SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. __)
ENTERACTIVE, INC.
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(Name of Issuer)
ENTERACTIVE, INC.
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(Name of Person(s) Filing Statement)
Common Stock Purchase Warrant Expiring October 20, 1997
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(Title of Class of Securities)
(CUSIP Number of Class of Securities)
Andrew Gyenes
Enteractive, Inc.
110 West 40th Street, Suite 2100
New York, New York 10018
(212) 221-6559
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
Steven Wolosky, Esq.
Kenneth A. Schlesinger, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, NY 10022
(212) 753-7200
Facsimile: (212) 755-1467
September __, 1997
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(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation(1) Amount of Filing Fee
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$480,137,625 $96.03
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o Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
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(1) Estimated solely for purposes of calculating the fee in accordance with
Rule 0-11 under the Securities Exchange Act of 1934, as amended. Based
upon the average of the high and low sales prices as of September __,
1997 of the Warrants ($3/32), multiplied by the number of Warrants that
the issuer, Enteractive, Inc. (the "Company") is offering to acquire
(5,121,468) Warrants).
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Item 1. Security and Issuer.
(a) The name of the Issuer is Enteractive, Inc., a Delaware corporation
(the "Company"), which has its principal executive offices at 110 West 40th
Street, Suite 2100, New York, New York 10018.
(b) The Company is seeking to acquire up to all of the 5,121,468
outstanding publicly-traded Common Stock Purchase Warrants expiring on October
20, 1997 (the "Warrants"). The Company is offering to exchange one share of its
Common Stock, $.01 par value per share (the "Common Stock"), for twenty Warrants
properly tendered and not validly withdrawn, upon the terms and subject to the
conditions set forth in the Offering Circular of the Company, dated September
16, 1997 (the "Offering Circular"), and the related Letter of Transmittal (the
"Exchange Offer"). Copies of the Offering Circular and the Letter of Transmittal
relating to the Exchange Offer are filed herewith as Exhibits (a)(1) and (a)(2),
respectively. Information with respect to the number of Warrants outstanding is
set forth in the Offering Circular under "THE EXCHANGE OFFER -- General --
Exchange Offer" and is incorporated herein by reference. Officers, directors and
affiliates of the Company that own Warrants may participate in the Exchange
Offer on the same basis as all other holders of Warrants. Definitive information
with respect to their participation in the Exchange Offer will not be available
to the Company until the consummation thereof.
(c) The information in the Offering Circular under "SUMMARY -- Price
Range of Warrants" is incorporated herein by reference.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
(a) The consideration being offered in the Exchange Offer consists of
one share of Common Stock for every twenty Warrants as described in the Offering
Circular under "Summary -- The Offer" and "The Offer," which is incorporated
herein by reference. The Company had previously reserved 5,121,468 shares of its
authorized but unissued Common Stock for issuance upon exercise of the Warrants.
The Company has reserved 256,073 shares of its authorized but unissued Common
Stock for issuance upon exchange of the Warrants.
(b) Not Applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
The information set forth in the Offering Circular under "Summary --
Purposes and Effects of the Offer," "Purposes and Effects of the Offer," and
"The Offer" is incorporated herein by reference. All Warrants that are exchanged
pursuant to the terms and
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conditions of the Exchange Offer will be canceled upon consummation of the
Exchange Offer. The Company presently has no plans or proposals that relate to
or would result in any of the events listed in Items 3(a)-3(j) of Schedule
13E-4, except as set forth below.
(a) The information set forth in the Offering Circular under "The Offer
- -- Interests of Directors and Executive Officers" is incorporated herein by
reference.
(e) The capitalization of the Company will change as a result of
issuance of Common Stock in exchange for the Warrants. The information set forth
in the Offering Circular under "Summary -- Capitalization of the Company" and
"Capitalization of the Company" is incorporated herein by reference.
(h) The Warrants will no longer be quoted on the Nasdaq SmallCap Market
if all of the Warrants are exchanged in the Exchange Offer and in any event will
no longer be quoted on the Nasdaq SmallCap Market upon expiration of the
Warrants on October 20, 1997.
(i) As a result of the Exchange Offer, the Warrants will become
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended.
Item 4. Interest in Securities of the Issuer.
Based upon the Company's records and upon information provided to the
Company by the persons identified in General Instruction C of Schedule 13E-4
(the "Affiliated Persons"), neither the Company nor, to the best of the
Company's knowledge, any Affiliated Persons has effected any transactions in the
Warrants during the 40 business days prior to the date hereof.
Item 5. Contracts, Arrangements, Understandings or Relationships With Respect
to the Issuer's Securities.
Not applicable.
Item 6. Persons Retained, Employed or to be Compensated.
Not applicable.
Item 7. Financial Information.
(a) Audited financial statements of the Company for the two most recent
fiscal years are included in the Company's 1997 Annual Report on Form 10-KSB for
the fiscal year ended May 31, 1997 filed with the Securities and Exchange
Commission, which is
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incorporated herein by reference). A copy of the Company's 1997 Annual Report on
Form 10-KSB is filed herewith as Exhibit (a)(5).
(b) Not Applicable.
Item 8. Additional Information.
(a)-(d) Not Applicable.
(e) The information set forth in the materials filed herewith
pursuant to Item 9 is incorporated herein by reference.
Item 9. Material to be Filed as Exhibits.
(a)(1) Offering Circular dated September 16, 1997.
(2) Form of Letter of Transmittal.
(3) Form of Press Release.
(4) Form of letter to Warrantholders from the Chairman of the
Board and Chief Executive Officer of the Company dated
September 16, 1997.
(5) Supplement to Offering Circular.
(6) 1997 Annual Report on Form 10-KSB -- Previously Filed by the
Company.
(b)-(f) Not Applicable.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
ENTERACTIVE, INC.
By: /s/ Andrew Gyenes
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Name: Andrew Gyenes
Title: Chairman of the Board and Chief
Executive Officer
Dated: September 16, 1997
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OFFERING CIRCULAR
ENTERACTIVE, INC.
OFFER TO EXCHANGE TWENTY COMMON STOCK PURCHASE WARRANTS
EXPIRING OCTOBER 20, 1997 INTO
ONE SHARE OF ITS COMMON STOCK
Enteractive, Inc. ("Enteractive" or the "Company") hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Offering Circular (the "Offering Circular"), and in the accompanying Letter
of Transmittal (the "Letter of Transmittal"), to exchange twenty common stock
purchase warrants expiring October 20, 1997 (the "Warrants") into one share of
its common stock, $.01 par value per share (the "Common Stock"). As of the date
of this Offering Circular, there are 5,121,468 Warrants outstanding. The
Exchange Offer is being made for up to all outstanding Warrants. Each Warrant
currently entitles the registered holder to purchase one share of the Company's
Common Stock at an exercise price of $4.00 per Share. After the expiration of
the Exchange Offer and only up to October 20, 1997 at 5:00 p.m., New York City
time, the holders of Warrant will be able to convert such securities into shares
of Common Stock at such exercise price (as such price may be adjusted in certain
events).
The terms and conditions of the Exchange Offer will not be applicable
to any Warrants that are not accepted pursuant to the Exchange Offer, or which
are delivered for exchange after the Expiration Date.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
OCTOBER 14, 1997, UNLESS EXTENDED (SUCH DATE AS EXTENDED FROM TIME TO TIME, THE
"EXPIRATION DATE"). WARRANTS TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. AFTER
THE EXPIRATION DATE, WARRANTS TENDERED IN THE EXCHANGE OFFER MAY NOT BE
WITHDRAWN UNLESS THE EXCHANGE OFFER IS TERMINATED OR EXPIRES WITHOUT
CONSUMMATION THEREOF.
Notwithstanding any other provision of the Exchange Offer, the
Company's obligation to accept for exchange, and to exchange, Warrants properly
tendered and not withdrawn pursuant to the Exchange Offer is conditioned upon
certain conditions (including, among others, there shall be no litigation
instituted which seeks to prevent or enjoin this Exchange Offer) set forth under
"The Exchange Offer--Conditions to the Exchange Offer." If the conditions of the
Exchange Offer are satisfied or waived and the Warrants are accepted by the
Company for exchange, the Common Stock will be exchanged on or promptly after
the date on which the Warrants are accepted for exchange (the "Exchange Offer
Acceptance Date"). Subject to applicable securities laws and the terms set forth
in this Offering Circular, the Company reserves the right (i) to waive any and
all conditions to the Exchange Offer, (ii) to extend the Exchange Offer or (iii)
otherwise to amend the Exchange Offer in any respect.
The terms of the Exchange Offer equate to one share of Common Stock
(trading at a last reported sales price on Nasdaq of $2-15/32 on September 11,
1997) for the twenty Warrants. The Common Stock and the Warrants are both traded
on the Nasdaq Small Cap Market ("Nasdaq") and the Boston Stock Exchange, the
symbols of which are "ENTR" and "ENTRW" and "ENT" and "ENTW," respectively. On
September 11, 1997, the last reported sales price of the Warrants on Nasdaq was
$3/32 per Warrant.
See "Risk Factors" on page 11 for a discussion of certain factors that
should be carefully considered in connection with the exchange offered hereby.
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IMPORTANT
Any beneficial holder of Warrants desiring to tender all or any portion
of his Warrants should either (i) complete and sign the Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it, together with the certificates representing
tendered Warrants and any other required documents, to Continental Stock
Transfer & Trust Company (the "Exchange Agent") or tender such Warrants pursuant
to the procedure for book-entry transfer set forth in "The Exchange Offer --
Procedures for Tendering" or (2) request his broker, dealer, commercial bank,
trust company or nominee to effect the transaction for him. BENEFICIAL HOLDERS
WHOSE WARRANTS ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH PERSON IF THEY DESIRE TO TENDER
THEIR WARRANTS. Holders who wish to tender Warrants and whose certificates
representing such Warrants are not immediately available or who cannot comply
with the procedures for book entry transfer on a timely basis may tender such
Warrants by following the procedures for guaranteed delivery set forth in "The
Exchange Offer -- Procedures for Tendering."
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The date of this Offering Circular is September 16, 1997.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
October 14, 1997 (such time and date, the "Expiration Date"), unless the
Company, in its sole discretion, extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date at which the Exchange Offer, as so extended by the Company, shall
expire. See "The Exchange Offer -- Expiration; Extension; Termination;
Amendment." Warrants may be tendered and will be accepted for exchange only in
sets of twenty and integral multiples thereof. No fractional shares of Common
Stock will be issued in the Exchange Offer.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE COMPANY AS TO WHETHER ANY HOLDER OF WARRANTS SHOULD TENDER WARRANTS PURSUANT
TO THE EXCHANGE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS
CONTAINED IN THIS OFFERING CIRCULAR OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR
MADE, SUCH RECOMMENDATIONS, INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS
OFFERING CIRCULAR NOR ANY DISTRIBUTION OF SECURITIES 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 INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
This Offering Circular does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities covered
by this Offering Circular, nor does it constitute an offer to sell or a
solicitation of an offer to buy any such securities by any person in any
jurisdiction in which such offer or solicitation would be unlawful.
The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act of 1933, as
amended ("the Securities Act"), afforded by Section 3(a)(9) thereof. The Company
therefore will not pay any commission or other remuneration to any broker,
dealer, salesman or other
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person for soliciting tenders of Warrants. Officers, directors and regular
employees of the Company may solicit tenders of Warrants but they will not
receive additional compensation therefor.
IN DECIDING WHETHER TO ACCEPT THE EXCHANGE OFFER, HOLDERS OF WARRANTS
MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE EXCHANGE
OFFER, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT PASSED UPON THE FAIRNESS OF SUCH TRANSACTION NOR
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are hereby
incorporated by reference in this Offering Circular: (i) the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997, (the "1997 Form
10-KSB"); and (ii) the description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A filed with the Commission on
September 28, 1994. EACH WARRANT HOLDER IS URGED TO READ THE 1997 FORM 10-KSB IN
ITS ENTIRETY. THE 1997 FORM 10-KSB IS ATTACHED HERETO AS ANNEX 1.
The Company also incorporates herein by reference all documents and
reports subsequently filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Offering Circular and prior to termination of this Exchange Offer. Such
documents and reports shall be deemed to be incorporated by reference in this
Offering Circular and to be a part hereof from the date of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Offering Circular to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded, except as so modified
or superseded, shall not be deemed to constitute a part of this Offering
Circular.
The Company will provide without charge to each person to whom a copy
of this Offering Circular has been delivered, on the written or oral request of
such person, a copy of any or all of the documents incorporated herein by
reference, other than exhibits to such documents unless they are specifically
incorporated by reference into such documents. Requests for such copies should
be directed to: Enteractive, Inc., 110 West 40th Street, Suite 2100, New York,
New York 10018 Attention: Mr. Kenneth Gruber, Chief Financial Officer.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited and reported upon by its independent
accounting firm and make available to stockholders quarterly reports containing
unaudited interim financial information and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
This Offering Circular includes references to trademarks of entities
other than the Company which have reserved all rights with respect to their
respective trademarks.
AVAILABLE INFORMATION
The Company has filed with the Commission a Schedule 13E-4, which term
shall encompass any amendments thereto, under the Exchange Act, with respect to
the Exchange Offer. This Offering Circular does not contain all the information
set forth in the Schedule 13E-4 and the exhibits thereto, to which reference is
hereby made for further information about the Company and the Exchange Offer.
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files periodic reports, proxy and
information statements, and other information with the Commission. The Schedule
13E-4 and all reports, proxy and information statements, and other information
filed by the Company with the Commission may be inspected 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 the Northeast Regional Office, Seven World Trade
Center, New York, New York 10048, and the Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can also 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 Commission also maintains a home
page on the World Wide Web that contains reports, proxy and information
statements, and other information regarding registrants that file
electronically. The address of such site is http://www.sec.gov.
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The Company will provide without charge to each person to whom a copy
of this Offering Circular has been delivered, on the written and oral request of
such person, a copy of the Schedule 13E-4. Requests for such copies should be
directed to: Enteractive, Inc., 110 West 40th Street, Suite 2100, New York, New
York 10018 Attention: Mr. Kenneth Gruber, Chief Financial Officer; telephone
(212) 221-6559.
The Warrants and the Common Stock are listed on Nasdaq, and all
reports, proxy and information statements, and other information filed with the
Commission also may be inspected at the Nasdaq SmallCap Market, 1735 K Street,
N.W., Washington, DC 20006.
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TABLE OF CONTENTS
Incorporation of Certain Documents by Reference..........................4
Available Information....................................................4
Offering Summary.........................................................7
Risk Factors............................................................11
Dilution................................................................16
Condition to the Exchange Offer.........................................16
Certain Federal Income Tax Considerations...............................23
Exchange Agent..........................................................23
Miscellaneous...........................................................24
Description of Securities...............................................25
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OFFERING SUMMARY
The following is a summary of certain information included in this
Offering Circular or in documents incorporated by reference herein. It is not
intended to be complete and is qualified in its entirety by the more detailed
information found elsewhere in this Offering Circular or in such documents,
which should be read with care. As used herein, unless the context otherwise
requires, the "Company" refers to Enteractive, Inc. and its subsidiaries. As
used herein, the term "Offering Circular" shall mean this Offering Circular and
all Appendixes and Exhibits hereto, as the same may be amended, supplemented,
restated or otherwise modified from time to time. The term "Exchange Offer"
shall mean the offering contemplated hereby. References to the Company's fiscal
year shall refer to the calendar year in which the Company's fiscal year ends
(e.g., fiscal year 1997 refers to the Company's fiscal year ended May 31, 1997).
THE COMPANY
Its address is 110 West 40th Street, Suite 2100, New York, New York
10018 and its telephone number is (212) 221-6559. Its World Wide Web site
address is http://www.crstone.com.
Recent Developments
Enteractive, Inc. , a Delaware corporation ("Enteractive" or the
"Company"), incorporated in December 1993, is the successor to Sonic Images
Productions, Inc., a District of Columbia corporation incorporated in 1979 which
was merged with and into the Company in May 1994 ("Merger"). The Company, as the
surviving entity of the Merger, continued its existence following the Merger as
a Delaware corporation. On February 29, 1996, Lyriq International Corporation
merged into a wholly owned subsidiary of the Company pursuant to an Agreement
and Plan of Merger. Unless otherwise indicated, references to the Company shall
include its wholly owned subsidiaries and predecessor. Headquartered in New
York, New York, the Company offers products and services to customers for the
design, development, operation and maintenance of customer Intranets or sites on
the Internet and World Wide Web.
On August 15, 1997 the Company entered into an agreement with
Enteractive Distribution Company, LLC ("EDC"), an unrelated company, which is
subject to the satisfaction of certain closing conditions. Under the terms of
the agreement EDC will acquire the inventory and certain accounts receivable
existing at the date of the closing resulting from the Company's interactive
multimedia publishing business. In addition the Company has assigned its
domestic distribution contracts with its domestic distributors to EDC and has
granted EDC an exclusive license to market the Company's interactive multimedia
titles in North America for a minimum of two years. If the transaction is
consummated, the Company has been guaranteed the greater of $100,000 or 50% of
EDC's proceeds from the sale of the inventory in the 9 months following the
closing and 50% of the accounts receivable balances collected by EDC within 24
months of closing. The Company will also receive royalties on sales of its
products subsequent to liquidation of existing inventory of 15% for three years
and 10% thereafter. EDC will also pay the Company a 5% royalty from the sales of
any third party products it sells. The Company is evaluating the most
appropriate manner to continue licensing its multimedia titles outside the
United States. The Company does not believe that it will incur significant
ongoing costs associated with the domestic or international distribution of its
multimedia titles.
As a result of the Company's agreement with EDC, the Company wrote down
the majority of its interactive multimedia related business assets in the fourth
quarter of fiscal 1997 to the related anticipated minimum proceeds of $100,000.
These assets are classified as "assets held for sale" in the Company's May 31,
1997 balance sheet.
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THE EXCHANGE OFFER
The Offering The Company is offering to exchange
Warrants tendered to the Company prior to
the Expiration Date and accepted by the
Company on the basis of twenty Warrants for
one share of Common Stock (the "Exchange
Offer Consideration"). The terms of the
Exchange Offer equate to one share of
Common Stock (trading at a last reported
sales price on Nasdaq of $2- 15/32 per
share on September 11, 1997) for twenty
Warrants. On September 11, 1997, the last
reported sales price on Nasdaq of the
Warrants was $3/32 per Warrant. Each
Warrant currently entitles the registered
holder to purchase one share of the
Company's Common Stock at an exercise price
of $4.00 per Share. Although the Company
has no current intention to do so, if it
should modify the Exchange Offer
Consideration, the modified consideration
would be applicable with regard to all
Warrants accepted in the Exchange Offer,
including those tendered before the
announcement of the modification. If the
Exchange Offer Consideration is modified,
the Exchange Offer will remain open at
least ten business days from the date the
Company gives notice by public announcement
or otherwise, of such. See "The Exchange
Offer -- Terms of the Exchange Offer."
Purpose of Offering The purpose of the Offering is to offer
Warrant holders the opportunity to
participate in the long term ownership of
the Company's securities, since absent the
Exchange Offer, it is likely that the
Warrants will expire unexercised on October
20, 1997.
Expiration Date 5:00 p.m., New York City time, on October
14, 1997, unless extended by the Company.
See "The Exchange Offer -- Expiration;
Extensions; Termination; Amendment. After
expiration of the Exchange Offer and prior
to October 20, 1997 at 5:00 p.m., the
Warrants will be convertible into Common
Stock at a conversion price of $4.00 (as
such price may be adjusted in certain
events).
Withdrawal of Tenders Tenders of Warrants may be withdrawn at any
time prior to the expiration of the
Exchange Offer. Thereafter, such tenders
are irrevocable, except that they may be
withdrawn after the expiration of 40
business days from the commencement of the
Exchange Offer, unless accepted for
exchange prior to that date. See "The
Exchange Offer -- Withdrawal Rights."
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Acceptance of and Delivery
of Common Stock The Company will accept for exchange any
and all Warrants that are properly tendered
prior to the Expiration Date. No fractional
shares of Common Stock will be issued in
the Exchange Offer. Warrants tendered in
other than lots of 20 will be returned to
the Warrant holders. The Common Stock to be
issued pursuant to the Exchange Offer will
be delivered on or promptly following the
Exchange Offer Acceptance Date. The
Exchange Agent (as defined herein) will act
as agent for tendering holders for the
purpose of issuing Common Stock See "The
Exchange Offer -- Acceptance of Warrants;
Delivery of Common Stock."
Conditions to the Exchange
Offer The obligation of the Company to consummate
the Exchange Offer is subject to certain
conditions including, among others, there
shall be no litigation instituted which
seeks to prevent or enjoin the Exchange
Offer. The Company reserves the right to
amend the Exchange Offer at any time for
any reason. See "The Exchange Offer --
Conditions to the Exchange Offer."
Procedures for Tendering
Warrants Each holder of Warrants wishing to accept
the Exchange Offer must complete and sign
the Letter of Transmittal, in accordance
with the instructions contained herein and
therein, and forward or hand deliver such
Letter of Transmittal, together with any
signature guarantees and any other
documents required by the Letter of
Transmittal, including certificates
representing the tendered Warrants or
confirmations of, or an Agent's Message (as
defined herein) with respect to, book entry
transfers of such Warrants, to the Exchange
Agent at one of its addresses set forth on
the back cover page of this Offering
Circular. Any beneficial owner of Warrants
whose securities are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee is urged to
contact the registered holder(s) of such
securities promptly to instruct the
registered holder(s) whether to tender such
beneficial owner's securities. Beneficial
Holders whose certificates representing
their Warrants are not immediately
available or who cannot deliver their
certificates or any other required
documents to the Exchange Agent prior to
the Expiration Date may tender their
Warrants pursuant to the guaranteed
delivery procedure set forth herein. See
"The Exchange Offer -- Procedures for
Tendering -- Guaranteed Delivery."
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Certain Federal Income Tax
Consequences For a discussion of certain federal income
tax consequences of the Exchange Offer to
holders of Warrants, see "Certain Federal
Income Tax Considerations."
The Warrants and
the Common Stock As of the date hereof, there were 7,679,441
shares of Common Stock issued and
outstanding and 13,145,864 shares of Common
Stock reserved for issuance in connection
with the exercise of outstanding options
and warrants. In addition, the Company has
6,720 shares of Convertible Preferred Stock
issued and outstanding which are
convertible commencing May 1, 1998. If such
Convertible Preferred Stock was convertible
as of September 8, 1997 such Convertible
Preferred Stock would be convertible into
12,330,275 shares of Common Stock. Assuming
that all of the holders of the outstanding
Warrants accept the Exchange Offer, the
number of issued and outstanding shares of
Common Stock upon the consummation of the
Exchange Offer would increase by 256,073 to
7,935,514 and the number of shares of
Common Stock reserved for issuance in
connection with the exercise of outstanding
warrants, options and Convertible Preferred
Stock (assuming the Convertible Preferred
Stock was convertible into Common Stock as
of September 8, 1997) would be 20,354,671.
See "Description of the Warrants" and
"Description of Capital Stock."
Trading The Common Stock is reported on the Nasdaq
Small Cap Market ("Nasdaq") under the
symbol "ENTR." The Warrants are listed on
Nasdaq under the symbol "ENTRW." The Common
Stock and Warrants are also traded on the
Boston Stock Exchange under the symbols
"ENT" and "ENTW," respectively.
Exchange Agent Continental Stock Transfer & Trust Company.
See "The Exchange Offer -- Exchange Agent."
Risk Factors See "Risk Factors" beginning on
page 11 for discussion of certain risk
factors that should be carefully considered
in connection with deciding whether to
tender Warrants in the Exchange Offer.
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RISK FACTORS
The securities offered hereby involve a high degree of risk.
Prospective investors should carefully consider the following risk factors, as
well as information contained elsewhere in this Offering Circular, before making
a decision to tender the Warrants in exchange for shares of Common Stock.
GENERAL RISKS AND RISKS RELATED TO CURRENT FINANCIAL CONDITION
History of Losses; Change in Strategy; Continuing Net Losses;
Accumulated Deficit. The Company has incurred significant losses since
inception. In July 1996, the Company announced a restructuring whereby certain
members of its management resigned and certain fixed costs were reduced as a
result of the Company's decision to focus its efforts on recreation and
entertainment products. Subsequently, the Company decided to capitalize on its
expertise in on-line and internet development to provide on-line and internet
web-site development and network solutions for corporations. In connection
therewith, the Company incurred significant expenses to start the Internet
services business and the Company continues to incur significant losses. For the
year ended May 31, 1997, the Company had a net loss of $8,236,700. The Company
had an accumulated deficit of $22,955,500 as of May 31, 1997. On August 15, 1997
the Company entered into an agreement with EDC pursuant to which the Company
wrote down the majority of its interactive multimedia related business assets.
However, the Company anticipates that significant losses are likely to continue
until such time, if ever, as the Company can profitably deliver network
solutions, services and products.
Dependence on Management; Need to Attract Additional Personnel. The
Company is dependent upon the business and technical expertise of its executive
and creative personnel. In particular, the loss of the services of Andrew
Gyenes, the Chairman of the Board and Chief Executive Officer, could have a
material adverse effect upon the Company. The Company has an employment
agreement with Mr. Gyenes which expires in October 19, 1997. The Company has
obtained a "key person" insurance policy on the life of Mr. Gyenes in the amount
of $1,000,000 under which the Company is the beneficiary. In addition, the
ability to attract and retain highly trained executives and professionals with
background experience and knowledge of the Internet, intranet and other new
media platforms is critical to the success of the Company. The Company's ability
to develop its businesses will depend upon its ability to recruit and retain
additional personnel, including engineering, marketing and management personnel.
Competition for qualified personnel is intense and accordingly, there can be no
assurance that the Company will be able to retain or hire all of the necessary
personnel or that the Company may not otherwise need to change its personnel to
compete in its rapidly changing market.
Limited Working Capital; Possible Need for Additional Financing;
Uncertainty of Capital Funding. As of May 31, 1997, the Company had cash and
cash equivalents of $4,952,900. In May 1996, the Company consummated a public
offering whereby it received net proceeds of approximately $6,791,600. In
December 1996, the Company consummated a private placement of certain shares of
the Company's Class A Convertible Preferred Stock (the "Convertible Preferred
Stock") (the "1996 Private Placement") and received approximately $7,869,100 in
net proceeds. The Company expects that its existing capital resources will
enable it to undertake the Company's new strategy and to maintain its current
operations for the next 12 months. However, based on management's assessment of
the demand for Web-related services, the Company may significantly alter the
level of expenses both within the next 12 months and thereafter. Moreover, these
funds may not be sufficient to meet the Company's longer term cash requirements
for operations. The Company may also be required to obtain additional financing
to continue to operate its business. The Company does not currently have a line
of credit. There can be no assurance that any additional financing, if required,
will be available to the Company on acceptable terms, if at all. Any inability
by the Company to obtain additional financing, if required, will have a material
adverse effect on the operations of the Company.
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RISKS RELATED TO DESIGNING, DEVELOPING, INSTALLING, MAINTAINING AND HOSTING
CORPORATE WEB SITES
Developing Market For Providing Network Solutions, Products and
Services; New Entrants, USWeb Relationship. A portion of the Company's future
growth is dependent to a significant extent upon its ability to derive revenue
from sales to its customers of its "network related products and services,"
which the Company defines as designing, developing, installing, maintaining and
hosting corporate web sites and networks for internal communications as well as
external commerce. The market for designing, developing, installing, maintaining
and hosting corporate web sites and networks has only recently begun to develop,
is rapidly evolving, highly competitive, and is characterized by an increasing
number of market entrants who have introduced or developed products and services
for communication and commerce. Demand and market acceptance for such services
are subject to a high level of uncertainty and there can be no assurance that
commerce and communication through such services will continue to grow. In
connection with this new strategy, the Company has entered into an agreement
with US Web whereby it is a franchisee in a new franchise with no known
comparable franchise model and where the market for such franchise is untested.
USWeb has had limited experience as a franchisor and the Company has no previous
experience as a franchisee and the future success of the Company will be
dependent in part on the overall success of the US Web Network, which there can
be no assurance. While the Company believes that it can generate revenues as a
franchisee, there can be no assurance that it can generate revenues or become
profitable in the future. Finally, under the terms of the franchise agreement,
the Company can only serve certain territories and there can be no assurance
that the Company will be able to obtain additional franchises or serve
additional territories in the future.
Internet Services Competition; Low Barriers to Entry. The market for
the Company's web site related services is highly competitive. The Company faces
competition from national and regional advertising agencies, specialized and
integrated marketing communication firms as well as sole proprietorships and
small businesses in the computer network solutions industry. The Company expects
that new competitors that either provide integrated or specialized services
(e.g., corporate identity and packaging, advertising services or World Wide Web
site design) and are technologically proficient, will emerge and will be
competing with the Company. Many of the Company's competitors or potential
competitors have longer operating histories, longer client relationships and
significantly greater financial, management and other resources than the
Company. Although only a few of these competitors have to date offered a full
range of Internet and Intranet development and maintenance services, several
have announced their intention to offer comprehensive Internet and Intranet
solutions. Furthermore, most of the Company's current and potential competitors
have longer operating histories, larger installed customer bases, longer
relationships with customers and significantly greater financial, technical,
marketing and public relations resources than the Company and could decide to
increase their resource commitments to the Company's market. In addition, many
of the Company's competitors have lower overhead, more technical expertise and
more advanced technology. To the extent that existing competitors or new
competitors cause the Company to lose clients, the Company's business, financial
condition and operating results could be materially adversely affected.
Additionally, the Company has no significant proprietary technology that would
preclude or inhibit competitors from entering the integrated marketing
communication solutions market. The Company intends to compete on the basis of
price and the quality of its services. In addition, the market for Internet and
Intranet development is relatively new and subject to continuing definition,
and, as a result, the core business of certain competitors may better position
them to compete in this market as it matures. Competition of the type described
above could materially adversely affect the Company's business, results of
operations and financial condition. There can be no assurance that existing or
future competitors will not develop or offer marketing communication services
and products that provide significant performance, price, creative or other
advantages over those offered by the Company, which could have a material
adverse effect on the Company's business, financial condition and operating
results.
Uncertain Adoption of the Internet and Intranet as a Medium of Commerce
and Communications; Dependence on the Internet and Intranet. The Company's
ability to derive revenues from providing web-related and network solutions will
depend in part upon industry demand for Internet and Intranet services and the
type and quality of infrastructure for providing Internet and Intranet access
and carrying Internet and Intranet traffic. The
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Internet and Intranet may not become efficient, viable commercial marketplaces
because of issues such as, among other things, security, reliability, cost, ease
of use and access, and quality of service, and because of inadequate development
of the necessary solutions infrastructure, such as a reliable computer network
or timely development of complementary products, such as high speed modems. If
the necessary infrastructure or complementary products are not developed or the
Internet and Intranet do not become efficient, viable commercial marketplaces,
the Company's business, financial condition and operating results could be
materially adversely affected. Furthermore, even if the Internet and Intranet
become efficient, viable commercial marketplaces, there can be no assurance that
businesses will elect to outsource Web site and Intranet development and
maintenance services. If such services prove to be unreliable, ineffective or
too expensive, or if software companies develop tools sufficiently user-friendly
and cost-effective for nonprofessionals to use, enterprises may choose to
develop and maintain all or part of their Web sites or Intranets in-house.
Management of Growth. The rapid execution necessary for the Company to
exploit the market for its business model requires an effective planning and
management process. The Company's rapid growth has placed, and is expected to
continue to place, a significant strain on the Company's managerial, operational
and financial resources. The Company expects that continued hiring of new
personnel will be required to support its business. To manage its growth, the
Company must continue to implement and improve its operational and financial
systems and to expand, train and manage its employee base. There can be no
assurance that the Company's systems, procedures or controls will be adequate to
support the Company's operations or that the Company's management will be able
to achieve the rapid execution necessary to exploit the market for the Company's
business model. The Company's future operating results will also depend on its
ability to expand its Technology Services, Marketing and Affiliate Operations
organizations. If the Company is unable to manage growth effectively, the
Company's business, results or operations and financial condition will be
materially adversely affected.
Uncertain Acceptance and Maintenance of USWeb Brand. The Company
believes that establishing and maintaining the USWeb brand is a critical aspect
of its efforts to attract customers and that the importance of brand recognition
will increase due to the increasing number of companies entering the market for
Internet and Intranet service provision. Promotion of the USWeb brand will
depend largely on the success of USWeb's marketing and the ability of the
Company and other USWeb affiliates to provide high quality, reliable and cost
effective Web site and Intranet design, development and maintenance services.
Furthermore, in order to promote the USWeb brand in response to competitive
pressures, the Company may find it necessary to increase its marketing budget or
otherwise increase its financial commitment to creating and maintaining brand
loyalty among customers. If USWeb fails to promote and maintain its brand, or
incurs excessive expenses in an attempt to promote and maintain its brand, the
Company's business, results of operations and financial condition will be
materially adversely affected.
Risks Associated with Acquisitions. As part of its business strategy,
the Company expects to make acquisitions of, or significant investments in,
businesses that currently offer complementary web site and network solution
related services, products and technologies. Any such future acquisitions or
investments would be accompanied by the risks commonly encountered in
acquisitions of businesses. Such risks include, among other things, the
difficulty of assimilating the operations and personnel of the acquired
businesses, the potential disruption of the Company's ongoing business, the
inability of management to maximize the financial and strategic position of the
Company through the successful incorporation of acquired personnel and clients,
the maintenance of uniform standards, controls, procedures and policies and the
impairment of relationships with employees and clients as a result of any
integration of new management personnel. The Company expects that future
acquisitions, if any, could provide for consideration to be paid in cash, stock
or a combination of cash and stock. There can be no assurance that any of these
acquisitions will be consummated. If an entity is acquired by the Company and
such entity is not efficiently or completely integrated with the Company, then
the Company's business, financial condition and operating results could be
materially adversely affected.
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RISKS RELATED TO THE CAPITALIZATION OF THE COMPANY
Authorization of Preferred Stock. In addition to the Convertible
Preferred Stock, the Company's Board of Directors has the authority, without
further action by the stockholders, to issue 1,993,280 shares of Preferred
Stock, in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. While no additional
class or series of preferred stock can be senior to the Convertible Preferred
Stock, the issuance of preferred stock in the future could adversely affect the
voting power of holders of the Company's Common Stock and could have the effect
of delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any additional shares of preferred stock.
No Dividends. The Company has never paid cash dividends on the Common
Stock. The Company intends to retain any future earnings to finance its growth.
Outstanding Options and Warrants. There are currently outstanding
options and warrants to purchase 13,145,864 shares in the aggregate at exercise
prices ranging between $1.75 and $6.60, including 5,121,468 Warrants. In
addition, as of September 8, 1997, the Company has 6,720 shares of Convertible
Preferred Stock issued and outstanding which are convertible commencing May 1,
1998. If such Convertible Preferred Stock was convertible as of September 8,
1997 such Convertible Preferred Stock would be convertible into 12,330,275
shares of Common Stock. The exercise of such options and warrants or the
conversion of the Convertible Preferred Stock will have a dilutive effect on the
ownership interests of the Company's existing stockholders. Holders of
Convertible Preferred Stock have been issued an aggregate of 4,200,000 warrants
to purchase an aggregate of 4,200,000 Shares of Common Stock of the Company. It
is likely that the Company will, in the future, seek to offer to exchange such
warrants for Common Stock of the Company. The terms of any such exchange are
likely to be materially different from the terms of this Exchange Offer.
Possible Volatility of Securities Prices. The market price of Common
Stock has in the past been, and may in the future continue to be, volatile. A
variety of events, including quarter to quarter variations in operating results,
news announcements or the introduction of new products by the Company or its
competitors, as well as market conditions in the interactive multimedia industry
or changes in earnings estimates by securities analysts may cause the market
price of the Common Stock to fluctuate significantly. In addition, the stock
market in recent years has experienced significant price and volume fluctuations
which have particularly affected the market prices of equity securities of many
companies that service the software industry and which often have been unrelated
to the operating performance of such companies. These market fluctuations may
adversely affect the price of the Common Stock.
Indefinite Amount of Common Stock Issuable upon the Conversion of
Preferred Stock. The holders of the Convertible Preferred Stock have the right,
at the holder's option, at any time after April 30, 1998, or from time to time
to thereafter, to convert each share of Convertible Preferred Stock into such
whole number of shares of Common Stock equal to the aggregate stated value
($1,250) of the Convertible Preferred Stock to be converted divided by the
lesser of (i) $2.00 or (ii) 50% of the average closing sale price for the Common
Stock for the last ten trading days in the fiscal quarter of the Company prior
to such conversion. Accordingly, if the price of the Common Stock is below
$2.00, the number of shares that the Company will be required to issue upon the
conversion of the Convertible Preferred Stock will be uncertain. While the
Company intends to have sufficient authorized capital with respect to the
conversion of the Convertible Preferred Stock, there can be no assurance that
the Company will in fact have a sufficient amount of authorized Common Stock to
cover all conversions of Convertible Preferred Stock.
New Nasdaq Regulations. On August 22, 1997, the Commission approved
changes previously approved by the Board of Directors of The Nasdaq Stock
Market, Inc. that further strengthen both the quantitative and qualitative
standards for issuers listing on Nasdaq. While the Company presently meets the
new standards, there can be no
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assurance that it will continue to be able to do so. If it should fail to meet
one or more of such standards, its Common Stock would be subject to deletion
from Nasdaq. If this should occur, trading, if any, in the Common Stock, would
then continue to be conducted in the over-the-counter market on the OTC Bulletin
Board, an NASD- sponsored inter-dealer quotation system, or in what are commonly
referred to as "pink sheets." As a result, an investor may find it more
difficult to dispose of or to obtain accurate quotations as to the market value
of the Company's Common Stock.
Forward Looking Statements. This Offering Circular contains certain
forward-looking statements, which are intended to be covered by the safe harbors
created by the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that all forward-looking statements involve risks and uncertainty,
including without limitation, the ability of the Company to provide a full range
of Internet and Intranet-based business solutions. Although the Company believes
that the assumptions, including the demand for Web-related services, underlying
the forward- looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this press release will prove to be
accurate. In light of significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
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DILUTION
As of May 31, 1997, the unaudited net tangible book value of the
Company was $4,566,000, or approximately $.59 per share based on 7,679,441
shares of Common Stock outstanding. Assuming the issuance of an additional
256,073 shares of Common Stock pursuant to this Exchange Offer (without giving
effect to the conversion of the Company's outstanding Convertible Preferred
Stock and other options and warrants outstanding), the pro forma net tangible
book value of the Company's Common Stock at May 31, 1997 would have been
$4,566,000 or approximately $.58 per share based on 7,935,514 shares of Common
Stock outstanding. Net tangible book value per share represents the tangible
assets of the Company less all liabilities, divided by the number of shares
outstanding.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
will not be required to accept for exchange, subject to any applicable rules or
regulations of the Commission, any Warrants tendered for exchange and may
postpone the exchange of any Warrants tendered and to be exchanged by it, and
may terminate or amend the Exchange Offer as provided herein if any of the
following conditions exist:
(1) there shall have been instituted or threatened or be
pending any action or proceeding before or by any court or governmental,
regulatory or administrative agency or instrumentality, or by any other person,
(i) that challenges the making of the Exchange Offer, or might, directly or
indirectly, prohibit, prevent, restrict or delay consummation of the Exchange
Offer or otherwise adversely affect, in any material manner, the Exchange Offer
or which requires the Company to file a registration statement in respect of the
Common Stock being offered as consideration in the Exchange Offer or (ii) that
is, or is reasonably likely to be, in the sole judgment of the Company,
materially adverse to the business, operations, properties, condition (financial
or otherwise), assets, liabilities or prospects of the Company;
(2) there shall have occurred any material adverse
development, in the sole judgment of the Company, with respect to any action or
proceeding concerning the Company;
(3) an order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction shall have been proposed, enacted, entered,
issued, promulgated, enforced or deemed applicable by any court or governmental,
regulatory or administrative agency or instrumentality that, in the sole
judgment of the Company, would or might prohibit, prevent, restrict or delay
consummation of the Exchange Offer or that is, or is reasonably likely to be,
materially adverse to the business, operations, properties, condition (financial
or otherwise), assets, liabilities or prospects of the Company;
(4) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of the Company or which, in the sole
judgment of the Company, would or might prohibit, prevent, restrict or delay
consummation of the Exchange Offer, or that will, or is reasonably likely to,
materially impair the contemplated benefits to the Company of the Exchange
Offer, or otherwise result in the consummation of the Exchange Offer not being
or not reasonably likely to be in the best interests of the Company;
(5) the Company shall not have received from any federal,
state or local governmental, regulatory or administrative agency or
instrumentality, any approval, authorization or consent that, in the sole
judgment of the Company, is necessary to effect the Exchange Offer; and
(6) there shall have occurred (a) any general suspension of,
or limitation on prices for, trading in securities in the United States
securities or financial markets, (b) any significant adverse change in the price
of the Warrants or the Common Stock in the United States securities or financial
markets, (c) a material impairment in the trading market for debt or equity
securities, (d) a declaration of a banking moratorium or any suspension of
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payments in respect of banks in the United States, (e) any limitation (whether
or not mandatory) by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, on, or other event that, in
the reasonable judgment of the Company, might affect, the extension of credit by
banks or other lending institutions, (f) a commencement of a war or armed
hostilities or other national or international calamity directly or indirectly
involving the United States, (g) any imposition of a general suspension of
trading or limitation of prices on [Nasdaq], or (h) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof.
All the foregoing conditions are for the sole benefit of the Company
and may be asserted by the Company at any time regardless of the circumstances
giving rise to such conditions and may be waived by the Company, in whole or in
part, at any time and from time to time, in the sole discretion of the Company.
The failure by the Company at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
If any of the conditions set forth in this section shall not be
satisfied, the Company may, subject to applicable law, (i) terminate the
Exchange Offer and return all Warrants tendered pursuant to the Exchange Offer
to tendering holders; (ii) extend the Exchange Offer and retain all tendered
Warrants until the Expiration Date for the extended Exchange Offer; (iii) amend
the terms of the Exchange Offer or modify the consideration to be provided by
the Company pursuant to the Exchange Offer; or (iv) waive the unsatisfied
conditions with respect to the Exchange Offer and accept all Warrants tendered
pursuant to the Exchange Offer.
EXPIRATION; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer is scheduled to expire at 5:00 PM, New York City
time, on the Expiration Date. The Company expressly reserves the right, in its
sole discretion, at any time or from time to time, to extend the period of time
during which the Exchange Offer is open by giving oral or written notice of such
extension to the Exchange Agent and making a public announcement thereof as
described in the second succeeding paragraph. There can be no assurance that the
Company will exercise its right to extend the Exchange Offer. During any
extension of the Exchange Offer, all Warrants previously tendered pursuant
thereto and not exchanged or withdrawn will remain subject to the Exchange Offer
and may be accepted for exchange by the Company at the expiration of the
Exchange Offer subject to the right of a tendering holder to withdraw his
Warrants. See "The Exchange Offer -- Withdrawal of Tenders."
The Company also expressly reserves the right, subject to applicable
law, (i) to delay acceptance for exchange of any Warrants or, regardless of
whether such Warrants were theretofore accepted for exchange, to delay the
exchange of any Warrants pursuant to the Exchange Offer or to terminate the
Exchange Offer and not accept for exchange any Warrants, if any of the
conditions to the Exchange Offer specified herein fail to be satisfied by giving
oral or written notice of such delay or termination to the Exchange Agent; (ii)
to waive any condition to the Exchange Offer and accept all the Warrants
tendered; and (iii) at any time, or from time to time, to amend the terms of
Exchange Offer in any respect, including the Exchange Offer Consideration. The
reservation by the Company of the right to delay exchange or acceptance for
exchange of Warrants is subject to the provisions of Rule 13e-4(f)(5) under the
Exchange Act, which requires that the Company pay the consideration offered or
return the Warrants deposited by or on behalf of holders thereof promptly after
the termination or withdrawal of the Exchange Offer. No fractional shares of
Common Stock will be issued in the Exchange Offer. Warrants tendered in other
then lots of 20 will be returned to the Warrant holders.
Any extension, delay, termination or amendment of the Exchange Offer
will be followed as promptly as practicable by a public announcement thereof.
Without limiting the manner in which the Company may choose to make a public
announcement of any extension, delay, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service, except in the case of an announcement of an extension of
the Exchange Offer, in which case the Company shall have no obligation to
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other
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public announcement, which notice shall be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date.
If the Company makes a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer, or if the Company waives
any condition of the Exchange Offer that results in a material change to the
circumstances of the Exchange Offer, the Company will disseminate additional
Exchange Offer materials in a manner reasonably calculated to inform holders of
Warrants of such change, and will provide holders of Warrants adequate time to
consider such materials and their participation in the Exchange Offer. The
minimum period during which the Exchange Offer must remain open following a
material change in the terms of the Exchange Offer or the information concerning
the Exchange Offer, other than a change in the Exchange Offer Consideration or
the percentage of the Warrants sought in the Exchange Offer, will depend upon
the facts and circumstances, including the relative materiality, of the changed
terms or information.
If the Company increases or decreases the Exchange Offer Consideration
or the amount of Warrants sought in the Exchange Offer, the Exchange Offer will
remain open at least ten business days from the date that the Company first
publishes, sends or gives notice, by public announcement or otherwise, of such
increase or decrease. The Company has no current intention to increase or
decrease the Exchange Offer Consideration currently offered or the amount of
Warrants sought to be purchased.
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to reduce the overhang to the
market for its Common Stock and offer Warrant holders the opportunity to
participate in the long term ownership of the Company's securities, since absent
the Exchange Offer, it is likely that the Warrants will expire unexercised on
October 20, 1997. The Company believes that if it does not take some action
which would enable the holders of Warrants to achieve some value for their
investment it could, among other things, have a negative impact on the Company's
ability to raise equity or debt capital in the future. In addition, the Company
believes that a number of Warrant holders are also holders of the Company's
Common Stock and that if such holders do not receive some value for their
investment they could seek to sell their Common Stock thereby depressing the
trading price of the Common Stock.
The Company has considered various alternatives with respect to the
Warrants, which are scheduled to expire on October 20, 1997 and are exercisable
at a price of $4.00 per share, including extending the expiration date, lowering
the exercise price and exchanging the Warrants for newly-issued Common Stock. Of
these alternatives, the Company believes extending the expiration date of the
Warrants would continue a substantial overhang on the Company's Common Stock as
there are 5,121,468 Warrants outstanding. Moreover, the Company believes that it
would be inappropriate to lower the exercise price of the Warrants to a level
which would permit exercise as the Company believes that its Common Stock is
trading at levels below the intrinsic value of the Company and lowering the
exercise price of the Warrants would only exacerbate the over-hang problem since
it would make it more likely that Warrant holders would exercise the Warrants in
the future. Accordingly, the Company has determined that the best course of
action is to offer an exchange of Common Stock for Warrants. The Company
reviewed various exchange ratios and has concluded that a ratio of one share of
Common Stock for every 20 warrants best serves the needs of the Company, its
stockholders and the Warrant holders. The Company believes that such ratio will
enable Warrant holders to receive value for their investment since if the
Warrants expire unexercised at October 20, 1997, the Warrant holders will have
received nothing, while at the same time minimizing the dilutive effect on its
current Common Stockholders since only a maximum of 256,073 shares of Common
Stock will be issued as a result of the exchange. The Exchange Offer will also
allow Warrant holders to participate through the ownership of Common Stock, in
any long term appreciation resulting therefrom. To further address the over-
hang problem, it is likely that the Company will in the future, seek to offer to
exchange the 4,200,000 warrants issued in connection with the 1996 Private
Placement for Common Stock.
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PROCEDURES FOR TENDERING
TENDERS OF SECURITIES. For a Registered Holder to validly tender
Warrants pursuant to the Exchange Offer, a properly completed and validly
executed Letter of Transmittal (or a facsimile thereof), together with any
signature guarantees or, in the case of a Book-Entry Transfer (as defined
below), an Agent's Message (as defined below), and any other documents required
by the instructions to the Letter of Transmittal, must be received by the
Exchange Agent prior to the Expiration Date at the address set forth in the
Letter of Transmittal. In addition, the Exchange Agent must receive either
certificates for tendered Warrants at any of such addresses or such Warrants
must be transferred pursuant to the procedures for book-entry transfer described
below and a confirmation of, or an Agent's Message with respect to, such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date. A Registered Holder who desires to tender Warrants and who
cannot comply with the procedures set forth herein for tender on a timely basis
or whose Warrants are not immediately available must comply with the procedures
for guaranteed delivery set forth below. Letters of Transmittal, certificates
representing Warrants and confirmations of, or an Agent's Message with respect
to, book-entry transfer should be sent only to the Exchange Agent, and not to
the Company or the Trustee.
The term "Agent's Message" means (i) a message transmitted by a
Book-Entry Facility to, and received by, the Exchange Agent and forming a part
of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility (as defined herein) has received an express acknowledgment from the
participant in such Book-Entry Transfer Facility, (ii) tendering the Warrants
that such participant has received and (iii) agreeing to be bound by the terms
of the Letter of Transmittal and that the Company may enforce such agreement
against the participant.
DELIVERY OF LETTERS OF TRANSMITTAL. If the certificates for Warrants
are registered in the name of a person other than the signer of the Letter of
Transmittal relating thereto, then, in order to tender such Warrants pursuant to
the Exchange Offer, the certificates evidencing such Warrants must be endorsed
or accompanied by appropriate bond powers signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the signatures
on the certificates or bond powers guaranteed as provided below.
ANY BENEFICIAL OWNER WHOSE WARRANTS ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE AND WHO WISHES
TO TENDER WARRANTS IN THE EXCHANGE OFFER SHOULD CONTACT SUCH REGISTERED HOLDER
PROMPTLY AND INSTRUCT SUCH REGISTERED HOLDER TO TENDER THE WARRANTS ON SUCH
BENEFICIAL OWNER'S BEHALF. IF ANY BENEFICIAL OWNER WISHES TO TENDER WARRANTS
HIMSELF, THAT BENEFICIAL OWNER MUST, PRIOR TO COMPLETING AND EXECUTING THE
LETTER OF TRANSMITTAL AND, WHERE APPLICABLE, DELIVERING HIS WARRANTS, EITHER
MAKE APPROPRIATE ARRANGEMENTS TO REGISTER OWNERSHIP OF THE WARRANTS IN SUCH
BENEFICIAL OWNER'S NAME OR FOLLOW THE PROCEDURES DESCRIBED IN THE IMMEDIATELY
PRECEDING PARAGRAPH. THE TRANSFER OF RECORD OWNERSHIP MAY TAKE A CONSIDERABLE
AMOUNT OF TIME.
The method of delivery of Warrants, Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holder tendering the Warrants. If delivery is to be made by mail, it is
suggested that the holder use properly insured, registered mail with return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to that date and
time.
BOOK-ENTRY TRANSFER. Promptly after the commencement of the Exchange
Offer, the Exchange Agent and the Company will seek to establish a new account
or utilize an existing account with respect to the Warrants at The Depository
Trust Company (a "Book-Entry Transfer Facility"). Any financial institution that
is a participant in the Book-Entry Transfer Facility system and whose name
appears on a security position listing as the owner of Warrants may make book-
entry delivery of such Warrants by causing the Book-Entry Transfer Facility
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to transfer such Warrants into the Exchange Agent's account in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Warrants may be effected through book-entry transfer at a
Book-Entry Transfer Facility, the applicable Letter of Transmittal (or a
facsimile or electronic copy thereof or an electronic agreement to comply with
the terms thereof), properly completed and validly executed, with any required
signature guarantees, an Agent's Message and any other required documents, must,
in any case, be received by the Exchange Agent at one of its addresses set forth
on the back cover page of this Offering Circular on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures described below. The Company may elect to waive receipt of a written
Letter of Transmittal if delivery is properly effected through the Book-Entry
Transfer Facility.
IN ORDER TO BE ASSURED OF PARTICIPATING IN THE EXCHANGE OFFER, ANY
BENEFICIAL OWNER WHOSE WARRANTS ARE REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE OR WHO WISHES TO TENDER WARRANTS
SHOULD CONTACT SUCH REGISTERED HOLDER PROMPTLY (LEAVING SUCH REGISTERED HOLDER
WITH SUFFICIENT TIME TO TENDER THE WARRANTS ON THE BENEFICIAL HOLDERS BEHALF)
AND INSTRUCT SUCH REGISTERED HOLDER TO TENDER THE WARRANTS ON SUCH BENEFICIAL
OWNER'S BEHALF.
SIGNATURE GUARANTEES. Signatures on the Letter of Transmittal must be
guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15
under the Exchange Act (each of the foregoing being an "Eligible Institution")
unless (a) the Letter of Transmittal is signed by the registered holder of the
Warrants tendered therewith (or by a participant in one of the Book-Entry
Transfer Facilities whose name appears on a security position listing as the
owner of such Warrants) and neither the "Special Payment Instructions" box nor
the "Special Delivery Instructions" box of the Letter of Transmittal is
completed, or (b) such Warrants are tendered for the account of an Eligible
Institution.
GUARANTEED DELIVERY. If a holder desires to tender Warrants pursuant to
the Exchange Offer and (a) certificates representing such Warrants are not
immediately available, (b) time will not permit such holder's Letter of
Transmittal, certificates evidencing such Warrants or other required documents
to reach the Exchange Agent prior to the Expiration Date or (c) such holder
cannot complete the procedures for book-entry transfer prior to the Expiration
Date, a tender may be effected if all the following are complied with:
(a) such tender is made by or through an Eligible Institution;
(b) on or prior to the Expiration Date, the Exchange Agent has
received from such Eligible Institution, at the address of the Exchange Agent
set forth in the Letter of Transmittal, a properly completed and validly
executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) in substantially the form accompanying this
Offering Circular, setting forth the name and address of the registered holder
and the principal amount or number of Warrants being tendered and stating that
the tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the date of the Notice of Guaranteed Delivery,
the Letter of Transmittal validly executed (or a facsimile thereof), together
with certificates evidencing the Warrants (or confirmation of, or an Agent's
Message with respect to, book-entry transfer of such Warrants into the Exchange
Agent's account with a Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal and the instructions thereto, will be
deposited by such Eligible Institution with the Exchange Agent; and
(c) such Letter of Transmittal (or a facsimile thereof),
properly completed and validly executed, together with certificates evidencing
all physically delivered Warrants in proper form for transfer (or confirmation
of, or an Agent's Message with respect to, book-entry transfer of such Warrants
into the Exchange Agent's account with a Book-Entry Transfer Facility) and any
other required documents are received by the Exchange Agent within three New
York Stock Exchange trading days after the date of such Notice of Guaranteed
Delivery.
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LOST OR MISSING CERTIFICATES. If a holder desires to tender Warrants
pursuant to the Exchange Offer but the certificates evidencing such Warrants
have been mutilated, lost, stolen or destroyed, such holder should write to or
telephone the Trustee, at the address or telephone number listed below, about
procedures for obtaining replacement certificates for such Warrants or arranging
for indemnification or any other matter that requires handling by the Trustee:
Continental Stock Transfer & Trust Company
Two Broadway, 19th Floor
New York, New York 10004
Telephone No. (212) 509-4000 Ext. 535
Telecopy No. (212) 509-5150
TENDER CONSTITUTES AN AGREEMENT. The tender of Warrants into the
Exchange Offer pursuant to any of the procedures described above, including
tendering through a book- entry delivery, will constitute a binding agreement
between the tendering holder and the Company upon the terms and conditions of
the Exchange Offer, and a representation that (i) such holder owns the Warrants
being tendered and is entitled to tender such Warrants as contemplated by the
Exchange Offer all within the meaning of Rule 14e-4 under the Exchange Act, and
(ii) the tender of such Warrants complies with Rule 14e-4.
Further, by executing or transmitting a Letter of Transmittal (as set
forth above, including book-entry transfer, and subject to and effective upon
acceptance for exchange for the Warrants tendered therewith or effectively
agreeing to the terms of the Letter of Transmittal pursuant to a book- entry
delivery), a tendering holder irrevocably sells, assigns and transfers to or
upon the order of the Company or its assignee all right, title and interest in
and to all such Warrants tendered thereby, waives any and all rights with
respect to the Warrants and releases and discharges the Company from any and all
claims such holder may have now, or may have in the future, arising out of or
related to the Warrants, and each such holder irrevocably selects and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of such holder
with respect to such Warrants, with full power of substitution and
resubstitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (a) deliver certificates representing such
Warrants, or transfer ownership of such Warrants on the account books maintained
by a Book-Entry Transfer Facility, together, in each case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the Company, (b)
present such Warrants for transfer on the relevant security register and (c)
receive all benefits or otherwise exercise all rights of beneficial ownership of
such Warrants (except that the Depositary will have no rights to or control over
funds from the Company).
OTHER MATTERS. Notwithstanding any other provision of the Exchange
Offer, delivery of the shares of Common Stock for Warrants tendered and accepted
pursuant to the Exchange Offer will occur only after timely receipt by the
Exchange Agent of such Warrants (or confirmation of, or an Agent's Message with
respect to, book-entry transfer of such Warrants into the Exchange Agent's
account with a Book-Entry Transfer Facility), together with properly completed
and validly executed Letters of Transmittal (or a facsimile or electronic copy
thereof or an electronic agreement to comply with the terms thereof) and any
other required documents.
All questions as to the form of all documents, the validity (including
time of receipt) and acceptance of tenders of the Warrants will be determined by
the Company, in its sole discretion, the determination of which shall be final
and binding. Alternative, conditional or contingent tenders of Warrants will not
be considered valid. The Company reserves the absolute right to reject any or
all tenders of Warrants that are not in proper form or the acceptance of which,
in the Company's opinion, would be unlawful. The Company also reserves the right
to waive any defects, irregularities or conditions of tender as to particular
Warrants. If the Company waives its right to reject a defective tender of
Warrants, the holder will be entitled to the Exchange Offer Consideration. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding. Any defect or irregularity in connection with tenders of Warrants must
be cured within such time as the Company determines, unless waived by the
Company. Tenders of Warrants shall not be deemed to have been made until all
defects and irregularities have been waived by the Company or cured. None
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of the Company, the Exchange Agent or any other person will be under any duty to
give notice of any defects or irregularities in tenders of Warrants, or will
incur any liability to holders for failure to give any such notice.
WITHDRAWAL OF TENDERS
Tenders of Warrants may be withdrawn at any time until the Expiration
Date as such date may be extended. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after the expiration of 40 business days from
the commencement of the Exchange Offer (November 11, 1997) unless accepted for
exchange prior to that date.
Holders who wish to exercise their right of withdrawal with respect to
a Exchange Offer must give written notice of withdrawal, delivered by mail, hand
delivery or facsimile transmission, to the Exchange Agent at the address set
forth in the Letter of Transmittal prior to the Expiration Date or at such other
time as otherwise provided for herein. In order to be effective, a notice of
withdrawal must specify the name of the person who deposited the Warrants to be
withdrawn (the "Depositor"), the name in which the Warrants are registered, if
different from that of the Depositor, and the number of Warrants to be withdrawn
prior to the physical release of the certificates to be withdrawn. If tendered
Warrants to be withdrawn have been delivered or identified through confirmation
of book-entry transfer to the Exchange Agent, the notice of withdrawal also must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with withdrawn Warrants. The notice of withdrawal must be signed
by the registered holder of such Warrants in the same manner as the applicable
Letter of Transmittal (including any required signature guarantees), or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of such Warrants.
Withdrawals of tenders of Warrants may not be rescinded, and any Warrants
withdrawn will be deemed not validly tendered thereafter for purposes of the
Exchange Offer. However, properly withdrawn Warrants may be tendered again at
any time prior to the Expiration Date by following the procedures for tendering
not previously tendered Warrants described elsewhere herein.
All questions as to the form, validity and eligibility (including time
of receipt) of any withdrawal of tendered Warrants will be determined by the
Company, in its sole discretion, which determination shall be final and binding.
None of the Company, the Exchange Agent or any other person will be under any
duty to give notification of any defect or irregularity in any withdrawal of
tendered Warrants, or will incur any liability for failure to give any such
notification.
If the Company is delayed in its acceptance for conversion and payment
for any Warrants or is unable to accept for conversion or convert any Warrants
pursuant to the Exchange Offer for any reason, then, without prejudice to the
Company's rights hereunder, tendered Warrants may be retained by the Exchange
Agent on behalf of the Company and may not be withdrawn (subject to Rule
13e-4(f)(5) under the Exchange Act, which requires that the issuer making the
tender offer pay the consideration offered, or return the tendered securities,
promptly after the termination or withdrawal of a tender offer), except as
otherwise permitted hereby.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued in the Exchange
Offer. Warrants tendered in other than lots of 20 will be returned to the
Warrant holders.
ACCEPTANCE OF WARRANTS;
DELIVERY OF COMMON STOCK
The acceptance of the Warrants validly tendered for exchange and not
withdrawn will be made as promptly as practicable after the Expiration Date. For
purposes of the Exchange Offer, the Company will be deemed to have accepted for
exchange validly tendered Warrants if, as and when the Company gives oral or
written notice thereof to the Exchange Agent. Such notice of acceptance shall
constitute a binding contract between the Company and the tendering holder
pursuant to which the Company will be obligated to provide the Exchange Offer
Consideration
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<PAGE>
therefor. Subject to the terms and conditions of the Exchange Offer, delivery of
Common Stock in respect of Warrants accepted and exchanged pursuant to the
Exchange Offer. The Exchange Agent will act as agent for the tendering holders
of Warrants for the purposes of receiving Common Stock and transmitting the
Common Stock (through Book-Entry Transfer or otherwise) to the tendering
holders. Tendered Warrants not accepted for conversion by the Company, if any,
will be returned without expense to the tendering holder of such Warrants (or,
in the case of Warrants tendered by book-entry transfer into the Exchange
Agent's account at a Book-Entry Transfer Facility, such Warrants will be
credited to an account maintained at a Book-Entry Transfer Facility) as promptly
as practicable following the Expiration Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain Federal income tax aspects of the
exchange of the Warrants for Common Stock of the Company is limited to a
discussion of those aspects as they pertain to Warrant holders who are U.S.
persons. The rules governing the tax treatment of an exchange by U.S. persons of
bearer obligations for stock are not entirely clear, and the Company has not
sought and will not seek a ruling from the Internal Revenue Service regarding
this exchange. Accordingly, both U.S. persons and non U.S. persons are urged to
consult their own tax advisors with regard to the application of the federal
income tax laws to their own particular situation, as well as to the
applicability and effect of any state, local or foreign tax laws to which they
might be subject.
The Company believes that the Exchange Offer should constitute a
"recapitalization" within the meaning of section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"). Generally, in a recapitalization
involving the exchange of warrants for stock, the following rules apply:
(1) Except as described below, no gain or loss will be recognized by
the Warrant holder.
(2) The recapitalization, however, will not be tax-free to the extent
of any stock received in discharge of interest arrearages, and the receipt of
such stock will give rise to ordinary interest income to the extent the
arrearages have not previously been included in the Warrant holder's income.
(3) The adjusted basis of the Warrants will become the adjusted basis
for the stock received in the exchange and the Warrant holder's holding period
for the stock will include his holding period for the Warrants.
If the Exchange Offer is determined not to constitute a
recapitalization, the rules described above would not apply. Instead, in such
event, a Warrant holder would realize gain or loss equal to the difference
between the value of the stock received and his adjusted basis in the Warrants.
Any gain recognized on the Exchange Offer by a U.S. person (other than those
financial institutions, broker-dealers and certain other persons described in
Treasury Regulation section 1.165-12(c)), including accrued market discount,
would likely be treated as ordinary income under section 1287 of the Code, and
the deduction for any loss realized on the Exchange Offer would likely be
disallowed under section 165(j) of the Code.
EXCHANGE AGENT
Continental Stock Transfer & Trust Company has been appointed Exchange
Agent for the Exchange Offer. All deliveries and correspondence sent to the
Exchange Agent should be directed to the address set forth in the Letter of
Transmittal Requests for assistance or additional copies of this Offering
Circular and the Letter of Transmittal should be directed to the Exchange Agent,
at its address set forth on the back cover page of this Offering Circular. The
Company has agreed to pay the Exchange Agent customary fees for its services and
to reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company also has agreed to indemnify the Exchange
Agent for certain liabilities, including liabilities under the federal
securities laws.
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<PAGE>
MISCELLANEOUS
The Company has not retained any dealer manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting tenders of Warrants. However, directors,
officers and employees of the Company (who will not be separately compensated
for such services) may solicit exchanges by use of the mails, personally or by
telephone, facsimile or similar means of electronic transmission. The Company
also will pay brokerage houses and other custodians, nominees and fiduciaries
their reasonable out-of-pocket expenses incurred in forwarding copies of this
Offering Circular and related documents to the beneficial owners of the Warrants
and in handling or forwarding tenders of Warrants by their customers.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue 50,000,000 shares of the
Company's Common Stock, par value $.01 per share, and 2,000,000 shares of
preferred stock, par value $.01 per share. As of the date of this Offering
Circular, 7,679,441 shares of the Company's Common Stock are currently issued
and outstanding and 6,720 shares of Convertible Preferred Stock are issued are
issued and outstanding. The Convertible Preferred Stock is convertible into
Common Stock commencing May 1, 1998. If such Convertible Preferred Stock was
converted into Common Stock as of September 8, 1997, such Convertible Preferred
Stock would be convertible into 12,330,275 shares of Common Stock of the
Company.
Common Stock
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted can elect all of the
directors then being elected at a meeting at which a quorum is present. The
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining available
for distribution to them after payment of liabilities and after provision has
been made for the Convertible Preferred Stock and any other class of stock, if
any, having preference over the Common Stock. Holders of shares of Common Stock,
as such, have no redemption, preemptive or other subscription rights, and there
are no conversion provisions applicable to the Common Stock.
Convertible Preferred Stock
Stated Value. Each share of Preferred Stock will have a stated value
(the "Stated Value") equal to $1,250.
Liquidation Preferences. Upon a liquidation of the Company (including a
sale by the Company of all or substantially all of its assets or a merger or
consolidation of the Company with another Company where the Company is not the
surviving entity), the assets of the Company available for distribution to the
stockholders of the Company, whether from capital, surplus or earnings, shall be
distributed in the following order of priority: (i) the holders of the
Convertible Preferred Stock shall be entitled to receive, prior and in
preference to any distribution to the holders of any Junior Securities (as
defined below) of the Company, an amount equal to the product of the Stated
Value multiplied by 1.1 for each share of Convertible Preferred Stock then
outstanding and (ii) the remaining assets of the Company available for
distribution, if any, to the stockholders of the Company shall be distributed
pro rata to the holders of issued and outstanding shares of Common Stock.
Ranking. The Convertible Preferred Stock will rank senior to all
classes and series of capital stock of the Company now existing or hereinafter
authorized, issued or outstanding, including, without limitation, the Common
Stock, and any other classes and series of capital stock of the Company now or
hereinafter authorized, issued or outstanding (collectively, "Junior
Securities"). The Company will not issue any class or series of any class of
capital
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<PAGE>
stock which ranks pari passu with the Convertible Preferred Stock with respect
to rights on liquidation, dissolution or winding up of the Company.
Dividends. The holders of the Convertible Preferred Stock shall not be
entitled to receive any dividends, cash or otherwise, in connection with the
Preferred Stock. No dividends shall be payable upon any Junior Securities unless
equivalent dividends, on an as-converted basis, are declared and paid
concurrently on the Convertible Preferred Stock. No dividends shall be payable
on any other classes of preferred stock during such time as the Convertible
Preferred Stock is outstanding.
Conversion. The holders of the Convertible Preferred Stock shall have
the right, at the holder's option, at any time after April 30, 1998, or from
time to time thereafter, to convert each share of Convertible Preferred Stock
into such whole number of shares of Common Stock equal to the aggregate Stated
Value of the Convertible Preferred Stock to be converted divided by the lesser
of (i) $2.00 or (ii) 50% of the average closing sale price for the Common Stock
for the last ten trading days in the fiscal quarter of the Company prior to such
conversion (the "Conversion Rate"). The Conversion Rate of the Convertible
Preferred Stock (when calculated on the basis of dividing the Stated Value by
$2.00 only) will be subject to adjustment to protect against dilution in the
event of stock dividends, stock splits, combinations, subdivision and
reclassifications.
Redemption. (a) At any time and from time to time, the Company shall
have the option (unless otherwise prevented by law) to redeem all, or any
portion of on a pro-rata basis, the Convertible Preferred Stock, upon 30 days
prior written notice, at a redemption price equal to 1.1 multiplied by the
Stated Value for each such share of the Convertible Preferred Stock; and (b) the
Company must redeem the Convertible Preferred Stock at 1.1 multiplied by the
Stated Value, in the event the Company receives proceeds from (i) the exercise
of any of the Company's outstanding Common Stock Purchase Warrants, or (ii) any
other equity financing, provided, however, that only 50% of the proceeds from
such other financing will be used to redeem the Convertible Preferred Stock. If
the proceeds raised from the exercise of the Common Stock Purchase Warrants or
such other equity financing are not sufficient to redeem all of the Convertible
Preferred Stock, the Convertible Preferred Stock shall be redeemed with such
proceeds on a pro-rata basis.
Voting. The holders of the Convertible Preferred Stock shall be
entitled to vote on all matters submitted to the stockholders. Each share of
Convertible Preferred Stock shall have that number of votes equal to the number
of shares of Common Stock into which it is then convertible as of the record
date of the proposed stockholder action. The holders of the Convertible
Preferred Stock shall also vote as a separate class on all matters which the
General Corporate Law of the State of Delaware specifically requires the holders
of such Convertible Preferred Stock to vote as a separate class.
Other Preferred Stock
The Company's authorized shares of preferred stock may be issued in one
or more series, and the Board of Directors is authorized, without further action
by the stockholders, to designate the rights, preferences, limitations and
restrictions of and upon shares of each series, including dividend, voting,
redemption and conversion rights. The Board of Directors also may designate par
value, preferences in liquidation and the number of shares constituting any
series. The Company believes that the availability of preferred stock issuable
in series will provide increased flexibility for structuring possible future
financings and acquisitions, if any, and in meeting other corporate needs. It is
not possible to state the actual effect of the authorization and issuance of any
series of preferred stock upon the rights of holders of Common Stock until the
Board of Directors determines the specific terms, rights and preferences of a
series of preferred stock. However, such effects might include, among other
things, restricting dividends on the Common Stock, diluting the voting power of
the Common Stock, or impairing liquidation rights of such shares without further
action by holders of the Common Stock. In addition, under various circumstances,
the issuance of preferred stock may have the effect of facilitating, as well as
impeding or discouraging, a merger, tender offer, proxy contest, the assumption
of control by a holder of a large block of the Company's securities or the
removal of
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<PAGE>
incumbent management. Issuance of preferred stock could also adversely effect
the market price of the Common Stock. The Company has no present plan to issue
any shares of preferred stock.
-26-
LETTER OF TRANSMITTAL
To Exchange
Twenty Common Stock Purchase Warrants Expiring
October 20, 1997 Into One Share of Common Stock
Of
Enteractive, Inc.
Pursuant To The Offering Circular Dated September 16, 1997
Of
Enteractive, Inc.
(The "Company")
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 14,
1997 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF COMMON STOCK PURCHASE
WARRANTS EXPIRING OCTOBER 20, 1997, MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE. AFTER THE EXPIRATION DATE, WARRANTS TENDERED IN THE EXCHANGE
OFFER MAY NOT BE WITHDRAWN UNLESS THE EXCHANGE OFFER IS TERMINATED OR EXPIRES
WITHOUT CONSUMMATION THEREOF.
TO:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, EXCHANGE AGENT
By Mail, By Hand or Overnight Delivery:
c/o Continental Stock Transfer & Trust Company
Two Broadway, 19th Floor
New York, New York 10004
Attention: Reorganization Department
By Facsimile:
(212) 509-5150
Phone Number
(212) 509-4000 Ext. 535
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX, OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. Except as otherwise
provided herein, all signatures on this Letter of Transmittal must be guaranteed
in accordance with the procedures set forth herein. See Instruction 1.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE THE EXCHANGE OFFER
CONSIDERATION PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER
<PAGE>
(AND NOT WITHDRAW) THEIR COMMON STOCK PURCHASE WARRANTS TO THE EXCHANGE AGENT
PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used only if Common Stock Purchase
Warrants expiring October 20, 1997 (the "Warrants") of the Company are to be
physically delivered to the Exchange Agent or delivered by book-entry transfer
to the Exchange Agent's account at [The Depository Trust Company ("DTC") (a
"Book-Entry Transfer Facility") pursuant to the book-entry transfer procedures
set forth in the Offering Circular of the Company dated September 16, 1997 (as
the same may be amended or supplemented from time to time, the "Offering
Circular") under the heading "Procedures for Tendering -- Book-Entry Transfer."
See Instruction 2. Delivery of documents to a Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
Holders whose certificates representing such Warrants are not
immediately available or who cannot deliver their Warrants and all other
required documents to the Exchange Agent, or who cannot complete the procedure
for book-entry transfer, prior to the Expiration Date, may nevertheless tender
their Warrants in accordance with the guaranteed delivery procedures set forth
in the Offering Circular under the heading "Procedures for Tendering --
Guaranteed Delivery." See Instruction 2.
All capitalized terms used herein and not otherwise defined herein are
used herein with the meanings ascribed to them in the Offering Circular.
HOLDERS WHO WISH TO TENDER THEIR WARRANTS MUST, AT A MINIMUM, COMPLETE
COLUMNS (1) THROUGH (3) IN THE BOX HEREIN ENTITLED "DESCRIPTION OF SECURITIES
TENDERED" AND SIGN IN THE APPROPRIATE BOX BELOW. If only those columns are
completed, the holder will be deemed to have tendered all the Warrants, listed
in the table. If a holder wishes to tender less than all of such Warrants,
column (4) must be completed in full, and such holder should refer to
Instruction 5.
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<PAGE>
/ / CHECK HERE IF TENDERED WARRANTS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:___________________________________
Account Number:___________________________
Transaction Code Number:________________
/ / CHECK HERE IF TENDERED CONVERTIBLE DEBENTURES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):_________________________________
Window Ticket No. (if any):______________________________________
Date of Execution of Notice of Guaranteed Delivery:______________
Name of Institution which Guaranteed Delivery:___________________
Account Number:____________
Transaction Code Number:________________
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<PAGE>
DESCRIPTION OF SECURITIES TENDERED
(1)
NAME(S) AND
ADDRESS(ES) OF
HOLDER(S) (PLEASE FILL (2) (3)
IN, IF BLANK, EXACTLY
AS NAME(S) APPEAR(S) WARRANT NUMBER OF WARRANTS
ON SECURITIES) NUMBER* TENDERED**
- -------------------------- --------------- ---------------------------
Total:
- --------------------------------------------------------------------------------
* Need not be completed by holders tendering by book- entry transfer (see
below).
** Completion of column (3) will constitute the tender by you of all
Securities delivered unless otherwise specified in column (4). See
Instruction 5.
-4-
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
By execution hereof, the undersigned hereby acknowledges he
has received and reviewed the Offering Circular and this Letter of Transmittal
relating to the Company's offer to exchange (the "Exchange Offer") Twenty Common
Stock Purchase Warrants (the "Warrants") into one share of the Company's Common
Stock, par value $.01 per share (the "Exchange Offer Consideration") and
otherwise upon the terms and subject to the conditions set forth in the Offering
Circular.
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to the Company the number of Warrants
indicated above. The undersigned understands that the obligation of the Company
to consummate the Exchange Offer is subject to several conditions as set forth
in the Offering Circular under "Conditions to the Exchange Offer."
The undersigned acknowledges that all the foregoing conditions
are for the sole benefit of the Company and may be asserted by the Company at
any time regardless of the circumstances giving rise to such conditions and may
be waived by the Company, in whole or in part, at any time and from time to
time, in the sole discretion of the Company. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. If any of the conditions set forth
in this section shall not be satisfied, the Company may, subject to applicable
law, (i) terminate the Exchange Offer and return all Warrants tendered pursuant
to the Exchange Offer to tendering holders; (ii) extend the Exchange Offer and
retain all tendered Warrants until the Expiration Date for the extended Exchange
Offer; (iii) amend the terms of the Exchange Offer or modify the consideration
to be provided by the Company pursuant to the Exchange Offer; or (iv) waive the
unsatisfied conditions with respect to the Exchange Offer and accept all
Warrants tendered pursuant to the Exchange Offer. Notwithstanding anything to
the contrary, the Company may extend the period of the Exchange Offer in its
sole discretion.
In any such event, the tendered Warrants not accepted for
exchange will be returned to the undersigned without cost to the undersigned as
soon as practicable following the date on which the Exchange Offer is terminated
or expires without any Warrants being purchased thereunder, at the address shown
below the undersigned's signature(s) unless otherwise indicated under "Special
Payment Instructions" below.
-5-
<PAGE>
Subject to, and effective upon, the acceptance by the Company
of the number of Warrants tendered hereby for exchange pursuant to the terms of
the Exchange Offer, the undersigned hereby irrevocably sells, assigns and
transfers to, or upon the order of, the Company, all right, title and interest
in and to, and any and all claims in respect of or arising or having arisen as a
result of the undersigned's status as a holder of, all Warrants tendered hereby,
waives any and all rights with respect to the Warrants tendered hereby
(including, without limitation, the undersigned's waiver of any existing or past
defaults and their consequences with respect to the Warrants) and releases and
discharges any obligor or parent of any obligor of the Warrants from any and all
claims the undersigned may have now, or may have in the future, arising out of
or related to the Warrants, including, without limitation, any claims that the
undersigned is entitled to participate in any redemption or defeasance of the
Warrants. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent (with full knowledge that the Exchange Agent also acts as agent
of the Company) as the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Warrants, with full power of substitution (such
power-of-attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver such Warrants, or transfer ownership of such Warrants
on the account books maintained by a Book- Entry Transfer Facility, together, in
either case, with all accompanying evidences of transfer and authenticity, to or
upon the order of the Company, (b) present such Warrants for transfer on the
books of the Company, and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Warrants, all in accordance with the
terms of the Exchange Offer.
The undersigned hereby represents and warrants that (i) the
undersigned has full power and authority to tender, sell, assign and transfer
the Warrants tendered hereby, and that when such Warrants are accepted for
exchange by the Company, the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and that none of such Warrants will be subject to any adverse
claim or right; (ii) the undersigned owns the Warrants being tendered hereby and
is entitled to tender such Warrants as contemplated by the Exchange Offer, all
within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (iii) the tender of such Warrants complies
with Rule 14e-4. The undersigned, upon request, will execute and deliver all
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the sale, assignment and transfer of the Warrants
tendered hereby.
The undersigned understands that tenders of Warrants pursuant
to any of the procedures described in the Offering Circular under the caption
"Procedures for Tendering" and in the instructions hereto will constitute the
undersigned's acceptance of
-6-
<PAGE>
the terms and conditions of the Exchange Offer. The Company's acceptance of such
Warrants for exchange pursuant to the terms of the Exchange Offer will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer. The undersigned has
read and agrees to all terms and conditions of the Exchange Offer. Delivery of
the enclosed Warrants shall be effected, and risk of loss and title of such
Warrants shall pass, only upon proper delivery thereof to the Exchange Agent.
All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Letter of Transmittal shall
be binding upon the undersigned's heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives. WARRANTS TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. See the information set
forth under the heading "Withdrawal of Tenders" in the Offering Circular.
Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please issue the Exchange Offer Consideration with
respect to Warrants accepted for exchange, and return any certificates for
Warrants not tendered or not accepted for exchange, in the name(s) of the
registered holder(s) appearing in the box entitled "Description of Warrants
Tendered" (and, in the case of Warrants tendered by book-entry transfer, by
credit to the account at the Book-Entry Transfer Facility designated above).
Similarly, unless otherwise indicated herein in the box entitled "Special
Delivery Instructions," please deliver the Exchange Offer Consideration with
respect to Warrants accepted for exchange, together with any certificates for
Warrants not tendered or not accepted for exchange (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing in the
box entitled "Description of Warrants Tendered." If both the "Special Payment
Instructions" box and the "Special Delivery Instructions" box are completed,
please issue the Exchange Offer Consideration with respect to any Warrants
accepted for exchange, and return any certificates for Warrants not tendered or
not accepted for exchange, in the name(s) of, and deliver such Exchange Offer
Consideration and any such certificates to, the person(s) at the address(es) so
indicated. Please credit any Warrants tendered hereby and delivered by
book-entry transfer, but which are not accepted for exchange, by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Payment
Instructions" box or "Special Delivery Instructions" box provisions of this
Letter of Transmittal to transfer any Warrants from the name of the registered
holder(s) thereof if the Company does not accept any of such Warrants for
exchange pursuant to the terms of the Exchange Offer.
-7-
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if certificates for Warrants not tendered
or not accepted for exchange, and/or the certificates representing the Exchange
Offer Consideration, are to be issued in the name of someone other than the
undersigned or if Warrants delivered by book-entry transfer not accepted for
purchase are to be returned by credit to a participant number maintained at the
Book-Entry Transfer Facility other than the participant number indicated above.
Issue: / / Warrants
/ / Exchange Offer Consideration to:
Name:___________________________________________________________________________
(Please Print)
Address:________________________________________________________________________
Zip Code
Wire Transfer Instructions______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Please complete the Substitute Form W-9 below.
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if certificates for Warrants not tendered
or not accepted for exchange, and/or the certificates representing the Exchange
Offer Consideration, are to be sent to someone other than the undersigned, or to
the undersigned at an address other than that shown above.
Deliver: / / Warrants
/ / Exchange Offer Consideration to:
Name:___________________________________________________________________________
(Please Print)
Address:________________________________________________________________________
Zip Code
________________________________________________________________________________
Please complete the Substitute Form W-9 below.
-8-
<PAGE>
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF WARRANTS REGARDLESS OF
WHETHER SECURITIES ARE BEING PHYSICALLY DELIVERED HEREWITH)
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Holder(s) and Authorized Signatory
Date____________, 1997
Must be signed by the registered holder(s) of the Warrants tendered hereby
exactly as their name(s) appear(s) on the certificate(s) for such Warrants or,
if tendered by a participant in one of the Book-Entry Transfer Facilities,
exactly as such participant's name appears on a security position listing as the
owner of the Warrants, or by person(s) authorized to become registered holder(s)
by endorsements and documents transmitted with this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, agent or other person acting in a fiduciary or
representative capacity, please provide the following information and see
Instruction 6.
Name(s):________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No._____________________________________________________
Tax Identification Number or Social Security Number_____________________________
SIGNATURE GUARANTEE (See Instructions 1 and 6 below)
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
-9-
<PAGE>
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including
area code) of Eligible Institution)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Printed Name)
________________________________________________________________________________
(Title)
Date: ______________ 1997
-10-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of
Transmittal must be guaranteed by a firm which is an "Eligible Guarantor
Institution" as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing being referred to herein
as an "Eligible Institution") unless (a) this Letter of Transmittal is signed by
the registered holder of the Warrants tendered herewith (or by a participant in
one of the Book-Entry Transfer Facilities whose name appears on a security
position listing as the owner of such Warrants) and neither the "Special Payment
Instructions" box nor the "Special Delivery Instructions" box of this Letter of
Transmittal has been completed or (b) such Warrants are tendered for the account
of an Eligible Institution. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SECURITIES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used only if Warrants
tendered hereby are to be physically delivered to Exchange Agent or delivered by
book-entry transfer to the Exchange Agent's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in the Offering Circular under the
heading "Procedures for Tendering -- Book-Entry Transfer." All physically
tendered Warrants or confirmations of, or an Agent's Message with respect to,
book- entry transfer into the Exchange Agent's account with a Book- Entry
Transfer Facility, together with a properly completed and validly executed
Letter of Transmittal (or facsimile or electronic copy thereof or an electronic
agreement to comply with the terms thereof) and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at one of its
addresses set forth on the cover page hereof prior to the Expiration Date. If
Warrants are forwarded to the Exchange Agent in multiple deliveries, a properly
completed and validly executed Letter of Transmittal must accompany each such
delivery. The Company may elect to waive receipt of a written Letter of
Transmittal if delivery is properly effected through a Book-Entry Transfer
Facility.
If a holder desires to tender Warrants pursuant to the Exchange Offer
and (a) certificates representing such Warrants are not immediately available,
(b) time will not permit this Letter of Transmittal, certificates representing
such Warrants or other required documents to reach the Exchange Agent prior to
the Expiration Date, or (c) such holder cannot complete the procedures for
book-entry transfer prior to the Expiration Date, a tender may be effected in
accordance with the guaranteed delivery procedure set forth in the Offering
Circular under the caption "Procedures for Tendering -- Guaranteed Delivery."
Pursuant to such procedure:
-11-
<PAGE>
(a) such tender must be made by or through an Eligible
Institution;
(b) on or prior to the Expiration Date, the Exchange Agent must
have received from such Eligible Institution, at one of the addresses of the
Exchange Agent set forth on the cover page hereof, a properly completed and
validly executed Notice of Guaranteed Delivery (by telegram, facsimile, mail or
hand delivery) substantially in the form provided by the Company, setting forth
the name and address of the registered holder and the number of Warrants being
tendered and stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the date of the
Notice of Guaranteed Delivery, this Letter of Transmittal validly executed (or a
facsimile hereof), together with certificates evidencing the Warrants (or
confirmation of, or an Agent's Message with respect to, book- entry transfer of
such Warrants into the Exchange Agent's account with a Book-Entry Transfer
Facility), and any other documents required by this Letter of Transmittal and
these instructions, will be deposited by such Eligible Institution with the
Exchange Agent; and
(c) this Letter of Transmittal (or a facsimile hereof,) properly
completed and validly executed, with any required signature guarantees, together
with certificates representing the Securities in proper form for transfer (or
confirmation of book-entry transfer into the Exchange Agent's account with a
Book-Entry Transfer Facility) and all other documents required by this Letter of
Transmittal must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, WARRANTS
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
TENDERING HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
THE MAILING SHOULD BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE, TO
PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE. NO ALTERNATIVE,
CONDITIONAL OR CONTINGENT TENDERS OF WARRANTS WILL BE ACCEPTED. BY EXECUTION OF
THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), ALL TENDERING HOLDERS WAIVE
ANY RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF THEIR WARRANTS FOR PAYMENT.
3. INADEQUATE SPACE. If the space provided herein under
"Description of Warrants Tendered" is inadequate, the certificate numbers of the
Warrants and the principal amount of Warrants tendered should be listed on a
separate schedule and attached hereto.
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<PAGE>
4. WITHDRAWAL OF TENDERS. Tenders of Warrants may be withdrawn at
any time until the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after the expiration of 40 business days from
the commencement of the Exchange Offer (September 16, 1997) unless accepted for
exchange prior to that date.
Holders who wish to exercise their right of withdrawal with respect to
a Exchange Offer must give written notice of withdrawal, delivered by mail or
hand delivery or facsimile transmission, to the Exchange Agent at the address
set forth on the first page of this Letter of Transmittal prior to the
Expiration Date or at such other time as otherwise provided for herein. In order
to be effective, a notice of withdrawal must specify the name of the person who
deposited the Warrants to be withdrawn (the "Depositor"), the name in which the
Warrants are registered, if different from that of the Depositor, and the number
of the Warrants to be withdrawn prior to the physical release of the
certificates to be withdrawn. If tendered Warrants to be withdrawn have been
delivered or identified through confirmation of book-entry transfer to the
Exchange Agent, the notice of withdrawal also must specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with withdrawn
Warrants. The notice of withdrawal must be signed by the registered holder of
such Warrants in the same manner as the applicable Letter of Transmittal
(including any required signature guarantees), or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of such Warrants. Withdrawals of tenders of Warrants
may not be rescinded, and any Warrants withdrawn will be deemed not validly
tendered thereafter for purposes of the Exchange Offer. However, properly
withdrawn Warrants may be tendered again at any time prior to the Expiration
Date by following the procedures for tendering not previously tendered Warrants
described elsewhere herein.
If the Company is delayed in its acceptance for conversion and payment
for any Warrants or is unable to accept for conversion or convert any Warrants
pursuant to the Exchange Offer for any reason, then, without prejudice to the
Company's rights hereunder, tendered Warrants may be retained by the Exchange
Agent on behalf of the Company and may not be withdrawn (subject to Rule
13e-4(f)(5) under the Exchange Act, which requires that the issuer making the
tender offer pay the consideration offered, or return the tendered securities,
promptly after the termination or withdrawal of a tender offer), except as
otherwise permitted hereby.
5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). Tenders of Warrants will be accepted only in integral
multiples of 20. The aggregate principal amount of all Warrants delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If tenders of Warrants are made with respect to less than the number of Warrants
delivered
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<PAGE>
herewith, certificates(s) for the number of Warrants not tendered will be issued
and sent to the registered holder, unless otherwise specified in the "Special
Payment Instructions" or "Special Delivery Instructions" boxes in this Letter of
Transmittal.
6. SIGNATURES ON LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Warrants tendered hereby, the signature(s) must correspond with
the name(s) as written on the face of the certificates representing such
Warrants without alteration, enlargement or any other change whatsoever. If this
Letter of Transmittal is signed by a participant in one of the Book-Entry
Transfer Facilities whose name is shown on a security position listing as the
owner of the Warrants tendered hereby, the signature must correspond with the
name shown on the security position listing as the owner of the Warrants.
If any Warrants tendered hereby are owned of record by two or
more persons, all such persons must sign this Letter of Transmittal.
If any Warrants tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal, and any necessary accompanying documents, as
there are different registrations of such Warrants.
If this Letter of Transmittal is signed by the registered
holder of Warrants tendered hereby, no endorsements of such Warrants or separate
bond powers are required, unless the Exchange Offer Consideration is to be
issued to, or Warrants not tendered or not accepted for exchange are to be
issued in the name of, a person other than the registered holder(s), in which
case the Warrants tendered hereby must be endorsed or accompanied by appropriate
bond powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on such Warrants (and with respect to a participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Warrants, exactly as the name(s) of the participant(s) appear(s)
on such security position listing as the owner of the Warrants). Signatures on
such Warrants and bond powers must be guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal is signed by a person other than
the registered holder(s) of the Warrants tendered hereby, the Warrants must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
representing such Warrants. Signatures on such Warrants and bond powers must be
guaranteed by an Eligible Institution. See Instruction 1.
-14-
<PAGE>
If this Letter of Transmittal or any Warrants or bond powers
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of such person's authority so to act must be
submitted with this Letter of Transmittal.
7. TRANSFER TAXES. Except as otherwise provided in this
Instruction 7, the Company will pay all transfer taxes with respect to the
delivery and conversion of Warrants pursuant to the Exchange Offer. If, however,
issuance of the Exchange Offer Consideration is to be made to, or Warrants not
tendered or not accepted for exchange are to be issued in the name of, a person
other than the registered holder(s), the amount of any transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such other person will be deducted from the Exchange
Offer Consideration unless evidence satisfactory to the Company of the payment
of such taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 7, it will not be necessary for transfer tax stamps to be affixed to
the Warrants tendered hereby.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the Exchange
Offer Consideration with respect to any Securities tendered hereby is to be
issued, or Securities not tendered or not accepted for exchange are to be
issued, in the name of a person other than the person(s) signing this Letter of
Transmittal or to the person(s) signing this Letter of Transmittal but at an
address other than that shown in the box entitled "Description of Warrants
Tendered," the appropriate boxes in this Letter of Transmittal must be
completed. All Warrants tendered by book-entry transfer and not accepted for
exchange will be returned by crediting the account at the Book- Entry Transfer
Facility designated above as the account from which such Warrants were
delivered.
9. TAXPAYER IDENTIFICATION NUMBER. Each tendering holder is
required to provide the Exchange Agent with the holder's correct taxpayer
identification number ("TIN"), generally, the holders' social security or
federal employer identification number, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify whether such
person is subject to backup withholding of federal income tax.
10. CONFLICTS. In the event of any conflict between the terms of
the Offering Circular and the terms of this Letter of Transmittal, the terms of
the Offering Circular will control.
11. MUTILATED, LOST, STOLEN OR DESTROYED WARRANTS. Any holder of
Warrants, whose Warrants have been mutilated, lost, stolen or destroyed, should
contact the Exchange Agent at the addresses indicated above for further
instructions.
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<PAGE>
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance may be directed to the Exchange Agent at its address set forth below
or from the tendering registered holder's broker, dealer, commercial bank or
trust company. Additional copies of the Offering Circular, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
obtained from the Exchange Agent.
13. DETERMINATION OF VALIDITY. All questions as to the form of all
documents, the validity (including time of receipt) and acceptance of tenders of
the Warrants will be determined by the Company, in its sole discretion, the
determination of which shall be final and binding. Alternative, conditional or
contingent tenders of Warrants will not be considered valid. The Company
reserves the absolute right to reject any or all tenders of Warrants that are
not in proper form or the acceptance of which, in the Company's opinion, would
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Warrants. If the Company
waives its right to reject a defective tender of Warrants, the holder will be
entitled to the Exchange Offer Consideration. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the Letter of Transmittal) will be final and binding. Any defect or irregularity
in connection with tenders of Warrants must be cured within such time as the
Company determines, unless waived by the Company. Tenders of Warrants shall not
be deemed to have been made until all defects and irregularities have been
waived by the Company or cured. None of the Company, the Exchange Agent or any
other person will be under any duty to give notice of any defects or
irregularities in tenders of Warrants, or will incur any liability to holders
for failure to give any such notice.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder whose tendered Securities
are accepted for exchange is required by law to provide the Exchange Agent (as
payer) with such holder's correct TIN on Substitute Form W-9 below. If such
holder is an individual, the TIN is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, a $50 penalty may be
imposed by the Internal Revenue Service, and payments of Exchange Offer
Consideration may be subject to backup withholding.
Certain holders (including, among others, corporations) are not subject
to these backup withholdings and reporting requirements. Exempt holders should
indicate their exempt status on Substitute Form W-9. In order for a foreign
individual to qualify as an exempt recipient, such individual must submit a
statement, signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the
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<PAGE>
Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Exchange Agent is required
to withhold 31% of any reportable payments made to the holder or other payee.
Backup withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on reportable payments made with
respect to securities accepted for conversion pursuant to the Exchange Offer,
the holder is required to notify the Exchange Agent of such holder's correct TIN
by completing the form below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that such holder is awaiting a TIN) and that (a) such
holder is exempt from backup withholding, (b) such holder has not been notified
by the Internal Revenue Service that he is subject to backup withholding as a
result of a failure to report all interest or dividends or (c) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The holder is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the holder
of the Warrants tendered hereby. If the Warrants are held in more than one name
or are not held in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
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<PAGE>
PAYOR'S NAME: CONTINENTAL STOCK TRANSFER & TRUST COMPANY.
NAME/ADDRESS:
SUBSTITUTE
FORM W-9
Department of PART 1(a) _ PLEASE TIN_______________
the Treasury PROVIDE YOUR TIN IN (Social Security
Internal BOX AT RIGHT AND Number or (Employer
Revenue Service CERTIFY BY SIGNING Identification
AND DATING BELOW Number)
PART 1(b) _ PLEASE CHECK THE BOX AT THE
RIGHT IF YOU HAVE APPLIED FOR, AND ARE
AWAITING RECEIPT OF, YOUR TIN [ ]
Payor's Request PART 2 - FOR PAYEES EXEMPT FROM BACKUP
for WITHHOLDING PLEASE WRITE "EXEMPT" HERE
Taxpayer (SEE INSTRUCTIONS)________________________
Identification
Number ("TIN")
and Certification
PART 3 - CERTIFICATION UNDER PENALTIES OF
PERJURY, I CERTIFY THAT (X) The number
shown on this form is my correct TIN (or I
am waiting for a number to be issued to
me), and (Y) I am not subject to backup
withholding because: (a) I am exempt from
backup withholding, or (b) I have not been
notified by the Internal Revenue Service
(the "IRS") that I am subject to backup
withholding as a result of a failure to
report all interest or dividends, or (c)
the IRS has notified me that I am no
longer subject to backup withholding.
SIGNATURE___________________ DATE_________
You must cross out Item (Y) of Part 3 above if you have been notified
by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out Item (Y) of Part 3. (Also see Certification under
Specific Instructions in the enclosed Guidelines.)
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 1(B)
OF THE SUBSTITUTE FORM W-9 INDICATING YOU HAVE APPLIED FOR, AND ARE AWAITING
RECEIPT OF, YOUR TIN
-18-
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS
NOT BEEN ISSUED TO ME, AND THAT I MAILED OR DELIVERED AN APPLICATION TO RECEIVE
A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE
CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE (OR I INTEND TO MAIL OR DELIVER
AN APPLICATION IN THE NEAR FUTURE). I UNDERSTAND THAT IF I DO NOT PROVIDE A
TAXPAYER IDENTIFICATION NUMBER TO THE PAYOR, 31 PERCENT OF ALL PAYMENTS MADE TO
ME PURSUANT TO THIS OFFER SHALL BE RETAINED UNTIL I PROVIDE A TAX IDENTIFICATION
NUMBER TO THE PAYOR AND THAT, IF I DO NOT PROVIDE MY TAXPAYER IDENTIFICATION
NUMBER WITHIN SIXTY (60) DAYS, SUCH RETAINED AMOUNTS SHALL BE REMITTED TO THE
IRS AS BACKUP WITHHOLDING AND 31 PERCENT OF ALL REPORTABLE PAYMENTS MADE TO ME
THEREAFTER WILL BE WITHHELD AND REMITTED TO THE IRS UNTIL I PROVIDE A TAXPAYER
IDENTIFICATION NUMBER.
- ------------------------------------ ------------------------
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31 PERCENT OF ANY CASH PAYMENTS.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-
9 FOR ADDITIONAL DETAILS.
-19-
<PAGE>
The Exchange Agent for the Exchange Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
TWO BROADWAY, 19TH FLOOR
NEW YORK, NEW YORK 10004
BANKERS AND BROKERS AND OTHERS CALL: (212) 509-4000 EXT. 535
-22-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
Give the SOCIAL SECURITY
For this type of account number of ____
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined funds,
any one of the individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor is
account) the only contributor, the
minor(1)
6. Account in the name of The ward, minor or incompetent
guardian or committee for person(3)
a designated ward, minor,
or incompetent person
7.a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
Law
8. Sole proprietorship The owner(4)
account
-21-
<PAGE>
Give the SOCIAL SECURITY
For this type of account number of ____
9. A valid trust, estate or Legal entity (Do not furnish
pension trust the identifying number of the
personal representative or
trustee unless the legal
entity itself is not
designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district or
prison) that receives
agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name,
the number will be considered to be that of the first
name listed.
-23-
<PAGE>
GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
* A corporation.
* A financial institution.
* An organization exempt from tax under section 501 (a), or an
individual retirement plan.
* The United States or any agency or instrumentality thereof.
* A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
* A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
* An international organization or any agency or instrumentality
thereof.
* A registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
* A real estate investment trust.
* A common trust fund operated by a bank under section 584(a).
* An exempt charitable remainder trust, or a non-exempt trust
described in section 4947 (a)(1).
* An entity registered at all times under the Investment Company
Act of 1940.
-23-
<PAGE>
* A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
* Payments to nonresident aliens subject to withholding under
section 1441.
* Payments to partnerships not engaged in a trade or business in
the U.S. and which have at least one nonresident partner.
* Payments of patronage dividends where the amount received is
not paid in money.
* Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
* Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
* Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
* Payments described in section 6049 (b) (5) to nonresident
aliens.
* Payments on tax-free covenant bonds under section 1451.
* Payments made by certain foreign organizations.
* Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, CHECK THE BOX IN PART 4 ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice _ Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes.
-24-
<PAGE>
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. _ If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding. _ If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. _ Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
(4) Failure to Report Certain Dividend and Interest Payments. _ If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an underpayment attributable to that
failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX, CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-25-
PRESS RELEASE Contact: Kenneth Gruber
SEPTEMBER 16, 1997 (212) 221-6559
FOR IMMEDIATE RELEASE:
- ----------------------
ENTERACTIVE, INC. ANNOUNCES EXCHANGE OFFER
Enteractive, Inc. - New York, New York. Enteractive, Inc.
(NASDAQ -- ENTR Boston Stock Exchange -- ENT), today announced that it is
offering to exchange (the "Exchange Offer") twenty of its publicly-traded Common
Stock Purchase Warrants (the "Warrants") expiring October 20, 1997 into one
share of its Common Stock, $.01 par value. As of the date of this press release,
there are 5,121,468 Warrants outstanding. The Exchange Offer is being made for
up to all outstanding Warrants. Each Warrant currently entitles the registered
holder to purchase through October 20, 1997 one share of the Company's Common
Stock at an exercise price of $4.00 per share. The Exchange Offer will expire at
5:00 P.M., New York City Time on October 14, 1997, unless extended. Continental
Stock Transfer & Trust Company will serve as Exchange Agent.
Andrew Gyenes, Chairman of the Board and Chief Executive
Officer of Enteractive, Inc., stated that the purpose of the Exchange Offer is
to (i) reduce the overhang to the market for the Company's Common Stock and (ii)
offer Warrant holders the opportunity to participate in any long term
appreciation of the Company's securities, since absent the Exchange Offer, it is
likely that the Warrants will expire unexercised on October 20, 1997.
The Exchange Offer is being made by the Company in reliance on
the exemption from the registration requirements of the Securities Act of 1933,
as amended, afforded by Section 3(a)(9) thereof. The Company therefore will not
pay any commission or other remuneration to any broker, dealer, salesman or
other person for soliciting tenders of Warrants. Officers, directors and regular
employees of the Company may solicit tenders of Warrants but they will not
receive additional compensation therefor. It is anticipated that an Offering
Circular will be mailed to Warrant holders on or about September 16, 1997.
ENTERACTIVE, INC.
110 West 40th Street
New York, New York 100018
September 16, 1997
To The Holders of Enteractive, Inc.'s Common Stock Purchase Warrants Expiring
October 20, 1997:
I am pleased to tell you about a new financial initiative that
the Board of Directors has authorized which should improve our capital
structure.
The Board has approved a plan to exchange one share of the
Company's Common Stock for Twenty of its publicly traded Common Stock Purchase
Warrants Expiring October 20, 1997:
For a detailed description of this initiative, of the terms
for the proposed transaction and necessary procedures to participate in the
Exchange Offer, please see the enclosed Offering Circular, dated September 16,
1997, the accompanying Letter of Transmittal and the other ancillary documents.
The Exchange Offer is subject to certain conditions.
The purpose of the Exchange Offer is to 1.) reduce the
overhang to the market for the Company's Common Stock and 2.) offer Warrant
holders the opportunity to participate in any long term appreciation of the
Company's securities, since absent the Exchange Offer, it is likely that the
Warrants will expire unexercised on October 20, 1997.
The Company reviewed various exchange ratios and has concluded
that a ratio of one share of Common Stock for every 20 warrants best serves the
needs of the Company, its stockholders and the Warrant holders.
Management and the Board of Directors are convinced that the
Exchange Offer is an important part of Enteractive, Inc. long- term strategy to
improve its financial strength and its capitalization and to meet its growth
objectives.
We look forward to your continued support of our Company.
Sincerely,
/s/ Andrew Gyenes
Chairman of the Board and
Chief Executive Officer
ENTERACTIVE, INC.
TO The Warrant Holders of Enteractive, Inc.
RE Amendment to Offering Circular (the "Offering Circular") dated
September 16, 1997) relating to the Exchange Offer of
Enteractive, Inc.
================================================================================
The following discussion amends and supersedes the discussion
relating to the Federal Income Tax Consequences appearing on page 23 of the
Offering Circular.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO WARRANTHOLDERS
The following discussion summarizes the material federal
income tax consequences to holders of the Warrants (herein referred to as
"Holders") relating to the exchange of the Warrants for Common Stock of the
Company. The discussion is based upon the Internal Revenue Code of 1986 (the
"Code"), the applicable Treasury Regulations (the "Regulations") and judicial
and administrative interpretations of the Code and Regulations, all as in effect
on the date of this Prospectus. Each Holder should be aware that the Code and
the Regulations, and any interpretation thereof, are subject to change and that
any change could be applied retroactively. This summary does not discuss all
aspects of federal income taxation that may be relevant to a particular Holder
in light of his personal investment circumstances or to certain types of Holders
subject to special treatment under the federal income tax laws (for example,
tax- exempt entities and foreign taxpayers) and does not discuss any aspect of
state, local or foreign tax laws. Each Holder is urged to consult his own tax
advisor to determine the particular tax consequences to him (including the
applicability and effect of state, local, foreign and other tax laws) of the
exchange of the Warrants for Common Stock.
Exchange of Warrants for Common Stock
- -------------------------------------
In general, a Holder exchanging Warrants for Common Stock will
recognize gain or loss equal to the difference between the amount realized upon
the exchange (which will be equal to the fair market value of the Common Stock
received in exchange for the Warrants), and the basis of the Warrants that were
exchanged therefor. Such gain or loss will be capital gain or loss if the
Warrants thus exchanged were a capital asset in the hands of the Holder and the
Common Stock which would have been acquired upon the exercise of a Warrant would
have been a capital asset if so acquired, and will be long-term capital gain or
loss if the Holder has held the Warrants for more than 18 months prior to the
sale.
<PAGE>
Tax Basis and Holding Period of the Common Stock
- ------------------------------------------------
Shares of Common Stock acquired upon the exchange of the
Warrants will have a tax basis equal to their fair market value at the time of
the exchange. The Holder may not tack to his holding period of the Common Stock
the period he held the Warrants transferred in exchange for the Common Stock.
Disposition of Common Stock
- ---------------------------
Upon the sale or exchange of shares of Common Stock to or with
a person other than the Company, a Holder will, as a general rule, recognize
capital gain or loss equal to the difference between the amount realized upon
such sale or exchange and the Holder's adjusted tax basis in such shares. Any
capital gain or loss recognized will generally be treated as long-term capital
gain or loss if the Holder held such shares for more than 18 months.
-2-
