-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LtHreRikedZ2EN+ux8xq21hColkYeAKo7xoiB2eOJwZtwnQhWDtI0nbkKv9Uk4ff tGXAvdky94HWujBDa5e8bQ== 0001021771-97-000022.txt : 19970411 0001021771-97-000022.hdr.sgml : 19970411 ACCESSION NUMBER: 0001021771-97-000022 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970409 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDATA INC CENTRAL INDEX KEY: 0000755465 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 112841799 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-22165 FILM NUMBER: 97577543 BUSINESS ADDRESS: STREET 1: 26 HARBOR PARK DR CITY: PORT WASHINGTON STATE: NY ZIP: 11050 BUSINESS PHONE: 5164849060 MAIL ADDRESS: STREET 1: 26 HARBOR PARK DR CITY: PORT WASHINGTON STATE: NY ZIP: 11050 FORMER COMPANY: FORMER CONFORMED NAME: SDS INC DATE OF NAME CHANGE: 19870818 FORMER COMPANY: FORMER CONFORMED NAME: SANDSPORT DATA SERVICES INC DATE OF NAME CHANGE: 19870520 S-3/A 1 FORM S-3 AMENDMENT NO. 1 As filed with the Securities and Exchange Commission on April 9, 1997 Registration No. 333-22165 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SANDATA, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation) 11-2841799 (I.R.S. Employer Identification Number) 26 Harbor Park Drive Port Washington, New York 11050 (516) 484-9060 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Bert E. Brodsky President Sandata, Inc. 26 Harbor Park Drive Port Washington, New York 11050 (516) 484-9060 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Copies of all communications and notices to: Steven J. Kuperschmid, Esq. Certilman Balin Adler & Hyman, LLP 90 Merrick Avenue East Meadow, New York 11554 (516) 296-7000 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. (Cover continued on following page) If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, check the following box. [x] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
Proposed Proposed Maximum Maximum Amount to be Offering Price Aggregate Offering Amount of Title of Each Class of Securities to be Registered Registered (1) Per Share (2) Price (2) Registration Fee - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, $.001 1,988,140 $10.3 $20,636,893 $6,253.60(3) Par Value, registered for the benefit of Selling Stockholders ====================================================================================================================================
(1) This Registration Statement also covers such additional number of shares of Common Stock as may be issuable by reason of the operation of the antidilution provisions of certain outstanding warrants. (2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c). (3) $3,056.71 of the registration fee was paid with the original filing. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Subject to Completion Preliminary Prospectus Dated April 9, 1997 PROSPECTUS 1,988,140 SHARES OF COMMON STOCK, $.001 PAR VALUE SANDATA, INC. This Prospectus relates to 1,988,140 shares of Common Stock (the "Shares") of Sandata, Inc. (the "Company"), or approximately 170% of the Company's currently issued and outstanding shares of Common Stock. See Risk Factors--Effect of Outstanding Exercisable Securities" and "Risk Factors--Shares Eligible for Future are Resale May Adversely Affect the Market". This Prospectus covers: (i) the resale by certain individuals and entities of up to an aggregate of 300,000 Shares issued by the Company pursuant to Subscription Agreements dated as of December 23, 1996, (ii) the resale by certain persons of up to an aggregate of 100,000 Shares issued by the Company pursuant to Subscription Agreements dated as of September 13, 1996, (iii) the resale by certain Directors and executive officers of the Company of up to an aggregate of 1,238,140 Shares, including, without limitation, shares underlying options and warrants, and (iv) the resale by certain individuals and entities of up to an aggregate of 350,000 shares issuable upon the exercise of outstanding warrants. The various persons and entities referred to herein are hereinafter referred to individually as a "Selling Stockholder" and collectively as the "Selling Stockholders". The Company will receive no proceeds upon the resale of the Shares by such persons and entities. There are no commitments pursuant to which the Company will receive any proceeds from the resale of the Shares by the Selling Stockholders. See "Selling Stockholders." In October, 1996, the Company commenced a private offering, on a "best efforts--all or none" basis, to raise $1,500,000 by issuing an aggregate of 300,000 shares of Common Stock and five year warrants for the purchase of 150,000 shares of Common Stock at an exercise price of $7.00 per share. Neither the shares of Common Stock, the warrants nor the shares of Common Stock underlying the warrants were registered under the Securities Act of 1933, as amended (the "Securities Act"). Contemporaneously with the execution and delivery by the Company of the letter of intent with regard to such private offering, certain assignees of the placement agent acquired 100,000 shares of the Company's Common Stock at a purchase price of $3.00 per share. In connection with the closing of such private offering, an affiliate of the placement agent entered into a financial consulting agreement with the Company pursuant to which, among other things, such affiliate will receive aggregate annual payment of $36,000 and certain assignees of such affiliate received warrants to purchase an aggregate of 200,000 shares of Common Stock exercisable as follows: 100,000 shares at $5.00 per share and 100,000 shares at $7.00 per share, such warrants to be exercisable for one year (with respect to the warrants exercisable at $5.00 per share) and two years (with respect to the warrants exercisable at $7.00 per share). The warrants issued in such private offering, including those issued to investors as well as the assignees of the placement agent's affiliate, are redeemable by the Company under certain circumstances. Except for the Shares of Messrs. Bert E. Brodsky, Hugh Freund and Gary Stoller, the Shares proposed to be sold hereby were acquired by Selling Stockholders pursuant to the above mentioned private offering. Among other things, in connection with such private offering, the Company agreed to register, under certain circumstances, on one or more occasions, the Shares acquired by such Selling Stockholders (including, without limitation, the placement agent) in such private offering. The filing of the registration statement of which this Prospectus forms a part represents the fulfillment of certain obligations of the Company to such Selling Stockholders. To the Company' s knowledge, the Selling Stockholders, directly through agents designated by them from time to time or through broker-dealers or underwriters also to be designated, may sell the Shares from time to time, in or through privately negotiated transactions, or in one or more transactions, including block transactions, on the NASDAQ SmallCap Market, or on any other market or stock exchange on which the Shares may be listed in the future pursuant to and in accordance with the applicable rules of such market or exchange or otherwise. The selling price of the Shares may be at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. See "Selling Stockholders" and "Plan of Distribution". The Company has agreed to indemnify certain of the Selling Stockholders against certain civil liabilities, including liabilities under the Securities Act. See "Selling Stockholders" and "Plan of Distribution". The Selling Stockholders and any agents, broker-dealers, or underwriters that participate with the Selling Stockholders in the distribution of any of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions received by them, and any profit on the resale of the Shares purchased by them, may be deemed to be underwriting commissions or discounts under the Securities Act. The Company is not aware of any underwriting arrangements with respect to the resale of the Shares by the Selling Stockholders. See "Selling Stockholders" and "Plan of Distribution". A PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" (PAGE 5). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Company's Common Stock is traded on the NASDAQ SmallCap Market under the symbol "SAND". On April 8, 1997, the closing bid price for the Company's Common Stock, as reported on the NASDAQ SmallCap Market, was $10.00. , 1997 NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. AVAILABLE INFORMATION The Company files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, statements and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Furthermore, the Commission maintains a Web site that contains reports, proxy and information statements and other information regarding the Company. The address of such Web site is http://www.sec.gov. 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The documents listed below have been filed by the Company with the Commission under the Securities Exchange Act of 1934, as amended (the "1934 Act") and are incorporated herein by reference: (a) The Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 1996, as amended (the "Form 10-KSB"). (b) The Company's Quarterly Report on Form 10-QSB for the period ended August 31, 1996, as amended. (c) The Company's Quarterly Report on Form 10-QSB for the period ended November 30, 1996, as amended (the "November 10-QSB"). (d) The description of the Company's Common Stock contained in the Company's Registration Statement on Form 8(a), as amended. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the termination of the offering of the Shares offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from their respective dates of filing. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents referred to above which have been incorporated into this Prospectus by reference (other than exhibits to such documents). Requests for such copies should be directed to the Secretary, Sandata, Inc., 26 Harbor Park Drive, Port Washington, New York 11050 (telephone number: (516) 484-9060). Any statement contained in a document incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THE COMPANY The Company, through its wholly-owned subsidiaries, is engaged in the business of providing computerized data processing services and custom software and programming services, by utilizing Company- developed software, and software acquired or licensed by the Company, principally to the health care industry, but also to the general commercial market. In addition, the Company provides hardware maintenance of personal computers ("PCS"), printers and networks and training on PC software packages. Applications of the Company's software include: a home health care system, computerized preparation of management reports, payroll processing and electronic time card with voice recognition systems. 3 Principal products and services provided by the Company include the Sandsport Home Attendant Reporting Program, data entry services and specialized system development, among others. In addition, the Company provides administration and processing services for an affiliate engaged in the pharmacy prescription reimbursement business See "Risk Factors--Unascertainable Risks Related to Possible Acquisitions". Generally, in providing data processing services, the Company first receives data from its customers, then processes it and generates reports based on such data. Services are provided to customers by processing on the Company's equipment at its premises. The Company also has available software which permits information retrieval from customers' facilities which communicate with the Company's computers at its data center. This allows the Company's customers to have access to processing hardware and software without a substantial investment on their part. The Company also offers its services on a turnkey basis. Turnkey computer systems offer the customer total in-house capabilities through the licensing of the Company's software for use on a customer's computer. The Company's software is written in a variety of software languages including COBOL, C and FoxPro. Over the past several years, the Company has developed its Santrax product, a computerized time and attendance management system. The Santrax system utilizes voice recognition and telecommunications technology to verify that a person is at a particular telephone number at a particular time. Presently, the system is being utilized by several of the Company's home health care clients, with the Company receiving approximately an aggregate of 400,000 calls per week. Although no assurances can be given, it is anticipated that the Santrax product can be utilized by other industry applications. The Company was incorporated in the State of New York in June 1978 and reincorporated in the State of Delaware in December 1986, at which time it also assumed its present name. The Company maintains its executive offices at 26 Harbor Park Drive, Port Washington, New York 11050; telephone number (516) 484-9060. FORWARD-LOOKING STATEMENTS The Company cautions readers that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this Prospectus or which are otherwise made by or on behalf of the Company. For this purpose, any statements contained in this Prospectus that are not statements of historical fact may be deemed to be forward- looking statements. Without limiting the generality of the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate", or "continue" or the negative variations thereof or comparable terminology are intended to identify forward-looking statements. Factors which may effect the Company's results include, but are not limited to, the risks and uncertainties associated with data processing and system sales. The Company is also subject to other risks detailed herein or detailed from time to time in the Company's Commission filings. Factors that could cause or contribute to such difference include, but are not limited to, those discussed in "Risk Factors" below, as well as those discussed elsewhere in this Prospectus and in the Company's filings with the Commission. 4 RISK FACTORS An investment in the securities offered hereby is speculative and involves a high degree of risk and should only be purchased by investors who can afford to lose their entire investment. Prospective purchasers, prior to making an investment, should carefully consider the following risks and speculative factors, as well as other information set forth elsewhere in this Prospectus. As discussed above, this Prospectus contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially. Factors that could cause or contribute to such difference include, but are not limited to, those discussed below, as well as those discussed elsewhere in this Prospectus. 1. Dependence on Governmental Program. For its fiscal years ended May 31, 1996 and 1995, and the fiscal six month periods ended November 30, 1996 and 1995, approximately 51%, 61%, 77% and 62%, respectively, of the Company's revenues were derived from data processing and other related services rendered to vendor agencies under contract with the Human Resources Agency of the City of New York ("HRA"). Such vendor agencies receive a substantial portion of their operating funds from the federal government through its Medicaid program; the balance of their funding is provided by the State and City of New York. Management believes that operations will, for the foreseeable future, continue to be dependent upon revenues generated from such vendor agencies. Elimination of the home attendant services program by HRA or a substantial cut-back in the level of funding of this program by the federal, state or city governments would have, through the impact of such cut-backs on the vendor agencies, a material adverse effect on the Company. See "Item 1--Description of Business--Principal Products and Services" in the Form 10-KSB. 2. Technological Obsolescence. The data processing and computer software fields are characterized by rapid technological developments and advances, often resulting in partial or total obsolescence of systems. There is no assurance that the Company's research and development activities will permit it to keep abreast of new developments. See "Item 1--Description of Business--Research and Development" in the Form 10-KSB. 3. Competition. Some of the Company's competitors are larger and have greater financial resources than the Company. Furthermore, the Company's customers may find it desirable to perform for themselves the services being rendered by the Company. The Company also competes with larger and better established companies for the hiring of qualified technical and marketing personnel. See "Item 1--Description of Business--Competition" in the Form 10-KSB. 5 4. Proprietary Rights. The Company does not own, nor has it applied for, Federal Copyright registration on its computer software systems now in existence or being developed. However, the Company believes that its computer software systems are proprietary trade secrets and that they, together with the documentation, manuals, training aids, instructions and other materials supplied by the Company to customers, are subject to the proprietary rights of the Company and protected by applicable law. However, there can be no assurance that the Company will be able to protect itself against misappropriation of its proprietary rights and trade secrets. See "Item 1--Business--Proprietary Rights" in the Form 10-KSB. 5. Control by Current Stockholders. The Company's Certificate of Incorporation does not provide for cumulative voting. Therefore, stockholders owning in excess of 50% of the outstanding shares of the Company's Common Stock are able to elect all the members of the Board of Directors. As of the date of this Prospectus, present management of the Company owns approximately 68.1% of the issued and outstanding shares of Common Stock of the Company and will be able to elect all of the Company's directors and to control the Company. However, upon the completion of this offering, as to which no assurances can be made, the present management of the Company will own 13.2% in the aggregate of the issued and outstanding shares of the Company's Common Stock. 6. Effect of Outstanding Exercisable Securities. As of the date of this Prospectus, the Company had currently exercisable outstanding options and warrants to purchase shares of the Company's Common Stock exercisable at various prices from $1.38 to $7.00, subject to adjustment per share, pursuant to which an aggregate of 1,575,259 shares of Common Stock (subject to adjustment) may be issued. This includes warrants granted to the Company's Chairman and options granted to various directors, officers, employees and consultants. During the respective terms of the Company's outstanding derivative securities, the holders thereof may be able to purchase shares of Common Stock at prices substantially below the then-current market price of the Company's Common Stock with a resultant dilution in the interests of the existing stockholders. In addition, the exercise of outstanding derivative securities and the subsequent public sales of Common Stock by holders of such securities pursuant to this offering, a registration statement effected at their demand, under Rule 144 or otherwise, could have an adverse effect upon the market for and price of the Company's securities. 7. Shares Eligible for Future Sale May Adversely Affect the Market. 870,420 of the Company's outstanding shares of Common Stock) (exclusive of shares of Common Stock issuable upon the exercise of outstanding options and warrants) are "restricted securities" and, in the future, may be sold upon compliance with Rule 144 or pursuant to registration (effected by demand or other rights granted to certain stockholders) under the Act. Rule 144 currently provides, in essence, that a person holding "restricted securities" for a period of two years (as of April 29, 1997, one year) may sell an amount every three months up to the greater of (a) 1% of the Company's issued and outstanding securities of that class of securities or (b) the average 6 weekly volume of sales of such securities during the four calendar weeks preceding the sale if there is adequate current public information available concerning the Company. Additionally, non-affiliates (who have not been affiliates of the Company for at least three months) may sell their "restricted securities" in compliance with Rule 144 without volume limitations after they have held such securities for a period of three years (as of April 29, 1997, two years). An aggregate of 442,754 shares of Common Stock have been owned by Messrs. Brodsky, Freund and Stoller for more than two years. However, such shares are subject to an agreement with Barber & Bronson Incorporated ("B&B") imposing certain restrictions on the public sale thereof until December 22, 1997 without B&B's consent. B&B has authorized Messrs. Brodsky, Freund and Stoller to sell an aggregate of 1,238.140 shares, which amount includes outstanding shares of Common Stock, as well as shares of Common Stock underlying presently exercisable options and warrants. The Company is registering for resale 1,988,140 Shares held by certain stockholders, including, without limitation, Shares underlying certain options and warrants. Such Shares may be resold at any time following the date of this Prospectus. Prospective investors should be aware that the possibility of resales by the Selling Stockholders, as well as other stockholders of the Company, may have a material depressive effect on the market price of the Company's shares of Common Stock in any market which may develop. 8. Ability to Renew Present Financing; Significant Outstanding Indebtedness; Loan Covenants and Security Interests. From time to time the Company and/or its subsidiaries have entered into loan arrangements with Marine Midland Bank (the "Bank"), among others. As of November 30, 1996, the Company owed the Bank $704,154. Although in the past the Bank has renewed its loans to the Company when they matured, there can be no assurance that it will continue to do so or that the Company, if the Bank does not renew the loan, will be able to arrange alternative financing on terms satisfactory to it. In order to finance the Company's capital requirements, the Company 's wholly owned subsidiary, Sandsport Data Services, Inc. ("Sandsport") incurred substantial indebtedness in relation to the Company's consolidated equity capital. Of the Company's total outstanding indebtedness of $3,007,985 at November 30, 1996, $704,154 was outstanding under Sandsport's Revolving Credit and Term Loan Agreement (the "Credit Agreement") with the Bank. Pursuant to the Credit Agreement, Sandsport may borrow up to an aggregate of $2.5 million. Amounts outstanding under the Credit Agreement were due and payable on February 10, 1995; however, on April 20, 1995, the Credit Agreement with the Bank was amended, extending the due date to April 20, 1997. Upon maturity, Sandsport may, at its option, convert the then-outstanding principal balance of the advances under the Credit Agreement into a five year term loan payable in sixty equal monthly principal installments, plus interest at 3/4% above the Bank's prime rate. However, the Company has accepted a commitment from the Bank to restructure the Credit Facility as discussed below. Also, pursuant to the Credit Agreement, on April 20, 1995, a two year loan (the "Term Loan") in the amount of $500,000 was advanced by the Bank to Sandsport (which amount constitutes part of the total credit facility available under the Credit Agreement). The Term Loan is payable in 24 monthly principal installments of $20,834, plus interest at 3/4% above the Bank's prime rate, through April 1997. All of Sandsport's, the Company's and Company's subsidiaries' (the "Group") assets are pledged to the Bank as collateral for the amounts due under the Credit Agreement. The Group is prohibited from incurring additional indebtedness except under certain circumstances. 7 In addition, pursuant to the Credit Agreement, the Group is required to maintain certain levels of net worth and meet certain financial ratios in addition to various other affirmative and negative covenants. The Group has, in the past, failed to meet these net worth and financial ratios, and the Bank has granted the Group waivers. No assurance can be given that the Group will be able to meet these net worth and financial requirements in the future, and/or that the Bank will continue to grant to the Group waivers. On February 13, 1997, Sandsport received a commitment from the Bank to restructure the above mentioned credit facility. Such commitment has been accepted by Sandsport as of March 4, 1997. Consummation of the restructuring of such facility is subject to the negotiation, execution and delivery of formal documentation acceptable to Sandsport and the Bank, among other things. It is anticipated that the credit facility will be restructured as described below. However, no assurances can be given in that Sandsport has not fully negotiated the required documentation and it is not known at this time whether or not such documentation will be acceptable to Sandsport or the Bank. In addition, other factors such as proposals from competing financial institutions may be considered. However, management of Sandsport considers it likely that the credit facility will be restructured with the Bank. The restructured facility (the "Restructured Facility") allows Sandsport to borrow up to $3,000,000 and contemplates the satisfaction of the existing facility. Under the Restructured Facility, Sandsport may borrow and re-borrow amounts up to $3,000,000. Interest will accrue on amounts outstanding under the Restructured Facility at a rate equal to the London Interbank Offered Rate plus 2% and will be paid quarterly in arrears or, at Sandsport's option, interest may accrue at the Bank's prime rate. The Restructured Facility requires Sandsport to pay a commitment fee in the amount of $30,000 and a fee equal to 1/4% percent per annum payable on the unused average daily balance of the Restructured Facility. In addition, there are other fees and charges imposed based upon Sandsport's failure to maintain certain minimum balances. The Restructured Facility will expire on March 1, 2000. The Restructured Facility is guaranteed by the Company and Sandsport's sister subsidiaries. The collateral for the Restructured Facility will be a first lien on all equipment owned by Sandsport and the guarantors, as well as a collateral assignment of $2,000,000 of life insurance payable on the life of Mr. Brodsky. The Restructured Facility contemplates that the Group will be required to meet certain covenants similar to those described above with regard to the existing Credit Agreement. The Group's guaranty to the Bank, relating to the bonds discussed below, is anticipated to be modified to conform covenants described therein to comply with those in the Restructured Credit Facility. In addition, the Company is indebted to companies affiliated with the Company's Chairman in the amount, as of November 30, 1996, of $1,847,000. Of this amount, as of November 30, 1996, an aggregate of $462,000 of indebtedness was evidenced by notes due in December 1997 and May 1998. On June 1, 1994, BFS Sibling Realty Inc., formerly known as Brodsky Sibling Realty, Inc. ("BFS") borrowed $3,350,000 in the form of Industrial Development Revenue Bonds ("Bonds") to finance costs incurred in connection with the acquisition, renovation and equipping of the Company's office space located at 26 Harbor Park Drive, Port Washington, New York (the "Facility" or the "Building") from the Nassau County Industrial Development Agency (the "NCIDA"). These Bonds were subsequently purchased by the Bank. The aggregate cost incurred by BFS in conjunction with such acquisition, renovation and equipping was approximately $4,377,000. In addition, the Company incurred approximately $500,000 of indebtedness to affiliates of Mr. Brodsky in connection with additional capital improvements. The Bonds bore interest at prime plus 3/4 of 1% until August 11, 1995, at which time the interest rate became fixed at 9% for a five-year term through September 1, 2000. At that 8 time, the interest rate will be adjusted to a rate of either prime plus 3/4 of 1%, or the applicable fixed rate if offered by the Bank. As a condition to the issuance of the Bonds, the NCIDA obtained title to the Facility which it then leased to BFS. On June 21, 1994 (as of June 1, 1994), the Company and its Chairman guaranteed the full and prompt payment of principal and interest of the Bonds and the Company granted the Bank a security interest and lien on all the assets of the Company. In connection with the issuance and sale of the Bonds, the Company entered into a lease agreement (the "Sublease") with BFS, whereby the Company leased the Facility for the conduct of its business and, in consideration therefor, was obligated to make lease payments that at least equal amounts due to satisfy the underlying Bond obligations. On July 31, 1995, by an Assignment and Assumption and First Amendment to Lease between the Company and BFS, the Company assumed the obligations of BFS under the lease and became the direct tenant and the beneficial owner of the Facility (collectively the "Assignment Transaction"). In connection with the Assignment Transaction, the Sublease was terminated. During the period commencing July 1, 1995 and ending October 31, 1996 the Company paid rent for the Facility to the NCIDA in the amount of $48,600 per month, subject to adjustment based upon the then effective interest rate of the Bonds, among other things. In connection with the Assignment Transaction, the Company obtained the right to acquire the Facility upon expiration of the lease with the NCIDA (the "Lease") and became directly liable to the NCIDA for amounts due thereunder. In connection with the Assignment Transaction, the Company assumed certain indebtedness owed to affiliates of the Company's Chairman as follows: (i) the $364,570 remaining balance of a 48-month term loan bearing interest at 8.7% per annum, and (ii) the $428,570 remaining balance of a 42-month term loan bearing interest at 8.91%. Each of the foregoing loans were incurred in connection with the construction of improvements to the Building, are collateralized by the assets of the primary obligor and are guaranteed by the Company's Chairman. On August 11, 1995, the Company entered into a $750,000 loan agreement with the Long Island Development Corporation ("LIDC"), under a guarantee by the U.S. Small Business Administration ("SBA") (the "SBA Loan"). The entire $750,000 proceeds have been used to repay a portion of the Bonds. The Company entered into the Assignment Transaction primarily to satisfy certain requirements of the SBA. The SBA Loan is payable in 240 monthly installments of $6,255, which includes principal and interest at a rate of 7.015%. As of November 1, 1996, the Company entered into an Assignment and Assumption of and Second Amendment to Lease Agreement among BFS Realty, LLC, an affiliate of the Company's Directors (the "Assignee"), the Bank and the Company (the "Second Amendment"). In connection with the Second Amendment, (i) the Assignee assumed all of the Company's obligations under the Lease with the NCIDA and entered into a sublease with the Company for the Facility; and (ii) the Company conveyed to the Assignee the right to become the owner of the Facility upon expiration of the Lease. In addition, pursuant to the sublease, the Company has assumed certain obligations owed by the Assignee to the NCIDA under the Lease. The Assignee has indemnified the Company with respect to certain obligations relative to the Lease and the Second Amendment. The documentation with regard to each of the foregoing contain various covenants requiring and/or restricting the Company from taking various action. Among other things, the documentation relating to the SBA Loan contains certain covenants which require certain principal stockholders of the Company to maintain certain levels of equity in the Company. Such restriction could impact the Company's ability to engage in equity financings and a violation of such covenant could result in a default under the SBA Loan. In the past, the Company has been 9 able to obtain a waiver of such provision, however, no assurances can be made that it will continue to be able to do so. Messrs. Brodsky, Freund and Stoller have advised the Company that, if as a result of action taken by any of them, a default occurs under the SBA Loan, such individuals shall either cure such default, if possible, or satisfy the obligation. 10. Limited Marketing Capability. The Company has limited marketing capabilities and resources. To date, substantially all of the Company's commercial marketing activities have been conducted by sales representatives directly employed by the Company and independent sales agents. Such activities have consisted primarily of personal contact with potential customers. Because of the nature of the Company's business, management will continue to devote a substantial amount of time developing and maintaining continuing personal relationships with the Company's customers. See "Item 1--Description of Business--Marketing and Distribution" in the Form 10-KSB. 11. Dependence on Key Personnel. The Company is dependent upon the expertise and abilities of three key executive personnel: Bert E. Brodsky, Chairman of the Board, President and Treasurer, Hugh Freund, Executive Vice President and Secretary, and Gary Stoller, Executive Vice President. Messrs. Stoller and Freund are not parties to any employment agreements with the Company; Effective February 1, 1997 the Company and Mr. Brodsky entered into an employment agreement for a 5 year term (the "Brodsky Employment Agreement"). Among other things, the Brodsky Employment Agreement provides for compensation at the annual rate of $500,000. See--"Subsequent Events". The Company's agreement with the Bank requires that Mr. Brodsky at all times be active on a substantially full-time basis in the affairs of the Company. The Company or its subsidiaries is the beneficiary under certain key- man life insurance policies on the life of each of Messrs. Brodsky and Freund in the amounts of $4,500,000 and $1,400,000, respectively, the benefits of which are payable to the Company. Of such insurance benefits, an aggregate of $2,000,000 on the life of Mr. Brodsky has been pledged to the Bank. However, if the Company were to lose the services of any of these key personnel as a result of disability, death or otherwise the Company could be in default under its agreement with the Bank and its business could be adversely affected. 12. No Dividends. To date, the Company has not paid any cash dividends on its Common Stock and does not expect to declare or pay any cash or other dividends in the foreseeable future. Dividends are restricted pursuant to the terms of the Credit Agreement between the Company and the Bank. See "Item 5 - Market for Common Equity and Related Stockholder Matters--Dividend Policy" in the Form 10-KSB. 13. Unascertainable Risks Related to Possible Acquisitions. The Company intends to explore opportunities to add, through acquisition or licensing, technology or products to enhance or add to its current product line, or to acquire a customer base or sales organization to augment the Company's infrastructure. In exploring potential acquisitions or licenses, the Company will consider, among other criteria: the comparative cost to the Company in capital, resources and personnel to create the identified technology or product, or to establish the targeted customer base or sales organization; restrictions to the Company developing similar technology or 10 products arising from patent or other intellectual property protection; and the synergy of the identified technology or products, or customer base or sales organization, with the Company's products and organization. Although the Company anticipates it will follow the foregoing general criteria in determining whether or not to make any acquisitions, management will have sole discretion over whether or not to engage in an acquisition. There can be no assurance that the Company will identify any acquisition or licensing candidates or, if it does, that it will be able to reach any agreements to acquire or license technology or products, or acquire assets, on terms acceptable to the Company. To the extent that the Company effects an acquisition of technology or products in the early stage of development or growth (including technology or products which have not been fully tested or marketed), the Company will be subject to numerous risks inherent in developmental technology and other high level of risk associated with high technology industries based on innovative technologies or processes. Furthermore, future acquisition transactions may require the Company to obtain additional financing from banks or financial institutions or to undertake debt or equity financing. No assurance can be given that the Company would be able to obtain financing upon commercially reasonable terms, or at all. Furthermore, equity financing will result in a dilution of existing Stockholders of the Company, which may be significant. To the extent that debt financing ultimately proves to be available, any borrowings may subject the Company to various risks traditionally associated with the incurring of indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest. Although the Company will endeavor to evaluate the risks inherent in a particular acquisition, there can be no assurance that the Company will properly ascertain or assess such significant risk factors. The Company provides data processing services to a company of which affiliates of Mr. Brodsky are principal stockholders, and which is engaged in the administration of pharmacy prescription reimbursement programs for unions and other benefit providers. The Company is considering entering into the pharmacy prescription reimbursement administration business directly or through one or more acquisitions of existing companies, including, without limitation, the above mentioned affiliate; the Company is considering several possible acquisition candidates in such industry, including, without limitation, the above-mentioned affiliate; however, the Company is in the preliminary stages of such consideration and has not had formal negotiations with any such company. Accordingly, no assurances can be made as to whether (i) the Company will enter into the business directly, (ii) any of the acquisitions presently being considered will be consummated, (iii) if consummated, the terms upon which any such acquisitions may occur, and (iv) if consummated, whether such acquisitions will be successful. Except as set forth above, as of the date of this Prospectus , the Company has no other specific plans with respect to material acquisitions. In addition to the foregoing, the Company may, from time to time, enter into agreements with related parties. In such case, the Company anticipates that the terms of such agreements will be commercially reasonable and no less favorable to the Company than the Company could obtain from unrelated third parties. Additionally, the Company intends that such agreements will be approved by a majority of disinterested directors. 14. Securities Market Factors. In recent years, the securities markets have experienced a high level of volume volatility and market prices for many companies, particularly small and emerging growth companies, have been subject to wide fluctuations in response to quarterly variations in operating results. The securities of many of theses companies which trade in the over-the-counter market, have experienced wide price fluctuations, which in many cases were unrelated to the operating performance of, or announcements concerning, the issuers of the affected stock. Factors such as announcements by the Company or its competitors concerning technological innovations, new products or 11 procedures, government regulations and developments or disputes relating to proprietary rights may have a significant impact on the market for the Company's securities. General market price declines or market volatility in the future could adversely affect the future price of the Company's securities. SUBSEQUENT EVENTS Effective February 1, 1997, the Company and Mr. Brodsky entered into the Brodsky Employment Agreement providing for, among other things, compensation at the annual rate of $500,000 plus such bonuses or additional compensation that the Board of Directors of the Company may, on the basis of improvements in the Company's performance or other reasonable criteria, deem appropriate. During the term of the Brodsky Employment Agreement, the employee shall also be provided with a full-time use of a Company automobile, six (6) weeks paid vacation annually and group medical insurance and other benefits or programs which the Company establishes or is made available to its employees. See "Risk Factors" - "Ability to Renew Present Financing; Significant Outstanding Indebtedness; Loan Covenants and Security Interests" for a discussion of a contemplated restructuring of the Company's Bank financing. In March 1997, Sandsport entered into a sale/lease-back transaction with General Electric Capital Corporation ("GEC") whereby certain fixed assets, including, without limitation, a certain program licensing agreement (the "License") (the "Assets"), were sold to GEC for $981,000 and concurrently leased back to Sandsport. The License was originally paid for by Sandsport and inadvertently registered in the name of an affiliate of Mr. Brodsky for which the Company provides services, but was assigned to Sandsport in connection with the above-mentioned lease. The lease requires monthly rental payments of $25,465.98 commencing on May 1, 1997 for a term of 38 months, and provides Sandsport the option to purchase the Assets for $200,000 upon expiration of the lease. Sandsport has assigned such purchase option to P.W. Capital Corp., an affiliate of the Company, which has agreed to purchase the Assets from GEC subject to the terms of the lease. 12 SELLING STOCKHOLDERS The following table sets forth, as of April 8, 1997, to the Company's knowledge, certain securities ownership information with respect to the Selling Stockholders:
Common Shares Number of Common Common Shares to be Beneficially Shares Offered Beneficially Owned Name and Address Owned (1) for Sale After Offering(2) ---------------- --------- -------- -------------- Percent of Number Outstanding Bert E. Brodsky 955,809 (3) 820,213 (3) 135,596 7.1% Hugh Freund 323,493 (4) 255,696 (4) 67,797 5.0% Gary Stoller 257,786 (5) 162,231 (5) 95,555 7.2% Steven N. Bronson 152,950 (6) 152,950 (6) -0- -0- James S. Cassel 30,800 (7) 30,800 (7) -0- -0- James S. Cassel and Mindy Cassel, TBTE 58,300 (8) 58,300 (8) -0- -0- James S. Cassel, as Custodian for Chira Cassel 1,000 1,000 -0- -0- James S. Cassel, as Custodian for Seth Cassel under the Uniform Gifts to Minors Act ("UGMA") 1996 1,000 1,000 -0- -0- James S. Cassel, as Custodian for Philip Cassel under the Uniform Gifts to Minors Act 1996 1,000 1,000 -0- -0- James S. Cassel, as Custodian for Levi Cassel under the Uniform Gifts to Minors Act 1996 1,000 1,000 -0- -0- Keil Stern 30,000 (9) 30,000 (9) -0- -0- Eric R. Elliot 8,900 (10) 6,650 (10) -0- -0- Eric R. Elliott (IRA) 7,500 (15) 7,500 (15) -0- -0- Barry J. Booth 6,650 (11) 6,650 (11) -0- -0- Bruce C. Barber 6,650 (12) 6,650 (12) -0- -0- Barry Steiner & Lisa Steiner (JT) 5,750 (13) 5,750 (13) -0- -0- Scott Salpeter 2,000 (14) 2,000 (14) -0- -0- Leonard Adler 3,750 (15) 3,750 (15) -0- -0- 13 Common Shares Number of Common Common Shares to be Beneficially Shares Offered Beneficially Owned Name and Address Owned (1) for Sale After Offering(2) ---------------- --------- -------- -------------- Percent of Number Outstanding Hans Koenig Revocable Living Trust (Hans & Hanni Koenig) - by agreement 3/6/91 7,500 (15) 7,500 (15) -0- -0 Paul Pesce 7,500 (15) 7,500 (15) -0- -0- Amral Raul Ragoonanan 3,750 (15) 3,750 (15) -0- -0- Peter David Bronson & Maguy F. Bronson (JT) 7,500 (15) 7,500 (15) -0- -0- Martin & Dolores Elkin (JT) 7,500 (15) 7,500 (15) -0- -0- Stephen Paul Kregstein 3,750 (15) 3,750 (15) -0- -0- Juetten Family Trust (Richard Juetten, Trustee) - by agreement dated 4/4/91 3,750 (15) 3,750 (15) -0- -0- Kenneth B. Elias 3,750 (15) 3,750 (15) -0- -0- Ronald A. David & Dona C. David (TE) 3,750 (15) 3,750 (15) -0- -0- Haguy Shechter 7,500 (15) 7,500 (15) -0- -0- Nial Maura Ingerto 3,750 (15) 3,750 (15) -0- -0- Ronald Richard Fieldstone & Linda Brady Fieldstone (TE) 7,500 (15) 7,500 (15) -0- -0- Gordon Jay Dow (IRA) 7,500 (15) 7,500 (15) -0- -0- James Allen Settlage & Carol Lynn Settlage (JT) 3,750 (15) 3,750 (15) -0- -0- Paul Maurice Bronson & Laura Mae Bronson (JT) 7,500 (15) 7,500 (15) -0- -0- Fern Susan Thaw 3,750 (15) 3,750 (15) -0- -0- David Wayne Raisbeck & Ellen Jane Raisbeck (JT) 3,750 (15) 3,750 (15) -0- -0- 14 Common Shares Number of Common Common Shares to be Beneficially Shares Offered Beneficially Owned Name and Address Owned (1) for Sale After Offering(2) ---------------- --------- -------- -------------- Percent of Number Outstanding The Petersen Family Trust (Norman W. Petersen) - by agreement 9/28/93 3,750 (15) 3,750 (15) -0- -0- Margery Schwartz (Cust for Evan Schwartz NJ- UTMA) 3,750 (15) 3,750 (15) -0- -0- Joseph Anthony Spinella 3,750 (15) 3,750 (15) -0- -0- David William Rogers 3,750 (15) 3,750 (15) -0- -0- Craig Loren Silverman 3,750 (15) 3,750 (15) -0- -0- Anthony Peter Conza 7,500 (15) 7,500 (15) -0- -0- Jeffrey L. Thomas & Sylvia H. Thomas (JT) 3,750 (15) 3,750 (15) -0- -0- Howard Clifford Beach 3,750 (15) 3,750 (15) -0- -0- Delaware Charter Guarantee & Trust Co. Custodian F/B/O Law Offices Bruce Thaw Keogh Plan 3,750 (15) 3,750 (15) -0- -0- Sylvia Levine 3,750 (15) 3,750 (15) -0- -0- Hal Kaufman 3,750 (15) 3,750 (15) -0- -0- Leonard Goodfriend & Audrey Goodfriend (JT) 3,750 (15) 3,750 (15) -0- -0- A.C. Brown 3,750 (15) 3,750 (15) -0- -0- Frederick H. Fialkow 7,500 (15) 7,500 (15) -0- -0- James A. Cook 3,750 (15) 3,750 (15) -0- -0- Thomas A. Hanford Trust (Thomas A. Hanford) - by agreement 5/17/96 7,500 (15) 7,500 (15) -0- -0- S. Daniel Ponce (IRA) 3,750 (15) 3,750 (15) -0- -0- Yehuda Shechter 7,500 (15) 7,500 (15) -0- -0- 15 Common Shares Number of Common Common Shares to be Beneficially Shares Offered Beneficially Owned Name and Address Owned (1) for Sale After Offering(2) ---------------- --------- -------- -------------- Percent of Number Outstanding Effectenbank Stroeve N.V. 7,500 (15) 7,500 (15) -0- -0- Jeffrey Scott Roschman 7,500 (15) 7,500 (15) -0- -0- Steven I. Levin 3,750 (15) 3,750 (15) -0- -0- Frank T. Vicino, Jr. 3,750 (15) 3,750 (15) -0- -0- Mark S. Schecter 3,750 (15) 3,750 (15) -0- -0- Michael J. Bonner & Deborah M. Bonner (JT) 3,750 (15) 3,750 (15) -0- -0- C.G. Chase Construction Co. 7,500 (15) 7,500 (15) -0- -0- John Raymond Prufeta 3,750 (15) 3,750 (15) -0- -0- Richard S. Serbin & Kathe Serbin 7,500 (15) 7,500 (15) -0- -0- Zvika Shechter 3,750 (15) 3,750 (15) -0- -0- George Andrew Solack 3,750 (15) 3,750 (15) -0- -0- Sheldon Drobny 7,500 (15) 7,500 (15) -0- -0- Susan Lambeth Charitable Remainder Unitrust (Susan Lambeth and Edmuns Schupp) - by agreement 3/5/47 7,500 (15) 7,500 (15) -0- -0- Mark Hart 11,250 (15) 11,250 (15) -0- -0- David Brian Cohen 7,500 (15) 7,500 (15) -0- -0- Robert Stuart Pearlman & Rita Jo Pearlman (JT) 3,750 (15) 3,750 (15) -0- -0- Robbins, Tunkey, Ross, Amsel, Raben and Waxman, P.A. 401K Profit Sharing Trust F/B/O William R. Tunkey 3,750 (15) 3,750 (15) -0- -0- Doran Topaz 3,750 (15) 3,750 (15) -0- -0- 16 Common Shares Number of Common Common Shares to be Beneficially Shares Offered Beneficially Owned Name and Address Owned (1) for Sale After Offering(2) ---------------- --------- -------- -------------- Percent of Number Outstanding Harvey Morton Soldan & Ingrid Else Soldan (JT) 7,500 (15) 7,500 (15) -0- -0- The Beckham Family Trust (David Beckham, Trustee) - by agreement dated 10/26/95 3,750 (15) 3,750 (15) -0- -0- Boris Zalkind 3,750 (15) 3,750 (15) -0- -0- Eliahu Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0- Horst Siegfried Filtzer 3,750 (15) 3,750 (15) -0- -0- Charles G. Leaness 3,750 (15) 3,750 (15) -0- -0- Lior Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0- Sonya Ben-Shmuel Personal Revocable Trust (Sonya Ben-Shmuel, Trustee) - by agreement dated 5/13/96 3,750 (15) 3,750 (15) -0- -0- The Equity Group Profit- Sharing Plan and Trust (Robert D. Goldstein, Trustee) - by agreement dated 1/1/80 7,500 (15) 7,500 (15) -0- -0- Jeffrey I. Binder & Rosalie G. Binder (TE) 7,500 (15) 7,500 (15) -0- -0- Jay Haft 3,750 (15) 3,750 (15) -0- -0- Henry Tie Shue 3,750 (15) 3,750 (15) -0- -0- Bruno Guazzoni c/o Zanett Capital, Inc. 7,500 (15) 7,500 (15) -0- -0- Barry J. Booth & Suellen G. Booth (JT) 7,500 (15) 7,500 (15) -0- -0- Lenore Katz 7,500 (15) 7,500 (15) -0- -0- Private Opportunity Partners II, Ltd. FL Limited Partnership 71,250 71,250 -0- -0-
17 (1) Unless otherwise noted, the Company believes that all persons named above have sole voting and investment power with respect to all Common Stock beneficially owned by them, subject to community property laws, where applicable. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options. Each beneficial owner's percentage ownership is determined by assuming that options or warrants that are held by such person (but not those held by any other person) and which are exercisable within 60 days from the date hereof have been exercised. (2) Assumes that all of the shares registered for the account of the Selling Stockholders are sold. (3) Includes 50,000 shares of Common Stock owned by Mr. Brodsky's wife. Includes presently exercisable options to purchase 74,000 shares of Common Stock at $1.79 per share under the Company's Employee's Incentive Stock Option Plan (the "Incentive Plan"); includes presently exercisable options to purchase 44,000 shares of Common Stock at $1.51 per share under the 1995 Stock Option Plan (the "1995 Plan"); includes presently exercisable options to purchase 44,000 shares of Common Stock at $2.34 per share under the 1995 Plan; includes presently exercisable options to purchase 60,667 shares of Common Stock at $1.38 per share under the Non-Qualified Stock Option Plan (the "Non-Qualified Plan"); includes presently exercisable options to purchase 110,000 shares of Common Stock at $2.61 per share under the 1995 Plan; includes presently exercisable warrants to purchase 400,000 shares of Common Stock at $1.38 per share under a Warrant Agreement which expires in August, 2001; includes 68,352 shares of the Company's Common Stock owned by the trusts established for the benefit of Mr. Brodsky's four children, of which Mr. Brodsky is a trustee. (4) Excludes 8,000 shares of Common Stock owned by Mr. Freund's adult children. Excludes 4,000 shares of Common Stock and presently exercisable options to purchase (i) 43,000 shares of Common Stock at $1.79 per share under the Incentive Plan, (ii) 18,000 shares of Common Stock at $1.38 per share under the 1995 Plan and (iii)18,000 shares of Common Stock at $1.38 per share under the Non-Qualified Plan owned by Mr. Freund's wife. As set forth in Mr. Freund's Schedule 13G, filed with the SEC on February 9, 1997, Mr. Freund disclaims any beneficial interest in, or voting or dispositive control over, such shares; includes presently exercisable options to purchase 43,000 shares of Common Stock at $1.79 per share under the Incentive Plan; includes presently exercisable options to purchase 18,000 shares of Common Stock at $1.51 per share under the 1995 Plan; includes presently exercisable options to purchase 36,000 shares of Common Stock at $2.34 per share under the 1995 Plan; includes presently exercisable options to purchase 18,000 shares of Common Stock at $1.38 per share under the Non-Qualified Plan; includes presently exercisable options to purchase 90,000 shares of Common Stock at $2.61 per share under the 1995 Plan. (5) Includes presently exercisable options to purchase 46,667 shares of Common Stock at $1.79 per share under the Incentive Plan; includes presently exercisable options to purchase 20,000 shares of Common Stock at $1.51 per share under the 1995 Plan; includes presently exercisable options to purchase 20,000 shares of Common Stock at $2.34 per share under the 1995 Plan; includes presently exercisable options to purchase 20,000 shares of Common Stock at $1.38 per share under the Non-Qualified Plan; includes presently exercisable options to purchase 50,000 shares of Common Stock at $2.61 per share under the 1995 Plan. Includes 13,000 shares of the Company's Common Stock owned by trusts established for the benefit of Mr. Stoller's children of which Mr. Stoller is a trustee. (6) Includes 101,200 Shares issuable upon the exercise of currently exercisable warrants. (7) Includes 30,800 Shares issuable upon the exercise of currently exercisable warrants. (8) Includes 30,800 Shares issuable upon the exercise of currently exercisable warrants. (9) Includes 20,000 Shares issuable upon the exercise of currently exercisable warrants. (10) Includes 4,400 Shares issuable upon the exercise of currently exercisable warrants. 18 (11) Includes 4,400 Shares issuable upon the exercise of currently exercisable warrants. (12) Includes 4,400 Shares issuable upon the exercise of currently exercisable warrants. (13) Includes 2,000 Shares issuable upon the exercise of currently exercisable warrants. (14) Includes 2,000 Shares issuable upon the exercise of currently exercisable warrants. (15) Of such amount, two-thirds represents shares of Common Stock and one-third represents shares of Common Stock issuable upon exercise of currently exercisable warrants. Certain of the securities set forth in the above table are included in this Prospectus pursuant to registration commitments accorded to certain of the Selling Stockholders. There are no commitments pursuant to which the Company will receive any proceeds from the sale of the Shares by the Selling Stockholders. To the Company's knowledge, no Selling Stockholder has had any position, office or other material relationship with the Company or any of its affiliates during the past three years (other than as a holder of the Company's securities), except that (i) Bert E. Brodsky has served as Chairman of the Board and Treasurer of the Company since 1983 and President since 1989; (ii) Hugh Freund has served as a director of the Company since 1978 and Executive Vice President of the Company since 1986 (iii) Gary Stoller has served as a director and Executive Vice President of the Company since 1983; and (iv) B&B has been a market maker of the Company's Common Shares during such three year period. B&B acted as the placement agent in a recent private offering by the Company. The Company believes that Messrs. Steven R. Bronson, James S. Cassel, (and Mindy Cassel), Keil Stern, Eric R. Elliot, Barry J. Booth, Bruce C. Barber, Barry E. Steiner (and Ms. Lisa Steiner) and Scott Salpeter are affiliated with B&B. PLAN OF DISTRIBUTION The Shares set forth in the "Selling Stockholders" table may be sold by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest, either pursuant to the Registration Statement of which this Prospectus forms a part or, if available, under Section 4(1) of the Securities Act or Rule 144 promulgated thereunder. To the Company's knowledge, this offering is not being underwritten. The Company believes that the Selling Stockholders, directly through agents designated from time to time, or through broker-dealers or underwriters also to be designated (who may purchase as principal and resell for their own account), may sell the Shares from time to time, in or through privately negotiated transactions, or in one or more transactions, including block transactions, on the NASDAQ SmallCap Market or on any other market or stock exchange on which the Shares may be listed in the future pursuant to and in accordance with the applicable rules of such market or exchange or otherwise. The selling price of the Shares may be at market prices prevailing at the time of sale, at prices relating to such prevailing market prices or at negotiated prices. From time to time the Selling Stockholders may engage in short sales against the box, puts and calls and other transactions in securities of the Company or derivatives thereof, and may sell and deliver the shares in connection therewith. Further, except as set forth herein, the Selling Stockholders are not restricted as to the number of shares which may be sold at any one time, and it is 19 possible that a significant number of shares could be sold at the same time, which may have a depressive effect on the market price of the Company's shares of Common Stock. The Selling Stockholders may also pledge shares as collateral for margin accounts, and such shares could be resold pursuant to the terms of such accounts. Resales or reoffers of the Shares by the Selling Stockholders must be accompanied by a copy of this Prospectus. The Selling Stockholders and any agents, broker-dealers or underwriters that participate in the distribution of the Shares may be deemed to be underwriters, and any profit on the sale of the Shares by them, and any discounts, commissions or concessions received by them, may be deemed to be underwriting commissions or discounts under the Securities Act. LEGAL MATTERS Matters relating to the legality of the securities being offered hereby are being passed upon for the Company by Certilman Balin Adler & Hyman, LLP, 90 Merrick Avenue, East Meadow, New York 11554. EXPERTS The consolidated financial statements of the Company appearing in the Form 10-KSB, as amended, have been audited by Marcum & Kliegman, LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed a Registration Statement on Form S-3 (together with all amendments thereto, the "Registration Statement") with the Commission under the Securities Act of 1933, as amended, with respect to the securities offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement. For further information with respect to the Company and the securities offered hereby, reference is made to the Registration Statement and to the exhibits filed therewith, copies of which may be obtained upon payment of a fee prescribed by the Commission, or may be examined free of charge at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Each statement made in this Prospectus referring to a document filed as an exhibit to the Registration Statement is qualified by reference to the exhibit for a complete statement of its terms and conditions. 20 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the expenses (estimated except for the Registration Fee) in connection with the Offering described in the Registration Statement: Registration Fee.......................................................$6,253.60 Accountants' Fees and Expenses..........................................3,000.00 Legal Fees and Expenses................................................17,000.00 Printing .............................................................. 1,500.00 Miscellaneous.............................................................500.00 Total................................................................28,253.66 Item 15. Indemnification of Directors and Officers. Pursuant to Section 145 of the Delaware General Corporation Law, Sandata, Inc. (hereinafter, the "Registrant") has the power, under certain circumstances, to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. Article Tenth of the Registrant's Certificate of Incorporation provides that the Registrant shall, to the fullest extent permitted by said Section 145, indemnify all persons whom it may indemnify pursuant thereto. Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("1933 Act") may be permitted to directors, officers or controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemni fication against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-1 Item 16. Exhibits. Exhibit Number Description of Exhibit 5 Opinion of Certilman Balin Adler & Hyman, LLP regarding the legality of the securities being registered * 10.1 Form of agreement between Sandsport and vendor agency 10.2 Form of agreement between Sandsport and vendor agency 10.3 Form of Subscription Agreement dated December 23, 1996 10.4 Form of Subscription Agreement dated September 12, 1996 10.5 Form of Common Stock Purchase Warrant ($5.00 Exercise Price) 10.6 Form of Common Stock Purchase Warrant ($7.00 Exercise Price) 10.7 Form of Redeemable Common Stock Purchase Warrant 23.1 Consent of Marcum & Kliegman, LLP 23.2 Consent of Certilman Balin Adler & Hyman, LLP (included in its opinion filed as Exhibit 5) 24 Powers of Attorney(included in signature page forming a part hereof) * To be filed by amendment II-2 Item 17. Undertakings. The undersigned Registrant hereby undertakes: (l) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (l)(i) and (l)(ii) do not apply if the Registration Statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission II-3 such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Port Washington, State of New York, on the 9th day of April 1997. SANDATA, INC. By: /s/ Bert E. Brodsky Bert E. Brodsky President and Chief Executive Officer II-4 POWER OF ATTORNEY Know all men by these presents, that each person whose signature appears below constitutes and appoints Bert E. Brodsky as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Capacity Date President, Treasurer, Chief Executive Officer and Chairman of the Board (Principal Executive Officer and Principal Financial and /s/ Bert E. Brodsky Accounting Officer) Bert E. Brodsky April 9, 1997 Executive Vice President Secretary /s/Hugh Freund and Director Hugh Freund April 9, 1997 Executive Vice President /s/ Gary Stoller and Director Gary Stoller April 9, 1997 II-1 EX-10.1 2 FORM OF AGT BETWEEN SANDSPORT AND VENDOR AGENCY TimeTrax Contract Agreement, made this day of 1995 between Sandsport Data Services, Inc., a domestic corporation having its principal place of office at 26 Harbor Park Drive, Port Washington, New York, hereinafter referred to as "Processor" and __________________________________., a domestic not-for-profit corporation having its principal office at __________________________, herein referred to as "Vendor". Whereas, Vendor is in the business of rendering home care services within the jurisdiction of the Human Resources Administration of the City of New York, hereinafter referred to as "HRA", and under contract by the City of New York to render services to City's clients and Vendor desires certain computer and telephone-related services as provided herein; and whereas, processor desires, and is able, to furnish such services as provided herein. Now, therefore, in consideration of the mutual agreements set forth herein the parties hereto agree as follows: 1. Vendor represents to Processor that it has contracted with the City of New York, to deliver home attendant services to designated clients. 2. Vendor will make available to Processor client schedules, client's phone numbers, and client's name. Vendor will also make available to Processor attendant's name and social security number. 3. Processor will assign to Vendor an 800 telephone number to allow attendant to log in and log out from client's residence when arriving and departing. 4. Client authorized twenty-four hour assignment (sleep-in cases), will require attendant to log in once a day at an assigned time. 5. Cluster client cases, will require attendant to log in at the beginning of each assignment and log out at the end of the day from last assignment. 6. The Vendor will be responsible for maintaining the client database of information including client schedule and client phone number, and the attendant database of information including attendant's name and social security number. The On-Line Time Sheet System (OTS) provides Vendor with the facility to update the client (including the schedule) and the attendant data base. 7. Processor will record all calls received. TimeTrax will verify the following: - Call was received from correct client location. - The attendant social security number is from an active employee of the Vendor. - Calls received were for scheduled assigned times. 8. TimeTrax will generate reports on demand as follows: - No show report - listing all clients scheduled to receive care and no call was received from home care worker. - Unscheduled report - listing of clients who are not scheduled to receive care yet a log in call was received. - Unidentified phone numbers - listing of phone calls received that are not identified as belonging to any clients. - Unidentified attendants - listing of unidentifiable employee social security number that were received. - Daily call summary - listing of all activity from the preceding day. - Weekly call summary - listing of all activity from preceding week. 9. TimeTrax will consider an attendant on-time if they arrive within __ minutes of their assigned time. The attendant will also be given full credit if they leave within __ minutes of the scheduled depart time. However, at the end of the week, the system will accumulate all the late minutes and reduce total hours worked in increments of __ minutes. The most the attendant will be credited within one week for time not worked is __ minutes. The rounding of hours will be performed within each client assigned that week. 10. The Vendor will require attendants to log in when they arrive at the assigned client's home by picking up the phone and depressing the tones on the phone to correspond to employee's social security number, or the employee can enter his or her social security number by speaking the digits into phone. The attendant will log out when leaving the assigned client's home, following the same procedure as the log in. The maximum calls per visit should not exceed two calls. 11. As an option, TimeTrax can verify the person calling is the individual assigned. The feature is voice verification and requires caller to use voice recognition. To use the feature, all employees must go through an enrollment process. 12. The log in and log out times cannot be altered; they remain as permanent records. The Vendor may adjust total hours worked when situation warrants. Special passwords are available to limit access to this feature. 13. The Processor will tally hours worked daily. The Vendor will review the Daily Call Summary and make adjustments and corrections. The hours recorded will be inputted into the payroll module and the MMIS billing module. 14. Processor agrees that all information pertaining to the recipient or the provider of services contained in its files and all information pertaining to such recipients and/or providers or learned from official HRA files or records or from other sources, shall be held confidential by processor pursuant to the provisions of the New York State Social Services Law, the Federal Social Security Act and any other applicable laws and any regulation promulgated thereunder, and shall not be disclosed to unauthorized persons. 15. Processor agrees not to use, for any unauthorized purpose whatsoever, any information pertaining to the recipient or provider of services or learned from Vendor or official HRA files or records, or from other sources. For the purpose of this clause, unauthorized purpose means any use whatsoever not specifically authorized by Vendor. 16. In the event that the contract between the Vendor and the City of New York is terminated for any reason whatsoever, or the City of New York dissolves the program involved herein, this contract shall terminate immediately. 17. The terms of this Agreement shall run through ______________ and shall continue thereafter until terminated by either party on at least __ days prior written notice to the other. Sandsport agrees that it will not increase any of the fees through _______________. Thereafter such fees may be increased by Sandsport upon at least __ days prior written notice to Vendor. Any such price increase shall become effective unless Vendor gives Sandsport at least __ days prior written notice of its intention to terminate this Agreement on the effective date of such increase, in which case this Agreement shall, not withstanding anything to the contrary, terminate on such date. 18. This contract embodies all the terms of the agreement between parties. Any modifications hereto shall be in writing and signed by both parties. 19. Any disputes arising between the parties as to billing charges must be settled within ______ of receipt of billing by Vendor. 20. Processor agrees to allow audit firms hired by Human Resource Administration of the City of New York, to audit its computer systems and operating procedures in order to form an opinion of the security and integrity of the system. 21. Vendor hereby acknowledges that it shall have access to and come in contact with certain information and documentation which is the property of Processor which is copyrighted and/or which Processor considers a proprietary trade secret ("Confidential Information"). Vendor hereby agrees that: - All such confidential information shall be retained at the premises of Vendor unless Vendor obtains the expressed written consent of the Processor that such confidential information may be removed. - Vendor will use reasonable means (not less than that used to protect its own proprietary information) to safeguard Processor's confidential information. - Vendor shall not show or otherwise disclose any portion of the materials or their contents to anyone other than its employees. - It will make no copies of the confidential information. - It will return all confidential information promptly upon request of the company. 22. Processor agrees to comply with equal employment provision relating to subcontractors, where applicable, that are set forth in Part II, Section 6, of the Home Attendant Service Agreement between Vendor and HRA and all amendments and modifications to such provisions. 23. Processor will not violate or in any way infringe upon the rights of third parties, including, but not limited to, property, contractual, employment, trade secrets, proprietary information and nondisclosure rights, or any trademark, copyright or patent rights. 24. Processor is the lawful user of all programs used in providing the services hereunder; rights to use such programs have been lawfully acquired by Processor and Processor has the absolute right to permit Vendor access to or use such programs. 25. Processor will comply with and be responsible for ensuring that its employees, agents and subcontractors comply with all applicable federal, state, and local laws, rules, and regulations relating to the performance of the services, and that it will have obtained such permits licenses, and other forms of documentation and authorization required to comply with such laws, rules and regulations. 26. Processor hereby indemnifies and shall hold harmless Vendor against all liability to third parties (other than liability which is the fault of the Vendor), including, without limitation, any liability incurred as a result of an improper determination of benefit eligibility, arising from or in connection with Processor's improper performance of the services or any breach of the Processor's warranties provided for herein and accordingly shall on demand reimburse any indemnified party for any and all loss. Liability, fine, penalty, cost, or expense which may for any reason be imposed upon any indemnified party by reason of any suit, claim, action, proceeding or demand by and third party which results from Processor's performance of the services. 27. This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflict of laws but including any applicable provisions of the New York Uniform Commercial Code, except to the extent that the provisions of this Agreement are clearly inconsistent therewith, in which case the provisions hereof shall be controlling. 28. Any notices or other communications required or permitted hereunder shall be in writing and will be deemed sufficiently given only if delivered in person or sent by telex, telecopier, first-class mail or recognized courier service, postage and other charges pre-paid addressed as follows: If to Processor: Sandata TimeTrax Sandsport Data Services 26 Harbor Park Drive Port Washington, NY 11050 Attention: President If to Vendor: Address of Vendor Attention: Director (or to such other address as the addressee may have specified in a notice duly given to the sender as provided herein. 29. Vendor agrees to pay Processor as follows: Start up fee $ Weekly per client charge (or) Optional: Voice verification: Enrollment fee per attendant Weekly per client charge 30. This Agreement, together with any schedules, appendices and other attachments hereto, all of which are hereby incorporated by reference herein and made a part of this Agreement, constitutes the entire Agreement between Processor and Vendor and supersedes all proposals, oral and written and all other communications between the parties in relation to the subject matter of this Agreement. Except as otherwise provided herein, no amendment, modification or other variation of this Agreement shall be effective until reduced to writing and executed by the parties hereto. In witness whereof, the parties have caused this Agreement to be executed by their respective duly authorized officers. SANDSPORT DATA SERVICES, INC. VENDOR - ---------------------------------- -------------------------- Hugh Freund Name President Title - ------------------------------- -------------------------- Date Date EX-10.2 3 FORM OF AGT. BETWEEN SANDSPORT AND VENDOR AGENCY AGREEMENT, made this day of , 199 between Sandsport Data Services, Inc., a domestic corporation having a principal office at 26 Harbor Park Drive, Port Washington, New York, hereinafter referred to as "Processor" and [ ], a domestic not-for-profit corporation having a principal office at [ ], herein referred to as "Vendor". WHEREAS, Vendor is in the business of rendering Home Attendant Care services within the jurisdiction of the Human Resources Administration of the City of New York, hereinafter referred to as "HRA" and under contract by the City of New York to render services to the City's clients. NOW THEREFORE, in consideration of One ($l.00) Dollar, and other mutual and valuable considerations, by each to the other paid, the parties have agreed as follows: 1. Vendor represents to Processor that it has contracted with the City of New York to deliver Home Attendant Care Services to designated clients of HRA. 2. Vendor will make available to Processor completed time sheets and other related completed forms. 3. The Processor agrees to provide Vendor with an on-line system which includes the following features: Hardware: Software: Vendor agrees to pay a monthly computer access charge of ________. 4. Time sheets, received from attendants who worked in the prior week, should be batched with up to 50 time sheets. Totals of hours worked, number of time sheets, etc. should be entered for control purposes. Time sheets should be entered daily until twelve o'clock noon of day prior to payroll delivery. (If payroll is on Thursday, time sheets should be entered and completed prior to twelve noon on Wednesday.) In the event Vendor is unable to update its files or enter time sheets, processor will pick up data at Vendor's location and will enter data from Processor's forms or time sheets for Vendor. Vendor must request such assistance prior to twelve noon for such data to be entered and processed that day. 5a. Processor agrees to convey, on behalf of Vendor, a magnetic tape equivalent to the sum of its weekly invoicing to MMIS in Albany, State of New York, by Thursday of the week following time sheets received, and in conformance with HRA and State of New York specifications. 5b. Processor agrees, as an option, to provide Vendor Agency with a separate magnetic tape of Vendor Agency's weekly MMIS invoicing for an additional charge of $____ per magnetic tape generated. 5c. Processor agrees, as an option, to accept from Vendor Agency a separate magnetic tape of MMIS remittance to be processed against MMIS submissions generated on magnetic tape for an additional charge of $_____ per magnetic tape processed. 5d. Processor agrees, as an option, to accept from Vendor Agency paper MMIS remittance records to be keyed and verified and processed against Sandsport MMIS submissions generated on magnetic tape for an additional charge of ____ per line item. 6. Processor agrees that in the event (i) the Processor fails to meet the time specification established by MMIS for submission of magnetic tapes and such late submission was not caused by Vendor, or (ii) Processor submits a Magnetic Tape that MMIS does not process due to faulty tape, inaccuracies and/or omissions not caused by Vendor, and MMIS payments are delayed, Vendor shall be entitled to receive from Processor, as liquidated damages, the sum of __% of the amount due Processor from Vendor for such week's processing, for each week any such MMIS payment is delayed. 7. Processor agrees to convey to HRA or its designee on behalf of Vendor, a magnetic tape, including insurance requirements, monthly, per HRA specifications. 8. In consideration for services as herein outlined to be performed by Processor for the benefit of the Vendor, Vendor agrees to pay a fee based on the allowable client case load assigned to Vendor by HRA as follows: Up to ____ primary client cases $_____ weekly, plus $___ per week for each and every client. Vendor agrees to pay Processor such sum within _____ (__) days of receipt of such billing. Should any amounts due not be paid, and remain unpaid for a period of _____ (__) days thereafter, Vendor agrees to pay a late charge of ____% on the unpaid amount for each month subsequent to the due date that such amounts remain unpaid. In the event the Vendor fails to make such payments, the Processor, at its option, may terminate this Agreement by giving notice in writing of its intention to terminate. The termination shall be effective _______ (__) days from the date of receipt by the Vendor of the intention to terminate and Processor shall have no further obligation under this contract, except that this clause shall not serve to relieve the Vendor of its own breach of this contract. 9. Vendor, at its own cost and expense, shall pay for all payroll forms and other forms which require Vendor's specific design (i.e., payroll checks, personalized letterhead forms, time sheets etc.). 10. Processor agrees to provide Vendor at year end W-2 forms with employee's pay history for an additional charge of $___ per W-2 form printed. 11. Processor agrees to provide Vendor at year end a magnetic tape of W-2 information for the Social Security Administration and N.Y. State for an additional charge of $____ per tape. 12. Processor agrees to provide vendor, as an option, 24 hour payroll turnaround (48 hour if legal holiday falls on day after pickup) for an additional charge of $_____ per payroll upon written request of ______ (__) days' advanced notice. 13. Processor agrees to provide Vendor Tier II payroll processing for an additional charge of $________ per payroll. 14. Processor agrees to provide Vendor check signing of Vendor payroll checks for an additional charge of $__ per check with a minimum charge of $____ per payroll run. Cost of signature plates are $_____, and will be billed to Vendor. 15. Processor agrees to provide Vendor, as an option, special payroll run for an additional charge of $_____. 16. Vendor agrees to pay Processor the sum of _______ Dollars ($___), for each pickup and delivery of materials set forth in Processor's specifications. 17. Processor agrees to provide, as an option, Microfiche of various reports, at a charge of $____ per fiche. 18. Processor agrees that all information pertaining to the recipient or the provider of services contained in its files and all information pertaining to such recipients and/or providers or information learned from official HRA files or records or from other sources, shall be held confidential by Processor pursuant to the provisions of the New York State Social Services Law, the Federal Social Security Act and any other applicable laws and any regulation promulgated thereunder, and shall not be disclosed to unauthorized persons. For the purpose of this clause unauthorized persons are those persons not specifically designated by Vendor. 19. The Processor agrees not to use, for any unauthorized purpose whatsoever, any information pertaining to the recipient or provider of services obtained or learned from Vendor or official HRA files or records, or from other sources. For the purpose of this clause, unauthorized purpose means any use whatsoever not specifically authorized by Vendor. 20. Processor agrees to receive a magnetic tape from HRA with Client Prior Approval information (PARVND). Processor agrees to create a Client Prior Approval file. HRA will provide weekly, on Friday, a Prior Approval Transaction on Magnetic Tape, which will be used to update Vendor's client Prior Approval file. If Magnetic tape is not available on Friday, update of Vendor's Client Prior Approval file may be delayed until the following Friday. 21. Processor agrees to generate monthly a preliminary Surplus Fund Billing listing for clients with Surplus Funds from the Client Prior Approval file. 22. Processor agrees to generate monthly Surplus Fund Bills for all clients with Surplus Funds on the Client Prior Approval file and a Surplus Fund Billing Report at an additional charge of $____ per Surplus Fund Bill generated. 23. Vendor will make available to Processor completed forms with credit and debit transaction codes reflecting cash received, credit adjustments, and debit adjustments for Surplus Fund processing. 24. Processor agrees to generate monthly, Accounts Receivable Report, Transaction Report and Transaction Ledger. 25. Processor agrees to provide a clearance system at a monthly charge of $____. All Vendor Agencies' history of Employed Home Attendants will be maintained by Processor so that Vendor Agencies, who participate, can determine if a prospective Home Attendant was employed by another Vendor Agency. Only the following data relating to employee history will be made available to Vendor Agency when inquiry is made: Social Security Number, Name of Employee, Name of Vendor Agency(s) where Employee worked, and Date of Commencement of Employment. 26. Processor agrees to provide Vendor, as an option available at an additional charge of $_____, a "Quarterly Duplicate Hours Report" which lists attendants who are working on the same day for your Vendor Agency as well as another Vendor Agency. 27. Processor agrees to provide Vendor, as an option, 'Hour Reconciliation Report' weekly. 28. Processor agrees to provide, as an option, Expenditure Control Services, allowing Vendor to retrieve __ weeks of payroll history of employees at a monthly charge of $____. 29. The Processor agrees to comply with Equal Employment Provision relating to subcontractors, where applicable, as set forth in Part 11, Section 6. of the Home Attendant Services Agreement between Vendor and HRA and all amendments and modifications to such provisions. 30. The Processor certifies the implementation of the collective bargaining monitoring system as specified in HRA Memorandum No. 82-19 and represents that the necessary safeguards and controls exist in the payroll and billing systems which include this system. 31. The Processor will provide the Differential Billing Report and the Baseline Report as described in HRA Memorandum No. 82-19 when payroll is generated. 32. Processor agrees to provide, as an option, weekly pickup and delivery service of MMIS remittance checks, and/or remittance magnetic tape, at a charge of $____ per pickup. 33. The system will retain all paid claims up to ___ weeks old, and claims over ___ weeks old will be purged from the MMIS Invoice file and will no longer be accessible. 34. In the event that the contract between the Vendor and the City of New York is terminated for any reason whatsoever, or the City of New York dissolves the program involved herein, this Agreement shall terminate immediately. 35. The terms of this Agreement shall continue through ___________ and shall continue thereafter until terminated by either party upon at least __ days' prior written notice to the other. Processor agrees that it will not increase any of the fees through ________. Thereafter such fees may be increased by Processor upon at least __ days' prior written notice to Vendor. Any such price increase shall become effective unless Vendor gives Processor at least __ days' prior written notice of its intention to terminate this Agreement on the effective date of such increase, in which case this Agreement shall, notwithstanding anything to the contrary, terminate on such date. 36. Upon termination of this Agreement, Processor, at Vendor's request, will provide Vendor, in a mutually agreeable standard format, files and data still in possession, provided that Processor has been paid for all services rendered to the date of termination, and provided further that Processor is paid for such files and data at Processor's standard rates. 37. This Agreement constitutes the entire Agreement between the parties. Any modifications hereto shall be in writing and signed by both parties. 38. Any disputes arising between the parties as to billing charge(s) must be settled within one week of receipt of billing by Vendor. 39. Processor warrants that, in the event its system cannot be operated to process payroll data, Processor has arranged with a large local corporation for guaranteed portion of time on their computer system and that Vendor's payroll data shall be processed utilizing such back-up system at no additional cost to Vendor. 40. Processor agrees to allow audit firms hired by Human Resources Administration, City of New York, to audit its computer systems and operating procedures in order to form an opinion of the security and integrity of the system. 41. Vendor hereby acknowledges that it shall have access to and come in contact with certain information and documentation which is the property of Processor which is copyrighted and/or which Processor considers a proprietary trade secret ("Confidential Information"). Vendor hereby agrees that (1) all such Confidential Information shall be retained at the premises of Vendor unless the Vendor obtains the express written consent of the Processor that such Confidential Information may be removed; (2) Vendor will use reasonable means (not less than that used to protect its own proprietary information) to safeguard Processor's Confidential Information; (3) Vendor shall not show or otherwise disclose any portion of the materials or their contents to anyone other than its employees; (4) Vendor will make no copies of the Confidential Information; (5) Vendor will return all Confidential Information promptly upon the request of the Processor. 42. Processor agrees not to release any information in Vendor's files without written authorization from Vendor. IN WITNESS WHEREOF, the parties have duly executed this Agreement effective the day and year first above set forth. SANDSPORT DATA SERVICES, INC. By: By: Hugh Freund, President EX-10.3 4 FORM OF SUBSCRIPTION AGREEMENT DATED DEC. 12, 1996 RESIDENTS OF THE STATE OF FLORIDA WHO PURCHASE THE SHARES HAVE THE RIGHT, PURSUANT TO SECTION 517.061(11)(a)5 OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, TO WITHDRAW THEIR SUBSCRIPTIONS AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE DAYS AFTER RECEIPT OF THIS MEMORANDUM OR WITHIN THREE DAYS AFTER THE FIRST PAYMENT OF MONEY OR OTHER CONSIDERATION TO THE COMPANY, WHICHEVER OCCURS LATER. SUBSCRIPTION AGREEMENT Sandata, Inc. c/o Barber & Bronson Incorporated 2101 West Commercial Boulevard Suite 1500 Ft. Lauderdale, Florida 33309 Gentlemen: 1. Subscription. Subject to the terms and conditions of this Subscription Agreement (the "Agreement"), the undersigned hereby subscribes for and agrees to purchase from the Company the number of units (the "Units"), each Unit consisting of 5,000 shares of Common Stock and Redeemable Common Stock Purchase Warrants (the "Warrants") to purchase 2,500 shares of Common Stock of Sandata, Inc., a Delaware corporation (the "Company"), as set forth on the signature page hereof. Each Warrant forming part of the Units will allow the holder thereof to purchase one share of Common Stock at an exercise price of $7.00 per share commencing as of the date of issuance and extending for a period of five years thereafter, subject to extension by the Company (the "Expiration Date"). The Warrants are subject to redemption at the option of the Company, upon thirty days notice, at $.01 per Warrant, if at any time the closing bid price of the Common Stock as quoted on the Nasdaq Bulletin Board, Nasdaq SmallCap or Nasdaq National Market or such other source for obtaining information about the Company's shares of Common Stock, equals or exceeds $9.00 per share for a period of twenty consecutive trading days ending within ten calendar days of the date on which notice of redemption is given, provided such Warrants can then be exercised pursuant to an effective Registration Statement covering the re-sale of the underlying shares of Common Stock. This Agreement is accompanied by the payment by certified check, wire transfer or other immediately available funds of an amount equal to $25,000 multiplied by the number of Units subscribed for, together with the other Subscription Documents, all in the forms submitted to the undersigned. Capitalized terms used but not defined herein shall have the meanings as set forth in the Confidential Private Offering Memorandum dated October 29, 1996 (the "Memorandum"). 2. Acceptance of Subscription; Adoption and Appointment. It is understood and agreed that this Agreement is made subject to the following terms and conditions: (a) The Company shall have the right to accept or reject subscriptions in whole or in part, for any reason (or for no reason). (b) Investments are not binding on the Company until accepted by the Company. Any subscription may be rejected by giving written notice to the subscriber by personal delivery or first-class mail. In its sole discretion, the Company may establish a limit on the purchase of Units by a particular purchaser. (c) The undersigned hereby intends that the undersigned's signature hereon shall constitute an irrevocable subscription to the Company for the number of Units specified on the signature page of this Agreement, subject to a three-day right of rescission for Florida residents pursuant to Section 517.061 of the Florida Securities and Investor Protection Act. Each Florida resident has a right to withdraw a subscription for Units, without any liability whatsoever, and receive a full refund of all monies paid, within three days after the execution of this Agreement or payment for the Units has been made, whichever is later. To accomplish this withdrawal, a subscriber need only send a letter or telegram to the Company at the address set forth in this Agreement, indicating the intention to withdraw. Such letter or telegram should be sent and postmarked prior to the end of the aforementioned third day. It is prudent to send such letter by certified mail, return receipt requested, to ensure that is received and also to evidence the time when it was mailed. If the request is made orally (in person or by telephone) to the Company, a written confirmation that the request has been received should be requested. (d) The undersigned understands that the Placement Agent will notify the undersigned on or prior to the date in which the offering terminates (the "Termination Date") as to whether this subscription has been accepted or rejected. Subscriptions may be accepted in whole or in part, at the discretion of the Company and Placement Agent. If rejected, the Subscription Price paid by the subscriber will be returned to the subscriber forthwith without interest or deduction. Upon satisfaction of the all the conditions referred to herein, copies of this Agreement, duly executed by the Company, will be delivered to the undersigned. 3. Representations and Warranties of the Undersigned. The undersigned hereby represents and warrants to the Company that: (a) The undersigned has sufficient available financial resources to provide adequately for the undersigned's current needs, including possible contingencies, and can bear the economic risk of a complete loss of the investment hereunder without materially affecting the undersigned's financial condition; (b) The undersigned has received, and has read and reviewed with the undersigned's Purchaser Representative, designated on the Purchaser Representative Questionnaire (the "Purchaser Representative"), if any, and represents that the undersigned is familiar with this Agreement, the other Subscription Documents and the Memorandum accompanying these documents, including the risk factors set forth therein. The undersigned confirms that all documents, records and books pertaining to the investment in the Company and requested by the undersigned or the undersigned's Purchaser Representative have been made available or have been delivered to the undersigned and/or the undersigned's Purchaser Representative, and the undersigned and/or the undersigned's Purchaser Representative have been afforded the opportunity to obtain any additional information with respect thereto; (c) The undersigned is an "Accredited Investor", as defined in Rule 501(a) of Regulation D, promulgated under the Securities Act of 1933, as amended (the "Securities Act"). (d) The undersigned gives authority to the Company to verify employment, bank accounts and other matters as the Company deems necessary. (e) The Company, through the Placement Agent and its representatives, has answered all inquiries that the undersigned and/or the undersigned's Purchaser Representative has put to them concerning the Company and its proposed activities, and the Offering and sale of the Units; (f) The undersigned understands that the Units and the securities included therein or issuable upon exercise thereof have not been registered under the Act or applicable state securities laws, and that the issuance of the Units and the securities included therein or issuable upon exercise thereof is being effectuated pursuant to an exemption from the registration requirements under the Act and such state securities laws, and that reliance on such exemption is based, in part, upon the information being supplied hereunder by the undersigned; the undersigned also understands that the certificates representing the Shares and the Warrants will bear substantially the following restrictive Legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE SOLD, ASSIGNED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. (g) All the information set forth on the Confidential Purchaser Questionnaire attached hereto (the "Confidential Purchaser Questionnaire") which the undersigned has furnished the Company is correct and complete as of the date of this Agreement and, if there should be any material change in such information prior to the consummation of the undersigned's purchase of Units, the undersigned will immediately furnish such revised or corrected information to the Company in writing. (h) The undersigned is acquiring the Units, for which the undersigned hereby subscribes, for the undersigned's own account, as principal, for investment purposes only and not with a view to the further resale or distribution of all or any part of such Units; (i) The undersigned, if a corporation, partnership, trust or other form of business entity, is authorized and otherwise duly qualified to purchase and hold the Units and the securities included therein or issuable upon exercise thereof and such entity has not been formed for the specific purpose of acquiring the Units; (j) The address set forth for the undersigned on the signature page hereof is the undersigned's true and correct residence or principal place of business, as applicable, and the undersigned has no present intention of becoming a resident of, or relocating its principal place of business to, any other state or jurisdiction; (k) The undersigned acknowledges that if a "Purchaser Representative," as defined in Regulation D, has been utilized by the undersigned in evaluating the investment as contemplated hereby, (i) the undersigned has been advised by his Purchaser Representative as to the merits and risks of the investment in general and the suitability of the investment for the undersigned in particular; and (ii) the undersigned's Purchaser Representative has completed and executed the Purchaser Representative Questionnaire, and receipt of a copy of such completed and executed Purchaser Representative Questionnaire has been acknowledged in writing by the undersigned; (l) The person, if any, executing the Purchaser Representative Questionnaire, a copy of which has been received by the undersigned, is acting and is hereby designated to act as the undersigned's Purchaser Representative in connection with the offer and sale of the Units to the undersigned. This designation of a Purchaser Representative was made with the knowledge of the representations and disclosures made in such Purchaser Representative Questionnaire; (m) The undersigned acknowledges that if the assistance or advice of a Purchaser Representative is not required, the undersigned believes that the undersigned has sufficient knowledge and experience in financial and business matters generally to be capable of evaluating the merits and risks of this investment and, acknowledges further, that: (i) The undersigned has considered that the undersigned may have to hold the proposed investment for an indefinite period of time and may have to bear a complete economic loss of such investment. The undersigned represents that the information contained in the Confidential Purchaser Questionnaire, which has been completed by the undersigned and delivered to the Company, is true and correct; (ii) The purchase of the Units by the undersigned will be solely for the account of the undersigned and not for the account of any other person and will not be made with a view to the further resale or distribution thereof; and (iii) The undersigned recognizes that the proposed investment is being offered in a manner that is intended to comply with the requirements of Section 4(2) and/or Rule 506 of Regulation D of the Act and that the acceptance of the undersigned's Agreement has been induced by the reliance of the Company on the correctness of the representations contained herein; and (n) The undersigned acknowledges and is aware of the following: (i) There are substantial restrictions on the transferability of the Units and the securities included therein or issuable upon exercise thereof and such securities will not be registered under the Act, and investors in the Company have no rights to require that the Units and the securities included therein or issuable upon exercise thereof be registered under the Act. The undersigned may be required to hold the Units and the securities included therein or issuable upon exercise thereof for an indefinite period of time and it may not be possible for the undersigned to liquidate the investment in the Company; (ii) No federal or state agency has made any finding or determination as to the fairness of the offering of Units for investment or any recommendation or endorsement of the Units; and (iii) There can be no assurance that the prior performance on the part of the Company or any Affiliate (as defined in Rule 405 promulgated under the Act), or of any other person, will in any way indicate the predictable results of the ownership of the Units or of the Company. (iv) The Company shall incur certain costs and expenses and undertake other actions in reliance upon the irrevocability of the subscription (following the three-day rescission period described in Paragraph 2(c) of this Agreement) for the Units made hereunder. (o) If the subscriber for Units is an entity (the "Entity"), the subscriber covenants and undertakes to promptly notify the Company of any change of circumstances with respect to the Entity which would change the accuracy of the answers to any of the questions specified in Question 18 or Question 19 of the Confidential Purchaser Questionnaire attached hereto, regardless of when such change takes place. (p) The undersigned has responded "no" to each of the questions specified in Question 20 of the Confidential Purchaser Questionnaire attached hereto and therefore represents that the subscriber is not a "Restricted Person." (q) The subscriber will deliver to the Company, promptly upon demand by the Company, any form, document, or other information in order to allow the Placement Agent to make such determinations as it deems advisable with respect to the availability for exemption from registration as an investment company, or with respect to any other matter as the Placement Agent may reasonably determine. The foregoing representations and warranties are true and accurate as of the date of delivery of the Subscription Price to the Company and shall survive such delivery. If, in any respect, such representations and warranties shall not be true and accurate prior to the delivery of the Subscription Price pursuant to Paragraph 1 hereof, the undersigned shall give written notice of such fact to the Company and to the undersigned's Purchaser Representative, if any, specifying which representations and warranties are not true and accurate and the reasons therefor. 4. Registration Rights. (a) The Company will, as soon as reasonably possible following the Closing Date of the Private Offering, file a registration statement with the U.S. Securities and Exchange Commission (the "Commission") registering the offer and re-sale by the Holder of the shares of Common Stock included in the Units and issuable upon exercise of the Warrants (collectively, the "Shares"). The Company shall use its reasonable efforts to cause the registration statement to remain effective for a period of at least one hundred twenty (120) days from the effective date of the Registration Statement or such earlier date as all of the Shares have been sold (the "Effective Period"). (b) In addition, if, at any time during the five (5) years commencing as of the Closing Date, the holders of a majority of the Shares (the "Holders") shall give notice to the Company requesting that the Company file with the Commission a registration statement relating to the offer and re-sale of the Shares by the Holder, the Company shall promptly give written notice of such proposed registration statement to the Holders, and to any subsequent permissible transferee of any of the Shares (at the address of such persons appearing on the books of the Company or its transfer agent), which notice shall offer to include the Shares in the requested registration statement. The Company shall, as expeditiously as possible, file and use its reasonable efforts to cause to become effective under the Securities Act, the registration statement covering the sale of such of the Shares by such Holders as the Company has been requested to register for disposition by the Holders thereof, to the extent required to permit the public sale or other public disposition thereof by the Holders. The Company shall cause the registration statement to remain effective during the Effective Period. The Holders shall have the right to demand registration of the Shares as described above on one occasion only. Notwithstanding anything contained herein to the contrary, the Holders may not demand registration of the Shares if the Shares may otherwise be sold without registration under the Securities Act or applicable state securities laws and regulations and without limitation as to volume pursuant to Rule 144 of the Securities Act. Notwithstanding anything contained herein, the Company shall not be obligated to file or use its reasonable efforts to cause to become effective a registration statement under this section during any period commencing with the date the Company files a registration statement relating to the sale or exchange by it of its securities in either an underwritten offering or in an offering involving a merger, acquisition, combination or reorganization and ending with the date such registration statement becomes effective. (c) In addition, if at any time during the five (5) years commencing as of the Closing Date, the Company shall prepare and file one or more registration statements under the Securities Act (other than a registration statement on Form S-4 (or with regard to any transaction contemplated by Rule 145 promulgated under the Securities Act) or Form S-8 or any successor form of limited purpose and other than a post-effective amendment to any such registration statement), to the extent permitted by law, including, without limitation, the rules and regulations of the Commission, with respect to a public offering of equity or debt securities of the Company, or of any such securities of the Company held by its security holders, the Company will include in any such registration statement such information as is required, and such number of Shares held by the Holders thereof or their respective designees or transferees as may be requested by them, to permit a public offering of the Shares so requested; provided, however, that if, in the written opinion of the Company's managing underwriter, if any, for such offering, the inclusion of the Shares requested to be registered, when added to the securities being registered by the Company or the selling security holder(s), would exceed the maximum amount of the Company's securities that can be marketed without otherwise materially and adversely affecting the entire offering, then the Company may exclude from such offering all or that portion of the Shares requested to be so registered, so that the total number of securities to be registered is within the maximum number of shares that, in the opinion of the managing underwriter, may be marketed without otherwise materially and adversely affecting the entire offering, provided that at least a pro rata amount of the securities that otherwise were proposed to be registered for other stockholders is also excluded. In the event of such a proposed registration (other than the registration contemplated by Section 4(a) above), the Company shall furnish the then Holders with not less than twenty (20) days' written notice prior to the proposed date of filing of such registration statement. Further notice shall be given by the Company to the Holders, with respect to subsequent registration statements or post-effective amendments filed by the Company, until such time as all of the Shares have been registered or may be sold without registration under the Securities Act or applicable state securities laws and regulations pursuant to Rule 144 of the Securities Act. The holders of Shares shall exercise the rights provided for in this Section 4(c) by giving written notice to the Company, within ten (10) days of receipt of the Company's notice of its intention to file a registration statement. Notwithstanding anything contained herein to the contrary, prior to the effectiveness of a registration statement pursuant to which the Holders have requested registration of the Shares pursuant to this Section 4(c), the Company may delay the effectiveness of such registration statement or withdraw such registration statement. (d) Notwithstanding anything contained herein to the contrary, the Holders shall not be permitted to exercise the registration rights provided for herein with respect to all or such portion of the Shares as may be sold without registration under the Securities Act or applicable state securities laws and regulations under Rule 144 of the Securities Act. (e) The Company shall bear all expenses, incurred in the preparation and filing of such registration statements or post-effective amendment (and related state registrations, to the extent permitted by applicable law) and the furnishing of copies of the preliminary and final prospectus thereof to the Holder, other than expenses of the Holder's counsel, and other than sales commissions or transfer taxes incurred by the then holders with respect to the sale of such securities. (f) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to Section 4(b) or Section 4(c), a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed or go effective and it is therefore essential to defer the filing or effectiveness of such registration statement, then the Company shall have the right to defer taking action with respect to such filing or effectiveness for a period of not more than ninety (90) days after receipt of the request of the Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (g) Notwithstanding the provisions of Sections 4(b) and 4(c) above, if at any time during which the Company is obligated to maintain the effectiveness of a registration statement pursuant to such Section, counsel to the Company (which counsel shall be experienced in securities matters) has determined in good faith that the filing of such registration statement or the compliance by the Company with its disclosure obligations thereunder would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential, then the Company may delay the filing or the effectiveness of such registration statement (if not then filed or effective, as appropriate) and shall not be required to maintain the effectiveness thereof (if previously declared effective) for a period expiring upon the earlier to occur of (i) the date on which such information is disclosed to the public or ceases to be material or the Company is so able to comply with its disclosure obligations, or (ii) thirty (30) days after counsel to the Company makes such good faith determination. There shall not be more than one such delay period with respect to any registration statement after it has been declared effective pursuant to Sections 4(b) and 4(c). Notice of any such delay period and of the termination thereof will be promptly delivered by the Company to each Holder and shall be maintained in confidence by each such Holder. The Holders shall not sell any Shares during such period as any such registration statement is not current, as advised by the Company. Each Holder shall furnish to the Company such information regarding such Holder and a written description of the contribution proposed by such Holder as the Company may reasonably request. (h) Each Holder whose Shares are included in a registration statement pursuant to an underwritten public offering shall, if requested by the managing underwriter of the public offering, enter into an agreement with the underwriter pursuant to which the Holder will agree not to sell, transfer or otherwise dispose of the Shares for such period after consummation of the public offering as may reasonably be requested by the underwriter; up to a maximum of ninety (90) days, without the consent of the underwriter. (i) With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the Commission that may at any time permit the Holders to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144; (ii) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act"); and (iii) furnish to each Holder so long as such Holder owns the Shares, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit the Holders to sell such securities pursuant to Rule 144 without registration. (j) The rights and the obligations of the Holders under this Agreement, including the rights to cause the Company to register the Shares and the restrictions on the transferability of the Shares, shall be deemed to be automatically assigned with the transfer of the Shares. 5. Indemnification. The undersigned acknowledges that the undersigned understands the meaning and legal consequences of the representations and warranties contained herein, and the undersigned hereby indemnifies and holds harmless the Company and the Placement Agent, and their respective agents, employees and affiliates, from and against any and all losses, claims, damages or liabilities due to or arising out of a breach of any representations or warranties of the undersigned contained in this Agreement. 6. Transferability. The undersigned agrees not to transfer or assign this Agreement, or any of the undersigned's interest herein. Further, the undersigned acknowledges that an investor in the Units pursuant to this Agreement and applicable law, will not be permitted to transfer or dispose of the Units or the shares included therein or issuable upon exercise thereof unless they are registered or unless such transaction is exempt from registration under the Act and applicable state securities laws and, in the case of any such purportedly exempt transfer or disposition, such investor provides (at the investor's own expense) an opinion of counsel satisfactory to the Placement Agent and the Company and their respective counsel that such exemption is, in fact, available. 7. Revocation. The undersigned acknowledges and agrees that the subscription for the Units made by the execution and delivery of this Agreement by the undersigned is irrevocable, subject to the three-day right of rescission in Florida described in Section 2(c) herein, and that such subscription shall survive the death or disability of the undersigned, except as provided pursuant to the applicable law and regulations. 8. Miscellaneous. (a) All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned at the address set forth below and to the Company c/o Barber & Bronson Incorporated, 2101 West Commercial Boulevard, Suite 1500, Ft. Lauderdale, Florida 33309. (b) Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed in accordance with and shall be governed in all respects by the laws of the State of Delaware, without application of the principles of conflicts of laws. (c) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and may be amended only by a writing executed by all parties. (d) If the undersigned is more than one person, the obligations of the undersigned shall be joint and several, and the representations and warranties contained herein shall be deemed to be made by, and be binding upon, each such person and his heirs, estates, legal representatives, successors and permitted assigns. This Agreement, upon acceptance by the Company, shall be binding upon the heirs, estates, legal representatives, successors and permitted assigns of all parties hereto. (e) Any terms not otherwise defined herein shall have the meaning ascribed to it in the Memorandum. (f) Words used in this Agreement, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. (g) This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. (h) The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. [SIGNATURES ON FOLLOWING PAGES] SUBSCRIPTION AGREEMENT SIGNATURE PAGE FOR INDIVIDUALS Number of Units Subscribed for: ______ Units at $25,000 per Unit. (Signature of Subscriber) (Signature of Spouse or Joint Tenant, If Any) (Print Name of Subscriber) (Print Name of Spouse or Joint Tenant, If Any) (Address) (Address) (Telephone Number) (Telephone Number) (Social Security Number) (Social Security Number) Note: If two investors are signing, please check the manner in which the ownership is to be legally held (the indicated manner shall be construed as if written out in full accordance with applicable laws or regulations): __JTTEN: As joint tenants with right of survivorship and not as tenants in common. __TEN COM: As tenants in common. __TEN ENT: As tenants by the entireties. SUBSCRIPTION AGREEMENT SIGNATURE PAGE FOR CORPORATIONS, TRUSTS AND PARTNERSHIPS Number of Units Subscribed for: ______ Units at $25,000 per Unit. (Print Name of Subscriber) By: (Signature of Authorized Person) (Print Name of Authorized Person) (Title of Authorized Person) (Address) (Telephone Number) (Federal Employer Identification Number or Other Tax Identification Number) APPROVED AND ACCEPTED in accordance with the terms of this Agreement on this ____ day of ____________, 1996. COMPANY: SANDATA, INC., a Delaware corporation By: Name: Title: EX-10.4 5 FORM OF SUBSCRIPTION AGREEMENT DATED SEPT 12, 1996 RESIDENTS OF THE STATE OF FLORIDA WHO PURCHASE THE SHARES HAVE THE RIGHT, PURSUANT TO SECTION 517.061(11)(a)5 OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, TO WITHDRAW THEIR SUBSCRIPTIONS AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE DAYS AFTER RECEIPT OF THIS MEMORANDUM OR WITHIN THREE DAYS AFTER THE FIRST PAYMENT OF MONEY OR OTHER CONSIDERATION TO THE COMPANY, WHICHEVER OCCURS LATER. SUBSCRIPTION AGREEMENT As of September 12, 1996 Sandata, Inc. 26 Harbor Park Drive Port Washington, NY 11050 Ladies and Gentlemen: 1. Offer to Purchase. Subject to the terms and conditions set forth in this Subscription Agreement (the "Agreement"), ____________________ (the "Purchaser") hereby subscribes for the purchase of _________ shares (the "Shares") of common stock, $.001 par value per share ("Common Stock"), of Sandata, Inc., a Delaware corporation (the "Company"), at a price of $3.00 per share, which in the aggregate totals $_________. The purchase price is payable by unendorsed certified check made payable to the order of or wire transfer to Sandata, Inc., contemporaneously herewith. 2. Representations, Warranties and Agreements of Purchaser. In connection with its subscription, the Purchaser hereby makes the following representations, warranties and agreements and confirms the following understandings to the Company: (a) Investment Purpose. The Purchaser is acquiring the Shares for his own account and for investment purposes only, within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, with no intention of assigning any participation or interest therein and with no view to the distribution or resale thereof. CORP\02437\0068\LCF04.03B 970409 (b) Review and Evaluation of Information Regarding the Company. Purchaser is familiar with the Company's operations and financial condition. He acknowledges that he has had the opportunity to ask representatives of the Company questions about the Company's business and financial condition and that he has obtained and reviewed such information as he has requested to the extent he has deemed necessary to permit him to fully evaluate the merits and risks of his investment in the Company. (c) Purchaser's Financial Experience. The Purchaser is sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company. (d) Suitability of Investment. The Purchaser has evaluated the merits and risks of the Purchaser's proposed investment in the Company, including those risks particular to the Purchaser's situation, and has determined that this investment is suitable for him. The Purchaser has adequate financial resources for an investment of this character, and at this time the Purchaser can bear a complete loss of his investment. (e) Limitations on Disposition. Purchaser will not sell, assign, transfer, encumber or otherwise dispose of any of the Shares unless (i) a registration statement under the Securities Act with respect thereto is in effect and the prospectus included therein meets the requirements of Section 10 of the Securities Act, or (ii) the Company has received a written opinion of its counsel that, after an investigation of the relevant facts, such counsel is of the opinion that such proposed sale, assignment, transfer, encumbrance or disposition does not require registration under the Securities Act. The Purchaser understands that the Shares are not being registered under the Securities Act and must be held indefinitely unless they are subsequently registered thereunder or an exemption from such registration is available. The Purchaser understands that there are substantial restrictions on the transferability of the Shares. The Purchaser may not be able to avail himself of certain of the provisions of Rule 144 adopted by the Securities and Exchange Commission ("Commission") under the Securities Act with respect to the public resale of the Shares; and accordingly, the Purchaser may have to hold the Shares for an indefinite period of time and the Purchaser may not be able to liquidate his investment in the Company. The Purchaser represents that he can afford to hold the Shares for an indefinite period of time. (f) Accredited Investor. The Purchaser has reviewed the Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 1996 (the "Form 10-KSB"). The Purchaser (i) is either an "accredited investor," as such term is defined in Rule 501(a) promulgated by the Commission under the Securities Act, or has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the acquisition of the Shares contemplated hereby; (ii) the Purchaser is able to bear the economic risks of investment in the Shares, including, without limitation, the risk of the loss of part or all of his investment and the inability to sell or transfer the Shares for an indefinite period of time; (iii) the Purchaser has adequate means of providing for current needs and contingencies and has no need for liquidity in his investment in the Shares; and (iv) the Purchaser does not have an overall CORP\02437\0068\LCF04.03B 970409 commitment to investments which are not readily marketable that is excessive in proportion to his net worth and an investment in the Shares will not cause such overall commitment to become excessive. The Purchaser will execute and deliver to the Company such documents as the Company may reasonably request in order to confirm the accuracy of the foregoing. (g) Reliance on Representations. The Purchaser understands that the Shares are not being registered under the Securities Act in part on the ground that the issuance thereof is exempt under Section 4(2) of the Securities Act, as a transaction by an issuer not involving any public offering and that the Company's reliance on such exemption is predicated in part on the foregoing representations and warranties of the Purchaser. (h) Restrictive Legend. The Shares to be issued to Purchaser may not be sold, assigned, transferred, encumbered or disposed of unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration is available. Accordingly, the following restrictive legend will be placed on any instrument, certificate or other document evidencing the Shares. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE SOLD, ASSIGNED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. (i) Certain Risk Factors. Purchaser acknowledges that there are significant risks relating to the acquisition of the Shares including, without limitation, the risks referred to in the Company's Form 10-KSB. (j) Absence of Official Evaluation. The Purchaser understands that neither the Commission nor any other federal or state agency has made any finding or determination as to the fairness of the terms of an investment in the Company, nor any recommendation or endorsement of the Shares offered hereby. CORP\02437\0068\LCF04.03B 970409 (k) Obligation. This Agreement constitutes a valid and legally binding obligation of the Purchaser and neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation of or default under, or conflict with, any judgment, decree, statute or regulation of any governmental authority applicable to the Purchaser or violate, alone or with notice or the passage of time or both, result in a material breach or termination or otherwise give any contracting party the right to terminate or declare a default under any contract, commitment, agreement or restriction of any kind to which the Purchaser is a party or by which he or his assets are bound. The execution and delivery of this Agreement does not, and the consummation of the transactions described herein will not, violate applicable law, or any mortgage, lien, agreement, indenture, lease or understanding (whether oral or written) of any kind outstanding relative to the Purchaser. (l) Approvals Required. No approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is required in connection with the execution and delivery of this Agreement by the Purchaser or the consummation of the transactions described herein, and, except to the extent that the Purchaser or the Company is required to file reports in accordance with relevant regulations under Federal securities laws all of which reports have been or will be timely made by the Purchaser. 3. Representations, Warranties and Agreements of the Company. In connection with this subscription, the Company makes the following representations, warranties and agreements and confirms the following understanding: (a) No Pending Proceedings. Except as disclosed in the Form 10-KSB, there is not now pending or, to the Company's knowledge, threatened against the Company, any of its subsidiaries or affiliates nor any of their respective directors or officers (in their capacity as directors or officers) any action or proceeding of which it has been advised, either in any court of competent jurisdiction or before the Commission, or regulatory authority. (b) No Material Adverse Changes. Since the date of the Form 10-KSB, no facts have come to our attention which would cause us to believe that the Form 10-KSB includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. (c) Company's Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in all jurisdictions in which it is required to be qualified to do business, and has all necessary powers to carry on its business as now operated by it. CORP\02437\0068\LCF04.03B 970409 (d) Capitalization. The Company has 763,955 shares of Common Stock outstanding, and options and warrants to purchase 1,225,259 shares of Common Stock outstanding. No shares of the Common Stock are held by it as treasury shares; all of the outstanding shares of the Common Stock are validly issued, fully paid and non-assessable; none of the shares of the Common Stock have been issued in violation of the preemptive rights of any person. Except as described in the Form 10-KSB, there is not outstanding any security, option, warrant, right, instrument convertible into or exchangeable for, employee benefit plan or arrangement, agreement, understanding or commitment of any kind entitling any person, corporation or entity to purchase, subscribe for or otherwise acquire, or relating to the voting of, any shares of capital stock or other equity interests of the Company. (e) Legal and Other Proceedings. Neither the Company, nor any of its subsidiaries or affiliates or each of their respective directors or officers (in their capacity as directors or officers), is a party to any pending or, to the best knowledge of the Company, threatened, claim, action, suit, investigation, arbitration or proceeding, or is subject to any order, judgment or decree that is reasonably expected to have, either individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), earnings or results of operations of the Company. The Company is not, as of the date hereof, a party to or subject to any enforcement action instituted by, or any agreement or memorandum of understanding with, any federal or state regulatory authority restricting its operations or requiring that actions be taken, and no such regulatory authority has threatened any such action, memorandum or order against the Company and the Company has not received any report of examination from any federal or state regulatory agency which requires that the Company address any problem or take any action which has not already been addressed or taken in a manner satisfactory to the regulatory agency. (f) Compliance with Laws. The Company represents and warrants that, to the best of its knowledge, the Company: (1) is in compliance in all material respects with all laws, regulations, reporting and licensing requirements and orders applicable to its business or any of its employees (because of any such employee's activities on the Company's behalf); (2) is in compliance in all material respects with all federal, state and local employment laws and regulations (including employment discrimination laws and regulations) applicable to its business or any of its employees; and (3) has received no notification from any agency or department of federal, state or local government or any regulatory authority or the staff thereof asserting that it is not in material compliance with or has violated any of the statutes, regulations or ordinances which such governmental authority or regulatory authority enforces, or threatening to revoke any license, franchise, permit or governmental authorization, and is subject to no material agreement or consent CORP\02437\0068\LCF04.03B 970409 decree with any regulatory authorities arising out of previously asserted violations with respect to its assets or business. (g) Financial Statements. The financial statements included in the Form 10-KSB (the "Financial Statements"), as of the dates thereof and for the periods covered thereby, are in accordance with the books and records of the Company, which books and records are complete and correct in all material respects required by generally accepted accounting principles ("GAAP") and present fairly, in all material respects, the financial position and results of the Company in accordance with GAAP applied on a basis consistent with prior periods. (h) Tax Matters. All federal, state, local and foreign tax returns (including, without limitation, estimated tax returns, and, with respect to employees, FICA and FUTA returns) required to be filed by or on behalf of the Company have been timely filed, or requests for extensions have been timely filed, granted and have not expired, and all returns filed are complete and accurate in all material respects. All taxes shown on filed returns have been paid. As of the date hereof, there is no deficiency or refund litigation, matter in controversy, or audit examination with respect to any taxes that might result in a determination adverse to the Company, except as reserved in the Financial Statements. All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation have been paid. The Company has not executed an extension or waiver of any statute of limitations on the assessment or collection of any tax due that is currently in effect. To the extent any federal, state, local or foreign taxes are due from or, for any periods through and including December 31, 1996, adequate provision has been made for the payment of such taxes by establishing appropriate liability accounts on the Financial Statements. (i) Obligation. This Agreement constitutes a valid and legally binding obligation of the Company and neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation of or default under, or conflict with, any judgment, decree, statute or regulation of any governmental authority applicable to the Company or violate, alone or with notice or the passage of time or both, results in a material breach or termination or otherwise give any contracting party the right to terminate or declare a default under any contract, commitment, agreement or restriction of any kind to which the Company is a party or by which its assets are bound. The execution and delivery of this Agreement does not, and the consummation of the transactions described herein will not, violate applicable law, or any mortgage, lien, agreement, indenture, lease or understanding (whether oral or written) of any kind outstanding relative to the Company. (j) Approvals Required. No approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is required in connection with the execution and delivery of this Agreement by the Company or the consummation of the transactions described herein, and, except to the extent that the Purchaser or the Company is required to file reports in accordance with CORP\02437\0068\LCF04.03B 970409 relevant regulations under Federal securities laws all of which reports have been or will be timely made by the Company. 4. Registration Rights. If at any time during the three (3) years after the date hereof, the Company shall prepare and file one or more registration statements under the Securities Act (other than a registration statement on Form S-4 (or with regard to any transaction contemplated by Rule 145, promulgated under the Securities Act) or Form S-8 or any successor form of limited purpose and other than a post-effective amendment to any registration statement), to the extent permitted by law, including, without limitation, the rules and regulations of the Commission, with respect to a public offering of equity or debt securities of the Company, or of any such securities of the Company held by its security holders, the Company will, to the extent permitted by law, including without limitation, the rules and regulations of the Commission, include in any such registration statement such information as is required, and such number of Shares held by the Purchaser or his respective designees or transferees (the "Purchasers") as may be requested by them, to permit a public offering of the Shares so requested; provided, however, that if, in the written opinion of the Company's managing underwriter, if any, for such offering, the inclusion of the Shares requested to be registered, when added to the securities being registered by the Company or the selling security holder(s), would exceed the maximum amount of the Company's securities that can be marketed without otherwise materially and adversely affecting the entire offering, then the Company may exclude from such offering all or that portion of the Shares requested to be so registered, so that the total number of securities to be registered is within the maximum number of shares that, in the opinion of the managing underwriter, may be marketed without otherwise materially and adversely affecting the entire offering, provided that at least a pro rata amount of the securities that otherwise were proposed to be registered for other stockholders is also excluded. In the event of such a proposed registration, the Company shall furnish the then Purchasers with not less than twenty (20) days' written notice prior to the proposed date of filing of such registration statement. Further notice shall be given by the Company to Purchasers, with respect to subsequent registration statements or post-effective amendments filed by the Company, until such time as all of the Shares have been registered or may be sold without registration under the Securities Act or applicable state securities laws and regulations pursuant to Rule 144 of the Securities Act. The Purchaser shall exercise the rights provided for in this Section by giving written notice to the Company, within ten (10) days of receipt of the Company's notice of its intention to file a registration statement. Notwithstanding anything contained herein to the contrary, the Purchaser shall not be permitted to exercise the registration rights provided for herein with respect to all or such portion of the Shares as may be sold without registration under the Securities Act or applicable state securities laws and regulations under Rule 144 of the Securities Act. The Company shall bear all expenses, incurred in the preparation and filing of such registration statements or post-effective amendment (and related state registrations, to the extent permitted by applicable law) and the furnishing of copies of the preliminary and final prospectus thereof to the Purchaser, other than expenses of the Purchaser's counsel, and other than sales CORP\02437\0068\LCF04.03B 970409 commissions or transfer taxes incurred by the Purchasers with respect to the sale of such securities. The Purchaser whose Shares are included in a registration statement pursuant to an underwritten public offering shall, if requested by the managing underwriter of the public offering, enter into an agreement with the underwriter pursuant to which the Purchaser will agree not to sell, transfer or otherwise dispose of the Shares for such period after consummation of the public offering as may reasonably be requested by the underwriter; up to a maximum of ninety (90) days, without the consent of the underwriter. Notwithstanding anything contained herein to the contrary, prior to the effectiveness of a registration statement pursuant to which the Purchaser has requested registration of his Shares pursuant to this Agreement, the Company may delay the effectiveness of such registration statement or withdraw the registration statement. Notwithstanding anything contained herein to the contrary, if at any time during which the Company is obligated to maintain the effectiveness of a registration statement, counsel to the Company (which counsel shall be experienced in securities matters) has determined in good faith that the filing of such registration statement or the compliance by the Company with its disclosure obligations thereunder would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential, then the Company may delay the filing or the effectiveness of such registration statement (if not then filed or effective, as appropriate) and shall not be required to maintain the effectiveness thereof (if previously declared effective) for a period expiring upon the earlier to occur of (i) the date on which such information is disclosed to the public or ceases to be material or the Company is so able to comply with its disclosure obligations, or (ii) thirty (30) days after counsel to the Company makes such good faith determination. There shall not be more than one such delay period with respect to any registration statement after it has been declared effective pursuant to this Section. Notice of any such delay period and of the termination thereof will be promptly delivered by the Company to each Purchaser and shall be maintained in confidence by each such Purchaser. The Purchaser shall not sell any Shares during such period as any such registration statement is not current, as advised by the Company. Each Purchaser shall furnish to the Company such information regarding such Purchaser and a written description of the distribution proposed by such Purchaser as the Company may reasonably request. 5. Miscellaneous. (a) Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior negotiations, letters and understandings relating to the subject matter hereof. CORP\02437\0068\LCF04.03B 970409 (b) Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement or modification is sought. (c) Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Florida, without giving effect to the application of the principles pertaining to conflicts of laws. (d) Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision. (e) Construction. The parties hereto and their respective legal counsel participated in the preparation of this Agreement; therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof. (f) Severability. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect any other provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. (g) Enforcement. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, the successful party will be awarded reasonable attorneys' fees at all trial and appellate levels, expenses and costs. (h) Binding Nature. This Agreement will be binding upon and will inure to the benefit of any successor or successors of the parties hereto. (i) Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. CORP\02437\0068\LCF04.03B 970409 IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be executed as of the date first above written. ---------------------------------- ---------------------------------- AGREED AND ACCEPTED this ____ day of September, 1996 SANDATA, INC., a Delaware corporation By: Name: Title: CORP\02437\0068\LCF04.03B 970409 EX-10.5 6 FORM OF COMMON STOCK PURCHASE WARRANT VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 1997. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT. SANDATA, INC. COMMON STOCK PURCHASE WARRANT Warrant Certificate No. 1~ 1. Number and Price of Shares of Common Stock Subject to Common Stock Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~ (the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware corporation (the "Company"), at any time and from time to time during the period from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida Time, on December 22, 1997 (the "Expiration Date"), at which time this Common Stock Purchase Warrant (the "Warrant") shall expire and become void, an aggregate of 3~ shares (the "Warrant Shares") of the Company's common stock, $.001 par value per share (the "Common Stock"), which number of Warrant Shares is subject to adjustment from time to time, as described below, upon payment therefor of the exercise price of $5.00 per Warrant Share, in lawful funds of the United States of America, such amounts (the "Basic Exercise Price") being subject to adjustment in the circumstances set forth hereinbelow. This applicable Basic Exercise Price, until such adjustment is made and thereafter as adjusted from time to time, is called the "Exercise Price." This Warrant is one of a series of Common Stock Purchase Warrants dated December 23, 1996 to purchase an aggregate of 200,000 Warrant Shares, of which 100,000 Warrant Shares may be purchased for a Basic Exercise Price of $5.00 and 100,000 Warrant Shares may be purchased for a Basic Exercise Price of $7.00. The terms and conditions of the Common Stock Purchase Warrants shall be identical in all material respects except that the number of Warrant Shares to which the holder is entitled to purchase may differ. CORP\02437\0068\LCFAS12.19C 970409 2. Exercise of Warrant. This Warrant may be exercised in whole or in part at any time from and after the Commencement Date and on or before the Expiration Date, provided however, if such Expiration Date is a day on which Federal or State chartered banking institutions located in the State of Florida are authorized by law to close, then the Expiration Date shall be deemed to be the next succeeding day which shall not be such a day, by presentation and surrender to the Company at its principal office, or at the office of any transfer agent for the Warrants ("Transfer Agent"), designated by the Company, of this Warrant accompanied by the form of election to purchase on the last page hereof signed by the Holder and upon payment of the Exercise Price for the Warrant Shares purchased thereby, by cashier's check or by wire transfer of immediately available funds. If this Warrant is exercised in part only, the Company or Transfer Agent shall, promptly after presentation of this Warrant upon such exercise, execute and deliver a new Warrant, dated the date hereof, evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder upon the same terms and conditions herein set forth. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares or other securities issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share as provided below. 3. Call Option. At any time prior to the expiration of this Warrant, except as provided below, the Company shall have the right and option, upon notice mailed to the Holder, to call, redeem and acquire all of the Warrants remaining outstanding and unexercised at the date fixed for such redemption in such notice, which redemption date shall be at least 30 days after the date of such notice, for an amount equal to $.01 per underlying share (the "Redemption Price"); provided, that the Company may exercise such right and option only if, for 20 consecutive trading days ending within 10 calendar days prior to the redemption notice date, the closing price per share of the Common Stock equals or exceeds $7.00, such amount being subject to adjustment under the same circumstances and in the same proportion as the Exercise Price. The Holder shall have the right, during the 20-day period immediately following the date of such notice, to exercise the Warrants. If any Warrants are exercised during such 20-day period, this call option shall be deemed not to have been exercised by the Company as to the Warrant Shares so exercised by the Holder. Said notice of redemption shall require the Holder to surrender to the Company, on or before the redemption date, at the offices of the Company, or its warrant agent, if any, the certificate or certificates representing the Warrants to be redeemed. Notwithstanding the fact that any Warrants called for redemption have not been surrendered for redemption and cancellation on the redemption date, after the redemption date, such Warrants shall be deemed to be expired and all rights of the Holder with respect to such unsurrendered Warrants shall cease and terminate, other than the right to receive the Redemption Price. The rights of the Company pursuant to this Section 3 are conditioned upon the registration by the Company of the resale of the Warrant Shares under the Securities Act of 1933, as amended (the "Securities CORP\02437\0068\LCFAS12.19C 970409 -2- Act"), pursuant to a registration statement which is kept current by the Company for at least 120 days after the notice of redemption. 4. Registration Rights. 4.1 If, at any time prior to the Expiration Date, the Holders of a majority of the Warrants Shares shall give notice to the Company requesting that the Company file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Registration Statement") relating to the sale of the Warrant Shares by the Holder, the Company shall promptly give written notice of such proposed Registration Statement to the Holders of such Warrants or Warrant Shares, and to any subsequent permissible transferee of any of the Warrants or Warrant Shares (at the address of such persons appearing on the books of the Company or its transfer agent) which notice shall offer to include the Warrant Shares in the requested Registration Statement. The Company shall, as expeditiously as possible, file and use its reasonable efforts to cause to become effective under the Securities Act, the Registration Statement covering the sale of such of the Warrant Shares by such Holders as the Company has been requested to register for disposition by the Holders thereof, to the extent required to permit the public sale or other public disposition thereof by the Holders. The Company shall cause the Registration Statement to remain effective for a period of at least 120 days from the effective date of the Registration Statement or such earlier date as all of the Warrant Shares have been sold or the Warrants expire (the "Effective Period"). The Holders shall have the right to demand registration of the Warrant Shares as described above on one occasion only. Notwithstanding anything contained herein to the contrary, the Holders may not demand registration of the Warrant Shares if the Warrant Shares may otherwise be sold without registration under the Securities Act or applicable state securities laws and regulations and without limitation as to volume pursuant to Rule 144 of the Securities Act. Notwithstanding anything contained herein, the Company shall not be obligated to file or use its reasonable efforts to cause to become effective a registration statement under this section during any period commencing with the date the Company files a registration statement relating to the sale or exchange by it of its securities in either an underwritten offering or in an offering involving a merger, acquisition, combination or reorganization and ending with the date such registration statement becomes effective. 4.2 In addition, if at any time during the four years after the Commencement Date, the Company shall prepare and file one or more registration statements under the Securities Act (other than a registration statement on Form S-4 (or with regard to any transaction contemplated by Rule 145 promulgated under the Securities Act) or Form S-8 or any successor form of limited purpose and other than a post-effective amendment to any such registration statement), with respect to a public offering of equity or debt securities of the Company, or of any such securities of the Company held by its security holders, the Company will include in any such registration statement such information as is required, and such number of Warrant Shares held by the Holders thereof or their respective designees or transferees as may be requested by them, to permit a public offering of the Warrant Shares so requested; provided, however, that if, in the written opinion of the Company's managing underwriter, if any, for such offering, the inclusion of the Warrant Shares requested to be registered, when added to the securities being registered by the Company or the selling security holder(s), would exceed the CORP\02437\0068\LCFAS12.19C 970409 -3- maximum amount of the Company's securities that can be marketed without otherwise materially and adversely affecting the entire offering, then the Company may exclude from such offering all or that portion of the Warrant Shares requested to be so registered, so that the total number of securities to be registered is within the maximum number of shares that, in the opinion of the managing underwriter, may be marketed without otherwise materially and adversely affecting the entire offering, provided that at least a pro rata amount of the securities that otherwise were proposed to be registered for other stockholders is also excluded. In the event of such a proposed registration, the Company shall furnish the then Holders of Warrant Shares with not less than 20 days' written notice prior to the proposed date of filing of such registration statement. Further notice shall be given by the Company to Holders of Warrant Shares, with respect to subsequent registration statements or post-effective amendments filed by the Company, until such time as all of the Warrant Shares have been registered or may be sold without registration under the Securities Act or applicable state securities laws and regulations pursuant to Rule 144 of the Securities Act. The holders of Warrant Shares shall exercise the rights provided for in this Section 4.2 by giving written notice to the Company, within ten days of receipt of the Company's notice of its intention to file a registration statement. Notwithstanding anything contained herein to the contrary, the Company may delay the effectiveness of such registration statement or withdraw such registration statement; provided, however, the Company must provide the Holders of Warrant Shares with notice of such delay or withdrawal. 4.3 Notwithstanding anything contained herein to the contrary, the Holders shall not be permitted to exercise the registration rights provided for herein with respect to all or such portion of the Warrant Shares as may be sold without registration under the Securities Act or applicable state securities laws and regulations under Rule 144 of the Securities Act. 4.4 The Company shall bear all expenses, incurred in the preparation and filing of such registration statements or post-effective amendment (and related state registrations, to the extent permitted by applicable law) and the furnishing of copies of the preliminary and final prospectus thereof to the Holder, other than expenses of the Holder's counsel, and other than sales commissions or transfer taxes incurred by the then holders with respect to the sale of such securities. 4.5 Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to Section 4.1 or Section 4.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed or go effective and it is therefore essential to defer the filing or effectiveness of such registration statement, then the Company shall have the right to defer taking action with respect to such filing or effectiveness for a period of not more than 90 days after receipt of the request of the Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. 4.6 Notwithstanding the provisions of Sections 4.1 and 4.2, if at any time during which the Company is obligated to maintain the effectiveness of a registration statement pursuant to such Section, counsel to the Company (which counsel shall be experienced in securities matters) has determined in good faith that the filing of such registration statement or CORP\02437\0068\LCFAS12.19C 970409 -4- the compliance by the Company with its disclosure obligations thereunder would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential, then the Company may delay the filing or the effectiveness of such registration statement (if not then filed or effective, as appropriate) and shall not be required to maintain the effectiveness thereof (if previously declared effective) for a period expiring upon the earlier to occur of (i) the date on which such information is disclosed to the public or ceases to be material or the Company is so able to comply with its disclosure obligations, or (ii) 30 days after counsel to the Company makes such good faith determination. There shall not be more than one such delay period with respect to any registration statement after it has been declared effective pursuant to Sections 4.1 and 4.2. Notice of any such delay period and of the termination thereof will be promptly delivered by the Company to each Holder and shall be maintained in confidence by each such Holder. The Holders shall not sell any Warrant Shares during such period as any such registration statement is not current, as advised by the Company. Each Holder shall furnish to the Company such information regarding such Holder and a written description of the contribution proposed by such Holder as the Company may reasonably request. 4.7 Each Holder whose Warrant Shares are included in a registration statement pursuant to an underwritten public offering shall, if requested by the managing underwriter of the public offering, enter into an agreement with the underwriter pursuant to which the Holder will agree not to sell, Transfer or otherwise dispose of the Warrant Shares for such period after consummation of the public offering as may reasonably be requested by the underwriter; up to a maximum of 90 days, without the consent of the underwriter. 5. Reservation of Common Stock. The Company covenants that, during the period this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock to provide for the issuance of the Warrant Shares upon the exercise of this Warrant. This Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Warrant Shares upon the exercise of this Warrant. 6. No Stockholder Rights. This Warrant, as such, shall not entitle the Holder to any rights of a stockholder of the Company, until the Holder has exercised this Warrant in accordance with Section 2 hereof. 7. Adjustment of Exercise Price and Number of Warrant Shares. 7.1 The number and kind of securities issuable upon the exercise of this Warrant shall be subject to adjustment from time to time, and the Company agrees to provide notice upon the happening of certain events, as follows: a. If the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock into a larger or smaller number of shares of Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased or reduced, as of the record date for such recapitalization, in the CORP\02437\0068\LCFAS12.19C 970409 -5- same proportion as the increase or decrease in the outstanding shares of Common Stock, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all of the Warrant Shares issuable hereunder immediately after the record date for such recapitalization shall equal the aggregate amount so payable immediately before such record date. b. If the Company declares a dividend on its Common Stock payable in shares of its Common Stock or securities convertible into shares of its Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares of Common Stock (and shares of Common Stock issuable upon conversion of all such securities convertible into shares of Common Stock) as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date for such dividend shall equal the aggregate amount so payable immediately before such record date. c. If the Company effects a general distribution to holders of its Common Stock, other than as part of the Company's dissolution or liquidation or the winding up of its affairs, of any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, shares of Common Stock or securities convertible into shares of Common Stock), the Company shall give written notice to the Holder of any such general distribution at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before the record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such general distribution, except as otherwise provided herein. d. If the Company offers rights or warrants (other than the Warrant) to all holders of its Common Stock which entitle them to subscribe to or purchase additional shares of Common Stock or securities convertible into shares of Common Stock, the Company shall give written notice of any such proposed offering to the Holder at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before such record date. e. In the event an adjustment in the Exercise Price or the number of Warrant Shares issuable hereunder is made under subsection a. or b. above, and such an event does not occur, then any adjustments in the Exercise Price or number of Warrant Shares issuable upon exercise of this Warrant that were made in accordance with such subsection a. or b. shall be re-adjusted to the Exercise Price and number of Warrant Shares as were in effect immediately prior to the record date for such an event. f. If and whenever the Company issues or sells, or in accordance with Section 7.1 is deemed to have issued or sold, any shares of its Common Stock for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issuance or sale (except for the issuance or deemed issuance of securities in a transaction described in paragraph g. of this Section 7.1), then immediately upon such issuance or sale the Exercise Price will be reduced to an Exercise Price determined by multiplying the Exercise Price CORP\02437\0068\LCFAS12.19C 970409 -6- in effect immediately prior to the issuance or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding prior to the issuance or sale plus (ii) the number of Warrant Shares issuable hereunder that the maximum aggregate amount of consideration receivable by the Company upon such issuance or sale would purchase at the Exercise Price in effect immediately prior to the issuance or sale, and the denominator of which shall be the number of shares of Common Stock deemed outstanding, as hereinafter determined, immediately after such issuance or sale. g. Notwithstanding anything contained herein to the contrary, the following securities or transactions shall be excluded from the operation of paragraph f. of this Section 7.1: (i) The existence and any exercise, conversion and/or exchange of any option, convertible promissory note and/or other convertible or exchangeable security, warrant, or other right to purchase Common Stock, that is outstanding on the date hereof (whether or not currently exercisable, convertible or exchangeable); and (ii) Any grant or exercise of options for Common Stock granted under the Company's stock option plans, in existence as of the date hereof, provided said grant or exercise is not effectuated as a result of any amendment to such plans subsequent to the date hereof, with an exercise price equal to at least the fair market value of the shares of Common Stock on the date of grant. Notwithstanding anything contained herein to the contrary, if the Company amends such plans with the consent of Barber & Bronson Incorporated (which consent shall not be unreasonably withheld or delayed), the securities issued pursuant to such plan, as amended, shall be excluded from the operation of paragraph f. of this Section 7.1. As used herein, the term "fair market value" shall mean the closing bid price, or, if not available, the highest bid price, of the shares of Common Stock as quoted on a national securities exchange, or in the over-the-counter market as reported by Nasdaq or, if not available, by the National Quotation Bureau, Incorporated, as the case may be (or, if there is no bid price on a particular day, then the closing bid price or, if not available, the highest bid price on the nearest trading date before that day and for which such prices are available), and if the shares of Common Stock are not listed on such an exchange or traded in such a market on such particular day, then the fair market value per share shall be determined by mutual agreement of the Board of Directors and the Holders by taking into consideration all relevant factors, including, but not limited to, the Company's net worth, prospective earning power and dividend paying capacity. h. If the Company in any manner grants any rights or options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Rights" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), and the price per share for which Common Stock is issuable upon the exercise of such Rights or upon conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting of such Rights, then the total maximum number of shares of Common Stock issuable upon the exercise of such Rights or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Rights will be deemed to be outstanding and to have been issued and CORP\02437\0068\LCFAS12.19C 970409 -7- sold by the Company for such price per share. For purposes of this Section, the "price per share for which Common Stock is issuable upon exercise of such Rights or upon conversion or exchange of such Convertible Securities" will be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such Rights, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Rights, plus, in the case of Rights that relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the exercise of such Rights or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of such Rights. Except as otherwise provided in Subsections j. and k. below, no adjustment of the Exercise Price will be made when Convertible Securities are actually issued upon the exercise of such Rights or when Common Stock is actually issued upon the exercise of such Rights or the conversion or exchange of such Convertible Securities. i. If the Company in any manner issues or sells any Convertible Securities, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Exercise Price in effect immediately prior to the time of such issuance or sale, then the maximum number of shares of Common Stock then issuable upon conversion or exchange of all such Convertible Securities will be deemed to be outstanding and to have been issued and sold by the Company for such price per share, as determined below. For the purposes of this Section, the "price per share for which Common Stock is issuable upon such conversion or exchange" will be determined by dividing (i) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Subsections j. and k. below, no adjustment of the Exercise Price will be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Convertible Securities for which adjustments of the Exercise Price had been or are to be made pursuant to other provisions of this Section 6, no further adjustment of the Exercise Price will be made by reason of such issuance or sale. j. If the purchase price provided for in any Rights, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time (other than under or by reason of provisions that are designed to protect against dilution of the type set forth in this Section 7 and are no more favorable to the holders of such Rights or Convertible Securities than this Section 7 would have been if this Section 7 were included in such Rights or Convertible Securities), then the Exercise Price in effect at the time of such change will be re-adjusted to the Exercise Price that would have been in effect at such time had such Rights or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or changed conversion rate, as the case may be, at the time initially granted, issued, or sold; and such adjustment of the Exercise Price will be made whether the result thereof is to increase or reduce the Exercise Price then in effect CORP\02437\0068\LCFAS12.19C 970409 -8- under this Warrant, provided that no such adjustment shall increase the Exercise Price above the initial Exercise Price hereof and that such adjustments shall be made by the Board of Directors of the Company, who shall promptly provide notice of the new Exercise Price to the Holder. k. Upon the expiration of any Right, or the termination of any right to convert or exchange any Convertible Security, without the exercise of such Right, or the conversion of such Convertible Security, the Exercise Price then in effect hereunder will be adjusted to the Exercise Price that would have been in effect at the time of such expiration or termination had such Right or Convertible Security never been issued, but such subsequent adjustment shall not affect the number of shares of Common Stock issued upon any exercise of this Warrant prior to the date such adjustment is made. l. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for consideration that includes cash, then the amount of cash consideration actually received by the Company will be deemed to be the cash portion thereof. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for a consideration part or all of which is other than cash, then the amount of the consideration other than cash received by the Company will be the fair value of such consideration as determined by the Board of Directors of the Company, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the market value thereof as of the date of receipt. If any shares of Common Stock, Rights, or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, then the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Rights, or Convertible Securities, as the case may be. m. If any Right is issued in connection with the issuance or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Right by the parties thereto, the Right will be deemed to have been issued without consideration. n. The number of shares of Common Stock deemed outstanding at any given time shall include the number of shares of Common Stock outstanding, as adjusted as provided herein, but shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issuance or sale of Common Stock hereunder. o. No adjustment of the Exercise Price shall be made if the amount of such adjustment would be less than one cent per Warrant Share, but in such case any adjustment that otherwise would be required to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment that, together with any adjustment or adjustments so carried forward, shall amount to not less than one cent per Warrant Share. CORP\02437\0068\LCFAS12.19C 970409 -9- 7.2 In the event of any reorganization or reclassification of the outstanding shares of Common Stock (other than a change in par value, or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination) or in the event of any consolidation or merger of the Company with another entity at any time prior to the expiration of this Warrant, the Holder shall have the right to exercise this Warrant. Upon such exercise, the Holder shall have the right to receive the same kind and number of shares of capital stock and other securities, cash or other property as would have been distributed to the Holder upon such reorganization, reclassification, consolidation or merger. The Holder shall pay upon such exercise the Exercise Price that otherwise would have been payable pursuant to the terms of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution in excess of the then applicable Exercise Price, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price, and in such case the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full, and in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. In the event of any such reorganization, merger or consolidation, the corporation formed by such consolidation or merger or the corporation which shall have acquired the assets of the Company shall execute and deliver a supplement hereto to the foregoing effect, which supplement shall also provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in the Warrant. 7.3 If the Company shall, at any time before the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the right to exercise this Warrant. Upon such exercise the Holder shall have the right to receive, in lieu of the shares of Common Stock of the Company that the Holder otherwise would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any such dissolution, liquidation or winding up with respect to such stock receivable upon exercise of this Warrant on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the Exercise Price provided by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price and, in such case, the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full and, in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. 7.4 Upon each adjustment of the Exercise Price pursuant to Section 7 hereof, the Holder shall thereafter (until another such adjustment) be entitled to purchase, at the adjusted Exercise Price in effect on the date this Warrant is exercised, the number of Warrant Shares, calculated to the nearest number of Warrant Shares, determined by (a) multiplying the number of Warrant Shares purchasable hereunder immediately prior to the adjustment of the Exercise Price by the Exercise Price in effect immediately prior to such adjustment, and (b) dividing the product so obtained by the adjusted Exercise Price in effect on the date of such exercise. The provisions of Section 11 shall apply, however, so that no fractional share of Common Stock or fractional Warrant shall be issued upon exercise of this Warrant. CORP\02437\0068\LCFAS12.19C 970409 -10- 7.5 The Company may retain a firm of independent public accountants of recognized standing (who may be any such firm regularly employed by the Company) to make any computation required under this Section 7, and a certificate signed by such firm shall be conclusive evidence of the correctness of any computation made under this Section 7. 8. Voting Agreement. Upon exercise of the Warrants, the Holder shall agree to vote the Warrant Shares in favor of management's nominees to the Board of Directors for a period of four years or so long as Holder owns the Warrant Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder shall be contingent upon the execution and delivery to the Company of a document providing for the foregoing in a form reasonably satisfactory to the Company. 9. Notice to Holder. So long as this Warrant shall be outstanding (a) if the Company shall pay any dividends or make any distribution upon the Common Stock otherwise than in cash or (b) if the Company shall offer generally to the holders of Common Stock the right to subscribe to or purchase any shares of any class of capital stock or securities convertible into capital stock or any similar rights or (c) if there shall be any capital reorganization of the Company in which the Company is not the surviving entity, recapitalization of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or other transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company, then in such event, the Company shall cause to be mailed by registered or certified mail to the Holder, at least 30 days prior to the relevant date described below (or such shorter period as is reasonably possible if 30 days is not reasonably possible), a notice containing a description of the proposed action and stating the date or expected date on which a record of the Company's stockholders is to be taken for the purpose of any such dividend, distribution of rights, or such reorganization, recapitalization, consolidation, merger, sale, lease or transfer, dissolution, liquidation or winding up is to take place and the date or expected date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event. 10. Certificate of Adjustment. Whenever the Exercise Price or number or type of securities issuable upon exercise of this Warrant is adjusted, as herein provided, the Company shall promptly deliver to the Holder of this Warrant a certificate of an officer of the Company setting forth the nature of such adjustment and a brief statement of the facts requiring such adjustment. 11. No Fractional Shares. No fractional shares of Common Stock will be issued in connection with any subscription hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company's Board of Directors. CORP\02437\0068\LCFAS12.19C 970409 -11- 12. Restrictions on Exercise. 12.1 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, the notice of exercise shall be accompanied by a representation of the Holder to the Company that such shares are being acquired for investment and not with a view to the distribution thereof, and such other representations and documentation as may reasonably be required by the Company, unless in the opinion of counsel to the Company such representations or other documentation is not necessary to comply with such the Securities Act. 12.2 The Company shall not be obligated to deliver any Warrant Shares unless and until the Company has compiled with any requirements of the securities exchange or other self-regulatory body on which the Company's shares of Common Stock may be listed or until there has been qualification under or compliance with such federal or state laws, rules or regulations. The Company agrees and undertakes to comply with such laws, rules or regulations promptly upon receipt by the Company of the Election to Purchase, and in any event by such date as compliance is required. Notwithstanding anything contained herein to the contrary, where the actions described herein may be taken after the issuance of the Warrant Shares, the Company will promptly issue the Warrant Shares and thereafter take such appropriate action. 13. Restrictions on Transfer. 13.1 Neither this Warrant nor any Warrant Shares may be transferred except as follows: (a) to a person who, in the opinion of counsel satisfactory to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 13 with respect to any Transfer of such securities; or (b) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act relating to such securities and the offering thereof for such Transfer. 13.2 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, upon exercise of this Warrant and the issuance of the Warrant Shares, all certificates representing such Warrant Shares shall bear on the face or reverse thereof substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN CORP\02437\0068\LCFAS12.19C 970409 -12- COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. 14. Lost, Stolen or Destroyed Warrants. In the event that the Holder notifies the Company that this Warrant has been lost, stolen or destroyed and either (a) provides a letter, in form satisfactory to the Company, to the effect that it will indemnify the Company from any loss incurred by it in connection therewith, and/or (b) provides an indemnity bond in such amount as is reasonably required by the Company, the Company shall accept such letter and/or indemnity bond in lieu of the surrender of this Warrant as required by Section 2 hereof. 15. Exchange or Assignment of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company, for other Warrants of different denominations, entitling the Holder to purchase in the aggregate the same number of shares purchasable hereunder. Subject to the provisions of this Warrant and receipt by the Company of any required representations and agreements, upon surrender of this Warrant to the Company with the Assignment annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without additional charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. 16. Notices. Notices and other communications to be given to the Holder shall be deemed sufficiently given if delivered by hand, or five days after mailing by registered or certified mail, postage prepaid, to the Holder at 201 South Biscayne Boulevard, Suite 2950, Miami, Florida 33131. Notices or other communications to the Company shall be deemed to have been sufficiently given if delivered by hand or five days after mailing if mailed by registered or certified mail postage prepaid, to the Company at 26 Harbor Park Drive, Port Washington, New 11050. A party may change the address to which notice shall be given by notice pursuant to this Section 16. 17. Enforcement. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Warrant, the successful party will be awarded reasonable attorneys' fees at all trial and appellate levels, expenses and costs. 18. Entire Agreement and Modification. The Company and the Holder of this Warrant hereby represent and warrant that this Warrant is intended to and does contain and embody all of the understandings and agreements, both written and oral, of the parties hereto with respect to the subject matter of this Warrant, and that there exists no oral agreement or understanding, express or implied, whereby the absolute, final and unconditional character and nature of this Warrant shall be in any way invalidated, impaired or affected. A modification or waiver of any of the terms, conditions or provisions of this Warrant shall be effective only if made in writing and executed with the same formality of this Warrant. 19. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without application of the principles of conflicts of laws. CORP\02437\0068\LCFAS12.19C 970409 -13- IN WITNESS WHEREOF, the Company has executed this Warrant as of the 23rd day of December, 1996. SANDATA, INC., a Delaware corporation By: Bert E. Brodsky, President CORP\02437\0068\LCFAS12.19C 970409 -14- ELECTION TO PURCHASE TO: Sandata, Inc. The undersigned hereby irrevocably elects to exercise Warrants represented by this Common Stock Purchase Warrant to purchase ____________________ shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) (Please print name and address) Dated: ____________________, 19__ NOTICE: The signature on this Election to Purchase must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFAS12.19C 970409 -15- ASSIGNMENT FOR VALUE RECEIVED, __________________________________________, the undersigned Holder hereby sells, assigns, and transfers all of the rights of the undersigned under the within Warrant with respect to the number of Shares covered thereby set forth below, unto the Assignee identified below, and does hereby irrevocably constitute and appoint ________________________________________ to effect such transfer of rights on the books of the Company, with full power of substitution: Name of Assignee Address of Assignee No. of Shares Exercise Price Dated: (Signature of Holder) (Print or type name) NOTICE: The signature on this Assignment must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFAS12.19C 970409 -16- EX-10.5 7 FORM OF COMMON STOCK PURCHASE WARRANT VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 1997. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT. SANDATA, INC. COMMON STOCK PURCHASE WARRANT Warrant Certificate No. 1~ 1. Number and Price of Shares of Common Stock Subject to Common Stock Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~ (the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware corporation (the "Company"), at any time and from time to time during the period from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida Time, on December 22, 1997 (the "Expiration Date"), at which time this Common Stock Purchase Warrant (the "Warrant") shall expire and become void, an aggregate of 3~ shares (the "Warrant Shares") of the Company's common stock, $.001 par value per share (the "Common Stock"), which number of Warrant Shares is subject to adjustment from time to time, as described below, upon payment therefor of the exercise price of $5.00 per Warrant Share, in lawful funds of the United States of America, such amounts (the "Basic Exercise Price") being subject to adjustment in the circumstances set forth hereinbelow. This applicable Basic Exercise Price, until such adjustment is made and thereafter as adjusted from time to time, is called the "Exercise Price." This Warrant is one of a series of Common Stock Purchase Warrants dated December 23, 1996 to purchase an aggregate of 200,000 Warrant Shares, of which 100,000 Warrant Shares may be purchased for a Basic Exercise Price of $5.00 and 100,000 Warrant Shares may be purchased for a Basic Exercise Price of $7.00. The terms and conditions of the Common Stock Purchase Warrants shall be identical in all material respects except that the number of Warrant Shares to which the holder is entitled to purchase may differ. CORP\02437\0068\LCFAS12.19C 970409 2. Exercise of Warrant. This Warrant may be exercised in whole or in part at any time from and after the Commencement Date and on or before the Expiration Date, provided however, if such Expiration Date is a day on which Federal or State chartered banking institutions located in the State of Florida are authorized by law to close, then the Expiration Date shall be deemed to be the next succeeding day which shall not be such a day, by presentation and surrender to the Company at its principal office, or at the office of any transfer agent for the Warrants ("Transfer Agent"), designated by the Company, of this Warrant accompanied by the form of election to purchase on the last page hereof signed by the Holder and upon payment of the Exercise Price for the Warrant Shares purchased thereby, by cashier's check or by wire transfer of immediately available funds. If this Warrant is exercised in part only, the Company or Transfer Agent shall, promptly after presentation of this Warrant upon such exercise, execute and deliver a new Warrant, dated the date hereof, evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder upon the same terms and conditions herein set forth. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares or other securities issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share as provided below. 3. Call Option. At any time prior to the expiration of this Warrant, except as provided below, the Company shall have the right and option, upon notice mailed to the Holder, to call, redeem and acquire all of the Warrants remaining outstanding and unexercised at the date fixed for such redemption in such notice, which redemption date shall be at least 30 days after the date of such notice, for an amount equal to $.01 per underlying share (the "Redemption Price"); provided, that the Company may exercise such right and option only if, for 20 consecutive trading days ending within 10 calendar days prior to the redemption notice date, the closing price per share of the Common Stock equals or exceeds $7.00, such amount being subject to adjustment under the same circumstances and in the same proportion as the Exercise Price. The Holder shall have the right, during the 20-day period immediately following the date of such notice, to exercise the Warrants. If any Warrants are exercised during such 20-day period, this call option shall be deemed not to have been exercised by the Company as to the Warrant Shares so exercised by the Holder. Said notice of redemption shall require the Holder to surrender to the Company, on or before the redemption date, at the offices of the Company, or its warrant agent, if any, the certificate or certificates representing the Warrants to be redeemed. Notwithstanding the fact that any Warrants called for redemption have not been surrendered for redemption and cancellation on the redemption date, after the redemption date, such Warrants shall be deemed to be expired and all rights of the Holder with respect to such unsurrendered Warrants shall cease and terminate, other than the right to receive the Redemption Price. The rights of the Company pursuant to this Section 3 are conditioned upon the registration by the Company of the resale of the Warrant Shares under the Securities Act of 1933, as amended (the "Securities CORP\02437\0068\LCFAS12.19C 970409 -2- Act"), pursuant to a registration statement which is kept current by the Company for at least 120 days after the notice of redemption. 4. Registration Rights. 4.1 If, at any time prior to the Expiration Date, the Holders of a majority of the Warrants Shares shall give notice to the Company requesting that the Company file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Registration Statement") relating to the sale of the Warrant Shares by the Holder, the Company shall promptly give written notice of such proposed Registration Statement to the Holders of such Warrants or Warrant Shares, and to any subsequent permissible transferee of any of the Warrants or Warrant Shares (at the address of such persons appearing on the books of the Company or its transfer agent) which notice shall offer to include the Warrant Shares in the requested Registration Statement. The Company shall, as expeditiously as possible, file and use its reasonable efforts to cause to become effective under the Securities Act, the Registration Statement covering the sale of such of the Warrant Shares by such Holders as the Company has been requested to register for disposition by the Holders thereof, to the extent required to permit the public sale or other public disposition thereof by the Holders. The Company shall cause the Registration Statement to remain effective for a period of at least 120 days from the effective date of the Registration Statement or such earlier date as all of the Warrant Shares have been sold or the Warrants expire (the "Effective Period"). The Holders shall have the right to demand registration of the Warrant Shares as described above on one occasion only. Notwithstanding anything contained herein to the contrary, the Holders may not demand registration of the Warrant Shares if the Warrant Shares may otherwise be sold without registration under the Securities Act or applicable state securities laws and regulations and without limitation as to volume pursuant to Rule 144 of the Securities Act. Notwithstanding anything contained herein, the Company shall not be obligated to file or use its reasonable efforts to cause to become effective a registration statement under this section during any period commencing with the date the Company files a registration statement relating to the sale or exchange by it of its securities in either an underwritten offering or in an offering involving a merger, acquisition, combination or reorganization and ending with the date such registration statement becomes effective. 4.2 In addition, if at any time during the four years after the Commencement Date, the Company shall prepare and file one or more registration statements under the Securities Act (other than a registration statement on Form S-4 (or with regard to any transaction contemplated by Rule 145 promulgated under the Securities Act) or Form S-8 or any successor form of limited purpose and other than a post-effective amendment to any such registration statement), with respect to a public offering of equity or debt securities of the Company, or of any such securities of the Company held by its security holders, the Company will include in any such registration statement such information as is required, and such number of Warrant Shares held by the Holders thereof or their respective designees or transferees as may be requested by them, to permit a public offering of the Warrant Shares so requested; provided, however, that if, in the written opinion of the Company's managing underwriter, if any, for such offering, the inclusion of the Warrant Shares requested to be registered, when added to the securities being registered by the Company or the selling security holder(s), would exceed the CORP\02437\0068\LCFAS12.19C 970409 -3- maximum amount of the Company's securities that can be marketed without otherwise materially and adversely affecting the entire offering, then the Company may exclude from such offering all or that portion of the Warrant Shares requested to be so registered, so that the total number of securities to be registered is within the maximum number of shares that, in the opinion of the managing underwriter, may be marketed without otherwise materially and adversely affecting the entire offering, provided that at least a pro rata amount of the securities that otherwise were proposed to be registered for other stockholders is also excluded. In the event of such a proposed registration, the Company shall furnish the then Holders of Warrant Shares with not less than 20 days' written notice prior to the proposed date of filing of such registration statement. Further notice shall be given by the Company to Holders of Warrant Shares, with respect to subsequent registration statements or post-effective amendments filed by the Company, until such time as all of the Warrant Shares have been registered or may be sold without registration under the Securities Act or applicable state securities laws and regulations pursuant to Rule 144 of the Securities Act. The holders of Warrant Shares shall exercise the rights provided for in this Section 4.2 by giving written notice to the Company, within ten days of receipt of the Company's notice of its intention to file a registration statement. Notwithstanding anything contained herein to the contrary, the Company may delay the effectiveness of such registration statement or withdraw such registration statement; provided, however, the Company must provide the Holders of Warrant Shares with notice of such delay or withdrawal. 4.3 Notwithstanding anything contained herein to the contrary, the Holders shall not be permitted to exercise the registration rights provided for herein with respect to all or such portion of the Warrant Shares as may be sold without registration under the Securities Act or applicable state securities laws and regulations under Rule 144 of the Securities Act. 4.4 The Company shall bear all expenses, incurred in the preparation and filing of such registration statements or post-effective amendment (and related state registrations, to the extent permitted by applicable law) and the furnishing of copies of the preliminary and final prospectus thereof to the Holder, other than expenses of the Holder's counsel, and other than sales commissions or transfer taxes incurred by the then holders with respect to the sale of such securities. 4.5 Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to Section 4.1 or Section 4.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed or go effective and it is therefore essential to defer the filing or effectiveness of such registration statement, then the Company shall have the right to defer taking action with respect to such filing or effectiveness for a period of not more than 90 days after receipt of the request of the Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. 4.6 Notwithstanding the provisions of Sections 4.1 and 4.2, if at any time during which the Company is obligated to maintain the effectiveness of a registration statement pursuant to such Section, counsel to the Company (which counsel shall be experienced in securities matters) has determined in good faith that the filing of such registration statement or CORP\02437\0068\LCFAS12.19C 970409 -4- the compliance by the Company with its disclosure obligations thereunder would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential, then the Company may delay the filing or the effectiveness of such registration statement (if not then filed or effective, as appropriate) and shall not be required to maintain the effectiveness thereof (if previously declared effective) for a period expiring upon the earlier to occur of (i) the date on which such information is disclosed to the public or ceases to be material or the Company is so able to comply with its disclosure obligations, or (ii) 30 days after counsel to the Company makes such good faith determination. There shall not be more than one such delay period with respect to any registration statement after it has been declared effective pursuant to Sections 4.1 and 4.2. Notice of any such delay period and of the termination thereof will be promptly delivered by the Company to each Holder and shall be maintained in confidence by each such Holder. The Holders shall not sell any Warrant Shares during such period as any such registration statement is not current, as advised by the Company. Each Holder shall furnish to the Company such information regarding such Holder and a written description of the contribution proposed by such Holder as the Company may reasonably request. 4.7 Each Holder whose Warrant Shares are included in a registration statement pursuant to an underwritten public offering shall, if requested by the managing underwriter of the public offering, enter into an agreement with the underwriter pursuant to which the Holder will agree not to sell, Transfer or otherwise dispose of the Warrant Shares for such period after consummation of the public offering as may reasonably be requested by the underwriter; up to a maximum of 90 days, without the consent of the underwriter. 5. Reservation of Common Stock. The Company covenants that, during the period this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock to provide for the issuance of the Warrant Shares upon the exercise of this Warrant. This Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Warrant Shares upon the exercise of this Warrant. 6. No Stockholder Rights. This Warrant, as such, shall not entitle the Holder to any rights of a stockholder of the Company, until the Holder has exercised this Warrant in accordance with Section 2 hereof. 7. Adjustment of Exercise Price and Number of Warrant Shares. 7.1 The number and kind of securities issuable upon the exercise of this Warrant shall be subject to adjustment from time to time, and the Company agrees to provide notice upon the happening of certain events, as follows: a. If the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock into a larger or smaller number of shares of Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased or reduced, as of the record date for such recapitalization, in the CORP\02437\0068\LCFAS12.19C 970409 -5- same proportion as the increase or decrease in the outstanding shares of Common Stock, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all of the Warrant Shares issuable hereunder immediately after the record date for such recapitalization shall equal the aggregate amount so payable immediately before such record date. b. If the Company declares a dividend on its Common Stock payable in shares of its Common Stock or securities convertible into shares of its Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares of Common Stock (and shares of Common Stock issuable upon conversion of all such securities convertible into shares of Common Stock) as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date for such dividend shall equal the aggregate amount so payable immediately before such record date. c. If the Company effects a general distribution to holders of its Common Stock, other than as part of the Company's dissolution or liquidation or the winding up of its affairs, of any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, shares of Common Stock or securities convertible into shares of Common Stock), the Company shall give written notice to the Holder of any such general distribution at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before the record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such general distribution, except as otherwise provided herein. d. If the Company offers rights or warrants (other than the Warrant) to all holders of its Common Stock which entitle them to subscribe to or purchase additional shares of Common Stock or securities convertible into shares of Common Stock, the Company shall give written notice of any such proposed offering to the Holder at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before such record date. e. In the event an adjustment in the Exercise Price or the number of Warrant Shares issuable hereunder is made under subsection a. or b. above, and such an event does not occur, then any adjustments in the Exercise Price or number of Warrant Shares issuable upon exercise of this Warrant that were made in accordance with such subsection a. or b. shall be re-adjusted to the Exercise Price and number of Warrant Shares as were in effect immediately prior to the record date for such an event. f. If and whenever the Company issues or sells, or in accordance with Section 7.1 is deemed to have issued or sold, any shares of its Common Stock for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issuance or sale (except for the issuance or deemed issuance of securities in a transaction described in paragraph g. of this Section 7.1), then immediately upon such issuance or sale the Exercise Price will be reduced to an Exercise Price determined by multiplying the Exercise Price CORP\02437\0068\LCFAS12.19C 970409 -6- in effect immediately prior to the issuance or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding prior to the issuance or sale plus (ii) the number of Warrant Shares issuable hereunder that the maximum aggregate amount of consideration receivable by the Company upon such issuance or sale would purchase at the Exercise Price in effect immediately prior to the issuance or sale, and the denominator of which shall be the number of shares of Common Stock deemed outstanding, as hereinafter determined, immediately after such issuance or sale. g. Notwithstanding anything contained herein to the contrary, the following securities or transactions shall be excluded from the operation of paragraph f. of this Section 7.1: (i) The existence and any exercise, conversion and/or exchange of any option, convertible promissory note and/or other convertible or exchangeable security, warrant, or other right to purchase Common Stock, that is outstanding on the date hereof (whether or not currently exercisable, convertible or exchangeable); and (ii) Any grant or exercise of options for Common Stock granted under the Company's stock option plans, in existence as of the date hereof, provided said grant or exercise is not effectuated as a result of any amendment to such plans subsequent to the date hereof, with an exercise price equal to at least the fair market value of the shares of Common Stock on the date of grant. Notwithstanding anything contained herein to the contrary, if the Company amends such plans with the consent of Barber & Bronson Incorporated (which consent shall not be unreasonably withheld or delayed), the securities issued pursuant to such plan, as amended, shall be excluded from the operation of paragraph f. of this Section 7.1. As used herein, the term "fair market value" shall mean the closing bid price, or, if not available, the highest bid price, of the shares of Common Stock as quoted on a national securities exchange, or in the over-the-counter market as reported by Nasdaq or, if not available, by the National Quotation Bureau, Incorporated, as the case may be (or, if there is no bid price on a particular day, then the closing bid price or, if not available, the highest bid price on the nearest trading date before that day and for which such prices are available), and if the shares of Common Stock are not listed on such an exchange or traded in such a market on such particular day, then the fair market value per share shall be determined by mutual agreement of the Board of Directors and the Holders by taking into consideration all relevant factors, including, but not limited to, the Company's net worth, prospective earning power and dividend paying capacity. h. If the Company in any manner grants any rights or options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Rights" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), and the price per share for which Common Stock is issuable upon the exercise of such Rights or upon conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting of such Rights, then the total maximum number of shares of Common Stock issuable upon the exercise of such Rights or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Rights will be deemed to be outstanding and to have been issued and CORP\02437\0068\LCFAS12.19C 970409 -7- sold by the Company for such price per share. For purposes of this Section, the "price per share for which Common Stock is issuable upon exercise of such Rights or upon conversion or exchange of such Convertible Securities" will be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such Rights, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Rights, plus, in the case of Rights that relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the exercise of such Rights or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of such Rights. Except as otherwise provided in Subsections j. and k. below, no adjustment of the Exercise Price will be made when Convertible Securities are actually issued upon the exercise of such Rights or when Common Stock is actually issued upon the exercise of such Rights or the conversion or exchange of such Convertible Securities. i. If the Company in any manner issues or sells any Convertible Securities, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Exercise Price in effect immediately prior to the time of such issuance or sale, then the maximum number of shares of Common Stock then issuable upon conversion or exchange of all such Convertible Securities will be deemed to be outstanding and to have been issued and sold by the Company for such price per share, as determined below. For the purposes of this Section, the "price per share for which Common Stock is issuable upon such conversion or exchange" will be determined by dividing (i) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Subsections j. and k. below, no adjustment of the Exercise Price will be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Convertible Securities for which adjustments of the Exercise Price had been or are to be made pursuant to other provisions of this Section 6, no further adjustment of the Exercise Price will be made by reason of such issuance or sale. j. If the purchase price provided for in any Rights, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time (other than under or by reason of provisions that are designed to protect against dilution of the type set forth in this Section 7 and are no more favorable to the holders of such Rights or Convertible Securities than this Section 7 would have been if this Section 7 were included in such Rights or Convertible Securities), then the Exercise Price in effect at the time of such change will be re-adjusted to the Exercise Price that would have been in effect at such time had such Rights or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or changed conversion rate, as the case may be, at the time initially granted, issued, or sold; and such adjustment of the Exercise Price will be made whether the result thereof is to increase or reduce the Exercise Price then in effect CORP\02437\0068\LCFAS12.19C 970409 -8- under this Warrant, provided that no such adjustment shall increase the Exercise Price above the initial Exercise Price hereof and that such adjustments shall be made by the Board of Directors of the Company, who shall promptly provide notice of the new Exercise Price to the Holder. k. Upon the expiration of any Right, or the termination of any right to convert or exchange any Convertible Security, without the exercise of such Right, or the conversion of such Convertible Security, the Exercise Price then in effect hereunder will be adjusted to the Exercise Price that would have been in effect at the time of such expiration or termination had such Right or Convertible Security never been issued, but such subsequent adjustment shall not affect the number of shares of Common Stock issued upon any exercise of this Warrant prior to the date such adjustment is made. l. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for consideration that includes cash, then the amount of cash consideration actually received by the Company will be deemed to be the cash portion thereof. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for a consideration part or all of which is other than cash, then the amount of the consideration other than cash received by the Company will be the fair value of such consideration as determined by the Board of Directors of the Company, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the market value thereof as of the date of receipt. If any shares of Common Stock, Rights, or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, then the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Rights, or Convertible Securities, as the case may be. m. If any Right is issued in connection with the issuance or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Right by the parties thereto, the Right will be deemed to have been issued without consideration. n. The number of shares of Common Stock deemed outstanding at any given time shall include the number of shares of Common Stock outstanding, as adjusted as provided herein, but shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issuance or sale of Common Stock hereunder. o. No adjustment of the Exercise Price shall be made if the amount of such adjustment would be less than one cent per Warrant Share, but in such case any adjustment that otherwise would be required to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment that, together with any adjustment or adjustments so carried forward, shall amount to not less than one cent per Warrant Share. CORP\02437\0068\LCFAS12.19C 970409 -9- 7.2 In the event of any reorganization or reclassification of the outstanding shares of Common Stock (other than a change in par value, or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination) or in the event of any consolidation or merger of the Company with another entity at any time prior to the expiration of this Warrant, the Holder shall have the right to exercise this Warrant. Upon such exercise, the Holder shall have the right to receive the same kind and number of shares of capital stock and other securities, cash or other property as would have been distributed to the Holder upon such reorganization, reclassification, consolidation or merger. The Holder shall pay upon such exercise the Exercise Price that otherwise would have been payable pursuant to the terms of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution in excess of the then applicable Exercise Price, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price, and in such case the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full, and in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. In the event of any such reorganization, merger or consolidation, the corporation formed by such consolidation or merger or the corporation which shall have acquired the assets of the Company shall execute and deliver a supplement hereto to the foregoing effect, which supplement shall also provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in the Warrant. 7.3 If the Company shall, at any time before the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the right to exercise this Warrant. Upon such exercise the Holder shall have the right to receive, in lieu of the shares of Common Stock of the Company that the Holder otherwise would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any such dissolution, liquidation or winding up with respect to such stock receivable upon exercise of this Warrant on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the Exercise Price provided by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price and, in such case, the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full and, in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. 7.4 Upon each adjustment of the Exercise Price pursuant to Section 7 hereof, the Holder shall thereafter (until another such adjustment) be entitled to purchase, at the adjusted Exercise Price in effect on the date this Warrant is exercised, the number of Warrant Shares, calculated to the nearest number of Warrant Shares, determined by (a) multiplying the number of Warrant Shares purchasable hereunder immediately prior to the adjustment of the Exercise Price by the Exercise Price in effect immediately prior to such adjustment, and (b) dividing the product so obtained by the adjusted Exercise Price in effect on the date of such exercise. The provisions of Section 11 shall apply, however, so that no fractional share of Common Stock or fractional Warrant shall be issued upon exercise of this Warrant. CORP\02437\0068\LCFAS12.19C 970409 -10- 7.5 The Company may retain a firm of independent public accountants of recognized standing (who may be any such firm regularly employed by the Company) to make any computation required under this Section 7, and a certificate signed by such firm shall be conclusive evidence of the correctness of any computation made under this Section 7. 8. Voting Agreement. Upon exercise of the Warrants, the Holder shall agree to vote the Warrant Shares in favor of management's nominees to the Board of Directors for a period of four years or so long as Holder owns the Warrant Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder shall be contingent upon the execution and delivery to the Company of a document providing for the foregoing in a form reasonably satisfactory to the Company. 9. Notice to Holder. So long as this Warrant shall be outstanding (a) if the Company shall pay any dividends or make any distribution upon the Common Stock otherwise than in cash or (b) if the Company shall offer generally to the holders of Common Stock the right to subscribe to or purchase any shares of any class of capital stock or securities convertible into capital stock or any similar rights or (c) if there shall be any capital reorganization of the Company in which the Company is not the surviving entity, recapitalization of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or other transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company, then in such event, the Company shall cause to be mailed by registered or certified mail to the Holder, at least 30 days prior to the relevant date described below (or such shorter period as is reasonably possible if 30 days is not reasonably possible), a notice containing a description of the proposed action and stating the date or expected date on which a record of the Company's stockholders is to be taken for the purpose of any such dividend, distribution of rights, or such reorganization, recapitalization, consolidation, merger, sale, lease or transfer, dissolution, liquidation or winding up is to take place and the date or expected date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event. 10. Certificate of Adjustment. Whenever the Exercise Price or number or type of securities issuable upon exercise of this Warrant is adjusted, as herein provided, the Company shall promptly deliver to the Holder of this Warrant a certificate of an officer of the Company setting forth the nature of such adjustment and a brief statement of the facts requiring such adjustment. 11. No Fractional Shares. No fractional shares of Common Stock will be issued in connection with any subscription hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company's Board of Directors. CORP\02437\0068\LCFAS12.19C 970409 -11- 12. Restrictions on Exercise. 12.1 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, the notice of exercise shall be accompanied by a representation of the Holder to the Company that such shares are being acquired for investment and not with a view to the distribution thereof, and such other representations and documentation as may reasonably be required by the Company, unless in the opinion of counsel to the Company such representations or other documentation is not necessary to comply with such the Securities Act. 12.2 The Company shall not be obligated to deliver any Warrant Shares unless and until the Company has compiled with any requirements of the securities exchange or other self-regulatory body on which the Company's shares of Common Stock may be listed or until there has been qualification under or compliance with such federal or state laws, rules or regulations. The Company agrees and undertakes to comply with such laws, rules or regulations promptly upon receipt by the Company of the Election to Purchase, and in any event by such date as compliance is required. Notwithstanding anything contained herein to the contrary, where the actions described herein may be taken after the issuance of the Warrant Shares, the Company will promptly issue the Warrant Shares and thereafter take such appropriate action. 13. Restrictions on Transfer. 13.1 Neither this Warrant nor any Warrant Shares may be transferred except as follows: (a) to a person who, in the opinion of counsel satisfactory to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 13 with respect to any Transfer of such securities; or (b) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act relating to such securities and the offering thereof for such Transfer. 13.2 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, upon exercise of this Warrant and the issuance of the Warrant Shares, all certificates representing such Warrant Shares shall bear on the face or reverse thereof substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN CORP\02437\0068\LCFAS12.19C 970409 -12- COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. 14. Lost, Stolen or Destroyed Warrants. In the event that the Holder notifies the Company that this Warrant has been lost, stolen or destroyed and either (a) provides a letter, in form satisfactory to the Company, to the effect that it will indemnify the Company from any loss incurred by it in connection therewith, and/or (b) provides an indemnity bond in such amount as is reasonably required by the Company, the Company shall accept such letter and/or indemnity bond in lieu of the surrender of this Warrant as required by Section 2 hereof. 15. Exchange or Assignment of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company, for other Warrants of different denominations, entitling the Holder to purchase in the aggregate the same number of shares purchasable hereunder. Subject to the provisions of this Warrant and receipt by the Company of any required representations and agreements, upon surrender of this Warrant to the Company with the Assignment annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without additional charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. 16. Notices. Notices and other communications to be given to the Holder shall be deemed sufficiently given if delivered by hand, or five days after mailing by registered or certified mail, postage prepaid, to the Holder at 201 South Biscayne Boulevard, Suite 2950, Miami, Florida 33131. Notices or other communications to the Company shall be deemed to have been sufficiently given if delivered by hand or five days after mailing if mailed by registered or certified mail postage prepaid, to the Company at 26 Harbor Park Drive, Port Washington, New 11050. A party may change the address to which notice shall be given by notice pursuant to this Section 16. 17. Enforcement. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Warrant, the successful party will be awarded reasonable attorneys' fees at all trial and appellate levels, expenses and costs. 18. Entire Agreement and Modification. The Company and the Holder of this Warrant hereby represent and warrant that this Warrant is intended to and does contain and embody all of the understandings and agreements, both written and oral, of the parties hereto with respect to the subject matter of this Warrant, and that there exists no oral agreement or understanding, express or implied, whereby the absolute, final and unconditional character and nature of this Warrant shall be in any way invalidated, impaired or affected. A modification or waiver of any of the terms, conditions or provisions of this Warrant shall be effective only if made in writing and executed with the same formality of this Warrant. 19. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without application of the principles of conflicts of laws. CORP\02437\0068\LCFAS12.19C 970409 -13- IN WITNESS WHEREOF, the Company has executed this Warrant as of the 23rd day of December, 1996. SANDATA, INC., a Delaware corporation By: Bert E. Brodsky, President CORP\02437\0068\LCFAS12.19C 970409 -14- ELECTION TO PURCHASE TO: Sandata, Inc. The undersigned hereby irrevocably elects to exercise Warrants represented by this Common Stock Purchase Warrant to purchase ____________________ shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) (Please print name and address) Dated: ____________________, 19__ NOTICE: The signature on this Election to Purchase must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFAS12.19C 970409 -15- ASSIGNMENT FOR VALUE RECEIVED, __________________________________________, the undersigned Holder hereby sells, assigns, and transfers all of the rights of the undersigned under the within Warrant with respect to the number of Shares covered thereby set forth below, unto the Assignee identified below, and does hereby irrevocably constitute and appoint ________________________________________ to effect such transfer of rights on the books of the Company, with full power of substitution: Name of Assignee Address of Assignee No. of Shares Exercise Price Dated: (Signature of Holder) (Print or type name) NOTICE: The signature on this Assignment must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFAS12.19C 970409 -16- EX-10.7 8 FORM OF REDEEMABLE COMMON STOCK PURCHASE WARRANT VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 2001. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT. SANDATA, INC. REDEEMABLE COMMON STOCK PURCHASE WARRANT Warrant Certificate No. 1~ 1. Number and Price of Shares of Common Stock Subject to Common Stock Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~ (the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware corporation (the "Company"), at any time and from time to time during the period from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida Time, on December 22, 2001 (the "Expiration Date"), at which time this Redeemable Common Stock Purchase Warrant (the "Warrant") shall expire and become void, an aggregate of 3~ shares (the "Warrant Shares") of the Company's common stock, $.001 par value per share (the "Common Stock"), which number of Warrant Shares is subject to adjustment from time to time, as described below, upon payment therefor of the exercise price of $7.00 per Warrant Share, in lawful funds of the United States of America, such amounts (the "Basic Exercise Price") being subject to adjustment in the circumstances set forth hereinbelow. This applicable Basic Exercise Price, until such adjustment is made and thereafter as adjusted from time to time, is called the "Exercise Price." 2. Exercise of Warrant. This Warrant may be exercised in whole or in part at any time from and after the Commencement Date and on or before the Expiration Date, provided however, if such Expiration Date is a day on which Federal or State chartered banking institutions located in the State of Florida are authorized by law to close, then the Expiration Date shall be deemed to be the next succeeding day which shall not be such a day, by presentation and surrender to the Company at its principal office, or at the office of any transfer agent for the Warrants ("Transfer Agent"), designated by the Company, of this Warrant CORP\02437\0068\LCFJLS12.21A 970408 -1- accompanied by the form of election to purchase on the last page hereof signed by the Holder and upon payment of the Exercise Price for the Warrant Shares purchased thereby, by cashier's check or by wire transfer of immediately available funds. If this Warrant is exercised in part only, the Company or Transfer Agent shall, promptly after presentation of this Warrant upon such exercise, execute and deliver a new Warrant, dated the date hereof, evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder upon the same terms and conditions herein set forth. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the Warrant Shares or other securities issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share as provided below. 3. Call Option. At any time prior to the expiration of this Warrant, except as provided below, the Company shall have the right and option, upon notice mailed to the Holder, to call, redeem and acquire all of the Warrants remaining outstanding and unexercised at the date fixed for such redemption in such notice, which redemption date shall be at least 30 days after the date of such notice, for an amount equal to $.01 per underlying share (the "Redemption Price"); provided, that the Company may exercise such right and option only if, for 20 consecutive trading days ending within 10 calendar days prior to the redemption notice date, the closing price per share of the Common Stock equals or exceeds $9.00, such amount being subject to adjustment under the same circumstances and in the same proportion as the Exercise Price. The Holder shall have the right, during the 20-day period immediately following the date of such notice, to exercise the Warrants. If any Warrants are exercised during such 20-day period, this call option shall be deemed not to have been exercised by the Company as to the Warrant Shares so exercised by the Holder. Said notice of redemption shall require the Holder to surrender to the Company, on or before the redemption date, at the offices of the Company, or its warrant agent, if any, the certificate or certificates representing the Warrants to be redeemed. Notwithstanding the fact that any Warrants called for redemption have not been surrendered for redemption and cancellation on the redemption date, after the redemption date, such Warrants shall be deemed to be expired and all rights of the Holder with respect to such unsurrendered Warrants shall cease and terminate, other than the right to receive the Redemption Price. The rights of the Company pursuant to this Section 3 are conditioned upon the registration by the Company of the resale of the Warrant Shares under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement which is kept current by the Company for at least 120 days after the notice of redemption. CORP\02437\0068\LCFJLS12.21A 970408 -2- 4. Registration Rights. 4.1 The Company will, as soon as reasonably possible following issuance of these Warrants, file a registration statement with the Securities and Exchange Commission (the "Commission") for the purpose of registering the re-sale by the Holders thereof of the Common Stock issuable upon exercise of the Warrant. 4.2 In addition, if, at any time prior to the Expiration Date, the Holders of a majority of the Warrants Shares shall give notice to the Company requesting that the Company file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Registration Statement") relating to the offer and re-sale of the Warrant Shares by the Holder, the Company shall promptly give written notice of such proposed Registration Statement to the Holders of such Warrants or Warrant Shares, and to any subsequent permissible transferee of any of the Warrants or Warrant Shares (at the address of such persons appearing on the books of the Company or its transfer agent) which notice shall offer to include the Warrant Shares in the requested Registration Statement. The Company shall, as expeditiously as possible, file and use its reasonable efforts to cause to become effective under the Securities Act, the Registration Statement covering the sale of such of the Warrant Shares by such Holders as the Company has been requested to register for disposition by the Holders thereof, to the extent required to permit the public sale or other public disposition thereof by the Holders. The Company shall cause the Registration Statement to remain effective for a period of at least 120 days from the effective date of the Registration Statement or such earlier date as all of the Warrant Shares have been sold or the Warrants expire (the "Effective Period"). The Holders shall have the right to demand registration of the Warrant Shares as described above on one occasion only. Notwithstanding anything contained herein to the contrary, the Holders may not demand registration of the Warrant Shares if the Warrant Shares may otherwise be sold without registration under the Securities Act or applicable state securities laws and regulations and without limitation as to volume pursuant to Rule 144 of the Securities Act. Notwithstanding anything contained herein, the Company shall not be obligated to file or use its reasonable efforts to cause to become effective a registration statement under this section during any period commencing with the date the Company files a registration statement relating to the sale or exchange by it of its securities in either an underwritten offering or in an offering involving a merger, acquisition, combination or reorganization and ending with the date such registration statement becomes effective. 4.3 In addition, if at any time prior to the Expiration Date, the Company shall prepare and file one or more registration statements under the Securities Act (other than a registration statement on Form S-4 (or with regard to any transaction contemplated by Rule 145 promulgated under the Securities Act) or Form S-8 or any successor form of limited purpose and other than a post-effective amendment to any such registration statement), to the extent permitted by law, including, without limitation, the rules and regulations of the Commission, with respect to a public offering of equity or debt securities of the Company, or of any such securities of the Company held by its security holders, the Company will include in any such registration statement such information as is required, and such number of Warrant Shares held by the CORP\02437\0068\LCFJLS12.21A 970408 -3- Holders thereof or their respective designees or transferees as may be requested by them, to permit a public offering of the Warrant Shares so requested; provided, however, that if, in the written opinion of the Company's managing underwriter, if any, for such offering, the inclusion of the Warrant Shares requested to be registered, when added to the securities being registered by the Company or the selling security holder(s), would exceed the maximum amount of the Company's securities that can be marketed without otherwise materially and adversely affecting the entire offering, then the Company may exclude from such offering all or that portion of the Warrant Shares requested to be so registered, so that the total number of securities to be registered is within the maximum number of shares that, in the opinion of the managing underwriter, may be marketed without otherwise materially and adversely affecting the entire offering, provided that at least a pro rata amount of the securities that otherwise were proposed to be registered for other stockholders is also excluded. In the event of such a proposed registration (other than the registration statement contemplated by Section 4.1 above), the Company shall furnish the then Holders of Warrant Shares with not less than 20 days' written notice prior to the proposed date of filing of such registration statement. Further notice shall be given by the Company to Holders of Warrant Shares, with respect to subsequent registration statements or post-effective amendments filed by the Company, until such time as all of the Warrant Shares have been registered or may be sold without registration under the Securities Act or applicable state securities laws and regulations pursuant to Rule 144 of the Securities Act. The holders of Warrant Shares shall exercise the rights provided for in this Section 4.3 by giving written notice to the Company, within ten days of receipt of the Company's notice of its intention to file a registration statement. Notwithstanding anything contained herein to the contrary, the Company may delay the effectiveness of such registration statement or withdraw such registration statement; provided, however, the Company must provide the Holders of Warrant Shares with notice of such delay or withdrawal. 4.4 Notwithstanding anything contained herein to the contrary, the Holders shall not be permitted to exercise the registration rights provided for herein with respect to all or such portion of the Warrant Shares as may be sold without registration under the Securities Act or applicable state securities laws and regulations under Rule 144 of the Securities Act. 4.5 The Company shall bear all expenses, incurred in the preparation and filing of such registration statements or post-effective amendment (and related state registrations, to the extent permitted by applicable law) and the furnishing of copies of the preliminary and final prospectus thereof to the Holder, other than expenses of the Holder's counsel, and other than sales commissions or transfer taxes incurred by the then holders with respect to the sale of such securities. 4.6 Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to Section 4.2 or Section 4.3, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed or go effective and it is therefore essential to defer the filing or effectiveness of such registration statement, then the Company shall have CORP\02437\0068\LCFJLS12.21A 970408 -4- the right to defer taking action with respect to such filing or effectiveness for a period of not more than 90 days after receipt of the request of the Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. 4.7 Notwithstanding the provisions of Sections 4.2 and 4.3, if at any time during which the Company is obligated to maintain the effectiveness of a registration statement pursuant to such Section, counsel to the Company (which counsel shall be experienced in securities matters) has determined in good faith that the filing of such registration statement or the compliance by the Company with its disclosure obligations thereunder would require the disclosure of material information which the Company has a bona fide business purpose for preserving as confidential, then the Company may delay the filing or the effectiveness of such registration statement (if not then filed or effective, as appropriate) and shall not be required to maintain the effectiveness thereof (if previously declared effective) for a period expiring upon the earlier to occur of (i) the date on which such information is disclosed to the public or ceases to be material or the Company is so able to comply with its disclosure obligations, or (ii) 30 days after counsel to the Company makes such good faith determination. There shall not be more than one such delay period with respect to any registration statement after it has been declared effective pursuant to Sections 4.2 and 4.3. Notice of any such delay period and of the termination thereof will be promptly delivered by the Company to each Holder and shall be maintained in confidence by each such Holder. The Holders shall not sell any Warrant Shares during such period as any such registration statement is not current, as advised by the Company. Each Holder shall furnish to the Company such information regarding such Holder and a written description of the contribution proposed by such Holder as the Company may reasonably request. 4.8 Each Holder whose Warrant Shares are included in a registration statement pursuant to an underwritten public offering shall, if requested by the managing underwriter of the public offering, enter into an agreement with the underwriter pursuant to which the Holder will agree not to sell, Transfer or otherwise dispose of the Warrant Shares for such period after consummation of the public offering as may reasonably be requested by the underwriter, up to a maximum of 90 days, without the consent of the underwriter. 5. Reservation of Common Stock. The Company covenants that, during the period this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock to provide for the issuance of the Warrant Shares upon the exercise of this Warrant. This Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for Warrant Shares upon the exercise of this Warrant. 6. No Stockholder Rights. This Warrant, as such, shall not entitle the Holder to any rights of a stockholder of the Company, until the Holder has exercised this Warrant in accordance with Section 2 hereof. CORP\02437\0068\LCFJLS12.21A 970408 -5- 7. Adjustment of Exercise Price and Number of Warrant Shares. 7.1 The number and kind of securities issuable upon the exercise of this Warrant shall be subject to adjustment from time to time, and the Company agrees to provide notice upon the happening of certain events, as follows: a. If the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock into a larger or smaller number of shares of Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased or reduced, as of the record date for such recapitalization, in the same proportion as the increase or decrease in the outstanding shares of Common Stock, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all of the Warrant Shares issuable hereunder immediately after the record date for such recapitalization shall equal the aggregate amount so payable immediately before such record date. b. If the Company declares a dividend on its Common Stock payable in shares of its Common Stock or securities convertible into shares of its Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares of Common Stock (and shares of Common Stock issuable upon conversion of all such securities convertible into shares of Common Stock) as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date for such dividend shall equal the aggregate amount so payable immediately before such record date. c. If the Company effects a general distribution to holders of its Common Stock, other than as part of the Company's dissolution or liquidation or the winding up of its affairs, of any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, shares of Common Stock or securities convertible into shares of Common Stock), the Company shall give written notice to the Holder of any such general distribution at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before the record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such general distribution, except as otherwise provided herein. d. If the Company offers rights or warrants (other than the Warrant) to all holders of its Common Stock which entitle them to subscribe to or purchase additional shares of Common Stock or securities convertible into shares of Common Stock, the Company shall give written notice of any such proposed offering to the Holder at least 15 days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before such record date. CORP\02437\0068\LCFJLS12.21A 970408 -6- e. In the event an adjustment in the Exercise Price or the number of Warrant Shares issuable hereunder is made under subsection a. or b. above, and such an event does not occur, then any adjustments in the Exercise Price or number of Warrant Shares issuable upon exercise of this Warrant that were made in accordance with such subsection a. or b. shall be re-adjusted to the Exercise Price and number of Warrant Shares as were in effect immediately prior to the record date for such an event. f. If and whenever the Company issues or sells, or in accordance with Section 7.1 is deemed to have issued or sold, any shares of its Common Stock for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issuance or sale (except for the issuance of the Common Stock Purchase Warrants to B C Capital Corp. or its designees simultaneously herewith or the issuance or deemed issuance of securities in a transaction described in paragraph g. of this Section 7.1), then immediately upon such issuance or sale the Exercise Price will be reduced to an Exercise Price determined by multiplying the Exercise Price in effect immediately prior to the issuance or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding prior to the issuance or sale plus (ii) the number of Warrant Shares issuable hereunder that the maximum aggregate amount of consideration receivable by the Company upon such issuance or sale would purchase at the Exercise Price in effect immediately prior to the issuance or sale, and the denominator of which shall be the number of shares of Common Stock deemed outstanding, as hereinafter determined, immediately after such issuance or sale. g. Notwithstanding anything contained herein to the contrary, the following securities or transactions shall be excluded from the operation of paragraph f. of this Section 7.1: (i) The existence and any exercise, conversion and/or exchange of any option, convertible promissory note and/or other convertible or exchangeable security, warrant, or other right to purchase Common Stock, that is outstanding on the date hereof (whether or not currently exercisable, convertible or exchangeable); and (ii) Any grant or exercise of options for Common Stock granted under the Company's stock option plans, in existence as of the date hereof, provided said grant or exercise is not effectuated as a result of any amendment to such plans subsequent to the date hereof, with an exercise price equal to at least the fair market value of the shares of Common Stock on the date of grant. Notwithstanding anything contained herein to the contrary, if the Company amends such plans with the consent of Barber & Bronson Incorporated (which consent shall not be unreasonably withheld or delayed), the securities issued pursuant to such plan, as amended, shall be excluded from the operation of paragraph f. of this Section 7.1. As used herein, the term "fair market value" shall mean the closing bid price, or, if not available, the highest bid price, of the shares of Common Stock as quoted on a national securities exchange, or in the over-the-counter market as reported by Nasdaq or, if not available, by the National Quotation Bureau, Incorporated, as the case may be (or, if there is no bid price on a particular day, then the closing bid price or, if not available, the highest bid price on the nearest trading CORP\02437\0068\LCFJLS12.21A 970408 -7- date before that day and for which such prices are available), and if the shares of Common Stock are not listed on such an exchange or traded in such a market on such particular day, then the fair market value per share shall be determined by mutual agreement of the Board of Directors and the Holders by taking into consideration all relevant factors, including, but not limited to, the Company's net worth, prospective earning power and dividend paying capacity. h. If the Company in any manner grants any rights or options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Rights" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), and the price per share for which Common Stock is issuable upon the exercise of such Rights or upon conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting of such Rights, then the total maximum number of shares of Common Stock issuable upon the exercise of such Rights or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Rights will be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of this Section, the "price per share for which Common Stock is issuable upon exercise of such Rights or upon conversion or exchange of such Convertible Securities" will be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such Rights, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Rights, plus, in the case of Rights that relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the exercise of such Rights or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of such Rights. Except as otherwise provided in Subsections j. and k. below, no adjustment of the Exercise Price will be made when Convertible Securities are actually issued upon the exercise of such Rights or when Common Stock is actually issued upon the exercise of such Rights or the conversion or exchange of such Convertible Securities. i. If the Company in any manner issues or sells any Convertible Securities, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Exercise Price in effect immediately prior to the time of such issuance or sale, then the maximum number of shares of Common Stock then issuable upon conversion or exchange of all such Convertible Securities will be deemed to be outstanding and to have been issued and sold by the Company for such price per share, as determined below. For the purposes of this Section, the "price per share for which Common Stock is issuable upon such conversion or exchange" will be determined by dividing (i) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock then issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Subsections j. and k. below, no adjustment of the CORP\02437\0068\LCFJLS12.21A 970408 -8- Exercise Price will be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Convertible Securities for which adjustments of the Exercise Price had been or are to be made pursuant to other provisions of this Section 7, no further adjustment of the Exercise Price will be made by reason of such issuance or sale. j. If the purchase price provided for in any Rights, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time (other than under or by reason of provisions that are designed to protect against dilution of the type set forth in this Section 7 and are no more favorable to the holders of such Rights or Convertible Securities than this Section 7 would have been if this Section 7 were included in such Rights or Convertible Securities), then the Exercise Price in effect at the time of such change will be re-adjusted to the Exercise Price that would have been in effect at such time had such Rights or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or changed conversion rate, as the case may be, at the time initially granted, issued, or sold; and such adjustment of the Exercise Price will be made whether the result thereof is to increase or reduce the Exercise Price then in effect under this Warrant, provided that no such adjustment shall increase the Exercise Price above the initial Exercise Price hereof and that such adjustments shall be made by the Board of Directors of the Company, who shall promptly provide notice of the new Exercise Price to the Holder. k. Upon the expiration of any Right, or the termination of any right to convert or exchange any Convertible Security, without the exercise of such Right, or the conversion of such Convertible Security, the Exercise Price then in effect hereunder will be adjusted to the Exercise Price that would have been in effect at the time of such expiration or termination had such Right or Convertible Security never been issued, but such subsequent adjustment shall not affect the number of shares of Common Stock issued upon any exercise of this Warrant prior to the date such adjustment is made. l. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for consideration that includes cash, then the amount of cash consideration actually received by the Company will be deemed to be the cash portion thereof. If any shares of Common Stock, Rights, or Convertible Securities are issued or sold or deemed to have been issued or sold for a consideration part or all of which is other than cash, then the amount of the consideration other than cash received by the Company will be the fair value of such consideration as determined by the Board of Directors of the Company, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the market value thereof as of the date of receipt. If any shares of Common Stock, Rights, or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, then the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Rights, or Convertible Securities, as the case may be. CORP\02437\0068\LCFJLS12.21A 970408 -9- m. If any Right is issued in connection with the issuance or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Right by the parties thereto, the Right will be deemed to have been issued without consideration. n. The number of shares of Common Stock deemed outstanding at any given time shall include the number of shares of Common Stock outstanding, as adjusted as provided herein, but shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issuance or sale of Common Stock hereunder. o. No adjustment of the Exercise Price shall be made if the amount of such adjustment would be less than one cent per Warrant Share, but in such case any adjustment that otherwise would be required to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment that, together with any adjustment or adjustments so carried forward, shall amount to not less than one cent per Warrant Share. 7.2 In the event of any reorganization or reclassification of the outstanding shares of Common Stock (other than a change in par value, or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination) or in the event of any consolidation or merger of the Company with another entity at any time prior to the expiration of this Warrant, the Holder shall have the right to exercise this Warrant. Upon such exercise, the Holder shall have the right to receive the same kind and number of shares of capital stock and other securities, cash or other property as would have been distributed to the Holder upon such reorganization, reclassification, consolidation or merger. The Holder shall pay upon such exercise the Exercise Price that otherwise would have been payable pursuant to the terms of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution in excess of the then applicable Exercise Price, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price, and in such case the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full, and in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. In the event of any such reorganization, merger or consolidation, the corporation formed by such consolidation or merger or the corporation which shall have acquired the assets of the Company shall execute and deliver a supplement hereto to the foregoing effect, which supplement shall also provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in the Warrant. 7.3 If the Company shall, at any time before the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the right to exercise this Warrant. Upon such exercise the Holder shall have the right to receive, in lieu of the shares of Common Stock of the Company that the Holder otherwise would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any CORP\02437\0068\LCFJLS12.21A 970408 -10- such dissolution, liquidation or winding up with respect to such stock receivable upon exercise of this Warrant on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the Exercise Price provided by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price and, in such case, the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full and, in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. 7.4 Upon each adjustment of the Exercise Price pursuant to Section 7 hereof, the Holder shall thereafter (until another such adjustment) be entitled to purchase, at the adjusted Exercise Price in effect on the date this Warrant is exercised, the number of Warrant Shares, calculated to the nearest number of Warrant Shares, determined by (a) multiplying the number of Warrant Shares purchasable hereunder immediately prior to the adjustment of the Exercise Price by the Exercise Price in effect immediately prior to such adjustment, and (b) dividing the product so obtained by the adjusted Exercise Price in effect on the date of such exercise. The provisions of Section 11 shall apply, however, so that no fractional share of Common Stock or fractional Warrant shall be issued upon exercise of this Warrant. 7.5 The Company may retain a firm of independent public accountants of recognized standing (who may be any such firm regularly employed by the Company) to make any computation required under this Section 7, and a certificate signed by such firm shall be conclusive evidence of the correctness of any computation made under this Section 7. 8. Voting Agreement. Upon exercise of the Warrants, the Holder shall agree to vote the Warrant Shares in favor of management's nominees to the Board of Directors for a period of five years or so long as Holder owns the Warrant Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder shall be contingent upon the execution and delivery to the Company of a document providing for the foregoing in a form reasonably satisfactory to the Company. 9. Notice to Holder. So long as this Warrant shall be outstanding (a) if the Company shall pay any dividends or make any distribution upon the Common Stock otherwise than in cash or (b) if the Company shall offer generally to the holders of Common Stock the right to subscribe to or purchase any shares of any class of capital stock or securities convertible into capital stock or any similar rights or (c) if there shall be any capital reorganization of the Company in which the Company is not the surviving entity, recapitalization of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or other transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company, then in such event, the Company shall cause to be mailed by registered or certified mail to the Holder, at least 30 days prior to the relevant date described below (or such shorter period as is reasonably possible if 30 days is not reasonably possible), a notice containing a description of the proposed action and stating the date or expected date on which a record of the Company's stockholders CORP\02437\0068\LCFJLS12.21A 970408 -11- is to be taken for the purpose of any such dividend, distribution of rights, or such reorganization, recapitalization, consolidation, merger, sale, lease or transfer, dissolution, liquidation or winding up is to take place and the date or expected date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event. 10. Certificate of Adjustment. Whenever the Exercise Price or number or type of securities issuable upon exercise of this Warrant is adjusted, as herein provided, the Company shall promptly deliver to the Holder of this Warrant a certificate of an officer of the Company setting forth the nature of such adjustment and a brief statement of the facts requiring such adjustment. 11. No Fractional Shares. No fractional shares of Common Stock will be issued in connection with any subscription hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company's Board of Directors. 12. Restrictions on Exercise. 12.1 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, the notice of exercise shall be accompanied by a representation of the Holder to the Company that such shares are being acquired for investment and not with a view to the distribution thereof, and such other representations and documentation as may reasonably be required by the Company, unless in the opinion of counsel to the Company such representations or other documentation is not necessary to comply with such the Securities Act. 12.2 The Company shall not be obligated to deliver any Warrant Shares unless and until the Company has compiled with any requirements of the securities exchange or other self-regulatory body on which the Company's shares of Common Stock may be listed or until there has been qualification under or compliance with such federal or state laws, rules or regulations. The Company agrees and undertakes to comply with such laws, rules or regulations promptly upon receipt by the Company of the Election to Purchase, and in any event by such date as compliance is required. Notwithstanding anything contained herein to the contrary, where the actions described herein may be taken after the issuance of the Warrant Shares, the Company will promptly issue the Warrant Shares and thereafter take such appropriate action. 13. Restrictions on Transfer. 13.1 Neither this Warrant nor any Warrant Shares may be transferred except as follows: (a) to a person who, in the opinion of counsel satisfactory to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act with respect CORP\02437\0068\LCFJLS12.21A 970408 -12- thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 13 with respect to any Transfer of such securities; or (b) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act relating to such securities and the offering thereof for such Transfer. 13.2 Unless, prior to the exercise of this Warrant, the Warrant Shares have been registered with the Commission pursuant to the Securities Act, upon exercise of this Warrant and the issuance of the Warrant Shares, all certificates representing such Warrant Shares shall bear on the face or reverse thereof substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. 14. Lost, Stolen or Destroyed Warrants. In the event that the Holder notifies the Company that this Warrant has been lost, stolen or destroyed and either (a) provides a letter, in form satisfactory to the Company, to the effect that it will indemnify the Company from any loss incurred by it in connection therewith, and/or (b) provides an indemnity bond in such amount as is reasonably required by the Company, the Company shall accept such letter and/or indemnity bond in lieu of the surrender of this Warrant as required by Section 2 hereof. 15. Exchange or Assignment of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company, for other Warrants of different denominations, entitling the Holder to purchase in the aggregate the same number of shares purchasable hereunder. Subject to the provisions of this Warrant and receipt by the Company of any required representations and agreements, upon surrender of this Warrant to the Company with the Assignment annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without additional charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. 16. Notices. Notices and other communications to be given to the Holder shall be deemed sufficiently given if delivered by hand, or five days after mailing by registered or certified mail, postage prepaid, to the Holder at 4~. Notices or other communications to the Company shall be deemed to have been sufficiently given if delivered by hand or five days after CORP\02437\0068\LCFJLS12.21A 970408 -13- mailing if mailed by registered or certified mail postage prepaid, to the Company at 26 Harbor Park Drive, Port Washington, New York 11050. A party may change the address to which notice shall be given by notice pursuant to this Section 16. 17. Enforcement. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Warrant, the successful party will be awarded reasonable attorneys' fees at all trial and appellate levels, expenses and costs. 18. Entire Agreement and Modification. The Company and the Holder of this Warrant hereby represent and warrant that this Warrant is intended to and does contain and embody all of the understandings and agreements, both written and oral, of the parties hereto with respect to the subject matter of this Warrant, and that there exists no oral agreement or understanding, express or implied, whereby the absolute, final and unconditional character and nature of this Warrant shall be in any way invalidated, impaired or affected. A modification or waiver of any of the terms, conditions or provisions of this Warrant shall be effective only if made in writing and executed with the same formality of this Warrant. 19. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without application of the principles of conflicts of laws. IN WITNESS WHEREOF, the Company has executed this Warrant as of the 23rd day of December, 1996. SANDATA, INC., a Delaware corporation By: Bert E. Brodsky, President CORP\02437\0068\LCFJLS12.21A 970408 -14- ELECTION TO PURCHASE TO: Sandata, Inc. The undersigned hereby irrevocably elects to exercise Warrants represented by this Common Stock Purchase Warrant to purchase ____________________ shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) (Please print name and address) Dated: ____________________, 19__ NOTICE: The signature on this Election to Purchase must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFJLS12.21A 970408 -15- ASSIGNMENT FOR VALUE RECEIVED, __________________________________________, the undersigned Holder hereby sells, assigns, and transfers all of the rights of the undersigned under the within Warrant with respect to the number of Shares covered thereby set forth below, unto the Assignee identified below, and does hereby irrevocably constitute and appoint ________________________________________ to effect such transfer of rights on the books of the Company, with full power of substitution: Name of Assignee Address of Assignee No. of Shares Exercise Price Dated: (Signature of Holder) (Print or type name) NOTICE: The signature on this Assignment must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration, enlargement, or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, having an office or correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm having membership on a registered national securities exchange and an office in New York, New York, or Boca Raton or Miami, Florida. SIGNATURE GUARANTEE Authorized Signature: Name of Bank or Firm: Dated: CORP\02437\0068\LCFJLS12.21A 970408 -16- EX-23.1 9 CONSENT OF MARCUM & KLIEGMAN LLP CONSENT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Sandata, Inc. We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related prospectus of Sandata, Inc. and to the incorporation by reference therein of our report dated August 16, 1996 with respect to the consolidated financial statements included in its Annual Report on Form 10-KSB for the year ended May 31, 1996, as amended, filed with the Securities and Exchange Commission. Marcum & Kliegman LLP /s/ Marcum & Kliegman LLP Woodbury, New York April 9, 1997 -----END PRIVACY-ENHANCED MESSAGE-----