 kilograms
of Inks.
The OEM Supply Agreement, as amended above, shall remain in full force
and effect.
Agreed as of July 12, 1996 by:
SPECTRA, INC. ACCENT COLOR SCIENCES INC.
By: By:
Printed: Printed:
Title: Title:
<PAGE>
EXHIBIT 10.9
LEASE AGREEMENT
BY AND BETWEEN
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
("LANDLORD")
AND
ACCENT COLOR SCIENCES, INC.
("TENANT")
DATED: FEBRUARY 16, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. PREMISES.................................................. 1
ARTICLE 2. TERM AND CONDITION OF LEASED PREMISES..................... 1
ARTICLE 3. USE, NUISANCE, OR HAZARD.................................. 2
ARTICLE 4. RENT...................................................... 2
ARTICLE 5. RENT ADJUSTMENT........................................... 3
ARTICLE 6. SERVICES TO BE PROVIDED BY LANDLORD....................... 5
ARTICLE 7. REPAIRS AND MAINTENANCE BY LANDLORD....................... 6
ARTICLE 8. REPAIRS AND CARE OF BUILDING COMPLEX BY TENANT............ 7
ARTICLE 9. TENANT'S EQUIPMENT AND INSTALLATIONS...................... 7
ARTICLE 10. FORCE MAJEURE............................................ 7
ARTICLE 11. MECHANICS'AND MATERIALMAN'S LIENS........................ 8
ARTICLE 12. ARBITRATION.............................................. 8
ARTICLE 13. INSURANCE................................................ 8
ARTICLE 14. QUIET ENJOYMENT.......................................... 9
ARTICLE 15. ALTERATIONS.............................................. 9
ARTICLE 16. FURNITURE, FIXTURES, AND PERSONAL PROPERTY............... 10
ARTICLE 17. TAXES.................................................... 10
ARTICLE 18. ASSIGNMENT AND SUBLETTING................................ 11
ARTICLE 19. FIRE AND CASUALTY........................................ 12
ARTICLE 20. CONDEMNATION............................................. 13
ARTICLE 21. HOLD HARMLESS............................................ 13
ARTICLE 22. DEFAULT BY TENANT........................................ 13
ARTICLE 23. INTENTIONALLY OMITTED.................................... 17
ARTICLE 24. INTENTIONALLY OMITTED.................................... 17
ARTICLE 25. ATTORNEYS' FEES.......................................... 17
ARTICLE 26. NON-WAIVER............................................... 17
ARTICLE 27. RULES AND REGULATIONS.................................... 17
ARTICLE 28. ASSIGNMENT BY LANDLORD................................... 17
ARTICLE 29. LIABILITY OF LANDLORD.................................... 17
ARTICLE 30. SUBORDINATION AND ATTORNMENT............................. 18
ARTICLE 31. HOLDING OVER............................................. 18
ARTICLE 32. SIGNS.................................................... 18
ARTICLE 33. HAZARDOUS SUBSTANCES..................................... 18
ARTICLE 34. COMPLIANCE WITH LAWS AND OTHER REGULATIONS............... 19
ARTICLE 35. SEVERABILITY............................................. 19
ARTICLE 36. NOTICES.................................................. 19
ARTICLE 37. OBLIGATIONS OF SUCCESSORS, PLURALITY, GENDER............. 20
ARTICLE 38. ENTIRE AGREEMENT......................................... 20
ARTICLE 39. PARAGRAPH CAPTIONS....................................... 20
ARTICLE 40. CHANGES.................................................. 20
ARTICLE 41. AUTHORITY................................................ 21
ARTICLE 42. BROKERAGE................................................ 21
ARTICLE 43. EXHIBITS................................................. 21
ARTICLE 44. APPURTENANCES............................................ 21
ARTICLE 45. PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND JURY... 21
ARTICLE 46. RECORDING................................................ 22
ARTICLE 47. MORTGAGEE PROTECTION..................................... 22
ARTICLE 48. SHORING.................................................. 22
ARTICLE 49. PARKING.................................................. 22
ARTICLE 50. EXPANSION................................................ 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 51. ZONING................................................... 23
ARTICLE 52. LANDLORD DEFAULT......................................... 24
</TABLE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of the 16/th/
day of February, 1996, by and between JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY, a Massachusetts corporation ("Landlord") and ACCENT COLOR SCIENCES,
INC., a Connecticut corporation ("Tenant").
WITNESSETH:
ARTICLE 1. PREMISES
Subject to all of the terms and conditions hereinafter set forth, Landlord
hereby leases to Tenant and Tenant Hereby leases from Landlord the premises (the
"Leased Premises"), outlined on Exhibit B to this Lease, containing
------------
approximately 50,895 rentable square feet of Rentable Area (as hereinafter
defined), consisting of all of a portion of the basement, all of the leasable
space on the first floor and the entire third and fourth floors of the six-story
office building, being 800 Connecticut Boulevard, East Hartford, Connecticut
(the "Building"). 'Me exact number of square feet of Rentable Area shall be
determined by Landlord's Architect in accordance with Building Owners and
Managers Association International ANSI Z 65.1 standards ("BOMA Standards"), and
once so determined, such number of square feet of Rentable Area shall be used
for determining Base Rent and Tenant's Building Percentage. The land described
in Exhibit A to this Lease and all improvements thereon and appurtenances
thereto, including, but not limited to, the Building, access roadway, and
related areas, and all areas used for parking for the Building, shall be
collectively Hereinafter referred to as the "Building Complex."
ARTICLE 2. TERM AND CONDITION OF LEASED PREMISES
2.1 The term of the Lease "Term") shall commence on June 1, 1996 (the
"Commencement Date") and end on July 31, 2000 (the "Expiration Date") unless
sooner terminated (the "Termination Date") as hereinafter provided. The
Commencement Date of this Lease and the obligation of Tenant to pay rent,
additional rent and all other charges hereunder shall not be delayed or
postponed by reason of any delay by Tenant in performing changes or alterations
in the premises to be performed by Tenant. In the event that Tenant completes
its build-out in any portion of the Leased Premises prior to the Commencement
Date, it shall be permitted to occupy and conduct its business therein. All of
the terms and conditions of this Lease, except for Articles 4 and 5 hereof,
shall apply to such period of early occupancy.
2.2 Landlord will provide Tenant with an allowance, toward the cost of
Tenant's initial buildout of the Leased Premises, in the amount of One Hundred
Twenty-Five Thousand and 00/100 Dollars ($125,000.00) (the "Allowance"). Tenant
shall pay for all necessary permits and fees out of the Allowance. The
Allowance shall be paid to Tenant on a bi-weekly progress payment basis, upon
receipt of the following:
<PAGE>
(a) an invoice and certification from Tenant's general contractor as to
the amount billed to date;
(b) a certification from Landlord's architect as to the costs incurred to
date;
(c) partial lien waivers from Landlord's general contractor and all
subcontractors in the full amount being invoiced that month; and
(d) such other documentation as Landlord shall reasonably require in
connection therewith.
Tenant represents that Tenant has inspected the Leased Premises and the
Building and is thoroughly acquainted with their condition and, except for
Landlord's Work (as defined below) takes the premises "as is," and the taking of
possession of the Leased Premises by Tenant shall be conclusive evidence that
the Leased Premises and the Building were in good and satisfactory condition at
the time possession was taken by Tenant. Neither Landlord nor Landlord's agents
have made any representations or promises with respect to the condition of the
Building, the Leased Premises, the land upon which the Building is constructed,
or any other matter or thing affecting or related to the Building or the Leased
Premises, except as herein expressly set forth, and no rights, easement or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in this Lease.
2.3 Landlord shall, within ninety (90) days after the Commencement Date,
perform the work, in the common areas of the Building, that is set forth on
Exhibit C attached hereto ("Landlord's Work").
ARTICLE 3. USE, NUISANCE, OR HAZARD
3.1 The Leased Premises shall be used and occupied by Tenant solely for
general office purposes, including engineering offices, and for no other
purposes without the prior written consent of Landlord, except that the portion
of the Leased Premises that is on the first floor of the building may be used
for light assembly of printing equipment, a shop area and storage purposes.
3.2 Tenant shall not use, occupy, or permit the use or occupancy of the
Leased Premises for any purpose which Landlord, in its reasonable discretion,
deems to be illegal, immoral, or dangerous; permit any public or private
nuisance; do or permit any act or thing which may disturb the quiet enjoyment of
any other tenant of the Building Complex; keep any substance or carry on or
permit any operation which might introduce offensive odors or conditions into
other portions of the Building Complex; use any apparatus which might make undue
noise or set up vibrations in or about the Building Complex; permit anything to
be done which would increase the premiums paid by Landlord for FIRE and extended
coverage insurance on the Building Complex or its contents or cause a
cancellation of any insurance policy covering the Building Complex or any part
thereof or any of its contents; or permit anything to be done which is
prohibited by or which shall in any way conflict with any law, statute,
ordinance, or governmental rule or regulation now or hereinafter in force.
Should Tenant do any of the foregoing without the prior written consent of
Landlord, it shall constitute an Act of Default (as hereinafter defined) and
shall enable Landlord to resort to any of its remedies hereunder.
ARTICLE 4. RENT
<PAGE>
4.1 Tenant hereby agrees to pay Landlord a base annual rental (the "Base
Rent") Three Hundred Ninety-Four Thousand Four Hundred Thirty-Six and 25/100
Dollars ($394,436.25) per N-ear (based on $7.75 per rentable square foot),
payable in monthly installments of Tbirty-Two Thousand Eight Hundred Sixty-Nine
and 69/100 Dollars ($32,869.69), for the first two (2) years of the Term (pro
rated for any partial month at the commencement of the Term) and Five Hundred
Ninety-Eight Thousand Sixteen and 25/100 Dollars ($598,016.25) per year (based
on $11.75 per rentable square foot), payable in monthly installments of Forty-
Nine Thousand Eight Hundred Thirty-Four and 68/100 Dollars ($49,834.68), for the
balance of the Term. The Base Rent shall be due and payable in advance in
twelve (12) equal installments (the "Monthly Rent") in check or by money order
on or before the first day of each calendar month. In addition to the Base
Rent, Tenant also agrees to pay the Operating Expenses, Taxes, and any and all
other sums of money as shall become due and payable by Tenant as hereinafter set
forth, all of which shall constitute additional rent under this Lease (the
"Additional Rent"). The Monthly Rent and the Additional Rent are sometimes
hereinafter collectively called "Rent" and shall be paid when due in lawful
money of the United States with demand, deduction, abatement, or offset at such
place as is set forth in Article 36 of this Lease or as Landlord may designate
from time to time. Landlord expressly reserves the right to apply any payment
received to Base Rent or any other items of Rent that are not paid by Tenant.
Notwithstanding the above, no Base Rent shall be due or payable for the first
and second complete calendar months of the Term.
4.2 In the event any Monthly or Additional Rent or other amount payable by
Tenant hereunder is not paid within five (5) business days after its due date,
Tenant shall pay to Landlord a late charge (the "Late Charge"), as Additional
Rent, in an amount of ten percent (10%) of the amount of such late payment.
Failure to pay any Late Charge shall be deemed a Monetary Default (as
hereinafter defined). Provision for the Late Charge shall be in addition to all
other rights and remedies available to Landlord hereunder, at law or in equity,
and shall not be construed as liquidated damages or limiting Landlord's remedies
in any manner. Failure to charge or collect such Late Charge in connection with
any one (1) or more such late payments shall not constitute a waiver of
Landlord's right to charge and collect such Late Charges in connection with any
other or similar of like late payments.
4.3 The amount of Sixty Five Thousand Seven Hundred Thirty Nine and 37/100
Dollars ($65,739.37) shall be due and payable upon the execution of this Lease
by Tenant, which sum shall be the Monthly Rent for the third and fourth complete
calendar months of the Term.
4.4 If the Term commences on a date other than the first day of the
calendar month or expires or terminates on a date other than the last day of a
calendar month, the Rent for any such partial month shall be prorated to the
actual number of days Tenant is in occupancy of the Leased Premises for such
partial month.
4.5 All Rents and any other amount payable by Tenant to Landlord
hereunder, if not paid when due, shall bear interest from the date due until
paid at the rate equal to the prime commercial rate established from time to
time by Fleet Bank, Boston. Massachusetts, plus four percent (4%) per annum.
but not in excess of the maximum legal rate permitted by law. Failure to charge
or collect such interest in connection with any one (1) or more delinquent
payments shall not constitute a waiver of Landlord's right to charge and collect
such interest in connection with any other or similar or like delinquent
payments.
4.6 If Tenant fails to make when due two (2) consecutive payments of
Monthly Rent or makes two (2) consecutive payments of Monthly Rent which are
returned to Landlord by Tenant's financial institution for insufficient funds,
Landlord may require, by giving written notice to Tenant, that
<PAGE>
all future payments of Rent shall be made in cashier's check or by money order.
The foregoing is in addition to any other remedy of Landlord hereunder, at law
or in equity.
ARTICLE 5. RENT ADJUSTMENT
5.1 Definitions.
-----------
(a) "Operating Expenses," as said term is used herein, shall mean all
expenses, costs, and disbursements of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection with the ownership,
operation, or maintenance of the Building Complex. If less than ninety-five
percent (95%) of the Rentable Area of the Building is actually occupied during
any Lease Year (as hereinafter defined), Operating Expenses for such Lease Year
shall be the amount that the Operating Expenses should have been for such Lease
Year had ninety-five percent (95%) of the Rentable Area of the Building been
occupied during all of such Lease Year, as determined by Landlord. Operating
Expenses shall be computed in accordance with generally accepted accounting
principles, consistently applied, and shall include, but not be limited to, the
items as listed below:
(i) Wages, salaries, and any and all taxes, insurance and benefits
of the
Building manager and any clerical, maintenance, or other management employees
directly
associated with the operation of the Building;
(ii) All expenses for the Building management office including rent,
office supplies, and materials therefor,
(iii) All supplies, materials, and tools;
(iv) All costs incurred in connection with the operation,
maintenance, and repair of the Building Complex including, but not limited to,
the following: elevators; heating, ventilating and air conditioning systems;
security; cleaning and janitorial; parking lot and landscape; window washing;
and license, permit, and inspection fees;
(v) Costs of water, pure water, sewer, electric, and any other
utility charges, except that costs of electricity consumed by tenants for
lighting and plugged-in equipment in the leased or leasable areas of the
Building shall be excluded from Operating Expenses;
(vi) Costs of casualty, rental interruption, and liability
insurance, and any deductibles payable thereunder;
(vii) Management fees;
(viii) Any and all Taxes (as hereinafter defined) whether Federal,
State, county, or municipal, and whether by taxing districts or authorities
presently in existence or by other subsequently created (excluding, however,
Federal and State taxes on income, if any) and any costs and expenses of
contesting the validity of same. "Taxes" shall mean all ad valorem taxes,
personal property taxes, and all other taxes, assessments, embellishments, use
and occupancy taxes, transit taxes, water, sewer and pure water charges not
included in Section 5.1 (a)(v) above, excises, levies, license and peat fees or
taxes, and all other similar charges, levies, penalties, or taxes, if any, which
are levied, assessed , or imposed upon or due and payable in connection with, or
a lien upon, the land, the Building, or facilities used in connection therewith,
and rentals or receipts therefrom and all taxes of whatsoever nature that
<PAGE>
are imposed in substitution for or in lieu of any of the taxes, assessments, or
other charges including in this definition of Taxes;
(ix) The cost of any capital improvements made to the Building Complex
by Landlord after the date of this Lease which are or may be required, by any
law, ordinance, rule, regulation, or otherwise that was not applicable or in
effect at the time the Building Complex was constructed, including, but not
limited to, the Americans with Disabilities Act, amortized over such period as
Landlord shall reasonably determine, together with interest on the unamortized
balance;
(x) The cost of any labor or energy saving device or other equipment
installed by Landlord which improves the operating efficiency of any system
within the Building Complex and thereby reduces Operating Expenses. Such costs
may be added to Operating Expenses in each Lease Year during the useful life of
such device or equipment an amount equal to the annual amortization allowance of
the cost of such device or equipment as determined in accordance with generally
accepted accounting principles, consistently applied, together with interest on
the unamortized balance thereof, provided, however, that the amount of such
allowance and interest shall not exceed the annual cost or expense reduction
attributed by Landlord to such device or equipment; and
(xi) Legal, accounting, inspection, and consultation fees incurred in
connection with the operation of the Building Complex.
Expressly excluded from Operating Expenses are the following items:
(1) Replacement of capital investment items (except as provided
hereinabove);
(2) Advertising and leasing commissions (other than those set
forth hereinabove);
(3) Repairs and restoration, to the extent paid for by the
proceeds of any insurance policies;
(4) Principal, interest, and other costs directly related to
financing the Building Complex; and
(5) The cost of special services to tenants (including Tenant)
for which a special charge is made.
(b) "Lease Year" shall mean the twelve (12) month period commencing
January 1/st/. and ending December 31st.
(c) "Tenant's Building Percentage" shall mean Tenant's percentage of
the entire Building as determined by dividing the Rentable Area of the Leased
Premises by the total Rentable Area of the Building, which is 95,410 square
feet. For the purposes of this Section, Tenant's Building Percentage is fifty-
three and thirty-three one-hundredths percent (53.33%), subject to recalculation
when
<PAGE>
the precise number of square feet of rentable area in the Leased Premises is
determined pursuant to Article I hereof. If there is a change in the total
Building Rentable Area as a result of an addition to the Building, partial
destruction, modification or similar cause, which event causes a reduction or
increase on a permanent basis, Landlord shall cause adjustments in the
computations as shall be necessary to provide for any such changes.
5.2 In the event that the Operating Expenses of Landlord's operation
of the Building Complex during any Lease Year of the Term shall exceed the
actual Operating Expenses for the Building Complex for the 1996 calendar year as
adjusted to ninety-five percent (95%) occupancy for entire twelve (12) months
(the "Base Year"), Tenant shall pay to Landlord, as Additional Rent, "Tenant's
Share" as hereinafter defined) of the difference between the Operating Expenses
for a particular Lease Year and the Base Year. "Tenant's Share" shall be
determined by multiplying any such difference between Operating Expenses for any
Lease Year and the Base Year or pro rata portion thereof, respectively, by
Tenant's Building Percentage. Landlord shall, in advance of each Lease Year,
estimate what Tenant's share will be for such Lease Year based, in part, on
Landlord's operating budget for such Lease Year, and Tenant shall pay Tenant's
share as so estimated each month (the "Monthly Escalation Payments"). The
Monthly Escalation Payments shall be due and payable at the same time and in the
same manner as the Monthly Rent.
5.3 Landlord shall, within one hundred twenty (120) days after
the end of each Lease Year, provide Tenant with a written statement of the
actual Operating Expenses incurred during such Lease Year for the Building
Complex and such statement shall set forth Tenant's share of such Operating
Expenses. Tenant shall pay Landlord, as Additional Rent, the difference between
Tenant's Share of any increases in Operating Expense and the amount of Monthly
Escalation Payments made by Tenant attributable to said Lease Year, such payment
to be made within thirty (30) days; or the date of the statement, similarly,
Tenant shall receive a credit if Tenant's Share is less than the amount of
Monthly Escalation Payments collected by Landlord during said Lease Year, such
credit to be applied to future Monthly Escalation Payments to become due
hereunder. If real estate taxes, utilities, janitorial services or any other
components of Operating Expenses increase during any Lease Year, Landlord may
revise Monthly Escalation Payments due during such Lease Year by giving Tenant
written notice to that effect', and, thereafter, Tenant shall pay, in each of
the remaining months of such Lease Year, a sum equal to the amount of revised
difference in Operating Expenses times Tenant's Building Percentage divided by
the number of months remaining in such Lease Year.
5.4 If, within sixty (60) days following receipt of the Operating
Expense statement, neither party hereto delivers to the other party a notice
referring in reasonable detail to one (1) or more errors in such statement, it
shall be deemed conclusively that the information set forth in such statement is
correct. Tenant shall, however, be entitled to conduct or require an audit to
be conducted, provided that not more than one (1) such audit may be conducted
during any Lease Year of the Term. In no event shall payment of Rent ever be
contingent upon the performance of such audit. For purposes of any Audit,
Tenant or Tenant's duly authorized representative, at Tenant's sole cost and
expense, shall have the right, upon fifteen (15) days' written notice to
Landlord, to inspect Landlord's books and records pertaining to Operating
Expenses at the offices of Landlord during Landlord's ordinary business hours,
provided that such audit must be conducted so as not to interfere with
Landlord's Business Operations and must be reasonable as to scope and time.
Alternatively, at Landlord's sole discretion, Landlord may provide an audit of
such books and records prepared by a independent public accountant of Landlord's
selection. but at Tenant's expense, which shall be deemed to be conclusive for
the purposes of this Lease.
<PAGE>
5.5 Tenant's obligation with respect to Additional Rent and the
Payment of Tenant's Share shall survive the Expiration Date or Termination Date
of this Lease and Landlord shall have the right to retain the Security Deposit,
or so much thereof as it deems necessary, to secure payment of Tenant's Share
for the final year of the Lease, or part thereof, during which Tenant was
obligated to pay such expenses. If Tenant occupies the Leased Premises for less
than a full calendar year during the first or last calendar years of the Term,
Tenant's Share for such partial year shall be calculated by proportionately
reducing the Base Year Operating Expenses to reflect the number of months in
such year during which Tenant occupied the Leased Premises (the "Adjusted Base
Operating Expenses"). The Adjusted Base Operating Expenses shall then be
compared with the actual Operating Expenses for said partial ),ear to determine
the amount of any increases or decreases in the actual Operating Expenses for
such partial year over the Adjusted Base Operating Expenses. Tenant shall pay
its Tenant's Share of any such increases within thirty (30) days following the
receipt of a final statement.
ARTICLE 6. SERVICES TO BE PROVIDED BY LANDLORD
6.1 Subject to Articles 5 and 9 herein, Landlord shall pay for and
furnish to Tenant, while occupying the Leased Premises, the following services:
(a) The existing electric service at the Leased Premises, to
furnish sufficient power for lighting in the Leased Premises, typewriters, voice
writers, calculating machines, personal computers, and other machines of similar
low electrical consumption. In the event that Tenant requires any electric
capacity that is in excess of the existing service, Tenant shall have the right
to provide such excess service, at Tenant's cost. Any such work shall be
subject to the provisions of Article 15 hereof Tenant shall pay to Landlord
monthly, as billed, for all costs of the electricity used by Tenant in the
Leased Premises, as aforesaid, as measured by a separate meter or meters
therefor;
(b) Hot, cold, and refrigerated water at those points of supply
provided for general use of all lessees in the Building;
(c) Janitorial service on a five (5) day weed basis at no extra
charge pursuant to Exhibit E, provided that in no event shall Landlord be
---------
obligated to clean any portions of the Leased Premises that are not used for
normal use. Carpet cleaning, except as provided in normal business services,
shall be performed at Tenant's request and at Tenant's expense;
(d) Air conditioning and heating as reasonably required for
comfortable use and occupancy under ordinary office conditions from 7:00 a.m. to
6:00 p.m., Monday through Friday, and 7:00 a.m. to 12:00 p.m., Saturdays or any
legal holidays and on any holidays observed by a majority of the Building
lessees from time to time. Landlord shall also make available heat, air-
conditioning and ventilation for the Leased Premises on other days and at other
hours provided Tenant notifies Landlord: (a) in the case of hours following the
regular hours of a business day no later than 4:30 p.m. on such day and (b) in
the case of a Saturday, Sunday or legal holiday no later than 4:30 p.m. on the
last business day preceding such Saturday, Sunday or holiday. Tenant shall pay
to Landlord on a monthly basis the additional cost of such utilities and
services as determined by Landlord;
(e) Replacement of all standard fluorescent bulbs in all areas and
all incandescent bulbs in public areas, rest room areas, and stairwells.
Routine maintenance and electric lighting service for all public areas of the
Building Complex in a manner and to the extent deemed by Landlord to be
standard; and
<PAGE>
(f) Security for the Building Complex as may be deemed necessary
by Landlord. Landlord shall not be liable to Tenant for losses due to theft,
burglary, or damages done by unauthorized persons on the Building Complex.
6.2 Landlord shall not be liable for any loss or damage arising or
alleged to arise in connection with the failure, stoppage, or interruption of
any such services; nor shall the same be construed as an eviction of Tenant,
work an abatement of Rent, entitle Tenant to any reduction in Rent, or relieve
Tenant from the operation of any covenant or condition herein contained. It
being further agreed that Landlord reserves the right to discontinue temporarily
such services or any of them at such times as may be necessary by reason of
repair or capital improvements perforated within the Building Complex, accident,
unavailability of employees, repairs, alterations, or improvements, or whenever
by reason of strikes, lockouts, riots, acts of God, or any other happening or
occurrence beyond the reasonable control of Landlord. In the event of any such
failure, stoppage, or interruption of services, Landlord shall use reasonable
diligence to have the same restored. Neither diminution nor shutting off of
light or air or both, nor any other effect on the Building Complex by any
structure erected or condition now or hereafter existing on lands adjacent to
the Building Complex, shall affect this Lease, abate Rent, or otherwise impose
any liability on Landlord. Notwithstanding the foregoing, in the event of any
failure of any service or utility that Landlord is obligated to provide to
Tenant under this Lease that materially and adversely affects Tenant's business
in the Leased Premises, and that continues for more than five (5) consecutive
business days, Base Rent shall thereafter equitably abate, in proportion to the
interference with Tenant 's business caused thereby, until the service or
utility is restored.
Landlord shall have the right to reduce heating, cooling, or lighting
within the Leased Premises and in the public area in the Building as required by
any mandatory fuel or energy-saving program.
Unless otherwise provided by Landlord, Tenant shall separately arrange with
the applicable local public authorities or utilities, as the case may be, for
the furnishing of and payment for all telephone and facsimile services as may be
required by Tenant in the use of the Leased Premises. Tenant shall directly pay
for such telephone and facsimile services as may be required by Tenant in the
use of the Leased Premises. Tenant shall directly pay for such telephone and
facsimile services, including the establishment and connection thereof, at the
rates charged for such services by said authority or utility; and the failure of
Tenant to obtain or to continue to receive such services for any reason
whatsoever shall not relieve Tenant of any of its obligations under this Lease.
ARTICLE 7. REPAIRS AND MAINTENANCE BY LANDLORD
7.1 Landlord shall provide for the cleaning and maintenance of the public
portions of the Building Complex in keeping with the ordinary standard for
first-class office buildings in the greater Hartford area as a part of Operating
Expenses. Unless otherwise expressly stipulated herein, Landlord shall not be
required to make any improvements or repairs of any kind or character to the
Leased Premises during the Term, except such repairs as may be required to the
exterior walls, corridors, windows, roof, and other structural elements and
equipment of the Building Complex, and such additional maintenance as may be
necessary because of the damage caused by persons other than Tenant, its agents,
employees licensees, or invitees.
7.2 Landlord or Landlord's officers, agents, and representatives (subject
to any security regulations imposed by any governmental authority) shall have
the right to enter all parts of the Leased Premises at all reasonable hours upon
reasonable advance notice to Tenant except in cases of emergency
<PAGE>
when no notice shall be required to inspect, clean, make repairs, alterations,
and additions to the Building Complex or the Leased Premises which it may deem
necessary or desirable, to make repairs to adjoining spaces, to cure any
defaults of Tenant hereunder that Landlord elects to cure, to show the Leased
Premises to prospective tenants or purchasers of the Building, or to provide any
service which it is obligated or elects to furnish to Tenant; and Tenant shall
not be entitled to any abatement or reduction of Rent by reason thereof.
Landlord shall have the right to enter the Leased Premises at any time and by
any means in the case of an emergency.
ARTICLE 8. REPAIRS AND CARE OF BUILDING COMPLEX BY TENANT
If the Building, the Building Complex, or any portion thereof, including,
but not limited to, the elevators, boilers, engines, pipes, and other apparatus,
or members of elements of the Building (or any of them) used for the purpose of
climate control of the Building or operating the elevators, or of the water
pipes, drainage pipes, electric lighting, or other equipment of the Building or
the roof or outside walls of the Building of Landlord and also the Leased
Premises improvements, including, but not limited to, the carpet, wall covering,
doors, and woodwork, become damaged or are destroyed through the negligence,
carelessness, or misuse of Tenant, its servants, agents, employees, or anyone
permitted by Tenant to be in the Building, or through it or them, then the cost
of the necessary repairs, replacements, or alterations shall be done by Tenant
who shall forthwith pay the same on demand to Landlord as Additional Rent.
Landlord shall have the exclusive right, but not the obligation, to make any
repairs necessitated by such damage.
Tenant agrees, at its sole cost and expense, to repair or replace any damage
or injury done to the Building Complex, or any part thereof, caused by Tenant,
Tenant's agents, employees, licenses, or invitees which Landlord elects not to
repair. Tenant shall not injure the Building Complex or the Leased Premises and
shall maintain the Leased Premises in a clean, attractive condition and in good
repair. If Tenant fails to keep the Leased Premises in such good order,
condition, and repair as required hereunder to the satisfaction of Landlord,
Landlord may restore the Leased Premises to such good order and condition and
make such repairs without liability to Tenant for any loss or damage that may
accrue to Tenant's property or business by reason thereof, and upon completion
thereof, Tenant shall pay to Landlord, as Additional Rent, upon demand, the cost
of restoring the Leased Premises to such good order and condition and of the
making of such repairs, plus an additional charge of fifteen percent (15%)
thereof. Tenant shall leave the Leased Premises at the end of each business day
in a reasonably tidy condition for the purpose of allowing the performance of
Landlord's cleaning services. Upon the Expiration Date or the Termination Date,
Tenant shall surrender and deliver up the Leased Premises to Landlord in the
same condition in which they existed at the Commencement Date, excepting only
ordinary wear and tear and damage arising from any cause not required to be
repaired by Tenant. Upon the Expiration Date or the Termination Date, Landlord
shall have the right to re-enter and take possession of the Leased Premises.
Tenant shall not provide any janitorial or cleaning services without
Landlord's written consent, and then only subject to supervision of Landlord, at
Tenant's sole responsibility, and by a janitorial or cleaning contractor or
employees at all times satisfactory to Landlord.
ARTICLE 9. TENANT'S EQUIPMENT AND INSTALLATIONS
If heat-generating machines or equipment, including telephone equipment,
cause the temperature in the Leased Premises, or any part thereof, to exceed the
temperatures the Building's air conditioning system would be able to maintain in
such Leased Premises were it not for such heat generating
<PAGE>
equipment, then Landlord reserves the right to install supplementary air
conditioning units in the Leased Premises, and the cost thereof, including the
cost of installation and the cost of operation and maintenance thereof,
including water, shall be paid by Tenant to Landlord upon demand by Landlord.
Except for desk or table-mounted typewriters, adding machines, office
calculators, dictation equipment, personal computers, and other similar office
equipment, and high speed data printers provided that not more than 15,000
square feet of the Leased Premises shall contain high speed data printers.
Tenant shall not install within the Leased Premises any fixtures, equipment,
facilities, or other improvements without the specific written consent of
Landlord. Tenant shall not, without the specific written consent of Landlord,
install or maintain any apparatus or device within the Leased Premises which
shall increase the usage of electrical power or water for the Leased Premises to
an amount greater than would be normally required for general office use for
space or comparable size in the greater Hartford area; and if any such apparatus
or device is so installed, Tenant agrees to furnish Landlord written agreement
to pay for any additional costs of utilities as the result of said installation.
ARTICLE 10. FORCE MAJEURE
It is understood and agreed that with respect to any service to be
furnished or obligations to be performed by Landlord for Tenant that in no event
shall Landlord be liable for failure to furnish or perform the same when
prevented from doing so by strike, lockout, or inability by the exercise of
reasonable diligence to obtain supplies, parts, or employees necessary to
furnish such service or met such obligation; or because of war or other
emergency; or for any cause beyond Landlord's reasonable control; or for any
cause due to any act or omission of Tenant or its agents, employees, licensees,
invitees, or any persons claiming by, through, or under Tenant.
ARTICLE 11. MECHANICS' AND MATERIALMAN'S LIENS
11.1 Tenant shah not suffer or permit any mechanics' or materialman's lien
to be filed against the Leased Premises or any portion of the Building Complex
by reason of work, labor, services, or materials supplied or claimed to have
been supplied to Tenant. Nothing herein contained shall be deemed or construed
in any way as constituting the consent or request of Landlord, expressed or
implied, by inference or otherwise, for any contractor, subcontractor, laborer,
or materialman to perform any labor or to furnish any materials or to make any
specific improvement, alteration, or repair of or to the Leased Premises or any
portion of the Building Complex; nor of giving Tenant any right, power, or
authority to contract for, or pen-nit the rendering of, any services or the
furnishing of any materials that could give rise to the filing of any mechanics'
or materialman's lien against the Leased Premises or any portion of the Building
Complex.
11.2 If any such mechanics' or materialman's lien shall at any time be
filed against the Leased Premises or any portion of the Building Complex as the
result of any act or omission of Tenant, Tenant covenants that it shall, within
twenty (20) days after Tenant has notice of the claim for lien, procure the
discharge thereof by payment or by giving security or in such other manner as is
or may be required or permitted by law or which shall otherwise satisfy
Landlord. If Tenant fails to take such action, Landlord, in addition to any
other right or remedy it may have, may take such action as may be reasonably
necessary to protect its interests. Any amounts paid by Landlord in connection
with such action, all other expenses of Landlord incurred in connection
therewith, including reasonable attorney's fees, court costs, and other
necessary disbursements shall be repaid by Tenant to Landlord on demand.
ARTICLE 12. ARBITRATION
<PAGE>
In the event that a dispute arises under Section 5.3 above, or if any
disputes relating to provisions or obligations in this Lease as to which a
specific provision for a reference to arbitration is made herein, the same shall
be submitted to arbitration in accordance with the provisions of applicable
state law, if any, as from time to time amended. Arbitration proceedings,
including the selection of an arbitrator, shall be conducted pursuant to the
rules, regulations, and procedures from time to time in effect as promulgated by
the American Arbitration Association. Prior written notice of application by
either party for arbitration shall be given to the other at least ten (10) days
before submission of the application to the said Association's office in the
city wherein the Building is situated (or the nearest other city having an
Association office). 'Me arbitrator shall hear the parties and their evidence.
The decision of the arbitrator may be entered in the appropriate court of law;
and the parties consent to the jurisdiction of such court and further agree that
any process or notice of motion or other application to the Court or a Judge
thereof may be served outside the State wherein the Building is situated by
registered mail or by personal service, provided a reasonable time for
appearance is allowed. The costs and expenses of each arbitration hereunder and
their apportionment between the parties shall be determined by the arbitrator in
his award or decision. No arbitrable dispute shall be deemed to have arisen
under this Lease prior to (a) the expiration of the period of twenty (20) days
after the date of the giving of written notice by the party asserting the
existence of the dispute, together with a description thereof sufficient for an
understanding thereof, and (b) where a Tenant payment (e.g., Operating Expense
Excess under Article 9 hereof is in issue, the amount billed by Landlord having
been paid by Tenant. The prevailing party in such arbitration shall be
reimbursed for its expenses, including reasonable attorneys' fees.
ARTICLE 13. INSURANCE
13.1 Landlord shall maintain, as a art of Operating Expenses, fire and
extended coverage insurance on the Building Complex. Such insurance shall be
maintained with an insurance company, in amounts desired by Landlord or
Landlord's mortgagee, and payment for losses thereunder shall be made solely to
Landlord subject to the rights of the holder of any mortgage or deed of trust
which may now or hereafter encumber the Building Complex.
13.2 Tenant shall maintain, at its sole cost and expense, comprehensive
general liability insurance (including coverage for bodily injury and death,
property damage, fire, legal liability, and owner's contractors protective
liability with respect to the Leased Premises to the extent that the same is not
covered by Landlord's own insurance) in a form and with an insurance company
acceptable to Landlord in a minimum amount of Two Million and 00/100 Dollars
($2,000,000.00) combined single limit. At all times during the Term, such
insurance shall be maintained, and Tenant shall cause a current and valid
certificate of such policy to be deposited with Landlord. If Tenant fails to
have a current and valid certificate of such policy on deposit with Landlord at
all times during the Term, then Landlord shall have the right, but not the
obligation, to obtain such an insurance policy, and Tenant shall be obligated to
pay Landlord the amount of the premiums applicable to such insurance within ten
(10) days after Tenant's receipt of Landlord's request for payment thereof. Said
policy of insurance shall name Landlord and Tenant as the insureds and shall be
non-cancelable with respect to Landlord except after thirty, (30) days' written
notice from the insurer to Landlord.
13.3 Tenant shall adjust annually the amount of the coverage established
in Section 13.2 hereof to such amount as, in Landlord's reasonable opinion,
adequately protects Landlord's interest.
13.4 Notwithstanding anything herein to the contrary, Landlord and Tenant
each hereby waives any and all rights of recovery, claim, action, or cause of
action against the other, its agents,
<PAGE>
employees, licensees, or invitees for any loss or damage to or at the Leased
Premises or the Building Complex or any personal property of such party therein
or thereon by reason of fire, the elements, or any other cause which would be
insured against under the terms of the insurance policies referred to
hereinabove, to the extent of such insurance, regardless of cause or origin,
including omission of the other party hereto, its agents, employees, licensees,
or invitees. Landlord and Tenant covenant that no insurer shall hold any right
of subrogation against either of such parties. This waiver shall be ineffective
against any insurer of Landlord or Tenant to the extent that such waiver is
prohibited by the laws and insurance regulations of the State of Connecticut.
The parties hereto agree that any and all such insurance policies required to be
carried by either shall be endorsed with a subrogation clause, substantially as
follows: "This insurance shall not be invalidated should the insured waive, in
writing prior to a loss, any and all right of recovery against any party for
loss occurring to the property described therein," and shall provide that such
party's insurer waives any right of recovery against the other party in
connection with any such loss or damage.
ARTICLE 14. QUIET ENJOYMENT
Provided Tenant has performed all its obligations under this Lease,
including, but not limited to, the payment of Rent and all other sums due
hereunder, Tenant shall peaceably and quietly hold and enjoy the Leased Premises
for the Term, without hindrance by Landlord, subject to the provisions and
conditions set forth in this Lease.
ARTICLE 15. ALTERATIONS
Tenant agrees that it shall not make or allow to be made any alterations,
physical additions, or improvements in or to the Leased Premises without first
obtaining the written consent of Landlord in each instance, which consent may be
conditioned, given, or withheld in Landlord's sole discretion. At the time of
said request, Tenant shall submit to Landlord plans and specifications of the
proposed alterations, additions, or improvements; and Landlord shall have a
period of not less than sixty (60) days therefrom in which to review and approve
or disapprove said plans. Tenant shall pay to Landlord upon demand the
reasonable cost and expense of Landlord -in (a) reviewing said plans and
specifications, and (b) inspecting the alterations, additions, or improvements
to determine whether the same are being performed in accordance with the
approved plans and specifications and all laws and requirements of public
authorities, including, without limitation, the fees of any architect or
engineer employed by Landlord for such purpose. In any instance where Landlord
grants such consent, and permits Tenant to use its own contractors, laborers,
materialmen, and others furnishing labor or materials for Tenant's construction
(collectively, "Tenant's Contractors"), Landlord's consent shall be deemed
conditioned upon each of Tenant's Contractors (a) working in harmony and not
interfering with any laborer utilized by Landlord, Landlord's contractors,
laborers, or materialmen; (b) furnishing Landlord with evidence of acceptable
liability insurance, worker's compensation coverage and if required by Landlord,
completion bonding, and if at any time such entry by one or more persons
furnishing labor or materials for Tenant's work shall cause such disharmony or
interference, the consent granted by Landlord to Tenant m be withdrawn
immediately upon written notice from Landlord to Tenant. Tenant, at its
expense, shall obtain all necessary governmental permits and certificates for
the commencement and prosecution of alterations, additions, or improvements to
be performed in compliance therewith and with all applicable law and
requirements of public authorities and with all applicable requirements of
insurance bodies. All alterations, additions, or improvements to be performed
in compliance therewith and with all applicable law and requirements of public
authorities and with all applicable requirements of insurance bodies. All
alterations, additions, or improvements shall be diligently performed in a good
and workmanlike manner, using new materials and equipment at least equal in
quality and class to the better of (a) the original
<PAGE>
installations of the Building, or (b) the then standards for the Building
established by Landlord. Upon the completion of work and upon request by
Landlord, Tenant shall provide Landlord copies of all waivers or releases of
lien from each of Tenant's contractors. No alterations, modifications, or
additions to the Building Complex or the Leased Premises shall be removed by
Tenant either during the Term or upon the Expiration Date or the Termination
Date without the express written approval of Landlord. Tenant shall not be
entitled to any reimbursement or compensation resulting from its payment of the
cost of constructing all or any portion of said improvements or modifications
thereto unless otherwise expressly agreed by Landlord in writing. Tenant agrees
specifically that no food, soft drink, or other vending machine shall be
installed within the Leased Premises, without the prior written consent of
Landlord.
Landlord's approval of Tenant's plans for work shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules, and regulations of
governmental agencies or authorities, including, but not limited to, the
Americans with Disabilities Act. Landlord may, at its option, at Tenant's
expense, require that Landlord's contractors be engaged for any mechanical or
electrical work or other building or leasehold improvement.
At least five (5) days prior to the commencement of any work permitted to
be done by persons requested by Tenant on the Leased Premises, Tenant shall
notify Landlord of the proposed work and the names and addressed of Tenant's
Contractors. During any such work on the Leased Premises, Landlord, or its
representatives, shall have the right to go upon and inspect the Leased Premises
at all reasonable times, and shall have the right to post and keep posted
thereon building permits or to take any further action which Landlord may deem
to be proper for the protection of Landlord's interest in the Leased Premises.
ARTICLE 16. FURNITURE, FIXTURES, AND PERSONAL PROPERTY
16.1 Tenant, at its sole cost and expense, may remove its trade fixtures,
office supplies and moveable office furniture and equipment not attached to the
Building Complex or Leased Premises provided:
(a) such removal is made prior to the Expiration Date or the
Termination Date;
(b) Tenant is not in default of any obligation or covenant under
this Lease at the time of such removal; and
(c) Tenant promptly repairs all damage caused by such removal.
16.2 If Tenant does not remove its trade fixtures, office supplies, and
moveable furniture and equipment is hereinabove provided prior to the Expiration
Date or the Termination Date (unless prior arrangements have been made with
Landlord and Landlord has agreed in writing to permit Tenant to leave such items
in the Leased Premises for an agreed period), then, in addition to its other
remedies, at law or in equity, Landlord shall have the right to have such items
removed and stored at Tenant's sole cost and expense and all damage to the
Building Complex or the Leased Premises resulting from said removal shall be
repaired at the cost of Tenant; Landlord may elect that such items automatically
become the property of Landlord upon the Expiration Date or the Termination
Date, and Tenant shall not have any further rights with respect thereto or
reimbursement therefor. All other property in the Leased Premises, any
alterations, or additions to ' the Leased Premises (including wall-to-wall
carpeting, paneling, wall covering, specially constructed or built-in cabinetry
or bookcases), and any other article
<PAGE>
attached or affixed to the floor, wall, or ceiling of the Leased Premises shall
become the property of Landlord and shall remain upon and be surrendered with
the Leased Premises as a part thereof at the Expiration or Termination Date
regardless of who paid therefor; and Tenant hereby waives all rights to any
payment or compensation therefor. If, however, Landlord so requests, in writing,
Tenant shall remove, prior to the Expiration Date or the Termination Date, any
and all alterations, additions, fixtures, equipment, and property placed or
installed in the Leased Premises and shall repair any damage caused by such
removal.
16.3 All the furnishings, fixtures, equipment, effects, and property of
every kind, nature, and description of Tenant and of all persons claiming by,
through, or under Tenant which, during the continuance of this Lease or any
occupancy of the Leased Premises by Tenant or anyone claiming under Tenant, may
be on the Leased Premises or elsewhere in the Building Complex shall be at the
sole risk and hazard of Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting
of water pipes, steam pipes, or other pipes, by theft, or from any other cause,
no part of said loss or damage is to be charged to or be done by Landlord unless
due to the gross negligence of Landlord.
ARTICLE 17. TAXES
During the Term hereof, Tenant shall pay, prior to delinquency, all
business and other taxes, charges, notes, duties, and assessments levied, and
rates or fees imposed, charged, or assessed against or in respect of Tenant's
occupancy of the Leased Premises or in respect of the personal property, trade
fixtures, furnishings, equipment, and all other personal property of Tenant
contained in the Building Complex, and shall hold Landlord harmless from and
against all payment of such taxes, charges, notes, duties, assessments, rates,
and fees, and against all loss, costs, charges, notes, duties, assessments,
rates, and fees, and any and all such taxes. Tenant shall cause said fixtures,
furnishings, equipment, and other personal property to be assessed and billed
separately from the real and personal property of Landlord. In the event any or
all of Tenant's fixtures, furnishings, equipment, and other personal property
shall be assessed and taxed with Landlord's real property, Tenant shall pay to
Landlord Tenant's share of such taxes within ten (10) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to Tenant's property.
ARTICLE 18. ASSIGNMENT AND SUBLETTING
18.1 Neither Tenant nor Tenant's legal representatives nor successors in
interest by operation of law or otherwise shall assign this Lease or sublease
the Leased Premises or any part thereof or mortgage, pledge, or hypothecate its
leasehold interest therein, or permit the use of a desk or other space within
the Leased Premises by any third party and any attempt to do so without the
prior express written consent of Landlord shall be void, of no effect, and
constitute an Act of Default (as hereinafter defined). This prohibition against
assigning or subletting shall be construed to include a prohibition against any
assignment or subletting by operation of law. The voluntary or other surrender
of this Lease by Tenant or a mutual cancellation hereof shall not work a merger
and shall, at the option of Landlord, terminate all or any existing sublease or
may, at the option of Landlord, operate as an assignment to Landlord of Tenant's
interest in any or all such subleases.
18.2 A sale or transfer, by Tenant of all or substantially all of its
assets or all or substantially all of its stock, or if Tenant is a publicly
traded corporation, a merger of Tenant with another corporation
<PAGE>
or a sale of ten percent (10%) or more of its stock or a sale of substantially
all its assets; or the sale or transfer, of fifty percent (50%) or more of the
stock of Tenant if Tenant's stock is not publicly traded; or the sale or
transfer, of fifty percent (50%) or more of the beneficial ownership interest in
Tenant if Tenant is a partnership without the prior written consent of Landlord,
shall, in any of the foregoing cases and whether or not accomplished by one or
more related or unrelated transactions, constitute an assignment of this Lease
that is subject to the provisions of Section 18.3 hereof.
18.3 If Tenant should desire to assign this Lease or sublease the Leased
Premises or any portion thereof, Tenant shall give Landlord written notice of
such desire to make such assignment or effect such sublease. At the time of
giving such notice, Tenant shall provide Landlord with a copy of the proposed
assignment or sublease document, and such information as Landlord may reasonably
request concerning the proposed sublessee or assignee to assist Landlord in
making an informed judgment regarding the financial condition, reputation,
operation, and general desirability of the proposed sublessee or assignee.
Landlord shall then have a period of thirty (30) days following receipt of such
notice within which to notify Tenant in writing of Landlord's election to:
(a) terminate this Lease as to the space so affected as of the date
specified by Tenant, in which event Tenant shall be relieved of all further
obligations hereunder as to the Leased Premises or said portion thereof, after
paying all Rent due as of the Termination Date; or
(b) permit Tenant to assign or sublet the Leased Premises or said
portion thereof, or
(c) refuse to consent to Tenant's assignment or subleasing of the
Leased Premises or said portion thereof and to continue this Lease in full force
and effect as to the entire Leased Premises.
Landlord and Tenant agree that, in the event of any approved
assignment or subletting, the rights of any such assignee or sublessee of Tenant
herein shall be subject to all of the terms, conditions and revisions of this
Lease, including, without limitation, restriction on use, assignment, and
subletting and the covenant to pay Rent. Landlord may collect Rent directly
from such assignee or sublessee and apply the amount so collected to the Rent
herein reserved. No such consent to or recognition of any such assignment or
subletting shall constitute a release of Tenant or any guarantor of Tenant's
performance hereunder from further performance by Tenant or such guarantor of
covenants undertaken to be performed by Tenant herein. Tenant and/or such
guarantor shall remain liable and responsible for all Rent and other obligations
herein imposed upon Tenant. Consent by Landlord to a particular assignment,
sublease, or other transaction shall not be deemed a consent to any other or
subsequent transaction. In any case, Landlord consents to any such assignment,
sublease, or other transaction, Tenant shall pay any reasonable attorneys' fees
incurred by Landlord in connection with such transaction. All documents
utilized by Tenant to evidence any subletting or assignment for which Landlord's
consent has been requested, shall be subject to prior approval by Landlord or
its attorney. If any Rent payable to Tenant by any sublessee, assignee,
licensee, or other transferee exceeds the Rent reserved herein, then Tenant
shall be bound and obligated to pay Landlord all such excess Rent within ten
(10) days following receipt thereof by Tenant from such sublessee, assignee,
licensee, or other transferee. as the case might be.
18.4 If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, I I U.S.C. Section 101 et. seq. (the
"Bankruptcy Code"), any and all monies or other consideration payable or
otherwise to be delivered in connection with such assignment shall be paid or
delivered to Landlord, shall be and remain the exclusive property of Landlord,
and shall not constitute
<PAGE>
property of Tenant or of the estate of Tenant within the meaning of the
Bankruptcy Code. Any such monies or other consideration not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and shall be
promptly paid or delivered to Landlord. Any person or entity to whom this Lease
is so assigned shall be deemed, without further act or deed, to have assumed all
of the obligations arising under this Lease as of the date of such assignment.
Any such assignee shall, upon demand therefor, execute and deliver to Landlord
an instrument confirming such assumption. In no event shall Tenant have any
right to sublet or assign if there exists any default under this Lease.
18.5 Notwithstanding the foregoing provisions, any consents required by
Landlord under this Section shall not be unreasonably withheld or untimely
delayed.
ARTICLE 19. FIRE AND CASUALTY
19.1 If the Leased Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give prompt written notice thereof to Landlord.
If the Building Complex shall be damaged by fire or other casualty and any of
the following applies: (a) substantial alteration or reconstruction of the
Building Complex is, in Landlord's reasonable opinion, required (whether or not
the Leased Premises shall have been damaged by such fire or other casualty), (b)
any mortgagee under a mortgage or deed of trust covering the Building Complex
requires that the insurance proceeds payable as a result of said fire or other
casualty be used to retire the mortgage debt, (c) the Building Complex is
damaged as a result of a risk that is not covered by Landlord's insurance, or
(d) the Leased Premises is materially damaged during the last year of the Term,
then Landlord may, at its option, terminate this Lease by notifying Tenant in
writing of such termination within thirty (30) days after the date of such
damage or casualty, in which event the Rent hereunder shall be abated as of the
date of such notice. In cases of less than such substantial damage and upon
receipt of the insurance proceeds for the damage, Landlord shall restore and
repair the Leased Premises.
19.2 If Landlord elects not to terminate this Lease as herein provided,
then within forty-five (45) days from the date of damage Landlord shall provide
Tenant with an estimate, from Landlord's general contractor, of the time it will
take to substantially restore the damage. If the estimate is that it will take
more than six (6) months, then Tenant shall have the right, by written notice to
Landlord within (7) business days after receiving the estimate, to terminate
this Lease. If Tenant fails to so terminate this Lease, and the damage is not
thereafter substantially restored on or before the day that is the number of
days of the estimate, plus sixty (60) days, after the end of the seven (7)
business day period, (excepting that Landlord shall not be responsible for
delays brought about by force majeure, as described in Article 10 hereof), this
Lease may be immediately terminated by Tenant by serving written notice upon
Landlord.
19.3 To the extent of the insurance proceeds available to Landlord
therefor, Landlord shall repair and restore the Building Complex and/or the
Leased Premises to substantially the same condition in which they were
immediately prior to the fire or other casualty, except that Landlord shall not
be required to rebuild, repair, or replace any part of Tenant's furniture,
fixtures, furnishings, or equipment or any alterations, additions, or
improvements made by Tenant to the Leased Premises pursuant to Article 15 of
this Lease. Landlord's repair or restoration work shall not exceed the scope of
work done in originally constructing the Building Complex and the Leased
Premises. Landlord shall not be liable for any inconvenience, annoyance, or
injury done to the business of Tenant resulting in any way from such damage or
the repair thereof and Tenant's obligations to pay rent shall continue unabated,
except
<PAGE>
Landlord shall allow Tenant an equitable reduction of Rent during the time and
to the extent the Leased Premises are unfit for occupancy, save for Tenant's
fault or negligence hereinbelow described.
19.4 If the Leased Premises or the Building Complex shall be totally
or partially damaged by fire or other casualty resulting from the fault or
negligence of Tenant, or its agents, employees, licensees, or invitees, such
damage shall be repaired by and at the expense of Tenant (to the extent that
such destruction or damage is not covered by the fire and extended coverage
insurance carried by Landlord as provided herein), under the direction and
supervision of Landlord, and Rent shall continue without abatement.
ARTICLE 20. CONDEMNATION
If there shall be taken by exercise of the power of eminent domain, or by
conveyance in lieu thereof, during the Term any material part of the Leased
Premises or the Building Complex, Landlord may elect to terminate this Lease
upon written notice to Tenant within thirty (30) days after the date of such
taking or transfer in lieu thereof or to continue the same in effect. All
compensation awarded for any taking or the proceeds or private sale in lieu
thereof) of the Leased Premises, Building or Building Complex shall be the
property of Landlord, and Tenant hereby assigns its interest in any such award
to Landlord, provided, however, Landlord shall have no interest in any award
made to Tenant for the taking of Tenant's fixtures and other personal property
or moving expenses if a separate award for such items is made to Tenant. If
this Lease is terminated as a result of any such exercise of the power of
eminent domain, Rent shall be payable up to the date that possession is taken by
the condemning authority; Landlord shah refund to Tenant any prepaid uncured
Rent, less any sum then owing by Tenant to Landlord; and Tenant shall have no
claim against Landlord for the value of any unexpired portion of the Term. If
such condemnation does not result in the termination of this Lease, the Rent
thereafter to be paid shall be proportionately reduced as to the space affected.
ARTICLE 21. HOLD HARMLESS
21.1 Tenant agrees to defend, with counsel approved by Landlord, all
actions against Landlord, any partner, trustee, stockholder, officer, director,
employee, or beneficiary of Landlord, holders of mortgages secured by the Leased
Premises or the Building Complex and any other party having an interest therein
(the "Landlord's Indemnified Parties") with respect to, and to pay, protect,
indemnify and save harmless, to the extent permitted by law, all Landlord's
Indemnified Parties from and against, any and all liabilities, losses, damages,
costs, expenses (including reasonable attorneys' fees and expenses), causes of
action, suits, claims, demands, or judgments of any nature to which any
Indemnified Party is subject because of its estate or interest in the Leased
Premises or the Building Complex arising from (i) injury to or death of any
person, or damage to or loss of property, on the Leased Premises, the Building
Complex, or, to the extent caused by or attributable to Tenant, on adjoining
sidewalks, streets or ways, or, in any of the foregoing cases, connected with
the use, condition, or occupancy, of the Leased Premises, the Building Complex
sidewalks, streets, or ways unless caused by the negligence of Landlord or its
servants or agents, (ii) violation of this Lease by or attributable to Tenant,
or (iii) any act, fault, omission, or other misconduct of Tenant or its agents,
contractors, licenses, sublessees, or invitees. Tenant agrees to use and occupy
the Leased Premises and other facilities of the Building Complex at its own
risk, and hereby releases the Landlord's Indemnified Parties from any and all
claims for any damage or injury to the fullest extent permitted by law.
21.2 Tenant agrees that Landlord shall not be responsible or liable to
Tenant, its agents, employees, licensees, or invitees for fatal or non-fatal
bodily injury or property damage occasioned by
<PAGE>
the acts or omissions of any other tenant, or such other tenant's agents,
employees, licensees, or invitees, of the Building Complex.
21.3 Landlord agrees to defend, with counsel approved by Tenant, all
actions against Tenant, any partner, trustee, stockholder, officer, director,
employee, or beneficiary of Tenant, (the "Tenant's Indemnified Parties") and to
pay, protect, indemnify, and save harmless, to the extent permitted by law, all
Tenant's Indemnified Parties from and against, any and all liabilities, losses,
damages, costs, expenses (including reasonable attorneys' fees and expenses),
causes of action, suits, claims, demands, or judgments of any nature to which
any Tenant's Indemnified Party is subject because of its estate or interest in
the Leased Premises arising from (i) injury to or death of any person, or damage
to or loss of property, in the common areas of the Building Complex, unless
caused by the negligence of Tenant or its servants or agents, (ii) violation of
this Lease by or attributable to Landlord, or (iii) any act, fault, omission, or
other misconduct of Landlord or its agents, contractors, licenses, or invitees.
ARTICLE 22. DEFAULT BY TENANT
22.1 The term "Act of Default" refers to the occurrence of any one (1)
or more or the following:
(a) Failure of Tenant to pay when due any sum required to be paid
hereunder (the "Monetary Default");
(b) Failure of Tenant, after ten (10) days written notice thereof,
to perform any of Tenant's obligations, covenants, or agreements except a
Monetary Default.
(c) If Tenant, or any guarantor of Tenant's obligations under this
Lease (the "Guarantor"), admits in writing that it cannot meet its obligations
as they become due; or is declared insolvent according to any law; or assignment
of Tenant's or Guarantor's property is made for the benefit of creditors; or a
receiver or trustee is appointed for Tenant or Guarantor or its property; or the
interest of Tenant or Guarantor under this Lease is levied on under execution or
other legal process; or any petition is filed by or against Tenant or Guarantor
to declare Tenant bankrupt or to delay, reduce, or modify Tenant's debts or
obligations; or any petition is filed or other action taken to reorganize or
modify, Tenant's or Guarantor's capital structure if Tenant is a corporation or
other entity. Any such levy, execution, legal process, or petition filed
against Tenant or Guarantor shall not constitute a breach of this Lease provided
Tenant or Guarantor shall vigorously contest the same by appropriate proceedings
and shall remove or vacate the same within sixty (60) days from the date of its
creation, service, or filing;
(d) The abandonment of the Leased Premises by Tenant, which shall
mean that Tenant has vacated the Leased Premises for ten (10) consecutive days,
whether or not Tenant is in Monetary Default; or that Tenant, in the judgment of
Landlord, is vacating the Leased Premises by removing a substantial part of its
furniture and fixtures;
(e) The discovery by Landlord that any financial statement given by
Tenant or any of its assignees, subtenants, successors-in-interest, or
Guarantors was materially false; or
(f) If Tenant or any Guarantor shall die, cease to exist as a
corporation or partnership, or be otherwise dissolved or liquidated or become
insolvent, or shall make a transfer in fraud of creditors.
<PAGE>
22.2 In the event of any Act of Default by Tenant, Landlord, at its
option, may pursue one or more of the following remedies without notice or
demand in addition to all other rights and remedies provided for in law or in
equity:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender possession of the Leased Premises to Landlord;
(b) Enter upon or take possession of the Leased Premises and its
contents and expel or remove Tenant, any other occupant, and any contents
therefrom using such force as may be reasonably necessary, with or without
having terminated the Lease and without being liable for prosecution of any
claim of damages therefor; and/or
(c) In connection with any action taken by Landlord under Sections
22.2(a) and (b) above, alter locks and other security devices from the Leased
Premises without being liable for prosecution of any claim of damages therefor.
22.3 If Landlord shall exercise any one or more remedies hereunder granted
or otherwise available, it shall not be deemed to be an acceptance or surrender
of the Leased Premises by Tenant whether by agreement or by operation of law; it
is understood that such surrender can be effected only by the written agreement
of Landlord and Tenant. No alteration of security devices and no removal or
other exercise of dominion by Landlord over the property of Tenant or others in
the Leased Premises shall be deemed unauthorized or constitute a conversion,
Tenant hereby consenting to the aforesaid exercise of dominion over Tenant's
property within the Leased Premises after any Act of Default. All claims for
damages by reason of such reentry and/or repossession and/or alteration of locks
or other security devices are hereby waived as are all claims for damages by
reason of any distress warrant, forcible detainer proceedings, sequestration
proceedings, or other legal process. Tenant agrees that any reentry by Landlord
may be pursuant to a judgment obtained in legal proceedings or without the
necessity of legal proceedings as Landlord may elect, and Landlord shall not be
liable in trespass or otherwise.
In the event Landlord may elect to regain possession of the Leased Premises
by a summary proceeding or forcible detainer proceedings, Tenant hereby
specifically waives, to the extent permitted by law, any statutory notice which
may be required prior to such proceeding and agrees that Landlord's execution of
this Lease is in part consideration for this waiver.
22.4 Should Landlord elect to terminate this Lease, Landlord may,
without further notice, repossess the Leased Premises and Tenant shall be liable
as if the expiration of the term fixed in such notice were the end of the Term
herein originally demised. In the event this Lease is terminated pursuant to
the provisions of this subsection, Tenant shall remain liable to Landlord for
damages in an amount equal to (a) the Rent and other sums which would have been
owing by Tenant hereunder for the balance of the Term had this Lease not been
terminated, less the not proceeds, if any, of any reletting of the Leased
Premises by Landlord subsequent to such termination after deduction all of
Landlord's expenses in connection with such reletting, including, but without
limitation, the expenses enumerated in Section 22.5 below, and (b) the
unamortized portion of the cost of Landlord's Work, amortized on a straight-line
basis over the initial term of this Lease. Landlord shall be entitled to
collect such damages from Tenant monthly on the days on which the Rent and other
amounts would have been payable hereunder if this Lease had not been terminated,
and Landlord shall be entitled to receive the same from Tenant on each such day.
<PAGE>
22.5 Alternatively, at the option of Landlord, in the event this Lease
is terminated, Landlord shall be entitled to (a) accelerate and collect from
Tenant the Rent due under this Lease from the date on which the Act of Default
occurred through the date which would otherwise have been the Expiration Date of
this Lease if and when the Act of Default is a Monetary Default under Article 4,
a failure to obtain the required insurance coverage under Article 13, or a
violation of Section 3.1 or Article 18; or, at Landlord's election (b) recover
forthwith again Tenant as damages for loss of the bargain and not as a penalty
and Tenant shall be liable for and shall pay to Landlord the sum of all Rent and
other indebtedness accrued to the date of such termination, plus, as damages for
loss of the bargain and not as a penalty, an amount equal to the then-present
value of the Rent and any and all other sums reserved hereunder for the
remaining portion of the Term (had such Term not been terminated by Landlord
prior to the Expiration Date), plus all costs of reletting enumerated in Section
22.6 below, less the present value of the then-fair rental value of the Leased
Premises for such period. The parties hereby stipulate that such fair rental
value shall in no event be deemed to exceed sixty percent (60%) of the then-
present value of the Rent reserved for such period. For computations of present
value, the parties agree to use a six percent (6 %) per annum interest figure.
The foregoing, together with any other damages incurred by Landlord in
connection with the termination of this Lease, shall accrue interest at the
highest applicable non-usurious rate permitted by law.
22.6 Should Landlord elect not to terminate this Lease, Landlord may,
without notice or demand, enter upon the Leased Premises or any part thereof and
take absolute possession of the same, and, at Landlord's option, Landlord may
relet the Leased Premises or any part thereof upon such terms and such rents as
Landlord may reasonably elect (which may include concessions of free rent and
alteration of the Leased Premises). Landlord shall use reasonable efforts but
shall not be obligated to relet the Leased Premises, and nothing herein
contained shall under any circumstances be construed so as to require Landlord
to lease the Leased Premises below the then-current market rental rates being
obtained for similar office buildings in a similar area or to lease the same to
any Tenant not creditworthy or otherwise unacceptable to Landlord and shall in
no way be responsible or liable for any failure to relet the Leased Premises, or
any part thereof, or for any failure to collect any rent due upon such
reletting. In the event Landlord shall elect to so relet, then any rent
received by Landlord from such reletting shall be applied first to the payment
of any indebtedness other than Rent due hereunder from Tenant to Landlord;
second, to payment of any reasonable cost of such reletting, including, without
limitation, all repossession costs, legal expenses, attorneys' fees,
concessions, moving and/or storage costs, alteration, remodeling and repair
costs, leasing commissions, and other expenses of preparation for such
reletting; and third, to the payment of Rent due and unpaid hereunder, and
Tenant shall satisfy and pay any deficiency between the rents so collected from
the Rents reserved herein upon demand therefor from time to time, and the
unamortized portion of the cost of the Tenant Work, amortized on a straight-line
basis over the initial term of this Lease. In no event shall Tenant be entitled
to any excess of any rent obtained by reletting over and above the Rent herein
reserved.
22.7 Tenant further agrees that Landlord may file suit from time to time
to recover any sums due under the terms of this Section and that no recovery of
any portion due Landlord hereunder shall be a defense to any subsequent action
brought for any amount not theretofore reduced to judgment in favor of Landlord.
Reletting the leased Premises shall not be construed as an election on the part
of Landlord to terminate this Lease, and notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach, whereupon the foregoing provisions with respect
to termination shall apply. Nothing herein shall be deemed to require Landlord
to await the date whereon this Lease or the Term hereof would have expired by
limitation had there been no such default by Tenant, or no such termination, as
the case may be. Each right and remedy provided
<PAGE>
for in this Lease shall be cumulative and shall be in addition to every other
right or remedy provided for in this Lease or now or hereafter existing at law
or in equity or by statute or otherwise, including, but not limited to, suits
for injunctive relief and specific performance. The exercise or beginning of the
exercise by Landlord or any or all other rights or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise. All such rights and remedies shall be considered cumulative and non-
exclusive. All costs incurred by Landlord in connection with collecting any Rent
or other amounts and damages owing by Tenant pursuant to the provisions of this
Lease, or to enforce any provision of this Lease, including reasonable
attorneys' fees from the date such matter is turned over to an attorney, whether
or not one or more actions are commenced by Landlord, shall also be recoverable
by Landlord from Tenant.
22.8 If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the Leased Premises for such purpose), and thereupon, Tenant shall be obligated
and hereby agrees to pay Landlord, upon demand, all reasonable costs, expenses,
and disbursements, plus fifteen percent (15%) overhead cost incurred by Landlord
in connection therewith.
22.9 In addition to Landlord's rights set forth above, if Tenant fails to
pay its Rent or any other amounts owing hereunder within the time period set
forth in Section 21(a)(i) above more than two (2) times during any calendar year
during the Term, or any extension thereof, then upon the occurrence of the third
or any subsequent default in the payment of monies during said calendar year,
Landlord, at its sole option, shall have the right to require that Tenant, as a
condition precedent to curing such default, pay to Landlord, in check or money
order, in advance, the Rent and Landlord's estimate or all other amounts which
will become due and owing hereunder by Tenant for a period of two (2) months.
All such amounts shall be paid by Tenant within thirty (30) days after notice
from Landlord demanding the same. All monies so paid shall be retained by
Landlord, without interest, for the balance of the Term and any extension
thereof, and shall be applied by Landlord to the last due amounts owing
hereunder by Tenant. If, however, Landlord's estimate of the Rent and other
amounts for which Tenant is responsible hereunder are inaccurate, when such
error is discovered, Landlord shall pay to Tenant, or Tenant shall pay to
Landlord, within thirty (30) days after written notice thereof, the excess of
deficiency, as the case may be, which is required to reconcile the amount on
deposit with Landlord with the actual amounts for which Tenant is responsible.
22.10 Nothing contained in this Section shall limit or prejudice the right
of Landlord to prove and obtain as liquidated damages in any bankruptcy,
insolvency, receivership, reorganization, or dissolution proceeding, an amount
equal to the maximum allowed by any statute or rule of law governing such a
proceeding and in effect at the time when such damages are to be proved, whether
or not such amount be greater, equal, or less than the amounts recoverable,
either as damages or Rent, referred to in any of the preceding provisions of
this Section. Notwithstanding anything contained in this Section to the
contrary, any such proceeding or action involving bankruptcy, insolvency,
reorganization, arrangement assignment for the benefit of creditors, or
appointment of a receiver or trustee, as set forth above, shall be considered to
be an Act of Default only when such proceeding, action, or remedy shall be taken
or brought by or against the then holder of the leasehold estate under this
Lease.
22.11 In the event of any Act of Default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable and shall pay to
Landlord, in addition to any sums provided to be paid above, brokers' fees
incurred by Landlord in connection with reletting the whole or any part of the
Leased Premises; the costs of removing and storing Tenant's or other occupant's
property; the costs of
<PAGE>
repairing, altering, remodeling, or otherwise putting the Leased Premises into
condition acceptable to a new tenant or tenants; and all reasonable expenses
incurred by Landlord in enforcing or defending Landlord's rights and/or
remedies, including reasonable attorneys' fees, whether suit was actually file
or not.
22.12 In the event of termination or repossession of the Leased Premises
for an Act of Default, Landlord shall not have any obligation to relet or
attempt to relet the Leased Premises or any portion thereof, or to collect
rental after reletting; and in the event of reletting, Landlord may relet the
whole or any portion of the Leased Premises for any period to any tenant and for
any use or purpose.
22.13 Landlord is entitled to accept, receive, in check or money order, and
deposit any payment made by Tenant for any reason or purpose or in any amount
whatsoever, and apply them at Landlord's option to any obligation of Tenant, and
such amounts shall not constitute payment of any amount owed, except that to
which Landlord has applied them. No endorsement or statement on any check or
letter of Tenant shall be deemed an accord and satisfaction or recognized for
any purpose whatsoever. The acceptance of any such check or payment shall be
without prejudice to Landlord's rights to recover any and all amounts owed b
Tenant hereunder and shall not be deemed to cure any other default nor prejudice
Landlord's rights to pursue any other available remedy.
22.14 In the event of any default by Landlord, Tenant's exclusive remedy
shall be an action for damages, Tenant hereby waiving the benefit of any laws
granting it a lien upon the property of Landlord and/or upon Rent due Landlord.
Prior to any such action for damages, Tenant shall give Landlord written notice
specifying such default with particularity, and Landlord shall thereupon have
thirty (30) days (plus such additional reasonable period as may be required in
the exercise by Landlord of due diligence) in which to cure any such default.
Unless and until Landlord fails to cure any default after such notice, Tenant
shall not have any remedy or cause of action by reasons thereof. All
obligations of Landlord hereunder shall be construed as covenants, not
conditions.
22.15 In addition to and without limiting the foregoing, in the event of
any abandonment of the Leased Premises by Tenant, and Landlord does not elect to
declare this Lease terminated, then Tenant shall remain obligated,
notwithstanding any such discontinuance or cessation of operations, to perform
all covenants and agreements under this Lease, including, without limitation,
payment of all Base Rent, and all Additional Rent and other sums provided for
herein.
ARTICLE 23. INTENTIONALLY OMITTED
ARTICLE 24. INTENTIONALLY OMITTED
ARTICLE 25. ATTORNEYS' FEES
Should it be necessary for Landlord or Tenant, because of a breach of the
other, to place the enforcement of this Lease or any part thereof, or the
collection of any Rent due or to become due hereunder, or recovery of the
possession of the Leased Premises, in the hands of any attorney, or file suit
upon the same, it is agreed that the prevailing party shall recover its
reasonable attorneys' fees from the non-prevailing party.
ARTICLE 26. NON-WAIVER
<PAGE>
Neither acceptance of any payment by Landlord from Tenant nor failure by
Landlord to complain of any action, non-action, or default of Tenant shall
constitute a waiver of any of Landlord's rights hereunder. Time is of the
essence with respect to the performance of every obligation of Tenant under this
Lease in which time of performance is a factor. Waiver by Landlord of any right
or arising in connection with any default of Tenant shall not constitute a
waiver of such right or remedy or any other right or remedy arising in
connection with either a subsequent default of the same obligation or any other
default. No right or remedy of Landlord hereunder or covenant, duty, or
obligation of Tenant hereunder shall be deemed waived by Landlord unless such
waiver is in writing, signed by Landlord or Landlord's duly authorized agent.
ARTICLE 27. RULES AND REGULATIONS
Such reasonable rules and regulations applying to all lessees in the
Building Complex as may be hereafter adopted by Landlord for the safety, care,
and cleanliness of the Building Complex and the preservation of good order
thereon are hereby made a part hereof as Exhibit D, and Tenant agrees to comply
---------
with all such rules and regulations. Landlord shall have the right at all times
to change such rules and regulations or to amend them in any reasonable manner
as may be deemed advisable by Landlord, all of which changes and amendments
shall be sent by Landlord to Tenant in writing and shall be thereafter carried
out and observed by Tenant. Landlord shall not have any liability to Tenant for
any failure of any other lessees of the Building Complex to comply with such
Rules and Regulations.
ARTICLE 28. ASSIGNMENT BY LANDLORD
Landlord shall have the right to transfer or assign, in whole or in part,
all its rights and obligations hereunder and in the Leased Premises and the
Building Complex. In such event, no liability or obligation shall accrue or be
charged to Landlord.
ARTICLE 29. LIABILITY OF LANDLORD
It is expressly understood and agreed that the obligations of Landlord
under this Lease shall be binding upon Landlord and its successors and assigns
and any future owner of the Building Complex only with respect to events
occurring during its and their respective ownership of the Building Complex. In
addition, Tenant agrees to look solely to Landlord's interest in the Building
Complex for recovery of any judgment against Landlord arising in connection with
this Lease, it being agreed that neither Landlord nor any successor or assign of
Landlord nor any future owner of the Building Complex, nor any partner,
shareholder, or officer of any of the foregoing shall ever be personally liable
for any such judgment.
ARTICLE 30. SUBORDINATION AND ATTORNMENT
This Lease, at Landlord's option, shall be subordinate to any mortgage (now
or hereafter placed upon the Building), ground lease or declaration of covenants
(hereafter placed upon the Building) regarding maintenance and use of any areas
contained in any portion of the Building, and to any and all advances made under
any mortgage and to all renewals, modifications, consolidations, replacements,
and extensions thereof Tenant agrees, with respect to any of the foregoing
documents, that no documentation other than this Lease shall be required to
evidence such subordination. If any holder of a mortgage shall elect for this
Lease to be superior to the lien of its mortgage and shall give written notice
thereof to
<PAGE>
Tenant, then this Lease shall automatically be deemed prior to such mortgage
whether this Lease is dated earlier or later than the date of said mortgage or
the date of recording thereof. Tenant agrees to execute such documents as may be
further required to evidence such subordination or to make this Lease prior to
the lien of any mortgage or deed of trust, as the case may be, and by failing to
do so within five (5) days after written demand, Tenant does hereby make,
constitute, and irrevocably appoint Landlord as Tenant; attorney-in-fact and in
Tenant's name, place, and stead, to do so. This power of attorney is coupled
with an interest. Tenant hereby attorns to all successor owners of the Building,
whether or not such ownership is acquired as a result of a sale through
foreclosure of a deed of trust or mortgage, or otherwise. Notwithstanding the
foregoing, Tenant shall only be obligated to subordinate its leasehold interest
to any mortgage, deed or trust, ground lease, or declaration of covenants now or
hereafter placed upon the Building if the holder of such mortgage or deed or
trust or the landlord under such ground lease or the declarant under such
declaration of covenants will grant to tenant a non-disturbance agreement, using
the form of document then being employed by such holder, landlord, or declarant
for such purposes, which will provide that Tenant, notwithstanding any default
of Landlord hereunder, shall have the right to remain in possession of the
Leased Premises described herein in accordance with the terms and provisions of
this Lease for so long as Tenant shall not be in default under this Lease.
Additionally, Tenant shall, at such time or times as Landlord may request, upon
not less than five (5) days' prior written request by Landlord sign and deliver
to Landlord a certificate stating whether this Lease is in full force and
effect; whether any amendments or modification exist; whether any Monthly Rent
has been prepaid and, if so, how much; whether there are any defaults hereunder;
and such other information and agreements as may be reasonable requested, it
being intended that any such statement delivered pursuant to this Article may be
relied upon by Landlord and by any prospective purchaser of all or any portion
of Landlord's interest herein, or a holder or prospective holder of any mortgage
encumbering the Building. Tenant's failure to deliver such statement within such
time shall constitute an Act of Default (as that term is defined elsewhere in
this Lease) and shall conclusively be deemed to be an admission by Tenant of the
matters set forth in the request for an estoppel certificate.
ARTICLE 31. HOLDING OVER
In the event Tenant, or any party claiming under Tenant, retains possession
of the Leased Premises after the Expiration Date or Termination Date, such
possession shall be that of a Holdover Tenant and an unlawful detainer. No
tenancy or interest shall result from such possession, and such parties shall be
subject to immediate eviction and removal. Tenant or any such party shall pay
Landlord, as Rent for the period of such holdover, an amount equal to double
Rent otherwise provided for herein during the time of holdover. Tenant shall
also be liable for any and all damages sustained by Landlord as a result of such
holdover. Tenant shall vacate the Leased Premises and deliver same to Landlord
immediately upon Tenant's receipt of notice from Landlord to so vacate. 'Me
Rent during such holdover period shall be payable to Landlord on demand. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease.
ARTICLE 32. SIGNS
No sign, symbol, or identifying marks shall be put upon the Building Complex,
Building, in the halls, elevators, staircases, entrances, parking areas, or upon
the doors or wells, without the prior written approval of Landlord. Should such
approval ever be granted, all signs or lettering shall conform in all respect to
the sign and/or lettering criteria established by Landlord. Landlord, at
Landlord's sole cost and expense, reserves the right to change the door plaques
as Landlord deems reasonably desirable.
ARTICLE 33. HAZARDOUS SUBSTANCES
<PAGE>
With respect to Tenant's use of the Building Complex, Tenant shall at all
times, at its own cost and expense, comply with all federal, state, and local
laws, ordinances, regulations, and standards relating to the use, analysis,
production, storage, sale, disposal, or transportation of any hazardous
materials ("Hazardous Substance Laws"), including oil or petroleum products or
their derivatives, solvents, PCB's explosive substances, asbestos, radioactive
materials or waste, and any other toxic, ignitable, reactive, corrosive,
contaminating, or pollution materials ("Hazardous Substances") which are now or
in the future subject to any governmental regulations.
Tenant shall not generate, store, or dispose of any Hazardous Substances in
or on the leased Premises or the Building Complex. Except in emergencies or as
otherwise required by law, Tenant shall not take any remedial action in response
to the presence or release of any Hazardous Substances on or about the Building
Complex without first giving written notice of the same to Landlord. Tenant
shall not enter into any settlement agreement, consent decree, or other
compromise with respect to any claims relating to any Hazardous Substances in
any way connected with the Building Complex without first notifying Landlord of
Tenant's intention to do so and affording Landlord the opportunity to
participate in any such proceedings.
All costs and expenses incurred by Landlord in connection with any
environmental audit shall be paid by Landlord (and may be included in Operating
Expenses), except that if any such environmental audit shows that Tenant has
failed to comply with the provisions of this Article, or that the Building
Complex (including surrounding soil and any underlying or adjacent groundwater)
have become contaminated due to the operations or activities in any way
attributable to Tenant, then all of the costs and expenses of such audit shall
be paid by Tenant.
In the event Tenant's occupancy or conduct of business in or on the Leased
Premises, whether or not Landlord has consented to the same, results in any
increase in premiums for the insurance carried from time to time by Landlord
with respect to the Building, Tenant shall pay any such increase in premiums as
Rent within ten (10) days after bills for such additional premiums shall be
rendered by Landlord. In determining whether increased premiums are a result of
Tenant's use or occupancy of the Leased Premises, a schedule issued by the
organization computing the insurance rate on the Building showing the various
components of such rate, shall be conclusive evidence of the several items and
charges which make up such rate. Tenant shall promptly comply with all
reasonable requirements of the insurance authority or of any insurer now or
hereafter in effect relating to the Leased Premises.
ARTICLE 34. COMPLIANCE WITH LAWS AND OTHER REGULATIONS
Tenant, at its sole cost and expense, shall promptly comply with all laws,
statutes, ordinances, and governmental rules, regulations, or requirements now
in force or which may hereafter become in force, of federal, state, county, and
municipal authorities, including, but not limited to, the Americans with
Disabilities Act, with the requirements of any board of fire underwriters or
other similar body now or hereafter constituted, and with any occupancy
certificate issued pursuant to any law by any public officer or officers, which
impose any duty upon Landlord or Tenant, insofar as any thereof relate to or
affect the condition, use, alteration, or occupancy of the Leased Premises.
Landlord's approval of Tenant's plans for any improvements shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules, and regulations of
governmental agencies or authorities, including, but not limited to, the
Americans with Disabilities Act.
<PAGE>
ARTICLE 35. SEVERABILITY
This Lease shall be construed in accordance with the laws of the State of
Connecticut. If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the Term, then it is
the intention of the parties hereto that the remainder of this Lease shall not
be affected thereby. It is also the intention of both parties that in lieu of
each clause or provision that is illegal, invalid, or unenforceable, there is
added as a part of this Lease a clause or provision as similar in terms to such
illegal, invalid, or unenforceable clause or provision as may be possible and
still be legal, valid, and enforceable.
ARTICLE 36. NOTICES
Whenever in this Lease it shall be required or permitted that notice or
demand be given or served by either party to this Lease to or on the other, such
notice or demand shall be given or served in writing and delivered personally,
set by facsimile or forwarded by certified or registered mail, postage prepaid,
or recognized overnight courier, addressed as follows:
If to Landlord: John Hancock Mutual Life Insurance Company
200 Berkeley Street
P.O. Box 111
Boston, Massachusetts 02117
with a copy to: Farley Whittier Partners
100 Pearl Street
Hartford, Connecticut 06103
If to Tenant Accent Color Sciences, Inc.
Prior to the Riverview Square
Commencement 99 East River Drive
Date: East Hartford, Connecticut 06108
After the 800 Connecticut Blvd.
Commencement East Hartford, CT 06108
Date:
Notice hereunder shall become effective upon (a) delivery in case of
personal delivery, (b) transmission with receipt confirmed in case of facsimile,
and (c) receipt or refusal in case of certified or registered mail.
Prior to the Commencement Date, the address for notices to Tenant shall be
the address set forth below its signature hereto; after the Commencement Date,
the address for notices to Tenant shall be as hereinabove set forth. Such
address may be changed from time to time by either party service notice as
provided above.
ARTICLE 37. OBLIGATIONS OF SUCCESSORS, PLURALITY, GENDER
Landlord and Tenant agree that all the provisions hereof are to be
construed as covenants and agreements as though the words imparting such
covenants were used in each paragraph hereof, and that,
<PAGE>
except as restricted by the provisions hereof, shall bind and inure to the
benefit of the parties hereto, their respective heirs, legal representatives,
successors, and assigns. If the rights of Tenant hereunder are owned by two or
more parties, or two or more parties are designated herein as Tenant, then all
such parties shall be jointly and severally liable for the obligations of Tenant
hereunder. Whenever the singular or plural number, masculine or feminine or
neuter gender is used herein, it shall equal include the other.
ARTICLE 38. ENTIRE AGREEMENT
This Lease and any attached addenda or exhibits constitute the entire
agreement between Landlord and Tenant. No prior or contemporaneous written or
oral leases or representations shall be binding. This Lease shall not be
amended, changed, or extended except by written instrument signed by Landlord
and Tenant.
ARTICLE 39. PARAGRAPH CAPTIONS
Paragraph captions are for Landlord's and Tenant's convenience only, and
neither limit nor amplify the provisions of this Lease. Tenant agrees, at
Landlord's request, to execute a recordable Memorandum of this Lease.
ARTICLE 40. CHANGES
Should any mortgagee require a modification of this Lease, which
modification will not bring about any increased cost or expense to Tenant or
will in any other way substantially and adversely change the rights and
obligations of Tenant hereunder, then and in such event Tenant agrees that this
Lease may be so modified.
ARTICLE 41. AUTHORITY
All rights and remedies of Landlord under this Lease, or those which may be
provided by law, may be exercised by Landlord in its own name individually, or
in its name by its agent, and all legal proceedings for the enforcement of any
such rights or remedies, including distress for Rent, unlawful detainer, and any
other legal or equitable proceedings may be commenced and prosecuted to final
judgment and be executed by Landlord in its own name individually or in its name
by its agent. Landlord and Tenant each represent to the other that each has
full power and authority to execute this Lease and to make and perform the
agreements herein contained, and Tenant expressly stipulates that any rights or
remedies available to Landlord, either by the provisions of this lease or
otherwise, may be enforced by Landlord in its own name individually or in its
name by its agent or principal.
ARTICLE 42. BROKERAGE
Tenant represents and warrants to Landlord that it has dealt only with
Farley Whittier Partners (the "Broker") in negotiation of this Lease. Landlord
shall make payment of the brokerage fee due to the Broker pursuant to and in
accordance with a separate agreement with the Broker. Tenant hereby agrees to
indemnify and hold Landlord and/or Landlord's agent harmless of and from any and
all damages, losses, costs, or expenses (including, without limitation, all
attorneys' fees and disbursements) by reason of any claim of or liability to any
other broker or other person claiming through Tenant and arising out of or in
connection with the negotiation, execution, and delivery of this Lease.
Additionally, Tenant acknowledges and agrees that Landlord and/or Landlord's
agent shall have no obligation for payment of
<PAGE>
any brokerage fee or similar compensation to any person with whom Tenant has
dealt or may in the future deal with respect to leasing of any additional or
expansion space in the Building or renewals or extensions of this Lease.
ARTICLE 43. EXHIBITS
Exhibits A through E are attached hereto and incorporated herein for all
--------------------
purposes and are hereby acknowledged by both parties to this Lease.
ARTICLE 44. APPURTENANCES
The Leased Premises include the right of ingress and egress thereto and
therefrom; however, Landlord reserves the right to make changes and alterations
to the Building, fixtures and equipment thereof, in the street entrances, doors,
halls, corridors, lobbies, passages, elevators, escalators, stairways, toilets
and other parts thereof which Landlord may deem necessary or desirable. Neither
this Lease nor any use by Tenant of the Building or any passage, door, tunnel,
concourse, plaza or any other area connecting the garages or other buildings
with the Building, shall give Tenant any right or easement of such use and the
use thereof may, without notice to Tenant, be regulated or discontinued at any
time and from time to time by Landlord without liability of any kind to Tenant
and without affecting the obligations of Tenant under this Lease.
ARTICLE 45. PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND JURY
Tenant, for itself and for all persons claiming through or under it, hereby
acknowledges that this Lease constitutes a commercial transaction as such term
is used and defined in Public Act No. 431 of the Connecticut General Statutes,
Revision of 1973, and hereby expressly waives any and all rights which are or
may be conferred upon Tenant by said Act to any notice or hearing prior to a
prejudgment remedy, and by any present or future law to redeem the Leased
Premises, or to any new trial in any action or ejection under any provisions of
law, after reentry thereupon, or upon any part thereof, by Landlord, or after
any warrant to dispossess or judgment in ejection. If Landlord shall acquire
possession of the Leased Premised by summary proceedings, or in any other lawful
manner without judicial proceedings, it shall be deemed a reentry within the
meaning of that word as used in this Lease. In the event that Landlord
commences any summary proceedings or action for nonpayment of rent or other
charges provided for in this Lease, Tenant shall not interpose any counterclaim
of any nature or description in any such proceeding or action. Tenant and
Landlord both waive a trial by jury of any or all issues arising in any action
or proceeding between the parties hereto or their successors, under or connected
with this Lease, or any of its provisions.
ARTICLE 46. RECORDING
Tenant shall not record this Lease but will, at the request of Landlord,
execute a memorandum or notice thereof in recordable form satisfactory to both
Landlord and Tenant specifying the date of commencement and expiration of the
term of this Lease and other information required by statute. Either Landlord
or Tenant may then record said memorandum or notice of lease.
ARTICLE 47. MORTGAGEE PROTECTION
<PAGE>
Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by
Registered Mail, a copy of any Notice of Default served upon Landlord, provided
that prior to such notice Tenant has been notified, in writing (by way of Notice
of Assignment of Rents and Leases, or otherwise), of the address of such
Mortgagees and/or Trust Deed Holders. Tenant further agrees that if Landlord
shall have failed to cure such default within the time provided for in this
Lease, then the Mortgagees and/or Trust Deed Holders shall have an additional
thirty (30) days within which to cure such default or if such default cannot be
cured within that time, then such additional time as may be necessary if within
such thirty (30) days, any Mortgagee and/or Trust Deed Holder has commenced and
is diligently pursuing the remedies necessary to cure such default, (including
but not limited to commencement of foreclosure proceedings, if necessary to
effect such cure) in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
ARTICLE 48. SHORING
If any excavation or construction is made adjacent to, upon or within the
Building, or any part thereof, Tenant shall afford to any and all persons
causing or authorized to cause such excavation or construction license to enter
upon the Leased Premises for the purpose of doing such work as such persons
shall deem necessary to preserve the Building or any portion thereof from injury
or damage and to support the same by proper foundations, braces and supports,
without any claim for damages or indemnity or abatement of rent, or of a
constructive or actual eviction of Tenant.
ARTICLE 49. PARKING
49.1 Tenant shall have the following parking rights as long as this Lease
is in full force and effect:
(a) The right to park twenty (20) cars, on a reserved basis, in the
garage that is under the Building (the "Garage"). Landlord shall mark twenty
(20) spaces in the garage as being reserved for Tenant, but Landlord shall not
be obligated to police such spaces, and Landlord shall have no liability to
Tenant, nor shall Tenant's obligations under this Lease be affected, in the
event of any unauthorized use of said spaces.
(b) The right to park up to one hundred ten (110) cars, on a non-
reserved basis, in the surface parking area located at the Building (the
"Building Lot").
(c) The right to park up to twenty (20) cars, on a non-reserved
basis, in the surface parking area located at 12 and 14 Village Street, East
Hartford, Connecticut (the "Adjacent Lot"), provided that if the Adjacent Lot is
not available, the number of cars provided for in this Section 49.1 (c) shall be
provided in the Garage and/or the Building Lot, in a proportion determined by
Landlord.
49.2 The parking provided for herein shall be subject to such reasonable
rules and regulations as Landlord shall provide from time to time and access
thereto may be controlled by keycards or other similar devices.
49.3 As long as the spaces are not needed for other tenants in the
building, Tenant may park entirely in the Garage and/or the Building Lot, but
Landlord shall have the right, on thirty (30) days notice to Tenant, to require
Tenant to park in accordance with the breakdowns set forth in this Article 49,
when it needs spaces in the Garage and/or the Building Lot for other tenants.
<PAGE>
49.4 If Tenant fails to Lease the Expansion Space pursuant to Article
50 hereof, then as of the first day of the thirteenth (13/th/) full month of the
Term, then Tenant shall only be permitted to park fifteen (15) cars in the
Garage.
ARTICLE 50. EXPANSION
Provided that this Lease is in full force and effect and Tenant is not in
default hereunder, Tenant shall have the right to expand the Leased Premises to
include the entire second (2nd) floor of the Building, which spare (the
"Expansion Space") consists of approximately 15,000 square feet of Rentable Area
(subject to verification by Landlord's architect in accordance with the BOMA
Method) and is shown on Exhibit F attached hereto, as follows:
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(a) In order to exercise this option, Tenant must so notify
Landlord, in writing, on or before the last day of the ninth (9th) full month of
the Term, time being of the essence.
(b) Landlord shall deliver vacant possession of the Expansion
Space to Tenant upon receipt of Tenant's exercise notice, and Tenant shall
accept the Expansion Space in a strictly "as is" condition, except that Landlord
shall be responsible for removing or demolishing the built-in equipment (but not
any permanent improvements such as walls, floors and ceilings) that make up the
cafeteria in the Expansion Space.
(c) Tenant shall be responsible for all build-out and/or interior
finish work that it shall require in the Expansion Space, which work (the
"Expansion Work") shall be subject to the provisions of Article 15 hereof.
(d) Landlord shall provide Tenant with an allowance of up to Thirty-
Five Thousand and 00/100 Dollars ($35,000.00) toward the cost of the Expansion
Work, which allowance shall be paid by Landlord to Tenant within thirty (30)
days after the following has occurred:
(i) Tenant has provided Landlord with a certificate of
occupancy for the Expansion Space, and a certificate from Landlord's architect
that the Expansion Work has been substantially completed in accordance with the
plans and specifications that have been approved by Landlord; and
(ii) Tenant has provided Landlord with a detailed invoice of
the costs incurred.
(e) The Expansion Space shall become part of the Leased Premises,
and all of the terms and conditions of this Lease shall apply thereto, as of a
date (the "Expansion Date") that is the earlier of (i) the date Tenant first
commences business operations in the Expansion Space, or (ii) the first day of
the thirteenth (13th) full month of the Term.
(f) As of the Expansion Date:
(i) Base Rent shall be increased by an amount equal to One
Hundred Seventy-Six Thousand Two Hundred Fifty and 00/100 Dollars ($176,250.00)
per year (which is based on $11.75 per Rentable Square Foot and shall be
adjusted if the measurement of the Expansion Space by Landlord's architect
discloses a different number of Rentable Square Feet in the Expansion Space),
payable in
<PAGE>
monthly installments of Fourteen Thousand Six Hundred Eighty-Seven and 50/100
Dollars. ($14,687.50), pro-rated for any partial month, provided that if the
Expiration Date is before the first day of the thirteenth (13th) full month of
the Term, then Base Rent for the Expansion Space for the period from the
Expansion Date to the first day of the thirteenth (13th) full month of the term
shall be payable at the rate of One Hundred Sixteen Thousand Two Hundred Fifty
and 00/100 Dollars ($116,250.00) per year (which is based on $7.75 per Rentable
Square Foot and shall be adjusted if the measurement of the Expansion Space by
Landlord's Architect discloses a different number of Rentable Square Feet in the
Expansion Space), payable in monthly installments of Nine Thousand Six Hundred
Eighty-Seven and 50/100 Dollars ($9,687.50), pro-rated for any partial month.
(ii) Tenant's Building Percentage shall be increased to
reflect the number of Rentable Square Feet in the Expansion Space.
(iii) Tenant shall be entitled to park an additional forty (40)
cars in the Building Lot and an additional five (5) cars in the Adjacent Lot.
(g) All of the terms and conditions of this Lease, except for
Articles 4 and 5, shall apply to the period of time commencing on the date
Landlord delivers vacant possession of the Expansion Space to Tenant and ending
on the Expansion Date.
ARTICLE 51. ZONING
Tenant acknowledges that the Building is not presently zoned to permit
light assembly of computer printing equipment. Landlord shall, at its expense,
promptly and diligently attempt to obtain either a variance from the East
Hartford Zoning Board of Appeals, a zone change from the East Hartford Planning
and Zoning Commission, or such other approvals or actions from the Town of East
Hartford as will permit such use (such variance, zone change, or other approval
or action being hereinafter referred to as the "Zoning Approval"). If Landlord
has not obtained the Zoning Approval on or before February 29, 1996, then Tenant
shall have the right, at any time before the Zoning Approval is actually
obtained, to terminate the Lease.
ARTICLE 52. LANDLORD'S DEFAULT
In the event that Landlord fails to comply with any of its obligations
under this Lease, and such failure continues for more than thirty (30) days
after receipt of written notice from Tenant (which thirty (30) day period shall
be extended to the extent that Landlord is diligently attempting to cure the
failure) and materially and adversely affects Tenant's business, then Tenant
shall have the right, after notice to Landlord, to cure the default itself, in
which event Landlord shall reimburse Tenant for all reasonable out-of-pocket
costs incurred by Tenant in connection therewith.
IN WITNESS WHEREOF, Landlord and Tenant, acting herein through duly
authorized individuals, have caused these presents to be executed in multiple
counterparts, each of which shall have the force and effect of an original on
this 16/th/. Day of February, 1996.
TENANT:
ACCENT COLOR SCIENCES, INC.
<PAGE>
By: ______________________________
Its Chief Financial Officer
Tax I.D. or Tax Exempt No. 06-1380314
LANDLORD:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY, a Massachusetts corporation
By: HANCOCK REALTY INVESTORS, INC.
a Massachusetts Corporation
Its Agent
By: ______________________________
Robert J. Vey
Its Associate
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
(Intentionally omitted - to be inserted)
<PAGE>
EXHIBIT C
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LANDLORD'S WORK
Landlord will install, at its expense, doors at each vehicle entrance to the
parking garage which will be secured during all non-business hours with
provisions made for Tenants to have access during such hours.
<PAGE>
EXHIBIT D
---------
RULES AND REGULATIONS
1. The sidewalks, entries, passages, court, corridor, stairways, and
elevators shall not be obstructed or used for purposes other than ingress or
egress by Tenant, Tenant's employees, agents, or invitees.
2. Tenant shall not place within the Building any objects which exceed
the floor weight specifications of the Building without the express prior
written consent of Landlord. The placement and positioning of all such objects
within the Building shall be reasonably prescribed by Landlord, and such objects
shall, in all cases, be placed upon plates or footings of such size as shall be
reasonably prescribed by Landlord. Any damage done to the Building by taking in
or removing any heavy article from or overloading any floor in any way shall be
paid by Tenant. Defacing or injuring in any way any part of the Building Complex
by Tenant, his agent, or servants shall be paid by Tenant.
3. Initial name and number plates on doors shall be provided by Landlord
and any revisions or changes thereto shall be at the expense of Tenant. A
directory, located in a conspicuous place and listing the names of the tenants
of the Building, shall be provided by Landlord. Initial directory listings shall
be at the cost of Landlord and any revisions or changes thereto shall be at the
expense of Tenant. any necessary revision in such directory shall be made by
Landlord within a reasonable time after written notice from Tenant, but Landlord
shall not be responsible for any inconvenience or damage caused to Tenant as a
result of error in such directory.
4. Tenant shall not mark, paint, drill into, cut, string wires within, or
in any way deface any part of the Building with anything except normal picture
hanging apparatus without the express prior written consent of Landlord. Upon
removal of any wall decorations or installations or floor coverings by Tenant,
any damage to the walls or floors shall be repaired by Tenant at Tenant's sole
cost and expense. Without limitation upon any of the provisions of the Lease,
Tenant shall refer all contractors, representatives, installation technicians,
and other mechanics, artisans, and laborers rendering any service in connection
with the repair, or permanent improvements of the Leased Premises to Landlord
for Landlord's approval before performance of any such service. This Paragraph
4 shall apply to all work performed in the Building, including, without
limitation, installation of telephones, telegraph equipment, electrical devices,
and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment, or any other portion of the
Building. Plans and specifications for such work prepared at Tenant's sole
expense shall be submitted to Landlord and shall be subject to Landlord's
express prior written approval in each instance before the commencement of work.
Subject to the provisions of the Lease, all installations, alterations, and
additions shall be constructed by Tenant in a good and workmanlike manner and
only good grades of material shall be used in connection therewith.
<PAGE>
The means by which telephone, telegraph, and similar wires are to be introduced
to the Building Complex and Leased Premises and the location of telephones, call
boxes, and other office equipment affixed to the Building Complex shall be
subject to the express prior written approval of Landlord.
5. Tenant shall not employ any person other than the janitor of Landlord
for the purpose of cleaning the Leased Premises without the written consent of
Landlord. Landlord shall not be responsible to Tenant for loss of property from
the Leased Premises or for any damage done to the furniture by the janitor, any
of his employees, or by any other person. Any person employed by Tenant for the
purposes of cleaning the Leased Premises, with the written consent of Landlord,
must be subject to and under the control and direction of the Building janitor.
6. Landlord shall furnish Tenant two (2) keys for each corridor door
entering the Leased Premises. Additional keys shall be furnished at a charge by
Landlord on an order signed by Tenant or Tenant's authorized representative.
Tenant shall not make duplicate copies of such keys. Tenant shall not install
additional locks or bolts of any kind upon any of the doors or windows of, or
within, the Building, nor shall Tenant make any changes in existing locks or the
mechanisms thereof. Tenant shall, upon the termination of its tenancy, provide
Landlord or its representative with the combinations to all combination locks on
safes, safe cabinets and vaults and deliver to Landlord all keys to the
Building, the Leased Premises and all interior doors, cabinets, and other key-
controlled mechanisms therein, whether or not such keys were furnished to Tenant
by Landlord. Tenant shall pay to Landlord the reasonable cost of replacing the
same or of changing the lock or locks opened by such lost key if Landlord shall
reasonably deem it necessary to make such a change.
7. Tenant shall comply with all requirements necessary for the
security of the Building Complex, including the use of service passes issued by
Landlord for after hours removal of office equipment, packages, and signing in
and/or out in the security register in the Building lobby after hours. Landlord
reserves the right to deny entrance to the Building or remove any person from
the Building Complex in any case where the conduct of such person involves a
hazard or nuisance to any tenant of the Building Complex or to the public or in
the event of fire or other emergency, riot, civil commotion. or similar
disturbance involving risk to the Building Complex, tenants, or the general
public. Landlord also reserves the right to make such rules and regulations as
it may see fit concerning the use of electric current, water, and other supplies
of the Building and to designate such hours as the Building may be closed.
8. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed. Any damage resulting
to them from misuse or the defacing or injury of any part of the Building shall
be paid for by Landlord, excepting only where defacing or injury is done by
Tenant or an agent of Tenant. Tenant shall not waste water by interfering with
the operation of any plumbing fixture.
9. Tenant shall not disturb the occupants of the Building by the use of
any musical or sound producing instruments, making unseemly noises, or by
interference in any way. Tenant shall not bring any dogs or other animals into
the Building.
10. Tenant shall not bring or keep within the Building any bicycle or
motorcycle.
11. All office equipment and any other divider or any electrical or
mechanical nature shall be placed by Tenant in the Leased Premises in settings
reasonably approved by Landlord so as to absorb
<PAGE>
or prevent any vibration, noise, or annoyance. Tenant shall not cause improper
noises, vibrations, or odors within the Building.
12. Nothing shall be thrown out of the doors of the Building or down
stairways or other passages by Tenant.
13. All glass, locks, and trimmings in or about the doors and windows, and
all electric globes and shades belonging to the Building Complex shall be kept
whole; and whenever broken by Tenant, shall be immediately replaced or repaired
and put in order by Tenant under the direction and to the satisfaction of
Landlord.
14. Canvassing, soliciting, and peddling in the Building is prohibited,
and Tenant shall cooperate to prevent the same. Tenant shall notify the
Building Manager promptly of any unauthorized person who is soliciting from or
causing annoyance to tenants, their employees, guests, or invitees.
15. Parking in unmarked areas, blocking of walkways, loading areas,
entrances, or alleyways shall not be permitted. Should such a situation exist,
Landlord, at its option, shall have the right to tow such vehicle away at the
owner's expense.
16. Landlord shall not be responsible for, and Tenant hereby indemnifies
and holds Landlord harmless from any liability in connection with the loss,
theft, misappropriation, or other disappearance of furniture, furnishings,
fixtures, machinery, equipment, money, jewelry, or other items of personal
property from the Leased Premises or other parts of the Building regardless of
whether the Leased Premises or Building are locked at the time of such loss,
unless the loss arises from Landlord's willful or negligent acts or omissions.
17. Tenant, its agents, servants, and employees shall, before leaving the
Leased Premises unattended, close and lock all doors and shut off all lights.
Corridor doors, when not in use, shall be kept closed. Subject to applicable
fire or other safety regulations, all doors opening into Common Areas, as
hereinafter defined, and all doors upon the perimeter of the Leased Premises
shall be kept closed and, during non-business hours, locked, except when in use
for ingress or egress. If Tenant uses the Leased Premises after regular
business hours or on non-business days, Tenant shall lock any entrance doors to
the Leased Premises used by Tenant immediately after using such doors.
18. Tenant shall not deposit any trash, refuse, cigarettes, or other
substances of any kind within or out of the Building except in refuse containers
provided therefor. Smoking shall not be permitted in the common areas of the
Building.
19. To ensure orderly operation of the Building Complex, no deliveries of
any kind or nature shall be made to any leased area except by persons appointed
or approved by Landlord in writing. There shall not be used in any space or in
the public halls of the Building, either by Tenant, by jobbers, or others, in
the delivery or receipt of merchandise, any hand trucks, except those equipped
with rubber tires and side guards.
20. Tenant shall be responsible for any damage to carpeting and flooring
as a result of rust or corrosion of the file cabinets, pot holders, roller
chairs, and metal objects.
<PAGE>
21. Movement in or out of the Building Complex of furniture or office
equipment, or dispatch or receipt by Tenant of any bulky materials, merchandise,
or materials which requires use of elevators, is restricted to the freight
elevator. Tenant shall use its best efforts to protect common areas and
building elevators during movement in and out of the Building Complex of
furniture or office equipment, or dispatch and receipt by Tenant of any bulky
materials or merchandise. Movement through the building entrances or lobby
shall be restricted to such hours as Landlord shall designate. All such
movement shall be scheduled with the Building Management Office and done in a
manner agreed between Tenant and Landlord by prearrangement before performance.
Such prearrangement initiated by Tenant shall include determination by Landlord,
and subject to its decisions and control as to the time, method, and routing of
movement, and as to limitations for safety or other concerns which may prohibit
any article, equipment, or any other item being brought into the Building.
Tenant shall assume all risk regarding damage to articles moved and injury to
persons or public engaged or not engaged in such movement, including equipment,
property, and personnel of Landlord if damaged or injured as a result of any act
in connection with carrying out this service for Tenant from time of entering
the Building Complex to completion of work; and Landlord shall not be liable for
acts of any person engaged in, or any damage or loss to any of said property or
person resulting from any act in connection with such service performed for
Tenant.
22. Tenant shall not use the Building for lodging, sleeping, or for any
immoral or illegal purposes or for any purpose that will damage the Building, or
the reputation thereof, or for any purposes other than those specified in the
Lease in Landlord's reasonable judgment.
23. Tenant shall not obstruct or interfere with the rights of other
tenants of the Building or of persons having business in the Building or in any
way injure or annoy such tenants or persons.
24. Tenant shall not commit any act or permit anything in or about the
Building which shall or might subject Landlord to any liability or
responsibility for injury to any person or property by reason of any business or
operation being carried on, in or about the Building or for any other reason
subject to the terms of this Lease.
25. Tenant shall not commercially cook or prepare food, or place or use
any inflammable, combustible, explosive, or hazardous fluid, chemical, device,
substance, or material in or about the Building without the prior written
consent of Landlord over and above its initial use and leased purpose of the
Leased Premises. Tenant shall comply with the statutes, ordinances, rules,
orders, regulations, and requirements imposed by governmental or quasi-
governmental authorities in connection with fire and public safety and fire
prevention and shall not commit any act or permit any object to be brought or
kept in the Building which shall result in an increase in the cost of any
insurance purchased by Landlord in connection with this Lease.
26. Tenant shall not install or use in the Building any air conditioning
unit, engine, boiler, generator, machinery, heating unit, stove, water cooler,
ventilator, radiator, or any other similar apparatus without the express prior
written consent of Landlord, and then only as Landlord may reasonably direct.
27. Landlord reserves the right to exclude or expel from the Building
Complex any person who, in the reasonable judgment of Landlord, is intoxicated
or under the influence of liquor or drugs or who shall in any manner act in
violation of the rules and regulations of the Building Complex.
<PAGE>
28. No signs, awnings, showcases, advertising devices, or other
projections or obstructions shall be attached to the outside walls of the
Building or attached or placed upon any Common Areas without the express prior
written consent of Landlord. No blinds, drapes, or other window coverings shall
be installed in the Building without the express prior written consent of
Landlord. No sign, picture, advertisement, window display, or other public
display or notice shall be inscribed, exhibited, painted, or affixed by Tenant
upon or within any part of the Leased Premises in such a fashion as to be seen
from the outside of the Leased Premises of the Building without the express
prior written consent of Landlord. In the event of the violation of any of the
foregoing by Tenant, Landlord may, within fifteen (15) days of written notice to
Tenant, during which period Tenant may repair same, remove the articles
constituting the violation without any liability unless a loss other than said
removal arises from Landlord's willful or negligent acts or omissions, and
Tenant shall reimburse Landlord for the reasonable expenses incurred in such
removal upon demand and upon submission of applicable bills as Additional Rent
under the Lease.
29. Tenant shall not use the name of the Building or the name of Landlord
in its business name, trademarks, signs, advertisements, descriptive material,
letterhead, insignia, or any other similar item without Landlord's express prior
written consent.
30. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light or air into the Common Areas shall not be covered or obstructed by
Tenant through placement of objects upon window sills or otherwise. Tenant
shall cooperate with Landlord in obtaining maximum effectiveness of the cooling
system of the Building by closing drapes and other window coverings when the
sun's rays fall upon windows of the Leased Premises. Tenant shall not obstruct,
alter, or in any way impair the efficient operation of Landlord's heating,
ventilating, air conditioning, electrical, fire, safety, or lighting system.
31. Employees of Landlord shall not receive or carry messages for or to
Tenant or any other person, nor contract with nor render free or paid services
to Tenant or Tenant's servants, employees, contractors, jobbers, agents,
invitees, licensees, guests, or visitors.
32. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Leased Premises or the Building Complex. Landlord shall make
adjustments, if necessary, in Landlord's reasonable discretion, to thermostats
on call from Tenant.
Landlord reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its judgment
shall, from time to time, be needed for the safety, protection, care, and
cleanliness of the Building Complex, the operation thereof, the preservation of
good order therein, and the protection of comfort of the tenants and their
agents, employees, and invitees, which rules and regulations, when made and
written notice thereof is given to Tenant, shall be binding upon Tenant in like
manner as if originally herein prescribed.
<PAGE>
EXHIBIT E
---------
JANITORIAL AND CLEANING SERVICES
Landlord shall furnish janitorial and cleaning services adequate to keep
the demised premises clean at all times, subject, however, to the following
minimum requirements:
1. Daily cleaning routine:
. Empty waste baskets and other waste receptacles
. Empty ash trays and wipe clean
. Dust railings, ledges, furniture, phones, and cabinets
. Sweep floors and steps, vacuum carpet traffic areas
. Spot clean doors, walls, and glass
. Remove rubbish
. Toilets and lavatories:
. Clean bowls, basins, seats, urinals, partitions, and wars
. Damp mop floors
. Polish fixtures, dispensers, mirrors, and other polished surfaces
. Replenish all dispensers
2. Other Routines:
Monthly: Scrub and wash resilient floor, outside of business hours
Annually
(at least): Wash windows inside and outside
<PAGE>
3. Areas Not Included:
. Kitchen areas will only be swept, mopped and have the trash removed
. An extra charge will be required for any special janitorial needs over
and above "normal" cleaning practices
<PAGE>
Exhibit 10.10
Memorandum of Understanding
between
Accent Color Sciences, Inc.
and Oce Printing Systems USA, Inc.
- --------------------------------------------------------------------------------
This Memorandum of Understanding dated October 10, 1996, sets forth the basic
intentions of the parties, Oce Printing Systems USA, Inc. (hereinafter called
Oce) with offices at 5600 Broken Sound Boulevard, Boca Raton, Florida 33487, and
Accent Color Sciences, Inc. (hereafter called ACS), with offices at 800
Connecticut Boulevard, East Hartford, Connecticut 06108. The basic intentions of
the parties are to jointly cooperate in marketing ACS color printing
modules-in-two-basic configurations: the first, a module capable of accepting
variable data and printing multi-color in conjunction with Oce's continuous
forms printing systems; the second, a module capable of accepting variable data
and printing multi-color in conjunction with Oce's cut sheet printing systems.
It is the current intent of the parties:
1. To jointly market both continuous forms and cutsheet forms modules, on an OEM
basis. Initial availability of production quality continuous forms modules
for internal certification and systems testing with limited availability
customer shipments will be in January of 1996. The parties agree to negotiate
jointly the initial availability date of production quality cutsheet modules.
2. To designate Tom Lee as Oce's project leader and to designate David Stillwell
as ACS's project leader.
3. To conduct ongoing coordination meetings, with regularly scheduled weekly
telephone conference calls, to develop the detailed strategy for marketing
and service of the modules.
Oce and ACS will jointly cooperate to complete both Development and Distribution
agreements no later than November 30, 1995. Oce and ACS agree that while items
1,2, and 3 above are the current intentions of the parties, such items are only
the current intentions, do not constitute a binding agreement, and are subject
to further negotiation and execution of a definitive marketing agreement. Oce
and ACS further agree that the parties will keep any discussions and
communications confidential until the final execution of such agreements.
Agreed upon by the undersigned duly authorized representatives of the parties.
/s/ Timothy J. Moylan /s/
- --------------------------------- ---------------------------------
Oce Printing Systems USA, Inc. Accent Color Sciences, Inc.
By: Timothy J. Moylan By: Norman L. Milliard
Vice President, Marketing President
<PAGE>
EXHIBIT 10.11
ACCENT COLOR SCIENCES, INC.
1995 STOCK INCENTIVE PLAN
-------------------------
1. Purpose. This Plan is designed to give directors, officers and key
-------
employees of the Corporation and other persons an expanded opportunity to
acquire stock in the Corporation or receive other long-term incentive
remuneration in order that they may better participate in the Corporation's
growth and be motivated to remain with the Corporation and promote its further
development and success.
2. Definitions. The following terms shall have the meanings given below
-----------
unless the context otherwise requires:
(a) "Award" or "Awards" except where referring to a particular
category of grant under the Plan shall include Incentive Stock Options, Non-
Statutory Stock Options, Stock Appreciation Rights and Restricted Stock Awards.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
any successor Code, and related rules, regulations and interpretations.
(d) "Committee" means the committee of the Board established under
Section 9 hereof.
(e) "Corporation" means Accent Color Sciences, Inc.
(f) "Disability" or "disabled" means disability or disabled as
defined by the Code.
(g) "Eligible Person" means any person, including a person who is not
an employee of the Corporation or a Subsidiary, or entity who satisfies all the
eligibility requirements set forth in either Section 3(a) or 3(b) hereof.
(h) "Fair Market Value" of the Stock on any given date shall be the
average of the closing bid and asked prices of the Stock on the date of
determination; provided that in the event that there shall be no public market
for the Stock, "Fair Market Value" shall be as determined from time to time by
the Board.
(i) "Incentive Stock Option" means a stock option qualifying under
the provisions of Section 422 of the Code.
<PAGE>
(j) "Non-Employee Director Participant" means an Eligible Person, who
at the time of grant of an Award is a director of the Corporation but not an
employee of the Corporation or a Subsidiary.
(k) "Non-Statutory Option" means a stock option not qualifying for
incentive stock option treatment under the pro visions of Section 422 of the
Code.
(l) "Optionee" means the holder of any option granted under the Plan.
(m) "Participant" means the holder of any Award granted under the
Plan.
(n) "Plan" means the Accent Color Sciences, Inc. 1995 Stock Incentive
Plan.
(o) "Principal Shareholder" means any individual owning stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of capital stock of the Corporation.
(p) "Restricted Stock" means Stock received pursuant to a Restricted
Stock Award.
(q) "Restricted Stock Award" is defined in Section 8(a).
(r) "Stock" or "shares" means shares of Class A Common Stock of the
Corporation.
(s) "Stock Appreciation Right" or "Right" means a right described in
Section 7.
(t) "Subsidiary" means any corporation in which the Corporation owns,
directly or indirectly, a majority of the outstanding voting stock.
3. Eligibility.
-----------
(a) Incentive Stock Options. Incentive Stock Options may be granted
-----------------------
to any Eligible Persons who are full-time employees of the Corporation or a
Subsidiary and who in the sole opinion of the Committee are, from time to time,
responsible for the management and/or growth of all or part of the business of
the Corporation.
(b) Awards Other than Incentive Stock Options. Awards, other than
-----------------------------------------
Incentive Stock Options, may be granted to any Eligible Persons who in the sole
opinion of the Committee are,
-2-
<PAGE>
from time to time, responsible for the growth and/or the management of all or a
part of the business of the Corporation.
(c) Substitute Awards. The Committee, in its discretion, may also
-----------------
grant Awards in substitution for any stock incentive awards previously granted
by companies acquired by the Corporation or one of its Subsidiaries. Such
substitute awards may be granted on such terms and conditions as the Committee
deems appropriate in the circumstances, provided, however, that substitute
Incentive Stock Options shall be granted only in accordance with the Code.
4. Term of Plan. The Plan shall take effect on January 19, 1995 and
------------
shall remain effective for ten (10) years thereafter, expiring on January 18,
2005.
5. Stock Subject to the Plan. The aggregate number of shares of Stock
-------------------------
which may be issued pursuant to all Awards granted under the Plan shall not
exceed 100,000 shares of Stock, subject to adjustment as hereinafter provided in
Section 10, and which may be treasury shares or authorized but unissued shares.
In the event that any Award under the Plan for any reason expires, is
terminated, forfeited, reacquired by the Corporation, or satisfied without the
issuance of Stock (except in the cases of a Stock Appreciation Right to the
extent settled in cash) the shares allocable to the unexercised portion of such
Award may again be made subject to an Award under the Plan.
6. Stock Options. The following terms and conditions shall apply to each
-------------
option granted under the Plan and shall be set forth in a stock option agreement
between the Corporation and the Optionee together with such other terms and
conditions not inconsistent herewith as the Committee may deem appropriate in
the case of each Optionee:
(a) Option Price. The purchase price under each Incentive Stock
------------
Option shall be as determined by the Committee but not less than 100% of the
Fair Market Value of the shares subject to such option on the date of grant,
provided that such option price shall not be less than 110% of such Fair Market
Value in the case of any Incentive Stock Option granted to a Principal
Shareholder. The purchase price per share of Stock deliverable upon the exercise
of a Non-Statutory Option shall be determined by the Committee, but shall not be
less than 85% of the Fair Market Value of such Stock on the date of grant.
(b) Type of Option. All options granted under the Plan shall be
--------------
either Incentive Stock Options or Non-Statutory Options. All provisions of the
Plan applicable to Incentive Stock Options shall be interpreted in a manner
consistent with the provisions of, and regulations under, Section 422 of the
Internal Revenue Code.
-3-
<PAGE>
(c) Period of Incentive Stock Option. Each Incentive Stock Option
--------------------------------
shall have a term not in excess of ten (10) years from the date on which it is
granted, except in the case of any Incentive Stock Option granted to a Principal
Shareholder which shall have a term not in excess of five (5) years from the
date on which it is granted; provided that any Incentive Stock Option granted or
the unexercised portion thereof, to the extent exercisable at the time of
termination of employment, shall terminate at the close of business on the day
three (3) months following the date on which the Optionee ceases to be employed
by the Corporation or a Subsidiary unless sooner expired or unless a longer
period is provided under Subsection (g) of this Section in the event of the
death or disability of such an Optionee.
(d) Period of Non-Statutory Option. Each Non-Statutory Option
------------------------------
granted under the Plan shall have a term not in excess of ten (10) years and one
(1) day from the date on which it is granted; provided that any Non-Statutory
Option granted to an employee of the Corporation or a Subsidiary or to a Non-
Employee Director Participant, or the unexercised portion thereof shall
terminate not later than the close of business on the day three (3) months
following the date on which such employee ceases to be employed by the
Corporation or a Subsidiary or the date on which such Non-Employee Director
ceases to be a director of the Corporation, as the case may be, unless a longer
period is provided under Subsection (g) of this Section in the event of the
death or disability of such an Optionee. Such an Optionee's Non-Statutory Option
shall be exercisable, if at all, during such three (3) month period only to the
extent exercisable on the date such Optionee's employment terminates or the date
on which such Optionee ceases to be a director, as the case may be.
(e) Exercise of Option.
------------------
(i) Each option granted under the Plan shall become
exercisable on such date or dates and in such amount or amounts as the
Committee shall determine. In the absence of any other provision by the
Committee, each option granted under the Plan shall be exercisable with
respect to not more than twenty percent (20%) of such shares subject
thereto after the expiration of one (1) year following the date of its
grant, and shall be exercisable as to an additional twenty percent (20%) of
such shares after the expiration of each of the succeeding four (4) years,
on a cumulative basis, so that such option, or any unexercised portion
thereof, shall be fully exercisable after a period of five (5) years
following the date of its grant.
(ii) The Committee, in its sole discretion, may, from time to
time and at any time, accelerate the vesting provisions of any outstanding
option, subject, in the case
-4-
<PAGE>
of Incentive Stock Options, to the provisions of Subsection (6)(i) relating
to "Limit on Incentive Options".
(iii) Notwithstanding anything herein to the contrary, except as
provided in subsection (g) of this Section, no Optionee who was, at the
time of the grant of an option, an employee of the Corporation or a
Subsidiary, may exercise such option or any part thereof unless at the time
of such exercise he shall be employed by the Corporation or a Subsidiary
and shall have been so employed continuously since the date of grant of
such option, excepting leaves of absence approved by the Committee;
provided that the option agreement may provide that such an Optionee may
exercise his option, to the extent exercisable on the date of termination
of such continuous employment, during the three (3) month period, ending at
the close of business on the day three (3) months following the termination
of such continuous employment unless such option shall have already
expired by its term.
(iv) An option shall be exercised in accordance with the
related stock option agreement by serving written notice of exercise on the
Corporation accompanied by full payment of the purchase price in cash. As
determined by the Committee, in its discretion, at (or, in the case of Non-
Statutory Options, at or after) the time of grant, payment in full or in
part may also be made by delivery of (i) irrevocable instructions to a
broker to deliver promptly to the Corporation the amount of sale or loan
proceeds to pay the exercise price, or (ii) previously owned shares of
Stock not then subject to restrictions under any Corporation plan (but
which may include shares the disposition of which constitutes a
disqualifying disposition for purposes of obtaining incentive stock option
treatment for federal tax purposes). For purposes of subsection (ii) above,
such surrendered shares shall be valued at Fair Market Value on the date of
exercise.
(f) Nontransferability. No option granted under the Plan shall be
------------------
transferable by the Optionee otherwise than by will or by the laws of descent
and distribution, and such option shall be exercisable, during his lifetime,
only by him.
(g) Death or Disability of Optionee. In the event of the death or
-------------------------------
disability of an Optionee while in the employ of the Corporation or a Subsidiary
or while serving as a director of the Corporation, his stock option or the
unexercised portion thereof may be exercised within the period of one (1) year
succeeding his death or disability, but in no event later than (i) ten (10)
years (five (5) years in the case of a Principal Shareholder) from the date the
option was granted in the case of an Incentive Stock Option, and (ii) ten (10)
years and one (1) day in the case
-5-
<PAGE>
of a Non-Statutory Option, by the person or persons designated in the Optionee's
will for that purpose or in the absence of any such designation, by the legal
representative of his estate, or by the legal representative of the Optionee, as
the case may be. Notwithstanding anything herein to the contrary and in the
absence of any contrary provision by the Committee, during the one-year period
following termination of employment or cessation as a director by reason of
death or disability, an Optionee's stock option shall continue to vest in
accordance with its terms and be and become exercisable as if employment or
service as a director had not ceased.
(h) Shareholder Rights. No Optionee shall be entitled to any rights
------------------
as a shareholder with respect to any shares subject to his option prior to the
date of issuance to him of a stock certificate representing such shares.
(i) Limit on Incentive Stock Options. The aggregate Fair Market
--------------------------------
Value (determined at the time an option is granted) of shares with respect to
which Incentive Stock Options granted to an employee are exercisable for the
first time by such employee during any calendar year (under all incentive stock
option plans of the Corporation and its Subsidiaries to the extent required
under the Code) shall not exceed $100,000.
(j) Notification of Disqualifying Disposition. Participants granted
-----------------------------------------
Incentive Stock Options shall undertake, in the Incentive Stock Option
agreements, as a precondition to the granting of such option by the Corporation,
to promptly notify the Corporation in the event of a disqualifying disposition
(within the meaning of the Code) of any shares acquired pursuant to such
Incentive Stock Option agreement and provide the Corporation with all relevant
information related thereto.
7. Stock Appreciation Rights; Discretionary Payments.
-------------------------------------------------
(a) Nature of Stock Appreciation Right. A Stock Appreciation Right
----------------------------------
is an Award entitling the Participant to receive an amount in cash or shares of
Stock (or forms of payment permitted under Section 7(d) hereof) or a combination
thereof, as determined by the Committee at the time of grant, having a value
equal to (or if the Committee shall so determine at time of grant, less than)
the excess of the Fair Market Value of a share of Stock on the date of exercise
over the Fair Market Value of a share of Stock on the date of grant (or over the
option exercise price, if the Stock Appreciation Right was granted in tandem
with a stock option) multiplied by the number of shares with respect to which
the Stock Appreciation Right shall have been exercised.
-6-
<PAGE>
(b) Grant and Exercise of Stock Appreciation Rights.
-----------------------------------------------
(i) Stock Appreciation Rights may be granted in tandem with,
or independently of, any stock option granted under the Plan. In the case
of a Stock Appreciation Right granted in tandem with a Non-Statutory
Option, such Right may be granted either at or after the time of grant of
such option. In the case of a Stock Appreciation Right granted in tandem
with an Incentive Stock Option such Right may be granted only at the time
of the grant of such option. A Stock Appreciation Right or applicable
portion thereof granted in tandem with a given stock option shall terminate
and no longer be exercisable upon the termination or exercise of the
related stock option, except that a Stock Appreciation Right granted with
respect to less than the full number of shares covered by a related stock
option shall not be reduced until the exercise or termination of the
related stock option exceeds the number of shares not covered by the Stock
Appreciation Right.
(ii) Each Stock Appreciation Right granted under the Plan shall
become exercisable on such date or dates and in such amount or amounts as
the Committee shall determine; provided, however, that any Stock
Appreciation Right granted in tandem with a stock option shall be
exercisable in relative proportion to and to the extent that such related
stock option is exercisable; provided further, however, that,
not withstanding anything herein to the contrary, any Stock Appreciation
Right granted in tandem with a Non-Statutory Option which has a purchase
price at the date of grant of less than Fair Market Value shall not be
exercisable at all until at least one (1) year after the date of grant of
such option. Except as provided in the immediately preceding sentence, in
the absence of any other provision by the Committee, each Stock
Appreciation Right granted under the Plan shall be exercisable with respect
to not more than twenty percent (20%) of such shares subject thereto after
the expiration of one (1) year following the date of its grant, and shall
be exercisable as to an additional twenty percent (20%) of such shares
after the expiration of each of the succeeding four (4) years, on a
cumulative basis, so that such Right, or any unexercised portion thereof,
shall be fully exercisable after a period of five (5) years following the
date of its grant. The Committee, in its sole discretion, may, from time to
time and at any time, accelerate the vesting provisions of any outstanding
Stock Appreciation Right.
(iii) Notwithstanding anything herein to the contrary, except
as provided in subsections (c)(v) and (c)(vi) of this Section, no
Participant who was, at the time of the grant of a Stock Appreciation
Right, an employee of the
-7-
<PAGE>
Corporation or a Subsidiary, may exercise such Right or any part thereof
unless at the time of such exercise, he shall be employed by the
Corporation or a Subsidiary and shall have been so employed continuously
since the date of grant of such Right, excepting leaves of absence approved
by the Committee; provided that the Stock Appreciation Right agreement may
provide that such a Participant may exercise his Stock Appreciation Right,
to the extent exercisable on the date of termination of such continuous
employment, during the three (3) month period ending at the close of
business on the day three (3) months following the cessation of such
continuous employment, unless such Right shall have already expired by its
terms.
(iv) Notwithstanding anything herein to the contrary, except
as provided in subsections (c)(v) and (c)(vi) of this Section, no Non-
Employee Director Participant may exercise a Stock Appreciation Right or
part thereof unless at the time of such exercise he shall be a director of
the Corporation and shall have been a director of the Corporation
continuously since the date of grant of such Right excepting leaves of
absence approved by the Committee; provided that the Stock Appreciation
Right agreement may provide that such Participant may exercise his Stock
Appreciation Right, to the extent exercisable on the date he ceased to be a
director of the Corporation, during the three (3) month period ending at
the close of business on the day three (3) months following the cessation
of such continuous service as a director unless such Right shall already
have expired by its terms.
(v) A Stock Appreciation Right shall be exercised in
accordance with the related Stock Appreciation Right Agreement by serving
written notice of exercise on the Corporation.
(c) Terms and Conditions of Stock Appreciation Rights. Stock
-------------------------------------------------
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with stock
options shall be exercisable only at such time or times and to the extent
that the related stock options shall be exercisable;
(ii) Upon the exercise of a Stock Appreciation Right, the
applicable portion of any related stock option shall be surrendered.
(iii) Stock Appreciation Rights granted in tandem with a stock
option shall be transferable only with such
-8-
<PAGE>
option. Stock Appreciation Rights shall not be transferable otherwise than
by will or the laws of descent and distribution. All Stock Appreciation
Rights shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.
(iv) A Stock Appreciation Right granted in tandem with a stock
option may be exercised only when the then Fair Market Value of the Stock
subject to the stock option exceeds the exercise price of such option. A
Stock Appreciation Right not granted in tandem with a stock option may be
exercised only when the then Fair Market Value of the Stock exceeds the
Fair Market Value of the Stock on the date of grant of such Right.
(v) Each Stock Appreciation Right shall have a term not in
excess of ten (10) years from the date on which it is granted (ten (10)
years and one (1) day in the case of a Stock Appreciation Right granted in
tandem with a Non-Statutory Option); provided that any Stock Appreciation
Right granted to (aa) an employee of the Corporation or a Subsidiary shall
terminate not later than the close of business on the day three (3) months
following the date such Participant ceases to be employed by the
Corporation or a Subsidiary, excepting leaves of absences approved by the
Committee, and (bb) a Non-Employee Director Participant shall terminate not
later than the close of business on the day three (3) months following the
date such Participant ceases to be a director of the Corporation, unless a
longer period is provided under subsection (c)(vi) below in the event of
death or disability of a Participant. Such a Participant's Stock
Appreciation Right shall be exercisable, if at all, during such three (3)
month period only to the extent exercisable on the date his employment
terminates or the date he ceases to be a director, as the case may be.
(vi) In the event of the death or disability of a Participant
while in the employ of the Corporation or a Subsidiary or while serving as
a director of the Corporation, his Stock Appreciation Right or the
unexercised portion thereof may be exercised within the period of one (1)
year succeeding his death or disability, but in no event later than (i) ten
(10) years from the date on which it was granted (ten (10) years and one
(1) day in the case of a Non-Statutory Option), by the person or persons
designated in the Participant's will for that purpose or in the absence of
any such designation, by the legal representative of his estate, or by the
legal representative of the Participant, as the case may be.
Notwithstanding anything herein to the contrary and in the absence of any
contrary provision by the Committee, during the one-year period following
termination of employment or cessation as a director by reason of death
-9-
<PAGE>
or disability, a Participant's Stock Appreciation Right shall continue to
vest in accordance with its terms and be and become exercisable as if
employment or service as a director had not ceased.
(d) Discretionary Payments. Upon the written request of an Optionee
----------------------
whose stock option is not accompanied by a Stock Appreciation Right, the
Committee may, in its discretion, cancel such option if the Fair Market Value of
the shares subject to the option at the exercise date exceeds the exercise price
thereof; in that event, the Corporation shall pay to the Optionee an amount
equal to the difference between the Fair Market Value of the shares subject to
the cancelled option (determined as of the date the option is cancelled) and the
exercise price. Such payment shall be by check or in Stock having a Fair
Market Value (determined on the date the payment is to be made) equal to the
amount of such payments or any combination thereof, as determined by the
Committee.
8. Restricted Stock.
----------------
(a) Nature of Restricted Stock Award. A Restricted Stock Award is an
--------------------------------
Award entitling the Participant to receive shares of Stock, subject to such
conditions, including a Corporation right during a specified period or periods
to require for feiture of such shares upon the Participant's termination of
employment with the Corporation or a Subsidiary or cessation as a director of
the Corporation, as the case may be, as the Committee may determine at the time
of grant. The Committee, in its sole discretion, may, from time to time and at
any time, waive any or all restrictions and/or conditions contained in the
Restricted Stock Award agreement. Notwithstanding anything herein to the
contrary, the Committee, in its discretion, may grant Restricted Stock without
any restrictions or conditions whatsoever. Restricted Stock shall be granted in
respect of past services or other valid consideration.
(b) Award Agreement. A Participant who is granted a Restricted Stock
---------------
Award shall have no rights with respect to such Award unless the Participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the Award date by executing and delivering to
the Corporation a Restricted Stock Award Agreement in such form as the Committee
shall determine.
(c) Rights as a Shareholder. Upon complying with paragraph (b)
-----------------------
above, a Participant shall have all the rights of a shareholder with respect to
the Restricted Stock including voting and dividend rights, subject to
nontransferability and Corporation forfeiture rights described in this Section
8 and subject to any other conditions contained in the Award agreement. Unless
the Committee shall otherwise determine, certificates evidencing
-10-
<PAGE>
shares of Restricted Stock shall remain in the possession of the Corporation
until such shares are free of any restrictions under the Plan. The Committee in
its discretion may, as a precondition of the Corporation's obligation to issue a
Restricted Stock Award, require the Participant to execute a stock power or
powers or other agreement or instruments necessary or advisable in con nection
with the Corporation's forfeiture rights with respect to such shares.
(d) Restrictions. Shares of Restricted Stock may not be sold,
------------
assigned, transferred or otherwise disposed of or pledged or otherwise
encumbered. In the event of termination of employment of the Participant with
the Corporation or a Subsidiary for any reason, or cessation as a director of
the Corporation in the case of a Non-Employee Director Participant, such shares
shall be forfeited to the Corporation, except as set forth below:
(i) The Committee at the time of grant shall specify the date
or dates (which may depend upon or be related to the attainment of
performance goals and other conditions) on which the nontransferability of
the Restricted Stock and the Corporation's forfeiture rights with respect
thereto shall lapse. The Committee at any time may accelerate such date or
dates and otherwise waive or, subject to Section 13, amend any conditions
of the Award.
(ii) Except as may otherwise be provided in the Award
agreement, in the event of termination of a Participant with the
Corporation or a Subsidiary for any reason or cessation as a director of
the Corporation for any reason, all of the Participant's Restricted Stock
shall be forfeited to the Corporation without the necessity of any further
act by the Corporation, the Participant or the Participant's legal
representative; provided, however, that in the event of termination of
employment or cessation of service as a director of the Corporation by
reason of death or disability, all conditions and restrictions relating to
a Restricted Stock Award held by such a Participant shall thereupon be
waived and shall lapse.
(iii) In the absence of any other provision by the Committee,
each Restricted Stock Award granted to (A) an employee of the Corporation
or a Subsidiary shall be subject to forfeiture to the Corporation
conditioned on the Participant's continued employment and (B) Non-Employee
Director Participants shall be subject to forfeiture to the Corporation
conditioned on the Participant's continued service as a director of the
Corporation, and in the case of clause (A) or (B), such forfeiture rights
shall lapse as follows: with respect to twenty percent (20%) of the shares
subject to the Restricted Stock Award on the date one year
-11-
<PAGE>
following the date of grant, and with respect to an additional twenty
percent (20%) of such shares after the expiration of each of the
succeeding four (4) years thereafter, on a cumulative basis, so that such
Restricted Stock shall be free of such risk of forfeiture on the date five
(5) years following the date of its grant.
(e) Waiver, Deferral, and Investment of Dividends. The Restricted
---------------------------------------------
Stock Award agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid with respect to the Restricted Stock.
9. The Committee.
-------------
(a) Administration. The Committee shall be a committee of not less
--------------
than three (3) members of the Board. Vacancies occurring in membership of the
Committee shall be filled by the Board. The Committee shall keep minutes of its
meetings. One or more members of the Committee may participate in a meeting of
the Committee by means of conference telephone or similar communications
equipment provided all persons participating in the meeting can hear one
another. Two members of the Committee shall constitute a quorum, and the acts
of two or more members present at or so participating in any meeting at which a
quorum is constituted shall be the acts of the Committee. The Committee may act
without meeting by unanimous written consent. At any time when the Board shall
not have designated a committee to administer the Plan, the full Board shall
constitute the Committee.
(b) Authority of Committee. Subject to the provisions of the Plan,
----------------------
the Committee shall have full and final authority to determine the persons to
whom Awards shall be granted, the number of shares to be subject to each Award,
the term of the Award, the vesting provisions of the Award, if any, restrictions
on the Award, if any, and the price at which the shares subject thereto may be
purchased. The Committee is empowered, in its discretion, to modify, extend or
renew any Award theretofore granted and adopt such rules and regulations and
take such other action as it shall deem necessary or proper for the
administration of the Plan. The Committee shall have full power and authority
to construe, interpret and administer the Plan, and the decisions of the
Committee shall be final and binding upon all interested parties.
10. Adjustments. Any limitations, restrictions or other provisions of
-----------
this Plan to the contrary notwithstanding, each Award agreement shall make such
provision, if any, as the Committee may deem appropriate for the adjustment of
the terms and provisions thereof (including, without limitation, terms and
provisions relating to the exercise price and the number and class of shares
subject to the Award) in the event of any merger,
-12-
<PAGE>
consolidation, reorganization, recapitalization, stock dividend, divisive
reorganization, issuance of rights, combination or split-up or exchange of
shares, or the like. In the event of any merger consolidation, reorganization,
recapitalization, stock dividend, divisive reorganization, issuance of rights,
combination or split-up or exchange of shares, or the like, the Committee shall
make an appropriate adjustment in the number of shares authorized to be issued
pursuant to the Plan.
11. Amendment to and Termination of the Plan. The Board may from time to
----------------------------------------
time amend the Plan in such way as it shall deem advisable provided the Board
may not extend the expiration date of the Plan, change the class of Eligible
Persons, increase the maximum Award term, decrease the minimum exercise price or
increase the total number of authorized shares (except in accordance with
Section 10 hereof) for which Awards may be granted. The Board, in its
discretion, may at any time terminate the Plan prior to its expiration in
accordance with Section 4 hereof. No amendment to or termination of the Plan
shall in any way adversely affect Awards then outstanding hereunder.
12. General Provisions.
------------------
(a) Other Compensation Arrangements; No Right to Receive Awards; No
---------------------------------------------------------------
Employment or Other Rights. Nothing contained in this Plan shall prevent the
- --------------------------
Board from adopting other or additional capital stock based compensation
arrangements, subject to stockholder approval if such approval is required, and
such arrangements may be either generally applicable or applicable only in
specific cases. No Eligible Person shall have any right to receive Awards
except as the Committee may determine. The Plan does not confer upon any
employee any right to continued employment with the Corporation or a Subsidiary
or upon any director or officer of the Corporation any right to continued
service as a director or officer of the Corporation, nor does it interfere in
any way with the right of the Corporation or a Subsidiary to terminate the
employment of any of its employees or for the Corporation to remove a director
or officer with or without cause at any time.
((b) Status of Plan. Until shares pursuant to an Award or exercise
--------------
thereof are actually delivered to a Participant, a Participant shall have no
rights to or with respect to such shares greater than those of a general
creditor of the Corporation unless the Committee shall otherwise expressly
determine in connection with any Award or Awards.
(c) Tax Withholding, Etc. Any obligation of the Corporation to
---------------------
issue shares pursuant to the grant or exercise of any Award shall be conditioned
on the Participant having paid or made provision for payment of all applicable
tax withholding
-13-
<PAGE>
obligations, if any, satisfactory to the Committee. The Corporation and its
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Participant.
(d) Restrictions on Transfers of Shares. The Corporation is not
-----------------------------------
required to cause all shares acquired or received by Participants to be
registered under the Securities Act of 1933 or the Securities Act of 1934 or the
securities laws of any State. Accordingly, the shares acquired or received may
be "restricted securities" as defined in Rule 144 under said Securities Act of
1933 or other rule or regulation of the Securities and Exchange Commission. Any
certificate evidencing any such shares may bear a legend restricting the
transfer of such shares, and the recipient may be required to assert that the
shares are being acquired for his own account and not with a view to the
distribution thereof as a condition to the granting or exercise of an Award.
(e) Issuance of Shares. Any obligation of the Corporation to issue
------------------
shares pursuant to the grant or exercise of any Award shall be conditioned on
the Corporation's ability at nominal expense to issue such shares in compliance
with all applicable statutes, rules or regulations of any governmental
authority. The Participant shall provide the Corporation with any assurances or
agreements which the Committee, in its sole discretion, shall deem necessary or
advisable in order that the issuance of such shares shall comply with any such
statutes, rules or regulations.
(f) Date of Grant. The date on which each Award under the Plan shall
-------------
be considered as having been granted shall be the date on which the award is
authorized by the Committee, unless a later date is specified by the Committee;
provided, however, in the case of options intended to qualify as Incentive Stock
Options, the date of grant shall be determined in accordance with the Code.
-14-
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and entered into as of this 14th day of December, 1993
by and between Accent Color Sciences, Inc., a Connecticut corporation (the
"Company), and Norman L. Milliard, an individual residing at 7 Emerald Avenue,
Hampton, New Hampshire, 03842 (the "Employee").
WHEREAS, the Company desires to retain the services of the Employee, and
the Employee desires to be employed by the Company, on the terms hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein provided, the parties hereto (the "Parties") hereby agree
as follows:
1. Term of Employment.
------------------
1.1 The Company hereby employs the Employee, and the Employee hereby
accepts employment with the Company, all in accordance with the terms and
conditions hereof, for a term of five (5) years commencing on January 1, 1994,
(the "Anniversary Date") and ending December 31, 1998 (the "Employment Term").
1.2 Upon each Anniversary Date, the Parties will have the option to
renew this Employment Agreement for a five (5) year period commencing on such
Anniversary Date with such changes in compensation or other provisions as the
Parties may agree to.
2. Scope. During the Employment Term, the Employee shall be employed by
-----
the Company as Vice President and Chief Operating Officer.
3. Compensation.
------------
3.1 The Employee shall be paid base salary at the rate of $100,000
per annum ("Base Salary"), payable in equal bi-monthly installments, except
------
that, pending adequate initial funding of its operations, the Company may elect
to defer the cash payment of 40% of Base Salary ("Deferred Compensation") for a
period not to exceed one (1) year. In the event the Company elects such
deferral, upon adequate initial funding, the Company shall pay Employee such
Deferred Compensation ratably over a period not to exceed the period over which
such compensation was deferred.
Thereafter the base salary shall be reviewed annually upon renewal under
subsection 1.2 for any increase. Any increase shall be solely at the discretion
of the Board of Directors (the "Board"). In no event may Base Salary be
reduced.
3.2 The Company shall continue to provide reimbursement for business
and business-related expenses incurred by the Employee so long as appropriate
invoices or vouchers are submitted with respect thereto.
<PAGE>
3.3 The Employee shall be entitled to participate in any employee
benefit plan or program generally applicable to senior executives of the
Company, including without limitation pension, life insurance, tax-qualified
profit sharing, and medical coverages as in effect from time to time.
3.4 The Employee shall be entitled to vacation in accordance with the
Company's vacation policy as currently in effect from time to time, provided,
--------
however, in no event shall such vacation be for a period less than four (4)
weeks per annum.
The Employee may elect, at his option, to defer to use of vacation from the
year it is earned to subsequent years, provided, however, the Company has the
--------
option to pay cash in lieu of such deferred vacation, up to a maximum amount of
two (2) weeks of such deferred vacation, if (a) the amount of such deferred
vacation exceeds two weeks and (b) such payment is made within thirty (30) days
following the end of the year such deferral is elected.
In the event of termination under Section 4 below, any and all vacation
owed to the Employee will be paid at the time of termination.
4. Termination.
-----------
4.1 General. Notwithstanding the provisions of Sections 1, 2 and 3
-------
above, the Employee's employment may be terminated prior to the end of the
Employment Term as provided in Sections 4.2, 4.3, 4.4, 4.5 and 4.6 below.
4.2 Death or Disability. The Employee's employment shall be
-------------------
terminated in the event of his death or disability. Upon termination of the
Employee's employment hereunder as a result of the Employee's death or
Disability, the Employee (or, in the event of his death, his Beneficiary) shall
be entitled to (a) all arrears of salary and expenses, and (b) any other
compensation or benefits as determined under applicable plans and programs of
the Company (as in effect immediately prior to such termination).
For the purposes of this Agreement, "Disability" shall be deemed to
have occurred when the Employee shall be unable to perform the duties of his
then employment with the Company for an aggregate period of more than 36 weeks
in a consecutive period of 52 weeks, due to physical or mental impairment (other
than as a result of addiction to alcohol or any other drug) as determined by a
physician acceptable to both the Company and Employee.
The Employee may designate one or more persons to receive payment of
any compensation or other benefit payable on account of the Employee's death, by
giving written notice of such designation to the Company in accordance with
Section 13, below. The person so designated shall be the Employee's Beneficiary
with respect to such
-2-
<PAGE>
payment. In the event the Employee has not designated a Beneficiary with
respect to any particular payment, the Employee's estate shall be the
Beneficiary with respect to such payment.
4.3 Termination for Cause. The Employee's employment hereunder may
---------------------
be terminated for Cause at any time upon written notice from the Company to the
Employee, which notice shall set forth the specific facts on which such
termination is based. Upon any such termination for Cause, the Employee shall be
entitled to (i) all arrears of salary and expenses and (ii) any other
compensation or benefits as determined under applicable plans and programs of
the Company (as in effect immediately prior to such termination). For the
purposes of this Agreement "Cause" shall mean:
(a) a dishonest act or omission by the Employee which either (x) is
intended to result in his substantial personal enrichment at the
expense of the Company, or (y) results in his conviction of, or plea
of nolo contendere to, a felony or other serious crime (not including
a motor vehicle offense or a crime resulting from an action or
omission taken by the Employee in the course of his duties hereunder
and in the good faith belief that such action or omission was in the
best interest of the Company);
(b) gross misconduct or gross neglect of the executive's duties and
responsibilities hereunder, causing material harm to the Company,
unless remedied within 30 days after notice from the company requiring
the Employee to do so; or
(c) a willful and material breach of this Agreement by the Employee,
unless such breach is corrected within 30 days after notice from the
Company requiring the Employee to do so.
Non-performance of duties due to Disability shall not be grounds for
termination for Cause.
4.4 Termination Without Cause. If the Company terminates the
-------------------------
Employee's employment other than for Disability, as provided in Section 4.2,
above, or for Cause, as provided in Section 4.3, above, the Employee shall be
entitled to:
(a) base salary for a one year period commencing on the date
Employee's employment with the Company is terminated (such one year
period hereinafter referred to as the "Termination Period") and
(b) payment of health benefits for the Termination Period; and
-3-
<PAGE>
(c) any vacation owed Employee under subsection 3.4 above.
4.5 Constructive Termination Without Cause. In the event:
--------------------------------------
(a) there is a reduction, without the Employee's consent, (i) in
Employee's cash compensation or (ii) in the aggregate benefits
provided under this Agreement,
(b) the Employee is removed from his position as Vice President and
Chief Operating Officer of the Company, other than as a result of a
termination for Cause, as provided in Section 4.3 above, or
(c) there is a Change of Control of the Company
the Employee shall be entitled to terminate his employment voluntarily, and such
termination shall be treated as a termination by the Company without Cause under
Section 4.4 above, unless, in the case of an event described in clause (a), (b),
or (c) above, such event is remedied within 30 days after written notice from
the Employee requiring the Company to do so.
For purposes of this Section 4.5, a "Change of Control" shall be
deemed to have occurred if (i) the Company has received a report on Schedules
13D or 13G under the Securities Exchange Act of 1934 (the "Act") showing, or has
otherwise obtained actual knowledge, that any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Act), other than the Employee or his
affiliates or associates (as such terms are defined in the Act, hereafter
"Affiliates" or "Associates"), is the beneficial owner (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing at least 30% of the combined voting power of the Company's then
outstanding securities or (ii) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and any new director whose
nomination for election by the Board or by the Company's stockholders was
designated by the Board, cease for any reason to constitute the Board.
4.6 Voluntary Termination. The Employee may voluntarily terminate
---------------------
his employment hereunder provided that, in the event of such a termination,
other than pursuant to a constructive termination without cause, as provided in
Section 4.5 above, the Employee shall receive no further compensation, except as
may be provided in applicable plans and programs.
5. Covenant Not to Disclose. The Employee covenants and agrees that he
------------------------
will not, to the detriment of the Company, at any time during or after the
termination of his employment, whether
-4-
<PAGE>
under this Agreement or otherwise, reveal, divulge or make known to any person
(other than the Company or any of its Affiliates) or use for his own benefit or
purposes or for the benefit or purposes of any other person any customers'
lists, trade secrets, formulae, records, data, know-how or any secret or
confidential information whatsoever, including without limitation that used by
the Company or its Affiliates prior to the date of this Agreement or during the
Employment Term and made known (whether or not with the knowledge and permission
of the Company, whether or not developed, devised or otherwise created in whole
or in part by the efforts of the Employee) to the Employee by reason of his
employment by the Company; provided that it shall not be a violation of this
Section 5 for the Employee to make any disclosure (i) necessary or appropriate
to the performance of his duties hereunder or (ii) required by any law
(including any court or governmental order), so long as, in the case of
disclosure required by law, the Employee notifies the Company of such
requirement, where possible, and cooperates with the Company in taking any
reasonable steps to resist such disclosure (any costs thereby incurred to be
paid by the Company). The Employee further covenants and agrees that he shall
retain all such knowledge and information which he shall acquire or develop
respecting such customers' lists, trade secrets, formulae, records, data, know-
how and secret or confidential information in trust for the sole benefit of the
Company and its successors and assigns and upon leaving the employ of the
Company shall return all such documentation and information then in his
possession to the Company.
6. Inventions, etc. The Employee agrees that all inventions,
----------------
copyrightable material, secret processes, formulae, trademarks, trade secrets
and the like, discovered or developed by the Employee while in the employ of the
Company, whether in the course of his employment or otherwise on such employer's
time or property, shall be disclosed promptly to the Company and shall, if the
Company elects in writing, be the exclusive property of the Company. At the
request of the Company the Employee shall assign all such property to the
Company, and the Employee agrees to execute such instruments of transfer,
assignment, conveyance or confirmation and such other documents as may
reasonably be requested by the Company to transfer, confirm and perfect in the
Company all legally protected rights in any such inventions, copyrightable
material, secret processes, formulae, trademarks, trade secrets and the like.
This Section 6 shall not apply to any Property the development and nature of
which (i) is unrelated to any business then being conducted, developed or
actively being considered for development by the Company, and (ii) is not
competitive with any such business.
7. Covenant Not to Compete.
-----------------------
7.1 The Employee agrees that for the period set forth in Section 7.2
below, (the "No Compete Term"), he shall not, without the prior written consent
of the Company, directly or indirectly,
-5-
<PAGE>
whether as principal, partner, stockholder or as agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, firm, corporation, or other business organization, carry on, or be
engaged, concerned or take part in, or render services to, or own, share in the
earnings of, or invest in the stock, bonds or other securities of any person,
firm, corporation or other business organization which is engaged in a business
involving the manufacturing or selling of printers and printing systems (the
"Company Products") or in soliciting sales of any products similar to and
competitive with the Company Products from any business that was a customer of
the Company at any time within 24 months immediately preceding the termination
of the Employee's employment or from any business to which the Company attempted
to sell its Company Products during such 24 month period, and such restrictions
will pertain to the following geographic areas:
(a) within continental U.S.A., but if a court should find it
unreasonable, then
(b) within the Northeast and New England states of the U.S., but if a
court should find it unreasonable, then
(c) within the New England states and New York, but if a court should
find it unreasonable, then
(d) within Connecticut and New York;
provided, however, that the Employee may (i) own or invest in stocks, bonds or
other securities of the Company and (ii) own or invest in stocks, bonds or other
securities of any other corporation if such stocks, bonds or other securities
are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934; provided
his investment does not exceed, in the case of any class of the capital stock of
any one issuer, 2 percent of the issued and outstanding shares of such class,
or, in the case of bonds or other securities, 2 percent of the aggregate
principal amount thereof issued and outstanding; and such investment would not
prevent, directly or indirectly, the transaction of business by the Company with
any state, district, territory or possession of the United States or any
governmental subdivision, agency or instrumentality thereof by virtue of any
statute, law, regulation or administrative practice.
7.2 If the Employee's employment is terminated
(a) for Cause, pursuant to Section 4.3, or
(b) as a result of the Employee's voluntary termination, pursuant to
Section 4.6 above,
-6-
<PAGE>
the No Compete Term shall be the period ending on the second anniversary of the
termination of the Employee's employment. If the Employee's employment is
terminated for any reason other than as described immediately above, the No
Compete Term shall be the period ending on the Employee's termination of
employment. Notwithstanding the above, the Company may elect in writing to
extend the No Compete Term for a period of up to three years, provided that the
Company shall compensate the Employee for any period with respect to which it
elects to extend the No Compete Term (beyond any period of salary continuation)
at an annual rate equal to the base salary as in effect on the last day of the
Employee's employment. Such compensation shall be paid annually in advance.
7.3 It is understood by and between the Parties hereto that the
foregoing covenant by the Employee not to enter into competition as set forth in
Section 7.1 hereof, and the covenant by the Employee not to interfere with
certain employees of the Company as set forth in Section 9 below, are essential
elements of this Agreement and that, but for the agreement of the Employee to
comply with such covenants, the Company would not have entered into this
Agreement.
8. Business Materials, Covenant to Report. All written materials,
--------------------------------------
records and documents made by the Employee or coming into his possession
concerning the business or affairs of the Company or any of its Affiliates,
shall be the sole property of the Company or its Affiliates, as the case may be,
and, upon the termination of his employment with the Company or upon the request
of the Company at any time, the Employee shall promptly deliver any such
documents then in his possession to the Company. The Employee agrees to render
to the Company such reports of the activities undertaken by the Employee, or
conducted under the Employee's direction, pursuant hereto during the Employment
Term as the Company may reasonably request.
9. Non-Interference. The Employee agrees that during the No Compete Term
----------------
he will not, whether for his own account or for the account of any other person,
firm, corporation or other business organization, interfere with the Company's
relationship with, or endeavor to entice away from the Company, any individual
who at any time during the term of the Employee's employment with the Company
was employed by the Company in an executive, managerial or sales capacity. It
shall not be a violation of this Section 9 for the Employee, while employed by
the Company, to dismiss any employee (or to take similar action with regard to
any employee) if such action is taken in good faith in the performance of the
Employee's duties and responsibilities here under.
10. Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Employee further agrees that damages at law will
be an insufficient remedy to the Company in the
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<PAGE>
event that the Employee violates the terms of Section 5, 6, 7, 8 or 9, and that
the Company may apply for and have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants of such Sections.
11. Compliance with Other Agreements. The Employee represents and
--------------------------------
warrants to the Company that, to the best of the Employee's knowledge, the
execution of this Agreement by him and his performance of his obligations
hereunder will not, with or without the giving of notice and/or the passage of
time, conflict with, result in the breach of any provision of or the termination
of, or constitute a default under, any agreement to which the Employee is a
party or by which the Employee is or may be bound.
12. Binding Effect; Benefits. This Agreement shall inure to the benefit
------------------------
of, and shall be binding upon, the Parties hereto and their respective
successors, assigns, heirs and legal representatives. Insofar as the Employee
is concerned, this contract, being personal, cannot be assigned except that the
Employee's rights to compensation and benefits may pass to the Employee's
Beneficiary as provided hereinabove, and may pass by will or operation of law.
The Company may not assign this Agreement, except that such rights or
obligations may be assigned or transferred pursuant to a merger, consolidation
or sale of the Company, provided that the assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.
13. Notices. All notices and other communications which are required or
-------
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given if delivered personally, by courier or registered or
certified mail, return receipt requested, postage prepaid, to the Party being
notified at the following address, or to such other address as the Party shall
have specified by notice in writing to the other Party:
(a) if to the Employee, to him at the address hereinabove first
mentioned, and
(b) if to the Company, to it at:
Accent Color Sciences, Inc.
130 Prestige Park Road
East Hartford, CT 06720
Attention: Corporate Secretary
All such notices and communications shall be deemed to have been received on the
date of delivery thereof.
14. Entire Agreement. This Agreement contains the entire agreement
----------------
between the Parties hereto with respect to the subject
-8-
<PAGE>
matter hereof and supersedes all prior agreements and understandings, oral or
written, between the Parties hereto with respect to the subject matter hereof.
15. Amendments and Waivers. This Agreement may not be modified or amended
----------------------
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or amendment is sought. Either Party
hereto may, by an instrument in writing, waive compliance by the other Party
with any term or provision of this Agreement on the part of such other Party
hereto to be performed or complied with. The waiver by any Party hereto of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
16. Section and other Headings. The section and other headings contained
--------------------------
in this Agreement are for reference purposes only and shall not be deemed to be
a part of this Agreement or to affect the meaning or interpretation of this
Agreement.
17. Separability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction; provided, however, that
if the provisions of Section 7 or Section 9 should be or become invalid, illegal
or unenforceable under the laws of the State of Connecticut, the restrictions
contained in such section shall be deemed to be modified so that, as modified,
said restrictions shall be valid, legal and enforceable in accordance with the
intent expressed in Section 7 or 9, as the case may be. This Section shall be
interpreted so as to be consistent with the operation of Section 7.1 above.
18. Governing Law. This Agreement shall be construed and governed in
-------------
accordance with the laws of the State of Connecticut and the United States of
America, without regard to principles of conflict of laws.
19. Resolution of Disputes. Any controversy or claim arising out of or
----------------------
relating to this Agreement, or any breach thereof, shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
before a board of three disinterested persons, consisting of one arbitrator to
be appointed by the Company, one by the Employee, and one by the arbitrators so
chosen. Judgment upon an award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The arbitration shall be held in
Hartford, Connecticut or in such other place as the Parties may agree. Each of
the Company and the Employee shall bear its or his own costs of the arbitration
including, but not limited to, fees and disbursements of counsel, provided that
in the
-9-
<PAGE>
event the Employee shall prevail the Company shall pay all of the Employee's
costs.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on
the date first above written.
ACCENT COLOR SCIENCES, INC.
By_____________________________
Richard J. Coburn
Its Chairman
_______________________________
Norman L. Milliard
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<PAGE>
Exhibit 10.13
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
---------------------------------------
THIS AMENDMENT NO. 1 is made and entered into as of the 1st day of January 1995
(the "Amendment") to the employment agreement by and between Accent Color
Sciences, Inc., a Connecticut corporation (the "Company), and Norman L.
Milliard, an individual residing at 7 Emerald Avenue, Hampton, New Hampshire,
03842 (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employee entered into an employment agreement dated
December 14, 1993 (the "Employment Agreement"); and
WHEREAS, the Company desires to better reflect the value of the Employee to the
Company in the terms of his employment with the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein provided, the parties hereto (the "Parties") hereby agree to
amend the Employment Agreement, effective January 1, 1995, as follows:
A. Paragraph 1 is amended to read, in its entirety, as follows:
1. Term of Employment
------------------
1.1 The Company hereby employs the Employee, and the Employee hereby accepts
employment with the Company, all in accordance with the terms and conditions
hereof, for a term of three (3) years (the "Employment Term") commencing on
January 1, 1995, (the "Commencement Date") and ending December 31, 1998.
1.2 Upon each anniversary of the Commencement Date, the Employment Term will be
automatically extended by one (1) additional year expiring on the anniversary of
the date of such extension, subject to notice of termination by either party
prior to such anniversary of the Commencement Date in accordance with paragraph
4 hereof.
B. Section 3.1 of Paragraph 3 is amended to read, in its entirety, as follows:
3. Compensation.
------------
3.1 The Employee shall be paid a base salary at the rate of $120,000 per annum
(the "Base Salary"), payable in equal bi-monthly installments.
Thereafter the base salary shall be reviewed annually upon renewal under
subsection 1.2 for any increase. Any increase shall be solely at the discretion
of the Board of Directors (the "Board"). In no event may the Base Salary be
reduced.
<PAGE>
C
Section 4.2 of Paragraph 4 shall be amended to read, in its entirety, as
follows:
4.2 Death or Disability. The Employee's employment shall be terminated in
-------------------
the event of his death or Disability. Upon termination of the Employee's
employment hereunder as a result of the Employee's death or Disability, the
Employee (or, in the event of his death, his Beneficiary) shall be entitled to
(a) all arrears of salary and expenses, (b) full and immediate vesting of any
then unvested options to purchase securities of the Company which Employee may
then hold, and (c) any other compensation or benefits as determined under
applicable plans and programs of the Company (as in effect immediately prior to
such termination).
For the purposes of this Agreement, "Disability" shall be deemed to have
occurred when the Employee shall be unable to perform the duties of his then
employment with the Company for an aggregate period of more than 36 weeks in a
consecutive period of 52 weeks, due to physical or mental impairment (other than
as a result of addiction to alcohol or any other drug) as determined by a
physician acceptable to both the Company and Employee.
The Employee may designate one or more persons to receive payment of any
compensation or other benefit payable on account of the Employee's death, by
giving written notice of such designation to the Company in accordance with
Section 13 below. The person so designated shall be the Employee's Beneficiary
with respect to such payment. In the event the Employee has not designated a
Beneficiary with respect to any particular payment, the Employee's estate shall
be the Beneficiary with respect to such payment.
D. Section 4.4 of Paragraph 4 shall be amended to read, in its entirety, as
follows:
4.4 Termination Without Cause. If the Company terminates the Employee's
-------------------------
employment other than for Disability, as provided in Section 4.2, above, or for
Cause, as provided in Section 4.3, above, the Employee shall be entitled to:
(a) his base salary for a two-year period commencing on the date Employee's
employment with the Company is terminated (such two-year period hereinafter
referred to as the "Termination Period");
(b) full and immediate vesting of any then unvested options to purchase
securities of the Company which Employee may then hold;
(c) payment of health benefits for the Termination Period; and
(d) any vacation owed Employee under subsection 3.4 above.
E
Except as hereinabove modified and amended, the Employment Agreement shall
remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment No. 1
as of the date first above written.
ACCENT COLOR SCIENCES, INC.
By /s/ Richard J. Coburn
-----------------------------
Richard J. Coburn
I
Chairman
/s/ Norman L. Millard
-----------------------------
Norman L. Milliard
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<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and entered into as of this 14th day of December, 1993
by and between Accent Color Sciences, Inc., a Connecticut corporation (the
"Company), and Richard J. Coburn, an individual residing at 17 Stratford Park,
Bloomfield, Connecticut, 06002 (the "Employee").
WHEREAS, the Company desires to retain the services of the Employee, and
the Employee desires to be employed by the Company, on the terms hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein provided, the parties hereto (the "Parties") hereby agree
as follows:
1. Term of Employment.
------------------
1.1 The Company hereby employs the Employee, and the Employee hereby
accepts employment with the Company, all in accordance with the terms and
conditions hereof, for a term of five (5) years commencing on January 1, 1994,
(the "Anniversary Date") and ending December 31, 1998 (the "Employment Term").
1.2 Upon each Anniversary Date, the Parties will have the option to
renew this Employment Agreement for a five (5) year period commencing on such
Anniversary Date with such changes in compensation or other provisions as the
Parties may agree to.
2. Scope. During the Employment Term, the Employee shall be employed by
-----
the Company as Chairman of the Board.
3. Compensation.
------------
3.1 The Employee shall be paid base salary at the rate of $100,000
per annum ("Base Salary"), payable in equal bi-monthly installments, except
------
that, pending adequate initial funding of its operations, the Company may
compensate Employee at approximately 60% of Base Salary. Thereafter the base
salary shall be reviewed annually upon renewal under subsection 1.2 for any
increase. Any increase shall be solely at the discretion of the Board of
Directors (the "Board"). In no event may Base Salary be reduced.
3.2 The Company shall continue to provide reimbursement for business
and business-related expenses incurred by the Employee so long as appropriate
invoices or vouchers are submitted with respect thereto.
3.3 The Employee shall be entitled to participate in any employee
benefit plan or program generally applicable to senior executives of the
Company, including without limitation pension, life insurance, tax-qualified
profit sharing, and medical coverages as in effect from time to time.
<PAGE>
3.4 The Employee shall be entitled to vacation in accordance with the
Company's vacation policy as currently in effect from time to time.
4. Termination.
-----------
4.1 General. Notwithstanding the provisions of Sections 1, 2 and 3
-------
above, the Employee's employment may be terminated prior to the end of the
Employment Term as provided in Sections 4.2, 4.3, 4.4, 4.5 and 4.6 below.
4.2 Death or Disability. The Employee's employment shall be
-------------------
terminated in the event of his death or disability. Upon termination of the
Employee's employment hereunder as a result of the Employee's death or
Disability, the Employee (or, in the event of his death, his Beneficiary) shall
be entitled to (a) all arrears of salary and expenses, and (b) any other
compensation or benefits as determined under applicable plans and programs of
the Company (as in effect immediately prior to such termination).
For the purposes of this Agreement, "Disability" shall be deemed to
have occurred when the Employee shall be unable to perform the duties of his
then employment with the Company for an aggregate period of more than 36 weeks
in a consecutive period of 52 weeks, due to physical or mental impairment (other
than as a result of addiction to alcohol or any other drug) as determined by a
physician acceptable to both the Company and Employee.
The Employee may designate one or more persons to receive payment of
any compensation or other benefit payable on account of the Employee's death, by
giving written notice of such designation to the Company in accordance with
Section 13, below. The person so designated shall be the Employee's Beneficiary
with respect to such payment. In the event the Employee has not designated a
Beneficiary with respect to any particular payment, the Employee's estate shall
be the Beneficiary with respect to such payment.
4.3 Termination for Cause. The Employee's employment hereunder may
---------------------
be terminated for Cause at any time upon written notice from the Company to the
Employee, which notice shall set forth the specific facts on which such
termination is based. Upon any such termination for Cause, the Employee shall be
entitled to (i) all arrears of salary and expenses and (ii) any other
compensation or benefits as determined under applicable plans and programs of
the Company (as in effect immediately prior to such termination). For the
purposes of this Agreement "Cause" shall mean:
(a) a dishonest act or omission by the Employee which either (x) is
intended to result in his substantial personal enrichment at the
expense of the Company, or (y) results in his conviction of, or plea
of nolo contendere
-2-
<PAGE>
to, a felony or other serious crime (not including a motor vehicle
offense or a crime resulting from an action or omission taken by the
Employee in the course of his duties hereunder and in the good faith
belief that such action or omission was in the best interest of the
Company);
(b) gross misconduct or gross neglect of the executive's duties and
responsibilities hereunder, causing material harm to the Company,
unless remedied within 30 days after notice from the company requiring
the Employee to do so; or
(c) a willful and material breach of this Agreement by the Employee,
unless such breach is corrected within 30 days after notice from the
Company requiring the Employee to do so.
Non-performance of duties due to Disability shall not be grounds for
termination for Cause.
4.4 Termination Without Cause. If the Company terminates the
-------------------------
Employee's employment other than for Disability, as provided in Section 4.2,
above, or for Cause, as provided in Section 4.3, above, the Employee shall be
entitled to:
(a) base salary for a one year period commencing on the date
Employee's employment with the Company is terminated (such one year
period hereinafter referred to as the "Termination Period") and
(b) payment of health benefits for the Termination Period.
4.5 Constructive Termination Without Cause. In the event:
--------------------------------------
(a) there is a reduction, without the Employee's consent, (i) in
Employee's cash compensation or (ii) in the aggregate benefits
provided under this Agreement,
(b) the Employee is removed from his position as Chairman of the
Company, other than as a result of a termination for Cause, as
provided in Section 4.3 above,
(c) the principal place of the Employee's employment is moved from
the Hartford, Connecticut area, or
(d) there is a Change of Control of the Company
the Employee shall be entitled to terminate his employment
-3-
<PAGE>
voluntarily, and such termination shall be treated as a termination by the
Company without Cause under Section 4.4 above, unless, in the case of an event
described in clause (a), (b), or (c) above, such event is remedied within 30
days after written notice from the Employee requiring the Company to do so.
For purposes of this Section 4.5, a "Change of Control" shall be
deemed to have occurred if (i) the Company has received a report on Schedules
13D or 13G under the Securities Exchange Act of 1934 (the "Act") showing, or has
otherwise obtained actual knowledge, that any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Act), other than the Employee or his
affiliates or associates (as such terms are defined in the Act, hereafter
"Affiliates" or "Associates"), is the beneficial owner (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing at least 30% of the combined voting power of the Company's then
outstanding securities or (ii) during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and any new director whose
nomination for election by the Board or by the Company's stockholders was
designated by the Board, cease for any reason to constitute the Board.
4.6 Voluntary Termination. The Employee may voluntarily terminate
---------------------
his employment hereunder provided that, in the event of such a termination,
other than pursuant to a constructive termination without cause, as provided in
Section 4.5 above, the Employee shall receive no further compensation, except as
may be provided in applicable plans and programs.
5. Covenant Not to Disclose. The Employee covenants and agrees that he
------------------------
will not, to the detriment of the Company, at any time during or after the
termination of his employment, whether under this Agreement or otherwise,
reveal, divulge or make known to any person (other than the Company or any of
its Affiliates) or use for his own benefit or purposes or for the benefit or
purposes of any other person any customers' lists, trade secrets, formulae,
records, data, know-how or any secret or confidential information whatsoever,
including without limitation that used by the Company or its Affiliates prior to
the date of this Agreement or during the Employment Term and made known (whether
or not with the knowledge and permission of the Company, whether or not
developed, devised or otherwise created in whole or in part by the efforts of
the Employee) to the Employee by reason of his employment by the Company;
provided that it shall not be a violation of this Section 5 for the Employee to
make any disclosure (i) necessary or appropriate to the performance of his
duties hereunder or (ii) required by any law (including any court or
governmental order), so long as, in the case of disclosure required by law, the
Employee notifies the Company of such requirement, where possible, and
cooperates with the Company in taking any reasonable steps to
-4-
<PAGE>
resist such disclosure (any costs thereby incurred to be paid by the Company).
The Employee further covenants and agrees that he shall retain all such
knowledge and information which he shall acquire or develop respecting such
customers' lists, trade secrets, formulae, records, data, know-how and secret or
confidential information in trust for the sole benefit of the Company and its
successors and assigns and upon leaving the employ of the Company shall return
all such documentation and information then in his possession to the Company.
6. Inventions, etc. The Employee agrees that all inventions,
----------------
copyrightable material, secret processes, formulae, trademarks, trade secrets
and the like, discovered or developed by the Employee while in the employ of the
Company, whether in the course of his employment or otherwise on such employer's
time or property, shall be disclosed promptly to the Company and shall, if the
Company elects in writing, be the exclusive property of the Company. At the
request of the Company the Employee shall assign all such property to the
Company, and the Employee agrees to execute such instruments of transfer,
assignment, conveyance or confirmation and such other documents as may
reasonably be requested by the Company to transfer, confirm and perfect in the
Company all legally protected rights in any such inventions, copyrightable
material, secret processes, formulae, trademarks, trade secrets and the like.
This Section 6 shall not apply to any Property the development and nature of
which (i) is unrelated to any business then being conducted, developed or
actively being considered for development by the Company, and (ii) is not
competitive with any such business.
7. Covenant Not to Compete.
-----------------------
7.1 The Employee agrees that for the period set forth in Section 7.2
below, (the "No Compete Term"), he shall not, without the prior written consent
of the Company, directly or indirectly, whether as principal, partner,
stockholder or as agent, officer, director, employee, consultant, or otherwise,
alone or in association with any other person, firm, corporation, or other
business organization, carry on, or be engaged, concerned or take part in, or
render services to, or own, share in the earnings of, or invest in the stock,
bonds or other securities of any person, firm, corporation or other business
organization which is engaged in a business involving the manufacturing or
selling of printers and printing systems (the "Company Products") or in
soliciting sales of any products similar to and competitive with the Company
Products from any business that was a customer of the Company at any time within
24 months immediately preceding the termination of the Employee's employment or
from any business to which the Company attempted to sell its Company Products
during such 24 month period, and such restrictions will pertain to the following
geographic areas:
(a) within continental U.S.A., but if a court should
-5-
<PAGE>
find it unreasonable, then
(b) within the Northeast and New England states of the U.S., but if a
court should find it unreasonable, then
(c) within the New England states and New York, but if a court should
find it unreasonable, then
(d) within Connecticut and New York;
provided, however, that the Employee may (i) own or invest in stocks, bonds or
other securities of the Company and (ii) own or invest in stocks, bonds or other
securities of any other corporation if such stocks, bonds or other securities
are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934; provided
his investment does not exceed, in the case of any class of the capital stock of
any one issuer, 2 percent of the issued and outstanding shares of such class,
or, in the case of bonds or other securities, 2 percent of the aggregate
principal amount thereof issued and outstanding; and such investment would not
prevent, directly or indirectly, the transaction of business by the Company with
any state, district, territory or possession of the United States or any
governmental subdivision, agency or instrumentality thereof by virtue of any
statute, law, regulation or administrative practice.
7.2 If the Employee's employment is terminated
(a) for Cause, pursuant to Section 4.3, or
(b) as a result of the Employee's voluntary termination, pursuant to
Section 4.6 above,
the No Compete Term shall be the period ending on the fifth anniversary of the
termination of the Employee's employment. If the Employee's employment is
terminated for any reason other than as described immediately above, the No
Compete Term shall be the period ending on the Employee's termination of
employment. Notwithstanding the above, the Company may elect in writing to
extend the No Compete Term for a period of up to three years, provided that the
Company shall compensate the Employee for any period with respect to which it
elects to extend the No Compete Term (beyond any period of salary continuation)
at an annual rate equal to the base salary as in effect on the last day of the
Employee's employment. Such compensation shall be paid annually in advance.
7.3 It is understood by and between the Parties hereto that the
foregoing covenant by the Employee not to enter into competition as set forth in
Section 7.1 hereof, and the covenant by the Employee not to interfere with
certain employees of the Company
-6-
<PAGE>
as set forth in Section 9 below, are essential elements of this Agreement and
that, but for the agreement of the Employee to comply with such covenants, the
Company would not have entered into this Agreement.
8. Business Materials, Covenant to Report. All written materials,
--------------------------------------
records and documents made by the Employee or coming into his possession
concerning the business or affairs of the Company or any of its Affiliates,
shall be the sole property of the Company or its Affiliates, as the case may be,
and, upon the termination of his employment with the Company or upon the request
of the Company at any time, the Employee shall promptly deliver any such
documents then in his possession to the Company. The Employee agrees to render
to the Company such reports of the activities undertaken by the Employee, or
conducted under the Employee's direction, pursuant hereto during the Employment
Term as the Company may reasonably request.
9. Non-Interference. The Employee agrees that during the No Compete Term
----------------
he will not, whether for his own account or for the account of any other person,
firm, corporation or other business organization, interfere with the Company's
relationship with, or endeavor to entice away from the Company, any individual
who at any time during the term of the Employee's employment with the Company
was employed by the Company in an executive, managerial or sales capacity. It
shall not be a violation of this Section 9 for the Employee, while employed by
the Company, to dismiss any employee (or to take similar action with regard to
any employee) if such action is taken in good faith in the performance of the
Employee's duties and responsibilities here under.
10. Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Employee further agrees that damages at law will
be an insufficient remedy to the Company in the event that the Employee violates
the terms of Section 5, 6, 7, 8 or 9, and that the Company may apply for and
have injunctive relief in any court of competent jurisdiction to restrain the
breach or threatened breach of or otherwise to specifically enforce any of the
covenants of such Sections.
11. Compliance with Other Agreements. The Employee represents and
--------------------------------
warrants to the Company that, to the best of the Employee's knowledge, the
execution of this Agreement by him and his performance of his obligations
hereunder will not, with or without the giving of notice and/or the passage of
time, conflict with, result in the breach of any provision of or the termination
of, or constitute a default under, any agreement to which the Employee is a
party or by which the Employee is or may be bound.
12. Binding Effect; Benefits. This Agreement shall inure to the benefit
------------------------
of, and shall be binding upon, the Parties hereto and their respective
successors, assigns, heirs and legal
-7-
<PAGE>
representatives. Insofar as the Employee is concerned, this contract, being
personal, cannot be assigned except that the Employee's rights to compensation
and benefits may pass to the Employee's Beneficiary as provided hereinabove, and
may pass by will or operation of law. The Company may not assign this Agreement,
except that such rights or obligations may be assigned or transferred pursuant
to a merger, consolidation or sale of the Company, provided that the assignee or
transferee assumes the liabilities, obligations and duties of the Company, as
contained in this Agreement, either contractually or as a matter of law.
13. Notices. All notices and other communications which are required or
-------
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given if delivered personally, by courier or registered or
certified mail, return receipt requested, postage prepaid, to the Party being
notified at the following address, or to such other address as the Party shall
have specified by notice in writing to the other Party:
(a) if to the Employee, to him at the address hereinabove first
mentioned, and
(b) if to the Company, to it at:
Accent Color Sciences, Inc.
130 Prestige Park Road
East Hartford, CT 06720
Attention: Corporate Secretary
All such notices and communications shall be deemed to have been received on the
date of delivery thereof.
14. Entire Agreement. This Agreement contains the entire agreement
----------------
between the Parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, between the
Parties hereto with respect to the subject matter hereof.
15. Amendments and Waivers. This Agreement may not be modified or amended
----------------------
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or amendment is sought. Either Party
hereto may, by an instrument in writing, waive compliance by the other Party
with any term or provision of this Agreement on the part of such other Party
hereto to be performed or complied with. The waiver by any Party hereto of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
16. Section and other Headings. The section and other headings contained
--------------------------
in this Agreement are for reference purposes only and shall not be deemed to be
a part of this Agreement or to affect the meaning or interpretation of this
Agreement.
-8-
<PAGE>
17. Separability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction; provided, however, that
if the provisions of Section 7 or Section 9 should be or become invalid, illegal
or unenforceable under the laws of the State of Connecticut, the restrictions
contained in such section shall be deemed to be modified so that, as modified,
said restrictions shall be valid, legal and enforceable in accordance with the
intent expressed in Section 7 or 9, as the case may be. This Section shall be
interpreted so as to be consistent with the operation of Section 7.1 above.
18. Governing Law. This Agreement shall be construed and governed in
-------------
accordance with the laws of the State of Connecticut and the United States of
America, without regard to principles of conflict of laws.
19. Resolution of Disputes. Any controversy or claim arising out of or
----------------------
relating to this Agreement, or any breach thereof, shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
before a board of three disinterested persons, consisting of one arbitrator to
be appointed by the Company, one by the Employee, and one by the arbitrators so
chosen. Judgment upon an award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. The arbitration shall be held in Hartford,
Connecticut or in such other place as the Parties may agree. Each of the Company
and the Employee shall bear its or his own costs of the arbitration including,
but not limited to, fees and disbursements of counsel, provided that in the
event the Employee shall prevail the Company shall pay all of the Employee's
costs.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement on
the date first above written.
ACCENT COLOR SCIENCES, INC.
By_____________________________
Raymond N. Smith
Its President
_______________________________
Richard J. Coburn
-9-
<PAGE>
EXHIBIT 10.15
CONSULTING AGREEMENT
--------------------
AGREEMENT made this _____ day of August, 1994 by and between PETER TEUFEL
of 7 Weingarten Strasse, 35625 Huttenberg, Germany (the "Consultant") and ACCENT
COLOR SCIENCES, INC., a Connecticut corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Consultant has assisted the Company with respect to its
organizational and financial affairs from time to time in the past; and
WHEREAS, the Consultant, in addition to his regular, full-time business
pursuits, is willing to assist the Company with respect to its organizational
and financial affairs from time to time in the future; and
WHEREAS, the Company wishes to secure the services of the Consultant on the
terms hereinafter provided;
NOW, THEREFORE, the Consultant and the Company hereby mutually agree as
follows:
1. The Company hereby engages the Consultant and the Consultant agrees to
be so engaged on the following terms and conditions.
2. Consultant agrees to be available to the Company for up to 10 hours
per month at such times as shall be mutually agreed upon by the Consultant and
the Company, subject to the Consultant's regular duties in the course of his
primary occupation.
3. The term of this Agreement shall commence on the date hereof and
terminate on July 31, 1999, subject to earlier termination under the provisions
of paragraph 6 below.
4. The nature of the duties of the Consultant shall be to work with the
senior management of the Company and provide general business and management
advice with respect, primarily, to organizational, financial and business
development issues.
5. The consideration for the services to be performed by Consultant
hereunder shall consist of stock purchase warrants of even date herewith granted
to Consultant by two principal stockholders of the Company and such further
consideration, if any, as the Board of Directors of the Company may deem
appropriate from time to time.
<PAGE>
6. This Agreement may be terminated by Consultant on thirty (30) days
notice in writing to the Company but may not be terminated by the Company except
for "cause." As used herein, "cause" shall mean the gross neglect by Consultant
of his duties hereunder or the conviction of the Consultant of a felony against
the Company.
7. This Agreement shall be construed under the laws of the State of
Connecticut and may not be modified or amended except in writing signed by both
parties.
IN WITNESS WHEREOF, the Consultant and the Company have executed this
Agreement on the day and year first above written.
________________________________________
Peter Teufel
ACCENT COLOR SCIENCES, INC.
By:_____________________________________
Raymond N. Smith
Its Chairman
-2-
<PAGE>
EXHIBIT 10.16
CONSULTING AGREEMENT
--------------------
AGREEMENT made this 3rd day of May, 1996 by and between RAYMOND N. SMITH of
28622 Highgate Drive, Bonita Springs, Florida 33923 (the "Consultant") and
ACCENT COLOR SCIENCES, INC., a Connecticut corporation, having its place of
business at 800 Connecticut Boulevard, East Hartford, Connecticut (the
"Company").
W I T N E S S E T H:
WHEREAS, the Consultant has to the date hereof held the position of
Chairman of the Board of Directors of the Company under a certain Employment
Agreement dated December 14, 1993; and
WHEREAS, the Consultant is desirous of relinquishing such position as of
the date hereof and terminating such Employment Agreement; and
WHEREAS, the Consultant, in addition to his other business pursuits, is
willing to assist the Company with respect to its organizational and financial
affairs from time to time in the future; and
WHEREAS, the Company wishes to secure the services of the Consultant on the
terms hereinafter provided;
NOW, THEREFORE, the Consultant and the Company hereby mutually agree as
follows:
1. The Company hereby engages the Consultant and the Consultant agrees to be so
engaged on the following terms and conditions.
2. Consultant agrees to be available to the Company for up to 25 hours per month
at such times as shall be mutually agreed upon by the Consultant and the
Company.
3. The Consultant shall receive a quarterly retainer of $21,250 payable in
advance on July 1, 1996, October 1, 1996, January 1, 1997, April 1, 1997,
July 1, 1997 and October 1, 1997. If such date shall fall on a weekend or
holiday, such payment will be payable on the first business day following
such date. Upon the execution of this Agreement, the Consultant shall
receive a payment of $14,167 for the period from the date hereof until June
30, 1996.
4. The Company agrees to reimburse Consultant for all reasonable out-of-pocket
expenses incurred by the Consultant in the execution of his duties.
5. The term of this Agreement shall commence on the date hereof and terminate on
December 31, 1997, subject to earlier termination under the provisions of
paragraph 7 below.
1
<PAGE>
6. The nature of the duties of the Consultant shall be to work with the senior
management of the Company and provide general business and management advice
with respect, primarily, to organizational, financial and business
development issues and to provide such other functions or services as senior
management, in its reasonable discretion and from time to time, shall
require.
7. This Agreement may be terminated by Consultant on thirty (30) days notice in
writing to the Company, but may not be terminated by the Company except for
"cause." As used herein, "cause" shall mean the gross neglect by Consultant
of his duties hereunder or the conviction of the Consultant of a felony
against the Company.
8. Upon sixty (60) days written notice to the Consultant, the Company may extent
this Agreement on the same terms (or on other terms mutually agreed upon by
the Company and the Consultant) for a period not to exceed one (1) year from
the termination date.
9. This Agreement shall be construed under the laws of the State of Connecticut
and may not be modified or amended except in writing signed by both parties.
IN WITNESS WHEREOF, the Consultant and the Company have executed this
Agreement on the day and year first above written.
_________________________________
Raymond N. Smith
ACCENT COLOR SCIENCES, INC.
By: _________________________________
Richard J. Coburn
Its: President
2
<PAGE>
EXHIBIT 10.17
CONSULTING AGREEMENT
--------------------
AGREEMENT made this _____ day of August, 1994 by and between DR. KLAUS
WERDING of 73 Langasse Strasse, 6330 Wetzlar, Germany (the "Consultant") and
ACCENT COLOR SCIENCES, INC., a Connecticut corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Consultant has assisted the Company with respect to its
organizational and financial affairs from time to time in the past; and
WHEREAS, the Consultant, in addition to his regular, full-time business
pursuits, is willing to assist the Company with respect to its organizational
and financial affairs from time to time in the future; and
WHEREAS, the Company wishes to secure the services of the Consultant on the
terms hereinafter provided;
NOW, THEREFORE, the Consultant and the Company hereby mutually agree as
follows:
1. The Company hereby engages the Consultant and the Consultant agrees to
be so engaged on the following terms and conditions.
2. Consultant agrees to be available to the Company for up to 10 hours
per month at such times as shall be mutually agreed upon by the Consultant and
the Company, subject to the Consultant's regular duties in the course of his
primary occupation.
3. The term of this Agreement shall commence on the date hereof and
terminate on July 31, 1999, subject to earlier termination under the provisions
of paragraph 6 below.
4. The nature of the duties of the Consultant shall be to work with the
senior management of the Company and provide general business and management
advice with respect, primarily, to organizational, financial and business
development issues.
5. The consideration for the services to be performed by Consultant
hereunder shall consist of stock purchase warrants of even date herewith granted
to Consultant by two principal stockholders of the Company and such further
consideration, if any, as the Board of Directors of the Company may deem
appropriate from time to time.
-3-
<PAGE>
6. This Agreement may be terminated by Consultant on thirty (30) days
notice in writing to the Company but may not be terminated by the Company except
for "cause." As used herein, "cause" shall mean the gross neglect by Consultant
of his duties hereunder or the conviction of the Consultant of a felony against
the Company.
7. This Agreement shall be construed under the laws of the State of
Connecticut and may not be modified or amended except in writing signed by both
parties.
IN WITNESS WHEREOF, the Consultant and the Company have executed this
Agreement on the day and year first above written.
________________________________________
Dr. Klaus Werding
ACCENT COLOR SCIENCES, INC.
By:_____________________________________
Raymond N. Smith
Its Chairman
-4-
<PAGE>
EXHIBIT 10.18
Pennsylvania
Merchant
Group Ltd
An investment Banking and Venture Capital Firm
February 28, 1996
PRIVATE AND!CONFIDENTIAL
- ------------------------
Mr. Richard 1. Coburn
President and Chief Executive Office
Accent Color Sciences
Riverview Square
99 East River Drive
East Hartford, CT 06108
Dear Mr. Coburn:
We are pleased to propose that Accent Color Science, Inc. ("Accent" or the
"Company") retain Pennsylvania Merchant Group Ltd ("PMG") as its exclusive
financial advisor and investment banker. The principal elements of the
agreement ('Agreement') between PMG and Accent in connection with the
performance of our financial advisory and placement services are as follows:
I. Services to be Rendered. The services that PMG will render to Accent under
------------------------
the terms of this Agreement will include, but not be limited to, the
following:
(a) PMG will use its best efforts to raise, as soon as practicable, on
behalf of Accent, between S' ).O and $4.0 million in Common Stock (the
"Placement") at an offering price (the "Offering Price") of $12.00 per
share, based on approximately 1.6 million fully diluted shares
currently outstanding. The Placement may be completed as one closing,
or in a series of closings, subject to a minimum offering size (a
"Minimum Offering Size") to be agreed to by the Company and PMO. It is
understood that for the purpose of providing liquidity to prospective
investors, the Placement may be transacted through a publicly-traded
corporation.
(b) and PMG may render such other financial advisory and investment
banking services as from time to time may be agreed upon by PMO and
Accent, including, but not limited to acting as managing underwriter
for an initial public offering (the "IPO") of the Company's Common
Stock.
<PAGE>
Mr. Richard J. Coburn
February 28, 1996
Offering & Memorandum. The Company will provide to PMG documents to be provided
- ---------------------
to potential purchasers of the Placement as offering materials (the "Offering
Materials"). The Company represents that the Offering Materials will not, as of
the Closing Date of the Placement, contain any untrue statement of material fact
or omit to state any material fact required to be stated therein, or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading (other than information relating to PMG
furnished writing by PMG expressly for use in the Offering Materials as to which
the Company makes no representation or warranty). T'he Company agrees to
cooperate with PMG in connection with the Investment, including making
appropriate officers or principals of the Company available to PMG for meetings
with prospective purchasers. The Company and PMG will prepare definitive
transaction document5 for use in the Placement, including a Purchase Agreement
and a Registration Rights Agreement, all of which shall be in form and substance
reasonably satisfactory to PMG and Company. Registration Rights Agreement will
contain, among other provisions, provisions obligating the Company to indemnify
the holders of securities registered thereunder, including PMG. in certain
circumstances. The Company will also cause to be furnished to PMG at the
Closing Date and at any subsequent closing such customary opinions of counsel as
PMG may reasonably request, dated as of the Closing Date, reasonably
satisfactory to PMG. PMO recognizes and acknowledges that it is not authorized
to make any representations or statements to any potential purchaser other than
and to the extent that such representations and statements are contained in the
Offering Materials.
3. Fees.
-----
(a)Placement Agent Fee: PMG will receive a fee of 9.0% percent of the total
Placement.
(b)Expense Reimbursement: The Company will reimburse PMO our reasonable
out-of pocket expenses, which shall be limited to an aggregate of $100,000,
including Placement Agent's counsel.
<PAGE>
4. PMG Warrants. Company agrees to sell to P-NLG or its designees, for
------------
nominal consideration, warrants to purchase shares of Common Stock (the
'PMG Warrants") equal to 5 % of the shares issued or issuable in the
Placement. The PMG Warrants shall have the following terms: (i) be non-
redeemable by the Company; (ii) be immediately exercisable at a price per
share of Common Stock equal to the Offering Price; (iii) be exercisable at
any time and from time to time, in whole or in part, on a net basis for a
period of five (5) years following the Closing Date; and (iv) contain anti-
dilutive and registration rights provisions, and such other terms as shall
be agreed upon by the Company and PMG and set forth in final written
agreements governing such securities. The Company agrees to permit PMG to
exercise the PMG Warrants on a cashless "net" basis at any time prior to
expiration of the PMG Warrants.
Mr. Richard J. Coburn
February 28, 1996
5. Right of First Refusal Upon the successful completion of the Placement as
-----------------------
described in this letter, in which gross proceeds to the Company equal or
exceed the Minimum Offering Size, PMG shall have the right to act as
underwriter and/or placement agent for the Company for a period of three
(3) years from the signing of this letter. This will include the right to
act as managing underwriter should the Company pursue a Public Offering,
with a minimum of fifty (50) percent of any underwriting fees paid as part
of the Public Offering accruing to PMG. PMG agrees that it will notify the
Company of its decision whether or not to exercise this right within thirty
(30) business days of receipt of written notice of the intention of the
Company or its successor to offer securities for sale.
6. Term of Agreement. This Agreement shall commence as of the date of this
-----------------
letter and shall continue in effect through May 31, 1996. Tbereafter, this
Agreement shall continue in effect until terminated by either PMG or
Accent. Termination shall become effective thirty (30) days after written
notice of termination is received by the other party, subject to those
provisions of this Agreement which have application subsequent to the
termination of this Agreement. If the Company terminates the Agreement
prior to May 31, 1996, any unreimbursed Placement Agent expenses shall
become immediately due and payable.
7. Indemnity. Accent agrees to indemnity and hold harmless PMG, including any
---------
affiliated companies, and their respective officers, directors, controlling
persons and employees and any persons retained in connection with a
proposed financing (whether or not consummated) (the "Indemnitees"), from
and against all claims, damages, losses, liabilities and expenses as the
same are incurred (including any legal or other expenses incurred in
connection with investigating or defending against any such loss, claim,
damage or liability or any action in respect thereof), related to or
arising out of its activities hereunder. Notwithstanding the foregoing,
Accent shall not be liable for indemnity under this Agreement in respect of
any loss, claim, damage, liability or expense arising from PMG's misconduct
or negligence in performing the services described above. This provision
shall survive any termination of PMG's engagement as well as the
consummation or abandonment of any Acquisition, Placement or Offering.
<PAGE>
9. Entire Agreement and Governing Law. This Agreement may not be amended or
----------------------------------
modified except in writing, and shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
Mr. Richard J. Coburn
February 28, 1996
If the foregoing correctly sets forth your understanding, PLEASE so indicate by
signing and returning to us the ENCLOSED copy of this letter.
SINCERELY,
PENNSYLVANIA MERCHANT GROUP LTD
Richard A. Hanson
President
ACCEPTED and AGREED to this
ACCENT, INC.
day of
BY:
Mr. Richard J. Coburn
President
<PAGE>
EXHIBIT 10.19
PENNSYLVANIA
MERCHANT
GROUP LTD
An Investment Banking and Venture Capital Firm
May 6, 1996
PRIVATE AND CONFIDENTIAL
- ------------------------
Mr. Richard J. Coburn
President and Chief Executive Officer
Accent Color Sciences
Riverview Square
99 East River Drive
East Hartford, CT 06108
Dear Mr. Coburn
We are pleased to propose the following amendment to our letter of February 28,
1996. Capitalized terms shall have the same meaning ascribed to them as in that
letter.
1. Increase in Offering Size, In addition to the up to $4.0 million in gross
-------------------------
proceeds (the "First Round") which PMG agreed to raise, PMG will use its
best efforts to raise an additional $6.0 million (the "Second Round") in
Common Stock at an Offering Price of $12.00 per share, for a total Offering
size of $10.0 million. The Second Round will be pursuant to Regulation D
("Regulation D") under the Securities Act of 1933, as amended ("the Act").
The Offering will be completed by May 31, 1996, and may consist of one
closing, or a series of closings.
2. Shelf Registration, Not later than the 60th day after the closing of the
------------------
Company's initial public offering (the "IPO Date"), the Company shall
prepare and file with the SEC registration statement for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") covering the shares issued in the
First Round and the Second Round (the "Shelf Registration") and shall use
all reasonable efforts to cause the Shelf Registration to become effective
under the Securities Act as soon as practicable following the filing date.
3. Fees.
----
<PAGE>
(a) Placement Agent Fee: PMG will receive a fee of 8.0% percent of the
total Second Round.
Mr. Richard J. Coburn
May 6, 1996
(b) Expense Reimbursement: The Company will reimburse PMG our reasonable
out-of-pocket expenses, which shall be limited to an aggregate (including fees
to be reimbursed as part of the First Round) of $100,000 including Placement
Agent's counsel.
4. PMG Warrants. The Company agrees to sell to PMG or its designees, for
------------
nominal consideration, warrants to purchase shares of Common Stock (the
"PMG Warrants") equal to 5% of the shares issued or issuable in the Second
Round. The PMG Warrants shall have the following terms: (i) be non-
redeemable by the Company; (ii) be immediately exercisable at a price per
share of Common Stock equal to the Offering Price; (iii) be exercisable at
any time and from time to time, in whole or in Part, on a net basis for a
period of five (5) years following the Closing Date; and (iv) contain anti-
dilutive and registration rights provisions, and such other terms as shall
be agreed upon by the Company and PMG and set forth in final written
agreements governing such securities. The Company agrees to permit PMG to
exercise the PMG Warrants on a cashless "net" basis at any time prior to
expiration of the PMG Warrants.
5. Term of Agreement. The term of the Agreement shall extended to June 30,
-----------------
1996. Thereafter, this Agreement shall continue in effect until terminated
by either PMG or Accent. Termination shall become effective thirty (30)
days after written notice of termination is received by the other party,
subject to those provisions of this Agreement which have application
subsequent to the termination of this Agreement. If the Company terminates
the Agreement prior to June 30, 1996, any unreimbursed Placement Agent
expenses shall become immediately due and payable.
6. Indemnity. Accent agrees to indemnify and hold harmless PMG, including any
---------
affiliated companies, and their respective officers, directors, controlling
persons and employees and any persons retained in connection with a
proposed financing (whether or not consummated) (the "Indemnitees"), from
and against all claims, damages, losses, liabilities and expenses as the
same are incurred (including any legal or other expenses incurred in
connection with investigating or defending against any such loss, claim,
damage or liability or any action in respect thereof), related to or
arising out of its activities hereunder. Notwithstanding the foregoing,
Accent shall not be liable for indemnity under this Agreement in respect of
any loss, claim, damage, liability or expense arising from PMG's
<PAGE>
misconduct or negligence in performing the services described above. This
provision shall survive any termination of PMG's engagement as well as the
consummation or abandonment of any Acquisition, Placement or Offering.
7. Entire Agreement and Governing Law. This Agreement may not be amended or
----------------------------------
modified except in writing, and shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
<PAGE>
Mr. Richard J. Coburn
May 6, 1996
If the foregoing correctly sets forth your understanding, please so indicate by
signing and returning to us the enclosed copy of this letter.
Sincerely,
PENNSYLVANIA MERCHANT GROUP LTD
Richard A. Hansen
President
Accepted and Agreed to this 8th day of May
ACCENT, INC.
By:.
Mr. Richard J. Coburn
Chairman and CEO
<PAGE>
EXHIBIT 10.20
August 20, 1996
Mr. Richard A. Hansen, President
Pennsylvania Merchant Group Ltd
Suite 390, Fidelity Court
259 Radnor-Chester Road
Radnor, Pennsylvania 19087-5257
Dear Mr. Hansen:
We are pleased to confirm our discussions with you concerning the
termination of our letter agreement with you dated February 28, 1996, as amended
by our letter agreement dated May 6, 1996 (such letter, as amended, being
referred to hereinafter as the "Engagement Letter"). Terms capitalized herein
shall have the same meaning ascribed to them in the Engagement Letter.
1. Termination of Offering. The Company and PMG acknowledge that the
-----------------------
Offering size was increased from $10.0 million to $10.5 million and that the
final closing of the Offering was held on June 28, 1996.
2. Termination of Engagement Letter. PMG and the Company agree that the
--------------------------------
Engagement Letter is hereby terminated and shall be of no further force or
effect, except only for the obligation of the Company thereunder to indemnify
PMG.
3. Additional Warrants. In consideration of the termination and
-------------------
extinguishment of all rights of PMG under the Engagement Letter, except for its
right to indemnification, the Company shall pay to PMG upon the execution of
this letter additional warrants to purchase 56,250 shares of Common Stock of the
Company on the same terms as those warrants to purchase Common Stock of the
Company previously issued to PMG pursuant to the terms of the Engagement Letter
(an amount which, when combined with all such previously issued warrants under
the Engagement Letter, will entitle PMG to purchase an aggregate of 100,000
shares of Common Stock of the Company), subject to the provisions of the
following paragraph.
4. Knickerbocker Claims. PMG acknowledges its understanding that the
--------------------
Company may be obligated to pay to Knickerbocker Securities, Inc.
("Knickerbocker") certain consideration in connection with any sales of Common
Stock of the Company pursuant to the Offering to persons initially introduced to
the Company by Knickerbocker. PMG undertakes to deal with Knickerbocker to (a)
determine those investors in the Offering with respect to whom the Company may
owe consideration to Knickerbocker and to settle any such obligation of the
Company to
<PAGE>
Mr. Richard A. Hansen, President
August 20, 1996
Page 2
Knickerbocker out of consideration previously paid by the Company to PMG up to a
maximum of one-half of the commissions paid by the Company to PMG in connection
with sales pursuant to the Offering to those investors with respect to whom
Knickerbocker may also be entitled to commissions. The Company will be
responsible for any additional amount and any warrants which may be payable or
issuable to Knickerbocker with respect to the Offering.
5. Investor Agreements. PMG agrees to use its best efforts to secure
-------------------
such agreements and/or waivers from investors in the Offering as maybe necessary
in the reasonable judgment of the Company to facilitate an initial public
offering through reputable underwriters, including assisting the Company in
securing lock-up agreements for a minimum of 180 days following the offering in
the customary form from those investors in the Offering identified by the
Company and securing from holders of at least a majority of the shares acquired
by investors in the Offering a waiver or termination of the requirement upon the
Company to file a "Shelf Registration" pursuant to Section 2.2 of the
Registration Rights Agreement entered into between the Company and each such
investor in connection with the Offering.
6. Amendment; Governing Law. This letter agreement may not be amended or
------------------------
modified except in writing and shall be governed by and construed in accordance
with laws of the Commonwealth of Pennsylvania.
If the foregoing correctly sets forth our understanding, please so indicate
by signing and returning to me the enclosed copy of this letter.
Sincerely,
ACCENT COLOR SCIENCES, INC.
By___________________________
Richard J. Coburn,
Chairman and Chief Executive Officer
Accepted and agreed to this ___ day of August, 1996.
PENNSYLVANIA MERCHANT GROUP LTD
By_________________________
Richard A. Hansen,
President
<PAGE>
EXHIBIT 10.21
ACCENT COLOR SCIENCES, INC.
Riverview Square
99 East River Drive
East Hartford, CT 06108
Telephone: 860-282-2226
Facsimile: 860-290-4858
March 29, 1996
Mr. Walter R. Keay, President
Knickerbocker Securities, Inc.
300 Park Avenue
New York, New York 10022
Dear Walter:
This will confirm the terms under which Accent Color Sciences, Inc. ("ACS")
and Knickerbocker Securities, Inc. ("KSI") have agreed to conclude their
relationship established pursuant to letter agreements dated January 11, 1994,
April 4, 1994 and March 1, 1995 (the "Letter Agreements") and a Corporate
Finance Consulting Agreement dated September 20, 1994 (the "Consulting
Agreement"). Our agreement is as follows:
1. Upon the execution of this letter agreement by ACS and KSI, all prior
understandings and agreements between ACS and KSI, including, without
limitation, the Letter Agreements and the Consulting Agreement shall be
terminated and of no further force or effect.
2. ACS and KSI shall deliver to each other upon the execution of this
letter agreement general releases in form and substance acceptable to each of
them pursuant to which each shall release the other from all matters and claims
whatsoever arising or based on occurrences prior to the date of such releases
except for their respective obligations under this letter agreement and the
common stock purchase warrant referred to in paragraph 5 below and any currently
outstanding warrant or warrants entitling KSI to purchase ACS securities.
3. In consideration of KSI entering into this letter agreement, ACS shall
pay to KSI the total sum of $275,000, of which $75,000 shall be paid upon the
execution of this letter agreement, $100,000 shall be paid on May 1, 1996 and
the balance of $100,000 shall be paid on June 1, 1996. In the event of a
default in payment for more than ten (10) days from the date such payment is due
hereunder, interest shall accrue on the unpaid amount from the date of default
at the annual rate of 10% until such payment shall be made in full. In the
further event of a
<PAGE>
Mr. Walter R. Keay
March 29, 1996
Page 2
default in payment for more than thirty (30) days from the date such payment is
due hereunder, then, notwithstanding anything herein to the contrary, all prior
rights of KSI pursuant to any and all agreements between KSI and ACS, including,
without limitation, the Letter Agreements and the Consulting Agreement, shall be
deemed not to have been waived by KSI and shall be of full force and effect,
provided that any amounts which shall actually have been paid hereunder shall be
applied to any obligations of ACS under such Agreements.
4. In addition to the amount payable by ACS to KSI under paragraph 3
above, if during the period commencing with the date of this letter agreement
and ending on November 30, 1998, any person introduced to ACS by KSI (a "KSI"
Purchaser") shall purchase or commit to purchase securities of ACS (which
commitment ACS shall have accepted or shall subsequently accept), other than any
such purchase or commitment pursuant to an initial or subsequent public offering
of securities by ACS or pursuant to the exercise of any right or option to
purchase securities of ACS now held by such person, ACS shall pay to KSI an
amount equal to 9% of the consideration received by ACS for its securities sold
to such KSI Purchaser and ACS shall issue to KSI a warrant to purchase the class
of securities sold by ACS to such KSI Purchaser, such warrant to entitle KSI to
purchase an amount of such securities equal to 10% of the securities sold by ACS
to such person at 110% of the price paid to ACS by such KSI Purchaser.
5. If ACS proposes to sell any of its securities to any person with
respect to which KSI may be entitled to compensation and a warrant under the
preceding paragraph, ACS may first submit the name of such person to KSI and KSI
agrees to provide ACS within three business days of its receipt of such name a
statement as to whether or not it believes ACS would be obligated to pay
compensation under the preceding paragraph were ACS to sell securities to such
person. In the event that KSI shall not respond to ACS within such three
business day period, it shall be assumed for all purposes that KSI is not
entitled to any consideration under the preceding paragraph with respect to the
proposed sale to such person. Furthermore, KSI acknowledges and agrees that it
shall not be entitled to any compensation or warrants pursuant to the preceding
paragraph with respect to any sales of securities by ACS to, or with respect to
any efforts on behalf of ACS by, Pennsylvania Merchant Group Ltd except for such
sales made to a KSI Purchaser (it being further understood by ACS that this
reference to Pennsylvania Merchant Group Ltd shall not be deemed to include
sales to individuals who may have served or may serve as partners, principals or
officers of such firm).
<PAGE>
Mr. Walter R. keay
March 29, 1996
Page 3
6. As further consideration for the agreements of KSI set forth herein,
upon the execution of this letter agreement, ACS shall issue to KSI a common
stock purchase warrant entitling KSI, at any time during a period of five years
from the date of this letter agreement, to purchase up to 5,000 shares of the
common stock ACS at a price per share of $11, subject to normal and customary
adjustments similar to those contained in the form of warrant previously issued
by ACS to KSI.
7. ACS and KSI shall each bear its own expenses in connection with this
letter agreement and the matters discussed herein.
8. This letter agreement shall be governed by and shall be construed in
accordance with the laws of the State of Connecticut.
9. This letter agreement and the common stock purchase warrant referred
to in paragraph 5 above, constitute the entire understanding of ACS and KSI with
respect to the subject matter hereof and supersedes any prior communications,
understandings and agreements between the parties, except as expressly provided
herein.
Please indicate your agreement with an acceptance of the foregoing terms
and provisions by dating, signing and returning to me the enclosed copy of this
letter.
Very truly yours,
ACCENT COLOR SCIENCES, INC.
By:____________________________
Richard J. Coburn
Its: President
The foregoing terms and provisions are hereby agreed to and accepted this
____ day of March, 1996.
KNICKERBOCKER SECURITIES, INC.
By:______________________________
Walter R. Keay
Its: President
<PAGE>
EXHIBIT 10.22
NONDISCLOSURE AGREEMENT
-----------------------
Accent Color Sciences, Inc. ("ACS") and___________________ (the "Employee")
hereby agree on behalf of themselves, and their heirs, successors and assigns
that the following provisions shall apply to the Employee's employment by ACS.
(1) As part of the consideration provided by the Employee in return for his/her
employment by ACS and compensation therefor the Employee agrees:
(a) Except as may be reasonably required in the course of his/her
employment by ACS, never to reveal to any person unless authorized in writing to
do so by ACS, any information concerning secret or confidential information of
ACS including but not limited to such information about products, processes,
inventions, experimental developments, formula, calculations, manufacturing and
testing methods, customer or supplier identification, and product cost or profit
information:
(b) To disclose promptly and fully to ACS all inventions, including all
ideas, developments, discoveries, and improvements, whether patentable or not,
which shall have been made or conceived by the Employee, whether by
himself/herself or with others, within the period of his/her employment and six
months thereafter, which relate to or arise out of any work being performed by
him or others for or on behalf of ACS; to assign said inventions, ideas,
developments, discoveries, and improvements and all patent applications thereon
to ACS at any time on demand; and to review, execute, and deliver at any time on
demand any and all papers which ACS may consider necessary to secure all rights
to said inventions, ideas, developments, discoveries and improvements and patent
applications and patents therefor and to enforce the same, in the United States
and in all other countries of the world.
(2) Employee recognizes that all records and copies of records relating to ACS'
operations, investigations or business, proposals or bids for business, market
or product surveys, or analysis, made or received by him/her during his/her
period of employment with ACS are and shall be the exclusive property of ACS,
and the Employee will keep the same at all times in ACS' custody and subject to
its control, and will surrender the same at the termination of his/her
employment if not before.
(3) Employee agrees that for a period of two years after termination of his/her
employment with ACS, he/she will notify ACS in writing of (a) any change in
his/her address, and (b) each subsequent employment, including name and address
of the employer and the nature of his/her employment, or any other business
activity engaged in by him.
(4) For a period of two years after termination of his/her employment with ACS,
Employee agrees that he/she will not seek to or assist others to persuade any
employee of ACS engaged in work similar or related to Employee's work for ACS to
discontinue employment with ACS or become employed or engaged in any business
similar to or competitive with the business of ACS.
<PAGE>
(5) Employee agrees to conform to the rules and regulations of ACS and his/her
employment and compensation can be terminated, with or without cause, and with
or without notice, at any time, at the option of either ACS or the Employee.
Employee understands that no representative of ACS, other than any officer of
ACS, has any authority to enter into any agreement for employment for any
specified period of time, or to make any agreement contrary to the foregoing.
(6) Employee represents that he/she is free to enter into this Agreement and
accept employment with ACS without violating any obligations to any other person
or company. Employee agrees to make the terms of this Agreement known to any
subsequent employer for five years following termination of employment with ACS.
ACCENT COLOR SCIENCES, INC.
By:____________________________________ Date:________________________
Employee:______________________________ Date:________________________
2/95
<PAGE>
Exhibit 10.23
Exhibit A
-------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this ____ day
------------
of ______, 1994, by ACCENT COLOR SCIENCES, Inc., a Connecticut corporation (the
"Company") for the benefit of each Purchaser (individually a "Purchaser' and
- ---------- -----------
collectively, the "Purchasers") entering into a Subscription Agreement (the
-------------
"Subscription Agreement") with the Company of even date herewith.
- -------------------------
1. Securities Laws Representations and Covenants of Purchaser.
----------------------------------------------------------
This Agreement is made for the benefit of the Purchasers in reliance upon
each Purchaser's representations to the Company, contained in Section 2 of the
Subscription Agreement. This Agreement shall have no force or effect until such
time as the Company has otherwise become obligated to file periodic or other
reports pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended.
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
------------
any other federal agency at the time administering the Securities Act.
(b) "Common Stock' shall mean the common stock, par value $.OOOI per
-------
share, of the Company.
(c) "Form S-1, Form SB-1, Form S-2, Form SB-2 and Form S-3" shall mean
--------------------------------------------------
Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively, promulgated
by the Commission or any substantially similar form then in effect.
(d) "Conversion Shares" shall mean the Common Stock issuable upon
-------------------
conversion of the Preferred Stock.
(e) "Preferred Stock" shall mean the Series A Convertible Voting
-----------------
Preferred Stock, no par value, of the Company issued to the Purchasers pursuant
to various Subscription Agreements.
(f) The terms "Register", "Registered" and 'Registration" refer to a
------------------------ --------------
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(g) "Registrable Securities" shall mean the Conversion Shares so long
-----------------------
as such shares are ineligible for sale under
<PAGE>
subparagraph (k) of Rule 144.
(h) "Registration Expenses" shall mean all expenses incurred by the
-----------------------
Company in complying with Section 2, including, without limitation, all federal
and state registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such Registration
and the reasonable fees and disbursements of counsel for the Selling
Shareholders, as selling shareholders.
(i) "Registration Statement" shall mean Form S-1, Form SB-1, Form S-2,
------------------------
Form SB-2 or Form S-3, whichever is applicable.
(j) "Restriction Termination Date" shall mean, with respect to any
------------------------
Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been rendered to the effect that the legend referred to in Section 2(i)(i)
of the Subscription Agreement can be properly removed and such legend shall have
been removed.
(k) "Rule 144" shall mean Rule 144 promulgated by the Commission
----------
pursuant to the Securities Act.
(l) "Purchasers" shall mean, collectively, the Purchasers, their
------------
assignees and transferees, and individually, a Purchaser and any-transferee or
assignee of such Purchaser.
(m) "Securities Act" shall mean the Securities Act of 1933, as
----------------
amended.
(n) "Selling Expenses" shall mean all underwriting discounts and
------------------
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(o) "Selling Shareholders" shall mean a holder of Registrable
----------------------
Securities who requests Registration under Section 2 herein.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Subscription Agreement.
2.2 Required Registration. If the Company shall be requested by holders
---------------------
of at least a majority of the outstanding
-2-
<PAGE>
Conversion Shares to effect the Registration of Registrable Securities, then the
Company shall promptly give written notice of such proposed Registration to all
holders of Conversion Shares, and thereupon the Company shall promptly use its
best efforts to effect the Registration of the Registrable Securities that the
Company has been requested to Register for disposition as described in the
request of such holders of Conversion Shares and in any response received from
any of the holders of Conversion Shares within ten (10) days or such longer
period as shall be set forth in the notice, after the giving of the written
notice by the Company; provided, however, that the Company shall not be
-------- -------
obligated to effect any Registration except in accordance with the following
provisions:
(a) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 2.2.
(b) Notwithstanding the foregoing, the Company may include in each
such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by others,
provided, however, that, if the number of shares of Common Stock so included
- -----------------
pursuant to this clause (b) exceeds the number of Registrable Securities
requested by the holders of Preferred Stock requesting such Registration, then
such Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2-.3; and provided further, however, that the inclusion of
-------------------------
such previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Preferred Stock requesting such Registration
from registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration statement
pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under 'Excluded Forms," as defined in
Section 2.3(a) below) or (ii) for six (6) months after the request for
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
2.3 Piggyback Registration
----------------------
(a) Each time that the Company proposes to Register a public offering
solely of its Common Stock (not including an offering of Common stock issuable
upon conversion or exercise of
-3-
<PAGE>
other securities), other than pursuant to a Registration Statement on Form S-4
or Form S-8 or similar or successor forms (collectively, "Excluded Forms"), the
Company shall promptly give written notice of such proposed Registration to all
holders of Conversion Shares, which shall offer such holders the right to
request inclusion of any Registrable Securities in the proposed Registration.
(b) Each holder of Conversion Shares shall have ten (10) days or such
longer period as shall be set forth in the notice from the receipt of such
notice to deliver to the Company a written request specifying the number of
shares of Registrable Securities such holder intends to sell and the holder's
intended plan of disposition.
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2.3(b) may specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares of
Common Stock, if any, otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section 2.3(b), the
Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata, based on the number of shares of Registrable Securities each
--------
such holder proposed to include.
(f) All Conversion Shares that are not included in the underwritten
public offering shall be withheld from the market by the holders thereof for a
period, not to exceed 12 months
-4-
<PAGE>
following a public offering, that the managing underwriter reasonably determines
as necessary in order to effect the underwritten public offering. The holders of
such Conversion Shares shall execute such documentation as the managing
underwriter reasonably requests to evidence this lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become and remain effective in accordance with Section
2.4(b) hereof, keeping each Selling Shareholder advised as to the initiation,
progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of any
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such seller may reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided,
---------
however, that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.4(b) hereof, notify each Selling
Shareholder of the happening
-5-
<PAGE>
of any event as a result of which the prospectus included in such Registration,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and, at the request of such seller, prepare, file and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading in the light
of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses incurred by
--------
the Company in complying with this Section 2; provided, however, that all
-----------------
underwriting the number of discounts and selling commissions applicable to the
Registrable Securities covered by registrations effected pursuant to section 2.2
or 2.3 hereof shall be borne by the seller or sellers thereof, in proportion to
Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be a condition precedent
----------------------------------
to the Company's obligations under this Agreement as to any Selling Shareholder
that each Selling Shareholder furnish to the Company in writing such information
regarding such Selling Shareholder and the distribution proposed by such Selling
Shareholder as the Company may reasonably request.
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company shall
---------------------------------------
indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent partners, and each person who controls such underwriter, against all
claims, losses, damages or liabilities (or actions in respect thereof) suffered
or incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to actions or inaction required of the
Company in connection with any such Registration; and the Company will reimburse
each such Selling Shareholder,
-6-
<PAGE>
each such underwriter, each of their officers, directors and constituent
partners and each person who controls any such Selling Shareholder or
underwriter, for any legal and any other expenses as reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
-----------------
Section 2.7.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be withheld); and provided,
--------
however, that the Company will not be liable in any such case to the extent that
- -------
any such claim, loss, damage, liability or expense arises out of or is based
upon any untrue statement or omission based upon written information furnished
to the Company by such Selling Shareholder, underwriter, controlling person or
other indemnified person and stated to be for use in connection with the
offering of securities of the Company.
2.7.2 Selling Shareholder's Indemnification of Company. Each
------------------------------------------------
Selling-Shareholder shall indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's Registrable Securities
covered by a Registration Statement, each person who controls the Company or
such underwriter within the meaning of the Securities Act, and each other
Selling Shareholder, each of its officers, directors and constituent partners
and each person controlling such other Selling Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) suffered or
incurred by any of them and arising out of or based upon any untrue statement
(or alleged untrue statement) of a material fact contained in such Registration
Statement or related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Selling Shareholder
of any rule or regulation promulgated under the Securities Act applicable to
such Selling Shareholder and relating to actions or inaction required of such
Selling Shareholder in connection with the Registration of the Registrable
Securities pursuant to such Registration Statement; and will reimburse the
Company, such other Selling Shareholders, such directors, officers, partners,
persons, underwriters and controlling persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; such indemnification and
reimbursement shall be to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by such Selling
Shareholder and stated to be specifically for use in connection with the
offering of Registrable Securities.
-7-
<PAGE>
2.7.3 Indemnification Procedure. Promptly after receipt by an
-------------------------
indemnified party under this Section 2.7 of notice of the commencement of any
action which may give rise to a claim for indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 2.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the right to
employ separate counsel (reasonably satisfactory to the indemnifying party) to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified parties unless the named parties to
such action or-proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified parties shall
have been advised by counsel that there are one or more legal defenses available
to the indemnified parties which are different from or additional to those
available to the indemnifying party (in which case, if the indemnified parties
notify the indemnifying party in writing that they elect to employ separate
counsel at the reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified parties, it being understood, however,
that the indemnifying party shall not, in connection with any such action or
proceeding or separate or substantially similar or related action or proceeding
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate counsel at any time for all indemnified parties, which counsel shall be
designated in writing by the Purchasers of a majority of the Registrable
Securities).
2.7.4 Contribution. If the indemnification provided for in this
------------
Section 2.7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a
-8-
<PAGE>
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party
and the parties, relative intent, knowledge, access to information supplied by
such indemnifying party or indemnified party and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action,
suit, proceeding or claim.
3. Covenants of the Company.
------------------------
The Company agrees to:
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Conversion
Shares the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the
-9-
<PAGE>
Securities Act and the Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Conversion Shares, so long as
such holder of Conversion Shares owns any Registrable Securities, forthwith upon
written request (a) a written statement by the Company that it has complied with
the reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company), the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company and (c) such-other information as may be reasonably requested and as is
publicly available in availing the holders of Conversion Shares of any rule or
regulation of the Commission which permits the selling of any such securities
without registration.
(e) Prior to the filing of the Registration Statement or any
amendment thereto (whether pre-effective or post-effective), and prior to the
filing of any prospectus or prospectus supplement related thereto, the Company
will provide each Selling Shareholder with copies of all pages thereto, if any
which reference such Selling Shareholder.
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences Inc., 17 Stratford Park, Bloomfield,
Connecticut 06002 and (ii) if to a Purchaser, at the address set forth in his
Subscription Agreement, or at such other address as each such party furnishes by
notice given in accordance with this Section 4(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it
-10-
<PAGE>
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
IN WITNESS WHEREOF, the Company has executed this Agreement for the benefit
of the Purchasers by its duly authorized officer as of the date first above
written.
ACCENT COLOR SCIENCES, INC.
By: _____________________________________
Richard Coburn, President
and Chief Executive Officer
Agreed and Accepted this
___________ day of __________, 1994
By: ____________________________
Name:
Title:
-11-
<PAGE>
Exhibit 10.24
Exhibit A
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this
---------
____ day of _________ 1995, by ACCENT COLOR SCIENCES, INC., a Connecticut
corporation (the "Company") for the benefit of each Purchaser (individually a
-------
"Purchaser" and collectively, the "Purchasers") entering into a Convertible Note
- ---------- ----------
and Agreement relating to the Company's Series III Debentures (the "Convertible
-----------
Note") with the Company of even date herewith.
- ----
1. Securities Laws Representations and Covenants of Purchaser.
----------------------------------------------------------
This Agreement is made for the benefit of the Purchasers in reliance upon
each Purchaser's representations to the Company, contained in Section IV.B of
the Convertible Note. The registration rights granted pursuant to Sections 2.2
and 2.3 of this Agreement shall have no force or effect until such time as the
Company has otherwise become obligated to file periodic or other reports
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"1934 Act").
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Stock" shall mean the common stock, no par value, of
------------
the Company.
(c) "Form S-1, Form SB-1, Form S-2, Form SB-2 and Form S-3" shall
-----------------------------------------------------
mean Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively,
promulgated by the Commission or any substantially similar form then in effect.
(d) The terms "Register", "Registered" and "Registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares so long as
----------------------
such shares are ineligible for sale under subparagraph (k) of Rule 144.
(f) "Registration Expenses" shall mean all expenses incurred by
---------------------
the Company in complying with Section 2, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
Registration and the reasonable fees and disbursements of counsel for the
Selling Shareholders, as selling shareholders.
<PAGE>
(g) "Registration Statement" shall mean Form S-1, Form SB-1, Form
----------------------
S-2, Form SB-2 or Form S-3, whichever is applicable.
(h) "Restriction Termination Date" shall mean, with respect to
any Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been rendered to the effect that the legend referred to in Section 2(i)(i)
of the Convertible Note can be properly removed and such legend shall have been
removed.
(i) "Rule 144" shall mean Rule 144 promulgated by the Commission
--------
pursuant to the Securities Act.
(j) "Purchasers" shall mean, collectively, the Purchasers, their
----------
assignees and transferees, and individually, a Purchaser and any transferee or
assignee of such Purchaser.
(k) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
(l) "Selling Expenses" shall mean all underwriting discounts and
----------------
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(m) "Selling Shareholders" shall mean a holder of Registrable
--------------------
Securities who requests Registration under Section 2 herein.
(n) "Shares" shall mean the Common Stock issuable to each
------
Purchaser upon the conversion of the Convertible Note and upon exercise of the
warrant ("Warrant") issued by the Company to each Purchaser in connection with
the purchase of a Convertible Note. For the purposes of this Agreement only, a
Purchaser shall be considered a holder of the Shares issuable by the Company
upon full conversion of the Convertible Note and complete exercise of the
Warrant.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Convertible Note.
2.2 Required Registration. If the Company shall be requested by
---------------------
holders of at least a majority of the outstanding Shares to effect the
Registration of Registrable Securities, then the Company shall promptly give
written notice of such proposed Registration to all holders of Shares, and
thereupon the Company shall promptly use its best efforts to effect the
Registration of the Registrable Securities that the Company has been requested
to Register for disposition as described in the request of such holders of
Shares and in any response received from any of the holders of Shares within ten
(10) days or such longer period as shall be set forth in the notice, after
2
<PAGE>
the giving of the written notice by the Company; provided, however, that the
------------------
Company shall not be obligated to effect any Registration except in accordance
with the following provisions:
(a) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 2.2.
(b) Notwithstanding the foregoing, the Company may include in each
such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by others,
provided, however, that, if the number of shares of Common Stock so included
- -------- -------
pursuant to this clause (b) exceeds the number of Registrable Securities
requested by the holders of Shares requesting such Registration, then such
Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2.3; and provided further, however, that the inclusion of
-------- ----------------
such previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Shares requesting such Registration from
registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration statement
pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under "Excluded Forms," as defined in
Section 2.3(a) below) or (ii) for six (6) months after the request for
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
2.3 Piggyback Registration
----------------------
(a) Each time that the Company proposes to Register a public offering
solely of its Common Stock (not including an offering of Common stock issuable
upon conversion or exercise of other securities), other than pursuant to a
Registration Statement on Form S-4 or Form S-8 or similar or successor forms
(collectively, "Excluded Forms"), the Company shall promptly give written notice
of such proposed Registration to all holders of Shares, which shall offer such
holders the right to request inclusion of any Registrable Securities in the
proposed Registration.
(b) Each holder of Shares shall have ten (10) days or such longer
period as shall be set forth in the notice from the receipt of such notice to
deliver to the Company a written request specifying the number of shares of
Registrable Securities such holder intends to sell and the holder's intended
plan of disposition.
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2.3(b) may specify that the Registrable Securities be
included in the underwriting on the
3
<PAGE>
same terms and conditions as the shares of Common Stock, if any, otherwise being
sold through underwriters under such Registration.
(d) Upon receipt of a written request pursuant to Section 2.3(b), the
Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata, based on the number of shares of Registrable Securities each
--------
such holder proposed to include.
(f) All Shares that are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 12 months following a public offering, that the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such Shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become and remain effective in accordance with Section
2.4(b) hereof, keeping each Selling Shareholder advised as to the initiation,
progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of any
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such Selling Shareholder may
4
<PAGE>
reasonably request in order to facilitate the public sale or other disposition
of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided,
---------
however, that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.3(b) hereof, notify each Selling
Shareholder of the happening of any event as a result of which the prospectus
included in such Registration, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, at the request of such seller, prepare,
file and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses
--------
incurred by the Company in complying with this Section 2; provided, however,
-------- -------
that all underwriting discounts and selling commissions applicable to the
Registrable Securities covered by registrations effected pursuant to section 2.2
hereof shall be borne by the seller or sellers thereof, in proportion to the
number of Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be a condition
----------------------------------
precedent to the Company's obligations under this Agreement as to any Selling
Shareholder that each Selling Shareholder furnish to the Company in writing such
information regarding such Selling Shareholder and the distribution proposed by
such Selling Shareholder as the Company may reasonably request.
5
<PAGE>
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company shall
---------------------------------------
indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent partners, and each person who controls such underwriter, against all
claims, losses, damages or liabilities (or actions in respect thereof) suffered
or incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to actions or inaction required of the
Company in connection with any such Registration; and the Company will reimburse
each such Selling Shareholder, each such underwriter, each of their officers,
directors and constituent partners and each person who controls any such Selling
Shareholder or underwriter, for any legal and any other expenses as reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained in
-------- -------
this Section 2.7.1 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected without the
consent of the Company (which consent shall not unreasonably be withheld); and
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to the Company by such Selling Shareholder, underwriter, controlling
person or other indemnified person and stated to be for use in connection with
the offering of securities of the Company.
2.7.2 Selling Shareholder's Indemnification of Company. Each Selling
------------------------------------------------
Shareholder shall indemnify the Company, each of its directors and officers,
each underwriter, if any, of the Company's Registrable Securities covered by a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other Selling Shareholder,
each of its officers, directors and constituent partners and each person
controlling such other Selling Shareholder, against all claims, losses, damages
and liabilities (or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in such Registration Statement or
related prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by such Selling Shareholder of any rule
or regulation promulgated under the Securities Act applicable to such Selling
Shareholder and relating to actions or inaction required of such Selling
Shareholder in connection with the Registration of the Registrable Securities
pursuant to such Registration Statement; and will reimburse the Company, such
other Selling Shareholders, such directors, officers, partners, persons,
underwriters and controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; such indemnification and reimbursement
shall be to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
Registration
6
<PAGE>
Statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by such Selling Shareholder and stated to
be specifically for use in connection with the offering of Registrable
Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an
-------------------------
indemnified party under this Section 2.7 of notice of the commencement of any
action which may give rise to a claim for indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 2.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the right to
employ separate counsel (reasonably satisfactory to the indemnifying party) to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified parties unless the named parties to
such action or proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified parties shall
have been advised by counsel that there are one or more legal defenses available
to the indemnified parties which are different from or additional to those
available to the indemnifying party (in which case, if the indemnified parties
notify the indemnifying party in writing that they elect to employ separate
counsel at the reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified parties, it being understood, however,
that the indemnifying party shall not, in connection with any such action or
proceeding or separate or substantially similar or related action or proceeding
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate counsel at any time for all indemnified parties, which counsel shall be
designated in writing by the Purchasers of a majority of the Registrable
Securities).
2.7.4 Contribution. If the indemnification provided for in this
------------
Section 2.7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party
and the parties' relative intent, knowledge, access to information supplied by
such indemnifying party or indemnified party and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action,
suit, proceeding or claim.
7
<PAGE>
3. Covenants of the Company.
------------------------
The Company agrees to:
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company, after it has become obligated to file periodic or other reports
pursuant to Section 13 of the 1934 Act agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder of
Shares owns any Shares, forthwith upon written request (a) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (b) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (c) such other information as may be
reasonably requested and as is publicly available in availing the holders of
Shares of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
(e) Prior to the filing of the Registration Statement or any amendment
thereto (whether pre-effective or post-effective), and prior to the filing of
any prospectus or prospectus
8
<PAGE>
supplement related thereto, the Company will provide each Selling Shareholder
with copies of all pages thereto, if any, which reference such Selling
Shareholder.
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences, Inc., 99 East River Drive, East Hartford, CT
06108 and (ii) if to a Purchaser, at the address set forth in the Convertible
Note, or at such other address as each such party furnishes by notice given in
accordance with this Section 4(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut, as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Agreement for the benefit
of the Purchasers by its duly authorized officer as of the date first above
written.
ACCENT COLOR SCIENCES, INC.
By:
------------------------------
Richard J. Coburn, President
and Chief Executive Officer
Agreed and Accepted this
_____ day of _____________________, 1995
- -------------------------------
By:
----------------------------
Name:
Title:
10
<PAGE>
EXHIBIT 10.25
Exhibit I
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this ____ day
---------
of ______, 1995, by ACCENT COLOR SCIENCES, INC., a Connecticut corporation (the
"Company") for the benefit of each Purchaser (individually a "Purchaser" and
------- ---------
collectively, the "Purchasers") entering into a Warrant Purchase Agreement
----------
(the "Warrant Agreement") with the Company of even date herewith.
-----------------
1. Securities Laws Representations and Covenants of Purchaser.
----------------------------------------------------------
The registration rights granted pursuant to Sections 2.2 and 2.3 of this
Agreement shall have no force or effect until such time as the Company has
otherwise become obligated to file periodic or other reports pursuant to Section
13 of the Securities Exchange Act of 1934, as amended (the "1934 Act").
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Stock" shall mean the common stock, no par value, of
------------
the Company.
(c) "Form S-1, Form SB-1, Form S-2, Form SB-2 and Form S-3"
-----------------------------------------------------
shall mean Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively,
promulgated by the Commission or any substantially similar form then in effect.
(d) The terms "Register", "Registered" and "Registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares so long as
----------------------
such shares are ineligible for sale under subparagraph (k) of Rule 144.
(f) "Registration Expenses" shall mean all expenses incurred
---------------------
by the Company in complying with Section 2, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
Registration and the reasonable fees and disbursements of counsel for the
Selling Shareholders, as selling shareholders.
(g) "Registration Statement" shall mean Form S-1, Form SB-1, Form
----------------------
S-2, Form SB-2 or Form S-3, whichever is applicable.
(h) "Restriction Termination Date" shall mean, with respect to
----------------------------
any Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been
<PAGE>
rendered to the effect that any restrictive legend placed upon the Registrable
Securities under the Securities Act can be properly removed and such legend
shall have been removed.
(i) "Rule 144" shall mean Rule 144 promulgated by the Commission
--------
pursuant to the Securities Act.
(j) "Purchasers" shall mean, collectively, the Purchasers, their
----------
assignees and transferees, and individually, a Purchaser and any transferee or
assignee of such Purchaser.
(k) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
(l) "Selling Expenses" shall mean all underwriting discounts and
----------------
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(m) "Selling Shareholders" shall mean a holder of Registrable
--------------------
Securities who requests Registration under Section 2 herein.
(n) "Shares" shall mean the Common Stock issued to the Purchasers
------
pursuant to various Warrant Agreements.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Warrant Agreement.
2.2 Required Registration. If the Company shall be requested by
---------------------
holders of at least a majority of the outstanding Shares to effect the
Registration of Registrable Securities, then the Company shall promptly give
written notice of such proposed Registration to all holders of Shares, and
thereupon the Company shall promptly use its best efforts to effect the
Registration of the Registrable Securities that the Company has been requested
to Register for disposition as described in the request of such holders of
Shares and in any response received from any of the holders of Shares within ten
(10) days or such longer period as shall be set forth in the notice, after the
giving of the written notice by the Company; provided, however, that the Company
-----------------
shall not be obligated to effect any Registration except in accordance with the
following provisions:
(a) The Company shall not be obligated to file and cause to
become effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 2.2.
(b) Notwithstanding the foregoing, the Company may include in
each such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by others,
provided, however, that, if the number of shares of Common Stock so included
- -------- -------
pursuant to this clause (b) exceeds the number of Registrable Securities
requested by the holders of Shares requesting such Registration, then such
Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2.3; and provided further, however, that the inclusion of
-------- ----------------
such previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Shares requesting such Registration from
registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration statement
pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under "Excluded Forms," as defined in
Section 2.3(a) below) or (ii) for six (6) months after the request for
2
<PAGE>
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
2.3 Piggyback Registration.
----------------------
(a) Each time that the Company proposes to Register a public
offering solely of its Common Stock (not including an offering of Common stock
issuable upon conversion or exercise of other securities), other than pursuant
to a Registration Statement on Form S-4 or Form S-8 or similar or successor
forms (collectively, "Excluded Forms"), the Company shall promptly give written
notice of such proposed Registration to all holders of Shares, which shall offer
such holders the right to request inclusion of any Registrable Securities in the
proposed Registration.
(b) Each holder of Shares shall have ten (10) days or such longer
period as shall be set forth in the notice from the receipt of such notice to
deliver to the Company a written request specifying the number of shares of
Registrable Securities such holder intends to sell and the holder's intended
plan of disposition.
(c) In the event that the proposed Registration by the Company
is, in whole or in part, an underwritten public offering of securities of the
Company, any request under Section 2.3(b) may specify that the Registrable
Securities be included in the underwriting on the same terms and conditions as
the shares of Common Stock, if any, otherwise being sold through underwriters
under such Registration.
(d) Upon receipt of a written request pursuant to Section 2.3(b),
the Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of
an underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata, based on the number of shares of Registrable Securities each
--------
such holder proposed to include.
(f) All Shares that are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 12 months following a public offering, that the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such Shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
3
<PAGE>
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become and remain effective in accordance with
Section 2.4(b) hereof, keeping each Selling Shareholder advised as to the
initiation, progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of
any summary prospectus or other prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
documents as such Selling Shareholder may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided,
---------
however, that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.3(b) hereof, notify each Selling
Shareholder of the happening of any event as a result of which the prospectus
included in such Registration, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, at the request of such seller, prepare,
file and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses
--------
incurred by the Company in complying with this Section 2; provided, however,
-------- -------
that all underwriting discounts and selling commissions applicable to the
Registrable Securities covered by registrations effected pursuant to section 2.2
hereof shall be borne by the seller or sellers thereof, in proportion to the
number of Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be a condition
----------------------------------
precedent to the Company's obligations under this Agreement as to any Selling
Shareholder that each Selling Shareholder furnish to the Company in writing such
information regarding such Selling Shareholder and the distribution proposed by
such Selling Shareholder as the Company may reasonably request.
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company
---------------------------------------
shall indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent
4
<PAGE>
partners, and each person who controls such underwriter, against all claims,
losses, damages or liabilities (or actions in respect thereof) suffered or
incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to actions or inaction required of the
Company in connection with any such Registration; and the Company will reimburse
each such Selling Shareholder, each such underwriter, each of their officers,
directors and constituent partners and each person who controls any such Selling
Shareholder or underwriter, for any legal and any other expenses as reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained in
-------- -------
this Section 2.7.1 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected without the
consent of the Company (which consent shall not unreasonably be withheld); and
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to the Company by such Selling Shareholder, underwriter, controlling
person or other indemnified person and stated to be for use in connection with
the offering of securities of the Company.
2.7.2 Selling Shareholder's Indemnification of Company. Each
------------------------------------------------
Selling Shareholder shall indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's Registrable Securities
covered by a Registration Statement, each person who controls the Company or
such underwriter within the meaning of the Securities Act, and each other
Selling Shareholder, each of its officers, directors and constituent partners
and each person controlling such other Selling Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) suffered or
incurred by any of them and arising out of or based upon any untrue statement
(or alleged untrue statement) of a material fact contained in such Registration
Statement or related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Selling Shareholder
of any rule or regulation promulgated under the Securities Act applicable to
such Selling Shareholder and relating to actions or inaction required of such
Selling Shareholder in connection with the Registration of the Registrable
Securities pursuant to such Registration Statement; and will reimburse the
Company, such other Selling Shareholders, such directors, officers, partners,
persons, underwriters and controlling persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; such indemnification and
reimbursement shall be to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by such Selling
Shareholder and stated to be specifically for use in connection with the
offering of Registrable Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an
-------------------------
indemnified party under this Section 2.7 of notice of the commencement of any
action which may give rise to a claim for indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 2.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the right to
employ separate counsel (reasonably satisfactory to the indemnifying party) to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified parties unless the named parties to
such action or proceedings include both the indemnifying party and the
indemnified parties
5
<PAGE>
and the indemnifying party or such indemnified parties shall have been advised
by counsel that there are one or more legal defenses available to the
indemnified parties which are different from or additional to those available to
the indemnifying party (in which case, if the indemnified parties notify the
indemnifying party in writing that they elect to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action or proceeding on behalf of
the indemnified parties, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding or separate or
substantially similar or related action or proceeding in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate counsel at any time for
all indemnified parties, which counsel shall be designated in writing by the
Purchasers of a majority of the Registrable Securities).
2.7.4 Contribution. If the indemnification provided for in this
------------
Section 2.7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party
and the parties' relative intent, knowledge, access to information supplied by
such indemnifying party or indemnified party and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action,
suit, proceeding or claim.
3. Covenants of the Company.
------------------------
The Company agrees to:
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company, after it has become obligated to file periodic or other reports
pursuant to Section 13 of the 1934 Act agrees to:
6
<PAGE>
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder of
Shares owns any Shares, forthwith upon written request (a) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (b) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (c) such other information as may be
reasonably requested and as is publicly available in availing the holders of
Shares of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
(e) Prior to the filing of the Registration Statement or any
amendment thereto (whether pre-effective or post-effective), and prior to the
filing of any prospectus or prospectus supplement related thereto, the Company
will provide each Selling Shareholder with copies of all pages thereto, if any,
which reference such Selling Shareholder.
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences, Inc., 99 East River Drive, East Hartford, CT
06108 and (ii) if to a Purchaser, at the address set forth in his Warrant
Agreement, or at such other address as each such party furnishes by notice given
in accordance with this Section 4(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut, as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
7
<PAGE>
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Agreement for the benefit
of the Purchasers by its duly authorized officer as of the date first above
written.
ACCENT COLOR SCIENCES, INC.
By:
------------------------------
Richard J. Coburn, President
and Chief Executive Officer
Agreed and Accepted this
_____ day of _______________, 1995
- ----------------------------
By:
-------------------------
Name:
Title:
9
<PAGE>
EXHIBIT 10.26
Exhibit I
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this 1st
---------
day of March, 1996, by ACCENT COLOR SCIENCES, INC., a Connecticut corporation
(the "Company") for the benefit of each Purchaser (individually a "Purchaser"
------- ---------
and collectively, the "Purchasers") entering into a Warrant Purchase Agreement
----------
(the "Warrant Agreement") with the Company of even date herewith.
-----------------
1. Securities Laws Representations and Covenants of Purchaser.
----------------------------------------------------------
The registration rights granted pursuant to Sections 2.2 and 2.3 of this
Agreement shall have no force or effect until such time as the Company has
otherwise become obligated to file periodic or other reports pursuant to Section
13 of the Securities Exchange Act of 1934, as amended (the "1934 Act").
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
(b) "Common Stock" shall mean the common stock, no par value, of
------------
the Company.
(c) "Form S-1, Form SB-1, Form S-2, Form SB-2 and Form S-3" shall mean
-----------------------------------------------------
Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively, promulgated
by the Commission or any substantially similar form then in effect.
(d) The terms "Register", "Registered" and "Registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares so long as such
----------------------
shares are ineligible for sale under subparagraph (k) of Rule 144.
(f) "Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with Section 2, including, without limitation, all federal
and state registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such Registration
and the reasonable fees and disbursements of counsel for the Selling
Shareholders, as selling shareholders.
(g) "Registration Statement" shall mean Form S-1, Form SB-1, Form
----------------------
S-2, Form SB-2 or Form S-3, whichever is applicable.
(h) "Restriction Termination Date" shall mean, with respect to any
----------------------------
Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been
<PAGE>
rendered to the effect that any restrictive legend placed upon the Registrable
Securities under the Securities Act can be properly removed and such legend
shall have been removed.
(i) "Rule 144" shall mean Rule 144 promulgated by the Commission
--------
pursuant to the Securities Act.
(j) "Purchasers" shall mean, collectively, the Purchasers, their
----------
assignees and transferees, and individually, a Purchaser and any transferee or
assignee of such Purchaser.
(k) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
(l) "Selling Expenses" shall mean all underwriting discounts and
----------------
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(m) "Selling Shareholders" shall mean a holder of Registrable
--------------------
Securities who requests Registration under Section 2 herein.
(n) "Shares" shall mean the Common Stock issued to the Purchasers
------
pursuant to various Warrant Agreements.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Warrant Agreement.
2.2 Required Registration. If the Company shall be requested by
---------------------
holders of at least a majority of the outstanding Shares to effect the
Registration of Registrable Securities, then the Company shall promptly give
written notice of such proposed Registration to all holders of Shares, and
thereupon the Company shall promptly use its best efforts to effect the
Registration of the Registrable Securities that the Company has been requested
to Register for disposition as described in the request of such holders of
Shares and in any response received from any of the holders of Shares within ten
(10) days or such longer period as shall be set forth in the notice, after the
giving of the written notice by the Company; provided, however, that the Company
-----------------
shall not be obligated to effect any Registration except in accordance with the
following provisions:
(a) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 2.2.
(b) Notwithstanding the foregoing, the Company may include in each
such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by others,
provided, however, that, if the number of shares of Common Stock so included
- -------- -------
pursuant to this clause (b) exceeds the number of Registrable Securities
requested by the holders of Shares requesting such Registration, then such
Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2.3; and provided further, however, that the inclusion of
-------- ----------------
such previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Shares requesting such Registration from
registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration statement
pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under "Excluded Forms," as defined in
Section 2.3(a) below) or (ii) for six (6) months after the request for
2
<PAGE>
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
2.3 Piggyback Registration
----------------------
(a) Each time that the Company proposes to Register a public offering
solely of its Common Stock (not including an offering of Common stock issuable
upon conversion or exercise of other securities), other than pursuant to a
Registration Statement on Form S-4 or Form S-8 or similar or successor forms
(collectively, "Excluded Forms"), the Company shall promptly give written notice
of such proposed Registration to all holders of Shares, which shall offer such
holders the right to request inclusion of any Registrable Securities in the
proposed Registration.
(b) Each holder of Shares shall have ten (10) days or such longer
period as shall be set forth in the notice from the receipt of such notice to
deliver to the Company a written request specifying the number of shares of
Registrable Securities such holder intends to sell and the holder's intended
plan of disposition.
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2.3(b) may specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares of
Common Stock, if any, otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section 2.3(b), the
Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata, based on the number of shares of Registrable Securities each
--------
such holder proposed to include.
(f) All Shares that are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 12 months following a public offering, that the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such Shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
3
<PAGE>
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become and remain effective in accordance with Section
2.4(b) hereof, keeping each Selling Shareholder advised as to the initiation,
progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of any
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such Selling Shareholder may reasonably request in order to facilitate the
public sale or other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided,
---------
however, that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.3(b) hereof, notify each Selling
Shareholder of the happening of any event as a result of which the prospectus
included in such Registration, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, at the request of such seller, prepare,
file and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses
--------
incurred by the Company in complying with this Section 2; provided, however,
-------- -------
that all underwriting discounts and selling commissions applicable to the
Registrable Securities covered by registrations effected pursuant to section 2.2
hereof shall be borne by the seller or sellers thereof, in proportion to the
number of Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be a condition
----------------------------------
precedent to the Company's obligations under this Agreement as to any Selling
Shareholder that each Selling Shareholder furnish to the Company in writing such
information regarding such Selling Shareholder and the distribution proposed by
such Selling Shareholder as the Company may reasonably request.
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company shall
---------------------------------------
indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent
4
<PAGE>
partners, and each person who controls such underwriter, against all
claims, losses, damages or liabilities (or actions in respect thereof) suffered
or incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to actions or inaction required of the
Company in connection with any such Registration; and the Company will reimburse
each such Selling Shareholder, each such underwriter, each of their officers,
directors and constituent partners and each person who controls any such Selling
Shareholder or underwriter, for any legal and any other expenses as reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained in
-------- -------
this Section 2.7.1 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected without the
consent of the Company (which consent shall not unreasonably be withheld); and
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to the Company by such Selling Shareholder, underwriter, controlling
person or other indemnified person and stated to be for use in connection with
the offering of securities of the Company.
2.7.2 Selling Shareholder's Indemnification of Company. Each Selling
------------------------------------------------
Shareholder shall indemnify the Company, each of its directors and officers,
each underwriter, if any, of the Company's Registrable Securities covered by a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other Selling Shareholder,
each of its officers, directors and constituent partners and each person
controlling such other Selling Shareholder, against all claims, losses, damages
and liabilities (or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in such Registration Statement or
related prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by such Selling Shareholder of any rule
or regulation promulgated under the Securities Act applicable to such Selling
Shareholder and relating to actions or inaction required of such Selling
Shareholder in connection with the Registration of the Registrable Securities
pursuant to such Registration Statement; and will reimburse the Company, such
other Selling Shareholders, such directors, officers, partners, persons,
underwriters and controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; such indemnification and reimbursement
shall be to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in conformity with
written information furnished to the Company by such Selling Shareholder and
stated to be specifically for use in connection with the offering of Registrable
Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an
-------------------------
indemnified party under this Section 2.7 of notice of the commencement of any
action which may give rise to a claim for indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 2.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the right to
employ separate counsel (reasonably satisfactory to the indemnifying party) to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified parties unless the named parties to
such action or proceedings include both the indemnifying party and the
indemnified
5
<PAGE>
parties and the indemnifying party or such indemnified parties shall
have been advised by counsel that there are one or more legal defenses available
to the indemnified parties which are different from or additional to those
available to the indemnifying party (in which case, if the indemnified parties
notify the indemnifying party in writing that they elect to employ separate
counsel at the reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified parties, it being understood, however,
that the indemnifying party shall not, in connection with any such action or
proceeding or separate or substantially similar or related action or proceeding
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate counsel at any time for all indemnified parties, which counsel shall be
designated in writing by the Purchasers of a majority of the Registrable
Securities).
2.7.4 Contribution. If the indemnification provided for in this
------------
Section 2.7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party
and the parties' relative intent, knowledge, access to information supplied by
such indemnifying party or indemnified party and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action,
suit, proceeding or claim.
3. Covenants of the Company.
------------------------
The Company agrees to:
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company, after it has become obligated to file periodic or other reports
pursuant to Section 13 of the 1934 Act agrees to:
6
<PAGE>
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder of
Shares owns any Shares, forthwith upon written request (a) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (b) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (c) such other information as may be
reasonably requested and as is publicly available in availing the holders of
Shares of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
(e) Prior to the filing of the Registration Statement or any amendment
thereto (whether pre-effective or post-effective), and prior to the filing of
any prospectus or prospectus supplement related thereto, the Company will
provide each Selling Shareholder with copies of all pages thereto, if any, which
reference such Selling Shareholder.
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences, Inc., 99 East River Drive, East Hartford, CT
06108 and (ii) if to a Purchaser, at the address set forth in his Warrant
Agreement, or at such other address as each such party furnishes by notice given
in accordance with this Section 4(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut, as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
7
<PAGE>
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
IN WITNESS WHEREOF, the Company has executed this Agreement for the benefit
of the Purchasers by its duly authorized officer as of the date first above
written.
ACCENT COLOR SCIENCES, INC.
By:---------------------------------------------------
Richard J. Coburn, President
and Chief Executive Officer
Agreed and Accepted this
day of , 1995
- ----- ---------------------
- ---------------------------------
By:----------------------
Name:
Title:
8
<PAGE>
Exhibit 10.28
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made this ____ day
-----------
of February 1996, by ACCENT COLOR SCIENCES, INC., a Connecticut corporation
(the "Company") for the benefit of XEROX CORPORATION, a New York corporation
---------
("Xerox"), and each other Purchaser (individually a "Purchaser" and
-----------
collectively, the "Purchasers") entering into a Warrant Purchase Agreement (the
------------
"Warrant Agreement").
- -------------------
1. Securities Laws Representations and Covenants of Purchaser.
----------------------------------------------------------
The registration rights granted pursuant to Sections 2.2 and 2.3 of this
Agreement shall have no force or effect until such time as the Company has
otherwise become obligated to file periodic or other reports pursuant to Section
13 of the Securities Exchange Act of 1934, as amended (the "1934 Act").
2. Registration Rights.
-------------------
2.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "Common Stock" shall mean the common stock, no par value, of the
Company.
(c) "Form S1. Form SB-1. Form S-2. Form SB-2 and Form S-3" shall mean
Form S-1, Form SB-1, Form S-2, Form SB-2 or Form S-3, respectively, promulgated
by the Commission or any substantially similar or successor form then in effect.
(d) The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares until such time as
such shares become eligible for sale under subparagraph (k) of Rule 144 or any
successor thereto.
<PAGE>
(f) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Section 2, including, without limitation, all federal
and state registration, qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such Registration
and the reasonable fees and disbursements of counsel for the Selling
Shareholders, as selling shareholders.
(g) "Registration Statement" shall mean Form S-1, Form SB-1, Form
S-2, Form SB-2 or Form S-3, whichever is applicable.
(h) "Restriction Termination Date" shall mean, with respect to any
Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such securities or
transferred in compliance with Rule 144, and (ii) the date that an opinion of
counsel to the Company containing reasonable assumptions (which opinion shall be
subject to the reasonable approval of counsel to any affected Purchaser) shall
have been rendered to the effect that any restrictive legend placed upon the
Registrable Securities under the Securities Act can be properly removed and such
legend shall have been removed.
(i) "Rule 144" shall mean Rule 144 promulgated by the Commission
pursuant to the Securities Act and any successor rules thereto.
(j) "Purchasers" shall mean, collectively, the Purchasers (including
Xerox), their assignees and transferees, and individually, a Purchaser
(including Xerox) and any transferee or assignee of such Purchaser.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(l) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(m) "Selling Shareholders" shall mean a holder of Registrable
Securities who requests Registration under Section 2 herein.
(n) "Shares" shall mean the Common Stock issued to the Purchasers
pursuant to various Warrant agreements regardless of whether such Warrant
Agreements have been or in the future are entered into between the Company and
any Purchaser.
Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Warrant Agreement.
2
<PAGE>
2.2 Required Registration. If the Company shall be requested by holders
---------------------
of at least a majority of the outstanding Shares to effect the Registration of
Registrable Securities, then the Company shall promptly give written notice of
such proposed Registration to all holders of Shares, and thereupon the Company
shall promptly use its best efforts to effect the Registration of the
Registrable Securities that the Company has been requested to Register for
disposition as described in the request of such holders of Shares and in any
response received from any of the holders of Shares within ten (10) days or such
longer period as shall be set forth in the notice, after the giving of the
written notice by the Company; provided however, that the Company shall not be
----------------
obligated to effect any Registration except in accordance with the following
provisions:
(a) The Company shall not be obligated to file and cause to become
effective more than one (1) registration statement in which Registrable
Securities are Registered pursuant to this Section 2.2.
(b) Notwithstanding the foregoing, the Company may include in each
such Registration requested pursuant to this Section 2.2 any authorized but
unissued shares of Common Stock (or authorized treasury shares) for sale by the
Company or any issued and outstanding shares of Common Stock for sale by others,
provided however, that, if the number of shares of Common Stock so included
- ----------------
pursuant to this clause (b) exceeds the number of Registrable Securities
requested by the holders of Shares requesting such Registration, then such
Registration shall be deemed to be a Registration in accordance with and
pursuant to Section 2.3; and provided further however that the inclusion of such
------------------------
previously authorized but unissued shares of Common Stock by the Company or
issued and outstanding shares of Common Stock by others in such Registration
shall not prevent the holders of Shares requesting such Registration from
registering the entire number of Registrable Securities requested by them.
(c) The Company shall not be required to file a registration
statement pursuant to this Section 2: (i) within six (6) months after any other
registration by the Company (other than under "Excluded Forms," as defined in
Section 2.3 (a) below) or (ii) for six (6) months after the request for
registration under this Section 2.2 if the Company is then engaged in
negotiations regarding a material transaction which has not otherwise been
publicly disclosed, or such shorter period ending on the date, whichever first
occurs, that such transaction is publicly disclosed, abandoned or consummated.
3
<PAGE>
2.3 Piggyback Registration
----------------------
(a) Each time that the Company proposes to Register a public offering
solely of its Common Stock (not including an offering of Common stock issuable
upon conversion or exercise of other securities), other than pursuant to a
Registration Statement on Form S-4 or Form S-8 or similar or successor forms
(collectively,"Excluded Forms"), the Company shall promptly give written notice
of such proposed Registration to all holders of Shares, which shall offer such
holders the right to request inclusion of any Registrable Securities in the
proposed Registration.
(b) Each holder of Shares shall have ten (10) days or such longer
period as shall be set forth in the notice from the receipt of such notice to
deliver to the Company a written request specifying the number of shares of
Registrable Securities such holder intends to sell and the holder's intended
plan of disposition.
(c) In the event that the proposed Registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
any request under Section 2.3 (b) may specify that the Registrable Securities be
included in the underwriting on the same terms and conditions as the shares of
Common Stock, if any, otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section 2.3 (b),
the Company shall promptly use its best efforts to cause all such Registrable
Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter of an
underwritten public offering, determines and advises in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other issued and outstanding
shares of Common Stock proposed to be included therein by holders other than the
holders of Registrable Securities (such other shares hereinafter collectively
referred to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the underwritten public
offering, then the number of such shares to be included in such underwritten
public offering shall be reduced, and shares shall be excluded from such
underwritten public offering in a number deemed necessary by such managing
underwriter, first by excluding shares held by the directors, officers,
employees and founders of the Company, and then, to the extent necessary, by
excluding Registrable Securities participating in such underwritten public
offering, pro rata based
--------
4
<PAGE>
on the number of shares of Registrable Securities each such holder proposed to
include.
(f) All Shares that are not included in the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 12 months following a public offering, that the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering. The holders of such Shares shall execute such
documentation as the managing underwriter reasonably requests to evidence this
lock-up.
2.4 Preparation and Filing. If and whenever the Company is under an
----------------------
obligation pursuant to the provisions of this Section 2 to use its best efforts
to effect the Registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become and remain effective in accordance with
Section 2.4( b) hereof, keeping each Selling Shareholder advised as to the
initiation, progress and completion of the Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements-and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for nine months and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement;
(c) furnish to each Selling Shareholder such number of copies of any
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Selling Shareholder may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Selling Shareholder shall reasonably
request and do any and all other acts or things which may be necessary or
advisable to enable such holder to consummate the public sale or other
disposition in such jurisdictions of such Registrable Securities; provided
--------
however, that the Company shall not be required to consent to general service of
- -------
process, qualify to do business as a foreign corporation where it would not be
otherwise required to qualify or submit to liability for state or local taxes
where it is not liable for such taxes; and
5
<PAGE>
(e) at any time when a prospectus covered by such Registration
Statement is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 2.3 (b) hereof, notify each Selling
Shareholder of the happening of any event as a result of which the prospectus
included in such Registration, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, at the request of such seller, prepare,
file and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing.
2.5 Expenses. The Company shall pay all Registration Expenses incurred by
--------
the Company in complying with this Section 2; provided however that all
----------------
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to section 2.2 hereof
shall be borne by the seller or sellers thereof, inproportion to the number of
Registrable Securities sold by such seller or sellers.
2.6 Information Furnished by Purchaser. It shall be a condition precedent
----------------------------------
to the Company's obligations under this Agreement as to any Selling Shareholder
that each Selling Shareholder furnish to the Company in writing such information
regarding such Selling Shareholder and the distribution proposed by such Selling
Shareholder as the Company may reasonably request.
2.7 Indemnification.
---------------
2.7.1 Company's Indemnification of Purchasers. The Company shall
---------------------------------------
indemnify each Selling Shareholder, each of its officers, directors and
constituent partners, and each person controlling such Selling Shareholder, and
each underwriter thereof, if any, and each of its officers, directors,
constituent partners, and each person who controls such underwriter, against all
claims, losses, damages or liabilities (or actions in respect thereof) suffered
or incurred by any of them, to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to actions or inaction required of the
Company in
6
<PAGE>
connection with any such Registration; and the Company will reimburse each such
Selling Shareholder, each such underwriter, each of their officers, directors
and constituent partners and each person who controls any such Selling
Shareholder or underwriter, for any legal and any other expenses as reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided however, that the indemnity contained in
----------------
this Section 2.7.1 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected without the
consent of the Company (which consent shall not unreasonably be withheld); and
provided however, that the Company will not be liable in any such case to the
- ----------------
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to the Company by such Selling Shareholder, underwriter, controlling -
person or other indemnified person and stated to be for use in connection with
the offering of securities of the Company.
2.7.2 Selling Shareholder's Indemnification of Company.
------------------------------------------------
Each Selling Shareholder shall indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's Registrable Securities
covered by a Registration Statement, each person who controls the Company or
such underwriter within the meaning of the Securities Act, and each other
Selling Shareholder, each of its officers, directors and constituent partners
and each person controlling such other Selling Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) suffered or
incurred by any of them and arising out of or based upon any untrue statement
(or alleged untrue statement) of a material fact contained in such Registration
Statement or related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Selling Shareholder
of any rule or regulation promulgated under the Securities Act applicable to
such Selling Shareholder and relating to actions or inaction required of such
Selling Shareholder in connection with the Registration of the Registrable
Securities pursuant to such Registration Statement; and will reimburse the
Company, such other Selling Shareholders, such directors, officers, partners,
persons, underwriters ' and controlling persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; such indemnification and
reimbursement shall be to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by such Selling
Shareholder and stated to be specifically for use in connection with the
offering of Registrable Securities. Anything in the foregoing to the contrary
notwithstanding, in no event shall the aggregate obligations of a Selling
Shareholder under this
7
<PAGE>
Section 2.7.2 to all parties that may be entitled to indemnification hereunder
exceed the amount of proceeds received by such Selling Shareholder in connection
with such offering of Registrable Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an
-------------------------
indemnified party under this Section 2.7 of notice of the commencement of any
action which may give rise to a claim for indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 2.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim, and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the, right to
employ, separate counsel (reasonably satisfactory to the indemnifying party) to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified parties unless the named parties to
such action or proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified parties shall
have been advised by counsel that there are one or more legal defenses available
to the indemnified parties which are different from or additional to those
available to the indemnifying party (in which case, if the indemnified parties
notify the indemnifying party in writing that they elect to employ separate
counsel at the reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified parties, it being understood, however,
that the indemnifying party shall not, in connection with any such action or
proceeding or separate or substantially similar or related action or proceeding
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate counsel at any time for all indemnified parties, which counsel shall be
designated in writing by the Purchasers of a majority of the Registrable
Securities).
2.7.4 Contribution. If the indemnification provided for in this
------------
Section 2.7 from an indemnifying party is unavailable to an indemnified party
hereunder in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the statements
or omissions which result in such losses, claims, damages, liabilities or
expenses, as well as any
8
<PAGE>
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or indemnified party and the parties'
relative intent, knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action, suit, proceeding or
claim.
3. Covenants of the Company. The Company agrees to:
------------------------
(a) Notify the holders of Registrable Securities included in a
Registration Statement of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the reporting of the
Registrable Securities on NASDAQ.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the holders thereof
pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Purchasers to sell securities of the Company to the public without registration,
the Company, after it has become obligated to file periodic or other reports
pursuant to Section 13 of the 1934 Act agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days after the
effective date of the first Registration Statement filed by the Company for the
offering of its securities to the general public;
9
<PAGE>
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder
of Shares owns any Shares, forthwith upon written request: (a) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company), the Securities Act and the 1934
Act (at any time after it has become subject to such reporting requirements),
(b) a copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company and (c) such other
information as may be reasonably requested and as is publicly available in
availing the holders of Shares of any rule or regulation of the Commission which
permits the selling of any such securities without registration.
(e) Prior to the filing of the Registration Statement or any
amendment thereto (whether pre-effective or post-effective), and prior to the
filing of any prospectus or prospectus supplement related thereto, the Company
will provide each Selling Shareholder with copies of all pages thereto, if any,
which reference such Selling.
4. Miscellaneous.
-------------
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Accent Color Sciences, Inc., 99 East River Drive, East Hartford, CT
06108 and (ii) if to a Purchaser, at the address set forth in his Warrant
Agreement, or at such other address as each such party furnishes by notice given
in accordance with this Section 4 (a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Connecticut, as such laws
are applied by Connecticut courts to agreements entered into and to be performed
in Connecticut by and between residents of Connecticut. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall
10
<PAGE>
be deemed modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
(d) This Agreement may not be assigned by the Purchaser other than to
the purchaser or transferee of more than 50% of the Purchaser's Shares, provided
that such assignee is not engaged in a business in which the Company is engaged.
(e) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by the Company and the holders of a majority in interest
of the Registrable Securities.
(f) This Agreement may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which together shall be deemed to be one and the same Agreement.
IN WITNESS WHEREOF, the Company has executed this Agreement for the benefit
of the Purchasers by its duly authorized officer as of the date first above
written.
ACCENT COLOR SCIENCES, INC.
By:_________________________
Richard J. Coburn, President
and Chief Executive Officer
Agreed and Accepted this
____ day of October, 1996
XEROX CORPORATION
By:_________________________
Name:
Title:
11
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
registration Statement on Form S-1 of our report dated April 5, 1996, except as
to the stock split described in Note 13 which is as of October 8, 1996, relating
to the financial statements of Accent Color Sciences, Inc. (a development stage
company), which appears in such Prospectus. We also consent to the references to
us under the headings "Selected Financial Data" and "Experts" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
Hartford, CT
October 10, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby
appoint and constitute Richard J. Coburn and Norman L. Milliard and each of them
as his agent and attorney-in-fact to execute in his name, place and stead
(whether on behalf of the undersigned individually or as an officer or director
of Accent Color Sciences, Inc. or otherwise) the Registration Statement on Form
S-1 of Accent Color Sciences, Inc. respecting its offering of up to 3,450,000
shares of Common Stock (including the Underwriters' over-allotment option
shares) and any and all amendments thereto and to file such Form S-1 and any
such amendment thereto with the Securities and Exchange Commission. Each of the
said attorneys shall have the power to act hereunder with or without the other.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
__________ day of August, 1996.
/s/ Richard J. Colburn /s/ Raymond N. Smith
- ---------------------------------- ------------------------------
Richard J. Coburn Raymond N. Smith
/s/ Richard Hogdson /s/ Robert H. Steele
- ---------------------------------- ------------------------------
Richard Hogdson Robert H. Steele
/s/ Norman L. Milliard /s/ Peter Teufel
- ---------------------------------- ------------------------------
Norman L. Milliard Peter Teufel
/s/ Willard F. Pinney, Jr.
- ----------------------------------
Willard F. Pinney, Jr.
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