-----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, Bu7lmyU4H3OyRPvwlR5LylcUJKAFuzhI2tuyF0CASecbTjUdJ6dGbua1wR7GYOSj DAOI6kr4l7lG2aV5FQYi2Q== 0000868268-99-000013.txt : 19990524 0000868268-99-000013.hdr.sgml : 19990524 ACCESSION NUMBER: 0000868268-99-000013 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAMET SYSTEMS INC CENTRAL INDEX KEY: 0000868268 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 042985838 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-10623 FILM NUMBER: 99631825 BUSINESS ADDRESS: STREET 1: 1000 MAIN ST CITY: ACTON STATE: MA ZIP: 01720 BUSINESS PHONE: 5082632060 MAIL ADDRESS: STREET 1: 1000 MIN STREET STREET 2: 1000 MIN STREET CITY: ACTON STATE: MA ZIP: 01720 10QSB 1 PAMET SYSTEMS 10-QSB FOR Q1 1999 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ FORM 10-QSB Mark one [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _________to _________ Commission File No. 1-10623 Pamet Systems, Inc. ____________________________________________________________________ (exact name of small business issuer as specified in its charter) Massachusetts 04-2985838 ____________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Main Street, Acton, Massachusetts 01720 ____________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (978) 263-2060 -------------- Check whether the issurer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- State the number of shares outstanding of each of the issuer's classes of common equity, as of the close of the period covered by this report: Title of each class Number of share outstanding ------------------- --------------------------- Common stock 2,548,700 ($.01 par value) Transitional Small Business Disclosure Format YES NO X ------ ------ PAMET SYSTEMS, INC. FORM 10-QSB TABLE OF CONTENTS Part I - Financial Information Item 1 - Financial Statements Condensed Balance Sheets March 31, 1999 and December 31, 1998 Condensed Statements of Operations for the quarter ended March 31, 1999 and 1998 Condensed Statement of Cash Flows for the three months ended March 31, 1999 and 1998 Item 2 - Management's Discussion and Analysis of Financial Condition or Plan of Operations Part II - Other Information Item 1 - Legal Proceedings Item 2 - Changes in Securities Item 3 - Defaults Upon Senior Securities Item 4 - Submission of Matters to a Vote of Security Holders Item 5 - Other Information Item 6 - Exhibits and Reports on Form 8-K Signature(s) PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements PAMET SYSTEMS, INC. Condensed Balance Sheets March 31, December 31, 1999 1998 --------- ------------ CURRENT ASSETS (unaudited) Cash $ 93,051 $54,817 Accounts receivable, net of allowance for doubtful accounts of $60,000 and factored 229,169 418,229 receivables Accounts Receivable, factored 62,180 119,176 Inventory, net of reserve of $15,000 59,575 50,254 Prepaid expenses and other current assets 67,907 81,421 TOTAL CURRENT ASSETS 511,882 723,897 PROPERTY AND EQUIPMENT, net 932,659 947,188 OTHER ASSETS 4,190 4,190 RESTRICTED CASH 28,675 28,534 CAPITALIZED SOFTWARE DEVELOPMENT COSTS 253,907 195,665 TOTAL ASSETS $1,731,313 $1,899,474 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Line of credit (vendor) $298,220 $169,934 Mortgage note payable 475,473 479,743 Due to Factor -- 65,980 Accounts payable, trade 790,203 $787,764 Accounts payable, related party 21,940 20,513 Accrued expenses 309,487 265,267 Notes payable-related party 110,000 -- Deferred software maintenance revenue 192,460 295,669 TOTAL CURRENT LIABILITIES 2,197,783 2,084,870 LONG TERM DEBT, less current portion 1,400,000 1,050,000 UNEARNED SUPPORT REVENUE 3,802 3,802 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued Common Stock, $.01 par value, 7,500,000 shares authorized; 2,548,700 issued and outstanding 25,487 25,353 Additional paid-in Capital 5,306,956 5,306,924 Accumulated deficit (7,202,715) (6,571,577) TOTAL STOCKHOLDERS EQUITY (1,870,272) (1,239,198) TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 1,731,313 $1,899,474 ========== ==========
See accompanying "Notes to Financial Statements (Unaudited)"
Item 1 - Financial Statements PAMET SYSTEMS, INC. Statements of Operations (Unaudited) Three Months Ended March 31 ------------------ 1999 1998 Net sales $ 395,790 $604,163 Cost of product 149,779 294,131 -------- -------- 246,011 310,032 Operating expenses: Personnel costs 303,567 336,408 Rent, utilities and telephone 21,972 28,717 Travel and entertainment 25,272 53,494 Professional fees 68,280 62,570 Depreciation 20,335 18,042 Research and Development 301,026 179,138 Other operating expenses 62,636 49,075 -------- -------- Total operating expenses 803,088 727,444 -------- -------- Income (loss) from operations (557,077) (417,412) Interest Income (expense), Net (74,060) (23,649) Net Income (loss) (631,137) (441,061) ======= ======= Earnings (loss) per common share $(.25) $(.17) ===== ===== Shares used in Computing 2,548,700 2,535,250 Earnings per Share Earnings (loss) per common share- -- -- assuming dilution ===== ===== Shares used in Computing -- -- Earnings Per Share- assuming dilution
See accompanying "Notes to Financial Statements (unaudited)"
Item 1 - Financial Statements PAMET SYSTEMS, INC. Statements of Cash Flows (Unaudited) Three Months Ended March 31, 1999 March 31, 1998 -------------- -------------- Cash flows provided by (used in) operating activities: Net income/(loss) $(631,137) $(441,061) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 20,335 18,042 Capitalized software development costs (58,242) -- Change in assets and liabilities: (Increase) Decrease in accounts receivable 189,060 (74,738) Decrease in accounts receivable, factored 56,996 -- (Increase) Decrease in inventory (9,321) 12,502 (Increase) Decrease in prepaids and other current assets 13,514 (28,009) (Increase) in other assets and restricted cash (141) (4,369) (Decrease) in due to factor (65,980) -- Increase in accounts payable 2,439 96,785 Increase in accounts payable,related party 1,427 -- Increase in accrued expenses and other current liabilities 44,219 34,482 (Decrease) in deferred software maintenance revenue (103,209) (122,589) --------- -------- Total adjustments 91,097 (67,894) Net cash provided by (used in) operating activities (540,040) (508,955) Cash flows from investing activities: Expenditures for property and equipment (5,806) (20,209) --------- --------- Net cash used in investing activities (5,806) ( 20,209)
(continued on following page)
Item 1 - Financial Statements PAMET SYSTEMS, INC. Statements of Cash Flows (Unaudited) Three Months Ended March 31, 1999 March 31, 1998 -------------- -------------- Cash flows from financing activities: Payment of mortgage (4,270) ( 3,903) Net change note payable related party 110,000 -- Net change line of credit-vendor 128,286 -- Proceeds from long term convertible promissory notes 350,000 -- Issuance of capital stock 64 531,250 --------- --------- Net cash provided by financing activities 584,080 527,347 Net increase (decrease) in cash 38,234 (1,817) Cash and cash equivalents at 54,817 40,522 beginning of period Cash and cash equivalents at end of period $93,051 $38,705 ====== ====== Supplemental disclosure of cash flow information: Cash paid for interest: $31,307 $16,232
See accompanying "Notes to Financial Statements (Unaudited)" PAMET SYSTEMS, INC. Notes to Condensed Financial Statements (Unaudited) Note (1) Statement Presentation In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of March 31, 1999, the results of operations for the three month period and changes in cash flows for the period then ended. There were no material unusual charges or credits to operations during the recently completed fiscal quarter. The results reported for the three months ended March 31, 1999 are necessarily indicative of the results of operations which may be expected for the entire year. Note (2) Mortgage on Corporate Training, Development and Headquarters Facility On April 21, 1992 the Company consummated an agreement with the Lexington Savings Bank of Lexington, MA. to mortgage the Company's development, training and headquarters facility, located at 1000 Main Street, Acton, Massachusetts. The original principal amount of the mortgage was $560,000. In October 1997 the note was extended for a one year term through October 21, 1998 with monthly payments of $5,423.00, determined according to a twenty-year amortization period including interest at 10.0%. Lexington Savings Bank's parent company, Affiliated Community Bankcorp, Inc. was purchased by UST Corp., the parent company of USTrust in August 1998. The mortgage was not renewed in October 1998, however, the Company has received a mortgage proposal from USTrust. The principal of the loan has therefore been reclassified as a current liability. The remaining balance at March 31, 1999 was $475,473 The bank has required an interest bearing compensating balance account. On March 31, 1998 this account equaled $28,675. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Overview Pamet Systems, Inc. (the Company or Pamet Systems), founded in 1987, designs and implements broad-based information technology solutions for public safety agencies enabling them to realize cost efficiencies and provide better service. The company's suite of products is composed of four major components: PoliceServer, FireServer, CADServer and JailServer The Company also offers several companion products including ImageServer, MobileServer, QueryStation and Mapping. The Company's revenues consist primarily of sales of these software applications, the associated hardware and systems integration, and support and update service fees. The Company's revenues for the 3 month period ended March 31, 1999 (the 1999 period) decreased 34.5% to $395,790 from $604,163 for the 3 month period ending March 31, 1998 (the 1998 period). Revenues from the Company's principal products continued to decline in the 1999 period as a result of market expectations for a complete Microsoft operating environment using Microsoft NT Server and a Windows 95/98 or NT Desktop graphical user interface. In response to the market, the Company began rebuilding its products on the NT platform late in 1997 at considerable expense. The Company has invested over $1,280,000 to date developing what management believes will be one of the only fully integrated native NT suites of public safety applications available in the market. Sales for the 1999 period consisted of MobileServer systems (MDT) and sales to existing customers of server upgrades procured in preparation for the new NT-based applications. Management believes that sales of the Company's records management (RMS) and computer-aided dispatch (CAD) products will become a significant portion of the Company's revenue subsequent to the release of the NT-based versions of these products in the third quarter of 1999. The Company continues to believe there are significant market opportunities based on the federal Crime bill funding expected in 1999 and beyond, the establishment of E911 centers, heightened emphasis on crime prevention and control in most communities and the awareness by municipalities that computer systems can improve the efficiency and effectiveness of their public safety resources. The Company has also seen increased emphasis on the coordination of public safety systems between neighboring towns, county, and state police organizations. The Company's products are designed and marketed with the option to be used in this type of regional application. The primary focus of management during the 1999 period has been in three areas: current revenue and development of a sales pipeline for the NT product, completion of the development and integration of the new applications for release during the third quarter of 1999 and the acquisition of adequate funding to ensure the completion of the NT development program and the establishment of the sales and operations infrastructure required to support anticipated sales growth. Relative to the acquisition of investment, during the 1999 period $350,000 was received in the private placement program and, subsequent to the end of the 1999 period, an additional $410,000 was received. Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998 Net sales in the 1999 period decreased 34.5% to $395,790 from $604,163 for the 1998 period. The revenues for the 1999 period reflected the continued slowing of system sales while customers await the release of the Company's NT-based product as discussed above. Prospective customers who have received COPS More grant awards are either delaying spending the funds or purchasing companion products such as MobileServer and ImageServer or upgrading server capability while they await the release of the NT product suite. The revenues for the 1999 period were comprised of two hardware upgrades, two ImageServer systems, and three MobileServer systems compared to one hardware upgrade, three ImageServer systems, eight MobileServer systems during the 1998 period. The MobileServer sales in the 1999 period represented 61.3% of net hardware and software sales, down from 74.3% of net hardware and software sales in the 1998 period. Support revenues increased 28.8% to $158,071 for the 1999 period from $122,688 for the 1998 period reflecting the increase in the customer base from the 1998 period. Cost of product decreased 49.1% or $144,352 to $149,779 for the 1999 period from $294,131 for the 1998 period reflecting decreased revenues in the 1999 period and the increase of high margin support revenues during the period. The resulting increase in gross margin from from 51.3% in the 1998 period to 62.2% in the 1999 period can be attributed to the significant increase in the support revenues and improved margins on the MobileServer sales. Operating expenses increased $75,644 or 10.4% to $803,088 for the 1999 period compared to $727,444 for the 1998 period primarily due to the addition of sales and customer support resources and continued spending on research and product development. Total research and development expenditures, including non-capitalized spending on the NT suite of products for outside resources and the deployment of current staff to product development and testing, represented $121,888 or 161.1% of the increase. In addition, the Company capitalized $58,242 of development costs relating to PoliceServer NT and CADServer the 1999 period. During the development cycle of the NT products, the Company has utilized outside resources to accomplish product development goals while minimizing the long term financial commitments of the Company. As the products near release, management has focused internal resources on the projects to ensure timely completion of development and testing and product release on schedule in the third quarter of 1999. NT product development will continue throughout 1999 until all functionality in PoliceServer and FireServer have been ported to the NT platform consistent with market demands. Personnel costs show a decrease of 9.8% to $303,567 for the 1999 period compared to $336,408 for the 1998 period. However, gross personnel expenditures, prior to the reclassification of expense for employees assigned to the NT development program, reflect an increase of 9.5 %. The Company has continued to add strategic personnel in the areas of sales, support, and engineering to support expected increased revenue growth with an expanded market and the introduction of an NT-based product. Rent, utilities and telephone decreased 23.5% to $21,972 for the 1999 period from $28,717 for the 1998 period due primarily to an error in recording telephone expense in the fourth quarter of 1998. Travel and entertainment expenses decreased $28,222 or 52.8% to $25,272 for the 1999 period from $53,494 for the 1998 period. This decrease primarily reflects the reduction is sales travel in the Southeast region due to the resignation of the sales person in the region. Professional fees increased 9.1% to $68,280 for the 1999 period from $62,570 for the 1998 period due to increased legal fees that resulted from services associated with the ongoing private placement of debt and equity financing, the sale of the company headquarters building, and the issues associated with transactional activity. Depreciation expense increased 12.7% to $20,335 for the 1999 period from $18,042 for the 1998 period due to the purchase of several internally used software programs supporting the increased level of infrastructure. Other operating expenses increased 27.6% to $62,636 for the 1999 period from $49,075 for the 1998 period primarily due to increases in internet access and usage costs and increased expenditures on office supplies and equipment Net interest expense for the 1999 period was $74,060 compared to $23,649 for the 1998 period, reflecting an increase of $50,411 or 213.2%. This increase can be attributed to the fees incurred from utilization of the receivables financing agreement with Silicon Bank and the interest associated with the convertible promissory notes and vendor line of credit secured in the fourth quarter of 1998 and the first quarter of 1999. The net loss for the 1999 period was $(631,137) or $(.25) per share compared to net loss of $441,061 or $(.17) per share for the 1998 period. The loss is due primarily to a decrease in sales in the 1999 period in conjunction with increased operating expenses resulting from product development and the increased infrastructure costs which will position the Company for expected future revenue growth. Liquidity and Capital Resources The Company's working capital was a deficit of $(1,685,901) at March 31, 1999 compared to a deficit of $(1,360,973) at December 31, 1998 due to the reduced sales, the current level of research and development spending and the additional expenses associated with the increased corporate infrastructure. In addition, the mortgage note on the Company's headquarters building was not renewed as of March 31, 1999 and the entire loan amount outstanding of $475,473 is included in current liabilities for the 1999 period. Nevertheless, the Company remains highly leveraged. During the first quarter of 1999, the Company secured $350,000 of additional financing in the form of long-term convertible debt, received commitments from investors to convert $600,000 in long-term convertible debt to equity, and received $300,000 in loan commitments from directors. Subsequent to the end of the 1999 period, an additional $410,000 was secured in the form of long term convertible debt. In general, the outstanding long-term convertible debt funding accrues interest at 11%, has a two-year term, carries the option of conversion of the principal to common stock by the debt holder or repayment of principal and accrued interest by the Company, and has 100% warrant coverage attached that allows for purchase of additional shares of common stock at the conversion price of $2.50. Cash increased to $93,051 at March 31,1999 from $54,817 at December 31, 1998. Accounts receivable decreased to $229,169 at March 31, 1999 from $418,229 at December 31, 1998 due to the reduced sales for the 1999 period. While resources necessary to fund the completion of the NT development program and provide working capital for operations continue to be a focus of concern for the Company, the Company believes that the additional funding which has been secured or committed, the anticipated funds from the sale of the headquarters building, anticipated awards from the "COPS More 98" grant submissions combined with sales of the Company's existing and anticipated suite of products should ensure continued operations through the end of the year. If additional funds are required, the Board of Directors is willing to increase its investment or seek additional financing. Backlog at March 30, 1999 was $345,000. The Company is continuing to consider projects to increase its cash position such as activities to raise capital, mergers, acquisitions or other business combinations. As of March 31, 1999, the Company had accumulated approximately $7,000,000 of federal net operating loss carryforwards that expire beginning in the year 2004. In addition, the Company has state net operating losses to carryforward of $3,950,000 which expire between the years 1999 and 2003. Under the Internal Revenue Code of 1986, as amended, the rate at which a corporation may utilize its net operating losses to offsets income for federal tax purposes is subject to specified limitations during periods after the corporation has undergone an "ownership change". It has been determined that an ownership change did take place at the time of the Registrant's initial public offering. However, the limitations on the loss carryforward exceed the accumulated loss at the time of the"ownership change". Thus there is no restriction on its use. Seasonality The majority of the Company's installed base has a fiscal year that commences on July 1 and, therefore, the Company bills its customers for their annual software support and update service on July 1 of each year. Consequently, cash flow representing software support revenues has tended to be higher in the second half of the Registrant's fiscal year, although software support revenues are recognized ratably throughout the fiscal year. Revenue Recognition Revenues from software license fees are recognized when a contract has been executed, the product has been delivered, all significant contractual obligations have been satisfied and collection of the related receivable is probable. Maintenance revenues, including those bundled with the initial license fee, are deferred and recognized ratably over the service period. Consulting and training service revenues are recognized as the services are performed. Year 2000 Company engineers have performed extensive testing to insure that all of the Company's supported software products are compliant with the year 2000 transition. The Company's software was developed to store and calculate date related information using 4 digit values, so records dated December 31, 1999 will be followed by records dated January 1, 2000. Testing has shown that the Company's software successfully manages the year 2000 rollover while maintaining data and system integrity. For the turnkey systems that the Company sells, the Company continues to monitor the progress of other third party suppliers on whom it depends, such as Microsoft and Compaq. Although the Company cannot certify these third party products, the Company will continue to monitor the published status of their compliance and notify its supported customers of any findings. The Company's customers have been informed that year 2000 compliance may not apply to older computer equipment or non-current versions of system software. Internally the Company utilizes some third-party vendor computer hardware, networking equipment, telecommunication products and software products that may or may not be year 2000 compliant. However, the Company has been assured, by third party vendors that the software products that the Company relies on to manage its internal finance, materials and support activities are all year 2000 compliant. Internal testing to verify these assurances will not be completed until July 1999. The Company also relies, directly or indirectly, on the external systems of suppliers, creditors, financial organizations and governmental entities for accurate exchange of data. The impact of year 2000 non-compliance by any of these entities is being monitored at this time. Inflation Inflation has not had a significant impact on the Company's operations to date. Forward Looking Statements This Form 10-QSB contains statements which are not historical facts. These statements may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities and Exchange Act of 1934 as amended. Certain, but not necessarily all, of such forward looking statements can be identified by the use of such words as "believes", "expects", "may", "will", "should", or "anticipates"or the negative thereof or other variations thereon of similar terminology, and/or which include, without limitation, statements regarding the following: the timing of the development and release of the NT products, adequacy of the funding for the completion of the NT development, and market expectation for the NT operating environment; building a sales and marketing initiative; law enforcement trends regarding E911 and mobile systems; sufficiency of working capital and adequacy of the corporate infrastructure to support operations and anticipated growth; economic and competitive factors affecting market growth; year 2000 compliance; and discussions of strategies involving risk and uncertainties that reflect management's current views. These statements are based on many assumptions and factors and may involve risks and uncertainties. The actual results of the Company or industry results may be materially different from any future results expressed or implied by such forward looking statements because of factors such as problems in the development of the NT products; insufficient capital resources to complete development and operate the Company; inability to successfully market and sell the NT product; changes in the marketplace including variations in the demand for public safety software; and changes in the economic and competitive environment. These factors and other information contained in this Form 10-Q could cause such views, assumptions and factors and the Company's results of operations to be materially different. PART II - OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities c. Sales of Securities On January 22, 1999 the Company issued a $100,000 convertible promissory note with five year warrants attached to an accredited investor as defined in Rule 501(a) under the Securities Act of 1933, as amended. The note allows the noteholder to convert the principal amount of the note and purchase up to 40,000 shares of Pamet Systems Common Stock at $2.50 per share. The attached five year warrants allow the noteholder to purchase 40,000 shares of Pamet Systems Common Stock at a price of $2.50 per share. The note accrues interest at 11% per year and both the principal balance of the note and unpaid accrued interest are due on January 21, 2001. No principal has been converted to Common Stock or warrants exercised at March 31, 1999. On February 8, 1999 the Company issued a $250,000 convertible promissory note with five year warrants attached to an accredited investor as defined in Rule 501(a) under the Securities Act of 1933, as amended. The note allows the noteholder to convert the principal amount of the note and purchase up to 100,000 shares of Pamet Systems Common Stock at $2.50 per share. The attached five year warrants allow the noteholder to purchase 100,000 shares of Pamet Systems Common Stock at a price of $2.50 per share. The note accrues interest at 11% per year and both the principal balance of the note and unpaid accrued interest are due on February 7, 2001. No principal has been converted to Common Stock or warrants exercised at March 31, 1999. Item 3 - Defaults Upon Senior Securities Not applicable. Item 4 - Submission of Matters to a vote of Security Holders None Item 5 - Other Information Not applicable. Item 6 - Exhibits and Reports on Form 8-K a. Exhibits 4.16 Convertible Note issued to William Bell 1993 Trust dated February 8, 1999 4.17 Warrant issued to William Bell 1993 Trust dated February 8, 1999 4.18 Convertible Note issued to Stephen F. Wilder dated January 22, 1999 4.19 Warrant issued to Stephen F. Wilder dated January 22, 1999 27 Financial Date Schedule b. Reports on form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized Pamet Systems, Inc. ------------------------- (Registrant) May 20, 1999 Richard C. Becker _______________________________ ______________________ Date Richard C. Becker Vice President Principal Financial Officer EXHIBIT 4.16 Convertible Note issued to William Bell 1993 Trust dated February 8, 1999 No. L-007 THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE. CONVERTIBLE PROMISSORY NOTE $250,000 Acton, Massachusetts February 8, 1999 FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the "Company"), hereby promises to pay to William James Bell 1993 Trust ("Payee"), 10539 Bellagio Road, Los Angeles, CA 90077, the principal sum of Two Hundred Fifty Thousand Dollars ($250,000), on the dates and in the amounts hereinafter set forth. This Promissory Note is issued by the Company pursuant to the Securities Purchase Agreement, dated as of the date hereof, among the Company and Payee (the "Securities Purchase Agreement"). Capitalized terms used but not defined shall have the respective meanings ascribed to them in the Securities Purchase Agreement. This Promissory Note is hereinafter referred to as this "Note." 1. Principal and Maturity Date. The principal amount of this Note outstanding together with all accrued interest hereon shall be due and payable on February 7, 2001 (the "Maturity Date"). 2. Interest. The outstanding principal amount of this Note shall accrue interest at the per annum rate of eleven percent (11.0%) through the earlier of the date of repayment or conversion (in each case computed on the basis of a 365 day year and actual days elapsed). Interest shall be payable in full on the Maturity Date with respect to the principal amount of the Note then outstanding. No interest shall be deemed to have accrued or be payable on any portion of this Note which is Converted on or prior to the Maturity Date. 3. Prepayment. This Note may be prepaid, in whole or in part, without penalty or premium upon not less than thirty (30) days prior written notice from the Company to the Payee, at any time or from time to time. All prepayments made on this Note shall be applied first to the payment of all unpaid interest accrued on this Note, and then to the outstanding and unpaid principal amount of this Note as of the date of the payment. Prepayment, in whole or in part, shall be noted in the accounting records of the Company. 4. General Payment Provisions. All payments or prepayments of principal and interest and other sums due pursuant to this Note shall be made by check payable to the Payee at the address set forth above or at such other address as Payee shall have previously designated to the Company in writing not later than two Business Days (as defined below) prior to the date on which such payment becomes due. If the due date of any payment under this Note would otherwise fall on a day which is not a Business Day, such date will be extended to the immediately succeeding Business Day and interest shall be payable at the rate set forth herein for the period of the extension. The term "Business Day" shall mean any day on which commercial banks in the State of New York are not authorized or required to close. 5. Conversion; Repayment. (a) Conversion/Repayment and Conversion Price. The Payee may, subject to the terms and conditions of this Section 5, at any time, or from time to time, exercise its right to convert this Note to Common Stock by delivering a duly executed notice, in the form substantially similar to Exhibit A hereto, of such intention to the Company (the "Conversion Notice"); provided, however, that if, and to the extent, this Note or any portion thereof is called for prepayment, the holder may exercise its right to convert to Common Stock such portion of this Note as was called for prepayment. The Payee shall have the right, subject to the terms and conditions of this Section 5, to, no more frequently than four times per annum in the aggregate, convert all or any part of the principal amount then outstanding under this Note (the "Note Amount"), in an amount not less than $25,000 (or such lesser amount as may then be outstanding), into that number of fully-paid and nonassessable shares of Common Stock (the "Conversion Shares"), obtained by dividing the Note Amount or such portion thereof presented for conversion by the Conversion Price. The "Conversion Price" shall initially be $2.50 per share of Common Stock subject to adjustment as provided in Section 6 below. Upon a partial conversion or repayment of this Note, the Company shall execute and deliver to or on the order of the holder hereof, a new Note or Notes of authorized denominations in principal amount equal to the unconverted or unredeemed, as the case may be, portion of this Note. (b) Issuance of Common Stock on Conversion. In order to effect the conversion of this Note, the Payee shall deliver to the Company at its principal office, this Note and a duly executed Conversion Notice; provided, however, that if the Payee desires to convert the Note on the Maturity Date, Payee shall notify the Company in writing of its intention to convert the Note at least five (5) days prior to the Maturity Date. The date upon which the Company receives the Conversion Notice, the Note and any other documentation required under this Section 5 of this Note or the Conversion Notice shall be referred to herein as the "Effective Date." Upon the Effective Date, this Note (or portion thereof) shall be deemed converted into shares of Common Stock in accordance with this Section 5, at which time the rights of the Payee with respect to this Note and the amount so converted shall cease and, subject to the following provisions of this paragraph, the person or persons entitled to receive the shares of Common Stock upon conversion of this Note (or portion thereof) shall be treated for all purposes as having become the record holder or holders of such Common Stock. As promptly as practicable after the Effective Date, the Company shall deliver or cause to be delivered to the Payee, at the address set forth above or at such other address as the Payee shall designate in writing, certificates representing the number of fully paid and nonassessable shares of Common Stock into which this Note (or portion thereof), shall be converted in accordance with the provisions of this Section 5. If this Note is called for prepayment it may be converted as provided herein up to and including the close of business on the business day preceding the date of prepayment. No fractional shares of Common Stock shall be issued upon conversion of this Note (or portion thereof). In lieu of any fractional share of Common Stock which would otherwise be issuable upon conversion of this Note (or portion thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the Conversion Price. (c) Reserves. The Company covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock, solely for the purpose of issue upon conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of this Note. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon issuance, be duly and validly issued and fully paid and nonassessable. The Company shall from time to time, in accordance with applicable law, increase the authorized amount of its Common Stock if at any time the authorized amount of its Common Stock remaining unissued shall not be sufficient to permit the conversion of this Note at the time outstanding. (d) Taxes Upon Conversion. The issuance of certificates for shares of Common Stock upon the conversion of this Note shall be made without charge to the converting noteholder for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the holder of this Note; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of this Note, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid; and provided, further, that in no event shall the Company be required to pay or reimburse the holder for any income tax payable by such holder as a result of such issuance. (e) Legends. All certificates representing Conversion Shares shall bear a conspicuous legend stating in substance: "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE." The Company shall, upon the request of any holder of a stock certificate representing Conversion Shares and the surrender of such certificate, issue a new stock certificate without such legend if (i) the stock evidenced by such certificate has been effectively registered under the Securities Act and qualified under any applicable state securities law and sold by the holder thereof in accordance with such registration and qualification or (ii) such holder shall have delivered to the Company a legal opinion reasonably satisfactory to the Company to the effect that the restrictions set forth herein are no longer required or necessary under the Securities Act or any applicable state law. 6. Conversion Price Protection. (a) In the event of a stock split, reverse stock split or stock dividend, the Board of Directors of the Company shall adjust the Conversion Price to appropriately reflect such event. (b) Subject to adjustment in accordance with Section 6(a), if at any time, beginning April 1, 1999, the average of the Closing Prices (as defined herein) of the Common Stock for any 50 consecutive Trading Days (as defined herein) after April 1, 1999 (the "Average Closing Price") is less than $2.50 per share, then, so long as the Average Closing Price remains below $2.50 per share (a "Price Protection Period"), upon the conversion of all or any part of the principal amount outstanding under this Note, the Conversion Price of the Note shall be reduced to the Average Closing Price of the Common Stock for the 50 consecutive Trading Days immediately preceding the date of conversion. Notwithstanding any reduction of the Conversion Price pursuant to this Section 6(b), a Price Protection Period shall end if the Average Closing Price is equal to or greater than $2.50 (subject to adjustment in accordance with Section 6(a)) and the Conversion Price shall return to $2.50. Notwithstanding the foregoing, the Conversion Price shall not be reduced below $1.50 (subject to adjustment in accordance with Section 6(a)). (c) As used in this Section 6, Trading Day means, in the event that the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such exchange), a day on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which any New York Stock Exchange member firm is open for the transaction of business. (d) As used in this Section 6, the Closing Price of the Company's Common Stock shall be the last reported sale price as shown on the Composite Tape of the New York Stock Exchange, or, in case no such reported sale price is quoted on such day, the average of the reported closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such exchange, the last reported sales price, or in case no such reported sales price is quoted on such day, the average of the reported closing bid and asked prices, on the principal national securities exchange (including, for purposes hereof, the National Association of Securities Dealers, Inc. National Market System) on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, the average of the high closing bid price and the low closing asked price as reported on an inter-dealer quotation system. In the absence of any available public quotations for the Common Stock, the Board of Directors of the Company shall determine in good faith the fair value of the Common Stock, which determination shall be set forth in a certificate by the Secretary of the Company. 7. Subordination. (a) The Company irrevocably covenants and agrees, and the Holder of this Note, by its acceptance thereof, irrevocably covenants and agrees, that the payment of the principal of and interest on this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment and/or cancellation (as shall be appropriate) in full of all Senior Indebtedness (as defined herein). The provisions of this Section 7 are made for the benefit of the holders of Senior Indebtedness, and such holders shall, at any time, be entitled to enforce such provisions against the Company or Noteholder. No holder of any Senior Indebtedness shall be deemed to owe any fiduciary duty or any other obligation to any Holder of this Note now or at any time hereafter. Notwithstanding anything herein contained to the contrary, all the provisions of this Note shall, except as otherwise provided herein, be subject to the provisions of this Section 7, so far as the same may be applicable thereto. (b) For purposes of this Section 7 (and subject to Section 2.07 of the Securities Purchase Agreement), "Senior Indebtedness" shall mean any indebtedness, liability or obligation, contingent or otherwise, other than that arising pursuant to this Note, of the Company (any such indebtedness, liability or obligation being hereinafter in this definition referred to as an "Obligation") (i) which is created, assumed or incurred by the Company after the date of this Note and which, when created, assumed or incurred, is specifically designated by the Company as Senior Indebtedness for the purposes hereof in the instrument creating or evidencing the Company's liability with respect to such Obligations or (ii) any increases, guarantees, refundings, renewals, rearrangements or extensions of and amendments, modifications and supplements to any indebtedness, liability or obligation described in clause (i) above. 9. No Assignment. This Note may not be assigned by the Payee without the prior written consent of the Company. 10. Governing Law. This Note shall be construed in accordance with, and governed by, the laws of the Commonwealth of Massachusetts as applied to contracts made and to be performed entirely in the Commonwealth of Massachusetts without regard to principles of conflicts of law. Each of the parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any court of the Commonwealth of Massachusetts or any federal court sitting in the Commonwealth of Massachusetts for purposes of any suit, action or other proceeding arising out of this Note (and agrees not to commence any action, suit or proceedings relating hereto except in such courts). Each of the parties hereto agrees that service of any process, summons, notice or document by U.S. registered mail at its address set forth herein shall be effective service of process for any action, suit or proceeding brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Note, which is brought by or against it, in the courts of the Commonwealth of Massachusetts or any federal court sitting in the Commonwealth of Massachusetts and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 11. Adjustment of Interest Rate. No provision of this Note shall require the payment of interest to the extent that receipt of any such payment by the Company would be contrary to the provisions of law applicable to the Company limiting the maximum amount of interest that may be charged to or collected from the Company, and if any sum in excess of such maximum rate of interest is paid or charged, the excess will be deemed to have been a prepayment of principal of this Note when paid, without premium or penalty, and all payments made thereafter will be appropriately applied to interest and principal to give effect to such maximum rate, and after such application any excess shall be immediately refunded to the Company. PAMET SYSTEMS, INC. By: _____________________________________ Name: David McKay Title: President & CEO Attested: By:_________________________ Name: Title: EXHIBIT A TO PROMISSORY NOTE [Form of Conversion Notice] To Pamet Systems, Inc.: The undersigned registered holder (the "Payee") of the Note in the principal amount indicated below and bearing the certificate number indicated below (the "Note"), hereby irrevocably exercises its right to convert the principal amount of the Note indicated herein into shares of common stock, par value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance with the terms of the Note, and directs that the shares issuable and deliverable upon such conversion together with a check in payment for fractional shares, be issued and delivered to the Payee unless a different name has been indicated below. If shares are to be issued in the name of a person other than the Payee (such person being referred to as the "Transferee"), the Note must be duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company and duly executed by the undersigned, and the undersigned will pay all transfer taxes payable with respect thereto. In addition, the Transferee must sign this notice. All capitalized terms used in this notice and not otherwise defined shall have the respective meanings ascribed to them in the Note. The Payee, or in the event a Transferee shall receive the Conversion Shares issued upon conversion of this Note, the Transferee, hereby represents and warrants to the Company that (i) he has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company, (ii) he is acquiring the Conversion Shares for its own account for investment and not with a view to, or for distribution or sale in connection with any public offering in violation of the Securities Act of 1933, as amended (the "Securities Act"), (iii) he understands that (x) the Conversion Shares will not have been registered for sale under the Securities Act or qualified under applicable state securities laws and may not be resold without registration under the Securities Act and qualification under any applicable state securities law, (y) such Conversion Shares will be issued to him pursuant to one or more exemptions from the registration or qualification requirements of the Securities Act and that the representations and warranties contained herein are given with the intention that the Company may rely thereon for purposes of claiming such exemptions and (z) the Conversion Shares shall contain a legend substantially as set forth in Section 5(e) of the Note, (iv) he is an "accredited investor" as defined in Section 501 of Regulation D promulgated under the Securities Act, (v) he understands he must bear the economic risk of Conversion Shares issued upon conversion of the Note for an indefinite period of time as the Conversion Shares cannot be sold unless registered under the Securities Act and any other applicable state securities laws or sold in a transaction exempt from such registration thereunder and (vi) representatives of the Company have (x) fully and satisfactorily answered any questions which he deemed to ask concerning the Company and (y) furnished him with such additional information and documents regarding the Company as he has reasonably requested. Principal amount of Note to be converted: $________________ Certificate Number of Note: __ Print name, address (including zip code) and social security or other taxpayer identification number of the person in whose name the Common Stock will be issued: _________________________________ _________________________________ _________________________________ (Zip Code) _________________________________ Social Security or other Taxpayer Identification Number Dated:___________________________ _________________________________ Signature of Noteholder Dated:___________________________ _________________________________ Signature of Transferee EXHIBIT 4.17 Warrant issued to William Bell 1993 Trust dated February 8, 1999 No. LW-007 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. Eastern Standard Time, on February 7, 2004. WARRANT TO PURCHASE COMMON STOCK OF PAMET SYSTEMS, INC. FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts corporation, hereby certifies that William James Bell 1993 Trust, a trust with its address at 10539 Bellagio Road, Los Angeles, CA 90077, or its permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing February 8, 1999, and prior to 5:00 P.M., Eastern Standard Time, on February 7, 2004, a total of one hundred thousand (100,000) fully paid and nonassessable shares of Common Stock, par value $.01 per share, of the Company for an aggregate purchase price of Two Hundred Fifty Thousand Dollars ($250,000) (computed on the basis of $2.50 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares," (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder for each of the Warrant Shares is referred to as the "Per Share Warrant Price," (v) this Warrant, and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is referred to as the "Holder.") The number of Warrant Shares for which this Warrant is exercisable is subject to adjustment as hereinafter provided. This Warrant is issued by the Company pursuant to the Securities Purchase Agreement, dated as of the date hereof, among the Company and William James Bell 1993 Trust (the "Securities Purchase Agreement"). Capitalized terms used but not defined shall have the respective meanings ascribed to them in the Securities Purchase Agreement. 1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing February 8, 1999, and prior to 5:00 P.M., Eastern Standard Time, on February 7, 2004, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. (b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in cash by certified or official bank check payable to the order of the Company. (c) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the Warrant shall have been surrendered to the Company as provided in subsection 1(a) above (an "Exercise Date"). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. (d) If this Warrant is exercised in part, the Holder shall be entitled to receive a new Warrant covering the number of Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will (a) issue a certificate or certificates in the name of the Holder for the shares of the Common Stock to which the Holder shall be entitled, and (b) deliver the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of the Warrant. (e) No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the fair value of a share. 2. Reservation of Warrant Shares. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock as from time to time shall be receivable upon the exercise of this Warrant. 3. Adjustments. (a) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the number of Warrant Shares for which this Warrant may be exercised shall be adjusted so that if the Holder surrendered this Warrant for exercise after such action the Holder would be entitled to receive the number of shares of Common Stock or other capital stock of the Company which he would have been entitled to receive had such Warrant been exercised immediately prior to such action. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (a), the Holder of this Warrant shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock. (b) In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the holder shall have the right thereafter to exercise this Warrant for the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had such Warrant been exercised immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant. The above provisions of this subsection (b) shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. Notice of any such consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (c) In the event of any adjustment to the number of Warrant Shares issuable upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price in effect immediately prior to such adjustment by a fraction the numerator of which is the aggregate number of Warrant Shares for which this Warrant may be exercised immediately prior to such adjustment and the denominator of which is the aggregate number of Warrant Shares for which this Warrant may be exercised immediately after such adjustment. (d) Whenever the Per Share Warrant Price is adjusted as provided in this Warrant and upon any modification of the rights of the Holder of this Warrant in accordance with this Section 3, the Company shall promptly prepare a certificate of an officer of the Company, setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause a copy of such certificate to be mailed to the Holder. 4. Per Share Warrant Price Protection. (a) Subject to adjustment in accordance with Section 3, if at any time, beginning April 1, 1999, the average of the Closing Prices (as defined herein) of the Common Stock for any 50 consecutive Trading Days (as defined herein) after April 1, 1999 (the "Average Closing Price") is less than $2.50 per share, then, so long as the Average Closing Price remains below $2.50 per share (a "Price Protection Period"), upon the exercise of all or any part of this Warrant, the Per Share Warrant Price shall be reduced to the Average Closing Price of the Common Stock for the 50 consecutive Trading Days immediately preceding the date of exercise. Notwithstanding any reduction of the Per Share Warrant Price pursuant to this Section 4(a), a Price Protection Period shall end if the Average Closing Price is equal to or greater than $2.50 (subject to adjustment in accordance with Section 3) and the Per Share Warrant Price shall return to $2.50. Notwithstanding the foregoing, the Per Share Warrant Price shall not be reduced below $1.50 (subject to adjustment in accordance with Section 3). (b) In the event of any adjustment to the Per Share Warrant Price, the number of Warrant Shares issuable upon exercise of this Warrant during the relevant Price Protection Period shall be adjusted by multiplying the aggregate number of Warrant Shares for which this Warrant may be exercised immediately prior to such adjustment by a fraction the numerator of which is the Per Share Warrant Price immediately prior to such adjustment and the denominator of which is the Per Share Warrant Price immediately after such adjustment. (c) As used in this Section 4, Trading Day means, in the event that the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such exchange), a day on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which any New York Stock Exchange member firm is open for the transaction of business. (d) As used in this Section 4, the Closing Price of the Company's Common Stock shall be the last reported sale price as shown on the Composite Tape of the New York Stock Exchange, or, in case no such reported sale price is quoted on such day, the average of the reported closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such exchange, the last reported sales price, or in case no such reported sales price is quoted on such day, the average of the reported closing bid and asked prices, on the principal national securities exchange (including, for purposes hereof, the National Association of Securities Dealers, Inc. National Market System) on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, the average of the high closing bid price and the low closing asked price as reported on an inter-dealer quotation system. In the absence of any available public quotations for the Common Stock, the Board of Directors of the Company shall determine in good faith the fair value of the Common Stock, which determination shall be set forth in a certificate by the Secretary of the Company. 5. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the proper exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. Subject to Section 6(e) hereof, the Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes that may be payable in respect of the issuance of any Warrant Shares or certificates therefor. The Holder covenants and agrees that it shall pay, when due and payable, any and all federal, state and local income or similar taxes that may be payable in respect of the issuance of any Warrant Shares or certificates therefor. 6. Transfer (a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon the exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws and unless so registered may not be transferred, sold, pledged, hypothecated or otherwise disposed of unless an exemption from such registration is available. In the event the Holder desires to transfer this Warrant or any of the Warrant Shares issued, the Holder must give the Company prior written notice of such proposed transfer including the name and address of the proposed transferee. Such transfer may be made only either (i) upon publication by the Securities and Exchange Commission (the "Commission") of a ruling, interpretation, opinion or "no action letter" based upon facts presented to said Commission, or (ii) upon receipt by the Company of an opinion of counsel acceptable to the Company to the effect that the proposed transfer will not violate the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and regulations promulgated under either such act, or to the effect that the Warrant or Warrant Shares to be sold or transferred have been registered under the Securities Act of 1933, as amended, and that there is in effect a current prospectus meeting the requirements of Subsection 11(a) of the Securities Act, which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of the certificates evidencing the Warrant or Warrant Shares to be sold or transferred. (b) Conditions to Transfer. Prior to any such proposed transfer (including, without limitation, a transfer by will or pursuant to the laws of descent and distribution), and as a condition thereto, if such transfer is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if requested by the Company, deliver to the Company (i) an investment covenant, in form and substance equivalent to that signed by the original Holder of this Warrant, signed by the proposed transferee, (ii) an agreement by such transferee to the restrictive investment legend set forth herein on the certificate or certificates representing the securities acquired by such transferee, (iii) an agreement by such transferee that the Company may place a "stop transfer order" with its transfer agent or registrar, and (iv) an agreement by the transferee to indemnify the Company to the same extent as set forth in the next succeeding paragraph. (c) Indemnity. The Holder acknowledges that the Holder understands the meaning and legal consequences of this Section 6, and the Holder hereby agrees to indemnify and hold harmless the Company, its representatives and each officer and director thereof from and against any and all loss, damage or liability (including all attorneys' fees and costs incurred in enforcing this indemnity provision) due to or arising out of (a) the inaccuracy of any representation or the breach of any warranty of the Holder contained in, or any other breach by the Holder of, this Warrant, (b) any transfer of the Warrant or (c) any untrue statement or omission to state any material fact in connection with the investment representations or with respect to the facts and representations supplied by the Holder to counsel to the Company upon which its opinion as to a proposed transfer shall have been based. (d) Transfer. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with assignment documentation duly executed and funds sufficient to pay any transfer tax, and upon compliance with the foregoing provisions, the Company shall, without 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. Any assignment, transfer, pledge, hypothecation or other disposition of this Warrant attempted contrary to the provisions of this Warrant, or any levy of execution, attachment or other process attempted upon the Warrant, shall be null and void and without effect. (e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been registered under the Securities Act, upon exercise of any part of the Warrant and the issuance of any of the Warrant Shares, the Company shall instruct its transfer agent to enter stop transfer orders with respect to such shares, and all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend, insofar as is consistent with Massachusetts law: "The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, offered for sale, assigned, transferred or otherwise disposed of unless registered pursuant to the provisions of that Act or an opinion of counsel to the Company is obtained stating that such disposition is in compliance with an available exemption from such registration." 7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 8. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 9. Communication. No notice or other communication under this Warrant shall be effective unless the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at 10539 Bellagio Road, Los Angeles, CA 90077, or such other address as the Holder has designated in writing to the Company. 10. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 11. Applicable Law. This Warrant shall be governed by and construed in accordance with the law of the Commonwealth of Massachusetts without giving effect to the principles of conflict of laws thereof. IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed by a duly authorized officer as of this ______ day of ____________, 1999. ATTEST: PAMET SYSTEMS, INC. _______________________ By:___________________________________ Name: David T. McKay Title: President SUBSCRIPTION The undersigned, __________________________________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for the purchase of _________________________ shares of the Common Stock of PAMET SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated __________________ Signature__________________________ Address____________________________ ____________________________ ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers unto _________________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _________________________, attorney, to transfer said Warrant on the books of PAMET SYSTEMS, INC. Dated __________________ Signature_________________________ Address___________________________ ___________________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto _________________________ the right to purchase _________________________ shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint _________________________, attorney, to transfer that part of said Warrant on the books of PAMET SYSTEMS, INC. Dated ___________________ Signature__________________________ Address____________________________ ____________________________ EXHIBIT 4.18 Convertible Note issued to Stephen F. Wilder dated January 22, 1999 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered into as of January 21, 1999 by and between PAMET SYSTEMS, INC., a Massachusetts corporation whose principal place of business is 1000 Main Street, Acton, Massachusetts 01720 (the "Company"), and Mr. Stephen F. Wilder (the "Purchaser"), an individual with his address at Apartment 11E, 888 Eighth Avenue, New York, New York 10019. WHEREAS, the Company is desirous of selling, and the Purchaser is desirous of acquiring, (i) a convertible promissory note in substantially the form attached hereto as Exhibit A in the principal amount of One Hundred Thousand Dollars ($100,000) (the "Note") and (ii) a five-year warrant (the "Warrant") in substantially the form attached hereto as Exhibit B to purchase up to Forty Thousand (40,000) shares ("Warrant Shares") of the common stock, par value $.01 per share (the "Common Stock"), of the Company (the Note and the Warrant together sometimes hereinafter are referred to as the "Securities"), on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the promises and of the mutual obligations hereinafter set forth, and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows: ARTICLE I PURCHASE AND SALE OF THE NOTES AND WARRANTS; CLOSINGS Section 1.01 Purchase and Sale of the Notes and Warrants. (a) Subject to the terms and conditions set forth in this Agreement, the Company agrees to issue and sell to the Purchaser at the Closing, and the Purchaser agrees to purchase from the Company at the Closing, the Note and the Warrant for an aggregate purchase price of One Hundred Thousand Dollars ($100,000) (the "Purchase Price"). (b) The exercise price per share of the Warrant and the conversion price per share of the Note to be issued at the Closing shall initially be set at Two Dollars and Fifty Cents ($2.50). Section 1.02 Closing. The sale of the Securities by the Company to the Purchaser shall take place on January 21, 1999 at the offices of the Company or at such other place and time as may be agreed upon by the Purchaser and the Company (the "Closing"). At the Closing, the Company shall deliver to the Purchaser certificates evidencing the Securities against payment of the Purchase Price for the Securities, by certified or official bank check or wire transfer of immediately available funds to an account designated by the Company. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to, and agrees with, the Purchaser, as of the date hereof and as of the date of each Closing, as follows: Section 2.01 Incorporation and Corporate Existence. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by the Company and to carry on the business of the Company, as it is now being conducted. Section 2.02 Authority. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Company has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, and assuming due execution and delivery of the Agreement by the Purchaser, this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency (including, without limitation, all laws relating to fraudulent transfers), moratorium or similar laws affecting creditors' rights and remedies generally, subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and subject to the effect of applicable securities laws as to rights to indemnification. Section 2.03 Consents and Approvals; No Conflict. The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not (i) require any consent, approval, authorization or other action by, or filing with or notification to, any governmental or regulatory authority, except where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent the Company from performing any of its material obligations under this Agreement and would not have a material adverse effect on the Company; (ii) conflict with or violate the charter or by-laws of the Company; or (iii) conflict with or violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to the Company, except as would not prevent the Company from performing any of its material obligations under this Agreement and would not have a material adverse effect on the Company. Section 2.04 Absence of Litigation. No claim, action, proceeding or investigation is pending, or to the best knowledge of the Company, threatened, which seeks to delay or prevent the consummation of the transactions contemplated hereby or which would be reasonably likely to adversely affect or restrict the Company's ability to consummate the transactions contemplated hereby. Section 2.05 Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to, and agrees with, the Company, as of the date hereof and as of each Closing, as follows: Section 3.01 Authority. The Purchaser has all necessary power and authority to execute and deliver this Agreement, to purchase the Securities from the Company and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Purchaser and, and assuming due authorization, execution and delivery of the Agreement by the Company, this Agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency (including, without limitation, all laws relating to fraudulent transfers), moratorium or similar laws affecting creditors' rights and remedies generally, subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and subject to the effect of applicable securities laws as to rights to indemnification. Section 3.02 Consents and Approvals; No Conflict. The execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser will not (i) require any consent, approval, authorization or other action by, or filing with or notification to, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent the Purchaser from performing any of its material obligations under this Agreement; or (ii) except as would not prevent the Purchaser from performing any of its material obligations under this Agreement, conflict with or violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to the Purchaser. Section 3.03 Absence of Litigation. No claim, action, proceeding or investigation is pending, or to the best knowledge of the Purchaser, threatened, which seeks to delay or prevent the consummation of the transactions contemplated hereby or which would be reasonably likely to adversely affect or restrict the Purchaser's ability to consummate the transactions contemplated hereby. Section 3.04 Investment Purpose; Legend; Private Placement. (a) The Purchaser is acquiring the Securities solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof. (b) The Purchaser acknowledges that neither the Securities nor the Warrant Shares are registered under the Securities Act and that none of the Securities or the Warrant Shares may be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. The Purchaser acknowledges that the certificates evidencing the Securities and the Warrant Shares shall contain a legend substantially as follows: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND SUCH SECURITIES MAY NOT BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED. (c) The Purchaser acknowledges that the Securities involve a great deal of risk and that there is a limited or no market for the Securities and the Warrant Shares. The Purchaser is able to (i) bear the economic risk of the investment in the Company, (ii) afford a complete loss of such investment, and (iii) hold indefinitely the Securities. In reaching an informed decision to invest in the Company, the Purchaser has sufficient information to evaluate the merits and risks of an investment in the Securities of the Company. In that connection, (x) the Purchaser has received (A) the Company's proxy statement, dated May 14, 1998, for the Company's 1998 annual meeting of stockholders, (B) the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997, as amended to date, and (C) the Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 and (y) representatives of the Company have (A) fully and satisfactorily answered any questions which duly authorized representatives of the Purchaser desired to ask concerning the Company, and (B) furnished the Purchaser with any additional information or documents requested to verify the accuracy of or supplement any information previously delivered to or discussed with duly authorized representatives of the Purchaser. (d) The address of the Purchaser set forth on page 1 of this Agreement is the true and correct address of the Purchaser and the Purchaser has no present intention of becoming a resident or domiciliary of any other state or jurisdiction. Section 3.05 Accredited Investor. The Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act because (please check as appropriate): [x] (a) the Purchaser is an individual whose net worth, either individually or with his spouse, exceeds $1,000,000 on the date hereof; [ ] (b) the Purchaser is an individual whose individual income exceeded $200,000 in each of the two previous years or whose joint income with his spouse exceeded $300,000 in each of the three previous years, and has a reasonable expectation of reaching the same income level in the current year; [ ] (c) the Purchaser is a corporation, partnership or Massachusetts or similar business trust, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000; or [ ] (d) the investor hereby certifies that it is an accredited investor because it is an entity in which each of the equity owners qualifies as an accredited investor under items (a), (b) or (c) above. Section 3.06 Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser. Section 3.07 No General Solicitation. The Securities were not offered or sold by any form of general solicitation or general advertising. ARTICLE IV MISCELLANEOUS Section 4.01 Expenses. The Purchaser hereby agrees that all fees and expenses incurred by the Purchaser in connection with this Agreement shall be borne by the Purchaser, and the Company hereby agrees that all fees and expenses incurred by the Company shall be borne by the Company, in each case including without limitation all fees and expenses of such party's counsel and accountants. Section 4.02 Public Announcements. Except as required by law, neither the Company nor the Purchaser shall make any public announcements in respect of this Agreement or the transactions contemplated herein or otherwise communicate with any news media without prior notification to the other party. Section 4.03 Survival of Representations and Warranties. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Closings and any investigation at any time made by or on behalf of either party hereto. Section 4.04 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior oral or written agreement between the parties. Section 4.05 No Third-Party Beneficiaries; Assignment. This Agreement is for the sole benefit of and binding upon the parties hereto and their permitted successors and assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. This Agreement shall be binding upon the parties hereto and their respective successors and assigns, and shall inure to the benefit of and be enforceable by the parties hereof and their respective successors and assigns. Section 4.06 Amendment. This Agreement may be amended or modified only by an instrument in writing signed by the Company and the Purchaser. Section 4.07 Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 4.08 Gender and Number; Headings. Whenever used in this Agreement, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement Section 4.09 Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of laws thereof. The Company and the Purchaser hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts for all disputes arising under this Agreement. IN WITNESS WHEREOF, the Purchaser and the Company have caused this Agreement to be executed as of the date first written above. PAMET SYSTEMS, INC. Attest:__________________________ By:_____________________________ Name: Name: David T. McKay Title: Title: President & CEO Corporate Seal ____________________________________ By:_____________________________ Name: Stephen F. Wilder Title: No. L-007 THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE. CONVERTIBLE PROMISSORY NOTE $100,000 Acton, Massachusetts January 22, 1999 FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the "Company"), hereby promises to pay to Mr. Stephen F. Wilder ("Payee"), an individual with his address at Apartment 11E, 888 Eighth Avenue, New York, New York 10019, the principal sum of One Hundred Thousand Dollars ($100,000), on the dates and in the amounts hereinafter set forth. This Promissory Note is issued by the Company pursuant to the Securities Purchase Agreement, dated as of the date hereof, among the Company and Payee (the "Securities Purchase Agreement"). Capitalized terms used but not defined shall have the respective meanings ascribed to them in the Securities Purchase Agreement. This Promissory Note is hereinafter referred to as this "Note." 1. Principal and Maturity Date. The principal amount of this Note outstanding together with all accrued interest hereon shall be due and payable on January 21, 2001 (the "Maturity Date"). 2. Interest. The outstanding principal amount of this Note shall accrue interest at the per annum rate of eleven percent (11.0%) through the earlier of the date of repayment or conversion (in each case computed on the basis of a 365 day year and actual days elapsed). Interest shall be payable in full on the Maturity Date with respect to the principal amount of the Note then outstanding. No interest shall be deemed to have accrued or be payable on any portion of this Note which is Converted on or prior to the Maturity Date. 3. Prepayment. This Note may be prepaid, in whole or in part, without penalty or premium upon not less than thirty (30) days prior written notice from the Company to the Payee, at any time or from time to time. All prepayments made on this Note shall be applied first to the payment of all unpaid interest accrued on this Note, and then to the outstanding and unpaid principal amount of this Note as of the date of the payment. Prepayment, in whole or in part, shall be noted in the accounting records of the Company. 4. General Payment Provisions. All payments or prepayments of principal and interest and other sums due pursuant to this Note shall be made by check payable to the Payee at the address set forth above or at such other address as Payee shall have previously designated to the Company in writing not later than two Business Days (as defined below) prior to the date on which such payment becomes due. If the due date of any payment under this Note would otherwise fall on a day which is not a Business Day, such date will be extended to the immediately succeeding Business Day and interest shall be payable at the rate set forth herein for the period of the extension. The term "Business Day" shall mean any day on which commercial banks in the State of New York are not authorized or required to close. 5. Conversion; Prepayment. (a) Conversion/Prepayment and Conversion Price. The Payee may, subject to the terms and conditions of this Section 5, at any time, or from time to time, exercise its right to convert this Note to Common Stock by delivering a duly executed notice, in the form substantially similar to Exhibit A hereto, of such intention to the Company (the "Conversion Notice"); provided, however, that if, and to the extent, this Note or any portion thereof is called for prepayment, the holder may exercise its right to convert to Common Stock such portion of this Note as was called for prepayment. The Payee shall have the right, subject to the terms and conditions of this Section 5, to, no more frequently than four times per annum in the aggregate, convert all or any part of the principal amount then outstanding under this Note (the "Note Amount"), in an amount not less than $25,000 (or such lesser amount as may then be outstanding), into that number of fully-paid and nonassessable shares of Common Stock (the "Conversion Shares"), obtained by dividing the Note Amount or such portion thereof presented for conversion by the Conversion Price. The "Conversion Price" shall initially be $2.50 per share of Common Stock. Upon a partial conversion or prepayment of this Note, the Company shall execute and deliver to or on the order of the holder hereof, a new Note or Notes of authorized denominations in principal amount equal to the unconverted or unredeemed, as the case may be, portion of this Note. (b) Issuance of Common Stock on Conversion. In order to effect the conversion of this Note, the Payee shall deliver to the Company at its principal office, this Note and a duly executed Conversion Notice; provided, however, that if the Payee desires to convert the Note on the Maturity Date, Payee shall notify the Company in writing of its intention to convert the Note at least five (5) days prior to the Maturity Date. The date upon which the Company receives the Conversion Notice, the Note and any other documentation required under this Section 5 of this Note or the Conversion Notice shall be referred to herein as the "Effective Date." Upon the Effective Date, this Note (or portion thereof) shall be deemed converted into shares of Common Stock in accordance with this Section 5, at which time the rights of the Payee with respect to this Note and the amount so converted shall cease and, subject to the following provisions of this paragraph, the person or persons entitled to receive the shares of Common Stock upon conversion of this Note (or portion thereof) shall be treated for all purposes as having become the record holder or holders of such Common Stock. As promptly as practicable after the Effective Date, the Company shall deliver or cause to be delivered to the Payee, at the address set forth above or at such other address as the Payee shall designate in writing, certificates representing the number of fully paid and nonassessable shares of Common Stock into which this Note (or portion thereof), shall be converted in accordance with the provisions of this Section 5. If this Note is called for prepayment it may be converted as provided herein up to and including the close of business on the business day preceding the date of prepayment. No fractional shares of Common Stock shall be issued upon conversion of this Note (or portion thereof). In lieu of any fractional share of Common Stock which would otherwise be issuable upon conversion of this Note (or portion thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the Conversion Price. (c) Reserves. The Company covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock, solely for the purpose of issue upon conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of this Note. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon issuance, be duly and validly issued and fully paid and nonassessable. The Company shall from time to time, in accordance with applicable law, increase the authorized amount of its Common Stock if at any time the authorized amount of its Common Stock remaining unissued shall not be sufficient to permit the conversion of this Note at the time outstanding. (d) Taxes Upon Conversion. The issuance of certificates for shares of Common Stock upon the conversion of this Note shall be made without charge to the converting noteholder for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the holder of this Note; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of this Note, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid; and provided, further, that in no event shall the Company be required to pay or reimburse the holder for any income tax payable by such holder as a result of such issuance. (e) Legends. All certificates representing Conversion Shares shall bear a conspicuous legend stating in substance: "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE." The Company shall, upon the request of any holder of a stock certificate representing Conversion Shares and the surrender of such certificate, issue a new stock certificate without such legend if (i) the stock evidenced by such certificate has been effectively registered under the Securities Act and qualified under any applicable state securities law and sold by the holder thereof in accordance with such registration and qualification or (ii) such holder shall have delivered to the Company a legal opinion reasonably satisfactory to the Company to the effect that the restrictions set forth herein are no longer required or necessary under the Securities Act or any applicable state law. 6. Subordination. (a) The Company irrevocably covenants and agrees, and the Holder of this Note, by its acceptance thereof, irrevocably covenants and agrees, that the payment of the principal of and interest on this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment and/or cancellation (as shall be appropriate) in full of all Senior Indebtedness (as defined herein). The provisions of this Section 6 are made for the benefit of the holders of Senior Indebtedness, and such holders shall, at any time, be entitled to enforce such provisions against the Company or Noteholder. No holder of any Senior Indebtedness shall be deemed to owe any fiduciary duty or any other obligation to any Holder of this Note now or at any time hereafter. Notwithstanding anything herein contained to the contrary, all the provisions of this Note shall, except as otherwise provided herein, be subject to the provisions of this Section 6, so far as the same may be applicable thereto. (b) For purposes of this Section 6 (and subject to Section 2.06 of the Securities Purchase Agreement), "Senior Indebtedness" shall mean any indebtedness, liability or obligation, contingent or otherwise, other than that arising pursuant to this Note, of the Company (any such indebtedness, liability or obligation being hereinafter in this definition referred to as an "Obligation") (i) which is created, assumed or incurred by the Company after the date of this Note and which, when created, assumed or incurred, is specifically designated by the Company as Senior Indebtedness for the purposes hereof in the instrument creating or evidencing the Company's liability with respect to such Obligations or (ii) any increases, guarantees, refundings, renewals, rearrangements or extensions of and amendments, modifications and supplements to any indebtedness, liability or obligation described in clause (i) above. 8. No Assignment. This Note may not be assigned by the Payee without the prior written consent of the Company. 9. Governing Law. This Note shall be construed in accordance with, and governed by, the laws of the Commonwealth of Massachusetts as applied to contracts made and to be performed entirely in the Commonwealth of Massachusetts without regard to principles of conflicts of law. Each of the parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any court of the Commonwealth of Massachusetts or any federal court sitting in the Commonwealth of Massachusetts for purposes of any suit, action or other proceeding arising out of this Note (and agrees not to commence any action, suit or proceedings relating hereto except in such courts). Each of the parties hereto agrees that service of any process, summons, notice or document by U.S. registered mail at its address set forth herein shall be effective service of process for any action, suit or proceeding brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Note, which is brought by or against it, in the courts of the Commonwealth of Massachusetts or any federal court sitting in the Commonwealth of Massachusetts and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 10. Adjustment of Interest Rate. No provision of this Note shall require the payment of interest to the extent that receipt of any such payment by the Company would be contrary to the provisions of law applicable to the Company limiting the maximum amount of interest that may be charged to or collected from the Company, and if any sum in excess of such maximum rate of interest is paid or charged, the excess will be deemed to have been a prepayment of principal of this Note when paid, without premium or penalty, and all payments made thereafter will be appropriately applied to interest and principal to give effect to such maximum rate, and after such application any excess shall be immediately refunded to the Company. PAMET SYSTEMS, INC. By: ____________________________________ Name: David T. McKay Title: President & CEO Attested: By:_________________________ Name: Title: EXHIBIT A TO PROMISSORY NOTE [Form of Conversion Notice] To Pamet Systems, Inc.: The undersigned registered holder (the "Payee") of the Note in the principal amount indicated below and bearing the certificate number indicated below (the "Note"), hereby irrevocably exercises its right to convert the principal amount of the Note indicated herein into shares of common stock, par value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance with the terms of the Note, and directs that the shares issuable and deliverable upon such conversion together with a check in payment for fractional shares, be issued and delivered to the Payee unless a different name has been indicated below. If shares are to be issued in the name of a person other than the Payee (such person being referred to as the "Transferee"), the Note must be duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company and duly executed by the undersigned, and the undersigned will pay all transfer taxes payable with respect thereto. In addition, the Transferee must sign this notice. All capitalized terms used in this notice and not otherwise defined shall have the respective meanings ascribed to them in the Note. The Payee, or in the event a Transferee shall receive the Conversion Shares issued upon conversion of this Note, the Transferee, hereby represents and warrants to the Company that (i) he has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company, (ii) he is acquiring the Conversion Shares for its own account for investment and not with a view to, or for distribution or sale in connection with any public offering in violation of the Securities Act of 1933, as amended (the "Securities Act"), (iii) he understands that (x) the Conversion Shares will not have been registered for sale under the Securities Act or qualified under applicable state securities laws and may not be resold without registration under the Securities Act and qualification under any applicable state securities law, (y) such Conversion Shares will be issued to him pursuant to one or more exemptions from the registration or qualification requirements of the Securities Act and that the representations and warranties contained herein are given with the intention that the Company may rely thereon for purposes of claiming such exemptions and (z) the Conversion Shares shall contain a legend substantially as set forth in Section 5(e) of the Note, (iv) he is an "accredited investor" as defined in Section 501 of Regulation D promulgated under the Securities Act, (v) he understands he must bear the economic risk of Conversion Shares issued upon conversion of the Note for an indefinite period of time as the Conversion Shares cannot be sold unless registered under the Securities Act and any other applicable state securities laws or sold in a transaction exempt from such registration thereunder and (vi) representatives of the Company have (x) fully and satisfactorily answered any questions which he deemed to ask concerning the Company and (y) furnished him with such additional information and documents regarding the Company as he has reasonably requested. Principal amount of Note to be converted: $________________ Certificate Number of Note: __ Print name, address (including zip code) and social security or other taxpayer identification number of the person in whose name the Common Stock will be issued: _________________________________ _________________________________ _________________________________ (Zip Code) _________________________________ Social Security or other Taxpayer Identification Number Dated:___________________________ ___________________________________ Signature of Noteholder Dated:___________________________ ___________________________________ Signature of Transferee EXHIBIT 4.19 Warrant issued to Stephen F. Wilder dated January 22, 1999 LW - 007 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 p.m. Eastern Standard Time, on January 21, 2004. WARRANT TO PURCHASE COMMON STOCK OF PAMET SYSTEMS, INC. FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts corporation, hereby certifies that Mr. Stephen F. Wilder, an individual with his address at Apartment 11E, 888 Eighth Avenue, New York, New York 10019, or his permitted assigns, is entitled to purchase from the Company, at any time or from time to time commencing January 22, 1999, and prior to 5:00 P.M., Eastern Standard Time, on January 21, 2004, a total of Forty Thousand (40,000) fully paid and nonassessable shares of Common Stock, par value $.01 per share, of the Company for an aggregate purchase price of One Hundred Thousand Dollars ($100,000) (computed on the basis of $2.50 per share). (Hereinafter, (i) said Common Stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares," (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder for each of the Warrant Shares is referred to as the "Per Share Warrant Price," (v) this Warrant, and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is referred to as the "Holder.") The number of Warrant Shares for which this Warrant is exercisable is subject to adjustment as hereinafter provided. This Warrant is issued by the Company pursuant to the Securities Purchase Agreement, dated as of the date hereof, among the Company and Mr. Stephen F. Wilder (the "Securities Purchase Agreement"). Capitalized terms used but not defined shall have the respective meanings ascribed to them in the Securities Purchase Agreement. 1. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing January 22, 1999, and prior to 5:00 P.M., Eastern Standard Time, on January 21, 2004, by the Holder of this Warrant by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. (b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in cash by certified or official bank check payable to the order of the Company. (c) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the Warrant shall have been surrendered to the Company as provided in subsection 1(a) above (an "Exercise Date"). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. (d) If this Warrant is exercised in part, the Holder shall be entitled to receive a new Warrant covering the number of Warrant Shares in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will (a) issue a certificate or certificates in the name of the Holder for the shares of the Common Stock to which the Holder shall be entitled, and (b) deliver the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of the Warrant. (e) No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the fair value of a share. 2. Reservation of Warrant Shares. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock as from time to time shall be receivable upon the exercise of this Warrant. 3. Adjustments. (a) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock any shares of capital stock of the Company, the number of Warrant Shares for which this Warrant may be exercised shall be adjusted so that if the Holder surrendered this Warrant for exercise after such action the Holder would be entitled to receive the number of shares of Common Stock or other capital stock of the Company which he would have been entitled to receive had such Warrant been exercised immediately prior to such action. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (a), the Holder of this Warrant shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes of capital stock or shares of Common Stock and other capital stock. (b) In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the holder shall have the right thereafter to exercise this Warrant for the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had such Warrant been exercised immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant. The above provisions of this subsection (b) shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. Notice of any such consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than 30 days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (c) In the event of any adjustment to the number of Warrant Shares issuable upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price in effect immediately prior to such adjustment by a fraction the numerator of which is the aggregate number of Warrant Shares for which this Warrant may be exercised immediately prior to such adjustment and the denominator of which is the aggregate number of Warrant Shares for which this Warrant may be exercised immediately after such adjustment. (d) Whenever the Per Share Warrant Price is adjusted as provided in this Warrant and upon any modification of the rights of the Holder of this Warrant in accordance with this Section 3, the Company shall promptly prepare a certificate of an officer of the Company, setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause a copy of such certificate to be mailed to the Holder. 4. Fully Paid Stock; Taxes. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the proper exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and nonassessable, and not subject to preemptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Common Stock is at all times equal to or less than the then Per Share Warrant Price. Subject to Section 5(e) hereof, the Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes that may be payable in respect of the issuance of any Warrant Shares or certificates therefor. The Holder covenants and agrees that it shall pay, when due and payable, any and all federal, state and local income or similar taxes that may be payable in respect of the issuance of any Warrant Shares or certificates therefor. 5. Transfer (a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable upon the exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws and unless so registered may not be transferred, sold, pledged, hypothecated or otherwise disposed of unless an exemption from such registration is available. In the event the Holder desires to transfer this Warrant or any of the Warrant Shares issued, the Holder must give the Company prior written notice of such proposed transfer including the name and address of the proposed transferee. Such transfer may be made only either (i) upon publication by the Securities and Exchange Commission (the "Commission") of a ruling, interpretation, opinion or "no action letter" based upon facts presented to said Commission, or (ii) upon receipt by the Company of an opinion of counsel acceptable to the Company to the effect that the proposed transfer will not violate the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and regulations promulgated under either such act, or to the effect that the Warrant or Warrant Shares to be sold or transferred have been registered under the Securities Act of 1933, as amended, and that there is in effect a current prospectus meeting the requirements of Subsection 11(a) of the Securities Act, which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of the certificates evidencing the Warrant or Warrant Shares to be sold or transferred. (b) Conditions to Transfer. Prior to any such proposed transfer (including, without limitation, a transfer by will or pursuant to the laws of descent and distribution), and as a condition thereto, if such transfer is not made pursuant to an effective registration statement under the Securities Act, the Holder will, if requested by the Company, deliver to the Company (i) an investment covenant, in form and substance equivalent to that signed by the original Holder of this Warrant, signed by the proposed transferee, (ii) an agreement by such transferee to the restrictive investment legend set forth herein on the certificate or certificates representing the securities acquired by such transferee, (iii) an agreement by such transferee that the Company may place a "stop transfer order" with its transfer agent or registrar, and (iv) an agreement by the transferee to indemnify the Company to the same extent as set forth in the next succeeding paragraph. (c) Indemnity. The Holder acknowledges that the Holder understands the meaning and legal consequences of this Section 5, and the Holder hereby agrees to indemnify and hold harmless the Company, its representatives and each officer and director thereof from and against any and all loss, damage or liability (including all attorneys' fees and costs incurred in enforcing this indemnity provision) due to or arising out of (a) the inaccuracy of any representation or the breach of any warranty of the Holder contained in, or any other breach by the Holder of, this Warrant, (b) any transfer of the Warrant or (c) any untrue statement or omission to state any material fact in connection with the investment representations or with respect to the facts and representations supplied by the Holder to counsel to the Company upon which its opinion as to a proposed transfer shall have been based. (d) Transfer. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with assignment documentation duly executed and funds sufficient to pay any transfer tax, and upon compliance with the foregoing provisions, the Company shall, without 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. Any assignment, transfer, pledge, hypothecation or other disposition of this Warrant attempted contrary to the provisions of this Warrant, or any levy of execution, attachment or other process attempted upon the Warrant, shall be null and void and without effect. (e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been registered under the Securities Act, upon exercise of any part of the Warrant and the issuance of any of the Warrant Shares, the Company shall instruct its transfer agent to enter stop transfer orders with respect to such shares, and all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend, insofar as is consistent with Massachusetts law: "The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, offered for sale, assigned, transferred or otherwise disposed of unless registered pursuant to the provisions of that Act or an opinion of counsel to the Company is obtained stating that such disposition is in compliance with an available exemption from such registration." 6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 7. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 8. Communication. No notice or other communication under this Warrant shall be effective unless the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such other address as the Company has designated in writing to the Holder, or (b) the Holder at the address contained in the first paragraph of this Warrant, or such other address as the Holder has designated in writing to the Company. 9. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 10. Applicable Law. This Warrant shall be governed by and construed in accordance with the law of the Commonwealth of Massachusetts without giving effect to the principles of conflict of laws thereof. IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be signed by a duly authorized officer as of this 28th day of January, 1999. ATTEST: PAMET SYSTEMS, INC. _______________________ By:___________________________________ Name: David T. McKay Title: President & CEO SUBSCRIPTION The undersigned, __________________________________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for the purchase of _________________________ shares of the Common Stock of PAMET SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated __________________ Signature__________________________ Address____________________________ ____________________________ ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers unto _________________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _________________________, attorney, to transfer said Warrant on the books of PAMET SYSTEMS, INC. Dated __________________ Signature_________________________ Address___________________________ ___________________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto _________________________ the right to purchase _________________________ shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint _________________________, attorney, to transfer that part of said Warrant on the books of PAMET SYSTEMS, INC. Dated ___________________ Signature__________________________ Address____________________________ ____________________________ EX-27 2 PAMET SYSTEMS Q1 1999 10-QSB
5 1 3-MOS DEC-31-1999 MAR-31-1999 93,051 0 291,349 60,000 59,575 511,882 1,605,662 673,003 1,731,313 2,197,783 0 25,487 0 0 (1,870,272) 1,731,313 395,790 395,790 149,779 0 803,088 0 74,060 (631,137) 0 (631,137) 0 0 0 (631,137) (0.25) (0.25)
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