SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 0-26598
PAPERCLIP SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
22-3137907
(IRS Employer ID number)
THREE UNIVERSITY PLAZA
HACKENSACK, NJ 07601
(Address of principal executive offices) (Zip Code)
(201)487-3503
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceeding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No__.
(Applicable only to Corporate Issuers)
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable
date.
November 10, 1997
Class
Common Stock, $.01 par value 8,101,521
Redeemable Class A Warrants 3,599,500
<PAGE>
PAPERCLIP SOFTWARE, INC.
INDEX
Page #
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets 1
Condensed Statements of Operations 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Item 2 .Managements Discussion and Analysis
of Financial Condition and
Results of Operations 5
Part II Other Information
Item 6. Exhibits and reports on Form 8-K 10
Signatures 11
Exhibit index 12
Exhibit 2 Agreement and Plan of Merger 13
Exhibit 27, Article 5 Financial Data Schedule 14
<PAGE>
<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED BALANCE SHEETS -- SEPTEMBER 30, 1997 (Unaudited)
AND DECEMBER 31, 1996
<CAPTION>
September 30, Dec 31,
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $36,047 $220,573
Accounts receivable (net of
allowance for doubtful accounts
of $40,000 at September 30, 1997
and December 31, 1996) 214,085 275,527
Prepaid expenses and other current assets 1,465 33,855
--------------- --------------
Total current assets 251,597 529,955
--------------- --------------
Equipment, furniture and fixtures:
Computer and office equipment 386,597 669,889
Furniture and fixtures 204,858 204,858
--------------- --------------
591,455 874,747
Less- Accumulated depreciation (330,609) (451,902)
--------------- --------------
260,846 422,845
--------------- --------------
Other assets 50,624 53,282
--------------- --------------
Total assets $563,067 $1,006,082
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $1,212,738 $1,125,306
Loans payable - ASI 1,655,557
Deferred revenue 10,737 56,066
Capitalized lease 16,866 49,442
--------------- --------------
Total current liabilities 2,895,898 1,230,814
Notes payable 129,691 129,691
Capital lease, net of current portion 3,966
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, authorized 30,000,000
shares; $.01 par value; issued and
outstanding 8,101,521 shares on
September 30, 1997 and 7,722,188 shares
at December 31, 1996 81,015 77,222
Additional paid-in capital 16,413,764 16,362,395
Accumulated deficit (18,957,301) (16,798,006)
--------------- --------------
Stockholders' equity (deficit) (2,462,522) (358,389)
--------------- --------------
Total liabilities and
stockholders' equity (deficit) $563,067 $1,006,082
=============== ==============
-1-
</TABLE>
<PAGE>
<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
UNAUDITED
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1996 1997 1996
--------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Net sales $232,219 $490,037 $1,153,087 $1,474,847
--------------- -------------- ------------- ----------------
Operating expenses:
Salaries and related benefits 364,417 422,580 1,084,223 1,175,561
Research and development expenses 381,552 862,457 1,037,208 2,326,510
Selling expenses 160,974 313,057 487,352 909,647
General and administrative expenses 192,792 280,661 672,633 773,350
--------------- -------------- ------------- ----------------
Total operating expenses 1,099,735 1,878,755 3,281,416 5,185,068
--------------- -------------- ------------- ----------------
Loss from operations (867,516) (1,388,718) (2,128,329) (3,710,221)
--------------- -------------- ------------- ----------------
Other income (expense):
Interest income 74 16,339 3,211 84,323
Interest expense (12,540) (1,275) (34,177) (4,424)
--------------- -------------- ------------- ----------------
(12,466) 15,064 (30,966) 79,899
--------------- -------------- ------------- ----------------
Net loss ($879,982) ($1,373,654) ($2,159,295) ($3,630,322)
=============== ============== ============= ================
Loss per common share ($0.11) ($0.18) ($0.27) ($0.47)
=============== ============== ============= ================
Weighted average number common
shares outstanding 8,075,391 7,721,538 7,990,911 7,643,333
=============== ============== ============= ================
</TABLE>
<PAGE>
<TABLE>
PAPERCLIP SOFTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($2,159,295) ($3,630,321)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation 162,000 116,352
Decrease (Increase) in accounts receivabl 61,442 (118,992)
Decrease (Increase) in prepaid
expenses and other current assets 32,390 (70,000)
Decrease in other assets 2,657 241
Increase in accounts payable,
accrued expenses and deferred revenues 42,102 418,457
--------------- --------------
Net cash used in operating activities (1,858,704) (3,284,263)
--------------- --------------
INVESTING ACTIVITIES -- Purchases of
equipment, furniture and fixtures --- (126,203)
--------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock in
exchange for Bridge Warrants and cash 616,456
Proceeds from issuance of stock in
exchange for Stock Options and cash 3,080 33,624
Issuance of stock for compensation 52,083
Proceeds from borrowings 1,655,557
Payments on capitalized leases (36,542) (41,780)
--------------- --------------
Net cash provided by financing activities 1,674,178 608,300
--------------- --------------
Net (decrease) increase in cash (184,526) (2,802,166)
CASH, beginning of period 220,573 3,661,009
--------------- --------------
CASH, end of period $36,047 $858,843
=============== ==============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid $1,700 $4,424
=============== ==============
-3-
</TABLE>
<PAGE>
PAPERCLIP SOFTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information, the
instructions to Form 10-QSB and item 310 (b) of Regulation
SB. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair
presentation have been included. For further information,
refer to the Financial Statements and footnotes thereto
included in the Company's Registration Statement and
Prospectus and Form 10-KSB (for the year ended December 31,
1996) as filed with the Securities and Exchange Commission.
NOTE B -- LOSS PER SHARE
The loss per share amounts in the statement of operations
have been computed in accordance with a Staff Accounting
Bulletin (SAB) of the Securities and Exchange Commission.
According to the SAB, common stock and common stock warrants
issued are to be treated as common stock equivalents
outstanding for all periods presented if such common stock
was issued or such common stock warrants may be exercised,
at a price substantially below the public offering price.
As a consequence of the Company's offering of 1,799,750
shares of its common stock at $5.00 per share in an initial
public offering, its warrants issued to the Bridge Note
holders, entitling the holders thereof to acquire an
aggregate of 430,000 shares of the Company's common stock at
an exercise price of $2.25,would be treated as common stock
equivalents unless their inclusion would be antidilutive. The
unexercised Bridge Warrants have not been treated as common
stock equivalents for the three and nine months ended at September
30, 1996 or September 30, 1997 as their inclusion would be
antidilutive. The share data contained in this note does not take into
account a 2 for 1 stock split effected as of May 1996.
-4-
<PAGE>
PAPERCLIP SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months and Nine Months Ended September 30, 1997 Compared
with Three Months and Nine Months Ended September 30, 1996.
Net sales of PaperClip Software, Inc. (the "Company" or
"PaperClip") for the three months ended September 30, 1997
decreased by 52.61% over the three months ended September 30,
1996 (from $490,037 to $232,219). Net sales for the nine months
ended September 30, 1997 decreased by 21.82% over the nine months
ended September 30, 1996 (from $1,474,847 to $1,153,087). The
decrease was due to lower demand in the first and third quarters
of 1997. Net sales were adversely affected by a decrease in
marketing efforts, which resulted from the Company's
financial constraints. None of such decrease was a result of a
decrease in prices.
Salaries and related benefits for the three months ended
September 30, 1997 decreased by 13.76% over the three months
ended September 30, 1996 (from $422,580 to $364,417). Salaries
and related benefits for the nine months ended September 30, 1997
decreased by 7.77% over the nine months ended September 30, 1996
(from $1,175,561 to $1,084,223). The decrease was due to a
reduction in general and administrative personnel, resulting from
the Company's financial constraints.
Research and development expenses for the three months ended
September 30, 1997 decreased by 55.76% over the three months
ended September 30, 1996 (from $862,457 to $381,552). Research
and development expenses for the nine months ended September 30,
1997 decreased by 55.42% over the nine months ended September
30, 1996 (from $2,326,510 to $1,037,208). The decrease was due
to the completion of internet products, the cessation of work on
the workflow products, and the Company's financial constraints.
Selling expenses for the three months ended September 30, 1997
decreased by 48.58% over the three months ended September 30,
1996 (from $313,057 to $160,974). Selling expenses for the nine
months ended September 30, 1997 decreased by 46.42% over the nine
months ended September 30, 1996 (from $909,647 to $487,352). The
decrease was due to a lower marketing effort and lower promotion
expenses resulting from the Company's financial constraints.
-5-
<PAGE>
General and administrative expenses for the three months ended
September 30, 1997 decreased by 31.31% over the three months
ended September 30, 1996 (from $280,661 to $192,792). General and
administrative expenses for the nine months ended September
30,1997 decreased by 13.02% over the nine months ended September
30,1996 (from $773,350 to $672,633), due to an increase in
professional fees related to the sale of the Company's assets, as
described below, which increase was offset by a reduction in
recruiting fees.
The net loss from operations for the three months ended September
30, 1997 decreased by 37.53% over the three months ended
September 30, 1996 (from $1,388,718 to $867,516). The net loss
from operations for the nine months ended September 30, 1997
decreased by 42.64% over the nine months ended September 30, 1996
(from $3,710,221 to $2,128,329). The decrease was primarily due
to a decrease in research and development and marketing efforts
in light of the Company's financial constraints.
Interest income for the three months ended September 30, 1997
decreased by 99.55% over the three months ended September 30,
1996 (from $16,339 to $74). Interest income for the nine months
ended September 30, 1997 decreased by 96.19% over the nine months
ended September 30, 1996 (from $84,323 to $3,211). The decrease
is due to the loss of interest income on investments that the
company had in 1996, which was used to fund operations.
Interest expense for the three months ended September 30, 1997
increased by 883.53% over the three months ended September 30,
1996 (from $1,275 to $12,540). Interest expense for the nine
months ended September 30, 1997 increased by 672.54% over the
nine months ended September 30, 1996 (from $4,424 to $34,177).
The increase is due to accrued interest payable to Access Systems
International for the advances it has made to fund the Company's
operations.
Liquidity and Capital Resources
September 30, 1997 Compared with December 31, 1996
For the quarter ended September 30, 1997 the Company incurred a
net loss of $879,982. As of September 30, 1997, the Company had
an accumulated deficit of $18,957,301. The Company continues to
incur operating losses. The Company had negative working capital
of $700,859 and $2,644,301 as of December 31, 1996 and September
30, 1997, respectively.
-6-
<PAGE>
Throughout 1996, the Company incurred losses and had been seeking
sources of additional financing. In July 1996, the underwriter of
the Company's initial public offering and principal market maker
for its Common Stock, A.R. Baron & Co, Inc. ("A.R. Baron"), filed
for bankruptcy. In the last several months of 1996, management
had been engaged in discussions with a number of investment
banks, corporate buyout firms and potential merger and joint
venture partners regarding various financial and strategic
alternatives for the Company. The Company was unable to identify
additional sources for public or private financing.
After evaluating several potential opportunities for a sale
of the Company or its assets, the Company entered into a non-
binding Letter of Intent dated January 2, 1997 (the "Letter
of Intent") with Access Solutions International, Inc. ("Access
Solutions"), providing for the parties to use their best efforts
to negotiate a transaction involving the purchase by Access
Solutions of substantially all of the assets of the Company and
for Access Solutions to assume specified liabilities of the
Company.
Pursuant to the Letter of Intent, Access Solutions provided
a one year bridge loan, of $300,000 (the "Access Loan"), at
an interest rate of 12% per annum, to the Company for use as
operating capital. In consideration of such loan, the Company
issued a convertible note to Access Solutions("the Convertible
Note), convertible into common stock at a conversion price of
twenty-five cents ($0.25) per share.
On April 15, 1997, the Company and Access Solutions entered
into a definitive agreement for Access Solutions to purchase
substantially all of the assets of the Company and for
Access Solutions to assume substantially all of the
liabilities of the Company, including the Convertible Note.
The purchase price was to have been paid by delivery to the
Company of approximately 1,544,438 shares of Access Solutions'
common stock plus an equivalent number of Access Solutions'
Class B Warrants (the "Asset Sale Transaction").
-7-
<PAGE>
On November 12, 1997, the parties entered into a definitive
Merger Agreement which replaced the Asset Sale Transaction.
Pursuant to the Merger Agreement, the consideration to the
shareholders of PaperClip will be the same number of shares and
warrants of Access Solutions as would have been paid in the
aggregate to PaperClip under the Asset Sale Transaction except
that 75,000 shares of Access Solutions Common Stock and 75,000
Access Solutions Class B Warrants will be held in escrow and
subject to certain conditions. The shares and warrants of Access
Solutions that shall be received by PaperClip in the transaction
will be subject to a lock up agreement which will limit the
transferability thereof prior to either (i)October 1998, if
certain shareholders of Access Solutions agree to be bound by an
identical lock up, or (ii) April 1998, if certain shareholders of
Access Solutions do not agree to be bound by a lock up through
October 1998.
The parties have also entered into a Management Agreement,
dated April 15, 1997 (the "Management Agreement"), pursuant
to which Access Solutions has assumed the management and
control of the day-to-day operations of the Company pending
the closing. Pursuant to the Management Agreement, pending
the closing, Access Solutions is advancing funds to the
Company, in accordance with an agreed upon budget. As of
October 31, 1997, aggregate amounts advanced to the Company
pursuant to the Management Agreement totaled $1,307,575.
Consummation of the merger with Access Solutions is subject to
various conditions, including approval of the Company's
shareholders and the filing of a registration statement with the
Securities Exchange Commission. The transaction is expected to
close before or on January 31, 1998. There can be no assurances
that the merger will be consummated or that the original asset
sale transaction will be consummated. PaperClip has not
identified any alternative sources of liquidity and has no
commitment with regard to obtaining any further funds which would
be required to sustain PaperClip's operations if a transaction
with Access Solutions cannot be consummated.
-8-
<PAGE>
PaperClip has suffered recurring losses from operations and
incurred negative cash flows from its operating activities which
raise substantial doubt about PaperClip's ability to continue as
a going concern. As a result, PaperClip's independent accountants
in their report dated February 20, 1997 on the Financial
Statements have included an explanatory paragraph that describes
factors raising substantial doubt about PaperClip's ability to
continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability of assets
and classification of liabilities or any other adjustments that
might be necessary should PaperClip be unable to continue as a
going concern.
In March 11, 1997, the Company was informed by NASDAQ that
its securities had been deleted from The NASDAQ SmallCap
Market due to the Company's failure to comply with minimum
asset and capital surplus requirements established by
NASDAQ. The Company's securities are now quoted on the OTC
Bulletin Board.
-9-
<PAGE>
PART II
OTHER INFORMATION
IteExhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 2- Agreement and Plan of
Merger among PaperClip Software,
Inc., Access Solutions International,
Inc. and Paperclip Acquisition Corp.
dated November 12, 1997
Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
The Company has not filed any reports 8-K
for the quarter months ended September 30, 1997.
-10-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PAPERCLIP SOFTWARE, INC.
BY /s/ William Weiss
William Weiss, Chief Executive
Officer and Principal
Financial Officer
Date: November 14, 1997
-11-
<PAGE>
Paperclip Software, Inc.
Exhibit Index
Exhibit Number Page #
27 Financial Data Schedule 13
99.1 Agreement and Plan of Merger 14
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 36,047
<SECURITIES> 0
<RECEIVABLES> 254,085
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 251,597
<PP&E> 591,455
<DEPRECIATION> 330,609
<TOTAL-ASSETS> 563,067
<CURRENT-LIABILITIES> 2,895,898
<BONDS> 0
0
0
<COMMON> 81,015
<OTHER-SE> 16,413,764
<TOTAL-LIABILITY-AND-EQUITY> 563,067
<SALES> 1,153,087
<TOTAL-REVENUES> 1,153,087
<CGS> 0
<TOTAL-COSTS> 3,281,416
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,177
<INCOME-PRETAX> (2,159,295)
<INCOME-TAX> (2,159,295)
<INCOME-CONTINUING> (2,159,295)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,159,295)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
AGREEMENT AND PLAN OF MERGER
among
PAPERCLIP SOFTWARE, INC.
ACCESS SOLUTIONS INTERNATIONAL, INC.
and
PAPERCLIP ACQUISITION CORP.
November 12, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER
Section 1.1. The Merger
Section 1.2. The Closing
Section 1.3. Actions at the Closing
Section 1.4. Additional Actions
Section 1.5. Certificate of Incorporation
Section 1.6. By-laws
Section 1.7. Directors and Officers
Section 1.8. No Further Rights
ARTICLE II CONVERSION OF SECURITIES, EXCHANGE OF
CERTIFICATES
Section 2.1. Conversion of Shares
Section 2.2. Options and Warrants
Section 2.3. Appraisal Rights
Section 2.4. Exchange of Shares
Section 2.5. Closing of Transfer Books
Section 2.6. Preferred Stock
Section 2.7. Options and Warrants
ARTICLE III OTHER AGREEMENTS
Section 3.1. Preparation of Form S-4 and the Proxy
Statements; Stockholder Meetings; Other Filings
Section 3.2. Parent Board of Directors
ARTICLE IV REPRESENTATIONS AND WARRANTIES BY PSI
Section 4.1. Corporate Existence and Qualification of PSI
Section 4.2. PSI's Corporate Documents
Section 4.3. Authorization of Agreement
Section 4.4. No Violation
Section 4.5. SEC Documents; Undisclosed Liabilities
Section 4.6. Inventory
Section 4.7. Accounts Receivable
Section 4.8. Material Contracts and Obligations
Section 4.9. Title to Real Property; Liens; Condition of
Properties
Section 4.10. Licenses
Section 4.11. Arm's-Length Transactions, Conflicts of
Interest
Section 4.12. Intellectual Property
Section 4.13. Absence of Certain Developments
Section 4.14. Undisclosed Liabilities
Section 4.15. Litigation; Compliance with Law
Section 4.16. Employee Claims against PSI
Section 4.17. Intentionally Omitted
Section 4.18. Employee Benefit Plans
Section 4.19. Labor Relations
Section 4.20. Insurance Policies
Section 4.21. Bank Accounts
Section 4.22. Capitalization
Section 4.23. Disclosure
ARTICLE V REPRESENTATIONS AND WARRANTIES BY PARENT AND
ACQUISITION
Section 5.1. Corporate Existence and Qualification
Section 5.2. Access's Corporate Documents
Section 5.3. Authorization of Agreement, Etc
Section 5.4. Absence of Certain Developments
Section 5.5. Undisclosed Liabilities
Section 5.6. Litigation; Compliance with Law
Section 5.7. Capitalization; Status of Access Common Shares
Section 5.8. SEC Filings
Section 5.9. Information Supplied by Parent or Acquisition
ARTICLE VI CONDUCT PRIOR TO CLOSING
Section 6.1. Carry On in Ordinary Course
Section 6.2. No General Increases
Section 6.3. Contracts and Commitments
Section 6.4. Dispositions and Sale of Assets
Section 6.5. Preservation of Organization
Section 6.6. No Default
Section 6.7. Compliance with Laws
Section 6.8. Operation of Business
Section 6.9. Consents
Section 6.10. Advisement of Changes
Section 6.11. No Solicitation
Section 6.12. No Delaying Transactions
Section 6.13. Lock-Up Agreements
Section 6.14. Best Efforts
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARENT AND
ACQUISITION
Section 7.1. Compliance by PSI; Correctness of
Representations and Warranties of PSI
Section 7.2. Certified Resolutions of PSI
Section 7.3. Approval by Parent's and Acquisition's Counsel
Section 7.4. Opinions of Counsel for PSI
Section 7.5. Consents of Third Parties
Section 7.6. Certificate of Chief Executive Officer of PSI
Section 7.7. Approval of Governmental Authorities
Section 7.8. Corporate Authority
Section 7.9. Exchange of PSI Convertible Notes
Section 7.10. Approval of Parent Stockholders
Section 7.11. Form S-4 Effective
Section 7.12. Termination of Certain Agreements
Section 7.13. Certificate of Merger
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF PSI
Section 8.1. Compliance by Parent and Acquisition;
Correctness of Representations and Warranties
Section 8.2. Certified Resolutions of Parent and
Acquisition
Section 8.3. Approval by PSI's Counsel
Section 8.4. Opinion of Edwards & Angell
Section 8.5. Certificate of President of Parent and
Acquisition
Section 8.6. Approval of Governmental Authorities
Section 8.7. Corporate Authority
Section 8.8. Access Merger Securities
Section 8.9. Form S-4 Effective
Section 8.10. Certificate of Merger
ARTICLE IX FEES AND EXPENSES
Section 9.1. Fees and Expenses
Section 9.2. Termination Fee
ARTICLE X TERMINATION AND EFFECT
Section 10.1. Termination of Agreement
Section 10.2. Effect of Termination
ARTICLE XI ACKNOWLEDGMENTS OF PSI
Section 11.1. Restricted Securities
Section 11.2. Access to Information
ARTICLE XII BROKERS' COMMISSIONS
ARTICLE XIII ACCESS TO FACILITIES, PROPERTIES AND RECORDS
ARTICLE XIV SURVIVAL OF REPRESENTATIONS
ARTICLE XV MISCELLANEOUS
Section 15.1. Amendment to Agreement; Waivers; Procedure
Section 15.2. Binding Effect
Section 15.3. Entire Agreement
Section 15.4. Headings
Section 15.5. Confidential Information; Publicity
Section 15.6. Notices
Section 15.7. Indemnification and Insurance
Section 15.8. Counterparts
Section 15.9. No Benefit to Others
Section 15.10. Governing Law
Section 15.11. No Waiver
Section 15.12. Severability
Section 15.13. Time of Essence
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, made as of the 12th day of
November, 1997, by and among PAPERCLIP SOFTWARE, INC., a
Delaware corporation ("PSI"), ACCESS SOLUTIONS
INTERNATIONAL, INC., a Delaware corporation ("Parent") and
PAPERCLIP ACQUISITION CORP. a Delaware corporation and
wholly-owned subsidiary of Parent ("Acquisition"). Parent
and Acquisition are hereinafter sometimes referred to
collectively as Access.
W I T N E S S E T H:
WHEREAS, Parent and PSI are parties to that certain Asset
Purchase Agreement dated as of April 15, 1997 (the "Asset
Purchase Agreement"), pursuant to which Parent agreed to
purchase and PSI agreed to sell to Parent substantially all
of the assets of PSI on the terms and conditions set forth
therein; and
WHEREAS, the Boards of Directors of each of PSI, Acquisition
and Parent have now agreed that it is in their best
interests for Acquisition to merge with and into PSI upon
the terms and conditions set forth herein; and
WHEREAS, the Boards of Directors of PSI, Acquisition and
Parent have approved such merger; and
WHEREAS, PSI is engaged in the business of developing and
distributing computer software for document management and
imaging systems (hereinafter generally called the
"Business"); and
WHEREAS, as a condition to the willingness of Access to
enter into this Agreement, those directors and officers of
PSI who are also stockholders of PSI (the "PSI Significant
Stockholders") have entered into that certain Stockholder
Agreement of even date ("PSI Stockholder Agreement"), which
provides, among other things, that each PSI Significant
Stockholder will vote the shares of PSI Common Stock which
he owns in favor of the approval and adoption of this
Agreement and the consummation of the transactions
contemplated hereby; and
WHEREAS, as a further condition to the willingness of Access
to enter into this Agreement, PSI has entered into an
amendment to that certain Management Agreement dated April
15, 1997 (the "Management Agreement") which provides, among
other things, that Access will continue to manage PSI's
operations from the date hereof until the consummation of
the transactions contemplated hereby or the earlier
termination of this Agreement; and
WHEREAS, this Agreement contemplates that the common
stockholders of PSI will receive capital stock of Parent in
exchange for their capital stock of PSI.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger.
Upon and subject to the terms and conditions of this
Agreement and in accordance with the Delaware General
Corporation Law ("DGCL"), Acquisition shall be merged with
and into PSI (with such merger referred to herein as the
"Merger") at the Effective Time (as defined below). From
and after the Effective Time, as a result of the Merger, the
separate corporate existence of Acquisition shall cease and
PSI shall continue as the surviving corporation in the
Merger (the "Surviving Corporation") and a subsidiary of
Parent. The "Effective Time" shall be the time at which PSI
and Acquisition file a certificate of merger in
substantially the form attached hereto as Exhibit A (the
"Certificate of Merger") in accordance with the relevant
provisions of the DGCL, with the Secretary of State of the
State of Delaware. The Merger shall have the effects set
forth in Sections 251 and 259 of the DGCL.
Section 1.2. The Closing.
The closing of the Merger (the "Closing") shall take place
at the offices of Edwards & Angell in Providence, Rhode
Island, commencing at 10:00 a.m. local time on the first
business day after the receipt of PSI Stockholder Approval
and, if required, Parent Stockholder Approval (as defined in
Section 3.1), provided that on or prior thereto, all the
conditions to the obligations of the parties hereto to
consummate the transactions contemplated hereby as set forth
in Articles VII and VIII have been satisfied or waived, or
on such other mutually agreeable later date as soon as
practicable after the satisfaction or waiver of all
conditions to the obligations of the parties hereto to
consummate the transactions contemplated hereby (the
"Closing Date").
Section 1.3. Actions at the Closing.
At the Closing, subject to the satisfaction or waiver of all
of the conditions set forth in Articles VII and VIII not
theretofore satisfied or waived: (a) PSI and Acquisition
shall file with the Secretary of State of the State of
Delaware the Certificate of Merger, and (b) Acquisition
shall deliver the Merger Consideration (as defined below) to
such bank or trust company as may be designated by Parent
and approved by PSI (such approval not to be withheld or
delayed unreasonably) to act as the exchange agent (the
"Exchange Agent") in accordance with Section 2.5.
Section 1.4. Additional Actions.
The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either
PSI or Acquisition, in order to consummate the transactions
contemplated by this Agreement.
Section 1.5. Certificate of Incorporation.
The Certificate of Incorporation of the Surviving
Corporation shall be the Certificate of Incorporation of PSI
as amended and restated in the Certificate of Merger.
Section 1.6. By-laws.
The By-laws of Acquisition immediately prior to the
Effective Time shall become the By-laws of the Surviving
Corporation, except that the name of the corporation set
forth therein shall be changed to PaperClip Software, Inc.
Section 1.7. Directors and Officers.
The directors of Acquisition immediately prior to the
Effective Time shall become the directors of the Surviving
Corporation as of the Effective Time. The officers of
Acquisition immediately prior to the Effective Time shall be
the officers of the Surviving Corporation after the
Effective Time, retaining their respective positions. The
directors and officers of PSI immediately prior to the
Effective Time shall cease being officers and directors of
PSI as of the Effective Time and shall not become officers
or directors of the Surviving Corporation.
Section 1.8. No Further Rights.
From and after the Effective Time, no PSI Common Shares (as
defined in Section 2.1 below) shall be deemed to be
outstanding, and holders of certificates of PSI Common
Shares shall cease to have any rights with respect thereto,
other than the right to receive Merger Consideration (as
defined below) in accordance herewith. The rights of
holders of certificates of PSI Preferred Shares (as defined
in Section 2.1 below) shall be as described in this
Agreement.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1. Conversion of Shares. At the Effective Time,
by virtue of the Merger and without any action on the part
of Parent, Acquisition or PSI or the holder of any of the
following securities:
(a) Each share of common stock, $.01 par value per share,
of PSI ("PSI Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares
of PSI Common Stock owned by stockholders who, pursuant to
the DGCL, properly perfect their rights to appraisal in
accordance with Section 262 of the DGCL ("Dissenting
Stockholders"), and shares of PSI Common Stock held in PSI's
treasury) shall be converted into the right to receive: (i)
such number of shares of Parent's common stock, $.01 par
value, equal to the "Conversion Ratio" (the "Access Merger
Shares"); and (ii) an equivalent number of Parent's Class B
Warrants (the "Access Merger Warrants") (collectively the
"Merger Consideration"). The Conversion Ratio shall equal
1,544,438, divided by the number of shares of PSI Common
Stock issued and outstanding immediately prior to the
Effective Time.
(b) Each PSI Share held in PSI's treasury immediately prior
to the Effective Time shall, by virtue of the Merger and
without any further action, be canceled and retired without
payment of any consideration therefor.
(c) Each share of common stock, $.01 par value per share,
of Acquisition ("Acquisition Common Stock") issued and
outstanding immediately prior to the Effective Time shall be
converted into and thereafter evidence one share of common
stock, $.01 par value per share, of the Surviving
Corporation.
(d) Each share of PSI's Series A Preferred Stock, $.01 par
value ("PSI Preferred Stock"), issued and outstanding
immediately prior to the Effective Time shall become one
share of Series A Preferred Stock, $.01 par value, of the
Surviving Corporation. Following the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, honor
the put rights of the holders of the Series A Preferred
Stock, including, without limitation, providing funds to the
Surviving Corporation to satisfy the put, if necessary.
(e) Stockholders of record of PSI, in each case as of the
Effective Time ("PSI Stockholders"), other than Dissenting
Stockholders, shall be entitled to receive the Merger
Consideration into which their shares of PSI Common Stock or
PSI Preferred Stock (collectively, the "PSI Shares") shall
be converted pursuant to Section 2.1(a) upon tender of their
PSI Shares as set forth in Section 2.4 below.
Section 2.2. Options and Warrants.
(a) At the Effective Time: (i) all options to purchase PSI
Shares issued by PSI pursuant to its stock option plans or
otherwise ("Options") other than options described in
Section 2.2(c), and (ii) all warrants to purchase PSI Shares
("Warrants") (collectively the number of PSI shares which
can be purchased under Options and Warrants shall be
referred to as the "O&W PSI Shares"), shall be converted
into the right to receive the Merger Consideration which
would have been received for each share of PSI Common Stock
underlying such Option or Warrant upon the same terms and
conditions set forth in such Option or Warrant, including,
without limitation, the expiration date and exercise price.
(b) At or prior to the Effective Time, the Parent or the
Surviving Corporation shall deliver to the holders of the
Options and Warrants subject to Section 2.2(a) appropriate
notices setting forth such holders' rights pursuant to such
Options or Warrants and instructions for surrendering to the
Exchange Agent such Option or Warrant in exchange for the
Merger Consideration.
(c) At the Effective Time, Parent will offer PSI employees
who continue to be employed by Parent or the Surviving
Corporation options to purchase Parent common stock in an
amount deemed appropriate by Parent's Board of Directors in
substitution and cancellation of such employees' existing
Options.
Section 2.3. Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, any PSI Shares held by a Dissenting Stockholder
shall not be converted into the right to receive Merger
Consideration pursuant to Section 2.1(a), but such
Dissenting Stockholder shall only be entitled to such
payments as are provided by the DGCL.
(b) If, on or after the Effective Time, any Dissenting
Stockholder shall effectively withdraw or lose (through
failure to perfect or otherwise) such Dissenting
Stockholder's right to appraisal, then, as of the later of
the Effective Time or the occurrence of such event, such
Dissenting Stockholder's PSI Shares shall be treated under
this Agreement as if they had been converted as of the
Effective Time into the right to receive Merger
Consideration as provided in Section 2.1(a), without
interest thereon.
(c) PSI shall give the Parent: (i) prompt notice of any
written demands for appraisal of any PSI Shares, withdrawals
of such demands, and any other instruments that relate to
such demands received by PSI, and (ii) the right to
participate in all negotiations and proceedings with respect
to demands for appraisal under the DGCL. PSI shall not,
without the prior written consent of the Parent, make any
payment with respect to any demands for appraisal of PSI
Shares or offer to settle or settle any such demands.
Section 2.4. Exchange of Shares.
(a) Prior to the Effective Time, the Parent and PSI shall
appoint the Exchange Agent to effect the exchange for the
Merger Consideration of certificates that, immediately prior
to the Effective Time, represented PSI Shares
("Certificates"). On the Closing Date, the Parent shall
deliver to the Exchange Agent or its nominee, in trust for
the benefit of holders of Certificates, the Merger
Consideration. As soon as practicable after the Effective
Time, the Parent shall cause the Exchange Agent to send a
notice and a transmittal form to each holder of record of a
Certificate advising such holder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange
Agent such Certificate in exchange for the Merger
Consideration (which procedure shall include the execution
and delivery by such holder of the Lock-Up Agreement
described in Section 6.13 to the extent that the Lock-Up
Period (as defined in the Lock-Up Agreement) shall not have
expired). Each holder of a Certificate, upon proper
surrender thereof to the Exchange Agent in accordance with
the instructions in such notice, shall be entitled to
receive in exchange therefor (subject to any taxes required
to be withheld) 95.14% of the Merger Consideration, without
interest, determined pursuant to Sections 2.1(a); the
balance of the Merger Consideration will be distributed
pursuant to the Escrow Agreement described in Section
2.4(e). Until properly surrendered, from and after the
Effective Time each such Certificate shall be deemed for all
purposes to evidence only the right to receive 95.14% of the
Merger Consideration determined pursuant to Sections 2.1(a).
Holders of Certificates shall not be entitled to receive
Merger Consideration to which they would otherwise be
entitled until such Certificates are properly surrendered,
or an affidavit is delivered pursuant to Section 2.4(c).
(b) If any Merger Consideration is to be issued or paid in
the name of a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered,
it shall be a condition to the issuance and payment of such
Merger Consideration that: (i) the Certificate so
surrendered shall be transferable, and shall be properly
assigned, endorsed or accompanied by appropriate stock
powers, (ii) such transfer shall otherwise be proper, and
(iii) the person requesting such transfer shall pay to the
Exchange Agent any transfer or other taxes payable by reason
of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither
the Exchange Agent nor any party shall be liable to a holder
of PSI Shares for any Merger Consideration issuable or
payable to such holder that is delivered to a public
official in accordance with applicable abandoned property,
escheat or similar laws.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost,
stolen or destroyed, the Parent shall direct the Exchange
Agent to issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration issuable or
payable in exchange therefor pursuant to Section 2.1. The
Board of Directors of the Parent may, in its discretion and
as a condition precedent to the issuance or payment thereof,
if required by the Exchange Agent, require the owner of such
lost, stolen or destroyed Certificate to give the Parent a
bond in such sum as it may reasonably direct as indemnity
against any claim that may be made against the Parent with
respect to the Certificate alleged to have been lost, stolen
or destroyed.
(d) Promptly following the date which is twelve (12) months
after the Closing Date, the Exchange Agent shall return to
the Parent all Merger Consideration in its possession.
Thereafter, the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such
Certificate to the Parent and, subject to applicable
abandoned property, escheat and similar laws, receive in
exchange therefor the Merger Consideration without interest.
(e) On the Closing Date, Parent will issue to an escrow
agent a certificate for 75,000 of the Access Merger Shares
and a certificate for 75,000 of the Access Merger Warrants.
Such certificates will be placed into escrow pursuant to the
terms and conditions set forth in an Escrow Agreement
containing such terms and conditions a shall be mutually
agreeable to Parent and PSI..
(f) Prior to the Effective Date, Parent, at its option, may
determine that fractional shares of Parent Common Stock or
fractional interests in Class B Warrants will not be issued
to any PSI stockholder following the Effective Time. If ASI
makes such determination, for each fractional share of ASI
Common Stock that would otherwise be issued, ASI will pay
cash based upon a value of $3.75 for each whole share, and
for each fractional interest in a Class B Warrant that would
otherwise be issued, Parent will pay cash based upon a value
of $1.00 for each whole Class B Warrant. Calculations will
be made to the nearest one-thousandth of a share of Parent
Common Stock and of a Class B Warrant and to the nearest
cent.
Section 2.5. Closing of Transfer Books. At the Effective
Time, the stock transfer books of PSI shall be closed and no
transfer of PSI Shares shall thereafter be made. If, after
the Effective Time, Certificates are presented to the
Surviving Corporation, the Parent or the Exchange Agent,
they shall be canceled and exchanged for Merger
Consideration in accordance with Section 2.1, subject to
applicable law in the case of PSI Shares held by Dissenting
Stockholders.
Section 2.6. Preferred Stock. Prior to the Effective Time,
the PSI Convertible Notes (in the aggregate outstanding
principal amount of $129,690.74 plus unpaid interest accrued
on the PSI Convertible Notes through the date of exchange),
as set forth on Schedule 2.6, will be exchanged at the rate
of one share of PSI Preferred Stock for each $.30 of
principal and accrued interest on the PSI Convertible Notes
into an aggregate of 432,303 (plus the number of shares
determined by dividing the amount of such unpaid interest by
$.30 per share) of preferred shares of PSI (the "PSI
Preferred Stock"). PSI Preferred Stock shall be subject to
the rights, conditions and qualifications set forth on
Exhibit B attached hereto.
Section 2.7. Options and Warrants. On the Closing Date,
the Parent shall deliver to the Exchange Agent or its
nominee option agreements and warrants to purchase Parent
Common Stock and Class B Warrants (the "Merger Options and
Warrants") in an amount equal to the Merger Consideration
attributable to each share of PSI Common Stock underlying
each outstanding Option (other than options described in
Section 2.2(c)) and Warrant, and otherwise containing
substantially the same terms as are contained in the
applicable option agreement or warrant. As soon as
practicable after the Effective Time, Parent shall cause the
Exchange Agent to send a notice and transmittal form to each
holder of Options and Warrants (other than holders of
Options described in Section 2.2(c)), advising such holder
of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such Options or Warrants
in exchange for the Merger Options and Warrants.
ARTICLE III
OTHER AGREEMENTS
Section 3.1. Preparation of Form S-4 and the Proxy
Statements; Stockholder Meetings; Other Filings.
(a) PSI will, as soon as reasonably practicable following
the date of this Agreement, take all action necessary in
accordance with applicable law and its Certificate of
Incorporation and By-laws to convene a meeting of its
stockholders (the "PSI Stockholder Meeting") for the purpose
of obtaining the affirmative vote to approve and adopt this
Agreement and the transactions contemplated hereby at the
PSI Stockholder Meeting of the holders of a majority of the
votes represented by the outstanding PSI Common Stock ("PSI
Stockholder Approval"). The proxy statement for such
meeting shall contain the recommendation of PSI's Board of
Directors that the stockholders vote to approve and adopt
this Agreement and the transactions contemplated hereby, and
such recommendation shall not be withdrawn; provided,
however, that such recommendation is subject to the exercise
of the discretion of PSI's Board of Directors of its
fiduciary duties to PSI's shareholders. PSI shall use its
reasonable best efforts to solicit from its stockholders
proxies in favor of such adoption and approval and shall
take all other action necessary to secure the vote of
stockholders required by DGCL to effect the transactions
contemplated hereby.
(b) As soon as practicable after execution and delivery of
this Agreement, PSI shall prepare in accordance with the
applicable requirements of the Securities Exchange Act of
1934, as amended ("Exchange Act"), and DGCL, a proxy
statement in connection with the PSI Stockholder Meeting
(the "Proxy Statement"). Parent shall cooperate with PSI in
the preparation and filing of the Proxy Statement, including
any and all amendments and supplements thereto. Parent and
PSI will cooperate in order for Parent to prepare and file
with the United States Securities and Exchange Commission
("SEC") a registration statement on Form S-4 in connection
with the issuance of the Access Merger Securities (the "Form
S-4"), in which the Proxy Statement will be included as a
part of a proxy statement/prospectus. PSI and Parent shall
each use all reasonable efforts to have the Form S-4
declared effective under the Securities Act of 1933, as
amended ("Securities Act") as soon as practicable after such
filing. PSI will use all reasonable efforts to cause the
Proxy Statement to be mailed to each of PSI's stockholders
and, if Parent elects or is required to do so, Parent will
use all reasonable efforts to cause the Proxy Statement to
be mailed to Parent's stockholders, in each case as promptly
as reasonably practicable after the Form S-4 is declared
effective under the Securities Act. Parent will also take
any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or filing a
general consent to service of process) required to be taken
under any applicable state securities or blue sky laws in
connection with the issuance of the Access Merger Securities
and PSI shall furnish all information concerning PSI and its
stockholders as may be reasonably requested in connection
with any such action.
(c) If the Board of Directors of Parent determines that it
is necessary or desirable to do so, Parent will, as soon as
reasonably practicable following the date of this Agreement,
take all action necessary in accordance with applicable law
and its Restated Certificate of Incorporation and By-laws to
convene a meeting of its stockholders (the "Access
Stockholder Meeting") for the purpose of obtaining the
affirmative vote at the Access Stockholder Meeting of the
holders of a majority of the votes represented by the
outstanding Parent Common Stock ("Access Stockholder
Approval"). The proxy statement for such meeting (which
shall be part of the proxy statement/prospectus contained in
the Form S-4) shall contain the recommendation of Parent's
Board of Directors that the stockholders vote to approve and
adopt this Agreement and the transactions contemplated
hereby, and such recommendation shall not be withdrawn;
provided, however, that such recommendation is subject to
the exercise of the discretion of Parent's Board of
Directors of its fiduciary duties to Parent's shareholders.
Parent shall use its reasonable best efforts to solicit from
its stockholders proxies in favor of such adoption and
approval and shall take all other action necessary to secure
the vote of stockholders required by DGCL to effect the
transactions contemplated hereby.
(d) As soon as practicable after the execution and delivery
of this Agreement, PSI and Parent shall promptly and
properly prepare and file any other schedules, statements,
reports, or other documents required (if any) under the
Exchange Act, the Securities Act, or any other federal or
state securities laws relating to the transactions
contemplated hereby (the "Other Filings"). Each party shall
notify the other party hereto promptly of the receipt by
such party of any stop order, comments or requests for
additional information from any governmental official with
respect to the Proxy Statement, the Form S-4 or any Other
Filing made by such party and will supply the other party
with copies of all correspondence between such party and its
representatives, on the one hand, and the appropriate
government official, on the other hand, with respect to the
Proxy Statement, Form S-4 and Other Filings made by such
party. Each of PSI and Access shall use reasonable efforts
to obtain and furnish the information required to be
included in the Form S-4, the Proxy Statement and any Other
Filing and, after consultation with the other party, to
respond promptly to any comments made by any government
official with respect to any filing.
(e) PSI shall use all reasonable efforts to cause to be
delivered to Parent a so-called "cold comfort" letter of
Arthur Andersen LLP, PSI's independent public accountants,
dated a date within two business days before the date on
which the Form S-4 shall become effective, addressed to
Parent, in form reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by
independent public accountants in connection with
registration statements similar to the Form S-4.
(f) Parent shall use all reasonable efforts to cause to be
delivered to PSI a so-called "cold comfort" letter of Price
Waterhouse LLP, Parent's independent public accountants,
dated a date within two business days before the date on
which the Form S-4 shall become effective, addressed to PSI,
in form reasonably satisfactory to PSI and customary in
scope and substance for letters delivered by independent
public accountants in connection with the registration
statements similar to the Form S-4.
(g) Parent agrees to use reasonable efforts to effect,
prior to the Closing Date, the listing on the NASDAQ Small
Cap market, upon official notice of issuance, of the Access
Merger Shares and the Access Merger Warrants to be issued
hereunder.
(h) PSI hereby agrees to indemnify and hold harmless Parent
and its directors, officers, advisors and agents and Parent
hereby agrees to indemnify and holds harmless PSI and its
directors, officers, advisors and agents, from and against
any loss, claim, damage, cost, liability, obligation or
expense (including reasonable attorney's fees and costs of
investigation) to which any indemnified party may become
subject under the Securities Act, Exchange Act, or
otherwise, insofar as such loss, claim, damage, cost,
liability, obligation or expense or actions in respect
thereof: (i) relates solely to a claim brought against such
indemnified party by a third party who is not affiliated
with either the indemnified party or the indemnifying party;
and (ii) arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in
the Form S-4 or the Proxy Statement or arises out of or is
based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein with respect to such
indemnifying party not misleading; and (iii) such untrue
statement or omission or alleged omission is made in any
information with respect to the indemnifying party furnished
in writing by such indemnifying party specifically for
inclusion in the Proxy Statement, Form S-4 or any Other
Filing.
Section 3.2. Parent Board of Directors.
For a period of two years following the Closing Date, Parent
shall nominate one person designated by PSI (who initially
shall be Stephen Kornfeld) to Parent's Board of Directors.
In addition, during such two-year period, PSI will be
entitled to designate one person who will be permitted to
attend all meetings of Parent's Board of Directors as an
"advisor" or "observer"; and, in the event that Mr. Kornfeld
or any other designee of PSI resigns or is removed for cause
from Parent's Board of Directors, Mr. Kornfeld or such other
designee will be entitled to designate an additional
"advisor" or "observer".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY PSI
In order to induce Parent and Acquisition to enter into this
Agreement and to consummate the transactions contemplated
hereunder, PSI makes the following representations,
warranties, covenants and agreements (it being understood
that Parent has been managing the day to day operations of
the Business since April 15, 1997 pursuant to the Management
Agreement, and that it shall not be deemed a breach of any
of the following representations and warranties for PSI to
fail to disclose a matter known to Parent but not known to
PSI) :
Section 4.1. Corporate Existence and Qualification of PSI.
PSI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own its
properties and to carry on its business as it is now being
conducted. PSI is qualified to do business as a foreign
corporation in the states set forth in ScheduleE4.1. PSI
has no subsidiaries.
Section 4.2. PSI's Corporate Documents.
Copies of the Certificate of Incorporation and By-Laws,
including the respective amendments thereto, of PSI,
certified by the Secretary of PSI, have been delivered to
Parent, and such copies are true, complete and correct.
Section 4.3. Authorization of Agreement.
(a) PSI has all requisite corporate power to enter into
this Agreement and to consummate the transactions
contemplated hereby. Except for PSI Stockholder Approval,
all corporate and other actions required to be taken by PSI
to authorize it to carry out this Agreement and the
transactions contemplated hereby have been, or as of the
Closing Date shall have been, duly and properly taken. This
Agreement and the Management Agreement have been duly
executed and delivered by PSI, and each constitutes a valid
and binding obligation of PSI, enforceable against PSI in
accordance with its terms.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Federal, state
or local governmental or any court, administrative or
regulatory agency or commission ("Governmental Entity") is
required by or with respect to PSI in connection with the
execution and delivery of this Agreement by PSI or the
consummation of the transactions contemplated by this
Agreement, except: (i) the filing with the SEC of the Form
S-4 and the Proxy Statement, and (ii) such filings with
Governmental Entities as might be required to satisfy the
applicable requirements of state securities or blue sky laws
in connection with the transactions contemplated by this
Agreement.
Section 4.4. No Violation.
Neither the execution and delivery by PSI of this Agreement
nor the consummation of the transactions contemplated hereby
violate or will violate any provision of law applicable to,
or any provision of the Certificate of Incorporation or By-
laws of, PSI or conflict with or will result in any breach
of any term, condition or provision of, or constitute or
will constitute (with due notice or lapse of time or both) a
default under, or will result in the creation or imposition
of any lien, charge or encumbrance upon any of PSI's assets,
any mortgage, deed of trust or other agreement or instrument
to which PSI is a party except to the extent PSI shall have
obtained a waiver or release thereof.
Section 4.5. SEC Documents; Undisclosed Liabilities.
(a) PSI has filed with the SEC PSI's registration statement
on Form SB-2 (the "PSI SB-2"), which became effective on
August 9, 1995 (the "PSI SB-2 Effective Date"), and all
required reports, schedules, forms, statements and other
documents since PSI's SB-2 Effective Date (together with the
PSI Form SB-2, the "PSI SEC Documents"). As of their
respective dates, the PSI SEC Documents complied as to form
in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and
none of the PSI SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) As of their respective dates, the financial statements
of PSI included in the PSI SEC Documents complied as to form
in all material respects with applicable accounting
requirements and the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by the rules and
regulations of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated in the
notes thereto) and fairly present, in all material respects,
the financial position of PSI as of the dates thereof and
the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
(c) Attached hereto as Schedule 4.5 are the audited
financial statements of PSI for the year ended December 31,
1996 ("PSI 1996 Financial Statements"). The PSI 1996
Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis and fairly present, in all material
respects, the financial position of PSI as of such date and
the results of its operations and cash flows for the period
then ended.
(d) Except as set forth in the filed PSI SEC Documents, or
in Schedule 4.5, as of the date of this Agreement, PSI does
not have any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be
recognized or disclosed on a balance sheet of PSI or in the
notes thereto and which, individually or in the aggregate,
would have a material adverse effect on PSI.
(e) None of the information contained in the Proxy
Statement or any Other Filing shall, on the date the Proxy
Statement is first mailed to stockholders or any such Other
Filing is made, as the case may be, at the time of PSI
Stockholders Meeting or on the Closing Date, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they will be made, not misleading.
Notwithstanding the foregoing, PSI makes no representations
or warranties with respect to any information supplied by
Parent or Acquisition specifically for use in any of the
foregoing documents. The Proxy Statement shall comply as to
form in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations
promulgated thereunder and any Other Filings filed by PSI
shall comply as to form in all material respects with all
applicable requirements of law.
Section 4.6. Inventory.
Except as set forth on ScheduleE4.6 hereto, all inventory
set forth on the PSI 1996 Financial Statements, and all
additions to inventory since December 31, 1996, consist of
items of a quantity and quality usable or salable in the
ordinary course of the business at prevailing market prices
without discount. All inventories not written off have been
priced at the lower of cost or market on a first in, first
out basis. Except as set forth in Schedule 4.6 hereto,
since December 31, 1996, no inventory items have been sold
or disposed of except in the ordinary course of business.
ScheduleE4.6 sets forth the locations of all items of
inventory.
Section 4.7. Accounts Receivable.
All accounts receivable as shown on the PSI 1996 Financial
Statements or on the accounting records of PSI as of the
date hereof are valid, genuine and subsisting, have arisen
in the ordinary course of business from customers believed
to be commercially responsible, and the reserves shown on
PSI's 1996 Financial Statements are adequate and calculated
consistent with past practice and consistent with generally
accepted accounting principles. Since December 31, 1996,
any proceeds collected on accounts receivable have been
applied only to liabilities set forth on the PSI 1996
Financial Statements.
Section 4.8. Material Contracts and Obligations.
(a) Except for matters relating to real property listed on
ScheduleE4.9 hereto, ScheduleE4.8(a) is a true, complete and
accurate list prepared by PSI, categorized by subject
matter, of the following contracts, agreements, commitments,
options, liens, licenses, mortgages, other security
interests, understandings or promises, whether written or
oral ("Contract"), to which PSI is a party or by which it is
or any of its properties or assets are bound:
(i) purchase or sale orders and agreements to or with any
one customer or supplier for the sale of products or
services of an amount or value in excess of $5,000;
(ii) all employment contracts with any officer, consultant,
director or employee;
(iii) all plans, contracts or arrangements providing for
stock options or stock purchases, bonuses, pensions,
deferred compensation, retirement payments, profit-sharing
or the like;
(iv) all contracts for construction or for the purchase of
equipment, machinery and other items;
(v) all contracts relating to the rental or use of
equipment, other personal property or fixtures (except
personal property leases and installment and conditional
sales agreements having a value per item or aggregate
payments of less than $5,000 and with terms of less than one
year);
(vi) all license agreements, either as licensor or licensee;
(vii) all joint venture contracts and agreements
involving a sharing of profits;
(viii) all franchise agreements;
(ix) all distributor, sales agency and other similar
agreements;
(x) all loan or guaranty agreements, credit agreements,
notes or other evidences of indebtedness, indentures or
instruments evidencing liens or secured transactions; and
(xi) all other contracts, except those which: (i) are
cancelable on 30 days' or less notice without any penalty or
other financial obligation, or (ii) if not so cancelable,
involve annual aggregate payments by or to PSI of $5,000 or
less.
Each of the Contracts were entered into in the ordinary
course of business, is valid, binding and enforceable by or
against PSI and is in full force and effect. Except as set
forth on Schedule 4.8(a), neither PSI nor (to the knowledge
of PSI) any other party thereto is in default in any respect
under the terms of any material Contract. PSI has delivered
to Parent true and complete copies or descriptions of the
Contracts required to be listed in ScheduleE4.8(a).
(b) Neither the execution and delivery of this Agreement
nor the consummation of any of the transactions contemplated
hereby, nor compliance with the terms and provisions hereof,
will result in the creation or imposition of any lien upon
any of the property or assets of PSI, or conflict in any way
with the provisions of or result in a breach of or
termination of or a default or acceleration of any
obligation under, or except as set forth on ScheduleE4.8(b),
require the consent of any person pursuant to, any such
Contract.
(c) There is no term or provision of any Contract to which
PSI is a party or by which it or any of its properties are
bound, or of any provision of any state, Federal or foreign
law, judgment, decree, order, statute, rule or regulation
applicable to or binding upon PSI or its properties, which
materially adversely affects the business, condition,
affairs or operations of PSI or any of its properties or
assets.
Section 4.9. Title to Real Property; Liens; Condition of
Properties.
(a) ScheduleE4.9 contains an accurate legal description by
categories of PSI's real estate and easements and other
rights in real property, owned or leased by or to PSI. All
such leases of real property are valid, binding and
enforceable in accordance with their terms, and, except as
set forth on Schedule 4.9, neither PSI nor, to PSI's
knowledge, any other party thereto is in default thereunder.
(b) To the best of PSI's knowledge PSI has all of the
property and property rights used or necessary in the
operation of the Business as presently conducted. Except
for minor defects in title which do not materially affect
their use or value, and except for leased assets set forth
on Schedule 4.9, PSI owns good and marketable title to all
of its real and personal property free and clear of all
security interests, mortgages, pledges, liens, conditional
sales agreements, leases, encumbrances, charges, or claims
of third parties of any nature whatsoever except as set
forth on ScheduleE4.8(a) or 4.9 hereto, all of which shall
be released and discharged prior to the Closing Date.
(c) To PSI's knowledge, all real estate leased to PSI, and
all machinery, equipment, leasehold improvements, furniture,
furnishings, plant and office equipment and other fixed
assets of PSI, and PSI's use of the same, comply in all
material respects with all applicable ordinances and
regulations and building, zoning or other laws. All such
assets are and will be, as of the Closing Date, in good
working order and condition and suitable for use in the
operation of the business of PSI, subject to ordinary wear
and tear.
Section 4.10. Licenses.
The licenses listed on ScheduleE4.10 hereto (the "Licenses")
constitute all licenses, permits, and governmental
authorizations and approvals necessary for the operation of
PSI's business. PSI has duly obtained and legally and
validly holds all the Licenses, all of which are valid and
in full force and effect. No proceeding (judicial,
administrative, or otherwise) has been commenced or to PSI's
knowledge threatened which could lead to a revocation,
suspension, or limitation of the rights under any License,
and PSI is in compliance with each of the Licenses and knows
of no state of fact which could lead to any such revocation,
suspension, or limitation. The Licenses expire on the dates
set forth on ScheduleE4.10, and PSI has no reason to believe
that any of the Licenses will not be renewed, nor has any
person or entity informed PSI that such person or entity
intends to oppose any such renewal. PSI has delivered to
Parent true and complete copies of each of the Licenses.
Section 4.11. Arm's-Length Transactions, Conflicts of
Interest.
To the knowledge of PSI: (a) all transactions by PSI with
parties other than PSI are and have been conducted on an
arm's-length basis, and (b) neither the elected officers of
PSI nor the key employees of PSI, or their respective
spouses, have (or had during the past three fiscal years)
any material direct or indirect ownership or profit
participation in outside business enterprises with which PSI
had material purchases, sales or business dealings.
Section 4.12. Intellectual Property.
There is set forth in ScheduleE4.12 hereto a true and
complete list of all domestic and foreign patents,
copyrights, trademarks, trade names, and all registrations
or applications with respect thereto, and all licenses or
rights under the same relating to the Business presently
owned by PSI. There is not outstanding with respect thereto
any license or other permission granted by PSI to any other
person, firm or corporation, except as set forth in
ScheduleE4.12. PSI owns or possesses adequate licenses or
other rights (to the extent that the license fees provided
for in the applicable license agreements have been paid) to
use every item of intellectual property used in its business
and the same are sufficient to conduct the business
substantially as now conducted. There are no outstanding
claims asserted against PSI alleging infringement of any
patent, copyright, trademark, trade name, trade secret,
license or other intellectual property right of any other
person, firm or corporation, and PSI does not hold, nor is
PSI aware that there exists any adversely held patent,
copyright, trademark, trade name or license or other
intellectual property right on which such a claim could
reasonably be based. PSI does not know of any person, firm
or corporation producing, selling or using products or
services which constitute an infringement of any of PSI's
intellectual property rights or other proprietary rights.
Section 4.13. Absence of Certain Developments.
Except as set forth on ScheduleE4.13 attached hereto or on
any other Schedule to the Agreement, since December 31,
1996, PSI has not:
(i) entered into any contract, commitment or agreement
under which PSI has outstanding indebtedness, obligation or
liability for borrowed money or deferred purchase price of
property in excess of $10,000 or has the right or obligation
to incur such indebtedness, obligation or liability;
(ii) discharged or satisfied any lien or paid any obligation
or liability (absolute or contingent), other than in the
ordinary course of business;
(iii) mortgaged or pledged any of its assets, tangible
or intangible, or subjected them to any lien, except liens
for current property taxes not yet due and payable;
(iv) sold, leased, subleased, assigned or transferred any of
its tangible or intangible assets, except in the ordinary
course of business, or canceled any debts or claims;
(v) suffered any substantial losses on the sale or
disposition of individual items of non-inventory property or
waived any rights of material value (other than in
connection with the cancellation of sales orders), whether
or not in the ordinary course of business, or received
notice of cancellation of any firm order in excess of
$5,000;
(vi) made any changes in employee compensation, vacation
policies or fringe benefit plans, except in the ordinary
course of business and consistent with past practices and
not in excess of 5% of any employee's compensation level
during its most recently completed fiscal year;
(vii) entered into any other transaction other than in
the ordinary course of business, or entered into any other
material single transaction, whether or not in the ordinary
course of business which involves payments by or to PSI in
excess of $50,000 with respect to the purchase of raw
materials, $50,000 with respect to the sale of inventory,
and $50,000 with respect to other transactions:
(viii) suffered damage, destruction or other casualty
loss, or forfeiture of, any property or assets having a
value in excess of $10,000, whether or not covered by
insurance or which has had or may reasonably be expected to
have a material adverse effect on its business, financial
condition or prospects;
(ix) made any capital expenditures, additions or
improvements or commitments for the same, except those made
in the ordinary course of business which in the aggregate do
not exceed $20,000;
(x) made any voluntary prepayments of indebtedness or lease
obligations;
(xi) made any change in accounting procedures or practices;
(xii) authorized or effected any declaration, setting
aside or payment of any dividends or other distribution
(whether in cash, stock or property) with respect to any of
PSI's capital stock;
(xiii) authorized or effected any split, combination or
reclassification of any of its capital stock or any issuance
of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or
(xiv) entered into any agreement or understanding to do
any of the foregoing.
Section 4.14. Undisclosed Liabilities.
Except as set forth on Schedule 4.14, PSI does not have any
material liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to
become due, and PSI does not know of any basis for any claim
against PSI for any such material liabilities or
obligations, except: (i) to the extent set forth in this
Agreement or in the Schedules hereto or shown in the PSI
1996 Financial Statements or (ii) liabilities or obligations
incurred in the ordinary course of business since December
31, 1996.
Section 4.15. Litigation; Compliance with Law.
Except as set forth on Schedule 4.15, there are no actions,
suits, claims, proceedings or investigations (whether or not
purportedly on behalf of or against PSI) pending or, to
PSI's knowledge, threatened against PSI at law or in equity,
or before or by any Federal, state, municipal or other
governmental court, department, commission, board, bureau,
agency or instrumentality, domestic or foreign. PSI is not
in default with respect to any order, writ, injunction or
decree of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency
or instrumentality. PSI has complied in all material
respects with all laws, regulations and orders applicable to
the Business, including, without limitation, all laws
relating to the safe conduct of business and environmental
protection and conservation. PSI has not received
notification of any asserted past or present failure so to
comply with any of such laws or with the Federal
Occupational Safety and Health Act that has not been
remedied. PSI has no knowledge of any pending or threatened
litigation or government action which could prohibit or
interfere with the performance of this Agreement.
Section 4.16. Employee Claims against PSI.
Except as set forth on Schedule 4.16, no officer or employee
of PSI has any claim or claims against PSI, and PSI is not
obligated or liable to any of such persons in any way or for
any amounts, except current salaries, wages and current and
accrued vacation pay and bonuses, severance obligations,
reimbursable business expenses incurred in the ordinary
course of business and incentive compensation.
Section 4.17. Intentionally Omitted.
Section 4.18. Employee Benefit Plans.
(a) ScheduleE4.18 contains a true and complete list as of
the date of this Agreement of all employee benefit plans or
arrangements applicable to the employees of PSI and all
fixed or contingent liabilities or obligations of PSI with
respect to any person now or formerly employed by PSI
including, without limitation, pension or thrift plans,
individual or supplemental pension or accrued compensation
arrangements, contributions to hospitalization or other
health or life insurance programs, incentive plans, bonus
arrangements and vacation, sick leave, disability and
termination arrangements or policies, including workers'
compensation policies. Except as listed in Schedule 4.18,
PSI maintains no other employee benefit plan or arrangement
applicable to the employees of PSI and possesses no other
fixed or contingent liabilities or obligations with respect
to any person now employed by PSI. ScheduleE4.18 also
includes true and complete copies of all employee handbooks,
rules and regulations.
(b) PSI has furnished Parent with copies of all applicable
plan documents, trust documents, insurance contract summary
plan descriptions of the written plans and arrangements
listed in ScheduleE4.18 and with descriptions, in writing,
of the unwritten plans and arrangements listed in
ScheduleE4.18.
(c) PSI has no employee benefit plans that are tax
qualified plans under Sections 401 etEseq. of the Internal
Revenue Code of 1986, as amended (the "Code").
(d) All employee benefit and welfare plans or arrangements
listed in ScheduleE4.18 were established and have been
executed, managed and administered in all material respects
in accordance with all applicable requirements of the Code,
of the Employee Retirement Income Security Act of 1974, as
amended, and of other applicable laws. PSI is not aware of
the existence of any governmental audit or examination of
any of such plans or arrangements or of any facts which
would lead it to believe that any such audit or examination
is pending or threatened. There have been no federal
pension law excise taxes assessed against any of the benefit
or welfare plans, and PSI is not aware of any proceedings or
events that could result in the assessment of such excise
taxes.
(e) There exists no action, suit or claim (other than
routine claims for benefits) with respect to any of such
plans or arrangements pending or, to the knowledge of PSI,
threatened against any of such plans or arrangements, and
PSI possesses no knowledge of any facts which could give
rise to any such action, suit or claim. Except as set forth
in ScheduleE4.18, PSI is not a party to any multi-employer
pension benefit or welfare plans.
Section 4.19. Labor Relations.
PSI is not a party to or subject to any collective
bargaining agreements. Except as described in
ScheduleE4.8(a) hereto, PSI has no written or oral contracts
of employment with any employee. PSI has provided Parent
with true and complete copies of all such written contracts
of employment and true and accurate memoranda of any such
oral contracts.
PSI has complied in all material respects with all
applicable laws, rules and regulations relating to the
employment of labor including, without limitation, those
related to wages, hours, collective bargaining, occupational
safety, discrimination, and the payment of social security
and other payroll related taxes, and it has not received any
notice alleging that it has failed to comply in any material
respect with-any of the foregoing. There are no material
controversies, disputes or proceedings pending or, to the
best of its knowledge, threatened, between PSI and PSI's
employees (singly or collectively). In this regard, PSI is
now in material compliance with all Federal, state and local
laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is
not engaged in any unfair labor practice within the meaning
of Section 8(a) of the Labor Management Relations Act of
1947. There are no claims or complaints pending or to PSI's
knowledge threatened against PSI before any court or
governmental agency involving allegedly unlawful employment
practices relating to PSI, except as referred to in
ScheduleE4.19. To the knowledge of PSI, there are no union
campaigns being conducted to solicit cards from employees to
authorize any additional unions or to request a National
Labor Relations Board certification election with respect to
any of PSI's employees.
Section 4.20. Insurance Policies.
PSI has furnished Parent with a list, attached hereto as
ScheduleE4.20, which sets forth a brief description of all
policies of fire, liability and other forms of insurance
currently maintained in force by PSI in respect to PSI's
business and assets.
Section 4.21. Bank Accounts.
Schedule 4.21 attached hereto sets forth the name and
location of each bank in which PSI has an account, lock box
or safe-deposit box and names of all persons authorized to
draw thereon or have access thereto.
Section 4.22. Capitalization.
(a) The authorized capital of PSI consists of 30,000,000
shares of common stock, $.01 par value ("PSI Common Stock").
As of the close of business on September 30, 1997: (i)
8,101,521 shares of PSI Common Stock were issued and
outstanding; (ii) no shares of PSI Common Stock were held by
PSI in its treasury; (iii) 954,079 shares of PSI Common
Stock were reserved for issuance pursuant to PSI's stock
option plans; (iv) 365,820 shares of PSI Common Stock were
reserved for issuance under bridge warrants exercisable
through April 2000; (v) 45,608 shares of PSI Common Stock
were reserved for issuance under warrants issued in
connection with 8% secured notes; (vi) 3,599,500 shares of
PSI Common Stock were reserved for issuance under Class A
Warrants exercisable through August 9, 2000; (vii) 359,950
shares of PSI Common Stock were reserved for issuance under
an option exercisable through 2000; (viii) 359,950 shares of
PSI Common Stock were reserved for issuance under Class A
Warrants exercisable through 2000; and (ix) 432,303 shares
of PSI Common Stock were reserved for issuance in connection
with the principal portion of PSI Convertible Notes.
(b) Except as set forth above, at the close of business on
September 30, 1997, no shares of capital stock or other
voting securities of PSI were issued, reserved for issuance
or outstanding. From September 30, 1997 to the date of this
Agreement, no shares of capital stock or other securities of
PSI have been issued. PSI's outstanding convertible
securities are set forth on Schedule 4.22. Except as set
forth on Schedule 4.22, there are no other outstanding
securities, options, warrants, rights, agreements,
arrangements or undertakings of any kind, to which PSI is a
party or by which it is bound, obligating PSI to issue,
grant, extend or enter into any such security, option,
warrant, right, agreement, arrangement or undertaking, and
no events have occurred that would cause that would lower
the exercise price or increase the number of shares of PSI
Common Stock into which any such securities can be
converted.
Section 4.23. Disclosure.
PSI has provided Parent with complete and accurate
information as to PSI and its affairs. No representation or
warranty made by PSI set forth herein, or in any Schedule
hereto, in any supplement to any Schedule, in the Management
Agreement, or in any certificate or other document delivered
or to be delivered in connection with the transactions
contemplated by this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statement not
misleading in light of the circumstances in which it was
made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY PARENT AND ACQUISITION
In order to induce PSI to enter into this Agreement and to
consummate the transactions contemplated hereunder, each of
Parent and Acquisition makes the following representations,
warranties, covenants and agreements:
Section 5.1. Corporate Existence and Qualification.
Each of Parent and Acquisition is a corporation duly
organized and validly existing and in good standing under
the laws of the State of Delaware and has all requisite
corporate power and authority to own its properties and to
carry on its business as it is now being conducted and as it
will be conducted on the Closing Date. Parent is qualified
to do business as a foreign corporation in all states where
the conduct of its business so requires, including Rhode
Island and New York. The only subsidiary of Parent is
Acquisition.
Section 5.2. Access's Corporate Documents.
Copies of (i) the Restated Certificate of Incorporation and
By-Laws, including the respective amendments thereto, of
Parent, certified by the Assistant Secretary of Parent, and
(ii) the Certificate of Incorporation and By-Laws of
Acquisition, certified by the Assistant Secretary of
Acquisition have been, or as of the Closing Date shall have
been, delivered to PSI, and such copies are true, complete
and correct.
Section 5.3. Authorization of Agreement, Etc.
(a) Each of Parent and Acquisition has all requisite
corporate power to enter into this Agreement and to
consummate the transactions contemplated hereby. Except for
the Parent Stockholder Approval, all corporate and other
actions required to be taken by each of Parent and
Acquisition to authorize it to carry out this Agreement and
the transactions contemplated hereby, have been, or as of
the Closing Date shall have been, duly and properly taken.
This Agreement has been duly executed and delivered by each
of Parent and Acquisition, and constitutes a valid and
binding obligation of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition,
respectively, in accordance with its terms. The Management
Agreement has been duly executed and delivered by Parent,
and constitutes a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
Neither the execution and delivery by each of Parent and
Acquisition of this Agreement, the merger contemplated
hereby nor the delivery of the Access Merger Shares, the
Access Merger Warrants or the Series A Preferred Stock of
the Surviving Corporation, violate or will violate any
provision of law applicable to, or any provision of the
corporate charter or by-laws of Parent or Acquisition, or
conflict with or will result in any breach of any term,
condition or provision of, or constitute or will constitute
(with due notice or lapse of time or both) a default under,
or will result in the creation or imposition of any lien,
charge or encumbrance upon any property of Parent,
Acquisition, or upon the Access Merger Securities or
Preferred Stock Shares, pursuant to the terms of, any
mortgage, deed of trust or other agreement or instrument to
which either Parent or Acquisition is a party or by which or
to which either Parent or Acquisition or the Access Merger
Shares, the Access Merger Warrants or the Series A Preferred
Stock of the Surviving Corporation, are subject or bound,
except to the extent that Parent or Acquisition shall have
obtained a waiver or release thereof.
(b) The execution and delivery by each of Parent and
Acquisition of this Agreement the merger contemplated hereby
and the delivery of the Access Merger Shares, the Access
Merger Warrants or the Series A Preferred Stock of the
Surviving Corporation or any other transaction contemplated
hereby require no consent, approval, order or authorization
of, or registration, declaration or filing with any
Governmental Entity except as referenced in Section 5.8.
Section 5.4. Absence of Certain Developments.
Except as set forth in Schedule 5.4 attached hereto, since
December 31, 1996, Parent has not: (i) had any change or
changes in its condition, operations, business, properties,
assets or liabilities of any character, whether or not in
the ordinary course of business, that has had individually
or in the aggregate, a material adverse effect; (ii) made
any changes in accounting procedures or practices; (iii)
authorized or effected any declaration, setting aside or
payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Parent's
capital stock; or (iv) entered into any agreement or
understanding to do any of the foregoing.
Section 5.5. Undisclosed Liabilities.
Neither Parent nor Acquisition have any material liabilities
or obligations, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, and neither
Parent nor Acquisition have any knowledge of any basis for
any claim against Parent or Acquisition for any such
material liabilities or obligations, except: (i) to the
extent set forth in this Agreement or in the Schedules
hereto or shown in Parent's December 31, 1996 unaudited
financial statements or (ii) liabilities or obligations
incurred in the ordinary course of business since December
31, 1996.
Section 5.6. Litigation; Compliance with Law.
There are no actions, suits, claims, proceedings or
investigations pending or, to either Parent or Acquisition's
knowledge, threatened against Parent or Acquisition at law
or in equity, or before or by any Federal, state, municipal
or other governmental court, department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
Neither Parent nor Acquisition is in default with respect to
any order, writ, injunction or decree of any court or
Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality
pertaining to it. Each of Parent and Acquisition has
complied in all material respects with all laws, regulations
and orders applicable to their respective businesses,
including, without limitation, all laws relating to the safe
conduct of business and environment protection and
conservation. Neither Parent nor Acquisition have received
notification of any asserted past or present failure so to
comply with any of such laws or with the federal
Occupational Safety and Health Act that has not been
remedied. Neither Parent nor Acquisition have knowledge of
any pending or threatened litigation or government action
which would prohibit or interfere with their respective
performance of this Agreement.
Section 5.7. Capitalization; Status of Access Common
Shares.
(a) The authorized capital stock of Parent consists of
13,000,000 shares of Common Stock, par value $.01 per share,
and 1,000,000 shares of preferred stock, par value $.01 per
share. Except as set forth in the Prospectus dated November
16, 1996, previously delivered by Parent to PSI or as set
forth on Schedule 5.7 hereto, there are not, and on the
Closing will not be, outstanding: (i) any options, warrants
or other rights to purchase any capital stock of Parent;
(ii) any securities convertible into or exchangeable for
shares of such stock; or (iii) any other commitments of any
kind for the issuance of additional shares of capital stock
or options, warrants or other securities of Parent.
(b) The authorized capital stock of Acquisition consists of
1000 shares of Common Stock, par value $.01 per share, and
200,000 shares of preferred stock, par value $.01 per share.
(c) Except as set forth above, no shares of capital stock
or other voting securities of Parent or Acquisition are
issued, reserved for issuance or outstanding. There are no
other outstanding securities, options, warrants, rights,
agreements, arrangements or undertakings of any kind, to
which either Parent or Acquisition is a party or by which
either is bound, obligating Parent or Acquisition to issue,
grant, extend or enter into any such security, option,
warrant, right, agreement, arrangement or undertaking.
(d) The Access Merger Shares and the Access Merger Warrants
to be delivered to the stockholders of PSI (or for their
account) in connection with the transactions contemplated
hereby will be, at the time of delivery, duly authorized,
fully paid and non-assessable and free and clear of all
liens, claims and encumbrances. At the time of delivery the
Access Merger Shares and the Access Merger Warrants shall be
free of any transfer restriction legends other than the
legend provided for in Section 11.1 hereof.
Section 5.8. SEC Filings.
(a) Parent has filed with the SEC all reports and filings
required to be filed with the SEC pursuant to the Securities
Act, the Exchange Act, and any other applicable federal
securities laws, including without limitation: (i) its
Prospectus dated October 16, 1996, relating to its offering
of 1,066,667 Units, each Unit consisting of two shares of
common stock and one redeemable warrant; (ii) its quarterly
reports on Form 10-QSB for the quarterly periods ending
September 30, 1996, December 31, 1996, and March 31, 1997,
respectively; and (iii) its annual report on Form 10-KSB for
the fiscal year ending June 30, 1997.
(b) All of the reports and filings referred to in
subparagraph (a) and any that are filed prior to the Closing
comply and will comply in all material respects as to form
and substance with the applicable federal securities laws
pursuant to which they were filed. To the best of Parent's
knowledge, no such report or other filing, or any exhibit,
schedule or attachment thereto (whether or not incorporated
by reference) contains or will contain any untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which such statements were made.
(c) Except as may be disclosed in such reports and filings,
there has not been any material adverse change in the
business, operations or liabilities or prospects of Parent
since June 30, 1997, and the filings and reports listed in
the clauses (i), (ii) and (iii) inclusive, of subparagraph
(a), fairly and accurately reflect such business, operations
and liabilities and prospects as of the respective dates
thereof. Without limiting the generality of the foregoing
sentence, Parent has not filed a report on Form 8-K since
June 30, 1997.
Section 5.9. Information Supplied by Parent or Acquisition.
None of the information supplied or to be supplied by Parent
or Acquisition for inclusion or incorporation by reference
in the Proxy Statement, in any other filing of PSI or in the
Form S-4 will, at the time of the PSI Stockholder Meeting or
on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statement not
misleading in light of the circumstances under which they
were or will be made.
ARTICLE VI
CONDUCT PRIOR TO CLOSING
From and after the execution of this Agreement, and until
the Closing Date:
Section 6.1. Carry On in Ordinary Course.
PSI shall carry on in the ordinary course of business and
substantially in the same manner as heretofore, and shall
not make or institute any unusual or novel methods of
purchase, sale, lease, management, accounting or operation,
or make any capital expenditures, or issue or agree to issue
any convertible securities or PSI Common Stock (except upon
conversion of any convertible securities listed on Schedule
4.22), or take any action other than in the ordinary course.
Section 6.2. No General Increases.
Without the prior written consent of Parent, PSI shall not
grant any general or uniform increase in the rates of pay of
its employees nor grant any general or uniform increase in
the benefits under any bonus or pension plan or other
contract or commitment relating to its employees; and except
as approved in writing by Parent, PSI shall not increase the
compensation payable or to become payable to officers or key
salaried employees of PSI, or increase any bonus, insurance,
pension or other benefit plan, payment or arrangement made
to, for or with any of such officers, key salaried employees
or agents of PSI.
Section 6.3. Contracts and Commitments.
PSI shall not enter into any contract or commitment or
engage in any transaction not in the usual and ordinary
course of business of and consistent with the business
practices of PSI without the prior written consent of
Parent; provided, however, that PSI shall be permitted to
issue the PSI Preferred Stock to the holders of the PSI
Convertible Notes in exchange for such PSI Convertible
Notes.
Section 6.4. Dispositions and Sale of Assets.
PSI shall not sell or dispose of or agree to sell or dispose
of, any of its assets (other than inventory in the ordinary
course of business).
Section 6.5. Preservation of Organization.
PSI shall use its reasonable best efforts, provided that no
material expenditure is required, to preserve intact its
business organization, to keep available the services of
current employees and to preserve its present relationships
with its suppliers and customers and others having business
relations with PSI.
Section 6.6. No Default.
PSI shall not knowingly do any act or omit to do any act, or
(to the extent controllable by PSI) permit any act or
omission to act, which will cause a breach of any material
contract, commitment, judgment, order, injunction or
obligation relating to PSI's assets or business.
Section 6.7. Compliance with Laws.
PSI shall duly comply with all applicable laws in all
material respects as may be required for the operation of
its business and for the valid and effective merger and the
consummation of the transactions contemplated hereby.
Section 6.8. Operation of Business.
PSI shall take or suffer no action as shall render any
warranty or representation contained in Article IV untrue,
inaccurate or misleading at Closing.
Section 6.9. Consents.
PSI shall use its best efforts to obtain all written
consents of third parties necessary to effectuate the Merger
and transactions contemplated hereby, but shall not be
obligated to make any payments to third parties in so doing
unless PSI has heretofore agreed with any third party to
make such payments.
Section 6.10. Advisement of Changes.
PSI, Parent or Acquisition, as the case may be, shall
promptly advise the other party orally and in writing upon
its becoming aware of: (i) any representation or warranty
made by it in this Agreement being untrue or inaccurate as
of the date made in any material respect, (ii) the failure
by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or (iii) any change or
event which would have a material adverse effect on such
party or on the ability of the conditions set forth in
Articles VII or VIII to be satisfied; provided however, that
no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this
Agreement. Should either party become aware of a condition
that requires a change in the Schedules to this Agreement to
ensure they were accurate on the date made, PSI, Parent or
Acquisition, as the case may be, will promptly deliver to
the other party a supplement to such Schedules specifying
such change.
Section 6.11. No Solicitation.
(a) PSI shall not, nor shall it authorize or permit any
officer, director or employee of or any investment banker,
attorney or other advisor or representative of, PSI,
directly or indirectly: (i) solicit, initiate or knowingly
encourage the submission of any takeover proposal (as
defined below), (ii) enter into any agreement providing for
any takeover proposal or (iii) participate in any
negotiations regarding, or furnish to any person any non-
public information with respect to, or take any other action
knowingly to facilitate the making of, any takeover
proposal; provided, however, that if, at any time prior to
the receipt of PSI Stockholder Approval, the Board of
Directors of PSI determines in good faith that it is
necessary to do so in order to comply with its fiduciary
duties to PSI's stockholders under applicable law, as
advised by outside counsel, PSI may, with respect to an
actual or potential unsolicited takeover proposal and
subject to compliance with Section 6.11: (x) furnish non-
public information with respect to PSI to such person making
such actual or potential unsolicited takeover proposal and
(y) participate in negotiations regarding such proposal.
(b) Neither the Board of Directors of PSI nor any committee
thereof shall: (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or
Acquisition, the approval or recommendation by such Board of
Directors or any such committee of this Agreement or the
Closing, (ii) approve or recommend or propose to approve or
recommend, any takeover proposal or (iii) enter into any
agreement with respect to any takeover proposal.
(c) In addition to the obligations of PSI set forth in
paragraphs (a) and (b) of this Section 6.11, PSI shall
promptly advise Parent orally and in writing of any request
for information or of any takeover proposal or any inquiry
with respect to or which could reasonably be expected to
lead to any takeover proposal which, in any such case, is
either: (i) in writing or (ii) made to any executive
officer or director or representative of PSI, the identity
of the person making any such request (to the extent
practicable), takeover proposal or inquiry and all the
material terms and conditions thereof. PSI will keep Parent
fully informed of the status and details (including
amendments or proposed amendments) of any such request,
takeover proposal or inquiry.
For purposes of this Agreement, the term takeover proposal
shall mean any proposal for a merger, consolidation or other
business combination involving PSI or any proposal or offer
to acquire in any manner, directly or indirectly, an equity
interest in, any voting securities of, or a substantial
portion of the assets of PSI other than the transactions
contemplated by this Agreement.
Section 6.12. No Delaying Transactions.
Between the date of this Agreement and the Closing Date,
PSI, Parent and Acquisition will not enter into any
transaction or enter into negotiations for any transaction
that will delay the consummation of the transactions
contemplated by this Agreement.
Section 6.13. Lock-Up Agreements.
Prior to the Closing, Parent shall use its reasonable best
efforts to cause such of its shareholders who have executed
so-called "lock-up" agreements to execute a new lock-up
agreement containing a schedule substantially in the form of
the schedule set forth in Exhibit D-1. If PSI is reasonably
satisfied with the percentage of such shareholders of Parent
who have executed such a lock-up agreement, then, following
the Effective Date, in order to obtain the Merger
Consideration as set forth in Section 2.4, PSI's
shareholders shall execute and deliver a lock-up agreement
substantially in the form of Exhibit D-1. Otherwise, PSI's
shareholders shall execute and deliver a lock-up agreement
substantially in the form of Exhibit D-2 (the form of lock-
up agreement to be so executed and delivered by PSI's
shareholders shall be referred to as the Lock-Up Agreement).
Section 6.14. Best Efforts.
Between the date of this Agreement and the Closing Date,
PSI, Parent and Acquisition will each use its reasonable
best efforts to cause the conditions in Article VII and VIII
to be satisfied.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION
The obligations of each of Parent and Acquisition to take
the actions required to be taken by each of Parent and
Acquisition, respectively, at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Parent
or Acquisition, in whole or in part):
Section 7.1. Compliance by PSI; Correctness of
Representations and Warranties of PSI.
Except to the extent that PSI has delegated operational
control of the Business to Parent pursuant to the Management
Agreement, PSI shall have complied with and performed in all
material respects all the terms, covenants and conditions of
this Agreement to be complied with and performed (except as
would not have a material adverse effect on the business or
assets of PSI), and each of the representations and
warranties made by PSI under this Agreement shall be true
and correct in all material respects as of the date of this
Agreement (other than those representations and warranties
that expressly relate to an earlier date).
Section 7.2. Certified Resolutions of PSI.
PSI Stockholder Approval shall have been obtained, and PSI
shall have delivered to Parent a certificate signed by the
Secretary or Assistant Secretary of PSI under its corporate
seal setting forth the votes constituting the authorization
and approval of the board of directors and stockholders of
PSI of the Merger contemplated hereby on the terms set forth
herein.
Section 7.3. Approval by Parent's and Acquisition's
Counsel.
All actions, proceedings, instruments and documents required
to carry out this Agreement or incidental thereto and all
other related legal matters have been approved by counsel
for Parent and Acquisition, which approval will not be
unreasonably withheld.
Section 7.4. Opinions of Counsel for PSI.
(a) Parent and Acquisition shall have received an opinion
of Shereff, Friedman, Hoffman & Goodman, LLP, counsel for
PSI, dated the Closing Date, in form and substance
reasonably satisfactory to Parent, Acquisition and its
counsel, to the effect that: (i) PSI is a corporation duly
organized and validly existing and in good standing under
the laws of the State of Delaware and has full corporate
power and authority, to carry on its business as it is now
being conducted and to own or hold under lease the
properties and assets it now owns or holds under lease; (ii)
PSI has all requisite corporate power and authority to enter
into this Agreement, to merge with Acquisition as provided
in this Agreement and to carry out any other transactions
and agreements contemplated hereby; (iii) to such counsel's
knowledge, Section 4.22 accurately sets forth the
capitalization of PSI (except as to the PSI Preferred Stock
which is to be issued after the date hereof); (iv) all
corporate and other proceedings required to be taken by or
on the part of PSI to authorize PSI to carry out this
Agreement and for PSI to merge with Acquisition and enter
into and perform its obligations under any other closing
documents have been duly and properly taken including any
necessary approval by the stockholders of PSI of the
transactions contemplated by this Agreement; (v) this
Agreement and other closing documents have been duly
executed and delivered by PSI and constitute valid and
binding obligations of PSI enforceable in accordance with
their terms; (vi) the execution, delivery and performance of
this Agreement will not contravene any applicable provision
of law, any order of any court or other agency of government
known to such counsel, the Certificate of Incorporation or
By-Laws of PSI, or, to such counsel's knowledge, conflict
with or result in any breach of the terms of, or constitute
a default under, any indenture, agreement or other
instrument to which PSI is a party or by which PSI or any of
its assets is bound other than as would not have a material
adverse effect on the business of PSI; (vii) the execution
and delivery of the Agreement and the consummation of the
transactions contemplated by the Agreement do not require
any authorization, consent, approval, exemption or other
action by or notice to any court, arbitrator, administrative
or governmental body pursuant to any applicable law,
statute, ordinance, rule or regulation applicable to PSI
other than as would not have a material adverse effect on
the business of PSI; (viii) there are no agreements known to
such counsel pursuant to which PSI has pledged its assets,
or granted a lien, security interest or encumbrance on any
of the assets of PSI except as set forth in Schedule 4.9;
and (x) to the best of such counsel's knowledge, the
information supplied by PSI in the Form S-4 (including any
documents incorporated by reference therein) on the
effective date of the Form S-4, the date of mailing of the
Proxy Statement, and the date of the PSI Stockholder Meeting
did not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In delivering such opinion and to the extent specified in
such opinion and deemed appropriate by such counsel and
counsel to Parent and Acquisition, such counsel may rely, as
to factual matters, upon certificates of the officers of PSI
and upon opinions of associate counsel satisfactory to
Parent and Acquisition and its counsel. Such opinion shall
be limited to matters of New York law, Delaware law and
federal law.
(b) Parent and Acquisition shall have received an opinion
of Cowan, Liebowitz & Latman, P.C., patent and trademark
counsel to PSI, in form and substance reasonably
satisfactory to Parent, Acquisition and their counsel.
Section 7.5. Consents of Third Parties.
All necessary consents, waivers or approvals of third
parties required for the lawful consummation of the
transactions contemplated by this Agreement as set forth on
Schedule 4.8(b) shall have been obtained (and shown by
evidence reasonably satisfactory to Parent) and shall be in
full force and effect.
Section 7.6. Certificate of Chief Executive Officer of PSI.
PSI shall have delivered to Parent and Acquisition a
certificate of its Chief Executive Officer, certifying, in
such form as Parent and Acquisition may reasonably request,
as to the fulfillment of the conditions set forth in
Sections 7.1 and 7.5.
Section 7.7. Approval of Governmental Authorities.
No court or governmental authority shall have issued any
order, writ, injunction or decree prohibiting Parent or
Acquisition from consummating the transactions contemplated
hereby or shall have commenced or threatened any lawsuit
concerning such transactions or indicated its opposition to
such transactions.
Section 7.8. Corporate Authority.
Parent shall have received all documents it shall have
reasonably requested from PSI relating to the existence and
corporate and tax good standing of PSI and the authority of
PSI to enter into and consummate the transactions
contemplated by this Agreement.
Section 7.9. Exchange of PSI Convertible Notes.
PSI shall have consummated the exchange of all of the PSI
Convertible Notes for PSI Preferred Stock and shall have
provided evidence thereof reasonably satisfactory to Parent
and its counsel.
Section 7.10. Approval of Parent Stockholders.
If applicable pursuant to Section 3.1(c), the Parent
Stockholder Approval shall have been obtained.
Section 7.11. Form S-4 Effective.
The Form S-4 shall have become effective, and, at the
Closing Date, no stop order suspending the effectiveness of
the Form S-4 shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending
or contemplated by the SEC.
Section 7.12. Termination of Certain Agreements.
PSI shall have terminated and provided evidence to Parent
thereof, without further obligation or recourse, on terms
reasonably satisfactory to both PSI and Parent, (i) the
Consulting Agreement between PSI and Stephen Kornfeld, (ii)
the Employment Agreement between PSI and William Weiss, and
(iii) the Underwriting Agreement and Merger and Acquisitions
Agreement between PSI and A.R. Baron.
Section 7.13. Certificate of Merger. Parent shall have
received evidence of filing with the Secretary of State of
the State of Delaware of the Certificate of Merger pursuant
to Section 251 of the DGCL with respect to the Merger.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PSI
The obligation of PSI to take the actions required to be
taken by PSI at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following
conditions (any of which may be waived by PSI, in whole or
in part):
Section 8.1. Compliance by Parent and Acquisition;
Correctness of Representations and Warranties.
Each of Parent and Acquisition shall have complied with and
performed in all material respects all the terms, covenants
and conditions of this Agreement to be complied with and
performed (except as would not have a material adverse
effect on Parent or Acquisition), and all of the
representations and warranties made by Parent or Acquisition
under this Agreement shall be true and correct in all
material respects as of the date of this Agreement (other
than those representations and warranties that expressly
relate to an earlier date).
Section 8.2. Certified Resolutions of Parent and
Acquisition.
Each of Parent and Acquisition shall have delivered to PSI a
certificate signed by its Secretary or Assistant Secretary,
respectively, under its corporate seal, setting forth the
votes or consents constituting the authorization and
approval of the directors (and, if applicable pursuant to
Section 3.1(c), the stockholders) of Parent and Acquisition
of this Agreement and the transactions contemplated hereby
on the terms set forth herein.
Section 8.3. Approval by PSI's Counsel.
All actions, proceedings, instruments and documents required
to carry out this Agreement or incidental thereto, and all
other related legal matters, shall have been approved by
counsel for PSI, which approval will not be unreasonably
withheld.
Section 8.4. Opinion of EdwardsE& Angell.
PSI shall have received an opinion of Edwards & Angell,
counsel for Parent and Acquisition, dated the Closing Date,
in form and substance reasonably satisfactory to PSI and its
counsel to the effect that: (i) each of Parent and
Acquisition is a corporation duly organized and existing and
in good standing under the laws of the State of Delaware and
has full corporate power and authority to carry on its
business as it is now being conducted and to own or hold
under lease the properties and assets it now owns or holds
under lease; (ii) Parent is qualified to do business in
Rhode Island and New Jersey; (iii) each of Parent and
Acquisition has all requisite corporate power and authority
to enter into this Agreement, to enter into the Merger
transaction, to deliver the Access Merger Securities and the
shares of Series A Preferred Stock of the Surviving
Corporation and to carry out any of the transactions and
agreements contemplated hereby; (iv) all corporate and other
proceedings required to be taken on the part of each of
Parent and Acquisition to authorize it to enter into this
Agreement and to perform their respective obligations
hereunder have been duly and properly taken; (v) this
Agreement and the other closing documents have been duly
executed and delivered by, and constitute the valid and
binding obligations of each of, Parent and Acquisition
enforceable in accordance with their terms; (vi) the
execution, delivery and performance of this Agreement will
not violate any provision of law, any order of any court or
other agency of government known to such counsel, the
corporate charter or By-Laws of either Parent or
Acquisition, or to such counsel's knowledge, conflict with
or result in any breach of the terms of, or constitute a
default under, any indenture, agreement, or other instrument
to which either Parent or Acquisition is a party or by which
either or both of Parent or Acquisition or any of their
respective assets are bound other than as would not have a
material adverse effect on either or both of Parent or
Acquisition; (vii) the execution and delivery of this
Agreement and consummation of the transactions contemplated
by the Agreement do not require any authorization, consent,
approval, exemption or other action by or notice to any
court, arbitrator, administrative or governmental body
pursuant to any law, statute, ordinance, rule or regulation
applicable to either or both of Parent or Acquisition other
than as would not have a material adverse effect on Parent
or Acquisition; (viii) to such counsel's knowledge, Section
5.7 accurately sets forth the capitalization of each of
Parent and Acquisition; (ix) to the best of such counsel's
knowledge, the information supplied by Parent in the Form S-
4 (including documents incorporated by reference therein) on
the effective date of the Form S-4, the date of mailing, and
the date of the Parent Stockholder Meeting (if applicable)
did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(x) Acquisition's corporate existence as a separate entity
has ceased, and all of the issued and outstanding common
stock of the Surviving Corporation is owned by Parent, and
(xi) each of the Access Merger Securities and shares of
Series A Preferred Stock delivered to the stockholders of
PSI are duly authorized, fully paid and non-assessable, free
and clear of liens, claims and encumbrances and any transfer
restrictions and legends other than, with respect to the
Access Merger Securities, the legend provided in Section
11.1 hereof and the Lock-Up Agreement, and, with respect to
the shares of Series A Preferred Stock of the Surviving
Corporation, any legends reflecting that such securities are
not registered under the Securities Act or any state
securities law.
In delivering such opinion and to the extent specified in
such opinion and deemed appropriate by such counsel and
counsel to PSI, such counsel may rely, as to factual
matters, upon certificates of the officers of Parent and
Acquisition and, upon opinions of associate counsel
satisfactory to PSI and its counsel. Such opinion shall be
limited to matters of New York law, Delaware law and federal
law.
Section 8.5. Certificate of President of Parent and
Acquisition.
Each of Parent and Acquisition shall have delivered to PSI a
certificate of its President certifying, in such form as PSI
may reasonably request, as to the fulfillment of the
conditions set forth in Section 8.1 hereof.
Section 8.6. Approval of Governmental Authorities.
No court or governmental authority shall have issued any
order, writ, injunction or decree prohibiting PSI from
consummating the transactions contemplated hereby, or shall
have commenced or threatened any lawsuit concerning such
transactions or indicated its opposition to such
transactions.
Section 8.7. Corporate Authority.
PSI shall have received all documents it shall have
reasonably requested from each of Parent and Acquisition
relating to the existence and corporate and tax good
standing of Parent and Acquisition.
Section 8.8. Access Merger Securities.
Parent shall have delivered certificates representing the
Access Merger Securities to the Exchange Agent.
Section 8.9. Form S-4 Effective.
The Form S-4 shall have become effective, and on the Closing
Date, no stop order suspending the effectiveness of the Form
S-4 shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or
contemplated by the SEC.
Section 8.10. Certificate of Merger.
PSI shall have received evidence of filing with the
Secretary of State of the State of Delaware of the
Certificate of Merger pursuant to Section 251 of the DGCL
with respect to the Merger.
Section 8.11 Plan of Financing. Prior to the mailing
of the Proxy Statement to PSI's shareholders, Parent shall
have received and presented to PSI's Board of Directors a
copy of a bona fide written third-party proposal for
financing the Surviving Corporation for at least 12 months
following the Merger, and PSI's Board of Directors shall be
reasonably satisfied that the proposal is attainable. If,
within 5 business days of its receipt of such proposal,
PSI's Board of Directors does not object to the mailing of
the Proxy Statement on the grounds that it has not received
the proposal or is not reasonably satisfied that it is
attainable, Parent shall be deemed to have presented a
satisfactory plan of financing and PSI shall not thereafter
have any rights under this Section 8.11.
ARTICLE IX
FEES AND EXPENSES
Section 9.1. Fees and Expenses.
Parent, Acquisition and PSI will pay their respective
expenses, including the expenses of their legal and
accounting representatives and management consultants, in
connection with the origin, negotiation, execution and
performance of this Agreement, provided, however, that if
the Closing occurs, Parent and Acquisition shall assume and
pay at the Closing PSI's reasonable expenses in connection
therewith.
Section 9.2. Termination Fee.
PSI shall pay, or cause to be paid, in same day funds to
Parent or Acquisition Seven Hundred Fifty Thousand Dollars
($750,000) (the "Termination Fee") upon demand if: (i)
Parent, Acquisition or PSI terminates this Agreement
pursuant to Section 10.1(g); or (ii) if Parent, Acquisition
or PSI terminates this Agreement pursuant to Section 10.1(c)
where there shall have been made public prior to the PSI
Stockholder Meeting a takeover proposal involving PSI. PSI
acknowledges that the agreement contained in this Section
9.2 is an integral part of the transactions contemplated by
this Agreement, and that, without this agreement, Parent and
Acquisition would not enter into this Agreement.
Accordingly, if PSI fails promptly to pay the amount due
pursuant to this Section 9.2, and in order to obtain such
payment, Parent or Acquisition commences a suit that results
in a judgment against PSI for the Termination Fee, PSI shall
pay to Parent or Acquisition its reasonable costs and
expenses (including reasonable attorneys' fees) in
connection with such suit, together with interest on the
amount of the Termination Fee at the prime rate of Fleet
National Bank in effect on the date such payment was
required to be made.
ARTICLE X
TERMINATION AND EFFECT
Section 10.1. Termination of Agreement.
This Agreement may be terminated by notice given prior to or
at the Closing, whether before or after PSI Stockholder
Approval or the Parent Stockholder Approval:
(a) At the election of PSI, if any one or more of the
conditions in Article VIII to the obligation of PSI to
Closing has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of PSI to comply with its
obligations under this Agreement) and PSI has not waived
such condition on or before the Closing Date;
(b) At the election of Parent or Acquisition, if any one or
more of the conditions in Article IX to the obligations of
Parent or Acquisition to Closing has not been satisfied as
of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of
Parent or Acquisition to comply with its obligations under
this Agreement) and Parent or Acquisition has not waived
such condition on or before the Closing Date;
(c) At the election of PSI, Parent or Acquisition, if PSI
Stockholders Meeting shall have concluded without PSI
Stockholder Approval having been obtained;
(d) At the election of Parent or Acquisition, if the Access
Stockholder Meeting shall have concluded without the Access
Stockholder Approval having been obtained (if applicable);
(e) At the election of PSI or Access, if a breach of any
provision of this Agreement has been committed by the other
party which has a material adverse effect and such breach
has not been waived;
(f) At the election of Access or PSI, if the Closing shall
not have taken place on or before January 31, 1998 (or such
later date as may be agreed to in writing by Access and
PSI), provided that the party exercising such right of
termination shall not then be in default under its
obligations hereunder;
(g) At the election of PSI or Access, if the Board of
Directors of PSI approves or recommends a bona fide takeover
proposal to merge with or into PSI or to acquire, directly
or indirectly, all or a substantial portion of the shares of
PSI Common Stock then outstanding or all or substantially
all of the assets of PSI and otherwise on terms that the
Board of Directors of PSI determines in its good faith
judgment to be more favorable to PSI's stockholders than the
transactions contemplated by this Agreement; or
(h) By mutual written consent of Access and PSI.
Section 10.2. Effect of Termination.
If this Agreement is terminated pursuant to Section 10.1,
all further obligations of the parties under this Agreement
will terminate, and this Agreement shall become null and
void and of no further effect, except for the provisions of
Sections 9 and 15.5, without any liability on the part of
any party or any of its employees, representatives, agents,
directors, officers or stockholders; provided, however, that
if this Agreement is terminated by a party because of a
willful breach of the Agreement by the other party or
because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as
a result of the other party's willful failure to comply with
its obligations under this Agreement, the terminating
party's right to pursue all legal remedies will survive such
termination; and, provided, further, that recovery for any
damages suffered shall be limited to actual out of pocket
expenses incurred as a result of such breach; and provided,
further, that if this Agreement is terminated due to failure
to obtain the Access Director Approval or the Access
Stockholder Approval (if applicable), or due to the failure
of the condition contained in Section 8.11 of this
Agreement, Access will amend the Convertible Promissory Note
dated January 29, 1997, issued by PSI so as to extend the
Maturity Date (as defined therein) to May 31, 1998. If a
condition precedent to any party's obligation is not
satisfied, nothing contained herein shall be deemed to
require such party to terminate this Agreement, rather than
to waive such condition and proceed with the Closing.
ARTICLE XI
ACKNOWLEDGMENTS OF PSI
Section 11.1. Restricted Securities.
All certificates representing the Access Merger Securities
shall be stamped with a legend in substantially the
following form:
The holder of this certificate has agreed, prior to [insert
termination date of Lock-Up], not to directly or indirectly
issue, offer to sell, sell, grant an option for the sale of,
transfer, assign, hypothecate, pledge, or otherwise dispose
of or encumber (either pursuant to Rule 144 of the
regulations under the Securities Act of 1933, as amended, or
otherwise), the securities represented by this certificate,
whether or not beneficially owned or registered in the name
of the holder, without the prior written consent of Access
Solutions International, Inc. ("Company") and Joseph Stevens
& Company, Inc., ("JSC"), except to the extent set forth in
an agreement dated [__________, 1997] among the holder of
this certificate, the Company and JSC and any subsequent
agreement among the holder of this certificate, the Company
and JSC.
Section 11.2. Access to Information.
PSI acknowledges receipt and review of Parent's Prospectus
dated October 16, 1996, Forms 10-QSB for the quarterly
periods ending September 30, 1996, December 31, 1996 and
March 31, 1997, and Form 10-KSB for the fiscal year ending
June 30, 1997. PSI is aware of the financial condition of
Parent, has had ample opportunity to investigate and ask
questions regarding same, and does not have any unanswered
questions regarding same.
ARTICLE XII
BROKERS' COMMISSIONS
The parties hereby agree and warrant to each other that
there are no claims for brokerage commissions, or placement
or finders' fees in connection with the transactions
contemplated by this Agreement, other than JSC, the expenses
of which will be paid by Parent or Acquisition. Each of
Parent and Acquisition hereby agrees to indemnify and hold
PSI harmless from the commissions, fees or claims of any
person, firm or corporation employed or retained or claiming
to be employed or retained, by Access to bring about, or to
represent it, in the transactions contemplated hereby. PSI
hereby agrees to indemnify and hold each of Parent and
Acquisition harmless from the commissions, fees or claims of
any person, firm or corporation employed or retained or
claiming to be employed or retained, by PSI or its agents to
bring about, or to represent it, in the transactions
contemplated hereby.
ARTICLE XIII
ACCESS TO FACILITIES, PROPERTIES AND RECORDS
From and after the date of this Agreement, each party hereto
shall afford to the officers, attorneys, accountants and
other authorized representatives of the other party hereto
free and full access to the facilities, properties, books
and records of business and such party in order that the
other party may have full opportunity to make such
investigation as it shall desire to make of the affairs of
such party, provided that such investigation shall not
unreasonably interfere with the operations of the business
and shall at all times be governed by those certain
Confidentiality Agreements between PSI and Parent dated
November 7, 1996 ("Confidentiality Agreements") which
agreements shall remain in full force and effect. Parent,
Acquisition and PSI agree that the Confidentiality
Agreements are hereby amended to include Acquisition as a
party to each Agreement such that Acquisition is entitled to
the same benefits and is subject to the same obligations as
Parent.
ARTICLE XIV
SURVIVAL OF REPRESENTATIONS
PSI, Parent and Acquisition each agree that the
representations and warranties contained in this Agreement
shall terminate upon the Closing, and thereafter shall have
no further force or effect.
ARTICLE XV
MISCELLANEOUS
Section 15.1. Amendment to Agreement; Waivers; Procedure.
(a) Each of Access and Acquisition may, by written notice
to the other: (i) extend the time for the performance of
any of the obligations or other acts of the other party,
(ii) waive any inaccuracies in the representations of the
other party contained in this Agreement or in any document
delivered pursuant to this Agreement, and (iii) waive any
compliance with any of the covenants of the other party
contained in this Agreement and waive performance of any of
the obligations of the other party.
(b) This Agreement may be amended by the parties at any
time before or after PSI Stockholder Approval or the Access
Stockholder Approval (if applicable); provided, however,
that after any such approval, there shall not be made any
amendment that by law requires further approval by the
stockholders of PSI or Parent without first obtaining such
further approval. Neither this Agreement nor any provisions
hereof may be amended, modified or waived except by an
instrument in writing signed on behalf of Parent,
Acquisition and PSI.
(c) In order to be effective, a termination of this
Agreement pursuant to Section 10.1, or an amendment,
extension or waiver pursuant to this Section 15.1, shall
require in the case of Parent, Acquisition or PSI, action by
its Board of Directors or the duly authorized designee of
its Board of Directors.
Section 15.2. Binding Effect.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither
Access nor PSI may assign this Agreement in whole or in part
without the prior written consent of the other party, which
consent will not be unreasonably withheld or delayed.
Section 15.3. Entire Agreement.
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter (including (i)
the Letter of Intent between PSI and Parent dated January 2,
1997, (ii) the letter from Parent to PSI dated March 26,
1997, (iii) the letter from PSI to Parent dated September
11, 1997, and (iv) the Asset Purchase Agreement). This
Agreement and the Schedules and Exhibits referred to herein,
along with the Management Agreement, the Shareholders'
Agreements and the Confidentiality Agreements, contain the
entire agreement of the parties hereto with respect to the
merger and the other transactions contemplated herein, and
any reference herein to this Agreement shall be deemed to
include the Schedules and Exhibits hereto. In the event of
any inconsistency between the statements in the body of this
Agreement and those in the Schedules, the statements in the
body of this Agreement will control.
Section 15.4. Headings.
The descriptive headings in the Agreement are inserted for
convenience only and do not constitute a part of this
Agreement.
Section 15.5. Confidential Information; Publicity.
Any confidential information obtained by any party hereto
from any other party hereto shall not be disclosed or used
by any such party should such transactions not be effected,
and each party shall be bound by the terms and provisions of
the Confidentiality Agreements (which shall remain in full
force and effect) and return to the other all documents and
written information obtained from such other party as such
other party's counsel may request in writing. Except as in
the reasonable opinion of counsel to a party may be required
by law, the parties agree that they will not make any public
disclosure of the transactions contemplated by this
Agreement, including announcements to employees, without the
prior written approval of the content of such disclosure
from each other, which approval will not be unreasonably
withheld.
Section 15.6. Notices.
Any notice, waiver, request, information or other document
to be given hereunder to any of the parties by the other
shall be in writing and will be deemed to have been duly
given when: (a) delivered personally (with written
confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested),
in each case as follows:
If to Parent or Acquisition, addressed to:
ACCESS SOLUTIONS INTERNATIONAL, INC.
650 Ten Rod Road
North Kingstown, RI 02852
Attention: Robert H. Stone, President and CEO
Telecopy No.: (401) 295-1851
with a copy (which shall not constitute notice) to:
John E. Ottaviani, Esq.
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Telecopy No.: (401) 276-6611
If to PSI, addressed to:
PAPERCLIP SOFTWARE, INC.
Three University Plaza
Hackensack, NJ 07601
Attention: William Weiss, Chief Executive Officer
Telecopy No.: (201) 487-0613
with a copy (which shall not constitute notice) to:
Richard A. Goldberg, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Telecopy No.: (212) 758-9526
Any party may change the address to which notices are to be
sent to it by giving written notice of such change of
address to the other parties in the manner herein provided
for giving notice.
Section 15.7. Indemnification and Insurance.
(a) The certificate of incorporation of the Surviving
Corporation shall contain the provisions with respect to the
elimination of personal liability of directors of PSI to
shareholders of PSI set forth in Article NINTH of the
Certificate of Incorporation of PSI as in effect at the
Effective Time, and such provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years
from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the time
of execution and delivery of this Agreement were directors,
officers, employees or agents of PSI, unless such
modification is required by law. To the extent permitted by
applicable law, Acquisition and Parent agree that all rights
to indemnification now existing in favor of the directors
and officers of PSI as provided in PSI's certificate of
incorporation and by-laws in effect on the date hereof shall
survive the Merger and shall continue in full force and
effect for a period of six (6) years from the Effective
Time, and each of Parent and Acquisition agrees that it will
honor, or cause to be honored, all such rights to
indemnification.
(b) PSI shall, to the fullest extent permitted under
applicable law or under PSI's certificate of incorporation
or by-laws and regardless or whether the Merger becomes
effective, indemnify and hold harmless, and after the
Effective Time, Parent and the Surviving Corporation shall,
to the fullest extent permitted under applicable law or
under PSI's certificate of incorporation or by-laws,
indemnify and hold harmless, each present and former
director, officer, employee, fiduciary and agent of PSI
(collectively, the "Indemnified Parties") against any costs
or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or
pertaining to any action or omission occurring prior to the
Effective Time (including, without limitation, any claim,
action, suit, proceeding or investigation arising out of or
pertaining to the transactions contemplated by this
Agreement) for a period of six (6) years after the date
hereof and in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after
the Effective Time), (i) PSI or Parent or the Surviving
Corporation, as the case may be, shall pay the reasonable
fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to
PSI or the Surviving Corporation, promptly after statements
therefor are received, (ii) PSI and the Surviving
Corporation will cooperate in the defense of any such
matter, and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies
with the standards set forth under the DGCL and PSI's or the
Surviving Corporation's certificate of incorporation or by-
laws shall be made by independent counsel mutually
acceptable to the Surviving Corporation and the Indemnified
Party; provided, however, that none of PSI, Parent or the
Surviving Corporation shall be liable for any settlement
effected without its written consent (which consent shall
not be unreasonably withheld) and provided further that, in
the event any claim or claims for indemnification are
asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims.
The Indemnified Parties as a group may retain only one law
firm to represent them with respect to any such matter
unless there is, under applicable standards of professional
conduct, a conflict of any significant issue between the
positions of any two or more Indemnified Parties.
Section 15.8. Counterparts.
This Agreement may be executed in two or more counterparts,
and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together
shall be deemed to constitute but one agreement.
Section 15.9. No Benefit to Others.
The representations, warranties, covenants and agreements
contained in this Agreement are for the sole benefit of the
parties hereto and their successors and permitted assigns,
and they shall not be construed as conferring any rights on
any other persons, except, if and to the extent that Parent
fails to deliver the Merger Consideration to the Exchange
Agent, the holders of PSI's common stock may enforce such
obligation against Parent.
Section 15.10. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without
regard to the conflicts of law principles thereof).
Section 15.11. No Waiver.
Unless otherwise expressly stated, the rights and remedies
of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power or privilege,
and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of
such right, power or privilege or the exercise of any other
right, power or privilege.
Section 15.12. Severability.
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in force
and effect to the extent not held invalid or unenforceable.
Section 15.13. Time of Essence.
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
[Signatures on Following Page]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written
above.
PAPERCLIP SOFTWARE, INC.
By:________________________________
William Weiss, Chief Executive Officer
ACCESS SOLUTIONS INTERNATIONAL, INC.
By:_______________________________
Robert H. Stone, President and CEO
PAPERCLIP ACQUISITION CORP.
By:_______________________________
Robert H. Stone, President and CEO
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 2.6 PSI Convertible Note Holders
Schedule 4.1 Where PSI is Qualified as a Foreign
Corporation
Schedule 4.5 PSI 1996 Financial Statements
Schedule 4.6 Exceptions to Inventory
Schedule 4.8(a) Contracts
Schedule 4.8(b) Required Consents
Schedule 4.9 Real Property, Liens
Schedule 4.10 Permits and Licenses
Schedule 4.12 Intellectual Property
Schedule 4.13 Certain Developments Since December 31, 1996
Schedule 4.14 Other Liabilities
Schedule 4.15 Litigation
Schedule 4.16 Employee Claims Against PSI
Schedule 4.18 Employee Benefit Plans
Schedule 4.20 Insurance
Schedule 4.21 Deposits
Schedule 4.22 Outstanding Convertible Securities
Schedule 5.4 Certain Developments Since December 31, 1996
Schedule 5.7 Changes to Parent Capitalization
Exhibits
Exhibit A Form of Certificate of Merger
Exhibit B PSI Preferred Stock
Exhibits C-1 and C-2 Forms of Lock-Up Agreement
EXHIBIT B
PSI Preferred Stock
PSI Preferred Stock (which at the Effective Date will be
converted into the Series A Preferred Stock of the Surviving
Corporation) will be non-voting and have a liquidation
preference of $.30 per share or an aggregate of $129,690.74
(plus unpaid interest accrued on the PSI Convertible Notes
plus accrued but unpaid dividends on the PSI Preferred
Stock). The dividend rate will be 12% per annum. Holders
of PSI Preferred Stock will have an option to put the shares
to the Surviving Corporation or Parent after 18 months from
the Closing Date, in exchange for cash or Parent Common
Stock and Parent Class B Warrants. After 30 months from the
Closing Date, the Surviving Corporation or Parent will have
the right to redeem the PSI Preferred Stock for cash or
Parent Common Stock and Class B Warrants. Both the put
price and the redemption price for each share of PSI
Preferred Stock will be equal to any accrued but unpaid
dividends plus (i) in the event of payment by Parent Common
Stock, the Conversion Ratio multiplied by one Access Merger
Share and the Conversion Ratio multiplied by one Access
Merger Warrant, or (ii) in the event of payment by cash, the
liquidation preference value of the PSI Preferred Stock.
