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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
SPACEDEV, INC.
Colorado 84-1374613
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13855 Stowe Drive Poway, California 92064
(Address of principal executive office) (Zip Code)
Issuer's telephone number: (858) 375-2030
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None. None.
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
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TABLE OF CONTENTS
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PART I................................................................................................................4
ITEM 1. DESCRIPTION OF BUSINESS..................................................................................4
BACKGROUND.........................................................................................................4
THE COMPANY........................................................................................................5
BUSINESS PLAN......................................................................................................6
PRODUCTS AND SERVICES..............................................................................................7
MARKET STRATEGIES..................................................................................................9
COMPETITION.......................................................................................................11
REGULATION........................................................................................................12
EMPLOYEES.........................................................................................................13
INTELLECTUAL PROPERTY.............................................................................................13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...............................................13
OVERVIEW..........................................................................................................14
RESULTS OF OPERATIONS FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31, 1997 AND THE FISCAL YEAR
ENDED DECEMBER 31, 1998...........................................................................................14
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1999....................................................15
LIQUIDITY AND CAPITAL RESOURCES...................................................................................16
RECENT DEVELOPMENTS...............................................................................................17
YEAR 2000 COMPLIANCE..............................................................................................17
ITEM 3. DESCRIPTION OF PROPERTY.................................................................................18
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................................18
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.........................................19
ITEM 6. EXECUTIVE COMPENSATION..................................................................................22
REMUNERATION PAID TO EXECUTIVES...................................................................................22
EMPLOYMENT AGREEMENTS.............................................................................................25
EMPLOYEE BENEFITS.................................................................................................26
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................26
COMMON STOCK......................................................................................................27
PREFERRED STOCK...................................................................................................27
PART II..............................................................................................................27
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..........................................................................................28
MARKET INFORMATION................................................................................................28
HOLDERS...........................................................................................................28
DIVIDENDS.........................................................................................................28
ITEM 2. LEGAL PROCEEDINGS.......................................................................................28
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...........................................................28
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.................................................................29
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS...............................................................30
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ITEM 6. FINANCIAL STATEMENTS....................................................................................31
PART III.............................................................................................................32
ITEM 1. INDEX TO EXHIBITS.......................................................................................32
ITEM 2. DESCRIPTION OF EXHIBITS.................................................................................32
SIGNATURES...........................................................................................................33
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
SpaceDev, Inc., consisting of one wholly owned subsidiary and one Division,
is a development-stage company organized under the laws of the State of Colorado
on December 23, 1996. It became a publicly traded company in October 1997 and is
currently trading on the Over-The-Counter Bulletin Board exchange under the
symbol "SPDV."
SpaceDev's overall vision is to establish itself as the world's first
commercial space exploration and development company operating in "small space"
- - small spacecraft, small space transportation systems and focused, low-cost
mission solutions. SpaceDev believes it is pioneering a revolutionary
space-products business that has strong parallels to the early days of the
microcomputer revolution. The Company's approach is to provide small spacecraft
- - approximately 250 kg mass and less - and compatible small space transportation
vehicles to a growing market of commercial and government customers. SpaceDev
intends to use common commercial business practices, whenever possible, rather
than the government-driven processes that dominate the space industry. SpaceDev
seeks to avoid "re-inventing the wheel" on each project and instead intends to
rely on proven, "trailing-edge" technologies used in new ways, and relatively
innovative stable product and service offerings.
Since its inception, a specific SpaceDev objective has been to be the first
company to successfully define, implement and execute commercial, low-cost
deep-space missions, i.e., missions to the Moon and beyond. All prior deep-space
missions to date - U.S. and foreign - have been government-defined and
relatively expensive. However, following trends from the space
telecommunications sector that began decades ago and more recently in the space
remote-sensing sector, commercial practices have begun to penetrate the
deep-space sector - already a multi-billion-dollar market worldwide. As these
commercial practices take hold and the results of NASA's "faster, better,
cheaper" initiatives bear fruit, total mission costs should decrease.
SpaceDev's first entrant in this new arena, the Near Earth Asteroid
Prospector (NEAP) mission, was announced in 1997. The Company began offering
commercial Mars and lunar missions in 1999. Since then, the Company has been
actively marketing these missions as enabling products that could provide unique
information content to selected Internet, media, entertainment and education
markets.
From the outset, the Company's strategy has been to rapidly build a
growing, horizontally integrated company that provides low-cost access to space
through profitable, fixed-price commercial sales. This buildup is fueled by
in-house growth and by strategic acquisitions. Selected space-business niches
will be targeted for acquisition and integration.
A prime element of this strategy is a strong focus on small, capable,
low-cost satellites and launch systems addressing the deep space and
Earth-orbiting markets. Small satellites are also a key element of low-cost
Earth-orbiting missions, for which demand is rising. Analogous to the computer
field, such small satellites are often called "microsatellites" or
"micro-spacecraft," with their associated "micromissions."
Another key aspect of SpaceDev's strategy is the hiring of individuals with
world-class experience and skills in the areas above, combined with strategic
acquisitions of companies successfully engaged in these markets. The Company
intends to gain maximum competitive advantage by developing and offering a
limited yet relevant suite of proprietary, open-standard small satellites,
launch systems and related subsystem components. This is how the Company intends
to avoid re-inventing the wheel on each project.
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THE COMPANY
In February 1998, the Company acquired Integrated Space Systems (ISS, in
San Diego) ISS is now a wholly owned SpaceDev subsidiary. Most ISS employees are
former launch-vehicle engineers and managers who worked for General Dynamics in
San Diego. At ISS they perform aerospace-engineering services and R&D, with a
principal focus on launch-system and propulsion-module products. In August 1998
SpaceDev also acquired the patents and intellectual property produced by the
former American Rocket Company (AMROC), which specialized in hybrid rocket
technology (solid fuel and liquid or gas oxidizer) for small sounding rockets
and launch vehicles.
In October 1998 the Company entered into an agreement with Space
Innovations Limited (SIL) in Newbury, England to acquire all of the shares of
SIL in exchange for shares of SpaceDev. By mutual and amicable agreement of both
parties, this transaction was rescinded in December 1999. The primary reason for
the rescission was the difficulties that SpaceDev and SIL encountered in working
with each other due to the new highly restrictive technology-transfer
regulations instituted by the United States.
Commercial space missions are defined and offered by SpaceDev's Space
Missions Division, with support from ISS, and selected outside partner
organizations. In August 1998 SpaceDev hired two experts in the field of
low-cost spacecraft and space-mission development, Jan King and Rex Ridenoure;
together they form the core technical leadership of this Division.
With the acquisition of ISS, SpaceDev's employee base increased to 20
employees in February 1998. This number is expected to increase to approximately
40 over the next 12 months. The Company is actively investigating further
strategic acquisitions.
By 1998 the core SpaceDev team had refined the definition of the NEAP
mission to the degree that NASA formally recognized it as a "Mission of
Opportunity." Established scientists and engineers then began supporting the
concept with scientific-investigation proposals to NASA and commitments from
their home institutions, including three letters of intent for the design and
fabrication of science instruments. In late 1998 SpaceDev began the
approximately two-year process of working with NASA's Jet Propulsion Laboratory
(JPL) to secure scarce Deep Space Network (DSN) tracking time for the mission.
By the summer of 1999, JPL and NASA Headquarters formally agreed that NASA was
prepared to support the NEAP mission with the DSN. A firm contract for a ride on
NEAP was signed with a payload sponsor in mid-1999. Launch was planned for late
2001, with a rendezvous at the near-Earth asteroid Nereus in mid-2002. Multiple
back-up targets are available, if the mission schedule is required to slip. Due
to the number of factors involved and the Company's need for funding, there can
be no assurance that NEAP will be launched.
Also in late 1998, SpaceDev began bidding on and winning
government-sponsored R&D contracts directly relevant to its strategic interests.
The Company competed with seven other industry teams to perform a mission and
spacecraft feasibility assessment study of proposed 200-kg Mars micromissions
and was one of five firms selected by JPL. The final report was delivered to JPL
in March 1999. A few months later JPL initiated a procurement action for at
least one such spacecraft, to be launched in 2003. For several reasons, the
Company decided not to compete for this NASA contract, but has continued
refining its baseline micromissions concept independent of NASA and JPL, and is
now offering lunar and Mars commercial deep-space missions based on this design.
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In mid-1999 SpaceDev's ISS subsidiary competitively won an R&D contract
from the U.S. Air Force Office of Space Launch to study a family of very small,
hybrid-based "micro" kick-motors for small-satellite orbital transfer
applications. At about the same time, ISS and Lockheed Martin Astronautics (LMA)
entered into a joint marketing agreement to sell packaged commercial launch
services involving two to four small satellites on LMA's Athena launch vehicle.
In November 1999 the Space Missions Division was awarded a $4,995,868
million turnkey mission contract by the Space Sciences Laboratory (SSL) at
University of California, Berkeley (UCB). SpaceDev was competitively selected by
UCB/SSL to design, build, integrate, test and operate a small scientific,
Earth-orbiting spacecraft called CHIPSat.
Also in November 1999 SpaceDev hired Charles Lloyd, a leader in the
commercial launch systems field, to be CEO of ISS and CFO for SpaceDev. Mr.
Lloyd brings to the Company extensive experience in corporate finance and
strategic planning as well as direct, recent experience with the development and
implementation of a global marketing and sales organization for commercial
launch systems.
BUSINESS PLAN
SpaceDev's corporate goal is to increase the intrinsic value of the Company
by providing proprietary, reliable, low-cost access to space through innovative
solutions currently lacking in the marketplace. The Space Missions Division
intends to define and market proprietary, open standards-based, low-cost
space-mission solutions involving microsatellites and nanosatellites. ISS
continues to market its current products and services to the aerospace industry
as well as expand its offerings. SpaceDev intends to continue developing new
products and services the Company's management believes are needed in the
marketplace.
SpaceDev is successfully implementing a strategic thrust to be perceived
and regarded as an experienced provider of small-satellite launch-integration
services. Its staff and some carefully selected external partners have a
combined experience base with such systems - direct experience in defining,
implementing and operating several dozen small-spacecraft missions - believed to
be equal to any in the industry. This allows the Company to identify launch
opportunities (whether on U.S. or foreign launchers), conceive and evaluate
small-satellite designs matched with those opportunities and to support the
design, development, test, integration, launch and operations of these
satellites.
SpaceDev believes that a majority of its customers are drawn to the Company
because they are being underserved by the traditional aerospace industry. Most
of the companies that have been servicing this market - especially U.S.
companies - have recently redirected their efforts to larger systems, leaving a
relatively unpopulated market niche for SpaceDev to fill just as the demand for
small satellites is blossoming. The Company intends to continue to introduce new
and useful low-cost space products and services designed to meet customers'
needs, all with an aggressive and practical commercial approach.
The Company's preferred space-mission implementation approach has the
following attributes atypical of projects done by traditional defense
contractors:
o SpaceDev-proprietary spacecraft and launch-vehicle interfaces
o SpaceDev-defined products and services from a catalog, rather than
designs responding to government-supplied specifications
o A focus on "Small Space, " involving turnkey mission solutions and
application of proven commercial business practices such as space
insurance, competitive pricing and creative billing arrangements
o Relatively simple and elegant programmatic and technical solutions
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The Company believes that this business model emphasizing smaller
satellites, commercial approaches, technological simplicity, architectural and
interface standardization and horizontal integration ("whole product") provides
the following advantages:
o Enables small-space customers to contract for end-to-end mission
solutions, reducing the need for and complexity of finding other
contractors for different project tasks
o Creates an easy and convenient way for customers to contract for space
missions and/or spacecraft subsystems
o Lowers total project costs and therefore provides greater value and
increases return on investment for SpaceDev and its customers
o Creates barriers to entry and competition from competitors
Though the Company prefers to define and execute complete space missions
for clients, it also offers customers space-delivery services (for
customer-supplied science or technology demonstration payloads);
science-instrument or technology-demonstration data-set products (from
SpaceDev-supplied payloads); integration and launch services (for a
customer-supplied spacecraft); and space hardware from commercial price lists
(for customer spacecraft).
These features of the Company's business approach thus place it more into
the template that existed during the early days of the microcomputer revolution
rather than into the classical patterns of the existing government-dominated,
limited-profit margin, aerospace industry.
PRODUCTS AND SERVICES
SpaceDev's products and services are grouped into three business areas:
Space Missions, Space Products and Engineering Services. Its business is not
seasonal to any significant extent; however, because it is a commercial
business, it follows normal industry trends.
SPACE MISSIONS
The Company's Space Missions Division offers commercial, standards-based
turnkey space missions for sale as products to a variety of customer bases
(government agencies, other countries, universities, corporations, consortia,
individuals, etc.). It is this product line for which SpaceDev was originally
formed, particularly in the deep-space arena.
DEEP-SPACE MISSIONS. SpaceDev defined the NEAP mission in 1997-99 and has
been in the process of taking the necessary steps for project implementation. In
1998 NASA Headquarters recognized the project as a valid commercial "Mission of
Opportunity" for both its Discovery Program of solar-system exploration missions
and Mid-class Explorer ("MIDEX") program of space-science missions. This opened
the door for space scientists to submit proposals to NASA for science-instrument
development funding and for coverage of the fee that SpaceDev would charge the
scientist for an instrument ride on NEAP. Three proposals were submitted (two to
Discovery and one to MIDEX) in 1998, but none were selected nor funded. In
December 1998, SpaceDev funded JPL to evaluate the feasibility of supporting the
NEAP mission with NASA's DSN, and in October 1999 JPL and NASA headquarters
concurred that such support was feasible. From the mission-operations
standpoint, NASA now treats NEAP as a valid mission (an "Advanced Planning"
mission). NEAP is the first proposed commercial deep-space mission to be granted
this status.
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In December 1998, approximately fifteen months after SpaceDev announced the
feasibility of deep space missions costing less than $50 million, a SpaceDev-led
team was awarded a contract by JPL to assess the feasibility of sending
"micromissions" to Mars for less than $50M total mission cost each. These
missions would cost approximately one-third to one-fifth of recent Mars-mission
costs. An extensive final report was submitted to JPL the following March. This
work formed the basis for redefining the NEAP mission to be significantly
smaller and lower cost than the previous baseline and also prompted SpaceDev to
offer low-cost commercial lunar orbiter and Mars probe-carrier missions
employing a similar design. The Company marketed its commercial micromissions
concept during the summer of 1999 and by late fall was fielding inquiries from
various U.S. and foreign prospects.
EARTH-ORBITING MISSIONS. A natural byproduct of the Company's focus on
small, low-cost spacecraft for commercial deep-space mission applications is the
in-house capability to design, build, market and sell similar concepts for
Earth-orbiting applications.
In November 1999 the Space Missions Division was awarded a turnkey mission
contract by the Space Sciences Laboratory (SSL) at University of California,
Berkeley (UCB). SpaceDev was competitively selected by UCB/SSL's Dr. Michael
Hurwitz to design, build, integrate, test and operate a small spacecraft called
CHIPSat. The 85-kg microspacecraft will carry one science instrument, the Cosmic
Hot Interstellar Plasma Spectrometer, or CHIPS. CHIPS facilitates the
observation and diagnosis of the astrophysical environment in the void outside
our solar system and between the nearby stars in our galaxy. Dr. Hurwitz, the
CHIPS Principal Investigator, and his team are responsible for the overall
CHIPSat mission, designing and building the CHIPS instrument, and performing the
science-data analysis.
CHIPSat is the first mission of NASA's low-cost University-Class Explorer
(UNEX) series to be approved for the implementation phase. SpaceDev started its
work on the CHIPSat project in November 1999 under the $4,995,868 million
commercial, fixed-price contract with UCB. Initial integration and testing of
the spacecraft's components are planned at the Company's headquarters in Poway
in late 2000. Launch at the Cape Canaveral Air Station on a Boeing Delta II is
expected in early 2002, followed by one year of mission operations to be
controlled at SpaceDev's Mission Control Center in Poway, California.
SpaceDev believes that the CHIPSat contract establishes the Company as a
significant competitor in the small-satellite arena, and it expects this
perception to spread rapidly among NASA, DoD, university/R&D, and foreign and
commercial customer bases during the next several months.
SPACE PRODUCTS
SpaceDev's space-products business currently includes spacecraft and
related space systems; launch vehicles and propulsion modules.
SPACECRAFT AND RELATED SPACE SYSTEMS. The Company is presently bidding on
several programs to supply spacecraft buses that would utilize the basic
elements of the CHIPSat and other proprietary spacecraft designs.
LAUNCH VEHICLES AND PROPULSION MODULES. Currently, SpaceDev's ISS
subsidiary is performing design analyses and computer simulations of various
sounding rockets and launch vehicles that primarily use hybrid-propulsion
technology (based on the AMROC intellectual property). The Company anticipates
the possible spin-off of this activity from ISS once specific product lines are
defined and developed. Currently, however, no action has been taken to
accomplish such a spin-off.
In mid-1999 ISS competitively won an R&D contract from the U.S. Air Force
Office of Space Launch to study the feasibility of building small, hybrid-based
"micro" kick-motors for small-satellite applications. The Secondary Payload
Orbital Transfer Vehicle (SPOTV) family has a multitude of possible on-orbit
uses and is now being marketed by SpaceDev as a part of its growing product
line.
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ENGINEERING SERVICES
SpaceDev corporate-level staff and staff in SMD and ISS are available for
supplying aerospace-related technical services to a variety of clients. ISS is
currently most actively engaged in such services.
Most ISS employees are former launch systems engineers and managers at
General Dynamics in San Diego; many have extensive experience with the Atlas
family of launch vehicles and other large-scale rockets and launch facilities.
The ISS staff has core competencies in engineering design and analysis; system
modeling and simulation; instrumentation and testing; launch-site operations and
range safety; launch environments and transport; and mission and trajectory
design. Other skills include project planning and development; systems
engineering and pre-design engineering (e.g., definition of engineering
processes and methods); and systems integration.
ISS has recently performed launch-vehicle design and testing support
services for the Atlas launcher program, Titan/Centaur program and the Kistler
Aerospace launcher development program. ISS has also provided launch-site
design, analysis, test and operations support for various U.S. launcher programs
and launch sites. Various engineering services have been supplied to over a
dozen unmanned spacecraft, manned spacecraft and Remotely Piloted Vehicles
(RPVs).
MARKET STRATEGIES
SPACE MISSIONS
The Company intends through its commercial deep-space and Earth-orbiting
missions to prove its viability and establish itself as the premier commercial
space-exploration and development company. Once it has established its
capabilities for insured, high-quality, fast turnaround and low-cost systems and
missions, the Company believes it will be able to effectively compete, develop
new markets and expand existing markets for space exploration and other
applications.
The Company believes that its low-cost commercial missions can provide
unique information content to various traditionally unconventional space-mission
customers. In particular, the Company is actively seeking potential strategic
partners and customers who share SpaceDev's vision of the convergence of
commercial deep-space activities with selected Internet, media, entertainment
and education activities.
DEEP-SPACE MISSIONS. Since all deep-space missions to date world-wide have
been defined and executed by various government agencies, SpaceDev's plan for
defining and executing such missions as a commercial venture places the Company
at the forefront of a new way of doing business in this arena. Under such
conditions, questions naturally arise within the space community about whether
the Company and its partners are capable of successfully performing in this
arena. The Company's approach is two-fold: (1) Selectively compete for
deep-space related work (R&D studies and development efforts as well as real
projects) against established space-systems companies, and (2) Define, develop
and execute space missions independently of government agencies. Inherent to the
latter approach is a concerted effort to define and cultivate alternative
sponsors for these missions, such as other commercial companies, research and
technology consortia, non-U.S. space interests, etc.
SpaceDev's win of the JPL-funded Mars Micromissions study in 1998 is
representative of approach (1) above, while its efforts to define and promote
the NEAP mission fit approach (2) above.
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EARTH-ORBITING MISSIONS. The market situation in this arena has
similarities to the deep-space arena, but there are more competitors and a wider
variety and greater number of missions to consider as marketing targets. The
challenge here, as in the deep-space arena, is for the Company to rapidly
establish credibility by selectively competing for and winning R&D studies and
development efforts as well as real projects. The Company's commercial focus
works more easily with government-funded efforts if it performs the work on a
commercial basis for a Principal Investigator or task manager who interfaces
directly with the government sponsor(s). For non-governmental sponsors, the
Company prefers to deal directly with the customer(s).
SPACE PRODUCTS
SPACECRAFT AND RELATED SPACE SYSTEMS. In general, the Company believes
that any market target in the space-missions segment discussed above also
represents a potential customer for its space products (vs. turnkey missions).
This includes both the earth-orbiting and deep space markets.
LAUNCH VEHICLES AND PROPULSION MODULES. SpaceDev addresses this market
segment with its ISS subsidiary. Small spacecraft are produced by government
agencies, universities and commercial companies throughout the United States,
Europe and Japan. These spacecraft represent significant science and
technology-demonstration opportunities that require exposure to the space
environment to fulfill their mission objectives. Annual launch rates for such
spacecraft are limited principally by the high cost of current launch vehicles.
These conditions result in many valuable experiments and payloads being left on
the ground.
Recognizing this problem, government and commercial industry have been
performing research and development in an attempt to reduce the cost per
kilogram (or pound) to orbit for small spacecraft. Paul Coleman, president of
the Universities Space Research Association (USRA), has challenged the space
industry with launch-cost targets priced between $2.0M and $3.5M for a 300-kg
spacecraft. Clearly, today's commonly used launch-vehicle technologies cannot
achieve this goal. Launch service users have pinned their future hopes on
reusable launch vehicles, which appear to be ten years or more away from
day-to-day use, to lower launch costs.
In the near term the only real hope for small spacecraft is to find an
alternative path to space using a secondary ride system such as the Ariane
Structure for Auxiliary Payloads (ASAP) or a low-cost launch system yet to be
developed. ISS retained key personnel critical in the development of General
Dynamics' Atlas Centaur launch vehicle. It is believed that this level of
experience has never before been available to the small launch-vehicle market.
ISS has also obtained the rights to the patents and intellectual property
produced by the former American Rocket Company (AMROC), which specialized in
hybrid rocket technology (solid fuel and liquid or gas oxidizer) in the design
of sounding rockets and launch vehicles.
The ISS approach of combining large-vehicle expertise with the lower cost
inherent in hybrid rocket technology could give small payload customers new and
valuable capabilities at small-business savings. SpaceDev research has indicated
a very large university and government market, starving for cost-effective
access to space. ISS intends to put that expertise to work building a family of
orbital transfer vehicles and small launch vehicles using hybrid rocket
technology. The funds need to fully develop this family of vehicles have not yet
been secured and there is no guarantee that these funds can be raised.
ENGINEERING SERVICES
SpaceDev addresses this market segment principally with its ISS subsidiary,
though the SMD staff can be applied selectively to provide such services. The
current business base lies principally within the aerospace- engineering and
test-services market. ISS can be distinguished from its competitors by its
highly experienced personnel, who gained their knowledge and know-how during
years of employment with major aerospace companies (General Dynamics Space
Systems in particular). Contemporary space-market analysis indicates an overall
trend toward shrinking budgets. This could result in smaller spacecraft, rapid
turn-ons, shorter schedules and smaller project budgets. ISS is being groomed to
work within this environment. ISS intends to exploit its technologies, low-cost
focus, rapid turn-on capabilities and small-business assets to form teaming
arrangements, solicit business and win contracts.
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Currently no experienced small launch-vehicle company is known to offer
this service to space-vehicle contractors. ISS also offers experienced personnel
to launch-vehicle customers as a low-cost alternative to in-house capabilities.
ISS provides companies the ability to complete jobs where the work has surpassed
workforce capabilities or the task requires unique expertise, without having to
hire permanent employees.
COMPETITION
SpaceDev believes that competition for sales of its products and services
is based on price, performance and other technical features, contracting
approach, reliability, scheduling, customization, and in some situations,
geography.
SPACE MISSIONS
The primary domestic competition for space missions in the targeted
SpaceDev markets comes from such companies as Orbital Sciences Corporation, Ball
Aerospace and Technology Corporation, Spectrum Astro, Inc., Space Dynamics
Laboratory and AeroAstro. Though Lockheed Martin Aerospace, TRW, Inc., Swales
Aerospace, GM Hughes Electronics and a few other companies and R&D organizations
are perhaps capable of mounting a competition in these markets, the Company is
not aware of any serious intent to do so. SpaceDev believes that it has made
much more substantial and significant progress compared to these firms in
defining business models and pursuing sales in the small, emerging commercial
deep-space and Earth-orbiting markets. In addition to private companies there
are certain universities in the United States that have the capability to
produce reasonably simple satellites.
The clear competitor in the international arena is Surrey Satellite
Technology Limited in the UK. Swedish Space Corporation is also able to compete
in the small-satellite arena; they were named in November 1999 as the prime
contractor for ESA's SMART-1 technology-demonstration spacecraft to the Moon.
The Company is not aware of any current direct and credible competition in
the field of commercial space exploration and development. Firms such as those
mentioned above and other R&D laboratories (e.g., JPL, Applied Physics
Laboratory, ISAS in Japan) have the technical knowledge and experience to design
and execute missions similar to NEAP and CHIPSat, but they are primarily
government agencies or contractors. SpaceDev management believes that federal
procurement regulations and accounting systems make it difficult if not
impossible for these companies and labs to compete on price with the Company.
Governments and government programs like those in NASA, ESA and the
Japanese space agencies (NASDA and ISAS) have executed many missions over a
period of many years, but all of these are characterized by long lead times,
high expense, little flexibility, and generally uninsured payloads. It is
SpaceDev's opinion that NASA Administrator Dan Goldin has done an excellent job
in lowering the cost of NASA missions, but the cost has declined from billions
of dollars to hundreds of millions of dollars, whereas SpaceDev is targeting
missions costing tens of millions. With the overhead and culture of such
agencies and their defense contractors, it may be difficult for the
government-defined and managed programs to lower costs much more.
The Company believes that government-driven programs pose very little
threat of competing on the basis of price, although governments have
considerably greater experience, and substantially greater financial, workforce
and facilities resources. The Company also believes that governments and their
legislatures will increasingly encourage and support private, routine commercial
space exploration due to budgetary pressures, private-sector job creation and
tax-revenue considerations.
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SPACE PRODUCTS
The trend in some sectors of the space industry to smaller, lower cost
spacecraft is creating a new market for smaller, cheaper, launch-on-demand space
systems. With respect to SpaceDev's initiatives into low-cost launch systems,
several competitors have already entered the top end of this small-satellite
market, including Lockheed Martin with its Athena launch vehicle and Orbital
Sciences Corporation with its Pegasus and Taurus. The launch costs of these
vehicles, beginning at approximately $16 million per launch, are considered by
many to be too expensive for university-class and micro-spacecraft missions,
resulting in low launch rates for these launch systems. Although these companies
have been operating longer than SpaceDev, the Company believes that it may be
able to effectively compete against them in the area of launching small
satellites for under $10 million. This, combined with what is perceived as the
rapid growth in the demand for mini and micro-satellites, has left the market
open for a low-cost, reliable, rapidly deployed family of launch vehicles.
EXPENDABLE LAUNCH VEHICLES. Today's launch mainstays in the large
launch-vehicle class are the United States' Titan, European Ariane and Russian
Proton and Zenit. In the medium launch-vehicle class the United States' Atlas
and Delta rockets face heavy competition from around the world from the European
Space Agency, former Soviet States and more recently from Japan, China and
India. In the small launch-vehicle class the United States' Athena, Taurus and
Pegasus are dominant. Microcosm, Inc. has been working on the development of a
low-cost family of expendables called Scorpius, with first orbital launch not
expected before 2002. A common thread in the existing medium and small
launch-vehicle classes is that the United States' launch systems are
consistently more expensive than their foreign counterparts. SpaceDev believes
there is a great need for a low-cost (less than $10 million) U.S.-built and
controlled micro launch system. SpaceDev has not formally initiated a launch
vehicle program and might not in the future.
RE-USABLE LAUNCH VEHICLES. There is only one partially re-usable launch
vehicle currently in use: the Space Shuttle (the "Space Transportation System,"
or STS). Over the past five years, a multitude of companies have been working on
a variety of designs to capture this market. The most notable attempts at
developing re-usable vehicles are the NASA co-sponsored X-33/Venture Star (with
a Lockheed Martin-led consortium), the X-34 (with an Orbital-led consortium) and
the X-38 (led by Boeing). Other commercial firms such as Kistler, Kelly, Roton,
and Pioneer Rocketplane are attempting to develop conceptually similar systems.
ENGINEERING SERVICES
There are a number of small to very large companies that supply engineering
services in the space arena. SpaceDev offers one unique capability in that it
has collocated in one area both launch and spacecraft engineers. This allows the
Company to provide efficient and coordinated responses to design issues that
almost always have both spacecraft and launch considerations.
REGULATION
The Company's business activities are regulated by various agencies and
departments of the U.S. Government and, in certain circumstances, the
governments of other countries. Exports of the Company's products, services, and
technical information require licenses from the U.S. Department of State, which
recently published new regulations restricting the ability of U.S. based
companies to complete off-shore launches, or to export certain satellite
components and technical data to certain non-NATO countries. Commercial space
launches require licenses from the U.S. Department of Transportation.
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Command and telemetry frequency assignments for space missions are
regulated internationally by the International Telecommunications Union (ITU)
and in the U.S. by the Federal Communications Commission (FCC) and National
Telecommunications Information Agency (NTIA).
In addition, the Company is required to obtain permits, licenses, and other
authorizations under federal, state, local and foreign statutes, laws or
regulations or other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
The failure of the Company to comply with any of the above mentioned
regulations could have material adverse effects.
EMPLOYEES
As of the date of this registration statement, the Company, together with
ISS, employs approximately 25 persons full and part-time, of which most are
aerospace, mechanical and electrical engineers. The Company expects to hire
other personnel as necessary for product development, quality assurance, sales
and marketing and administration.
SpaceDev does not have any collective bargaining agreements with its
employees and believes its employee relations are good. An employee
stock-incentive program and an employee stock-purchase program were approved at
the 1999 annual shareholders meeting and have been implemented.
INTELLECTUAL PROPERTY
SpaceDev relies in part on patents, trade secrets and know-how to develop
and maintain its competitive position and technological advantage. The Company
intends to protect its intellectual property through a combination of license
agreements, trademark, servicemark, copyright, trade secret laws and other
methods of restricting disclosure and transferring title. There is no guarantee
that such applications will be granted. The Company has and intends to continue
entering into confidentiality agreements with its employees, consultants and
vendors; entering into license agreements with third parties; and generally
seeking to control access to and distribution of its intellectual property.
In August 1998, SpaceDev acquired license to intellectual property
(including patents and trade secrets) from an individual who had acquired them
from the former American Rocket Company (AMROC), which specialized in hybrid
rocket technology. The Company issued warrants to this individual to purchase a
minimum of 100,000 and a maximum of 3,000,000 shares of its Common Stock over
the next 10 years, depending on the Company's annual revenues related to sales
of hybrid technology-based products.
In 1999 the Company began preparing a new patent application addressing a
technological need in the small-satellite arena. It expects to submit the
application in early 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company
financial statements and the notes thereto and the other financial information
appearing elsewhere in this document. In addition to historical information, the
following discussion and other parts of this document contain forward-looking
information that involves risks and uncertainties. Actual results could differ
materially from those anticipated by such forward-looking information due to
risk factors discussed elsewhere in this submittal.
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OVERVIEW
SpaceDev, Inc. is a development-stage company organized under the laws of
the State of Colorado on December 23, 1996. It became a publicly traded company
in October 1997 and is currently trading on the Over-The-Counter Bulletin Board
exchange under the symbol "SPDV."
SpaceDev's overall vision is to establish itself as the world's first
commercial space exploration and development company operating in "small space"
- - small spacecraft, small space transportation systems and focused, low-cost
mission solutions. SpaceDev is pioneering a revolutionary space-products
business that has strong parallels to the early days of the microcomputer
revolution. The Company's approach is to provide small spacecraft -
approximately 250 kg mass and less - and compatible small launch vehicles to a
growing market of commercial and government customers. SpaceDev intends to use
common commercial business practices rather than the government-driven processes
that dominate the space industry. SpaceDev seeks to avoid "re-inventing the
wheel" on each project and instead intend to rely on proven, "trailing-edge"
technologies and relatively stable product and service offerings.
During 1997 operating activities consisted largely of developing the
preliminary designs and mission analysis for the NEAP mission. During 1998,
SpaceDev acquired ISS and SIL. In 1998, operating activities included
engineering technical services work for aerospace customers and continued
development of NEAP preliminary designs and mission analysis. During 1999,
operating activities included preliminary design and conceptual studies for the
CHIPSat program, engineering technical services and continued work on the NEAP
mission. SpaceDev's employee base increased with the acquisition of ISS to 20
employees in February 1998.
Effective December 17, 1999, SpaceDev. Inc. entered a "Mutual Release and
Rescission of Agreement" with the management of Space Innovations Limited (SIL)
to rescind the original acquisition of SIL by SpaceDev. Following general
acceptable accounting principles, SpaceDev Inc.'s 1998 Consolidated Financial
Statements have not been restated and include SIL as a wholly-owned subsidiary.
All interim financial statements for 1999 have been adjusted and will include
SIL under the equity method of accounting, as a consolidated entity since
control of SIL was only temporary. Goodwill related to the acquisition of SIL
was reclassified to investment in SIL and not eliminated on the consolidated
financial statements for 1999.
RESULTS OF OPERATIONS FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31, 1997 AND THE
FISCAL YEAR ENDED DECEMBER 31, 1998
NET SALES
For the four-month period ended December 31, 1997 the Company generated
no sales. In 1998, net sales consisted primarily of engineering technical
services to aerospace customers. Net sales were $2,093,254 in 1998.
COST OF SALES
Cost of sales primarily represents all costs directly associated with
individual contracts. Included in this category are direct labor and associated
fringe benefits, direct material and subcontracts, and direct travel. Cost of
sales was $1,152,813 (55.1% of net sales) for 1998 compared to no cost of sales
generated for 1997.
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SALES AND MARKETING
The Company did not incur sales and marketing expenses for the period
ended December 31, 1997. Sales and marketing expense consists primarily of
direct marketing expenses, salaries and commissions. Sales and marketing expense
was $141,581 (6.8% of net sales) during 1998.
RESEARCH AND DEVELOPMENT
Research and development expense in 1998 was $700,921 compared to
$904,094 expended in 1997. The 1998 expense was incurred in the continued
development of the NEAP project and SIL's program to develop their MiniSIL and
small satellite projects. The 1997 expenses were primarily subcontractor and
consulting expenses related to the NEAP project. The Company expenses research
and development costs as they are incurred.
GENERAL AND ADMINISTRATIVE
General and administrative expense consist primarily of salaries for
administrative personnel, fees for outside consultants, goodwill allocation of
acquisition costs, depreciation, facilities related costs, insurance, legal and
accounting fees, and other overhead. General and administrative expense was
$2,001,507 (95.6% of net sales) during 1998 compared with no general and
administrative expenses for 1997. Amortization expenses associated with the
acquisition of ISS, SIL and the hybrid technology totaled $894,688 (44.7% of
total general and administrative). It is anticipated that overall general and
administrative expense will increase in the foreseeable future. General and
administrative expense as a percentage of net sales may fluctuate depending upon
the level of future net sales and the timing of additional investments in
general and administrative infrastructure.
OTHER INCOME EXPENSE, (NET)
Net interest expense of $6,074 during 1998 resulted from interest
incurred on a building mortgage and various leases of $87,270 and other income
of $93,154 from SIL's Grant contract with the UK government. The Company did not
incur interest expenses for the period ended 1997.
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1999
NET SALES
Net sales, for the nine months ended September 30, 1999, consisted
primarily of the sales for engineering technical services to various aerospace
customers. Net sales were $634,145 for the nine months ending September 30, 1999
compared with sales of $1,083,096 for the same period in 1998 (41.5% reduction).
This reduction in sales was a direct result of Integrated Space Systems' move
from the Small Disadvantage Business classification after being acquired. This
reclassification resulted in loss contract opportunities of approximately
$500,000. However, during this period, contracts with seven new customers were
initiated.
Net sales are generated through either fixed price contracts or time
and material contracts. Sales recognition for time and material contracts is
recognized at time of work, while fixed price contracts are based on a percent
completion basis.
On November 1, 1999, SpaceDev entered into a $4,995,868 firm fixed
price contract with the University of California at Berkeley. It is anticipated
that net revenues will increase in the year 2000 with this contract award.
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COST OF SALES
Cost of sales primarily represents all costs directly associated with
individual contracts. Included in this category are direct labor and associated
fringe benefits, direct material and subcontracts, and direct travel. Cost of
sales for the nine-month period ended September 30, 1999 was $331,498 (52.3% of
net sales) compared to $493,268 (46% of net sales) for the first nine months of
1998.
RESEARCH AND DEVELOPMENT
Research and development expense for the nine-month period ended
September 30, 1999 was $67,816 compared to $173,754 for the first nine months in
1998 (61.0% reduction). These expenses were incurred in the continued
development of the NEAP project and other projects. The Company expenses
research and development costs as they are incurred.
GENERAL AND ADMINISTRATIVE
General and administrative expense consists primarily of salaries for
administrative personnel, fees for outside consultants, goodwill allocation of
acquisition costs, depreciation, facilities related costs, insurance, legal and
accounting fees, and other overhead. General and administrative expense for the
nine months ended September 30, 1999 was $1,896,045 (299% of net sales) compared
to $1,314,325 (121% of net sales) during first nine months of 1998. Amortization
expenses associated with the acquisition of Integrated Space Systems for the
nine months ending September 30, 1999 totaled $522,826 (24.3% of general and
administrative) compared to $462,078 in the same period in 1998 (35% of general
and administrative). SpaceDev anticipates that overall general and
administrative expense will increase in the foreseeable future; however, general
and administrative expense as a percentage of net sales may fluctuate depending
on the level of future net sales and the timing of additional investments in
general and administrative infrastructure.
OTHER INCOME EXPENSE, (NET)
Net interest expense of $500,541 for the nine-month period ended
September 30, 1999 was interest incurred on a building mortgage and various
leases of $220,680 and an equity loss in subsidiary of $280,127.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business strategy requires significant capital expenditures.
The Company will incur a substantial portion of these expenditures before it
generates significant sales. Combined with operating expenses, these capital
expenditures will result in a negative cash flow until the Company establishes
an adequate revenue-generating customer base. The Company expects losses through
2000 and does not expect to generate net positive cash flow from operations
sufficient to fund both operations and capital expenditures until the launch of
its first commercial spacecraft or launch vehicle. There is no assurance that
the Company will achieve or sustain any positive cash flow or profitability
thereafter.
During the year ended December 31, 1999, the Company raised approximately
$900,000 through private sales of stock. After consummation of this offering,
the Company still requires substantial additional funds, currently estimated at
more than of $10,000,000 to implement its business strategies. The Company does
not have a commitment from any placement agent or underwriter to obtain
additional funds or to implement this or any additional public offering. The
Company hopes to raise additional capital through private or public offerings.
The expected proceeds from such offerings are expected to generate sufficient
funds to meet the Company's cash requirements for the next twelve months and to
allow the Company to begin to implement various business strategies. The Company
has raised $360,000 of funding through a recent registered offering in Colorado,
and anticipates that such capital, when coupled with revenues generated by
CHIPSat and the Company's general operations, may be sufficient to help maintain
operations until additional funding becomes available.
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The Company's ability to consummate any additional public offering or
otherwise obtain funds is subject to numerous factors beyond the Company's
control, including, without limitation, a receptive securities market and
appropriate governmental clearances. No assurances can be given that the Company
will be profitable, or that any additional public offering will occur, that the
Company will be successful in obtaining additional funds from any source or that
the Company will be successful in implementing an acceptable exit strategy on
behalf of its investors. Moreover, additional funds, if obtainable at all, may
not be available on terms acceptable to the Company when the Company needs such
funds or may be on terms which are significantly adverse to the Company's
current shareholders. The unavailability of funds when needed would have a
material adverse effect on the Company.
The Company may also need to raise additional capital if, for example,
(i) significant delays occur in deploying its first deep-space mission due to
technical difficulties, launch, or satellite failure, or other reasons; (ii) the
Company does not enter into agreements with customers on the terms the Company
anticipates; (iii) the Company's net operating deficit increases because it
incurs significant unanticipated expenses; or (iv) the Company incurs additional
costs from modifying all or part of NEAP or its proposed hybrid-related systems
to meet changed or unanticipated market, regulatory, or technical requirements.
If these or other events occur, there is no assurance that the Company could
raise additional capital on favorable terms, on a timely basis or at all. A
substantial shortfall in funding would delay or prevent deployment of NEAP
and/or the hybrid-related systems.
RECENT DEVELOPMENTS
In December 1999 the Company completed negotiations with SIL to rescind
the 1998 Share Acquisition Agreement between the parties and to arrange a more
mutually beneficial trading relationship between SIL and the Company. It was
unclear what effect recent regulations released by the U.S. Department of State
(restricting export of technical information) would have on the offshore
operations of SIL as a wholly owned subsidiary of the Company. Management
believed rescission of the agreement would allow the Company more flexibility in
its relationship with SIL. Although the long-term financial effects of the
rescission on the Company are unclear, management anticipates that, initially,
the rescission will have a positive net effect on the Company's balance sheet.
In January 2000, the Company received preliminary approval from a
financial institution to refinance the $1.3 million first mortgage on the
company's office building. This refinancing changes the first mortgage from a
one-year term loan to a 25-year term loan and reduces the interest expense from
13% to 10%.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications, and other control devices
use only two digits to identify a year in the date field, without considering
the impact of the recent change in the century. Others do not correctly process
"leap year" dates. The Company has not experienced any technical difficulties as
a result of this problem, however, systems and applications could fail or create
erroneous results during the next six months. While the Company has evaluated
its products for year 2000 compliance and believes that each is substantially
year 2000 compliant, there can be no assurance that the Company's products are
or will ultimately be year 2000 compliant. In addition, the Company believes
that it is not possible to determine whether all of its customers' products into
which the Company's products are incorporated are year 2000 compliant because
the Company has little or no control over the design production and testing of
its customers' products.
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The Company relies on its systems, applications and devices in operating
and monitoring all major aspects of its business, including financial systems
(such as general ledger, accounts payable and payroll modules), customer
services, infrastructure, embedded computer chips, networks and
telecommunications equipment and end products. The Company could be affected
through disruptions in the operation of the enterprises with which the Company
interacts or from general widespread problems or an economic crisis resulting
from non-compliant year 2000 systems. Despite the Company's efforts to address
the year 2000 impact on its internal systems and business operations, there can
be no assurance that such impact will not result in a material disruption of its
business or have a material adverse effect on the Company's business, financial
condition or results of operations. Contingency plans include alternative
vendors and procedures. Remediation costs associated with the Year 2000 have
been minimal for the Company. SpaceDev believes such costs will continue to be
nominal through the next six months.
ITEM 3. DESCRIPTION OF PROPERTY
SpaceDev owns over 25,000 square feet of office, engineering and
manufacturing space in Poway, CA.
In December 1998 the Company purchased its headquarters facility in the
Poway Industrial Park complex and proceeded to invest $300,000 in modifications
and improvements before moving in mid-May (SpaceDev corporate and ISS). Key uses
of the Poway facility are program and project conferences and meetings,
engineering design, engineering analysis, spacecraft assembly, avionics labs and
software labs and media outreach. By late 1999 the Company had defined plans for
outfitting the building with a 1,800 square foot clean-room facility to support
spacecraft integration and additional space for testing, an avionics test area,
machine shop and shipping/receiving area. Completion of these improvements is
expected in 2000. The Company also has plans for a Mission Control Center in the
Poway building and expects this to be completed in 2000. Avionics systems may be
built up from components and undergo system-level tests at this location prior
to shipment to other facilities. Because these improvements depend on the
Company obtaining adequate funding, there can be no assurance that they will be
completed as scheduled.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as December 31, 1999 concerning
the beneficial ownership of the Company's common stock by (i) each director,
(ii) each named executive officer, (iii) each shareholder known by the Company
to be the beneficial owner of more than 10% of its outstanding Common Stock, and
(iv) the directors and officers as a group. Except as otherwise indicated, the
persons named in the table have sole voting and investing power with respect to
all shares of Common Stock owned by them.
<TABLE>
<CAPTION>
- ------------------------------ ----------------------------------- ---------------------------- --------------------
Name and Address of Beneficial Amount and Nature of Percent of Class
Title of Class Owner(2) Beneficial Ownership
- ------------------------------ ----------------------------------- ---------------------------- --------------------
<S> <C> <C> <C>
$.0001 par value common stock James W. Benson, CEO and 9,628,413(2)(3) 66%(1)
President and
Susan Benson, Secretary
13855 Stowe Drive
Poway, California 92064
$.0001 par value common stock Philip E. Smith 333,335 2.2%
Chief Operating Officer
13855 Stowe Drive
Poway, California 92064
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$.0001 par value common stock Jan A. King, Vice President 5,000 <0.1%
13855 Stowe Drive
Poway, California 92064
$.0001 par value common stock Wesley T. Huntress Jr., Director 4,444 <0.1%
13855 Stowe Drive
Poway, California 92064
$.0001 par value common stock Officers and Directors as a group 9,971,192 67.2%(1)
</TABLE>
(1) Where persons listed on this table have the right to obtain additional
shares of Common Stock through the exercise of outstanding options or
warrants or the conversion of convertible securities within 60 days from
December 31, 1999, these additional shares are deemed to be outstanding for
the purpose of computing the percentage of Common Stock owned by such
persons, but are not deemed outstanding for the purpose of computing the
percentage owned by any other person. Percentages are based on 14,839,945
Shares outstanding on December 31, 1999.
(2) Does not include options to purchase 500,000 shares of common stock
currently exercisable.
(3) Represents 236,000 shares held directly by James W. Benson; 8,895,000
shares held by SD Holdings, LLC, an entity controlled by James W. Benson;
and 497,413 shares recently transferred from SD Holdings, LLC to Space
Development Institute, a 501(c)(3) corporation.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The management and directors of the Company's business activities are under
the control of its Board of Directors. Its Chief Executive Officer, James W.
Benson, manages the Company's daily operations. The Company currently has four
directors. Below are the executive officers and directors of the Company.
NAME POSITION HELD
- ---- -------------
James W. Benson Chief Executive Officer, President,
13855 Stowe Drive Director, Chairman of the Board
Poway, California 92064
Charles H. Lloyd** Director, Chief Financial Officer
13855 Stowe Drive
Poway, California 92064
Philip E. Smith*** Chief Operating Officer - ISS
13855 Stowe Drive
Poway, California 92064
Susan Benson Secretary
13855 Stowe Drive
Poway, California 92064
Jan King Vice-President, Space Engineering
13855 Stowe Drive
Poway, California 92064
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Wesley T. Huntress* Director
13855 Stowe Drive
Poway, California 92064
* Denotes Independent Director
** Thomas W. Brown resigned as the Company's Chief Financial Officer on
November 3, 1999. He remains acting Chief Financial Officer of the
Company's wholly owned subsidiary, ISS. Mr. Lloyd has been appointed
Chief Financial Officer of SpaceDev.
*** Philip E. Smith resigned as a Director of the Company in November 1999.
The Board of Directors has appointed Charles H. Lloyd to act as interim
director until the next annual shareholders' meeting.
The following is a summary of the business experience of the officers and
directors of the Company as well as other key employees.
JAMES W. BENSON, age 54, is the founder of the Company, and has served as
its Chief Executive Officer and President since inception. Mr. Benson is also a
Director of the Company, a position he has held since October 1997. In 1984, Mr.
Benson founded Compusearch Corporation (later renamed Compusearch Software
Systems), in McLean, Virginia. The company was based on use of personal
computers to create full text indexes of massive government procurement
regulations and to provide fast full text searches for any word or phrase; the
first instance of large scale, commercial implementation of PC-based full text
searching, which later grew to encompass such systems as worldwide web search
engines. Seeing related opportunities in document and image management, Mr.
Benson started the award-winning ImageFast Software Systems in 1989, which later
merged with Compusearch. In 1995, Mr. Benson sold Compusearch and ImageFast, and
retired at age fifty. After months of research, Mr. Benson started SpaceDev LLC,
which was acquired by the Company in October 1997. Mr. Benson holds a Bachelor
of Science degree in Geology from the University of Missouri. He founded the
non-profit Space Development Institute and introduced the $5,000 Benson Prize
for Amateur Discovery of Near Earth Objects. He is also Vice-Chairman and
private sector representative on NASA's national Space Grant Review Panel and a
member of the American Society of Civil Engineers subcommittee on Near Earth
Object Impact Prevention and Mitigation.
CHARLES H. LLOYD, age 49, has been retained as the Company's Chief
Financial Officer following resignation of that position by Thomas W. Brown on
November 3, 1999. Mr. Lloyd has also been named the CEO of the Company's ISS
subsidiary. Mr. Lloyd was formerly the CEO and President of International Launch
Services (ILS), a joint venture of Lockheed Martin Corporation, Khrunichev State
Research and Production Space Center and RSC Energia. During his tenure at ILS,
he was responsible for the development, expansion, and ongoing operation of the
joint venture. Lloyd aggressively marketed product lines globally, not only by
overcoming cultural barriers, but also by structuring the organization to
support multiple product and management requirements. He is credited with
developing strategic international relationships between the United States and
Russia, and with setting the industry standard for strict controls in the
transfer of technology. Lloyd and his team at ILS generated over a billion
dollars in new contracts and developed competitive markets in Asia, Europe, and
North America, all of which have provided increased revenues. Mr. Lloyd has
close to 20 years of senior management experience in high technology,
international service and manufacturing environments, with most of that time in
positions focused on operations management, marketing and finance and
administration. Prior to his employment with Lockheed and ILS, Mr. Lloyd held
several management positions at General Dynamics (GD). He was Vice President and
Managing Director, and responsible for the management and operations of General
Dynamics Commercial Launch Services. Prior to that, he was Vice President of
Finance and Controller of GD Space Systems, and Vice President of Finance and
Administration of GD Services Company. Mr. Lloyd began his career as a Senior
Financial Planning Analyst at Ford Motor Company in 1975. Mr. Lloyd holds a
Masters of Business Administration from the University of Michigan and earned
his Bachelor of Arts Degree in Finance from Virginia Polytechnic Institute and
State University.
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PHILIP E. SMITH, age 41, was a Director of the Company until November 1999
and has been COO of ISS since February 1998, when the Company acquired ISS, a
company he founded in 1994. Mr. Smith was the President and founder of ISS, a
profitable engineering services company from 1994 to 1998. Mr. Smith began his
aerospace career in 1983, when he joined then General Dynamics' Space Systems
Division in San Diego, California as a launch vehicle engineer. Prior to joining
GDSS, he worked for several engineering firms in the San Francisco Bay area,
including Bechtel, URS John Blume and EDS Nuclear. Mr. Smith earned a Bachelor
of Science degree in Civil Engineering (with honors) and a Master of Science
degree in Structural/Mechanical Engineering from University of California at
Berkeley in 1980 and 1982 respectively. He is currently a member of the Board of
Directors of California Space Technology Alliance, a California non-profit
corporation that is the "California Spaceport Authority." He is a registered
professional civil engineer in the State of California.
SUSAN BENSON, age 54, has served as the Company's Secretary since its
inception. She is the wife of James W. Benson. Ms. Benson was the Customer
Support Manager for Compusearch Software Systems in McLean, Virginia from 1986
through 1995.
JAN KING, age 52, has served as Vice-President of the Company since August
1998. With more than 30 years experience in the field, Mr. King has a
distinguished record within the small satellite and launch vehicle communities.
During this time he has been associated with the design and development of 17
small spacecraft and 9 larger spacecraft, as well as one launch vehicle. He has
also provided technical advice and consulting support to other corporations and
organizations regarding small satellite system technology. Some of his previous
positions include: Schriever Chair Professor (endowed chair), Dept. of
Astronautics, United States Air Force Academy; Vice President, Technology,
Qualcomm, Inc., Boulder, Colorado; Vice President of Boulder Operations, Orbital
Sciences Corporation; Vice President for Space Technology, Member BOD and
Founder, Skylink Corporation; Aerospace Technologist, NASA/GSFC; Vice President
for Engineering, Member of the BOD, Co-founder of the Radio Amateur Satellite
Corp., Washington, D.C. Mr. King received a Bachelor of Science degree in
Physics from Oakland University in 1968 and a Master of Science degree in
Electrical Engineering from Catholic University of America in 1973.
WESLEY T. HUNTRESS, age 57, was elected to the Company's Board of
Directors as an Independent Director at the Company's annual shareholder meeting
held June 30, 1999. Dr. Huntress is currently Director of the Geophysical
Laboratory at the Carnegie Institution of Washington in Washington, DC, where he
leads an interdisciplinary group of scientists in the fields of high-pressure
science, astrobiology, petrology and biogeochemistry. Prior to his appointment
at Carnegie, Dr. Huntress served the Nation's space program as the Associate
Administrator for Space Science at NASA from October 1993 through September 1998
where he was responsible for NASA's programs in astrophysics, planetary
exploration, and space physics. During his tenure, NASA space science produced
numerous major discoveries, and greatly increased the launch rate of missions.
These discoveries include the discovery of possible ancient microbial life in a
Mars meteorite; a possible subsurface ocean on Jupiter's moon Europa; the
finding that gamma ray bursts originate at vast distances from the Milky Way and
are extraordinarily powerful; discovery of massive rivers of plasma inside the
Sun; and a wealth of announcements and images from the Hubble Space Telescope,
which have revolutionized astronomy as well as increased public interest in the
cosmos. Dr. Huntress also served as a Director of NASA's Solar System
Exploration Division from 1990 to 1993, and as special assistant to NASA's
Director of the Earth Science and Applications from 1988 to 1990. Dr. Huntress
came to NASA Headquarters from Caltech's Jet Propulsion Laboratory (JPL). Dr.
Huntress joined JPL as a National Research Council resident associate after
receiving is B.S. in Chemistry from Brown University in 1964 and his Ph.D. in
Chemical Physics from Stanford in 1968. He became a permanent research scientist
at JPL in 1969. He and his JPL team gained an international reputation for their
pioneering studies of chemical evolution in interstellar clouds, comets and
planetary atmospheres. At JPL Dr. Huntress served as co-investigator for the ion
mass spectrometer experiment in the Giotto Halley's Comet mission, and as an
interdisciplinary scientist for the Upper Atmosphere Research Satellite and
Cassini missions. He also assumed a number of line and research program
management assignments while at JPL, and spent a year as a visiting professor in
the Department of Planetary Science and Geophysics at Caltech.
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REX RIDENOURE, age 43, is the Company's Chief Mission Architect, a position
he has held since August 1998. Mr. Ridenoure brings 20 years of broad experience
in the space-mission community, including a distinguished track record over the
past decade at Jet Propulsion Laboratory (JPL), the world's leading center for
deep-space mission planning, engineering, and implementation. During the past
two decades he has contributed to the success of five deep-space missions, eight
Earth-orbiting missions, and was directly involved with more than a dozen
mission studies, many of which evolved into ongoing programs and successful
missions. Mr. Ridenoure's previous positions include: Manager, Microcosm's Space
Systems Division; Program Architect, NASA's New Millennium Program; Project and
Mission Engineer on five projects, JPL; Mission Planner for the Voyager-2
Neptune Encounter; Mission Engineer on GEO comsats at Hughes and Hubble at
Lockheed. Mr. Ridenoure received a Bachelor of Science degree Cum Laude in
Aerospace Engineering from Iowa State University in 1978 and a Master of Science
degree in Aeronautics from California Institute of Technology in 1979.
THOMAS BROWN, age 46, has more than 20 years of management experience in
finance, new business development, contracts/estimating, and accounting in both
government and commercial manufacturing environments, including in-depth
knowledge of Government Cost Accounting Standards, advanced cost management
accounting, cost estimate preparation, and performance analysis. His
accomplishments include supervising staff of six employees in the development
and administration of General Dynamics Convair Division financial data for a $2
billion dollar fixed price commercial program; directing the reengineering of
the Convair Division financial forecasting system to integrated all disciplines
of forecasting (i.e. indirect budgets, rates development, material and revenue
forecasting, and performance measurement); supervising staff of twelve persons
in the development of over 100 government and commercial new business proposals
annually; holding various supervisory positions including Manager of Estimating,
Chief of Advanced Cruise Missile Estimating, and Chief of Proposal Rates and
Factors.
ITEM 6. EXECUTIVE COMPENSATION
REMUNERATION PAID TO EXECUTIVES
The following table sets forth the remuneration to the Company's
executive officers for the past three fiscal years:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
---------------------------------------
Long Term Compensation
------------------------------------- -------------------------- ------------
Annual Compensation Awards Payouts
------------------------------------- -------------------------- ------------ ------------
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year(3) Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
- --------------- --------- ------------ ------------ ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James W. 1997 - - - - 2,500,000 - -
Benson, CEO 1998 0 - - - - - -
1999 0 - - - 100,000 - -
22
<PAGE>
Charles H. 1997 - - - - - - -
Lloyd, CFO(1) 1998 - - - - - - -
1999 - - - - 450,000 - -
8,077
Philip E. 1997 - - - - - - -
Smith 1998 61,060 - - - 100,000 - -
COO(5) 1999 43,388 - - - - - -
Thomas 1997 - - - - - - -
Brown, 1998 59,246 - - - 100,000 - -
CFO(1) (5) 1999 68,454 - - - - - -
Susan 1997 - - - - - - -
Benson, 1998 0 - - - - - -
Secretary 1999 0 - - - - - -
Jan King, 1997 - - - - - - -
V.P. 1998 43,154 - - 10,000 - - 5,500(2)
1999 132,000 - - - - - -
</TABLE>
(1) Thomas W. Brown resigned as the Company's Chief Financial Officer on
November 3, 1999. He continues as acting Chief Financial Officer for ISS.
Charles H. Lloyd was appointed Chief Executive Officer upon Mr. Brown's
resignation.
(2) Represents a relocation allowance paid upon execution of Mr. King's
employment agreement.
(3) Figures for 1999 represent actual compensation and represent true year-end
compensation.
(4) James W. Benson purchased 100,000 shares for $.50 per share in December
1998.
(5) Certain of the employees listed above have earned compensation in excess of
the actual amount paid during fiscal year ended 1999, pursuant to the terms
of their various employment agreements, as discussed below. In 1999, Philip
E. Smith was paid a salary of $43,388 and Thomas Brown was paid $68,454.
These amounts are less than the amounts due to them under the provisions of
their employment agreements. The Company is currently in negotiations with
both Mr. Smith and Mr. Brown to determine the actual amount still due to
them for services provided in 1999 and the form of payment. It is possible
that all or a portion of the amount due will be paid to Mr. Smith and Mr.
Brown on a deferred basis or in the form of non-cash consideration. It is
anticipated that the final results of these negotiations will not have a
material impact on the Company's financial results.
During the last fiscal year and as of December 31, 1999, the Company
granted stock options to executive officers as set forth in the following table:
23
<PAGE>
<TABLE>
OPTION/SAR GRANTS ENDED DECEMBER 31, 1999
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise of Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
- ---- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
James W. Benson - - - -
Charles H. Lloyd 450,000 100% $1.34 11/01/09
Philip E. Smith - - - -
Thomas W. Brown - - - -
Susan Benson - - - -
Jan King - - - -
</TABLE>
The following table is intended to provide information as to the number of
stock options exercised by each of the executive officers listed above, the
value realized upon exercise of such options, and the number and value of any
unexercised options still held by such individuals.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-the-
Unexercised Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- -------------------------- ---------------------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
James W. Benson(1) 0 0 500,000/ $500,000/
2,000,000 0
Charles H. Lloyd 0 0 0/450,000 0/0
Philip E. Smith 0 0 0/100,000 0/0
Thomas W. Brown 0 0 0/100,000 0/0
Susan Benson 0 0 0 0
Jan King 0 0 0 0
</TABLE>
(1) Mr. Benson owns options to purchase 2,500,000 shares of the Company's
Common Stock as follows: 500,000 Shares at $1.00 currently vested 500,000
Shares at $1.50 vesting upon the Company obtaining $6,500,000 additional
equity capital 500,000 Shares at $2.00 vesting upon the financing/execution
of NEAP 500,000 Shares at $2.50 vesting upon launch of NEAP 500,000 Shares
at $3.00 vesting upon NEAP rendezvous with target asteroid
(2) Under the terms of Mr. Lloyd's employment agreement with ISS, SpaceDev, as
the parent corporation, agreed to grant Mr. Lloyd incentive stock options
to purchase 250,000 shares of the Company's common stock pursuant to the
Company's Stock Option Plan upon execution of the employment agreement.
24
<PAGE>
These options begin vesting three(3) months after the date of grant. Mr.
Lloyd will receive an additional 750,000 incentive stock options at a rate
of 250,000 per quarter during his first year of employment with ISS.
Additionally, the Company agreed to issue Mr. Lloyd non-qualified stock
options to purchase up to 200,000 common shares, which will vest upon ISS
raising and acquiring a minimum equity financing of $3,000,000 within the
first nine (9) months of his employment. These options will be issued on a
sliding scale based on a maximum equity financing of $10,000,000, with
options to purchase 20,000 common shares for each $1,000,000 of equity
financing obtained. All options will be exercisable at the fair market
value of the common stock on the date the option was granted.
(3) Pursuant to employment agreements with Philip E. Smith and Thomas W. Brown,
the Company has issued performance-based options to purchase 100,000 shares
of common stock to each of those individuals. None of these options are
currently vested. The options will have exercise prices ranging from $1.50
per share to $3.50 per share.
REMUNERATION PAID TO DIRECTORS
The following table sets forth the remuneration paid to the Company's
directors during its fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------- ------------------------------------------------------ -------------------------------------
Cash Compensation Security Grants
------------------------------------------------------ -------------------------------------
Number of
Securities
Annual Retainer Consulting Number of Shares Underlying
Name Fees Meeting Fees Fees/Other Fees Options/SARs
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
James W. Benson - - - - -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
Charles H. Lloyd(1) - - - - -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
Wesley T. Huntress(2) - - - 4,444 -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
Thomas W. Brown(3) - - - - -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
Susan Benson (3) - - - - -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
Philip E. Smith(1) - - - - -
- ----------------------- ----------------- ----------------- ------------------ ------------------ ------------------
</TABLE>
(1) Philip E. Smith resigned as a director of the Company in November 1999. The
Board has elected Charles H. Lloyd to serve as interim director until the
next annual shareholders' meeting.
(2) Wesley T. Huntress Jr. was elected to the Board at the 1999 Annual
Shareholders' Meeting
(3) Thomas B. Brown and Susan Benson resigned their positions on the Board by
not running for re-election at the 1999 Annual Shareholders' Meeting.
EMPLOYMENT AGREEMENTS
On November 21, 1997, the Company entered into a five-year employment
agreement with its President, James W. Benson. This agreement provides for
compensation of salary and stock as well as stock options. This agreement also
prohibits Mr. Benson from competing with the Company, disclosing any
confidential information, or soliciting any employees or customers of the
Company for one year after termination of employment.
25
<PAGE>
On February 7, 1998, the Company, through ISS, entered into three-year
employment agreements with its (then) Chief Operating Officer, Philip E. Smith,
its Manager of Business Development, Jack A. Rubidoux, and its (then) Chief
Financial Officer, Thomas W. Brown. These agreements provide for compensation of
salary and stock to the employees. The agreements also prohibit the employees
from competing with the Company, disclosing any confidential information, or
soliciting any employees or customers of the Company for three years after
termination of employment.
On August 3, 1998, the Company entered into a one-year employment agreement
with its Vice President, Space Engineering, Jan King. This contract will
automatically renew for one-year periods unless either party gives the other
written notice and provides for compensation of salary and stock to the
employee. Mr. King agreed to assign his interest in all inventions and
intellectual property developed by him in conjunction with his employment to the
Company. The agreement also prohibits Mr. King from competing with the Company,
disclosing any confidential information, or soliciting any employees or
customers of the Company for one year after termination of employment.
On November 1, 1999, the Company, through ISS, entered into an employment
agreement with its Chief Financial Officer, Charles H. Lloyd. The agreement
automatically renews for one-year periods until terminated by written notice of
either Mr. Lloyd or the Company. This agreement provides for compensation of
salary and options to the employee. The agreement also prohibits the employee
from competing with the Company for one year after termination of employment.
EMPLOYEE BENEFITS
The Company has adopted, at its 1999 Annual Stockholder Meeting, an
Incentive Employee Stock Option Plan under which its Board of Directors may
grant employees, directors and affiliates of the Company opportunities to
purchase Incentive Stock Options, Supplemental Stock Options and to receive
stock bonuses or rights to purchase restricted stock of the Company. Incentive
Stock Options will only be available to employees, including officers, and
affiliates of the Company; they will not be available to non-employee directors.
The exercise price of the Incentive Stock Options shall not be less than 100% of
the fair market value of the stock subject to the option on the date the option
is granted. The exercise price for the Supplemental Stock Options will not be
less than 85% of the fair market value of the stock subject to the option on the
date the option is granted. The Company will be required to reserve an amount of
common shares equal to the number of shares which may be purchased as a result
of such stock awards.
The Company also offers a variety of health, dental, vision and life
insurance benefits to its employees. The Company also offers a 401(k) program to
its employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James W. Benson, the Company's Chief Executive Officer and Chairman of the
Board of Directors, and Susan Benson, the Company's Secretary, are husband and
wife.
James W. Benson has personally guaranteed the letters of credit of the
Company's subsidiary, Integrated Space Systems in the amount of $250,000. Mr.
Benson also personally guaranteed two loans for the purchase of the Company's
new headquarters; the loans are in the amount of $1,800,000.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue up to 50,000,000 shares of its $.0001
par value common stock, of which 14,839,945 shares issued and outstanding as of
December 31, 1999. The Board of Directors may issue additional shares of Common
Stock without the consent of the holders of Common Stock.
26
<PAGE>
VOTING RIGHTS
Each outstanding share of Common Stock is entitled to one vote. The
holders of Common Stock do not have cumulative voting rights, which means that
the holders of more than 50% of such outstanding shares voting for the election
of directors can elect all of the directors of the Company to be elected, if
they so choose.
NO PREEMPTIVE RIGHTS
Holders of Common Stock are not entitled to any preemptive rights.
DIVIDENDS AND DISTRIBUTIONS
Holders of Common Stock are entitled to receive such dividends as may be
declared by the directors out of funds legally available therefore and to share
pro rata in any distributions to holders of Common Stock upon liquidation or
otherwise. However, the Company has not paid cash dividends on its Common Stock,
and does not expect to pay such dividends in the foreseeable future.
PREFERRED STOCK
The Articles of Incorporation authorize the Board of Directors to issue, by
resolution, 10,000,000 shares of preferred stock, in classes or series, having
such designations, powers, preferences, rights, and limitations as the Board of
Directors may from time to time determine. The conversion ratio is subject to
certain anti-dilution adjustments, and the holder of each share of preferred
stock is entitled to one vote for each share of common stock into which it would
convert. In 1997, 82,450 shares of Series B Convertible Preferred Stock were
issued at $3.64 per share and each was convertible at the option of the holder
into 100 shares of common stock. As of the date of this Prospectus, all of the
Series B Convertible Preferred Stock has been converted, and there are no
preferred shares outstanding.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock has been traded on the Over the Counter
Bulletin Board since August 1998 under the symbol "SPDV." The following table
sets forth the trading history of the Common Stock on the Over the Counter
Bulletin Board for each quarter as reported by Tradeline. The quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.
END DATE HIGH LOW CLOSE
- -------- ---- --- -----
03/31/99 2 1/2 1 7/8 2 1/4
06/30/99 2 3/8 1 1/2 2 1/4
09/30/99 2 3/8 1 1/8 1 3/8
12/31/99 1 7/8 7/8 1 1/8
27
<PAGE>
HOLDERS
As of December 31, 1999, there were approximately 156 holders of record of
the Company's common stock.
DIVIDENDS
The Company has never paid a cash dividend on its Common Stock. Payment of
dividends is at the discretion of the Board of Directors. The Board of Directors
plans to retain earnings, if any, for operations and does not intend to pay
dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
On August 6, 1998, the Securities and Exchange Commission ("SEC")
issued an Cease-and-Desist Proceeding ("Order") against the Company and James W.
Benson, for violation of Section 17(a) of the Securities Act of 1933 and Section
10(b) of the Securities Exchange Act of 1934. Although the Company and Mr.
Benson disputed the allegations, they submitted offers of settlement to the SEC
that were accepted on April 13, 1999. No sanctions were imposed against either
the Company or Mr. Benson.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
During its last fiscal year and as of the date of this Registration
Statement, the Company has had no changes in or disagreements with its principal
independent accountant regarding any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, nor
has the Company's principal accounting firm resigned or declined to stand for
re-election.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
During 1997, the Company entered into a five-year employment agreement with
its president. As part of the employment agreement, the Company granted options
to the president to purchase up to 2,500,000 shares of the Company's $.0001 par
value restricted Common Stock. In accordance with APB 25, the Company recognized
$500,000 of compensation expense and $250,000 of deferred compensation. The
options are subject to vesting conditions and have exercise prices between $1.50
and $3.00 per share.
On October 22, 1997, the Company entered into three agreements to grant
options to purchase common stock restricted under Securities Exchange Commission
Rule 144 in consideration for consulting services. The options were granted for
a total of 573,150 shares of the Company's $.0001 par value common stock with an
exercise price of $.07 per share. All of the options were exercisable at
December 31, 1997 and each option was to expire on October 21, 2002. Based on
the use of the Black-Scholes option-pricing model, the fair value of the stock
options issued for these services was $211,333. As a result, the Company
recognized $211,333 in consulting expenses in 1998 related to the issuance of
Common Stock options. All of these options were exercised in 1998. The options
were issued pursuant to Rule 701 of the Securities Act. During 1998, the Company
recorded approximately $126,000 of compensation expense related to 348,000
shares of Common Stock issued to the president at less than fair market value.
Also, during 1998, the Company issued 573,150 shares of Common Stock upon the
exercise of stock options.
28
<PAGE>
On February 7, 1998, the Company entered into a Share Acquisition Agreement
with ISS, pursuant to which it issued 2,000,000 shares of its Common Stock under
Section 4(2) of the Securities Act in exchange for the outstanding shares of ISS
(then a privately held company). ISS is now a wholly owned subsidiary of the
Company. In addition to the issuance of shares, the ISS shareholders also
received two seats on the Board of Directors of the Company, and former
employees of ISS became employees of the Company; such employees to receive
performance options for an additional 300,000 shares.
In August 1998, the Company secured intellectual property, including
patents and trade secrets, from an individual who had acquired them from
American Rocket Company (AMROC), an aerospace company active during the late
1980s and early 1990s. The consideration for the intellectual property was
warrants to purchase a minimum of 100,000 and a maximum of 3,000,000 shares of
the Company's Common Stock over the following 10-year period, depending on the
Company's annual revenues. The shares issued to AMROC, were issued pursuant to
the private offering exemption in Section 4(2) of the Securities Act. In return
for the exclusive royalty free right to use, sell and apply patents and other
technology developed by an individual, the Company issued warrants to purchase
25,000 shares of Common Stock at 50% of their fair market value on the date of
issuance. The warrants were issued pursuant to Section 4(2) of the Securities
Act. The individual will receive warrants to purchase a minimum of 75,000 shares
and a maximum of 3,000,000 shares of Common Stock at 50% of their fair market
value on the date of issuance. The number of shares varies with revenue
generated by the technology on specific dates.
On October 1, 1998 the Company entered into a Common Stock Exchange
Agreement with SIL pursuant to Section 4(2) of the Securities Act. Upon
execution of the Agreement, the Company obtained all outstanding shares of SIL
(then a privately held company) and issued 1,000,000 shares of the Company's
Common Stock to the SIL shareholders. The Company also agreed to issue
additional shares of Common Stock valued at $1,000,000 to the SIL shareholders
in installments, with the final installment due on July 15, 2000. SIL
shareholders also received incentive stock options for 500,000 additional
shares. SIL became a wholly owned subsidiary as a result of this Agreement. In
December 1999, the Company and SIL negotiated a rescission of the Share
Acquisition Agreement.
In 1998, the Company's Chief Executive Officer, James W. Benson, purchased
100,000 shares of the Company's common stock at a per share price of $0.50
pursuant to Section 4(2) of the Securities Act. All of these options have been
exercised, and the underlying shares have been issued with the appropriate
resale restrictions.
During 1998, the Company entered agreements with sales, investor relations
and public relations firms to perform services for the Company. In return for
these services, the Company issued 92,190 shares of its Common Stock pursuant to
the exemption in Section 4(2) of the Securities Act and recorded expenses of
approximately $120,000.
As part of an employment agreement with Jan King, the Company issued 5,000
shares of Common Stock as a signing bonus and recorded $8,750 of compensation
expense. The agreement renews annually and can be canceled by either party under
provisions of the agreement. Upon renewal of the agreement, the employee will
receive 5,000 shares of Common Stock annually for two years. The agreement also
includes 50,000 stock options with exercise prices of between $2 and $3 per
share. These options will vest upon future events occurring.
In conjunction with the Common Stock Exchange Agreement between the Company
and SIL, the Company granted options to five key employees to purchase up to
350,000 shares of restricted Common Stock with exercise prices between $1.50 and
$3.50 per share. The vesting of these options is contingent on several future
events. Should these events occur, no options would vest. These options are
being issued pursuant to Rule 701 of the Securities Act. The option agreements
were rescinded in December 1999 as part of the mutual rescission and release
between the Company and the former SIL shareholders.
29
<PAGE>
During 1999, the Company entered into agreements with sales, investor
relations, public relations firms and an employee to perform services for the
Company. For the three and nine months ended September 30, 1999, the Company
issued 7,074 and 30,656 shares of its common stock and recorded expense of
approximately $11,000 and $164,000, respectively.
All of the above referenced securities are restricted by Rule 144 of the
Securities Act of 1933.
During 1998 and 1999, the Company issued 970,235 shares of its Common
Stock, priced at an average of $0.66 per share for a total amount of $634,412.
These shares were issued in reliance on the exemption from registration provided
by Rule 504 under Section 3(b) of the Securities Act.
On August 26, 1999, the Colorado Securities Division made effective the
Company's registration statement on Form U-7 for offers and sales to Colorado
residents. The offering is for an aggregate amount of $350,000 in units of the
Company's $.0001 par value common stock and re-pricing warrants. Following
closing on the first $350,000 in units, the Company filed a post-effective
amendment to the Form U-7 registration statement to raise the aggregate amount
of the offering to $730,000. The post-effective amendment was made effective on
October 13, 1999. The Company sold $10,000 in units pursuant to the
post-effective amendment for an approximate price of $0.83 per share. The
Company made a decision to close this offering in December 1999.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation contain a provision which, in
accordance with Colorado law, eliminates or limits the personal liability of
directors and officers of the Company for monetary damages for certain breaches
of their duty of care or other duty if he or she acted in good faith and in a
manner they believed to be in, or not opposed to, the best interests of the
Company, except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
Company unless otherwise determined by the court before which such action was
brought. The Company believes this provision is essential to maintain and
improve its ability to attract and retain competent directors. These
indemnification provisions do not reduce the exposure of directors and officers
to liability under federal and state securities laws, nor do they limit the
shareholders' ability to obtain injunctive relief or other equitable remedies
for a violation of a director's or officer's duty to the Company or its
shareholders, although such equitable remedies may not be an effective remedy in
certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is informed that it is
the opinion of the Securities and Exchange Commission that such indemnification
is against public policy and therefore unenforceable.
ITEM 6. FINANCIAL STATEMENTS
Please see the Company financial statements attached hereto.
30
<PAGE>
<TABLE>
PART III
ITEM 1. INDEX TO EXHIBITS
<CAPTION>
ITEM EXH. NO.
- ----- --------
<S> <C>
Registrant's Articles of Incorporation 2.1
Registrant's Articles of Amendment to Articles of Incorporation dated November 4, 1997 2.2
Authorizing Series B Preferred Stock
Registrant's Articles of Amendment to Articles of Incorporation dated December 17, 1997 2.3
Registrant's Bylaws 2.4
Form of Common Stock Certificate 3.1
Form of Non-Qualified Stock Option 3.2
Form of Incentive Stock Option 3.3
Form of Re-Pricing Warrant 3.4
Form of Warrant 3.5
Common Stock Exchange Agreement Between Registrant and SIL 6.1
Mutual Rescission and Release of Share Acquisition Agreement 6.2
Share Exchange Agreement Between Registrant and ISS 6.3
Agreement of License and Purchase of Technology Between Registrant and AMROC 6.4
Firm Fixed Price Agreement Number 108252 Between Registrant and Regents of the University of California 6.5
1999 Stock Option Plan 6.6
1999 Employee Stock Purchase Plan 6.7
Employment Agreement of James W. Benson 6.8
Employment Agreement between ISS and Thomas W. Brown 6.9
Employment Agreement between ISS and Philip E. Smith 6.10
Employment Agreement of Jan A. King 6.11
Employment Agreement between ISS and Charles H. Lloyd 6.12
</TABLE>
ITEM 2. DESCRIPTION OF EXHIBITS
As appropriate, the Registrant has attached those documents required to be
filed as Exhibit Numbers 2, 3, 5, 6 and 7 of Part III of Form 1-A.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
SPACEDEV, INC.
Date: /s/ January 14, 2000 By: /s/ James W. Benson
--------------------- -----------------------------------------
James W. Benson, President and CEO
Date: /s/ January 14, 2000 By: /s/ Charles H. Lloyd
--------------------- -----------------------------------------
Charles H. Lloyd, Chief Financial Officer
31
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 1999
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
CONTENTS
================================================================================
REPORT ON REVIEWED CONSOLIDATED FINANCIAL STATEMENTS 3
FINANCIAL STATEMENTS
Consolidated Balance Sheet 4
Consolidated Statements of Operations 5
Consolidated Statements of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-23
<PAGE>
REPORT ON REVIEWED CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors of
SPACEDEV, INC.
We have reviewed the accompanying consolidated balance sheet of SPACEDEV, INC.
AND SUBSIDIARY (the "Company") (see Note 1(c) to the consolidated financial
statements) as of September 30, 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the three and nine months
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these consolidated financial statements is the
representation of the management of SPACEDEV, INC.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
As discussed in Note 1(e) to the consolidated financial statements, the method
of accounting for its investment in SIL, a wholly-owned subsidiary, changed
effective January 1, 1999.
/s/ Nations, Smith, Hermes, Diamond
January 10, 2000
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEE ACCOUNTANTS' REVIEW REPORT
================================================================================
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ASSETS (Note 4)
CURRENT ASSETS
Cash (Note 10) $ 18,009
Accounts receivable 134,622
Other current assets 6,974
- --------------------------------------------------------------------------------
Total current assets 159,605
FIXED ASSETS - NET (Notes 1(f) and 2) 2,035,842
INVESTMENT IN SUBSIDIARY (Note 1(e)) 2,561,096
INTANGIBLE ASSETS - NET (Notes 1(f) and 3) 2,326,319
OTHER ASSETS 130,321
- --------------------------------------------------------------------------------
$7,213,183
================================================================================
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
================================================================================
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 9,335
Line of credit (Note 4) 121,410
Current portion of notes payable (Note 5(a)) 1,298,921
Current portion of capitalized lease obligations (Note 9) 1,702
Acquisition price payable (Note 1(e)) 1,000,000
Accounts payable and accrued expenses 211,163
Customer deposits and deferred revenue 24,166
Related party note payable (Note 5(b)) 627,500
- --------------------------------------------------------------------------------
Total current liabilities 3,294,197
NOTES PAYABLE, LESS CURRENT MATURITIES (Note 5(a)) 960,000
CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT MATURITIES (Note 9) 2,581
- --------------------------------------------------------------------------------
Total liabilities 4,256,778
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value, 10,000,000 shares
authorized and no shares issued and outstanding (Note 8(a))
Common stock, $.0001 par value; 50,000,000 shares authorized,
14,857,851 shares issued and outstanding (Note 8(b)) 1,485
Additional paid-in capital 7,431,574
Additional paid-in capital - stock options (Note 8(d)) 750,000
Deferred compensation (Note 8(d)) (250,000)
Accumulated deficit (4,976,654)
- --------------------------------------------------------------------------------
Total stockholders' equity 2,956,405
- --------------------------------------------------------------------------------
$7,213,183
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS CONSOLIDATED FINANCIAL
STATEMENT.
4
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
SEE ACCOUNTANTS' REVIEW REPORT
================================================================================
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPT. 30, 1999 SEPT. 30, 1999
- --------------------------------------------------------------------------------
NET SALES $ 167,555 $ 634,145
Cost of sales 120,676 331,498
- --------------------------------------------------------------------------------
GROSS MARGIN 46,879 302,647
OPERATING EXPENSES
General and administrative 636,257 1,896,045
Research and development (Note 1(g)) 4,109 67,816
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 640,366 1,963,861
- --------------------------------------------------------------------------------
LOSS FROM OPERATIONS (593,487) (1,661,214)
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Equity loss from subsidiary (Note 1(e)) (174,806) (280,127)
Interest expense (83,363) (220,680)
- --------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (258,169) (500,807)
- --------------------------------------------------------------------------------
NET LOSS $ (851,656) $ (2,162,021)
================================================================================
BASIC AND DILUTED NET LOSS PER SHARE $ (.06) $ (.21)
- --------------------------------------------------------------------------------
Weighted-Average Shares Outstanding
(Basic and Diluted) 14,852,298 10,173,541
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
<TABLE>
SEE ACCOUNTANTS' REVIEW REPORT
====================================================================================================================================
<CAPTION>
Redeemable
Preferred Stock Common Stock
--------------------------------- ---------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 82,450 $ 82 6,047,743 $ 605
Shares issued for cash - - 30,000 3
Shares issued for services (Note 8(b)) - - 721 -
Comprehensive Income (Loss):
Net loss - - - -
Foreign currency translation adjustment - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 82,450 82 6,078,464 608
Preferred Stock Converted to Common Stock (82,450) (82) 8,245,000 825
Shares issued for cash - - 161,113 18
Shares issued for services (Note 8(b)) - - 22,861 -
Comprehensive Income (Loss):
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1999 - - 14,507,438 1,451
Shares issued for cash - - 343,339 34
Shares issued for services (Note 8(b)) - - 7,074 -
Comprehensive Income (Loss):
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) - - - -
BALANCE AT SEPTEMBER 30, 1999 - $ - 14,857,851 $ 1,485
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
============================================================================================================================
<CAPTION>
Additional
Paid-in: Accumulated
Additional Capital Other
Paid-In - Stock Deferred Accumulated Comprehensive
Capital Options Compensation Deficit Income Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$6,713,229 $ 750,000 $ (250,000) $(2,814,633) $ 7,323 $4,406,606
64,931 - - - - 64,934
1,666 - - - - 1,666
- - (527,535) - (527,535)
- - - - (7,323) (7,323)
- ----------------------------------------------------------------------------------------------------------------------------
- - - (527,535) (7,323) (534,858)
- ----------------------------------------------------------------------------------------------------------------------------
6,779,826 750,000 (250,000) (3,342,168) - 3,938,348
(743) - - - - -
176,984 - - - - 177,002
151,349 - - - - 151,349
- - - (782,830) - (782,830)
- ----------------------------------------------------------------------------------------------------------------------------
- - - (782,830) - (782,830)
- ----------------------------------------------------------------------------------------------------------------------------
7,107,416 750,000 (250,000) (4,124,998) - 3,483,869
312,966 - - - - 313,000
11,192 - - - - 11,192
- - - (851,656) - (851,656)
- ----------------------------------------------------------------------------------------------------------------------------
- - - (851,656) - (851,656)
- ----------------------------------------------------------------------------------------------------------------------------
$7,431,574 $ 750,000 $ (250,000) $(4,976,654) $ - $2,956,405
============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
6
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SEE ACCOUNTANTS' REVIEW REPORT
===================================================================================================================
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 1999 SEPT. 30, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (851,656) $(2,162,021)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 203,044 608,847
Loss on investment in subsidiary 174,806 280,127
Common stock issued for compensation and services 11,192 164,207
Change in operating assets and liabilities:
Accounts receivable 1,211 30,401
Prepaid assets - 2,050
Other assets 6,646 20,383
Accounts payable and accrued expenses 616 (49,089)
Customer deposits and deferred revenue 24,166 24,166
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (429,975) (1,080,929)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (2,433) (22,999)
Investment in subsidiary - (85,000)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,433) (107,999)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 313,000 554,936
Proceeds from notes payable - related party 99,500 390,500
Proceeds from bank lines of credit 32,300 21,410
Increase in bank overdraft 7,488 9,335
Payments on capitalized lease obligations (3,295) (10,381)
Payments on note payables (375) (1,079)
Proceeds from notes payable - 143,000
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 448,618 1,107,721
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash - (7,323)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 16,210 (88,530)
CASH AT BEGINNING OF PERIOD 1,799 106,539
- -------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 18,009 $ 18,009
===================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
7
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
SEE ACCOUNTANTS' REVIEW REPORT
===================================================================================================================
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPT. 30, 1999
SEPT. 30, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash paid during the period for:
Interest $ 45,178 $ 235,400
NONCASH INVESTING AND FINANCING ACTIVITIES:
During the three and nine months ended September 30, 1999, the Company issued 7,074 and 30,656
shares of stock for consulting expense of $11,192 and $164,207, respectively.
===================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
8
</TABLE>
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF A summary of the Company's significant accounting
SIGNIFICANT policies consistently applied in the preparation of
ACCOUNTING the accompanying consolidated financial statements
POLICIES follows.
(a) NATURE OF SPACEDEV, INC. (the "Company") was incorporated under
OPERATIONS the laws of Colorado on December 23, 1996 as Pegasus
Development Group, Inc. (PDGI). The Company is engaged
in the commercial development of low cost satellites
and their subsystems, as well as engineering technical
services to major aerospace companies. The principal
markets of the Company are the United States and
Europe. See Note 11(a).
The principal activities from inception have been
organizational matters, the sale and issuance of shares
of its $.0001 par value common stock and $.001 par
value preferred stock as part of a public stock
offering and the execution of a stock acquisition
agreement.
PDGI was originally formed for the purpose of entering
the real estate industry. SpaceDev LLC was formed for
commercial space exploration. On October 22, 1997, the
PDGI acquired 100 percent, or 1,000,000 shares, of
SPACEDEV'S $.001 par value common stock from SpaceDev,
LLC in exchange for 82,450 shares of the Company's
$.001 par value convertible, preferred stock, pursuant
to a comprehensive plan of reorganization of PDGI.
Following the acquisition of SPACEDEV, SPACEDEV was
merged into PDGI and the name of the corporation was
changed to SPACEDEV, INC. After the reorganization, the
former stockholders of SPACEDEV owned a majority of the
outstanding common stock of the Company, after giving
effect to the conversion privilege of the preferred
stock which is convertible into 8,245,000 shares of
common stock.
For accounting purposes, the transaction has been
accounted for as a recapitalization of Company with the
Company as the acquirer (reverse acquisition). Since
SPACEDEV had, prior to the recapitalization, minimal
assets, the recapitalization has been accounted for as
the sale of 1,755,000 shares for net assets of $1,232.
The Company's preferred shares reflected in the
consolidated financial statements have been restated
based upon the exchange rates of preferred stock issued
in connection with the acquisition.
9
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(b) LIQUIDITY The accompanying consolidated financial statements as
of September 30, 1999 and for the three and nine months
ended September 30, 1999 have been prepared assuming
the Company will continue as a going concern. However,
the Company has a negative working capital of
approximately $3,135,000 as of September 30, 1999 and
incurred a net loss of approximately $2,162,000 for the
nine months ended September 30, 1999. Subsequent to
September 1999, management intends to raise additional
equity financing to fund future operations and
commitments. There is no assurance that the new equity
will be sufficient to meet the Company's needs.
Additionally, there is no assurance that additional
equity financing needed to fund operations will be
consummated or obtained in sufficient amounts necessary
to meet the Company's needs.
The accompanying consolidated financial statements do
not include any adjustments to reflect the possible
future effects on the recoverability and classification
of assets or the amounts and classification of
liabilities that may result from the possible inability
of the Company to continue as a going concern.
(c) PRINCIPLES OF The consolidated financial statements include the
CONSOLIDATION accounts of the Company and its wholly-owned
subsidiary, Integrated Space Systems, Inc. (ISS) (a
California corporation). See Note 1(e). All significant
intercompany balances and transactions have been
eliminated in the consolidation.
(d) USE OF The preparation of financial statements in conformity
ESTIMATES with generally accepted accounting principles requires
management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those
estimates. Significant estimates used in preparing
these consolidated financial statements include those
assumed in computing the valuation allowance on
deferred tax assets. See Note 6. It is reasonably
possible that the significant estimates used will
change within the next year.
10
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(e) INVESTMENT IN During October 1998, the Company acquired 100 percent
SUBSIDIARY of SIL (an entity in England). The transaction was
accounted for under the purchase method of accounting
with the aggregate of the purchase price in excess of
the fair market value of the assets acquired being
capitalized as goodwill. The cost of the acquired
entity was $3,100,000 which was all capitalized as
goodwill. Amortization expense was approximately
$258,000 for the three months ended December 31, 1998.
The Company issued 1,000,000 shares of restricted
common stock for the outstanding common stock of SIL.
As part of the acquisition, the Company was to issue
$1,000,000 of common stock in four semi-annual
installments over the next two years. As a result of
the Mutual Release and Rescission Agreement discussed
below, the acquisition price payable of $1,000,000 is
included as a current liability.
Under the Revenue and Profit Incentive Stock Option
Plan and the Profit Sharing Stock Issuance Plan, the
former stockholders of SIL also received options to
purchase up to 500,000 additional shares at a price to
be determined in the year of grant should certain
future events occur in each of the next three years.
During 1998, 100,000 options expired as the qualifying
events did not occur. Effective December 17, 1999, all
remaining options have been cancelled.
The consolidated statement of operations for the year
ended December 31, 1998 included the operating results
from this entity.
In December 1999, the Company entered into a Mutual
Release and Rescission of Agreement to rescind the
original acquisition of SIL effective October 1, 1998.
The accounts of SIL were originally included in the
consolidated balances of the consolidated financial
statements of the Company. Effective January 1, 1999,
the investment in SIL was accounted for under the
equity method.
As a result of the change in accounting for SIL,
approximately $2,842,000 of unamortized goodwill was
reclassified to investment in subsidiary. In addition,
the Company's consolidated net loss decreased by
approximately $258,000 and $775,000 for the three and
nine months ended September 30, 1999. The decreases
resulted from the reversal of goodwill amortization.
11
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(e) INVESTMENT IN The Agreement further specified, all shares of
SUBSIDIARY, CONT'D outstanding common stock held by SIL's shareholders
will be returned to the Company and all outstanding
options are effectively cancelled. A promissory note
was received for approximately $345,000, which
represents additional cash provided to SIL during 1998
and 1999, and is payable in 24 monthly installments.
The Company will remain a guarantor on a bank loan used
to finance SIL's operations. Under terms of the Release
Agreement, SIL agreed to apply 25 percent of the
proceeds from each payment received on a specific
contract until the bank loan is paid in full. Once paid
in full, the loan agreement will be terminated.
Summary balance sheet and statements of operations for
SIL for the three months and nine months ended
September 30, 1999 are as follows:
ASSETS
Cash $ 94,000
Accounts receivable 973,000
Inventory 179,000
Other assets 58,000
Fixed assets - net 253,000
-------------------------------------------------------
$1,557,000
=======================================================
LIABILITIES
Current liabilities $1,780,000
Long-term liabilities 54,000
Stockholders' deficit (277,000)
-------------------------------------------------------
$1,557,000
=======================================================
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPT. 30, 1999 SEPT. 30, 1999
-------------------------------------------------------
Revenues $ 825,000 $2,410,000
Direct expenses (619,000) (1,319,000)
Other expenses (381,000) (1,371,000)
-------------------------------------------------------
Net loss $ (175,000) $ (280,000)
=======================================================
12
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(f) DEPRECIATION Fixed assets are depreciated over their estimated
AND useful lives of three to eight years using the
AMORTIZATION straight-line method of accounting. Leasehold
improvements are amortized over the shorter of the
estimated useful lives of the assets or the remaining
lease term.
Goodwill and other intangible assets were created upon
the acquisition of the Company's subsidiaries.
Intangible assets are amortized over their assets
estimated future useful lives on a straight-line basis
over three to five years. Goodwill and other
intangibles are periodically reviewed for impairment
based on an assessment of future operations to ensure
they are appropriately valued in accordance with
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of."
(g) RESEARCH AND The Company is actively engaged in new product
DEVELOPMENT development efforts. Research and development
expenditures relating to possible future products are
expensed as incurred. Total expense was approximately
$4,000 and $68,000 for the three and nine months ended
September 30, 1999, respectively.
(h) ADVERTISING The Company follows the policy of charging the costs of
advertising to expense as incurred. The Company did not
incur advertising expenses for either the three months
or nine months ended September 30 1999.
(i) INCOME Deferred income taxes are recognized for the tax
TAXES consequences in future years of differences between
the tax basis of assets and liabilities and their
financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to
affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income
tax expense is the combination of the tax payable for
the period and the change during the period in deferred
tax assets and liabilities.
13
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(j) NEW In 1997, the Financial Accounting Standards Board
ACCOUNTING issued Statement of Financial Accounting Standards No.
STANDARDS 130, "Reporting Comprehensive Income." This Statement
was adopted in 1998. In accordance with the Statement,
comprehensive income is presented in the consolidated
statements of stockholders' equity for the three and
nine months ended September 30, 1999.
Statement of Financial Accounting Standards No. 133,
"Accounting for Derivatives Instrument and Hedging
Activities," established accounting and reporting
standards for derivative instruments. The Company has
not in the past nor does it anticipate, that it will
engage in transactions involving derivative instruments
which will impact the consolidated financial
statements.
(k) STOCK-BASED In October 1995, the Financial Accounting Standards
COMPENSATION Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The Company adopted SFAS 123
in 1997. The Company has elected to measure
compensation expense for its stock-based employee
compensation plans using the intrinsic value method
prescribed by APB Opinion 25, "Accounting for Stock
Issued to Employees" (APB 25) and has provided pro
forma disclosures as if the fair value based method
prescribed SFAS 123 has been utilized. See Note 8(d).
(l) COMMON STOCK The Company has valued its stock and stock options
AND STOCK issued to non-employees at fair value in accordance
OPTIONS TO with the accounting prescribed in SFAS 123 which states
NON-EMPLOYEES that all transactions in which goods or services are
received for the issuance of equity instruments shall
be accounted for based on the fair value of the
consideration received or the fair value of the equity
instruments issued, whichever is more reliably
measurable.
(m) NET LOSS PER Net loss per common share has been computed on the
COMMON SHARE basis of the weighted average number of shares
outstanding, according to the rules of Statement of
Financial Accounting Standards No. 128, "Earnings per
Share."
14
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(n) FINANCIAL The Company's financial instruments consist primarily
INSTRUMENTS of cash, accounts receivable, accounts payable, line of
credit, accrued expenses, notes payable and acquisition
price payable. These financial instruments are stated
at their respective carrying values, which approximate
their fair values.
2. FIXED ASSETS Fixed assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------------------------------
<S> <C>
Building and improvements $2,020,189
Furniture, fixtures and equipment 18,443
Computer equipment 156,589
Leasehold improvements 38,538
--------------------------------------------------------------
2,233,759
Less accumulated depreciation and amortization (197,917)
--------------------------------------------------------------
$2,035,842
==============================================================
</TABLE>
Depreciation and amortization expense was approximately
$29,000 and $87,000 for the three and nine months ended
September 30, 1999, respectively.
3. ACQUISITIONS During 1998, the Company acquired 100 percent of the
outstanding common stock of Integrated Space Systems
(ISS), a San Diego-based company. The Company issued
2,000,000 shares of restricted common stock for the
outstanding shares of ISS. This transaction was
accounted for under the purchase method of accounting
with the aggregate of the purchase price in excess of
the fair market value of the assets acquired being
capitalized as goodwill. The cost of the acquisition
was $3,625,000, of which $3,461,000 was capitalized as
goodwill. Amortization expense was approximately
$174,000 and $523,000 for the three and nine months
ended September 30, 1999, respectively.
The consolidated statement of operations for the three
and nine months ended September 30, 1999 includes the
operating results from this entity.
15
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. ACQUISITIONS, The Company also acquired the exclusive royalty-free
cont'd rights to use, sell and apply all technology developed
by an individual. The purchase price for these
intangible assets was $24,500. See Note 8(c).
SEPTEMBER 30, 1999
-------------------------------------------------------
Goodwill $ 3,461,000
Other intangibles 24,500
-------------------------------------------------------
3,485,500
Less accumulated amortization (1,159,181)
-------------------------------------------------------
$ 2,326,319
=======================================================
4. LINE OF The Company (through ISS) obtained a bank line of
CREDIT credit in the amount of $250,000 which matures in
November 1999. At September 30, 1999, $121,410 was
outstanding on the line of credit.
The line of credit was secured by all of the assets of
ISS. The line is also guaranteed by SPACEDEV and a key
stockholder. The interest rate under the line of credit
is prime (8.5 percent at September 30, 1999) plus 2.0
percent.
5. NOTES
PAYABLE
(a) BUILDING In December 1998, the Company signed a $1,300,000 note
NOTES payable with a lender to finance the purchase of its
new facility. The note calls for monthly payments and a
balloon payment on December 21, 1999. The note accrues
interest at 13 percent.
In December 1998, the president of the Company entered
into a $500,000 loan agreement with another lender to
finance additional costs of its new facility. This
liability was assigned to the Company and calls for 59
monthly interest payments at 12.23 percent and a
balloon payment of $505,000, including interest, on
December 17, 2003.
16
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(a) BUILDING In 1999, the Company entered into a second loan
NOTES, CONT'D agreement with the lender. The $460,000 loan calls for
59 monthly interest payments at 10.5 percent and a
balloon payment of $464,000, including interest at
March 2004.
(b) RELATED At September 30, 1999, the Company had notes payable to
PARTY stockholders for $627,000 with interest between 4
percent and 12 percent. The notes, due in March 1999,
were converted to demand notes.
6. INCOME Deferred income taxes are provided for temporary
TAXES differences in recognizing certain income and expense
items for financial and tax reporting purposes. The
deferred tax asset of $1,494,000 as of September 30,
1999, consisted primarily of the income tax benefits
from net operating loss carryforwards and research and
development credits. A valuation allowance has been
recorded to fully offset the deferred tax asset as
realization of such asset is not assured. The valuation
allowance increased approximately $544,000 in the nine
months ended September 30, 1999 from $950,000 at
December 31, 1998 to $1,494,000 at September 30, 1999.
At September 30, 1999, the Company has federal and
state tax net operating loss carryforwards of
approximately $3,108,000 The federal and state tax loss
carryforwards will expire through 2019, unless
previously utilized.
A reconciliation of the statutory income tax rates and
the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------
<S> <C>
Statutory U.S. federal rate 34%
State income taxes - net of federal benefit 5%
Net operating loss for which no tax benefit is
currently available (39)%
---------------------------------------------------------------
-
===============================================================
</TABLE>
17
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. INCOME The tax effects of temporary differences and
TAXES, cont'd carryforwards that give rise to deferred tax assets
and liabilities consist of the following:
SEPTEMBER 30, 1999
-------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 1,444,000
Research and development credits 50,000
-------------------------------------------------------
Gross deferred tax assets 1,494,000
Valuation allowance (1,494,000)
-------------------------------------------------------
$ -
=======================================================
7. EMPLOYEE
BENEFIT PLAN
(a) PROFIT SHARING During 1997, the Company adopted a 401(k) retirement
401(K) PLAN savings plan for its U.S. employees which allows each
eligible employee to voluntarily make pre-tax salary
contributions up to 15 percent of their compensation.
The Company may elect to make a matching contribution.
During the three and nine months ended September 30,
1999, the Company did not contribute to the Plan. The
total Company contribution and participant salary
reduction may not exceed 25 percent of the compensation
of eligible participants.
(b) EMPLOYEE STOCK During 1999, the Company implemented an Incentive Stock
PURCHASE AND Option Plan as well as an Employee Stock Purchase Plan.
OPTION PLANS
8. STOCKHOLDERS'
EQUITY
(a) REDEEMABLE In 1997, 82,450 shares of $.001 par value redeemable
PREFERRED STOCK preferred stock were issued at $3.64 per share. Each
share of redeemable preferred stock is convertible, at
the option of the holder, into 100 shares of common
stock. The conversion ratio is subject to certain
anti-dilution adjustments, and the holder of each share
of preferred stock is entitled to one vote for each
share of common stock into which it would convert.
These shares were converted to 8,245,000 shares of
common stock on May 11, 1999.
18
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(b) COMMON During 1999, the Company entered agreements with sales,
investor relations and public relations firms and
employees to perform services for the Company. For the
three and nine months ended September 30, 1999, the
Company issued 7,074 and 30,656 shares of its common
stock and recorded expense of approximately $11,000 and
$164,000, respectively.
During 1998, the Company entered a five-year employment
agreement with a key employee. The agreement renews
annually and can be canceled by either party under
provisions of the agreement. Upon renewal of the
agreement, the employee will receive 5,000 shares of
common stock annually for two years. The agreement also
includes 50,000 shares of stock these shares become
available upon future events occurring.
(c) WARRANTS During 1998, the Company issued warrants to purchase
25,000 shares of common stock at 50 percent of their
fair market value on the date of issuance, in return
for the exclusive royalty free right to use, sell and
apply patents and other technology developed by an
individual. The individual will receive warrants to
purchase a minimum of 75,000 shares and a maximum of
3,000,000 shares of common stock at 50 percent of the
fair market value on the date of issuance. The number
of shares varies with revenue generated by the
technology on specific dates. At September 30, 1999,
the unissued warrants were not recorded as the future
exercise price of the warrants cannot be estimated.
(d) STOCK During 1997, the Company entered into a five-year
employment agreement with its president. As part of the
employment agreement, the Company granted options to
the president to purchase up to 2,500,000 shares of the
Company's $.0001 par value restricted common stock. In
accordance with APB 25, the Company recognized $500,000
of compensation expense and $250,000 of deferred
compensation. The options are subject to vesting
conditions and have exercise prices between $1.50 and
$3.00 per share.
19
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(d) STOCK OPTIONS, The following summarizes stock option activity related
CONT'D to the Plan:
<TABLE>
<CAPTION>
Weighted
Options Average
Outstanding Exercise Prices
------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1998 500,000 $1.00
Granted - -
Exercised - -
------------------------------------------------------------------
Balance at September 30, 1999 500,000 $1.00
==================================================================
</TABLE>
The Company has elected to account for its stock-based
compensation plans under APB 25. However, the Company
has computed, for pro forma disclosure purposes, the
value of all options granted during the three and nine
months ended September 30, 1999 using the minimum value
method as prescribed by SFAS 123. Under this method,
the Company used the risk-free interest rate at date of
grant, expected volatility, expected dividend yield and
the expected life of the options to determine the fair
value of options granted. The risk-free interest rates
ranged from 5.4 percent to 6.0 percent; expected
volatility of 100% and the dividend yield was assumed
to be zero, and the expected life of the options was
assumed to be five years based on the average vesting
period of options granted.
If the Company had accounted for these options in
accordance with SFAS 123, the total value of options
granted during the three and six months ended September
30, 1999 would be amortized on a pro forma basis over
the vesting period of the options. Thus, the Company's
consolidated net loss would have increased as reflected
in the following pro forma amounts:
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------------
Net loss:
As reported $(851,656) $(2,162,021)
Pro forma $(851,656) $(2,162,021)
Pro forma net loss per share $ (.06) $ (.21)
=======================================================
20
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
9. COMMITMENTS
AND
CONTINGENCIES
CAPITAL The Company leases certain equipment under
LEASES non-cancelable capital leases, which are included in
fixed assets as follows:
SEPTEMBER 30, 1999
-------------------------------------------------------
Computer equipment $ 39,000
Less accumulated depreciation (35,000)
-------------------------------------------------------
$ 4,000
=======================================================
Depreciation expense related to these capitalized
leases was $3,000 and $9,000 during the three and nine
months ended September 30, 1999, respectively.
Future minimum lease payments are as follows:
YEAR ENDING SEPTEMBER 30,
-------------------------------------------------------
2000 $ 1,872
2001 2,831
-------------------------------------------------------
Total minimum lease payments 4,703
Amount representing interest (420)
-------------------------------------------------------
Present value of minimum lease payments $ 4,283
=======================================================
Total obligation $ 4,283
Less current portion (1,702)
-------------------------------------------------------
Long-term portion $ 2,581
=======================================================
10. CONCENTRATIONS
CREDIT RISK The Company maintains cash balances at various
financial institutions primarily located in San Diego.
Accounts at these institutions are secured by the
Federal Deposit Insurance Corporation up to $100,000.
The Company has not experienced any losses in such
accounts. Management believes that the Company is not
exposed to any significant credit risk on cash.
21
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. OPERATING The Company's operating structure includes operating
SEGMENTS segments:
(a) SEGMENT The Company has two reportable segments: Space Missions
Division (SMD) and ISS. The Space Missions Division is
in the process of developing deep space science
exploration satellites. Through September 30, 1999,
this Division had no revenue with outside customers.
ISS provides engineering services, launch integration
services and space vehicle integration services.
The following is a summary of operating results and
assets by segment for the nine months ended September
30, 1999:
<TABLE>
<CAPTION>
(IN THOUSANDS) ISS SMD Total
---------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue from external
customers $ 634 $ - $ 634
Depreciation and
amortization expense 86 523 609
Other segment expenses 633 1,554 2,187
--------------------------------------
Segment profit (loss) $ (85) $ (2,077) $ (2,162)
--------------------------------------
Total segment assets $ 7,046 $ 428 $ 7,474
Less intersegment assets (80) (181) (261)
--------------------------------------
Net segment assets $ 6,966 $ 247 $ 7,213
======================================
</TABLE>
(b) METHOD OF Management evaluates the performance of its operating
DETERMINING segments separately to individually monitor the
SEGMENT PROFIT different factors affecting financial performance.
OR LOSS Segment profit or loss includes substantially all of
the segment's costs of production, distribution and
administration. The Company manages income taxes on a
global basis. Thus, management evaluates segment
performance based on profit or loss before income
taxes, exclusive of any significant gains or losses on
the disposition of investments or other assets. The
Company typically manages and evaluates equity
investments and related income on a segment level.
22
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
12. SETTLEMENT In August 1998, the U.S. Securities and Exchange
WITH U.S. Commission (SEC) alleged that the Company and its
SECURITIES AND chairman made statements on the Internet regarding
EXCHANGE revenue and earnings estimates without a reasonable
COMMISSION basis and also misrepresented a financing agreement it
had with a broker-dealer.
During April 1999, the Company and its chairman agreed
to settle the SEC's charges. Neither party paid any
fines. Under the settlement, the Company neither
admitted nor denied wrongdoing. The Company and its
chairman agreed to be subject to stiffer sanctions for
any future violations.
13. SUBSEQUENT In November 1999, the Company entered an employment
EVENT agreement with a key employee. The agreement can be
terminated by either party under certain circumstances.
The agreement also includes stock options contingent on
future events as well as grants under the Company's
Incentive Stock Option Plan.
23
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1998 and
Four Month Period Ended December 31, 1997
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-23
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
SPACEDEV, INC.
We have audited the accompanying consolidated balance sheet of SPACEDEV, INC.
AND SUBSIDIARIES (the "Company")(see Note 1(c) to the consolidated financial
statements) as of December 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended. These
consolidated statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
SPACE INNOVATIONS LIMITED, a wholly-owned subsidiary, whose statements reflect
total assets constituting 20% of consolidated assets as of December 31, 1998,
and net sales constituting 36% of consolidated net sales for the three-month
period then ended. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it related to the amounts
included for SPACE INNOVATIONS LIMITED is based solely on the report of other
auditors. The financial statements of SPACEDEV, INC. as of December 31, 1997
were audited by other auditors whose report dated January 30, 1998, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit and the report of
other auditors provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to in the first paragraph present
fairly, in all material respects, the financial position of SPACEDEV, INC. AND
SUBSIDIARIES as of December 31, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/
May 14, 1999
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
DECEMBER 31, 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 4)
CURRENT ASSETS
Cash (Note 10(a)) $ 106,539 $ 148,095
Accounts receivable 1,392,336 -
Inventory (Note 1(e)) 165,283 -
Other current assets (Note 1(f)) 125,709 1,040
- ------------------------------------------------------------------------------------------------
Total current assets 1,789,867 149,135
FIXED ASSETS - NET (Notes 1(f) and 2) 2,031,240 -
INTANGIBLE ASSETS - NET (Notes 1(f) and 3) 5,690,812 -
OTHER ASSETS (Note 1(f)) 150,704 -
- ------------------------------------------------------------------------------------------------
$9,662,623 $ 149,135
================================================================================================
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
===============================================================================================================
<CAPTION>
DECEMBER 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft facility $ 477,298 $
Line of credit (Note 4) 100,000 -
Current portion of notes payable (Note 5) 1,350,663 -
Current portion of acquisition price payable (Note 3) 500,000 -
Current portion capitalized leases (Note 9(b)) 43,666 -
Accounts payable 617,395 31,561
Customer deposits and deferred revenue 564,736 -
Accrued payroll, vacation and related taxes 282,170 -
Related party notes payable (Note 5(c)) 237,000 -
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 4,172,928 31,561
NOTE PAYABLE, LESS CURRENT MATURITIES (Note 5) 500,000 -
ACQUISITION PRICE PAYABLE, LESS CURRENT MATURITIES (Note 3) 500,000 -
CAPITALIZED LEASES, LESS CURRENT MATURITIES (Note 9) 28,351 -
OTHER LIABILITIES 54,738 -
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 5,256,017 31,561
COMMITMENTS AND CONTINGENCIES (Notes 8(c), 9, and 12)
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value, 10,000,000 shares
authorized and 82,450 shares issued and outstanding (Notes 8(a)) 82 82
Common stock, $.0001 par value; 25,000,000 shares authorized,
6,047,743 and 1,755,000 shares issued and outstanding,
respectively (Note 8(b)) 605 176
Additional paid-in capital 6,713,229 300,974
Additional paid-in capital - stock options (Note 8(d)) 750,000 971,333
Deferred compensation (Note 8(d)) (250,000) (250,000)
Accumulated deficit (2,814,633) (904,991)
Accumulated other comprehensive income:
Cumulative foreign currency translation adjustments (Note 1(j)) 7,323 -
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,406,606 117,574
- ---------------------------------------------------------------------------------------------------------------
$9,662,623 $ 149,135
===============================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
=========================================================================================================================
<CAPTION>
Four Month
YEAR ENDED Period Ended
DECEMBER 31, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 2,093,254 $ -
Cost of sales 1,152,813
- -------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN 940,441 -
OPERATING EXPENSES
General and administrative 2,143,088 -
Research and development (Note 1(g)) 700,921 904,094
- -------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,844,009 904,094
- -------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (1,903,568) (904,094)
- -------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (47,494) -
Other income - net 41,420 -
- -------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (6,074) -
- -------------------------------------------------------------------------------------------------------------------------
NET LOSS ($1,909,642) $ (904,094)
=========================================================================================================================
BASIC NET LOSS PER SHARE $ (.47) $ (.52)
- -------------------------------------------------------------------------------------------------------------------------
Weighted-Average Shares Outstanding 4,095,975 1,755,000
- -------------------------------------------------------------------------------------------------------------------------
Weighted-Average Shares Outstanding Assuming Dilution 12,883,975 10,500,000
=========================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
</TABLE>
<PAGE>
<TABLE>
================================================================================
<CAPTION>
Redeemable
Preferred Stock Common Stock
--------------------------------- --------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT AUGUST 22, 1997 (INCEPTION) - $ - - $ -
Shares issued for cash (Note 8(a)) 82,450 82 - -
Reverse acquisition of SpaceDev, Inc. (Note 1(a)) - - 1,755,000 176
Common stock options issued for
compensation (Note 1(l) and 8(d)) - - - -
Common stock options issued for deferred
compensation (Notes 1(m) and 8(b)) - - - -
Common stock options issued for services
(Note 1(m)) and 8(d)) - - - -
Net loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 82,450 82 1,755,000 176
Common stock issued for cash - - 622,403 62
Acquisition of intangible assets (Notes 1(f) and 3) - - - -
Common stock issued for compensation
(Notes 1(m) and 8(b)) - - 5,000 1
Common stock issued for business acquisition
of subsidiary - SIL (Note 1(c) and 3) - - 1,000,000 100
Common stock issued for business acquisition
of subsidiary - ISS (Note 1(c) and 3) - - 2,000,000 200
Common stock issued for services (Note 1(m)
and 8(b) - - 92,190 9
Common stock issued for exercise of options
(Note 8(d)) - - 573,150 57
Comprehensive income:
Net loss - - - -
Foreign currency translation adjustment - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 82,450 $ 82 6,047,743 $ 605
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
<CAPTION>
Additional
Paid-In Accumulated
Additional Capital Other
Paid-In Stock Deferred Accumulated Comprehensive
Capital Options Compensation Deficit Income Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ -
299,918 - - - - 300,000
1,056 - - - - 1,232
- 500,000 - - - 500,000
- 250,000 (250,000) - - -
- 221,333 - - - 221,333
- - - (904,991) - (904,991)
- -------------------------------------------------------------------------------------------------------------------------------
300,974 971,333 (250,000) (904,991) - 117,574
637,688 - - - - 637,750
24,500 - - - - 24,500
8,749 - - - - 8,750
1,667,900 - - - - 1,668,000
3,624,800 - - - - 3,625,000
189,572 - - - - 189,581
259,046 (221,333) - - - 37,770
- - - (1,909,642) - (1,909,642)
- - - - 7,323 7,323
- ------------------------------------------------------------------------------------------------------------------------------
7,323 (1,902,319)
- ------------------------------------------------------------------------------------------------------------------------------
$6,713,229 $750,000 $(250,000) $(2,814,633) $ 7,323 $4,406,606
==============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
6
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
===================================================================================================================
<CAPTION>
Four Month
YEAR ENDED Period Ended
DECEMBER 31, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,909,642) $(904,991)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 956,015 43
Common stock issued for compensation and services 324,081 -
Stock options issued for compensation and services - 721,333
Reverse acquisition of SpaceDev, Inc. - 149
Change in operating assets and liabilities:
Accounts receivable (391,032) -
Inventory (51,198) -
Other current assets (52,411) -
Other assets (20,474) -
Accounts payable 52,080 31,561
Customer deposits and deferred revenue (33,909) -
Accrued payroll, vacation and related taxes 75,172 -
Other liabilities (31,476) -
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,082,794) (151,905)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (61,826) -
Cash acquired in purchase of subsidiaries 31,427 -
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (30,399) -
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 512,000 -
Increase in bank overdraft 302,749 -
Proceeds from notes payable - related party 175,000 -
Proceeds from bank lines of credit 75,000 -
Proceeds from exercise of options 37,700 -
Payments on capital leases (29,383) -
Payments on note payables (10,544)
Proceeds from preferred stock issuance - 300,000
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,062,522 300,000
Effect of exchange rate changes on cash 9,115 -
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (41,556) 148,095
===================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
7
</TABLE>
<PAGE>
<TABLE>
SPACEDEV, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
===================================================================================================================
<CAPTION>
Four Month
YEAR ENDED Period Ended
DECEMBER 31, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH AT BEGINNING OF PERIOD 148,095 -
- -------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 106,539 $ 148,095
===================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash paid during the period for:
Interest $ 32,954 $ -
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITY:
During 1998, the Company issued 2,000,000 and 1,000,000 shares of restricted
stock for 100% of the outstanding stock of ISS and SIL, respectively. The
Company also incurred a liability to issue $1,000,000 of restricted common stock
when acquiring SIL. This amount was recorded as an acquisition price payable.
See Note 3.
In 1998, the Company issued warrants to purchase 25,000 shares of restricted
common stock for developed technology. See Note 3.
During 1998, the Company financed its new facility and related costs with
$1,800,000 of notes payable. The Company also financed approximately $6,300 of
equipment with capital leases.
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
8
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF A summary of the Company's significant accounting
SIGNIFICANT policies consistently applied in the preparation of the
ACCOUNTING accompanying consolidated financial statements follows.
POLICIES
(a) NATURE OF SPACEDEV, INC. (the "Company") was incorporated as
Pegasus Development Group, Inc. The Company is engaged
in the commercial development of low cost satellites
and their subsystems, as well as engineering technical
services to major aerospace companies. The principal
markets of the Company are 65% in the United States and
35% in Europe. (See Note 11(a))
The Company was incorporated under the laws of Colorado
on December 23, 1996 as Pegasus Development Group, Inc.
(PDGI). The principal activities from inception have
been organizational matters, the sale and issuance of
shares of its $.0001 par value common stock and $.001
par value preferred stock as part of a public stock
offering and the execution of a stock acquisition
agreement.
PDGI was originally formed for the purpose of entering
the real estate industry. However, on October 22, 1997,
the PDGI acquired 100 percent, or 1,000,000 shares, of
SpaceDev's $.001 par value common stock from SpaceDev,
LLC in exchange for 82,450 shares of the Company's
$.001 par value convertible, preferred stock, pursuant
to a comprehensive plan of reorganization of PDGI.
Following the acquisition of SpaceDev, SpaceDev was
merged into PDGI and the name of the corporation was
changed to SpaceDev, Inc. After the reorganization, the
former shareholders of SpaceDev owned a majority of the
outstanding common stock of the Company, after giving
effect to the conversion privilege of the preferred
stock which is convertible into 8,245,000 shares of
common stock.
For accounting purposes, the transaction has been
accounted for as a recapitalization of Company with the
Company as the acquirer (reverse acquisition). Since
SpaceDev had, prior to the recapitalization, minimal
assets, the recapitalization has been accounted for as
the sale of 1,755,000 shares for net assets of $1,232.
The Companys preferred shares reflected in the
consolidated financial statements have been restated
based upon the exchange rates of preferred stock issued
in connection with the acquisition.
9
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(b) LIQUIDITY The accompanying consolidated financial statements as
of December 31, 1998 have been prepared assuming the
Company will continue as a going concern. However, the
Company has a negative working capital of $1,883,061 as
of December 31, 1998 and incurred net losses of
$1,909,642 and $904,991 for the periods ended December
31, 1998 and 1997, respectively. Subsequent to December
1998, management intends to raise additional equity
financing to fund future operations and commitments.
There is no assurance that the new equity will be
sufficient to meet the Company's needs. Additionally,
there is no assurance that additional equity financing
needed to fund operations will be consummated or
obtained in sufficient amounts necessary to meet the
Company's needs.
The accompanying consolidated financial statements do
not include any adjustments to reflect the possible
future effects on the recoverability and classification
of assets or the amounts and classification of
liabilities that may result from the possible inability
of the Company to continue as a going concern.
(c) PRINCIPLES OF The consolidated financial statements include the
CONSOLIDATION accounts of the Company and its wholly-owned
subsidiaries, Space Innovations Limited (SIL) (a United
Kingdom entity) and Integrated Space Systems, Inc.
(ISS) (a California corporation). All significant
intercompany balances and transactions have been
eliminated in the consolidation.
(d) USE OF The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those
estimates. Significant estimates used in preparing
these consolidated financial statements include those
assumed in computing the valuation allowance on
deferred tax assets (see Note 6). It is reasonably
possible that the significant estimates used will
change within the next year.
(e) INVENTORY Inventory consists mainly of raw materials and is
stated at the lower of cost (first-in, forst-out) or
market.
10
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(f) DEPRECIATION Fixed assets are depreciated over their estimated
AND useful lives of three to eight years using the
AMORTIZATION straight-line method of accounting. Leasehold
improvements are amortized over the shorter of the
estimated useful lives of the assets or the remaining
lease term.
Goodwill and other intangible assets were created upon
the acquisition of the Company's subsidiaries.
Intangible assets are amortized over their assets
estimated future useful lives on a straight-line basis
over three to five years. Goodwill and other
intangibles are periodically reviewed for impairment
based on an assessment of future operations to ensure
they are appropriately valued in accordance with
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of."
(g) RESEARCH AND The Company is actively engaged in new product
DEVELOPMENT development efforts. Research and development
expenditures relating to possible future products are
expensed as incurred. Total expense was approximately
$701,000 and $907,000 for 1998 and 1997, respectively.
(h) ADVERTISING The Company follows the policy of charging the costs of
advertising to expense as incurred. Advertising
expenses were approximately $11,400 for 1998.
(i) INCOME Deferred income taxes are recognized for the tax
TAXES consequences in future years of differences between the
tax basis of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax
laws and statutory tax rates applicable to the periods
in which the differences are expected to affect taxable
income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the
combination of the tax payable for the year and the
change during the year in deferred tax assets and
liabilities.
(j) FOREIGN For the foreign subsidiary, assets and liabilities are
CURRENCY translated at the current year end exchange rate,
equity at the historical rate and income statement
items at the weighted average exchange rate for the
period. Resulting translation adjustments are made
directly to a separate component of stockholders
equity.
11
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(k) NEW In 1997, the Financial Accounting Standards Board
ACCOUNTING issued Statement of Financial Accounting Standards No.
STANDARDS 130, "Reporting Comprehensive Income." This Statement
was adopted in 1998. In accordance with the Statement,
comprehensive income is presented in the consolidated
statements of stockholders' equity for 1998 and 1997.
Statement of Financial Accounting Standards No. 133,
"Accounting for Derivatives Instrument and Hedging
Activities", established accounting and reporting
standards for derivative instruments. The Company has
not in the past nor does it anticipate, that it will
engage in transactions involving derivative instruments
which will impact the financial statements.
Statement of Position 98-5, "Accounting for Start-up
Costs", requires an entity to expense all start-up
related costs as incurred for fiscal years beginning
after December 15, 1998. The Company believes that this
statement will not have a material effect on the
Company's accounting for start-up costs.
(l) STOCK-BASED In October 1995, the Financial Accounting Standards
COMPENSATION Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The Company adopted SFAS 123
in 1997. The Company has elected to measure
compensation expense for its stock-based employee
compensation plans using the intrinsic value method
prescribed by APB Opinion 25, "Accounting for Stock
Issued to Employees" (APB 25) and has provided pro
forma disclosures as if the fair value based method
prescribed SFAS 123 has been utilized. See Note 8(d).
(m) COMMON STOCK The Company has valued its stock and stock options
AND STOCK issued to non-employees at fair value in accordance
OPTIONS TO with the accounting prescribed in SFAS 123 which states
NON-EMPLOYEES that all transactions in which goods or services are
received for the issuance of equity instruments shall
be accounted for based on the fair value of the
consideration received or the fair value of the equity
instruments issued, whichever is more reliably
measurable.
(n) NET LOSS PER Net loss per common share has been computed on the
COMMON SHARE basis of the weighted average number of shares
outstanding, according to the rules of Statement of
Financial Accounting Standards No. 128, "Earnings per
Share".
12
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(o) FINANCIAL The Company's financial instruments consist primarily
INSTRUMENTS of cash, accounts receivable, accounts payable, line of
credit, accrued expenses, notes payable and common
stock subscribed. These financial instruments are
stated at their respective carrying values, which
approximate their fair values.
2. FIXED ASSETS Fixed assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------
<S> <C>
Furniture, fixtures and equipment $ 222,073
Computer equipment 151,890
Leasehold improvements 36,769
----------------------------------------------------------------
410,732
Less accumulated depreciation and amortization (239,964)
----------------------------------------------------------------
170,768
Construction in progress 1,860,472
----------------------------------------------------------------
$2,031,240
================================================================
</TABLE>
Depreciation and amortization expense was approximately
$60,807 in 1998.
During 1998, the Company entered into construction
contracts on its new facility totaling approximately
$350,000.
3. ACQUISITIONS During 1998, the Company acquired 100% of the
outstanding common stock of two entities in San Diego
(ISS) and England (SIL) (see Note 8(b)). These
transactions were accounted for under the purchase
method of accounting with the aggregate of the purchase
price in excess of the fair market value of the assets
acquired being capitalized as goodwill. The cost of the
acquired entities was $5,725,000, of which $5,561,000
was capitalized as goodwill.
As part of the acquisition of SIL, the Company will
issue $1,000,000 of common stock in four semi-annual
installments over the next two years. The number of
shares issued will be determined on the then quoted
fair market value of its common stock. This amount was
recorded as acquisition price payable with $500,000 as
a current and $500,000 as a long-term liability.
13
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. ACQUISITIONS, The consolidated statement of operations for 1998
cont'd includes the operating results from cont'd these
entities beginning in February 1998 for ISS and October
1998 for SIL (see Note 1(c)).
The following unaudited pro forma information presents
a summary of consolidated results of operations of the
Company and its subsidiaries, ISS and SIL, as if the
acquisitions had occurred in August of 1997, with pro
forma adjustments to give effect to amortization of
goodwill and other intangible assets and certain other
adjustments:
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
PERIOD ENDED DECEMBER 31, 1998 1997
-------------------------------------------------------
Net sales $ 3,765 $ 1,415
Net losses $ (3,282) $ (751)
Basic net loss per share $ (.69) $ (.16)
=======================================================
The Company also acquired the exclusive royalty-free
rights to use, sell and apply all technology developed
by an individual. The purchase price for these
intangible assets was $24,500. See Note 8(c).
DECEMBER 31, 1998
-------------------------------------------------------
Goodwill $6,561,000
Other intangibles 24,500
-------------------------------------------------------
6,585,500
Less accumulated amortization (894,688)
-------------------------------------------------------
$5,690,812
=======================================================
4. LINE OF In July 1997, the Company (through ISS) obtained a bank
CREDIT line of credit in the amount of $100,000 which matured
in July 1998. In November 1998, the Company renewed the
line with a $250,000 agreement for one year. At
December 31, 1998, $100,000 was outstanding on the line
of credit.
The line of credit was secured by all of the assets of
ISS. The line is also guaranteed by SpaceDev and a key
shareholder. The interest rate under the line of credit
is prime (7.75% at December 31, 1998) plus 2.0% and
matures in November 1999.
14
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
5. NOTES
PAYABLE
(a) BUILDING In December 1998, the Company signed a $1,300,000 note
NOTES payable with a lender to finance the purchase of its
new facility. The note calls for monthly payments and a
balloon payment on December 21, 1999. The note accrues
interest at 13%.
In December 1998, the president of the Company entered
a $500,000 loan agreement with another lender to
finance additional costs of its new facility. This
liability was assigned to the Company and calls for 59
monthly interest payments at 12.23% and a balloon
payment of $505,000, including interest, on December
17, 2003.
(b) BANK LOAN - SIL has a bank loan due in monthly installments of
SIL approximately $5,000 with interest at 2.5% over the
bank's base rate. The $50,663 balance at December 31,
1998 is a current liability.
(c) RELATED At December 31, 1998, the Company had notes payable to
PARTY stockholder for $237,000. The notes were due between
January 1999 and March 1999 with interest between 4%
and 10%. These notes were extended as demand notes.
6. INCOME Deferred income taxes are provided for temporary
TAXES differences in recognizing certain income and expense
items for financial and tax reporting purposes. The
deferred tax asset of $950,000 and $311,000 as of
December 31, 1998 and 1997, respectively, consisted
primarily of the income tax benefits from net operating
loss carryforwards, amortization of goodwill and
research and development credits. A valuation allowance
has been recorded to fully offset the deferred tax
asset as realization of such asset is not assured. The
valuation allowance increased approximately $639,000 in
1998 from $311,000 at December 31, 1997 to $950,000 at
December 31, 1998.
At December 31, 1998, the Company has federal and state
tax net operating loss carryforwards of approximately
$1,700,000. The federal and state tax loss
carryforwards will expire between 1999 through 2018,
unless previously utilized.
15
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. INCOME A reconciliation of the statutory income tax rates and
TAXES the Company's effective rates is as follows:
cont'd
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1998 1997
------------------------------------------------------------------------
<S> <C> <C>
Statutory U.S. federal rate 34% 34%
State income taxes - net of federal benefit 5% 5%
Net operating loss for which no tax benefit is
currently available (39)% (39)%
------------------------------------------------------------------------
-% -%
========================================================================
</TABLE>
The tax effects of temporary differences and
carryforwards that give rise to deferred tax assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 688,000 $ 311,000
Temporary differences 220,000 -
Research and development credits 42,000 -
-------------------------------------------------------------------------
Gross deferred tax assets 950,000 311,000
Valuation allowance (950,000) (311,000)
-------------------------------------------------------------------------
$ - $ -
=========================================================================
</TABLE>
7. EMPLOYEE
BENEFIT PLAN
(a) PROFIT SHARING During 1997, the Company adopted a 401(k) retirement
401(k) PLAN savings plan for its U.S. employees which allows each
eligible employee to voluntarily make pre-tax salary
contributions up to 15% of their compensation. The
Company may elect to make a matching contribution. In
1998 and 1997, the Company did not contribute to the
Plan. The total Company contribution and participant
salary reduction may not exceed 25% of the compensation
of eligible participants.
(b) UNITED KINGDOM The Company provided a pension plan under the United
PENSION PLAN Kingdom Government social security system for Space
Innovations Limited employees. The expense related to
this plan was approximately $18,000 for 1998.
16
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. STOCKHOLDERS'
EQUITY
(a) REDEEMABLE In 1997, 82,450 shares of $.001 par value redeemable
PREFERRED STOCK preferred stock were issued at $3.64 per share. Each
share of redeemable preferred stock is convertible, at
the option of the holder, into 100 shares of common
stock. The conversion ratio is subject to certain
anti-dilution adjustments, and the holder of each share
of preferred stock is entitled to one vote for each
share of common stock into which it would convert.
Subsequent to year end, these shares were converted to
8,245,000 shares of common stock.
(b) COMMON In 1998, the Company issued 2,000,000 and 1,000,000
STOCK shares of restricted common stock for 100% of the
outstanding stock of ISS and SIL, respectively. See
Note 3.
During 1998, the Company entered agreements with sales,
investor relations and public relations firms to
perform services for the Company. In return for these
services, the Company issued 92,190 shares of its
common stock and recorded expense of approximately
$120,000.
As part of a five-year employment agreement with a key
employee, the Company issued 5,000 shares of common
stock as a signing bonus and recorded $8,750 of
compensation expense. The agreement renews annually and
can be canceled by either party under provisions of the
agreement. Upon renewal of the agreement, the employee
will receive 5,000 shares of common stock annually for
two years. The agreement also includes 50,000 stock
options with exercise prices of between $2 and $3 per
share. These options will vest upon future events
occurring. See Note 8(d).
During 1998, the Company recorded approximately
$126,000 of compensation expense related to 348,000
shares of restricted common stock issued to the
president at less than fair market value.
During 1998, the Company issued 573,150 shares of
common stock upon the exercising of stock options.
17
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(c) WARRANTS In return for the exclusive royalty free right to use,
sell and apply patents and other technology developed
by an individual, the Company issued warrants to
purchase 25,000 shares of common stock at 50% of their
fair market value on the date of issuance. The
individual will receive warrants to purchase a minimum
of 75,000 shares and a maximum of 3,000,000 shares of
common stock at 50% of the fair market value on the
date of issuance. The number of shares varies with
revenue generated by the technology on specific dates.
At December 31, 1998, the unissued warrants were not
recorded as the future exercise price of the warrants
cannot be estimated. See Note 3.
(d) STOCK OPTIONS
On October 22, 1997, the Company entered into three
agreements to grant options to purchase common stock
restricted under Securities Exchange Commission Rule
144 in consideration for consulting services. The
options were granted for a total of 573,150 shares of
the Company's $.0001 par value common stock with an
exercise price of $.07 per share. All of the options
were exercisable at December 31, 1997 and each option
was to expire on October 21, 2002. Based on the use of
the Black-Scholes option pricing model, the fair value
of the stock options issued for these services was
$221,333. As a result, the Company recognized $221,333
in consulting expense in 1998 related to the issuance
of the common stock options. All of these options were
exercised in 1998.
During 1997, the Company entered into a five-year
employment agreement with its president. As part of the
employment agreement, the Company granted options to
the president to purchase up to 2,500,000 shares of the
Company's $.0001 par value restricted common stock. In
accordance with APB 25, the Company recognized $500,000
of compensation expense and $250,000 of deferred
compensation. The options are subject to vesting
conditions and have exercise prices between $1.50 and
$3.00 per share.
During 1998, the Company granted options to five key
employees to purchase up to 350,000 shares of
restricted common stock with exercise prices between
$1.50 and $3.50 per share. The vesting of these options
are contingent on several future events. Should these
events not occur, no options would vest. Therefore,
these options were excluded from the pro forma amounts
shown below.
18
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(d) STOCK OPTIONS, All options expire 60 months from the date of the
CONT'D employment agreements.
The following summarizes stock option activity related
to the Plan:
<TABLE>
<CAPTION>
Weighted
Options Average
Outstanding Exercise Prices
------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at August 22, 1997 (inception) - $ -
Granted 1,073,150 $.07 - $1.00
Exercised - $ -
-----------------------------------------------------------------------------------------
Balance at December 31, 1997 1,073,150 $.07 - $1.00
Granted - $ -
Exercised (573,150) $.07
-----------------------------------------------------------------------------------------
Balance at December 31, 1998 500,000 $1.00
=========================================================================================
</TABLE>
The Company has elected to account for its stock-based
compensation plans under APB 25. However, the Company
has computed, for pro forma disclosure purposes, the
value of all options granted during 1998 and 1997 using
the minimum value method as prescribed by SFAS 123.
Under this method, the Company used the risk-free
interest rate at date of grant, expected volatility,
expected dividend yield and the expected life of the
options to determine the fair value of options granted.
The risk-free interest rates ranged from 5.4% to 6.0%;
expected volatility of 30% and a 0% dividend yield was
assumed to be zero, and the expected life of the
options was assumed to be five years based on the
average vesting period of options granted.
If the Company had accounted for these options in
accordance with SFAS 123, the total value of options
granted during 1998 and 1997 would be amortized on a
pro forma basis over the vesting period of the options.
Thus, the Company's consolidated net loss would have
increased as reflected in the following pro forma
amounts:
19
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(d) STOCK OPTIONS,
CONT'D
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
Net loss:
As reported $(1,909,642) $ (907,094)
Pro forma $(1,909,642) $(1,268,529)
Pro forma net loss per share $ (.47) $ (.72)
=========================================================================
</TABLE>
9. COMMITMENTS
AND
CONTINGENCIES
(a) OPERATING The Company leases its office facilities and certain
LEASES office and computer equipment under non-cancelable
operating leases which expire by December 2005. Rent
expense under these leases was approximately $94,800
for 1998.
Future minimum rental payments required under operating
leases that have initial or remaining non-cancelable
lease terms in excess of one year are as follows:
YEAR ENDING DECEMBER 31,
-------------------------------------------------------
1999 $ 89,409
2000 83,336
2001 77,274
-------------------------------------------------------
Total $ 250,019
=======================================================
(b) CAPITAL The Company leases certain equipment under
LEASES non-cancelable capital leases, which are included in
fixed assets as follows:
DECEMBER 31, 1998
-------------------------------------------------------
Computer equipment $ 39,000
Less accumulated depreciation (29,000)
-------------------------------------------------------
$ 10,000
=======================================================
Depreciation expense related to these capitalized
leases was $14,000 during 1998.
20
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(b) CAPITAL Future minimum lease payments are as follows:
LEASES, CONT'D
YEAR ENDING DECEMBER 31,
-------------------------------------------------------
1999 $ 53,410
2000 23,689
2001 3,560
-------------------------------------------------------
Total minimum lease payments 80,659
Amount representing interest (8,642)
-------------------------------------------------------
Present value of minimum lease payments $ 72,017
-------------------------------------------------------
Total obligation $ 72,017
Less current portion (43,666)
-------------------------------------------------------
Long-term portion $ 28,351
=======================================================
10. CONCENTRATIONS
(a) CREDIT RISK The Company maintains cash balances at various
financial institutions primarily located in San Diego.
Accounts at these institutions are secured by the
Federal Deposit Insurance Corporation up to $100,000.
The Company has not experienced any losses in such
accounts. Management believes that the Company is not
exposed to any significant credit risk on cash and cash
equivalents.
(b) FOREIGN ASSETS Included in the Company's consolidated balance sheet at
December 31, 1998 are the assets of the Company's
United Kingdom operations, which total approximately
$1,765,000.
(c) CUSTOMER During 1998, the Company had two major customers that
accounted for sales of approximately $1,142,000 or 55%
of consolidated revenue. At December 31, 1998, the
amount receivable from these customers was
approximately $122,000.
11. OPERATING The Company's operating structure includes operating
SEGMENTS segments:
(a) SEGMENT The Company has three reportable segments: Space
PRODUCTS AND Missions Division (SMD), ISS and SIL. The Space
SERVICES Missions Division is in the process of developing deep
space science exploration satellites. Through December
31, 1998, this Division had no revenue with outside
customers. ISS provides engineering services, launch
integration services and space vehicle integration
services. SIL develops low cost satellites and
satellite subsystems for use in space.
21
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(a) SEGMENT The following is a summary of operating results and
PRODUCTS AND assets by segment for the year ended December 31, 1998:
SERVICES, cont'd
<TABLE>
<CAPTION>
(IN THOUSANDS) ISS SIL SMD Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue from external
customers $ 1,340 $ 753 $ - $ 2,093
Depreciation and
amortization expense (44) (21) (897) (962)
Other segment expenses (1,256) (644) (1,141) (3,041)
---------------------------------------------
Segment profit (loss) $ 40 $ 88 $ (2,038) $ (1,910)
=============================================
Total segment assets $ 575 $ 1,765 $ 7,675 $ 10,015
Less intersegment assets (278) - (507) (785)
---------------------------------------------
Net segment assets $ 297 $ 1,765 $ 7,168 $ 9,230
=============================================
Geographic Information:
Revenue
---------------------------------------------------------------------------
United States $ 1,340 $ - $ - $ 1,340
Europe - 753 - 753
---------------------------------------------
$ 1,340 $ 753 $ - $ 2,093
=============================================
Assets
---------------------------------------------------------------------------
United States $ 297 $ - $ 7,168 $ 7,465
Europe - 1,765 - 1,765
---------------------------------------------
$ 297 $ 1,765 $ 7,168 $ 9,230
=============================================
</TABLE>
(b) METHOD OF Management evaluates the performance of its operating
DETERMINING segments separately to individually monitor the
SEGMENT PROFIT different factors affecting financial performance.
OR LOSS Segment profit or loss includes substantially all of
the segment's costs of production, distribution and
administration. The Company manages income taxes on a
global basis. Thus, management evaluates segment
performance based on profit or loss before income
taxes, exclusive of any significant gains or losses on
the disposition of investments or other assets. The
Company typically manages and evaluates equity
investments and related income on a segment level.
22
<PAGE>
SPACEDEV, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
12. SETTLEMENT In August 1998, the U.S. Securities and Exchange
WITH U.S. Commission (SEC) alleged that the Company and its
SECURITIES AND chairman made statements on the Internet regarding
EXCHANGE revenue and earnings estimates without a reasonable
COMMISSION basis and also misrepresented a financing agreement it
had with a broker-dealer.
During April 1999, the Company and its chairman agreed
to settle the SEC's charges. Neither party paid any
fines. Under the settlement, the Company neither
admitted nor denied wrongdoing. The Company and its
chairman agreed to be subject to stiffer sanctions for
any future violations.
23
ARTICLES OF INCORPORATION
OF
PEGASUS DEVELOPMENT GROUP, INC.
FILED COPY
KNOW ALL MEN BY THESE PRESENTS:
That I, Scott M. Thornock, desiring to establish a corporation under
the name of PEGASUS DEVELOPMENT GROUP, INC., for the purpose of becoming a body
corporate under and by virtue of the laws of the State of Colorado and, in
accordance with the provisions of the laws of said State, do hereby make,
execute and acknowledge this certificate in writing of my intention to become a
body corporate, under and by virtue of said laws.
961166285 C $50.00
SECRETARY OF STATE
12-23-96 09:00
ARTICLE I
The name of the corporation shall be: PEGASUS DEVELOPMENT GROUP, INC.
ARTICLE II
The nature of the business and the objects and purposes to be carried
on are to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do, and in any part of the world, viz:
(a) To transact all lawful business for which corporations may be
incorporated pursuant to the Colorado Corporation Code.
(b) To manufacture, purchase or otherwise acquire and to hold, own,
mortgage or otherwise lien, pledge, lease, sell, assign, exchange,
transfer or in any manner dispose of, and to invest, deal and trade in and
with goods, wares, merchandise and personal property of any and every
class and description, within or without the State of Colorado.
(c) To acquire the goodwill, rights and property and to undertake the
whole or any part of the assets and liabilities of any person, firm,
association or corporation; to pay for the same in cash, the stock of the
corporation, bonds or otherwise; to hold or in any manner dispose of the
whole or any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired and to exercise
all the powers necessary or convenient in and about the conduct and
management of such business.
(d) To guarantee, purchase or otherwise acquire, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of shares of the capital
stock, bonds or other evidences of indebtedness created by other
corporations and, while the holder of such stock, to exercise all the
rights and privileges of ownership, including the right to vote thereon, to
the same extent as natural persons might or could do.
<PAGE>
(e) To purchase or otherwise acquire, apply for, register, hold, use,
sell or in any manner dispose of and to grant licenses or other rights in
and in any manner deal with patents, inventions, improvements, processes,
formulas, trademarks, trade names, rights and licenses secured under
letters patent, copyright or otherwise.
(f) To enter into, make and perform contracts of every kind for any
lawful purpose, with any person, firm, association or corporation, town,
city, county, body politic, state, territory, government, colony or
dependency thereof.
(g) To borrow money for any of the purposes of the corporation and to
draw, make, accept, endorse, discount, execute, issue, sell, pledge or
otherwise dispose of promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable, transferable or
nontransferable instruments and evidences of indebtedness, and to secure
the payment thereof and the interest thereon by mortgage or pledge,
conveyance or assignment in trust of the whole or any part of the property
of the corporation at the time owned or thereafter acquired.
(h) To lend money to, or guarantee the obligations of, or to otherwise
assist the directors of the corporation or of any other corporation the
majority of whose voting capital stock is owned by the corporation, upon
the affirmative vote of at least a majority of the outstanding shares
entitled to vote for directors.
(i) To purchase, take, own, hold, deal in, mortgage or otherwise
pledge, and to lease, sell, exchange, convey, transfer or in any manner
whatever dispose of real property, within or without the State of Colorado.
(j) To purchase, hold, sell and transfer the shares of its capital
stock.
(k) To have one or more offices and to conduct any and all operations
and business and to promote its objects, within or without the State of
Colorado, without restrictions as to place or amount.
(l) To do any or all of the things herein set forth as principal,
agent, contractor, trustee, partner or otherwise, alone or in company with
others.
(m) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed,
shall be in no way limited or restricted by reference to or inference from
the terms of any other clauses or paragraph of these Articles of
Incorporation.
(n) The foregoing shall be constructed both as objects and powers and
the enumeration thereof shall not be held to limit or restrict in any
manner the general powers conferred on this corporation by the laws of the
State of Colorado.
ARTICLE III
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 11,000,000 of which 1,000,000 shall
be shares of preferred stock, $.00l par value per share, and 10,000,000 shall be
shares of common stock, $.0001 par value per share, and the designations,
preferences, limitations and relative rights of the shares of each class shall
be as follows:
2
<PAGE>
(a) Shares of Preferred Stock. The corporation may divide and issue
the shares of preferred stock in series. Shares of preferred stock of
each series, when issued, shall be designated to distinguish them from the
shares of all other series. The Board of Directors is hereby vested with
authority to divide the class of shares of preferred stock into series and
to fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by these
Articles of Incorporation and the Colorado Corporation Code in respect of
the following:
(i) The number of shares to constitute such
series, and the distinctive designations thereof;
(ii) The rate and preference of dividends, if
any, the time of payment of dividends, whether dividends
are cumulative and the date from which any dividends shall
accrue;
(iii) Whether shares may be redeemed and, if so,
the redemption price and the terms and conditions of
redemption;
(iv) The amount payable upon shares in event of
involuntary liquidation;
(v) The amount payable upon shares in event of
voluntary liquidation;
(vi) Sinking fund or other provisions, if any, for
the redemption or purchase of shares;
(vii) The terms and conditions upon which shares
may be converted, if the shares of any series are issued
with the privilege of conversion;
(viii) Voting powers, if any; and
(ix) Any other relative rights and preferences of
shares of such series, including, without limitation, any
restriction on an increase in the number of shares of any
series theretofore authorized and any limitation or
restriction of rights or powers to which shares of any
future series shall be subject.
(b) Shares of Common Stock. The rights of holders of shares of common
stock to receive dividends or share in the distribution of assets in the
event of liquidation, dissolution or winding up of the affairs of the
corporation shall be subject to the preferences, limitations and relative
rights of the shares of preferred stock fixed in the resolution or
resolutions which may be adopted from time to time by the Board of
Directors of the corporation providing for the issuance of one or more
series of shares of preferred stock.
The capital stock, after the subscription price has been paid in,
shall not be subject to assessment to pay the debts of the corporation. Any
stock of the corporation may be issued for money, property, services rendered,
labor done, cash advances for the corporation or for any other assets of value
in accordance with the action of the Board of Directors, whose judgment as to
value received in return therefor shall be conclusive and said stock when issued
shall be fully-paid and nonassessable.
3
<PAGE>
ARTICLE IV
The corporation shall have perpetual existence.
ARTICLE V
The governing board of this corporation shall be known as the Board of
Directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation,
provided that the number of directors shall not be reduced to less than one.
The name and post office address of the incorporator is as follows:
Scott M. Thornock 3351 South Magnolia Street
Denver, Colorado 80224
The name and post office address of the directors comprising the
original Board of Directors of the corporation are as follows:
Scott M. Thornock 3351 South Magnolia Street
Denver, Colorado 80224
C. Edward Venerable 3351 South Magnolia Street
Denver, Colorado 80224
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized: (
a) To manage and govern the corporation by majority vote of
members present at any regular or special meeting at which a quorum
shall be present.
(b) To make, alter, or amend the Bylaws of the corporation at
any regular or special meeting.
(c) To fix the amount to be reserved as working capital over and
above its capital stock paid in.
(d) To authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
(e) To designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which, to
the extent provided by resolution or in the Bylaws of the corporation,
shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation. Such
committees shall have such name or names as may be stated in the
Bylaws of the corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all of the property and
assets of the corporation, if in the usual and regular course of its business,
upon such terms and conditions as the Board of Directors may determine without
vote or consent of its shareholders.
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The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all the property or assets
of the corporation, including its goodwill, if not in the usual and regular
course of its business, upon such terms and conditions as the Board of Directors
may determine, provided that such sale shall be authorized or ratified by the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a shareholders meeting called for that purpose, or
when authorized or ratified by the written consent of all the shareholders of
the shares entitled to vote thereon.
The Board of Directors shall have the power and authority to merge or
consolidate the corporation upon such terms and conditions as the Board of
Directors may authorize, provided that such merger or consolidation is approved
or ratified by the shares entitled to vote thereon at a shareholders meeting
called for that purpose, or when authorized or ratified by the written consent
of all the shareholders of the shares entitled to vote thereon.
The corporation shall be dissolved upon the affirmative vote of the
shareholders of at least a majority of the shares entitled to vote thereon at a
meeting called for that purpose, or when authorized or ratified by the written
consent of all the shareholders of the shares entitled to vote thereon.
The corporation shall revoke voluntary dissolution proceedings upon
the affirmative vote of the shareholders of at least a majority of the shares
entitled to vote at a meeting called for that purpose, or when authorized or
ratified by the written consent of all the shareholders of the shares entitled
to vote.
ARTICLE VI
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and the same are
in furtherance of and not in limitation of the powers conferred by law.
No contract or other transactions of the corporation with any other
person, firm or corporation, or in which this corporation is interested, shall
be affected or invalidated by (a) the fact that any one or more of the directors
or officers of this corporation is interested in or is a director or officer of
such other firm or corporation; or (b) the fact that any director or officer of
this corporation, individually or jointly with others, may be a party to or may
be interested in any such contract or transaction, so long as the contract or
transaction is authorized, approved or ratified at a meeting of the Board of
Directors by sufficient vote thereon by directors not interested therein, to
which such fact or relationship or interest has been disclosed, or so long as
the contract or transaction is fair and reasonable to the corporation. Each
person who may become a director or officer of the corporation is hereby
relieved from any liability that might otherwise arise by reason of his
contracting with the corporation for the benefit of himself or any firm or
corporation in which he may be in any way interested.
The officers, directors and other members of management of this
corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's Board
of Directors as evidenced by resolutions appearing in the corporation's minutes.
When such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors and other members of management of this corporation shall be disclosed
promptly to this corporation and made available to it. The Board of Directors
may reject any business opportunity presented to it and thereafter any officer,
director or other member of management may avail himself of such opportunity.
Until such time as this corporation, through its Board of Directors, has
designated an area of interest, the
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<PAGE>
officers, directors and other members of management of this corporation shall be
free to engage in such areas of interest on their own and the provisions hereof
shall not limit the rights of any officer, director or other member of
management of this corporation to continue a business existing prior to the time
that such area of interest is designated by this corporation. This provision
shall not be construed to release any employee of the corporation (other than an
officer, director or member of management) from any duties which he may have to
the corporation.
ARTICLE VII
Each director and officer of the corporation shall be indemnified by
the corporation as follows:
(a) The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is
otherwise serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding, by
judgment, order, settlement, conviction upon a plea of nolo contendere
or its equivalent, shall not of itself create a presumption that the
person did not act in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding,
had reasonable cause to believe the action was unlawful.
(b) The corporation shall indemnify any person who was or is a
party, or is threatened to be made A party, to any threatened, pending
or completed action or suit by or in the right of the corporation, to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation, unless, and only to the extent that, the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which such court deems
proper.
(c) To the extent that a director, officer, employee or agent of
the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections (a)
and (b) of this Article, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses
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<PAGE>
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the officer, director and employee or agent is
proper in the circumstances, because he has met the applicable
standard of conduct set forth in Section (a) or (b) of this Article.
Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties
to such action, suit or proceeding, or (ii) if such quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or
(iii) by the affirmative vote of the holders of a majority of the
shares of stock entitled to vote and represented at a meeting called
for such purpose.
(e) Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding, as authorized in Section (d) of this Article, upon
receipt of an understanding by or on behalf of the director, officer,
employee or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
(f) The Board of Directors may exercise the corporation's power
to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under these Articles of Incorporation,
the Bylaws, agreements, vote of the shareholders or disinterested
directors, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such a person.
ARTICLE VIII
The initial registered and principal office of said corporation shall
be located at 3351 South Magnolia Street, Denver, Colorado 80224, and the
initial registered agent of the corporation at such address shall be Scott M.
Thornock.
Part or all of the business of said corporation may be carried on in
the City and County of Denver, or any other place in the State of Colorado or
beyond the limits of the State of Colorado, in other states or territories of
the United States and in foreign countries.
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ARTICLE IX
Whenever a compromise or arrangement is proposed by the corporation
between it and its creditors or any class of them, and/or between said
corporation and its shareholders or any class of them, any court of equitable
jurisdiction may, on the application in a summary way by said corporation, or by
a majority of its stock, or on the application of trustees in dissolution, order
a meeting of the creditors or class of creditors and/or of the shareholders or
class of shareholders of said corporation, as the case may be, to be notified in
such manner as the said court decides. If a majority in number, representing at
least three-fourths in amount of the creditors or class of creditors, and/or the
holders of a majority of the stock or class of stock of said corporation, as the
case may be, agree to any compromise or arrangement and/or to any reorganization
of said corporation, as a consequence of such compromise or arrangement, the
said compromise or arrangement and/or the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
upon all the creditors or class of creditors, and/or on all the shareholders or
class of shareholders of said corporation, as the case may be, and also on said
corporation.
ARTICLE X
No shareholder in the corporation shall have the preemptive right to
subscribe to any or all additional issues of stock and/or other securities of
any or all classes of this corporation or securities convertible into stock or
carrying stock purchase warrants, options or privileges.
ARTICLE XI
Meetings of shareholders may be held at any time and place as the
Bylaws shall provide. At all meetings of the shareholders, a majority of all
shares entitled to vote shall constitute a quorum.
ARTICLE XII
Cumulative voting shall not be allowed.
ARTICLE XIII
These Articles of Incorporation may be amended by resolution of the
Board of Directors if no shares have been issued, and if shares have been
issued, by affirmative vote of the shareholders of at least a majority of the
shares entitled to vote thereon at a meeting called for that purpose, or, when
authorized, when such action is ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
ARTICLE XIV
Whenever the shareholders must approve or authorize any matter,
whether now or hereafter required by the laws of the State of Colorado, the
affirmative vote of a majority of the shares entitled to vote thereon shall be
necessary to constitute such approval or authorization.
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<PAGE>
IN TESTIMONY WHEREOF, I have hereunto set my hand on this 20th day of
December, 1996, and, by my signature below, I hereby consent to my appointment
as the initial registered agent of Pegasus Development Group, Inc.
/S/ Scott M. Thornock
------------------------------
Scott M. Thornock
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, _________________, a Notary Public, in and for the said county and
state, hereby certify that there personally appeared before me, Scott M.
Thornock, who being first duly sworn, declared that he is the person who
executed the foregoing document as the incorporator and the initial registered
agent of the corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 20th day
of December, 1996.
__________________________
Notary Public
My commission expires: __________________
9
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
PEGASUS DEVELOPMENT GROUP. INC.,
a Colorado corporation
Pursuant to the provisions of the Colorado Business Corporation Act
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation.
FIRST: The name of this corporation is Pegasus Development Group, Inc.
SECOND: The following amendment to the Articles of Incorporation was
duly adopted by the directors as of October 23, 1997 in accordance with Section
7-106-102 of the Colorado Business Corporation Act.
Article III of Articles of Incorporation is amended by adding thereto
Section (a)(x) that reads as follows:
(x) SERIES B CONVERTIBLE PREFERRED STOCK, $.0OO1 PAR VALUE PER SHARE.
The corporation's preferred stock shall initially consist of one series: 82,450
of Series B Convertible Preferred Stock, $.001 par value per share, the rights,
preferences, privileges and restrictions of which are set forth as follows:
1. DEFINITIONS. For purposes of this resolution, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "COMMON STOCK" shall mean the Company's Common Stock, $.0001
par value per share.
(c) "COMMON STOCK DIVIDEND" shall mean a stock dividend declared
and paid on the Common Stock that is payable in shares of Common Stock.
(d) "DISTRIBUTION" shall mean the transfer of cash or property by
the Company to one or more of its shareholders without consideration, whether by
dividend or otherwise (except a dividend in shares of Company's stock), but not
including Permitted Repurchases (as defined below).
(e) "DIVIDEND RATE" shall mean an amount per share which is
equal to 100 times the amount payable with respect to any share of Common Stock
whether in cash or as a Common Stock Dividend.
(f) "ORIGINAL ISSUE DATE" shall mean the date on which the first
share of Series B Stock is issued by the Company.
(g) "PERMITTED REPURCHASES" shall mean the repurchase by the
Company of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other persons performing
services for the Company or a subsidiary.
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<PAGE>
which shares are subject to agreements under which the Company has the option
or obligation to repurchase such shares: (i) at not greater than the fair market
value thereof (determined by or in a manner approved by the Board, upon the
occurrence of certain events, such as the termination of employment or
services); or (ii) at any price pursuant to the Company's exercise of a right of
first refusal to repurchase such shares.
(h) "SERIES B STOCK" shall mean the Company's Series B
Convertible Preferred Stock, $.001 par value per share.
(i) "SUBSIDIARY" shall mean any corporation of which at least
fifty percent (50%) of the outstanding voting stock is at the time owned
directly or indirectly by the Company or by one or more of such subsidiary
corporations.
2. DIVIDEND RIGHTS.
(a) DIVIDEND PREFERENCE. The holders of the then issued and
outstanding Series B Stock shall be entitled to receive, when, as and if
declared by the Board, out of any funds and assets of the Company legally
available therefor, cumulative dividends at the annual or periodic Dividend Rate
in a fashion that will cause dividends to be paid ratably among holders of
Common Stock and Series B Stock in proportion to the amount of such stock owned
by each such holder, where, for this purpose, each holder of shares of Series B
Stock is deemed to hold the greatest whole number of shares of Common Stock then
issuable upon conversion of all shares of Series B Stock held by such holder
pursuant to SECTION 5.
(b) NON-CASH DIVIDENDS. Whenever a dividend or Distribution
provided for in this SECTION 2 shall be payable in property other than cash
(including without limitation Common Stock), the value of such dividend or
Distribution shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
(c) PAYMENT ON CONVERSION. If the Company shall have any accrued
and unpaid dividends with respect to any Series B Stock, then immediately prior
to, and upon a conversion of any of the Series B Stock as provided in SECTION 5,
the Company shall, subject to the legal availability of funds and assets
therefor, pay in cash or Common Stock (or a combination thereof) to the holder
of the shares of Series B Stock being converted the full amount of any dividends
accrued and unpaid on such shares. Upon any such conversion, if the Board elects
to pay dividends with respect to any Series B Stock in Common Stock, the Board
shall determine in good faith the total fair market value of such shares, equal
to the balance of all accrued but unpaid dividends not paid in cash.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the funds and
assets of the Company that may be legally distributed to the Company's
shareholders (the "AVAILABLE FUNDS AND ASSETS") shall be distributed to
shareholders in the following manner:
(a) LIQUIDATION. The holder of each share of Series B Stock then
issued and outstanding shall be entitled to be paid, out of the Available Funds
and Assets, ratably with any payment or distribution (or any setting apart of
any payment or distribution) of any Available Funds and Assets on any shares of
Common Stock, an amount per share equal to
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<PAGE>
the amount allocated to each share of Common Stock and then multiplied by 100,
plus all accrued and unpaid cumulative dividends thereon.
(b) MERGER OR SALE OF ASSETS. A (i) consolidation or merger of
the Company with or into any other corporation or corporations in which the
holders of record of the Company's outstanding shares immediately before such
consolidation or merger do not, immediately after such consolidation or merger,
hold (by virtue of securities issued as consideration in such transaction or
otherwise) a majority of the voting power of the surviving Corporation of such
consolidation or merger; or (ii) sale of all or substantially all of the assets
of the Company, shall each be deemed to be a liquidation, dissolution or winding
up of the Company as those terms are used in this SECTION 3.
(c) NON-CASH CONSIDERATION. If any assets of the Company
distributed to shareholders in connection with any liquidation, dissolution, or
winding up of the Company are other than cash, then the value of such assets
shall be their fair market value as determined by the Board, EXCEPT THAT any
securities to be distributed to shareholders in a liquidation, dissolution, or
winding up of the Company shall be valued as follows:
(i) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
(A) if the securities are then traded on a national
securities exchange or the Nasdaq NM (or a similar national quotation system),
then the value shall be deemed to be the average of the closing prices of the
securities on such exchange or system over the 30-day period ending three (3)
days prior to the distribution;
(B) if actively traded over-the-counter, then the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the closing of such merger, consolidation
or sale;
(C) if there is no active public market, then the value
shall be the fair market value thereof, as determined in good faith by the
Board: and
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (c)(A), (B) or (C) of this Section to reflect the approximate fair
market value thereof, as determined in good faith by the Board.
4. VOTING RIGHTS. A holder of a share of Series B Stock shall be
entitled to 100 votes for each vote allotted to the holder of one share of
Common Stock on any and all matters including the election of directors and
shall except as may be otherwise provided by law vote as a class with the
holders of outstanding Common Stock.
5. CONVERSION RIGHTS. The issued and outstanding shares of Series B
Stock shall be convertible into Common Stock as follows:
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<PAGE>
(a) OPTIONAL CONVERSION.
(i) At the option of the holder thereof, each share of
Series B Stock shall be convertible, at any time or from time to time into fully
paid and nonassessable shares of Common Stock as provided herein.
(ii) Each holder of Series B Stock who elects to convert the
same into shares of Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or any transfer agent for
the Series B Stock or Common Stock, and shall give written notice to the Company
at such office that such holder elects to convert the same and shall state
therein the number of shares of Series B Stock being convened. Thereupon the
Company shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled upon such conversion. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the certificate or certificates representing the shares of Series B
Stock to be converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(b) CONVERSION RATE. Each share of Series B Stock shall be
convertible in accordance with SECTION 5(a) above into 100 shares of Common
Stock (the "CONVERSION RATE"). The Conversion Rate of the Series B Stock shall
be subject to adjustment from time to time as provided below.
(c) ADJUSTMENT UPON COMMON STOCK EVENT. Upon the happening of a
Common Stock Event (as hereinafter defined), the Conversion Rate of the Series B
Stock shall, simultaneously with the happening of such Common Stock Event, be
adjusted by multiplying the Conversion Rate of the Series B Stock in effect
immediately prior to such Common Stock Event by a fraction, (i) the numerator of
which shall be the number of shares of Common Stock issued and outstanding
immediately prior to such Common Stock Event, and (ii) the denominator of which
shall be the number of shares of Common Stock issued and outstanding immediately
after such Common Stock Event, and the product so obtained shall thereafter be
the Conversion Rate for such Series B Stock. The Conversion rate for the Series
B Stock shall be readjusted in the same manner upon the happening of each
subsequent Common Stock Event. As used herein, the term "COMMON STOCK EVENT"
shall mean (x) the issue by the Company of additional shares of Common Stock as
a dividend or other distribution on outstanding Common Stock, (y) a subdivision
of the outstanding shares of Common Stock into a greater number of shares of
Common Stock, or (z) a combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock.
(d) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at any
time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of the Series B
Stock shall receive upon conversion thereof, in addition to the number of shares
of Common Stock receivable upon conversion thereof, the number of securities of
the Company which they would have received had their Series B Stock been
converted into Common Stock on the date of such event (or such record date, as
applicable) and had they
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<PAGE>
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this SECTION 5 with respect to
the rights of the holders of the Series B Stock or with respect to such other
securities by their terms.
(e) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of the Series B Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (OTHER THAN by a Common Stock
Event or a stock dividend, reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 5), then in any such event each
holder of Series B Stock shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
number of shares of Common Stock into which such shares of Series S Stock could
have been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
(f) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Rate for the Series B Stock, the Company, at its
expense, shall cause its Chief Financial Officer to compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each record holder of the Series B Stock
at the holder's address as shown in the Company's books.
(g) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon any conversion of Series B Stock. In lieu of any fractional share
to which the holder would otherwise be entitled, the Company shall, at the
Company's option: (x) pay the holder cash equal to the product of such fraction
multiplied by the Common Stock's fair market value as determined in good faith
by the Board as of the date of conversion, or (y) round up to the nearest whole
share of Common Stock to be issued upon any such conversion.
(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Stock, the Company
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
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<PAGE>
(i) NOTICES. Any notice required by the provisions of this
SECTION 5 to be given to the holders of shares of the Series B Stock shall be
deemed given upon the earlier of actual receipt or deposit in the United States
mail, by certified or registered mail, return receipt requested, postage
prepaid, addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(j) NO IMPAIRMENT. The Company shall not avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series B Stock
against impairment.
6. MISCELLANEOUS.
(a) NO REISSUANCE OF SERIES B STOCK. No share or shares of Series
B Stock acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue.
(b) CONSENT TO CERTAIN TRANSACTIONS. Each holder of shares of
Series B Stock shall, by virtue of its acceptance of a stock certificate
evidencing Series B Stock, be deemed to have consented, to all Permitted
Repurchases.
Dated: November 4, 1997.
PEGASUS DEVELOPMENT GROUP, INC.,
a Colorado corporation
By /S/ James W. Benson
-----------------------------------
James W. Benson, President
FILED COPY
CHANGE OF NAME
STOCK CHANGE
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PEGASUS DEVELOPMENT GROUP, INC.,
a Colorado corporation
19971203135 C
$ 25.00
SECRETARY OF STATE
12-17-97 14:23:43
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation that were adopted by the shareholders of the
corporation on November 21, 1997, The number of votes for the amendments cast by
each voting group entitled to vote separately on the amendments was sufficient
for approval by that voting group. The amendments to the Articles of
Incorporation are as follows:
ARTICLE I
"The name of the corporation is SpaceDev Inc."
ARTICLE III
Article III of Articles of Incorporation is amended by deleting the
opening paragraph thereof and replacing it with the following paragraph:
"The aggregate number of shares which the corporation shall have
authority to issue is 35,000,000 of which 10,000,000 shall be shares of
preferred stock, $.001 par value per share, and 25,000,000 shall be shares of
common stock, $.0001 par value per share. The designations, preferences,
limitations and relative rights of the shares of each class shall be as set
forth below in this Article III."
Dated the 25 day of November, 1997.
SPACEDEV,
a Colorado corporation
By /S/ James W. Benson
-----------------------------
James W. Benson, President
-1-
BYLAWS
OF
PEGASUS DEVELOPMENT GROUP, INC.
ARTICLE I
OFFICES
-------
The principal office of Pegasus Development Group, Inc. (the
"Company"), shall be located in the State of Colorado. The Company may have such
other offices or relocate its principal office either within or without the
State of Colorado as the Board of Directors of the Company (the "Board") may
designate or as the business of the Company may require.
The registered office of the Company in the Articles of Incorporation
(the "Articles") need not be identical with the principal office in the State of
Colorado.
ARTICLE III
SHAREHOLDERS
------------
Section 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held each year on a date and at a time and place to be determined by
resolution of the Board, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day designated for the annual
meeting of the shareholders, or at any adjournment thereof, the Board shall
cause the election to be held at a special meeting of the shareholders.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose, unless otherwise provided for by statute, may be called by the
president, the Board or by the president at the request of the holders of not
less than one-tenth of all the shares of the Company entitled to vote at the
meeting.
Section 3. PLACE OF MEETING. The Board may designate any place, either
within or without the State of Colorado, as the place of meeting for any annual
or special meeting. If no designation is made, the place of meeting shall be
the registered office of the Company in the State of Colorado.
Section 4. NOTICE OF MEETING. Written notice, stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered as the laws of the
State of Colorado shall provide.
Section 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board may fix in advance a date (the "Record Date") for any
such determination of shareholders, which date shall be not more than 50 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If no Record Date is fixed by the Board, the Record
Date for any such purpose shall be ten days before the date of such meeting or
action. The Record Date determined for the purpose of ascertaining the number of
shareholders entitled to notice of or to vote at a meeting may not be less than
ten days prior to the meeting. When a Record Date has been determined for the
purpose of a meeting, the determination shall apply to any adjournment thereof.
-1-
<PAGE>
Section 6. QUORUM. If less than a quorum of the outstanding shares as
provided for in the Articles are represented at a meeting, a majority of the
shares present may adjourn the meeting without further notice for a period which
shall not exceed 60 days. At such adjourned meeting, at which a quorum shall be
present, any business may be transacted which might have been transacted at the
original meeting. Once a quorum is present at a duly organized meeting, the
shareholders present may continue to transact business until adjournment,
notwithstanding any departures of shareholders during the meeting which leave
less than a quorum.
Section 7. VOTING OF SHARES. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
Section 8. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the Company
before or at the time of the meeting. No proxy shall be valid after 11 months
from the date of its execution, unless otherwise provided in the proxy. No
telegraphic proxies shall be valid. No proxies with printed or typed signatures
shall be valid.
Section 9. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by agent or proxy as the Bylaws of
such corporation may prescribe or, in the absence of such provision, as the
board of directors of such corporation may determine.
Neither treasury shares nor shares held by another corporation, if the
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the Company, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of the shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver and shares held by or under the control of a receiver may be voted by
such receiver, without the transfer thereof into his name if authority so to do
is contained in an appropriate order of the court by which the receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 10. ACTION BY CONSENT OF ALL SHAREHOLDERS. Any action required
to be taken, or which may be taken at a meeting of the shareholders may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such written consent or consents shall be filed with the
minutes of the Company. Such action by written consent of all entitled to vote
shall have the same force and effect as a unanimous vote of such shareholders.
-2-
<PAGE>
Section 11. INSPECTORS. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the chairman of the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them. No director or candidate
for the office of director shall act as an inspector of an election of
directors. Inspectors need not be shareholders.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. GENERAL POWERS. The Board shall have the power to manage
the business and affairs of the Company in such manner as it sees fit. In
addition to the powers and authorities expressly conferred upon it, the Board
may do all lawful acts which are not directed to be done by the shareholders by
statute, by the Articles or by these Bylaws.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the Company shall not be less than one. Each director shall hold office until
the next annual meeting of shareholders and until his successor has been elected
and qualified, or until his death, resignation or removal. Directors need not be
residents of the State of Colorado or shareholders of the Company.
Section 3. REGULAR MEETINGS. A regular meeting of the Board shall be
held, without other notice than this Bylaw, immediately after and at the same
place as the annual meeting of shareholders. The Board may provide, by
resolution, the time and place, either within or without the State of Colorado,
for the holding of additional regular meetings, without other notice than such
resolution,
Section 4. SPECIAL MEETINGS. Special meetings of the Board may be
called by or at the request of the president or any two directors. The person or
persons authorized to call special meetings of the Board may fix any place,
either within or without the State of Colorado, as the place for holding any
special meeting of the Board called by them.
Section 5. TELEPHONIC MEETINGS. Members of the Board and committees
thereof may participate and be deemed present at a meeting by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time.
Section 6. NOTICE. Notice of any special meeting of the Board shall be
given by telephone, telegraph or written notice sent by mail. Notice shall be
delivered at least one day prior to the meeting (five days before the meeting if
the meeting is held outside the State of Colorado) if given by telephone or
telegram. If notice is given by telegram, such notice shall be deemed to be
-3-
<PAGE>
delivered when the telegram is delivered to the telegraph company. Written
notice shall be delivered personally or by mail to each director at his business
or home address at least five days prior to the meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed with postage thereon prepaid. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in the notice or waiver of notice of such meeting.
Section 7. QUORUM. A majority of the total membership of the Board
shall constitute a quorum for the transaction of business at any meeting of the
Board, but if a quorum shall not be present at any meeting or adjournment
thereof, a majority of the directors present may adjourn the meeting without
further notice.
Section 8. ACTION BY CONSENT OF ALL DIRECTORS. Any action required to
be taken, or which may be taken at a meeting of the Board may be taken without a
meeting, if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the
minutes of the Company. Such action by written consent of all entitled to vote
shall have the same force and effect as a unanimous vote of such directors.
Section 9. MANNER OF ACTING. The act of a majority of the directors
present at a meeting at which a quorum is present shall be an act of the Board.
The order of business at any regular or special meeting of the Board
shall be:
1. Record of those present.
2. Secretary's proof of notice of meeting, if notice is
not waived.
3. Reading and disposal of unapproved minutes, if any.
4. Reports of officers, if any.
5. Unfinished business, if any.
6. New business.
7. Adjournment.
Section 10. VACANCIES. Any vacancy occurring in the Board by reason of
an increase in the number specified in these Bylaws, or for any other reason,
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board may remain at the time such meeting
considering filling such vacancies is held.
Section 11. COMPENSATION. By resolution of the Board, the directors
may be paid their expenses, if any, for attendance at each meeting of the Board
and may be paid a fixed sum for attendance at each meeting of the Board and a
stated salary as director. No such payment shall preclude any director from
serving the Company in any other capacity and receiving compensation therefor or
from receiving compensation for any extraordinary or unusual services as a
director.
Section 12. PRESUMPTION OF ASSENT. A director of the Company who is
present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting, filed in writing with the person
acting as the secretary of the meeting before the adjournment thereof or
-4-
<PAGE>
forwarded by registered mail to the secretary of the Company immediately after
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 13. EXECUTIVE OR OTHER COMMITTEES. The Board, by resolution
adopted by a majority of the entire Board, may designate among its members an
executive committee and one or more other committees, each of which, to the
extent provided in the resolution, shall have all of the authority of the Board,
but no such committee shall have the authority of the Board in reference to
amending the Articles, adopting a plan of merger or consolidation, recommending
to the shareholders the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Company otherwise than in
the usual and regular course of its business, recommending to the shareholders a
voluntary dissolution of the Company or a revocation thereof, or amending the
Bylaws. The designation of such committees and the delegation thereto of
authority shall not operate to relieve the Board, or any member thereof, of any
responsibility imposed by law.
Any action required to be taken, or which may be taken at a meeting of
a committee designated in accordance with this Section of the Bylaws, may be
taken without a meeting, if a consent in writing setting forth the action so
taken shall be signed by all those entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the minutes
of the Company. Such action by written consent of all entitled to vote shall
have the same force and effect as a unanimous vote of such persons.
Section 14. RESIGNATION OF OFFICERS OR DIRECTORS. Any director or
officer may resign at any time by submitting a resignation in writing. Such
resignation takes effect from the time of its receipt by the Company unless a
date or time is fixed in the resignation, in which case it will take effect from
that time. Acceptance of the resignation shall not be required to make it
effective.
ARTICLE IV
OFFICERS
--------
Section 1. NUMBER. The officers of the Company shall be a president, a
secretary and a treasurer, all of whom shall be executive officers and each of
whom shall be elected by the Board. A Chairman of the Board, Chairman of the
Board/Chief Executive Officer and one or more vice presidents shall be executive
officers if the Board so determines by resolution. Such other officers and
assistant officers, as may be deemed necessary, shall be designated
administrative assistant officers and may be appointed and removed as the
president decides. Any two or more offices may be held by the same person,
except the offices of president and secretary.
Section 2. ELECTION AND TERM OF OFFICE. The executive officers of the
Company, to be elected by the Board, shall be elected annually by the Board at
its first meeting held after each annual meeting of the shareholders or at a
convenient time soon thereafter. Each executive officer shall hold office until
his successor shall be duly elected and qualified, until his death, until he
shall resign or until he shall be removed in the manner provided herein.
Section 3. REMOVAL. Any officer or agent elected or appointed by the
Board may be removed by the Board whenever, in its judgment, the best interests
of the Company would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 4. VACANCIES. A vacancy in any executive office because of
death, resignation,
-5-
<PAGE>
removal, disqualification or otherwise maybe filled by the Board for the
unexpired portion of the term.
Section 5. CHAIRMAN OF THE BOARD. If a Chairman of the Board (the
"Chairman") shall be elected by the Board, he shall be, subject to the control
of the Board, in general charge of the affairs of the Company and shall preside
at all meetings of the shareholders and of the Board.
Section 6. CHAIRMAN OF THE BOARD/PRINCIPAL EXECUTIVE OFFICER. A
Chairman of the Board may also be elected as Principal Executive Officer, in
which case he shall perform the duties hereinafter set forth in Article IV,
Section 7 of these Bylaws.
Section 7. THE PRESIDENT. If no Chairman shall be elected as Principal
Executive Officer by the Board, the president shall be the principal executive
officer of the Company and, subject to the control of the Board, shall be in
general charge of the affairs of the Company. The president may sign, with the
other officer or officers of the Company authorized by the Board, certificates
for shares of the Company, deeds, mortgages, bonds, contracts or other
instruments whose execution the Board has authorized, except in cases where the
signing and execution thereof shall be expressly delegated by the Board or
Bylaws to some other officer or agent of the Company, or shall be required by
law to be otherwise signed or executed. Should a Chairman of the Board be
elected, the president shall perform all duties incident to his office and such
other duties as may be assigned to him by the Chairman or the Board.
Section 8. THE VICE PRESIDENT. In the absence of the president or in
the event of his death or inability or refusal to act, the vice president shall
perform the duties of the president, and when so acting shall have all the
powers of and be subject to all the restrictions upon the president. In the
event there is more than one vice president, the vice presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election shall perform the duties of the president
and, when so acting, shall have all the powers of and shall be subject to all
the restrictions upon the president. Any vice president may sign, with the other
officers authorized by the Board, certificates for shares of the Company and
shall perform such other duties as from time to time may be assigned to him by
the president or the Board.
Section 9. THE SECRETARY. Unless the Board otherwise directs, the
secretary shall keep the minutes of the shareholders' and directors' meetings in
one or more books provided for that purpose. The secretary shall also see that
all notices are duly given in accordance with the law and the provisions of the
Bylaws; be custodian of the corporate records and the seal of the Company; affix
the seal, or direct its affixation to all documents, the execution of which on
behalf of the Company is duly authorized; keep a list of the address of each
shareholder; sign with the president or a vice president certificates for shares
of the Company, the issuance of which shall have been authorized by resolution
of the Board; have charge of the stock transfer books of the Company and perform
all duties incident to the office of secretary and such other duties as may be
assigned by the president or by the Board.
Section 10. THE TREASURER. If required by the Board, the treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the Company,
receive and give receipts for monies due and payable to the Company from any
source whatsoever, deposit all such monies in the name of the Company in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of the Bylaws and perform all the duties as from time to
time may be assigned to him by the president or the Board.
-6-
<PAGE>
Section 11. ASSISTANT OFFICERS. The Board may elect (or delegate to
the Chairman or to the president the right to appoint) such other officers and
agents as may be necessary or desirable for the business of the Company. Such
other officers shall include one or more assistant secretaries and treasurers
who shall have the power and authority to act in place of the officer to whom
they are elected or appointed as an assistant in the event of the officer's
inability or unavailability to act in his official capacity. The assistant
secretary or secretaries, when authorized by the president, may sign with the
president or a vice president certificates for shares of the Company which are
issued pursuant to a resolution of the Board. The assistant secretaries and
assistant treasurers, in general, shall perform such duties as shall be assigned
to them by the secretary or the treasurer, respectively, or by the president.
Section 12. SALARIES. The salaries of the executive officers shall be
fixed by the Board and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the Company. The salaries of
the administrative assistant officers shall be fixed by the president.
ARTICLE V
CERTIFICATES FOR SECURITIES AND THEIR TRANSFER
----------------------------------------------
Section 1. CERTIFICATES FOR SECURITIES. Certificates representing
securities of the Company (the "Securities") shall be in such form as shall be
determined by the Board. To be effective, such certificates for Securities (the
"Certificates") shall be signed by the president or a vice president and the
secretary or an assistant secretary of the Company. The signatures of either or
both the president or vice president and the secretary or assistant secretary
may be facsimiles if the Certificate is either countersigned by the transfer
agent, or countersigned by the facsimile signature of the transfer agent and
registered by the written signature of an officer of any company designated by
the Board as registrar of transfers so long as that officer is not an employee
of the Company.
A Certificate signed or impressed with the facsimile signature of an
officer, who ceases by death, resignation or otherwise to be an officer of the
Company before the Certificate is delivered by the Company, is valid though
signed by a duly elected, qualified and authorized officer, provided that such
Certificate is countersigned by the signature of the transfer agent or facsimile
signature of the transfer agent of the Company and registered as aforesaid.
All Certificates shall be consecutively numbered or otherwise
identified. Certificates shall state the jurisdiction in which the Company is
organized, the name of the person to whom the Securities are issued, the
designation of the series, if any, and the par value of each share represented
by the Certificate, or a statement that the shares are without par value. The
name and address of the person to whom the Securities represented hereby are
issued, the number of Securities, and date of issue, shall be entered on the
Security transfer books of the Company. All Certificates surrendered to the
Company for transfer shall be canceled and no new Certificate shall be issued
until the former Certificate for a like number of shares shall have been
surrendered and canceled, except that, in case of a lost, destroyed or mutilated
Certificate, a new one may be issued therefor upon such terms and indemnity to
the Company as the Board may prescribe.
Section 2. TRANSFER OF SECURITIES. Transfers of Securities shall be
made only on the security transfer books of the Company by the holder of record
thereof, by his legal representative who shall furnish proper evidence of
authority to transfer, or by his attorney authorized by a power of attorney
which was duly executed and filed with the secretary of the Company and a
surrender
-7-
<PAGE>
for cancellation of the certificate for such shares. The person in whose name
Securities stand on the books of the Company shall be deemed by the Company to
be the owner thereof for all purposes.
ARTICLE VI
FISCAL YEAR
-----------
The fiscal year of the Company shall be determined by resolution of
the Board.
ARTICLE VII
DIVIDENDS
---------
The Board may declare, and the Company may pay in cash, stock or other
property, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles.
ARTICLE VIII
SEAL
----
The Board shall provide a corporate seal, circular in form, having
inscribed thereon the corporate name, the state of incorporation and the word
"seal." The seal on Securities, any corporate obligation to pay money or any
other document may be facsimile, engraved or printed.
ARTICLE IX
WAIVER OF NOTICE
----------------
Whenever any notice is required to be given to any shareholder or
director of the Company under the provisions of these Bylaws or under the
provisions of the Articles or under the provisions of the applicable laws of the
State of Colorado, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
ARTICLE X
INDEMNIFICATION
---------------
The Company shall have the power to indemnify any director, officer,
employee or agent of the Company or any person serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted by the Colorado Corporation Code.
ARTICLE XI
AMENDMENTS
----------
These Bylaws may be altered, amended, repealed or replaced by new
Bylaws by the Board at any regular or special meeting of the Board.
-8-
<PAGE>
ARTICLE XII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
---------------------------------------------
These Bylaws shall be so interpreted and construed as to conform to
the Articles and the statutes of the State of Colorado or of any other state in
which conformity may become necessary by reason of the qualification of the
Company to do business in such foreign state, and where conflict between these
Bylaws and the Articles or a statute has arisen or shall arise, the Bylaws shall
be considered to be modified to the extent, but only to the extent, conformity
shall require. If any Bylaw provision or its application shall be deemed invalid
by reason of the said nonconformity, the remainder of the Bylaws shall remain
operable in that the provisions set forth in the Bylaws are severable.
-9-
SPACEDEV LOGO
+--------------+ +--------------+
| NUMBER | | SHARES |
| | | |
+--------------+ +--------------+
SPACEDEV, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
SEE REVERSE FOR
CERTAIN DEFINITIONS
+-------------------
| CUSIP 846241 10 7|
+------------------+
This Certifies That
is the registered owner of
Fully paid and Non-assessable Common Shares, $.0001 par value per share of
SpaceDev, Inc.
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the Corporation has caused this Certificate to be signed
by the facsimile signatures of its duly authorized officers and to be sealed
with the facsimile seal of the Corporation.
Dated:
SECRETARY [SPACEDEV, INC. PRESIDENT
CORPORATE SEAL
HERE]
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
370-17th Street, Suite 2350, Denver, Colorado 80202
By: /s/ signature
-----------------------------------------------
Transfer Agent and Registrar Authorized Officer
<PAGE>
SpaceDev, Inc.
Corporate Stock Transfer, Inc.
Transfer Fee: $15.00 Per Certificate
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - .............Custodian for ...........
(Cust.) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act of .........................................
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
For value received .......................................... hereby sell, assign and transfer unto
</TABLE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
+-------------------------------------+
| |
+-------------------------------------+
Please print or type name and address of assignee
................................................................................
................................................................................
................................................................................
..........................................................................Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
................................................................................
................................................................................
Attorney to transfer the said stock on the books of the within named
Corporation, with full power of substitution in the premises.
Dated .............................. 19 ...............
SIGNATURE GUARANTEED: X _________________________________
X _________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
SPACEDEV, INC. STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is made and
entered into as of ____________ by and between SpaceDev, Inc., a Colorado
corporation (the "Company") and _____________ (the "OPTIONEE").
The Company has granted to the Optionee an option to purchase certain
units of the Company upon the terms and conditions set forth in this Option
Agreement (the "OPTION").
1. DEFINITIONS AND CONSTRUCTION.
1.1. DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "DATE OF OPTION GRANT" means _____________.
(b) "NUMBER OF OPTION SHARES" means ___________ shares of
Stock, as adjusted from time to time pursuant to Section 8.
(c) "EXERCISE PRICE" means $______ per share of Stock, as
adjusted from time to time pursuant to Section 8.
(d) "INITIAL VESTING DATE" means the date upon which
________________________.
(e) "OPTION EXPIRATION DATE" means, with respect to vested
options, the date ____ years after the Date of Option Grant.
(f) "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer options
granted to employees or consultants of the Company, "Board" also means such
Committee(s).
(g) "COMMITTEE" means the Executive Compensation Committee or
other committee of the Board duly appointed to administer options granted to
employees or consultants of the Company and having such powers as shall be
specified by the Board.
(h) "COMPANY" means SpaceDev, Inc., a Colorado corporation, or
any successor corporation thereto.
(i) "CONSULTANT" means any person, including an advisor,
engaged by the Company to render services other than as an Employee.
1
<PAGE>
(j) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the
Optionee's Service is continuous from ______%
the Date of Option Grant until the Initial
Vesting Date
Plus
----
______%
--------------------------------------------------------------
--------------------------------------------------------------
(i) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Company because of the sickness or
injury of the Optionee.
(j) "EMPLOYEE" means any person treated as an employee
(including an officer who is also treated as an employee) in the records of the
Company; provided, however, that neither service as a director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of this
Option.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the closing bid
price of the Company's common stock on the OTC Bulletin Board, or other exchange
upon which the Company's stock is traded or, for any other class of stock of
other property of the Company, the value as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(m) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(n) "SERVICE" means the Optionee's employment or service with
the Company, whether in the capacity of an Employee or a Consultant. The
Optionee's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Optionee renders Service to the Company or a
change in the Optionee's responsibilities, provided that there is no
interruption or termination of the Optionee's Service. The Optionee's Service
shall be deemed to have terminated upon an actual termination of Service.
Subject to the foregoing, the Company, in its sole discretion, shall determine
whether the Optionee's Service has terminated and the effective date of such
termination.
(o) "STOCK" means shares of the Common Stock of the Company.
1.2. CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
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2. Tax Consequences.
2.1. TAX STATUS OF OPTION. This Option is not intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option.
2.2. ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates or (b) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES UNITS. THIS TIME PERIOD CANNOT BE EXTENDED.
THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of the
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1. RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Vesting Date and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Ratio less the
number of shares previously acquired upon exercise of the Option, subject to the
Optionee's agreement that any shares purchased upon exercise are subject to the
Company's repurchase rights set forth in Section 11 and Section 12. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2. METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Company, prior to the termination of the Option as set
forth in Section 6, accompanied by full payment of the aggregate Exercise Price
for the number of shares being purchased. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
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4.3. PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise
Price for the number of shares of Stock for which the Option is being exercised
shall be made in cash, by check, or cash equivalent.
4.4. TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for, any sums required
to satisfy the federal, state, local and foreign tax withholding obligations of
the Company, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part, of any shares
acquired upon exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option. The
Optionee is cautioned that the Option is not exercisable unless the tax
withholding obligations of the Company are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested, and the Company shall have no obligation to issue a certificate for such
shares except as provided for herein.
4.5. CERTIFICATE REGISTRATION. Any certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6. RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
4.7. FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by the Optionee's legal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
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6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a transfer of control to the extent
provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1. OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the Company is
terminated because of the Disability of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of twelve months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Company is
terminated because of the death of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death) at any time prior to the expiration of twelve
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Company terminates for any reason, except Disability or death, the
Option, to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee's Service terminated, may be exercised by the Optionee within
three months after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.
7.2. EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
7.3. LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service with the Company shall not be deemed to terminate if the Optionee takes
any military leave, sick leave, or other bona fide leave of absence approved by
the Company of ninety (90) days or less. In the event of a leave of absence in
excess of ninety (90) days, the Optionee's Service shall be deemed to terminate
on the ninety-first (91st) day of such leave unless the Optionee's right to
re-employment with the Company remains guaranteed by statute or contract.
8. ADJUSTMENTS.
8.4. ADJUSTMENTS IN OPTION. Subject to Section 8.2, in the event
that the outstanding shares of the common stock are changed into or exchanged
for a different number or kind of shares of the Company or other securities of
the Company or a successor entity by reason of merger, consolidation, corporate
reorganization, recapitalization, reclassification, stock split-up, stock
dividend, combination of shares, or otherwise, the board, or the governing body
of any successor entity, shall make an appropriate and equitable adjustment in
the number and kind of Option Shares as to which the Option is then unexercised
in order that, after such event, the Option Shares as to which the Option is
then unexercised shall represent the same potential ownership interest in the
Company (or that part of a successor entity which consists of the Company)
immediately after such event as they represent immediately before such event.
The adjustment shall be made without change in the total price applicable to any
then unexercised portion of the Option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the purchase price per share. In no event
shall the Option Shares include any fractional share or other security but any
fractions resulting from any adjustment shall be rounded to the nearest whole
share. Any adjustment by the board or governing body shall be conclusive and
shall bind the Optionee, the Company, any successor entity, and any other
interested persons.
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8.2. ACCELERATION OF EXERCISABILITY. In the event of any merger or
consolidation of the Company into another corporation, exchange of all or
substantially all of the assets of the company for the securities of another
corporation, acquisition by another corporation of fifty percent (50%) or more
of the Company's then outstanding voting stock, or liquidation or dissolution of
the Company ("transfer of control"), the board, or the governing body of any
successor entity, shall either make the adjustment contemplated by Section 8.1
or provide, on such terms and conditions as it deems appropriate, that at some
time prior to the effective date of such event, the Option shall become
exercisable as to all Option Shares, notwithstanding that the Option may not yet
have become fully exercisable under Section 4.1. At least ten (10) days prior to
the effective date of merger, consolidation, exchange, acquisition, liquidation,
or dissolution, the Company or successor entity shall give the Optionee notice
of such event, advising the Optionee of the Board's or Committee's determination
under this Section 8.2. The Board or Committee may make such determinations and
adopt such rules and conditions as it, in its absolute discretion, deems
appropriate in connection with any adjustment pursuant to Section 8.1 or
acceleration of exercisability under this Section 8.2, including, but not by way
of limitation, provisions to insure that any adjustment or acceleration shall be
conditioned on the consummation of the contemplated corporate transaction.
9. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date of such exercise, except as provided in
Section 8. Nothing in this Option Agreement shall confer upon the Optionee any
right to continue in the Service of the Company or interfere in any way with any
right of the Company to terminate the Optionee's Service as an Employee or
Consultant, as the case may be, at any time.
10. RIGHT OF FIRST REFUSAL. The following right of first refusal is in
addition to any transfer restrictions that may exist by reason of the Articles
of Incorporation or Bylaws of the Company.
10.5. GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares
acquired upon exercise of the Option (the "TRANSFER SHARES") to any person or
entity, including, without limitation, any shareholder of the Company, the
Company shall have the right to repurchase the Transfer Shares under the terms
and subject to the conditions set forth in this Section 11 (the "RIGHT OF FIRST
REFUSAL").
10.6. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer
of the Transfer Shares, the Optionee shall give a written notice (the "TRANSFER
NOTICE") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"PROPOSED TRANSFEREE") and, if the transfer is voluntary, the proposed transfer
price, and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary transfer,
the proposed transfer price shall be deemed to be the Fair Market Value of the
Transfer Shares, as determined by the Board in good faith. If the Optionee
proposes to transfer any Transfer Shares to more than one Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
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10.7. BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 11. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
10.8. EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company determines
the proposed transfer to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee). In the event the Transfer Notice provides for the
payment for the Transfer Shares other than in cash, the Company shall have the
option of paying for the Transfer Shares by the present value cash equivalent of
the consideration described in the Transfer Notice. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to the Company shall
be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
10.9. FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and the Optionee otherwise agree) within the period specified in
Section 11.4 above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than six months
following delivery to the Company of the Transfer Notice. The Company shall have
the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 11.
10.10. TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 11 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 11 are met.
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10.11. TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of the Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of Section 11.9 below result in a termination of the Right of First
Refusal.
10.12. ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not there
has been an attempted transfer, to one or more persons as may be selected by the
Company.
10.13. EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a transfer of control, unless the successor entity assumes the Company's rights
and obligations under the Option or substitutes a substantially equivalent
option for the successor entity's stock for the Option, or (b) the existence of
a public market for the class of shares subject to the Right of First Refusal. A
"PUBLIC MARKET" shall be deemed to exist if (i) such stock is listed on a
national securities exchange (as that term is used in the Exchange Act) or (ii)
such stock is traded on the over-the-counter market and prices therefor are
published daily on business days in a recognized financial journal.
11. SHARE REPURCHASE OPTION.
11.14. GRANT OF REPURCHASE OPTION. Except as provided in Section
12.4 below, in the event of the occurrence of any Repurchase Event, as defined
below, the Company shall have the right to repurchase the shares acquired by the
Optionee pursuant to the Option (the "REPURCHASE SHARES") under the terms and
subject to the conditions set forth in this Section 12 (the "SHARE REPURCHASE
OPTION"). Each of the following events shall constitute a "REPURCHASE EVENT":
(a) Termination of the Optionee's Service with the Company for
any reason or no reason, with or without cause, including death or Disability.
The Repurchase Period, as defined below, shall commence on the date of
termination of the Optionee's Service.
(b) The Optionee, the Optionee's legal representative, or
other holder of shares acquired upon exercise of the Option attempts to sell,
exchange, transfer, pledge, or otherwise dispose of any Repurchase Shares
without complying with the provisions of Section 11. The Repurchase Period, as
defined below, shall commence on the date the Company receives actual notice of
such attempted sale, exchange, transfer, pledge or other disposition.
(c) The receivership, bankruptcy or other creditor's
proceeding regarding the Optionee or the taking of any of the Optionee's Shares
by legal process, such as a levy of execution. The Repurchase Period, as defined
below, shall commence on the date the Company receives actual notice of the
commencement of pendency of the receivership, bankruptcy or other creditor's
proceeding or the date of such taking, as the case may be. The Fair Market Value
of the Repurchase Shares shall be determined as of the last day of the month
preceding the month in which the proceeding involved commenced or the taking
occurred.
11.15. EXERCISE OF SHARE REPURCHASE OPTION. The Company may
exercise the Share Repurchase Option by written notice to the Optionee, the
Optionee's legal representative, or other holder of the Repurchase Shares, as
the case may be, during the Repurchase Period. The "REPURCHASE PERIOD" shall be
the period commencing at the time set forth in Section 12.1 above and ending on
the later of (a) the date ninety (90) days after the commencement of the
Repurchase Period or (b) the date ninety (90) days after the Option is last
exercised. If the Company fails to give notice during the Repurchase Period, the
Share Repurchase Option shall terminate (unless the Company and the Optionee
have extended the time for the exercise of the Share Repurchase Option) unless
and until there is a subsequent Repurchase Event. Notwithstanding a termination
of the Share Repurchase Option, the remaining provisions of this Option
Agreement shall remain in full force and effect, including, without limitation,
the Right of First Refusal set forth in Section 11. If there is a subsequent
Repurchase Event, the Share Repurchase Option shall again become exercisable as
provided in this Section 12. The Share Repurchase Option must be exercised, if
at all, for all of the Repurchase Shares, except as the Company and the Optionee
otherwise agree.
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11.16. PAYMENT FOR REPURCHASE SHARES. In the event of a voluntary
termination of employment by the Optionee or a termination "for cause" by the
Company, the repurchase price per share being repurchased by the Company
pursuant to the Share Repurchase Option shall be an amount equal to the LESSER
of (a) the Optionee's original cost per share, as adjusted pursuant to Section
8.1, or (b) the Fair Market Value of the shares determined as of the date of the
Repurchase Event (except as otherwise provided in Section 12.1(c) above) by the
Board in good faith. In the event of any other Repurchase Event, the repurchase
price per share being repurchased by the Company pursuant to the Share
Repurchase Option shall be an amount equal to the GREATER of the amounts set
forth in clause (a) or (b) from the preceding sentence. Payment by the Company
to the Optionee shall be made in cash on or before the last day of the
Repurchase Period, except that if the total payment due is in excess of $25,000,
the Company may elect to pay the repurchase price by delivery of a promissory
note payable in four equal annual installments, the first due on or before the
last day of the Repurchase Period, with interest payable at the prime rate of
interest on the date of the Repurchase Event. For purpose of the foregoing,
cancellation of any indebtedness of the Optionee to the Company shall be treated
as payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. For purposes of this paragraph, "for cause" shall
mean termination by reason of (i) conviction of a felony, (ii) repeated
inattention to the Optionee's responsibilities as an employee following written
notice from the Company and a reasonable time to cure such problems, or (iii)
willful breach of any of the employee's confidentiality obligations.
11.17. TRANSFERS NOT SUBJECT TO SHARE REPURCHASE OPTION. The Share
Repurchase Option shall not apply to any transfer or exchange of shares acquired
upon exercise of the Option if such transfer or exchange is in connection with
an Ownership Change Event. If the consideration received pursuant to such
transfer or exchange consists of stock of the Company, such consideration will
remain subject to the Share Repurchase Option unless the provisions of Section
12.6 below result in a termination of the Share Repurchase Option.
11.18. ASSIGNMENT OF SHARE REPURCHASE OPTION. The Company shall
have the right to assign the Share Repurchase Option at any time, whether or not
such option is then exercisable, to one or more persons as may be selected by
the Company.
11.19. EARLY TERMINATION OF SHARE REPURCHASE OPTION. The other
provisions of this Option Agreement notwithstanding, the Share Repurchase Option
shall terminate and be of no further force and effect upon (a) the occurrence of
a transfer of control, unless the successor entity assumes the Company's rights
and obligations under the Option or substitutes a substantially equivalent
option for the successor entity's stock for the Option, or (b) the existence of
a public market, as defined in Section 11.9, for the securities subject to the
Share Repurchase Option.
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12. DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split or other change, as described in
Section 8.1, in the character or amount of any of the outstanding stock or
ownership interests of the entity which is subject to the provisions of this
Option Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Right of First Refusal and the Share Repurchase
Option with the same force and effect as the shares subject to the Right of
First Refusal and the Share Repurchase Option immediately before such event.
13. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal, the Share Repurchase Option and any applicable federal,
state or foreign securities law restrictions on all certificates representing
shares subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this Section.
Unless otherwise specified by the Company, legends placed on such certificates
may include, but shall not be limited to, the following:
13.20. "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
13.21. "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
13.22. "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
14. PUBLIC OFFERING. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering
of stock, made by the Company pursuant to an effective registration statement
filed under the Securities Act, the Optionee shall not offer, sell, contract to
sell, pledge, hypothecate, grant any option to purchase or make any short sale
of, or otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the public
offering under the Securities Act. The Optionee shall be subject to this Section
provided and only if the officers and directors of the Company are also subject
to similar arrangements.
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15. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
16. TERMINATION OR AMENDMENT. The Board may terminate or amend the
Option at any time; provided, however, that except as provided in Sections 8.1
and 8.2 in connection with a transfer of control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
17. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein or therein, and there are no agreements,
understandings, restrictions, representations, or warranties among the Optionee
and the Company with respect to such subject matter other than those as set
forth or provided for herein or therein. To the extent contemplated herein or
therein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
18. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
SPACEDEV, INC.
By:
----------------------
Title: James W. Benson
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The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in Section 11 and the Share Repurchase Option set forth in Section 12, and
hereby accepts the Option subject to all of the terms and provisions thereof.
The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under this
Option Agreement.
THE OPTIONEE ACKNOWLEDGES THAT THE GRANT OF THIS OPTION SATISFIES ALL
PRIOR PROMISES MADE TO THE OPTIONEE WITH RESPECT TO OWNERSHIP INTERESTS OR
POTENTIAL OWNERSHIP INTERESTS IN THE COMPANY
OPTIONEE
Date:
----------------------------- -----------------------------
12
SPACEDEV, INC.
STOCK OPTION GRANT NOTICE
SPACEDEV, INC. (the "Company"), pursuant to its 1999 Stock Option Plan
(the "Plan") hereby grants to the Optionee named below a non-qualified stock
option to purchase the number of shares of the Company's common stock set forth
below. As designated below, this stock option either is or is not intended to
qualify for the federal income tax benefits available to an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended. This option is subject to all of the terms and conditions as set
forth herein and in Attachment I and the Plan which are incorporated herein in
their entirety.
Optionee/Employee: Employee I.D. #: - -
---------------- ----- --- -----
Grant No.: Date of Grant:
--- -----------
Shares Subject to Option: Exercise Price Per Share: $
------- ------
Expiration Date:
--------------
TYPE OF OPTION: [ ] Incentive Stock Option [ ] Nonstatutory Stock Option
VESTING SCHEDULE
The options shall vest on the three-month anniversary of the Date of
Grant set forth above.
ADDITIONAL TERMS/ACKNOWLEDGMENTS: The undersigned Optionee acknowledges
receipt of, and understands and agrees to the terms of the following: this Grant
Notice, the Stock Option Agreement and the Plan. Optionee further acknowledges
that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and
the Plan set forth the entire understanding between Optionee and the Company
regarding the acquisition of stock in the Company and supersedes all prior oral
and written agreements pertaining to this particular option.
SPACEDEV, INC. OPTIONEE:
By:
--------------------------------- -----------------------------------
James W. Benson Signature
President
Dated: Date:
---------------- ---------------
<PAGE>
Attachment I: Stock Option Agreement
SPACEDEV, INC.
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the
Company has granted you an option to purchase the number of shares of the
Company's common stock ("Common Stock") indicated in the Grant Notice at the
exercise price indicated in the Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of this option are as follows:
1. VESTING. Subject to the limitations contained herein, this option
will vest as provided in the Grant Notice, provided that vesting will cease upon
the termination of your Continuous Service.
2. METHOD OF PAYMENT. Payment of the exercise price by cash (or check)
is due upon exercise of all or any part of this option which has become
exercisable by you. Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company. Payment of the
exercise price may also be made by a combination of the above methods.
3. EXERCISE FOR MINIMUM NUMBER OF SHARES. The minimum number of shares
with respect to which this option may be exercised at any one time is one
hundred (100), except (a) as to an installment subject to exercise, as set forth
in paragraph 1, which amounts to fewer than one hundred (100) shares, in which
case, as to the exercise of that installment, the number of such shares in such
installment shall be the minimum number of shares, and (b) with respect to the
final exercise of this option, this minimum shall not apply. This option may
only be exercised for whole shares.
4. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
5. TERM.
(a) The term of this option commences on the Date of Grant (as
specified in the Grant Notice) and expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant; or
(iii) ninety (90) days after the termination of your Continuous
Service for any reason other than Disability or death, provided that if during
any part of such ninety (90) day period the option is not exercisable solely
because of the condition set forth in paragraph 4 (Securities Law Compliance),
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in which event the option shall not expire until the earlier of the Expiration
Date or until it shall have been exercisable for an aggregate period of ninety
(90) days after the termination of Continuous Service.
(b) Notwithstanding the foregoing:
(i) If your Continuous Service terminates due to your Disability,
then this option will continue to the extent of vested by unexercised options
options for a period of twelve (12) months after the date such service was
terminated, but no later than the Expiration Date.
(ii) If your Continuous Service terminates due to (x) your death,
or (y) your Disability and you subsequently die prior to the Expiration Date,
then this option shall immediately become fully vested and exercisable for all
of the option shares as of the date of your death. This option will then expire
on the earlier occurring of either the Expiration Date or twelve (12) months
after the date of your death.
(c) If this option is designated an incentive stock option, then to
obtain the federal income tax advantages associated with an "incentive stock
option," the Code requires that at all times beginning on the Date of Grant and
ending on the day three (3) months before the date of exercise, you must be an
employee of the Company or a "parent corporation" or a "subsidiary corporation"
(as those terms are defined in Section 424 of the Code), except in the event of
your death or your Disability. The Company has provided for extended
exercisability of this option under certain circumstances for your benefit, but
does not represent or guarantee that this option will necessarily be treated as
an "incentive stock option."
6. EXERCISE.
(a) You may exercise the vested portion of this option during its term
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to the Plan.
(b) By exercising this option you agree that as a condition to any
exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise.
(c) If this option is an incentive stock option, then by exercising
this option you agree to notify the Company in writing within fifteen (15) days
after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
Date of Grant or within one (1) year after such shares of Common Stock are
transferred upon exercise of this option.
7. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution or pursuant to a domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Securities Act of 1974, as amended (a "DRO"), or the rules thereunder, and is
exercisable during your life only by you or any transferee pursuant to a DRO.
8. OPTION NOT A SERVICE CONTRACT. This option is not an employment or
service contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the service of the Company
or an Affiliate, or of the Company or an Affiliate to continue your service with
the Company or the Affiliate. In addition, nothing in this option shall obligate
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<PAGE>
the Company or any Affiliates, their stockholders, Board of Directors, Officers
or Employees to continue any relationship as a Director or Consultant for the
Company or any Affiliate.
9. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.
10. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of this
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this option and
those of the Plan, the provisions of the Plan shall control.
4
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) THE
COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
SPACEDEV, INC.
ATTACHED REPRICING WARRANT
Warrant No. RPW-____
Original Issue Date: _________, 1999
THIS CERTIFIES THAT, if the average share price of the common stock,
par value $.0001 (the "COMMON STOCK") of SpaceDev, Inc., a Colorado corporation
(the "COMPANY"), for the 150-day period immediately following the Original Issue
Date hereof is less than the purchase price per share (the "VESTING DATE"), the
person stated below (the "HOLDER"), for value received, is entitled to purchase,
on the terms and conditions hereinafter set forth, at any time or from time to
time during the Exercise Period, but not thereafter, a number of shares of the
Common Stock determined in accordance with Section 2 hereof, at a price per
share equal to the purchase price of $_______ less the average market price, as
defined below, divided by the average market price and multiplied by the number
of shares of Common Stock purchased (the "EXERCISE PRICE"). Each share of Common
Stock as to which this Repricing Warrant is exercisable is a "REPRICING SHARE"
and all such shares are collectively referred to as the "REPRICING SHARES." This
Repricing Warrant shall remain attached to the shares of Common Stock issued to
Holder on the Original Issue Date (the "PURCHASED COMMON SHARES"), until
exercise of this Repricing Warrant, at which time it shall automatically detach.
SECTION 1. DEFINITIONS. The following capitalized terms are not defined
elsewhere in this Repricing Warrant, and are used herein with the meanings
thereafter ascribed:
"AVERAGE MARKET PRICE" means the greater of (i) the average
Closing Bid Price of the Common Stock for the ten trading days immediately prior
to the exercise of this Repricing Warrant or (ii) $1.25.
"CLOSING BID PRICE" means, the last closing bid price of the
Common Stock on the NASDAQ National Market (the "NASDAQ-NM") as reported by
Bloomberg Financial Markets ("BLOOMBERG"), or, if the NASDAQ-NM is not the
principal trading market for the Common Stock, the last closing bid price of the
Common Stock on the principal securities exchange or trading market where the
Common Stock is listed or traded as reported by Bloomberg, or if the foregoing
do not apply, the last closing bid price of the Common Stock in the
over-the-counter market on the pink sheets or bulletin board for the Common
Stock as reported by Bloomberg, or, if no closing bid price is reported for the
Common Stock by Bloomberg, the last closing trade price of the Common Stock as
reported by Bloomberg. If the Closing Bid Price cannot be calculated for the
Common Stock on such date on any of the foregoing bases, the Closing Bid Price
of the Common Stock on such date shall be the fair market value as reasonably
determined in good faith by the Board of Directors of the Company (all as
appropriately adjusted for any stock dividend, stock split, or other similar
transaction during such period);
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"EXERCISE PERIOD" means a one hundred twenty (120) day period
which commences on the Repricing Date and ends at 5:00 p.m. (Eastern Time) on
the Expiration Date.
"EXPIRATION DATE" means the one hundred twentieth (120th) day
after the Repricing Date.
"REPRICING DATE" means the date on which a Registration Statement
with respect to the Repricing Shares becomes effective.
"REPRICING PRICE" means the average Closing Bid Price of the
Common Stock for the five (5) trading days immediately prior to the issuance of
the Purchased Common Shares, or $_______.
SECTION 2. DETERMINATION OF NUMBER OF REPRICING SHARES. The number of
Repricing Shares issuable upon exercise of this Repricing Warrant shall be
determined on the Repricing Date. The number of Repricing Shares shall be equal
to: the number of Purchased Common Shares MULTIPLIED BY a fraction, (a) the
numerator of which is the Repricing Price MINUS the Average Market Price and (b)
the denominator of which is the Average Market Price. In the case of a dispute
as to the determination of the Average Market Price or the arithmetic
calculation of the Exercise Price, the Company shall promptly issue to such
Holder(s) the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within three (3) business days of receipt of such holder's Conversion
Notice. If such Holder(s) and the Company are unable to agree upon the
determination of the Average Market Price or arithmetic calculation of the
Exercise Price within two (2) business days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall
within one (1) business day submit via facsimile (A) the disputed determination
of the Average Market Price to an independent, reputable investment bank or (B)
the disputed arithmetic calculation of the Exercise Price to its independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and such Holders of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
SECTION 3. EXERCISE OF WARRANT; CONVERSION OF WARRANT; ELECTION TO PAY
CASH.
(a) This Warrant may, at the option of the Holder, be
exercised in whole or in part from time to time by delivery to the
Company at its office at 13855 Stowe Drive, Poway, CA 92064, Attention:
President, or to any transfer agent for the Common Stock, on or before
5:00 p.m., Eastern Time, on the Expiration Date, (i) a written notice
of such registered Holder's election to exercise this Warrant (the
"EXERCISE NOTICE"), which notice may be in the form of the Notice of
Exercise attached hereto, properly executed and completed by the
registered Holder or an authorized officer thereof, (ii) a check
payable to the order of the Corporation, in an amount equal to the
product of the Exercise Price MULTIPLIED BY the number of Repricing
Shares specified in the Exercise Notice, AND (iii) this Repricing
Warrant (the items specified in (i), (ii), and (iii) are collectively
the "EXERCISE MATERIALS").
(b) This Warrant may, at the option of the Holder, be
converted into Common Stock in whole but not in part, if and only if
the value of one share of Common Stock on the Effective Date (as
defined in Section 3(c) hereof) is greater than the Exercise Price, by
delivery to the Company at the address designated in Section 3(a) above
or to any transfer agent for the Common Stock, on or before 5:00 p.m.
Eastern Time on the Expiration Date, (i) a written notice of Holder's
election to convert this Warrant (the "CONVERSION NOTICE"), properly
executed and completed by the registered Holder or an authorized
officer thereof, AND (ii) this Repricing Warrant (the items specified
in (i) and (ii) are collectively the "CONVERSION MATERIALS"). The
number of shares of Common Stock issuable upon conversion of this
Repricing Warrant is equal to the quotient of (x) the product of the
number of Repricing Shares then issuable upon exercise of this Warrant
(assuming an exercise for cash) MULTIPLIED BY the difference between
(A) the Average Market Price MINUS (B) the then effective Exercise
Price DIVIDED BY (C) the Average Market Price. Any fraction resulting
from the calculation of the number of Repricing Shares then issuable in
a conversion of this Repricing Warrant shall be truncated.
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(c) Upon timely receipt of the Exercise Materials or
Conversion Materials (whichever is applicable), the Company shall, as
promptly as practicable, and in any event within five (5) business days
after its receipt of the Exercise Materials or Conversion Materials,
execute or cause to be executed and delivered to Holder a certificate
or certificates representing the number of Repricing Shares specified
in the Exercise Notice or if Holder delivered a Conversion Notice, the
number of shares of Common Stock issuable upon conversion of this
Warrant (whichever is applicable), together with cash in lieu of any
fraction of a share, and, (x) if the Warrant is exercised in full, a
copy of this Warrant marked "Exercised," or (y) if the Warrant is
partially exercised, a copy of this Warrant marked "Partially
Exercised" together with a new Warrant on the same terms for the
unexercised balance of the Repricing Shares, or (z) if the Warrant is
converted, a copy of this Warrant marked "Converted." The stock
certificate or certificates shall be registered in the name of the
registered Holder of this Warrant or such other name or names as shall
be designated in the Exercise Notice or Conversion Notice. The date on
which the Warrant shall be deemed to have been exercised or converted
(the "EFFECTIVE DATE"), and the date the person in whose name any
certificate evidencing the Common Stock issued upon the exercise or
conversion hereof is issued shall be deemed to have become the Holder
of record of such shares, shall be the date the Corporation receives
the Exercise Materials or Conversion Materials, irrespective of the
date of delivery of a certificate or certificates evidencing the Common
Stock issued upon the exercise or conversion hereof, except that, if
the date on which the Exercise Materials or Conversion Materials are
received by the Company is a date on which the stock transfer books of
the Company are closed, the Effective Date shall be the date the
Company receives the Exercise Materials or Conversion Materials, and
the date such person shall be deemed to have become the holder of the
Common Stock issued upon the exercise or conversion hereof shall be the
next succeeding date on which the stock transfer books are open. All
shares of Common Stock issued upon the exercise or conversion of this
Warrant will, upon issuance, be fully paid and nonassessable and free
from all taxes, liens, and charges with respect thereto.
(d) If the Company shall fail to issue to Holder within five
(5) business days following the date of receipt by the Company or the
Transfer Agent of the Exercise Materials or the Conversion Materials, a
certificate for the number of shares of Common Stock to which such
holder is entitled upon such holder's exercise or conversion of this
Warrant, in addition to all other available remedies which such holder
may pursue hereunder and under this Warrant and the Purchase Agreement
between the Company and the initial holder of the Warrant (the
"PURCHASE AGREEMENT") including indemnification pursuant to Section 7
thereof, the Company shall pay additional damages to such Holder on
each day after the Effective Date, an amount equal to 1.0% of the
product of (A) the number of Repricing Shares not issued to Holder and
to which Holder is entitled MULTIPLIED BY (B) the Closing Bid Price of
the Common Stock on the Effective Date. Such damages shall be computed
daily and are due and payable daily.
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(e) The Company may, in lieu of issuing the Repricing Shares,
pay Holder an amount equal to the number of Repricing Shares issuable
on the Effective Date (assuming an exercise for cash) MULTIPLIED BY the
Average Market Price (the "PAYMENT AMOUNT"). In such event, the Company
shall be obligated to provide notice to Holder of its intention to pay
the Payment Amount, and must deliver the Payment Amount to Holder
within seven (7) business days following the Effective Date. If the
Company shall fail to deliver the Payment Amount within seven (7)
business days after the Effective Date, in addition to all other
available remedies which Holder may pursue at law or equity, including
indemnification pursuant to Section 7 of the Purchase Agreement, the
Company shall pay additional damages to Holder on each day after the
Effective Date, until the Payment Amount has been paid, in an amount
equal to one percent (1.0%) of the Payment Amount. Such damages shall
be computed daily and are due and payable daily.
SECTION 4. ADJUSTMENTS TO REPRICING SHARES. The number of Repricing
Shares issuable upon the exercise hereof shall be subject to adjustment as
follows:
(a) In the event the Company is a party to a consolidation,
share exchange, or merger, or the sale of all or substantially all of
the assets of the Company to any person, or in the case of any
consolidation or merger of another corporation into the Company in
which the Company is the surviving corporation, and in which there is a
reclassification or change of the shares of Common Stock of the
Company, this Warrant shall after such consolidation, share exchange,
merger, or sale be exercisable for the kind and number of securities or
amount and kind of property of the Company or the corporation or other
entity resulting from such share exchange, merger, or consolidation, or
to which such sale shall be made, as the case may be (the "SUCCESSOR
COMPANY"), to which a holder of the number of shares of Common Stock
deliverable upon the exercise (immediately prior to the time of such
consolidation, share exchange, merger, or sale) of this Warrant would
have been entitled upon such consolidation, share exchange, merger, or
sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such
that the provisions set forth herein shall thereafter correspondingly
be made applicable, as nearly as may reasonably be, in relation to the
number and kind of securities or the type and amount of property
thereafter deliverable upon the exercise of this Warrant. The above
provisions shall similarly apply to successive consolidations, share
exchanges, mergers, and sales. Any adjustment required by this Section
4(a) because of a consolidation, share exchange, merger, or sale shall
be set forth in an undertaking delivered to the registered Holder of
this Warrant and executed by the Successor Company which provides that
the Holder of this Warrant shall have the right to exercise this
Warrant for the kind and number of securities or amount and kind of
property of the Successor Company or to which the holder of a number of
shares of Common Stock deliverable upon exercise (immediately prior to
the time of such consolidation, share exchange, merger, or sale) of
this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale. Such undertaking shall also provide for
future adjustments to the number of Repricing Shares and the Exercise
Price in accordance with the provisions set forth in this Section 4.
(b) In the event the Company should at any time, or from time
to time after the Original Issue Date, fix a record date for the
effectuation of a stock split or subdivision of the outstanding shares
of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in
additional shares of Common Stock, or securities or rights convertible
into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to
as "COMMON STOCK EQUIVALENTS") without payment of any consideration by
such holder for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split, or subdivision
if no record date is fixed), the number of Repricing Shares issuable
upon the exercise hereof shall be proportionately increased and the
Exercise Price shall be appropriately decreased by the same proportion
as the increase in the number of outstanding Common Stock Equivalents
of the Company resulting from the dividend, distribution, split, or
subdivision. Notwithstanding the preceding sentence, no adjustment
shall be made to decrease the Exercise Price below $.01 per Share.
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(c) In the event the Company should at any time or from time
to time after the Original Issue Date, fix a record date for the
effectuation of a reverse stock split, or a transaction having a
similar effect on the number of outstanding shares of Common Stock of
the Company, then, as of such record date (or the date of such reverse
stock split or similar transaction if no record date is fixed), the
number of Repricing Shares issuable upon the exercise hereof shall be
proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of
outstanding Common Stock Equivalents resulting from the reverse stock
split or similar transaction.
(d) In the event the Company should at any time or from time
to time after the Original Issue Date, fix a record date for a
reclassification of its Common Stock, then, as of such record date (or
the date of the reclassification if no record date is set), this
Warrant shall thereafter be convertible into such number and kind of
securities as would have been issuable as the result of such
reclassification to a holder of a number of shares of Common Stock
equal to the number of Repricing Shares issuable upon exercise of this
Warrant immediately prior to such reclassification, and the Exercise
Price shall be unchanged.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other
voluntary action, void or seek to avoid the observance or performance
of any of the terms of the Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the
rights of the Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (x) will not
create a par value of any share of stock receivable upon the exercise
of the Warrant above the amount payable therefor upon such exercise,
and (y) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
non-assessable shares upon the exercise of the Warrant.
(f) When any adjustment is required to be made in the number
or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Company shall promptly notify the Holder of such
event and of the number of shares of Common Stock or other securities
or property thereafter purchasable upon exercise of the Warrants and of
the Exercise Price, together with the computation resulting in such
adjustment.
(g) The Company covenants and agrees that all Repricing
Shares which may be issued will, upon issuance, be validly issued,
fully paid, and non-assessable. The Company further covenants and
agrees that the Company will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its
Common Stock to provide for the exercise of the Warrant in full.
5
<PAGE>
SECTION 5. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the
Holder hereof to any voting rights or other rights as a stockholder of the
Company.
SECTION 6. TRANSFER OF SECURITIES.
(a) This Warrant and the Repricing Shares and any shares of
capital stock received in respect thereof, whether by reason of a stock
split or share reclassification thereof, a stock dividend thereon, or
otherwise, shall not be transferable except upon compliance with the
provisions of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and applicable state securities laws with respect to the
transfer of such securities. The Holder of this Warrant, by acceptance
of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss
or liability arising from the disposition of this Warrant or the
Repricing Shares issuable upon exercise hereof or any interest in
either thereof in violation of the provisions of this Warrant.
(b) Each certificate for the Repricing Shares and any shares
of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon
or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions hereof) be stamped or otherwise imprinted
with a legend in substantially the following form:
Legend for Repricing Shares or other shares of capital stock:
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED
A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
SECTION 7. PIGGYBACK REGISTRATION RIGHTS.
(a) If the Company shall at any time following the Vesting
Date commence file a registration statement under the Securities Act
with respect to a public offering of its securities (other than on
Forms S-8, S-14 or S-15 or other similar form inappropriate to
registration of the Repricing Shares), and pursuant to the then
applicable rules and regulations under the Securities Act , a secondary
offering of the Repricing Shares by the Holder may be combined with
such public offering in a single registration. The Company shall, in
every such instance give reasonable written notice thereof to Holder
thirty (30) or more days prior to the filing of such registration
statement, and shall upon the written request of Holder made within
fifteen (15) days of the mailing of said written notice by the Company,
include in such registration statement such number of Repricing Shares
as Holder may request. Any such registration statement shall remain
effective for a period of not less than one hundred, twenty (120) days,
or the Exercise Period, following its effective date. The inclusion of
such Repricing Shares in any registration statement shall be without
any expense to Holder, other than fees and expenses of counsel to
Holder and any underwriting discounts and commissions. Neither the
delivery of such notice by the Company nor such request by Holder shall
in any way obligate the Company to file such registration statement,
and notwithstanding the filing of such registration statement, the
Company may, at any time prior to the effective date thereof, determine
not to offer the securities to which such registration statement
relates, without liability to the Holder. In the even the Company fails
to receive written notice from the Holder within fifteen (15) days of
the mailing of said written notice by the Company, then the Company
shall treat such failure as having the same force and effect as if
Holder had advised the Company that Holder does not intend to include
any Repricing Shares in such registration statement.
6
<PAGE>
(b) Notwithstanding the provisions of Subsection (a) above,
if the offering subject to any registration statement referred to in
Subsection (a) is made by the Company and is underwritten, and if the
underwriter makes a written determination prior to the effectiveness of
such registration statement and so requests and such request is based
upon the opinion of the underwriter that the sale of the Repricing
Shares to be registered on such registration statement by Holder
pursuant to Subsection (a) will materially and adversely interfere with
such planned offering, then: (i) Holder shall agree not to sell any
Repricing Shares, whether pursuant to such registration statement or
otherwise, for a period not to exceed ninety (90) days following the
effective date of such registration statement, and the Company shall,
at the expiration of the ninety (90) day period, at its expense,
maintain the currency of the registration statement and take such other
steps as may be required to permit Holder to sell the Repricing Shares
pursuant to such registration statement for an additional period of
ninety (90) days following expiration of such ninety (90) day period;
provided, however, that the Company shall have no duty to file any
amendment to any such registration statement at any time that the
Company reasonably believes that disclosure of the information required
to be included in such amendment would be premature or contrary to the
best interests of the Company and its security holders; and (ii) Holder
shall agree that the Repricing Shares shall be sold through such
underwriter in the same manner as the other securities that are the
subject of the registration, and shall pay to such underwriter a
commission in respect of such Repricing Shares at the same rate as the
commission to be paid to such underwriter in respect of the other
securities that are the subject of such registration.
If securities are proposed to be offered for sale pursuant to
such registration statement by other selling security holders of the
Company, and the total number of securities to be offered by Holder and
such other selling security holders is required to be reduced pursuant
to a request from the underwriter (which request shall be made only for
the reasons and in the manner set forth above in this Subsection (b)),
then the number of Repricing Shares to be offered by Holder pursuant to
such registration statement shall equal the number that bears the same
ratio to the maximum number of securities that the underwriter believes
may be included for all the selling security holders (including the
Holder) as the original number of Repricing Shares proposed to be sold
by Holder bears to the total original number of securities proposed to
be offered by Holder and the other selling security holders. In no
event shall there be a reduction in the number of shares of any
securities offered by the Company pursuant to the registration
statement referred to in Subsection (a) above.
(c) The Company shall use its best efforts to cause any
registration statement covering all or any portion of the Repricing
Shares to become effective as promptly as possible and, if any stop
order shall be issued in connection therewith, to use its best efforts
to obtain removal of such order. The Company shall furnish the selling
Holder with copies of preliminary prospectuses (together with any
supplements thereto) and other documents necessary or incidental to the
offering being made by Holder in such quantities as Holder may
reasonably request. Holder agrees to cooperate in all respects with the
Company in effectuating the foregoing. The obligations of the Company
to Holder hereunder are expressly conditioned on the timely furnishing
in writing by Holder to the Company of such information concerning
Holder and the terms of Holder's proposed offering as the Company may
reasonably request.
7
<PAGE>
(d) In connection with any registration of all or any portion
of the Repricing Shares, the Company shall, without any expense to
Holder (other than fees and expenses of counsel to Holder and any
underwriting discounts or commissions), prepare and file such documents
as may be necessary to register or qualify the Repricing Shares under
the securities or blue sky laws of such states as Holder shall
reasonably request, and use its best efforts to do any and all other
acts and things, consistent with its existing business practices, that
may reasonably be necessary or advisable to enable the Holder to
consummate a public sale in such states of such Repricing Shares;
provided, however, that in connection with any registration statement
files pursuant to Subsection (a) above, the Company shall be required
to make the Repricing Shares eligible for public offering and sale only
in such state (including the District of Columbia) as any other
securities of the Company included in such registration statement are
eligible for public offering and sale. In no event shall the Company be
obligated to qualify to do business in any state where it is not so
qualified at the time of filing such documents or to take any action
which would subject it to unlimited service of process in any state
where it is not so subject at such time. The Company shall keep any
such filing current for the time period it is obligated to keep any
registration statement current pursuant to Subsections (a) or (b).
(e) The provisions of this Section 7 shall apply to the
extent provided herein if the Company chooses to file an offering
statement under Regulation A promulgated under the Act.
(f) The Company agrees that until the Repricing Shares have
been sold under a registration statement or pursuant to Rule 144 under
the Act, it shall keep current in filing all materials required to be
filed with the U.S. Securities and Exchange Commission in order to
permit holders of the Repricing Shares, if they otherwise comply with
the requirements of Rule 144, to sell Repricing Shares under such Rule.
SECTION 8. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of
the holder or holders hereof and of the Common Stock issued or issuable
upon the exercise hereof.
(b) Except as otherwise provided herein, this Warrant and all
rights hereunder are transferable by the registered holder hereof in
person or by duly authorized attorney on the books of the Company upon
surrender of this Warrant, properly endorsed, to the Company. The
Company may deem and treat the registered holder of this Warrant at any
time as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary,
Holder hereof may not exercise, sell, transfer, or otherwise assign
this Warrant unless the Company is provided with an opinion of counsel
satisfactory in form and substance to the Company, to the effect that
such exercise, sale, transfer, or assignment would not violate the
Securities Act or applicable state securities laws.
(d) This Warrant may be divided into separate Warrants
covering one share of Common Stock or any whole multiple thereof, for
the total number of shares of Common Stock then subject to this Warrant
at any time, or from time to time, upon the request of the registered
holder of this Warrant and the surrender of the same to the Company for
such purpose. Such subdivided Warrants shall be issued promptly by the
Company following any such request and shall be of the same form and
tenor as this Warrant, except for any requested change in the name of
the registered holder stated herein.
8
<PAGE>
(e) All notices, requests, demands, and other communications
required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have
been duly given, made, and received when personally delivered the day
after deposited with a recognized national overnight delivery service
prior to its dead-line for receiving packages for next day delivery or
upon the fifth day after deposited in the United States registered or
certified mail with postage prepaid, return receipt requested, in each
case addressed as set forth below:
If to the Company:
SpaceDev, Inc.
13855 Stowe Drive
Poway, California 92064
Attn: James Benson
Facsimile: (858) 375-1000
If to the Holder hereof, to the address of such Holder
appearing on the books of the Company.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of California, irrespective of
the choice of law provisions thereof. The parties agree that any
appropriate state court located in San Diego County, California, or any
federal Court located in California, including without limitation to
the United States District Court of Southern District of California,
shall have exclusive jurisdiction of any case or controversy arising
under or in connection with this Agreement and shall be a proper forum
in which to adjudicate such case or controversy. The parties consent to
the jurisdiction of such courts.
[Signatures on the following page]
9
<PAGE>
SIGNATURE PAGE
TO
COMPANY
COMMON STOCK REPRICING WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed
in its name by its duly authorized officers under its corporate seal, and to be
dated as of the date first above written.
SPACEDEV, INC.
By:
-----------------------
James Benson, President
ATTEST:
- -----------------------------
Secretary/Assistant Secretary
10
<PAGE>
SIGNATURE PAGE
TO
COMMON STOCK REPRICING WARRANT
The undersigned Holder agrees and accepts this Warrant and acknowledges
that he/she/it has read and confirms each of the representations contained
herein.
By:
--------------------------
11
<PAGE>
SIGNATURE PAGE
TO
COMMON STOCK REPRICING WARRANT
The undersigned Holder agrees and accepts this Warrant and acknowledges
that he/she/it has read and confirms each of the representations contained
herein.
SovCap Equity Partners, Ltd.
By:
--------------------------
12
<PAGE>
ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the foregoing
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and transfers unto
___________________________________________________________________________ the
foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of SpaceDev, Inc. in accordance with terms and conditions thereof,
and does hereby irrevocably constitute and appoint ________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
Holder:
-------------------------------
-------------------------------
Address
Dated: __________________, 19__
In the presence of:
-------------------------------
13
<PAGE>
FORM OF NOTICE OF EXERCISE OR CONVERSION
[To be signed only upon exercise of Warrant]
To: SPACEDEV, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
_____ shares of Common Stock of SpaceDev, Inc., issuable upon exercise of said
Warrant and hereby surrenders said Warrant.
The Holder herewith delivers to SpaceDev, Inc., a check in the
amount of $______ representing the Exercise Price for such shares.
OR
The Holder elects a cashless exercise pursuant to Section 3(b) of
the Warrant. The Average Market Price as of _______ was $_____.
The undersigned herewith requests that the certificates for such shares
be issued in the name of, and delivered to the undersigned, whose address is
________________________________.
Dated: _________________
Holder:
------------------------------------
------------------------------------
By:
---------------------------------
NOTICE
The signature above must correspond to the name as written upon the
face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
14
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS
CONTAINED HEREIN. THIS WARRANT HAS BEEN ISSUED IN
RELIANCE UPON THE REPRESENTATION OF THE HOLDER THAT
IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TOWARDS THE RESALE OR OTHER
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT, HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS.
SPACEDEV, INC.
Common Stock Purchase Warrant
August , 1998
---
THIS CERTIFIES that, pursuant to the signed and executed License Agreement dated
August 5, 1998 by and between ___________, (the "Holder") and SPACEDEV, INC., a
Colorado corporation (hereinafter called the "Corporation"), the Holder shall
receive Warrants entitling the Holder to purchase from the Corporation its
Common Stock under the following terms and conditions:
NUMBER OF SHARES: Holder shall be entitled to subscribe and
purchase the following shares of SpaceDev Common stock:
1. Upon the execution of License Agreement, the Holder
shall be entitled to purchase 25,000 shares.
2. For the next three anniversaries of the License
Agreement, the Holder shall entitled to purchase the
greater of (i) 25,000 shares or (ii) one share for
each One Hundred Twenty-five dollars ($125) in
revenue earned from the sale of the Technology as
referenced in the License Agreement.
3. For the fourth through the tenth anniversary of the
License Agreement, the Holder is entitled to purchase
25,000 shares per year.
STRIKE PRICE: Holder shall be entitled to exercise the
warrants at the strike price equal to fifty percent (50%) of
the average SpaceDev Common Stock closing price for the five
business days prior to the date the shares are to be
exercised.
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<PAGE>
MAXIMUM LIMITATION: Under no event shall the Warrants entitle
the Holder, in cumulative, to purchase more than (i) three
million (3,000,000) shares; or (ii) six million dollars
($6,000,000) in Recognized Value. Recognized Value shall be
defined as the cumulative difference between the then current
full market value of the shares for which warrants have been
issued or exercised, as traded on the exchange on the date
that the warrants are first exercisable; and the price
actually paid for the stock (or if the warrants have not been
exercised, the price Summit would have paid for the stock on
the first day the warrants could be exercised), multiplied by
the number of shares for which warrants have been issued or
exercised.
SECTION 1
EXERCISE OF WARRANT
-------------------
The rights represented by this Warrant may be exercised by the Holder,
in whole at any time or from time to time in part, but not as to a fractional
share of Common Stock, by the completion of the purchase form attached hereto
and by the surrender of this Warrant (properly endorsed) at the office of the
Corporation as it may designate by notice in writing to the Holder hereof at the
address of the Holder appearing on the books of the Corporation, and by payment
to the Corporation of the Warrant Price in cash or by certified or official bank
check, for each share being purchased.
In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder, or its nominee or other party designated
in the purchase form by the Holder hereof, shall be delivered to the Holder
within thirty (30) business days after the date in which the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired or has been exercised in full, a new Warrant representing the number of
shares (except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder
within such time.
The person in whose name any certificate for shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the Holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Warrant Price, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the Holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends on the Common Stock issued upon such
exercise. If any fractional interest in a share of Common Stock would, except
for the provision of this Section 1, be delivered upon such exercise, the
Corporation, in lieu of delivery of a fractional share thereof, shall pay to the
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<PAGE>
Holder an amount in cash equal to the current market price of such fractional
share as determined in good faith by the Board of Directors of the Corporation
(the "Board").
SECTION 2
STOCK SPLITS, CONSOLIDATION, MERGER AND SALE
--------------------------------------------
In the event the outstanding shares of Common Stock shall be split,
combined or consolidated, by dividend, reclassification or otherwise, into a
greater or lesser number of shares of Common Stock, the Warrant Price in effect
immediately prior to such combination or consolidation and the number of shares
purchasable under this Warrant shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately adjusted.
If there shall be effected any consolidation or merger of the
Corporation with another corporation, or a sale of all or substantially all of
the Corporation's assets to another corporation, and if the holders of Common
Stock shall be entitled pursuant to the terms of any such transaction to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such consolidation, merger or sale, lawful and adequate
provisions shall be made whereby the Holder of this Warrant shall thereafter
have the right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore receivable upon the exercise of such Warrant, such shares of stock,
securities or assets as may be issuable or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore so receivable had
such consolidation, merger or sale not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holder to the end that the provisions hereof shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of this Warrant.
(a) STOCK TO BE RESERVED. The Corporation will at all times reserve and
keep available out of its authorized Common Stock, solely for the
purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant. The Corporation shall from time to time
in accordance with applicable law increase the authorized amount of its
Common Stock if at any time the number of shares of Common Stock
remaining unissued and available for issuance shall not be sufficient
to permit exercise of this Warrant. The Corporation covenants that all
shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation will
take all such action as may be necessary to assure that all such shares
of Common Stock may be so issued without violation of any applicable
3
<PAGE>
law or regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Corporation may be listed.
(b) ISSUE TAX. The issuance of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without deduction to the
Holders of this Warrant for any issuance tax in respect thereof
provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of
Holder of this Warrant.
(c) CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of the shares of Common Stock
issued or issuable upon the exercise of this Warrant in any manner
which interferes with the timely exercise of this Warrant.
SECTION 3
NOTICES OF RECORD DATES
-----------------------
In the event of:
(1) any taking by the Corporation of a record of the Holders of
any class of securities for the purpose of determining the
Holders thereof who are entitled to receive any dividend or
other distribution (other than cash dividends out of earned
surplus), or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other
securities or property, or to receive any other right;
(2) any capital reorganization of the Corporation, any
reclassification, or recapitalization of the capital stock of
the Corporation, or any transfer of all or substantially all
the assets of the Corporation to, or consolidation or merger
of the Corporation with or into any other corporation; or
(3) any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then and in each such event the Corporation will give notice to the Holder of
this Warrant specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the Holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 10 days and not more than 90
4
<PAGE>
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933 or to a favorable vote
of shareholders, if either is required.
SECTION 4
NO SHAREHOLDER RIGHTS OR LIABILITIES
------------------------------------
This Warrant shall not entitle the Holder hereof to any voting rights
or other rights as a shareholder of the Corporation. No provision hereof, in the
absence of affirmative action by the Holder hereof to purchase shares of Common
Stock, and no mere enumeration hereon of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Warrant Price or
as a shareholder of the Corporation, whether such liability is asserted by the
Corporation or by creditors of the Corporation.
SECTION 5
REPRESENTATIONS OF HOLDER
-------------------------
The Holder hereby represents and acknowledges to the Corporation that:
(1) this Warrant, the Common Stock issuable upon exercise of this
Warrant, and any securities issued with respect to either of
them by way of a stock dividend or stock split or in
connection with a recapitalization, merger, consolidation or
other reorganization will be "restricted securities" as such
term is used in the rules and regulations under the Securities
Act and that such securities have not been and will not be
registered under the Securities Act or any state securities
law, and that such securities must be held indefinitely unless
registration is effected or transfer can be made pursuant to
appropriate exemptions;
(2) it has read, and fully understands, the terms of this Warrant
set forth on its face and the attachment hereto, including the
restrictions on transfer contained herein;
(3) it has either a pre-existing personal or business relationship
with the Corporation or one of its officers, directors or
controlling persons;
(4) it is receiving this Warrant for investment and for its own
account and not with a view to or for sale in connection with
any distribution of this Warrant or the Common Stock of the
Corporation issuable upon exercise of this Warrant, and it has
no intention of selling such securities in a public
distribution in violation of the federal securities laws or
any applicable state securities laws; provided that nothing
contained herein will prevent Holder from transferring such
5
<PAGE>
securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
(5) it is an "accredited investor" within the meaning of paragraph
(a) of Rule 501 of Regulation D promulgated by the Securities
and Exchange Commission and an "excluded purchaser" within the
meaning of Section 25102 of the California Corporate
Securities Law of 1968;
(6) it has been afforded access to the Corporation's financial and
business information through disclosure meetings or otherwise,
and has had an opportunity to ask the Corporation's officers
questions regarding the Corporation and its financial and
business condition and to get independent advice from a
professional or investment advisor concerning the investment;
and it will not exercise the Warrant unless the same is true
with respect to its decision to exercise;
(7) it has the knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of
this investment and to protect its own interest;
(8) it acknowledges that an investment in the Corporation and this
Warrant involves a high degree of risk; and
(9) the Warrant, or any substitution warrant, issued to Holder (or
his assigns) will be imprinted with a legend in substantially
the form provided below:
"The transfer of this Warrant is subject to
restrictions contained herein. This Warrant has been
issued in reliance upon the representation of the
Holder that it has been acquired for investment
purposes and not with a view towards the resale or
other distribution thereof. Neither this Warrant nor
the shares issuable upon the exercise of this Warrant
have been registered under the Securities Act of
1933."
(10) the Corporation may affix the following legend (in addition to
any other legend(s), if any, required by applicable state
corporate and/or securities laws) to certificates for shares
of Common Stock (or other securities) issued upon exercise of
this Warrant ("Warrant Shares"):
"The securities represented by this certificate have
not been registered under the Securities Act of 1933
as amended or any state securities law, and may not
be sold, transferred or assigned in the absence of an
effective registration statement or an opinion of the
company's counsel that registration is not required
under said act."
6
<PAGE>
SECTION 6
NOTICE OF PROPOSED TRANSFERS
----------------------------
The Holder of this Warrant, by acceptance hereof, agrees to comply in all
respects with the provisions of this Section 6. Prior to any proposed transfer
of this Warrant or any Warrant Shares, unless there is in effect a registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
covering the proposed transfer, the Holder of such securities shall give written
notice to the Corporation of such Holder's intention to effect such transfer.
Each such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall be accompanied (except in transactions
in compliance with Rule 144) by either (i) a written opinion of legal counsel
who shall be reasonably satisfactory to the Corporation addressed to the
Corporation and reasonably satisfactory in form and substance to the
Corporation's counsel, to the effect that the proposed transfer of the Warrant
and/or Warrant Shares may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the U.S. Securities and Exchange
Commission (the "Commission") to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that enforcement action be taken with respect thereto, whereupon the
Holder of such securities shall be entitled to transfer such securities in
accordance with the terms of the notice delivered by the Holder to the
Corporation. Each new certificate evidencing the Warrant and/or Warrant Shares
so transferred shall bear the appropriate restrictive legends set forth in
Section 5 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for the Corporation, such legend is not
required in order to establish or assist in compliance with any provisions of
the Securities Act or any applicable state securities laws.
SECTION 7
LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
--------------------------------------------
If this Warrant is lost, stolen, mutilated or destroyed, the Corporation may, on
such terms as to indemnity or otherwise as it may in its discretion reasonably
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Corporation, whether or not the allegedly
lost, stolen, mutilated or destroyed. The Warrant shall be at any time
enforceable by anyone.
SECTION 8
PRESENTMENT
-----------
Prior to due presentment for registration of transfer of this Warrant, the
Corporation may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
7
<PAGE>
purpose of any exercise thereof and for all other purposes, and the Corporation
shall not be affected by any notice to the contrary.
SECTION 9
NOTICE
------
Notice or demand pursuant to this Warrant shall be sufficiently given or made,
if sent by first-class mail, postage prepaid, addressed, if to the Holder of
this Warrant, to the Holder at has last known address as it shall appear in the
records of the Corporation, and if to the Corporation, at 4180 La Jolla Village
Drive, Suite 315, La Jolla, California 92037, Attention: SpaceDev Corporate
Counsel. The Corporation may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 9 for the giving of notice.
SECTION 10
GOVERNING LAW
-------------
The validity, interpretation and performance of this Warrant shall be governed
by the laws of the State of California without regard to principles of conflicts
of laws.
SECTION 11
SUCCESSORS, ASSIGNS
-------------------
Subject to the restrictions on transfer by Holder set forth in Section 6 hereof,
all the terms and provisions of the Warrant shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
SECTION 12
SEVERABILITY
------------
Should any part but not the whole of this Warrant for any reason be declared
invalid, such decision shall not affect the validity of any remaining portion,
which remaining portion shall remain in force and effect as if this Warrant had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Warrant without including therein any such part which
may, for any reason, be hereafter declared invalid.
SECTION 13
GENDER AND NUMBER
-----------------
In this Warrant, the masculine, feminine and neuter genders and the singular and
plural shall be deemed to include one another as appropriate.
8
<PAGE>
SECTION 14
CAPTIONS
--------
The descriptive headings of the various Sections or parts of this Warrant are
for convenience only and shall not affect the meaning or construction of any of
the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written by one
of its officers thereunto duly authorized.
Dated: August ,1998 SPACEDEV, INC.
------ a Colorado corporation
By:
----------------------------------
James Benson, President
The undersigned Holder agrees and accepts this Warrant and acknowledges
that he/she/it has read and confirms each of the representations contained in
Section 5.
By:
----------------------------------
9
COMMON STOCK EXCHANGE AGREEMENT
by and among the shareholders of
SPACE INNOVATIONS LIMITED
a company incorporated in
England and Wales
and
SPACEDEV, INC.,
A United States Corporation
Incorporated in the State of Colorado
October 1, 1998
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<PAGE>
COMMON STOCK EXCHANGE AGREEMENT
AGREEMENT made and entered into this 1st day of October 1998 by
1) The persons whose names and addresses are shown in Schedule A (each a "SIL
SHAREHOLDER");
2) SpaceDev Inc, a company incorporated in Colorado, U.S.A. whose principal
place of business is at 7940 Silverton Avenue, Suite 202, San Diego,
California, U.S.A. ("SPACEDEV");
3) James Benson of 9208 Christopher St. Fairfax Virginia, U.S.A 22031 (the
"GUARANTOR"); and
4) Space Innovations Limited, a company incorporated in England and Wales
whose registered office is at The Paddock, Hambridge Road, Newbury, RG14
5TP, England ("SIL").
R E C I T A L S
WHEREAS, the SIL Shareholders collectively own all of the issued and outstanding
shares (the "SIL Shares") of Space Innovations Limited, a company incorporated
in England & Wales, whose registered office is at The Paddock, Hambridge Road,
Newbury, Berkshire RG14 5TQ, England ("SIL"); and
WHEREAS, the SIL Shareholders desire to exchange and SpaceDev wants to acquire,
directly the SIL Shares in exchange for shares of SpaceDev on the terms and
conditions set out in this agreement; and
NOW, THEREFORE, the parties hereto each in consideration of the representations,
warranties, covenants and agreements provided for or contained herein do hereby
agree as follows:
ARTICLE 1
DEFINITIONS/ACQUISITION/CLOSING
1.1 Definitions.
------------
For all purposes of this Agreement, except as otherwise expressly provided
unless the context otherwise requires,
2
<PAGE>
(a) the terms defined in this Article 1 have the meaning assigned to them in
this Article 1 and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the meanings
assigned under generally accepted accounting principles in the particular
country or jurisdiction to which they relate,
(c) all references in this Agreement to designated "Articles," "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as appropriate, the
other pronoun forms, and the words, "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not
to any particular Article, Section or other subdivision.
(e) As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"ACTION" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity;
"AGREED TERMS" means a document in a form agreed between the parties
immediately before the Signing of this Agreement;
"AGREEMENT" means this Agreement by and among the parties to this
Agreement together with all Exhibits, Schedules, documents and agreements
attached or incorporated by reference;
"APPROVAL" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be
obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other
Person;
"ASSOCIATE" of a Person means
a corporation or organization of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or
more or any class of equity securities;
any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
any relative or spouse of such person or any relative of such spouse.
3
<PAGE>
"AUDITORS" means independent public accountants;
"BUSINESS" means the business of SIL as currently conducted, and shall be
deemed to include, but not be limited to, any of the following incidents
of such business: income, cash flow, operations, condition (financial or
other), assets, properties, liabilities and personnel;
"CLOSING" means completion of this Agreement in accordance with clause 1.4
below;
"CLOSING DATE" means the date of Closing;
"CODE" means the United States Internal Revenue Code of 1986, as amended;
"CONTRACT" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license or understanding, whether
or not in writing;
"DISCLOSURE LETTER" means the letter from the SIL Warrantors to SpaceDev
dated the same date as this Agreement;
"DOLLARS" OR "$" means the United States of America currency unit;
"EMPLOYEE PLAN" means any employee benefit plan, collective bargaining,
employment or severance agreement or other similar arrangement or
governmental regulation or requirement to which either SIL is a party or
by which it is bound, legally or otherwise;
"ENCUMBRANCE" means any claim charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise,
except for any restrictions on transfer generally arising under any
applicable governmental securities law;
"EQUITY SECURITIES" means any capital stock or other equity interest or
any securities convertible into or exchangeable for capital stock or any
other rights, warrants or options to acquire any of the foregoing
securities;
"FINANCIAL STATEMENTS" means the second quarter 1998 unaudited interim
financial statements and the year ending 1997 unaudited financial
statements of SIL delivered to SpaceDev in accordance with Section 2.7(a)
of this Agreement;
"GAAP" means generally accepted accounting principles in the United States
of America, as in effect from time to time;
4
<PAGE>
"GOVERNMENTAL ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or
local, domestic or foreign.;
"HART-SCOTT-RODINO ACT" means the Untied States Legislation known as the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
related regulations and published interpretations;
"HAZARDOUS SUBSTANCE" means (but shall not be limited to) substances that
are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials,"
"hazardous wastes" or "toxic substances," or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, radioactivity,
carcinogenicity, reproduction toxicity or "EP toxicity," and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or
geothermal energy;
"INTANGIBLE PROPERTY" means any trade secret, secret process or other
confidential information or know-how and any and all Marks;
"IRS" means generally the United States of America Internal Revenue
Service or any other taxing authority of any other country or government;
"LAW" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order;
"LOSS" means any action, cost, damage, disbursement, expense, liability,
loss, deficiency, diminution in value, obligation, penalty or settlement
of any kind or nature, whether foreseeable or unforeseeable, including but
not limited to, interest or other carrying costs, penalties, legal,
accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or
suffered by the specified person;
"MARK" means any brand name, copyright, patent, service mark, trademark,
trade name, and all registrations or applications for registration of any
of the foregoing;
"MATERIAL ADVERSE EFFECT" means any change in or effect on SIL or SpaceDev
that is materially adverse to the business of the relevant company or
person;
"MATERIAL CONTRACT" means those Contracts listed in the Disclosure Letter
as Material Contracts;
"ORDER" means any decree, injunction, judgment, order, ruling, assessment
or writ;
5
<PAGE>
"PERMIT" means any license, permit, franchise, certificate of authority,
or order, or any waiver of the foregoing, required to be issued by any
Governmental Entity;
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or other entity or organization, including a
Governmental Entity;
"POUNDS" OR "(POUND)" means the United Kingdom currency unit;
"SIL WARRANTORS" means J Anzalchi, A J Barrington Brown, D R Brindley, J L
Culhane, J E Holloway and A K Ward;
"SPACEDEV FINANCIAL STATEMENTS" means the unaudited interim financial
statements of SpaceDev for the period ended December 31, 1997 delivered to
the SIL shareholders in accordance with section 3.7(a) of this Agreement;
"SPACEDEV SHARES" means common stock of SpaceDev;
"SPACEDEV WARRANTORS" means SpaceDev and the Guarantor
"SUBSIDIARY" means any Person in which SIL has a direct or indirect equity
or ownership interest in excess of 5%.
"TAX" means any foreign, federal, state, county or local income, sales and
use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal)
related thereto or to the nonpayment thereof, and any Loss in connection
with the determination, settlement or litigation of any Tax liability.
"TAX RETURN" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes.
1.2 Transfer of SIL Shares by the SIL Shareholders.
-----------------------------------------------
Subject to the terms and conditions of this Agreement, each of the SIL
Shareholders who has executed this Agreement agrees to transfer that number of
SIL Shares set forth next to their name in Schedule A below and to deliver the
certificates evidencing such SIL Shares to SpaceDev at Closing. This Agreement
is based upon the material assumption that the SIL Shareholders, as parties to
this Agreement, own collectively one hundred percent (100%) of the issued and
outstanding shares of SIL and that one hundred percent (100%) of the SIL shares
shall be tendered at Closing. In the event that less than one hundred percent
(100%) of the SIL Shares are tendered pursuant to this Agreement, SpaceDev shall
have sole and exclusive power to void this Agreement.
6
<PAGE>
1.3 Acquisition of the SIL Shares by SpaceDev.
------------------------------------------
SIL Shareholders agree to tender all the outstanding and issued SIL Shares to
SpaceDev and SpaceDev agrees to purchase the SIL Shares, in consideration of:
(a) the issue by SpaceDev to the SIL Shareholders of one million (1,000,000)
shares of common stock in SpaceDev in the proportions stated next to the
names of the respective SIL Shareholders set out in Schedule A;
(b) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on January 15, 1999 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(c) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on July 15, 1999 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(d) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on January 15, 2000 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(e) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on July 15, 2000 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(f) The value of all SpaceDev common stock issued under this Agreement shall
be calculated by taking the average of SpaceDev quoted stock closing price
for the five trading days prior to the date the stock is issued. SpaceDev
will retain the right to issue any stock to be issued under this agreement
by issuing that stock at any time prior to the due date of issue without
being in default of this Agreement.
(g) The SIL Board of Directors shall be entitled to nominate one person to sit
on the Board of Directors of SpaceDev, entitling the person to identical
rights in respect to attendance, voting, participation and notice. The
Guarantor, on behalf of SD Holdings, LLC shall provide at closing, a
letter of agreement to use best efforts to elect a SIL representative
(nominated by the SIL Board of Directors) on the SpaceDev Board. The
letter of agreement shall be in effect until December 31, 2000 after which
time, the Guarantor shall be released from all obligations under the
letter of agreement.
7
<PAGE>
1.4 The Closing.
------------
The Closing will simultaneously take place at the SpaceDev and SIL offices
immediately following execution of this Agreement by all the parties, at which
time:
(a) the SIL Shareholders and the SIL Board of Directors shall deliver to
SpaceDev:
(1) transfers of the SIL Shares duly completed in favor of SpaceDev
together with share certificates representing the SIL Shares;
(2) the Statutory Books of SIL;
(b) SpaceDev shall issue to the SIL Shareholders one million shares
(1,000,000) of common stock, with appropriate legend restriction pursuant
to Section 2.24 and each in accordance with Clause 1.3(a) above;
(c) SpaceDev shall provide a board resolution authorizing the SIL Board of
Directors to adopt the (i) Revenue and Profit Incentive Stock Option Plan
and (ii) Profit Sharing Stock Issuance Plan. The SIL Board of Directors
shall be vested with the authority and power to issue the stock options
pursuant to the Plans and upon satisfying all conditions and restrictions
contained therefrom including, but not limited to, the condition requiring
SIL to meet or exceed certain sales and profit projections;
(d) The Guarantor, on behalf of SD Holdings LLC, shall provide a letter of
agreement to use best efforts in electing a SIL representative on the
Board of Directors of SpaceDev.
(e) SpaceDev shall provide a letter of intent to enter into a Growth Assisted
Cash Infusion Agreement between SpaceDev and SIL.
1.5 Right of First Refusal
----------------------
(a) If SpaceDev, prior to December 31, 2000 elects to sell all or any portion
of the stock in SIL, the individuals named in Schedule A (the "Schedule A
individual(s)") shall have the right of first refusal to meet any bona
fide offer of sale from a third party on the same terms and conditions of
that offer, including but not limited to the price and date for closing.
On receipt of a bona fide third party offer for purchase of the stock,
SpaceDev shall notify the SIL Board of Directors who shall be responsible
for notifying the Schedule A individuals in writing of the offer and its
terms and conditions within 10 days. Within 15 days after the date of
SpaceDev's notice to the SIL Board, the Schedule A individuals shall
notify SpaceDev in writing whether or not they agree to purchase the
shares on the same terms and conditions as contained in the third party
offer. If the Schedule A individuals elect not to purchase the stock,
SpaceDev shall be free to sell the stock to that third party in accordance
with the terms and conditions of the third party offer.
8
<PAGE>
(b) In the event that one or more Schedule A individuals agree to participate
in the purchase of the offered shares, then the participating
individual(s) must purchase collectively, all of the offered shares at the
offered price. If the participating Schedule A individuals should fail to
purchase the total offered shares and or pay the specified purchase price,
the right of first refusal shall be deemed waived and SpaceDev shall be
free to sell the shares to the third party in accordance with the terms
and conditions of the third party offer.
(c) The Schedule A individual's right of first refusal shall terminate upon
the earlier occurrence of (i) the Schedule A individual ceasing to be a
SpaceDev shareholder or (ii) the Schedule A individual sells, transfers or
conveys any portion of his or her original issued SpaceDev stock or (ii)
at December 31, 2000.
1.6 Tax Free Exchange
-----------------
It is the intent of the parties that this transaction will constitute a tax free
exchange under the United States Internal Revenue Code Section 368(a)(1)(B) and
under United Kingdom tax legislation.
1.7 Best Efforts
------------
It is the intent of the parties to maximize the revenue and net income of SIL
and to advance the business of SIL utilizing the existing assets, personnel and
the nature of the business, therefore the parties shall use their best efforts
forward to achieve this intent.
1.8 Waiver of Pre-Emption Rights by SIL Shareholders
------------------------------------------------
Each of the SIL Shareholders hereby waives all pre-emption rights under the
Articles of Association in respect to the exchange of SIL shares for SpaceDev
shares hereunder.
9
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SIL WARRANTORS
2.1 The SIL Warrantors, hereby severally warrant to SpaceDev that so far as
they are aware and except as fairly disclosed in the Disclosure Letter,
each of the statements set out in this Article 2 below is true and
accurate in all material respects.
2.2 Each of the Warranties set out in the several paragraphs of this Article 2
below is separate and independent and except as expressly provided to the
contrary in this Agreement is not limited by reference to any other
paragraphs of Article 2.
2.3 Any claim by SpaceDev in connection with the Warranties (a "WARRANTY
CLAIM") will be subject to the following provisions of this Article.
2.4 SpaceDev acknowledges and agrees that:
(a) the warranties set out in Article 2 (the "WARRANTIES") are the only
representations, warranties or other assurances of any kind given by or on
behalf of the SIL Warrantors and on which SpaceDev may rely in entering
into this Agreement;
(b) no other statement, promise or forecast made by or on behalf of the SIL
Warrantors may form the basis of, or be pleaded in connection with, any
claim by SpaceDev under or in connection with this Agreement; and
(c) at the time of entering into this Agreement SpaceDev is not aware of any
matter or thing which is inconsistent with the Warranties or constitutes a
breach of any of them.
2.5 Organization and Related Matters.
---------------------------------
SIL is a company duly organized, validly existing and in good standing under the
laws of England and Wales. SIL has no subsidiaries. SIL has all necessary
corporate power and authority to own its properties and assets and to carry on
the Business as now conducted. True, correct and complete copies of the Articles
of Association of SIL as in effect on the date hereof have been delivered to
SpaceDev.
10
<PAGE>
2.6 SIL Shares.
-----------
The SIL Shareholders own the issued and outstanding shares of SIL beneficially
free and clear of any and all liens, covenants, conditions, rights or other
encumbrances. At Closing, SpaceDev will acquire good and marketable title to and
complete ownership of the SIL Shares, free of any and all covenants, conditions,
or other encumbrances. The authorized share capital of SIL consists of 100,000
shares of Common Stock of (pound)1 each, of which 82,000 shares are issued and
outstanding. There are no outstanding warrants, options or other contracts or
other rights to subscribe for or purchase, or Contracts or other obligations to
issue or grant any rights to acquire, any Equity Securities of SIL, or to
restructure or recapitalize SIL. There are no outstanding Contracts of SIL to
repurchase, redeem or otherwise acquire any Equity Securities of SIL. All issued
shares of SIL are duly authorized, validly issued and outstanding and are fully
paid and were issued in conformity with applicable laws. There are no preemptive
rights in respect of any Equity Securities of SIL, except as contained in the
Articles of Association of SIL and except for such rights held by the SIL
Shareholders which rights shall terminate upon the consummation of the
acquisition by SpaceDev of the SIL Shares under this Agreement. Any Equity
Securities of SIL which were issued and reacquired by SIL were so reacquired
(and, if reissued, so reissued) in compliance with all applicable Laws, and SIL
has no outstanding obligation or liability with respect thereto.
2.7 Financial Statements; Changes; Contingencies.
---------------------------------------------
(a) FINANCIAL STATEMENTS. The SIL Shareholders delivered to SpaceDev unaudited
financial statements for the second quarter ending June 30, 1998 and the
unaudited financial statements for the twelve (12) months ending 1997. All
financial statements have been prepared in accordance with the
requirements of the Companies Act 1985 consistently applied during the
periods covered (except as disclosed therein), the statements of income
present fairly the results of operations of SIL for the respective periods
covered, and the balance sheets present fairly the financial condition of
SIL as of their respective dates, except that such financial statements
may omit footnote disclosures required by the requirements of the
Companies Act 1985 to the extent the content thereof would not materially
differ in nature or amount from those disclosures reported in the most
recent audited period, and year-end adjustments to the extent not
material. Notwithstanding the foregoing, all such financial statements
reflect all material adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair presentation.
(b) NO MATERIAL ADVERSE CHANGES. Since the Statement Date, whether in the
ordinary course of business, there has not been, occurred or arisen:
(1) any change in or event affecting SIL, the Business or the SIL Shares
that has had or may reasonably be expected to have a Material Adverse
Effect.
(2) any agreement (other than a Material Contract listed on the
Disclosure Schedule), condition, action or omission which would be
proscribed by (or require consent under) Section 4.3 had it existed,
occurred or arisen after the date of this Agreement,
(3) any strike or other labor dispute, or
(4) any casualty, loss, damage or destruction whether or not covered by
insurance) or any material property of SIL.
11
<PAGE>
(c) NO OTHER LIABILITIES OR CONTINGENCIES. SIL does not have any material
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion or not,
that, in accordance with the requirements of the Companies Act 1985
applied on a consistent basis, should have been but were not reflected or
disclosed in the financial statements (including the notes thereto)
referred to in subsections 2.7(a) and (b) above, except liabilities which
were incurred after Statement Date, in the ordinary course of business
which do not exceed $10,000 exclusive of current payroll and payroll taxes
for the payroll period ending immediately prior to Closing.
2.8 Tax and Other Returns and Reports.
----------------------------------
SIL has filed, or will, on or before the Closing Date, file all Tax Returns
required to be filed by it on or before the Closing Date. Adequate provision has
been made in the books and records of SIL and in the financial statements
referred to in Section 2.7 above or delivered to SpaceDev, for all Taxes
relating to operations through, or property owned on or before, the date of the
most recent of such financial statements. No liability for Taxes has arisen
since such date other than in the ordinary course of SIL's business. All
required Tax Returns including amendments to date, have been prepared in good
faith without negligence or willful misrepresentation and are complete and
accurate in all material respects. No Governmental Entity has, during the past
three years, examined or is in the process of examining any Tax Returns of SIL.
No Governmental Entity has proposed (tentatively or definitively), asserted or
assessed or, to the best knowledge of SIL, threatened to propose or assert, any
deficiency, assessment or claim for Taxes and there would be no basis for any
such delinquency, assessment or claim.
2.9 Material Contracts.
-------------------
SIL has duly performed all its material obligations under each Material Contract
to the extent that such obligations to perform have accrued; and no material
breach or default, alleged material breach or default, or event which would
(with the passage of time, notice or both) constitute a material breach or
default thereunder by SIL or, to the best knowledge of SIL, by any other party
or obligor with respect thereto, has occurred or as a result of this Agreement
or performance will occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any Person a right to) terminate or modify
any rights of, or accelerate or augment any obligation of, SIL under any
Material Contract.
2.10 Tangible Property.
------------------
(a) SIL owns no real property. There is no pending or threatened action that
would materially interfere with the quiet enjoyment of any leasehold by
SIL.
(b) SIL owns or leases all tangible personal property that is material to the
Business free of Encumbrances except for Encumbrances consisting of liens
for Taxes not yet due.
12
<PAGE>
(c) All material leasehold properties held by SIL, as lessee, are held under
valid, binding and enforceable leases, subject only to such exceptions as
are not, individually or in the aggregate, material to the Business. All
material tangible properties of SIL are in a reasonable state of
maintenance and repair (except for ordinary wear and tear) and are
reasonably adequate for the Business.
2.11 Intangible Property.
--------------------
SIL owns or licenses Intangible Property, required for use in connection with
the Business.
2.12 Authorization; No Conflicts.
----------------------------
The execution, delivery and performance of this Agreement and or related
agreements by SIL has been duly and validly authorized by the Board of Directors
of SIL and by all other necessary corporate action on the part of SIL and by the
SIL Shareholders. SIL and the SIL Shareholders have the full capacity, right,
power and authority to enter into this Agreement and any related agreements to
which they are parties. The execution, delivery and performance of this
Agreement by the SIL Shareholders and the execution, delivery and performance of
any related agreements or contemplated transactions by the SIL Shareholders or
SIL will not violate, or constitute a breach or default (whether upon lapse of
time and/or the occurrence of any act or event or otherwise) under, the
Memorandum or Articles of Association of SIL or any Material Contract, result in
the imposition of any Encumbrance against any asset or properties of SIL, or
violate any Law. No Permits and Approvals are required to be obtained by the SIL
Shareholders to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the SIL Shareholders and the
performance of this Agreement and any related or contemplated transactions by
the SIL Shareholders or SIL will not, to the knowledge of SIL, require filing or
registration with, or the issuance of any Permit by, any other third party or
Governmental Entity. The consummation of the transactions contemplated by this
Agreement does not, to the knowledge of the SIL Warrantors require any filings
under the Hart-Scott-Rodino Act.
2.13 [Reserved]
2.14 Corporate Records.
------------------
The official records and minute books of SIL accurately reflect all material
actions and proceedings taken to date by its shareholders, board of directors
and committees, and the statutory books contain true and complete copies of the
Articles of Association of SIL and all related amendments. The Register of
Members of SIL reflects accurately all transactions in its Shares.
13
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2.15 Accounting Records; Internal Controls.
--------------------------------------
SIL has records that accurately reflect its transactions, and accounting
controls sufficient to ensure that such transactions are (i) executed in
accordance with management's general or specific authorization and (ii) recorded
in conformity with the requirements of the Companies Act 1985 so as to maintain
accountability for assets.
2.16 Permits.
--------
To the best knowledge of the SIL Warrantors SIL holds all material Permits that
are required by any Governmental Entity to permit the corporation to conduct its
business as now conducted, and all such permits are valid and in full force and
effect and will remain so upon consummation of the transactions contemplated by
this Agreement. To the best knowledge of the SIL Warrantors, no suspension,
cancellation or termination of any of such Permits is threatened or imminent.
2.17 Compliance with Law.
--------------------
(a) SIL is organized and has conducted its businesses in accordance with
applicable Laws in all material respects, and the forms, procedures and
practices of SIL are in compliance with all such Laws, to the extent
applicable, in all material respects.
(b) The use and operation of the assets of SIL are in compliance in all
material respects with all applicable Laws and there is no material
violation of any of such Laws.
(c) The share exchange of SpaceDev shares for SIL shares contemplated under
this Agreement does not violate any United Kingdom laws including but not
limited to corporate law, securities law or any tax revenue laws.
2.18 Employee Benefits.
------------------
Except as set forth in the Disclosure Letter, there are no employee benefit
plans or other employee benefits accruing for the benefit of any director,
officer or employee of SIL.
2.19 Certain Interests; Dividends.
-----------------------------
Neither SIL, nor any officer or director of SIL, nor any Associate of SIL has
any material interest in any property used in or pertaining to the Business; no
such Person is indebted or otherwise obligated to SIL; and SIL is not indebted
or otherwise obligated to any such Person, except for amounts due under normal
arrangements applicable to all employees generally as to salary or reimbursement
of ordinary business expenses not unusual in amount or significance. To the best
knowledge of the SIL Warrantors the consummation of the transactions
contemplated by this Agreement will not (either alone, or upon the occurrence of
any act or event, or with the lapse of time, or both) result in any benefit or
payment (severance or other) arising or becoming due from SIL or the successor
or assign thereof to any Person. Except as expressly permitted by this
Agreement, there has been no dividend or other distribution of assets or
securities whether consisting of money, property or any other thing of value,
declared, issued or paid to or for the benefit of the SIL Shareholders
subsequent to the date of the most recent financial statements described in
Section 2.7. SIL has paid no special bonuses to any officer, director or
employee.
14
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2.20 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of SIL or any of its respective Affiliates
in connection with the negotiation, execution or performance of this Agreement
or the transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transactions.
2.21 Environmental Compliance.
-------------------------
SIL has not generated, used, transported, treated, stored, released or disposed
of, or has suffered or permitted anyone else to generate, use, transport, treat,
store, release or dispose of any Hazardous Substance in violation of any Laws.
There has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous substance in connection with the conduct of
the Business of SIL or the use of any property or facility of SIL or to the
knowledge of SIL any nearby or adjacent properties or facilities, which has
created or might reasonably be expected to create any liability under any Laws
or which would require reporting to or notification of any Governmental Entity.
No asbestos or polychlorinated biphenyl or underground storage tank is contained
in or located at any facility of SIL.
2.22 Dividends.
----------
SIL has not declared or paid any dividends of any kind nor declared or made any
other distributions of any kind whatsoever including, without limitation, by way
of redemption or repurchase or reduction of authorized capital.
2.23 Waiver of Rights.
-----------------
SIL has not waived or surrendered any right of substantial value and has not
made any gift of money or of any of its property or assets.
2.24 Investment Representation.
--------------------------
The SpaceDev Shares are restricted securities within the meaning of the United
States federal securities laws, and the SIL Shareholders are acquiring the
SpaceDev Shares for their own account for investment purposes only and not with
a view to or for sale in connection with the distribution thereof. The SIL
Shareholders certify that they are not a United States person and are not
acquiring the SpaceDev Shares for the account or benefit of any United States
person. The SIL Shareholders agree to resell such securities only in accordance
with the provisions of Regulation S of the Securities Act of 1933 (the "Act"),
pursuant to a registration under the Act, or pursuant to an available exemption
from registration. The certificates evidencing the SpaceDev Shares shall bear a
legend substantially as follows:
15
<PAGE>
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR
SECURITIES LAWS AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR SUCH STATE LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT."
2.25 Limitations on the Liability of the SIL Warrantors
--------------------------------------------------
The liability of the SIL Warrantors under this Agreement shall be limited as
follows:
(a) there shall be disregarded for all purposes any breach of this Agreement
unless the amount of damages to which SpaceDev would otherwise be entitled
is an amount in excess of $15,000;
(b) SpaceDev shall not be entitled to recover any damages in respect of any
breach or breaches of the Warranties pursuant under Article 2 of this
Agreement unless the aggregate loss or damage amount in respect of all
such breach or breaches for which the SIL Warrantors are liable exceeds
$15,000, in which event a claim in respect of the excess over $15,000 may
be made;
(c) the maximum liability of each SIL Warrantor in respect of the aggregate of
all the claims made by SpaceDev in respect of any breach of this Agreement
shall not exceed five hundred thousand dollars ($500,000).
2.26 SpaceDev may not bring any claim for breach of the provisions of this
Agreement unless written notice of the claim shall have been given to the
SIL Warrantors accompanied by reasonable particulars of the claim,
including the amount of the claim:
(a) in the case of any claim under the Warranties under Article 2, within 12
months of the date of this Agreement; and
(b) in the case of any other claim, within 3 months of the date of this
Agreement, provided that the liability of the SIL Warrantors in respect of
any Warranty Claim shall absolutely terminate if proceedings in respect of
it have not been commenced within 2 months of service of notice of that
claim.
16
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2.27 The SIL Warrantors shall not be liable and no claim or claims shall be
made against them in respect of any Warranty Claim:
(a) if the fact, omission, circumstance or occurrence giving rise to or
forming the basis of the claim has been fairly disclosed to SpaceDev in
the Disclosure Letter;
(b) to the extent that provision or allowance for the matter or liability has
been made in the Financial Statements or is otherwise taken account of, or
reflected in, the Financial Statements;
(c) to the extent that the claim would not have arisen but for a change in
legislation made after the date of this Agreement (whether relating to
taxation, rates of taxation or otherwise) or the withdrawal of any
extra-statutory concession previously made by the IRS or other taxing
authority (whether or not the change purports to be effective
retrospectively in whole or in part);
(d) if the matter giving rise to the claim is provided for under the terms of
this Agreement or carried out in the implementation of it;
(e) to the extent the liability of the SIL Warrantors in respect of the claim
is affected by any voluntary act (other than in the ordinary course of
business of SIL) of SpaceDev or of SIL carried out on, or after the date
of this Agreement;
(f) if the claim arises from any act, matter or thing done or omitted to be
done by SpaceDev or SIL at the request or with the approval of SpaceDev;
(g) if the claim arises from SpaceDev or SIL disclaiming any part of the
benefit of capital or other allowances against taxation claimed or
proposed to be claimed on or before the date of this Agreement of which
particulars have been given to SpaceDev; or
(h) if the claim arises from any change in accounting policy or practice of
SpaceDev or SIL introduced or having effect after Closing.
2.28 If SpaceDev becomes aware of a matter which could give rise to a claim
under the other provisions of this Agreement, the SIL Warrantors shall not
be liable in respect of it unless written notice of the relevant facts is
given by SpaceDev to the SIL Warrantors as soon as reasonably practicable
and in any event within 30 days of SpaceDev becoming aware of those facts.
2.29 Without prejudice to SpaceDev's duty to mitigate any loss in respect of
any breach of the Warranties, any damages for such breach shall be
assessed on the basis of the diminution in value of the SIL Shares (which
value shall not be taken to be greater than the Consideration) directly
attributable to the breach in question (after taking into account all
compensating factors) and not on the basis of the loss of or cost to SIL
in respect of the matter giving rise to the claim.
17
<PAGE>
2.30 Without prejudice to any duty it may have at common law or otherwise,
SpaceDev shall use all reasonable endeavors to mitigate any loss or damage
which it may suffer in consequence of any breach by the SIL Warrantors of
the Warranties or other provisions of this Agreement.
2.31 If in respect of any matter which could give rise to a breach of the
Warranties SpaceDev or SIL is entitled to claim under any policy of
insurance (or would have been so entitled had it maintained in force the
insurance cover current at Closing) no such matter shall be the subject of
a claim unless and until the SpaceDev or SIL shall have made a claim
against its insurers and the amount of such claim (or of any claim which
could have been made had such policies or their equivalents been
maintained in effect after Closing) shall then reduce or extinguish any
such claim.
2.32 If any claim for breach of any of the Warranties is based upon a liability
of SIL which is contingent only, the SIL Warrantors shall not be liable to
make any payment to SpaceDev or to SIL unless and until such contingent
liability becomes an actual liability and is discharged.
2.33 If any of the SIL Warrantors makes any payment by way of damages in
respect of a Warranty Claim (the "DAMAGES PAYMENT") and within 12 months
of the making of the Damages Payment SIL or SpaceDev receives any benefit
otherwise than from that SIL Warrantor which it would not have received
but for the circumstance giving rise to the claim in respect of which the
Damages Payment was made, SpaceDev shall, once it or SIL has received such
benefit, forthwith repay to that SIL Warrantor the Damages Payment in so
far as it does not exceed the value of the benefit recovered from the
third party.
2.34 Any liability of the SIL Warrantors will take account of any corresponding
savings or benefits accruing to SpaceDev or SIL as a result of the
circumstances giving rise to the Warranty Claim. If any provision in the
Financial Statements for taxation proves to be an over-provision, the
amount of the over-provision will be set off against any liability of the
Warrantors under this Agreement.
2.35 Subject to the other provisions of this Article 2, it is hereby agreed
that each individual SIL Warrantor shall have no liability in respect of
any claim made by SpaceDev for breach of any of the provisions of this
Agreement if such claim or claims shall have arisen by reason of fraud,
dishonesty or deliberate non-disclosure on the part of any other SIL
Warrantor.
2.36 Notwithstanding Article 2.35 none of the SIL Warrantors shall, as between
each other be liable to make a contribution in respect of any payment made
or agreed to be made by any other SIL Warrantors in respect of any claim
under, or in respect of, any breach of this Agreement unless such SIL
Warrantor has been adequately consulted in the course of negotiations
following the notification of any such claim and has been joined as a
party to any proceedings in which that claim has been made.
18
<PAGE>
2.37 Any amount paid by the SIL Warrantors in respect of any claim under this
Agreement shall be deemed to be a reduction in the purchase consideration
for the SIL Shares.
2.38 The liability of each individual SIL Warrantor in respect of any claim
made by SpaceDev for breach of the SIL Warranties or any other provisions
of this Agreement shall not exceed the proportion set out below against
the name of that SIL Warrantor of the amount of any such claim or claims.
Prof J.L. Culhane 18.87%
Mr. A.K. Ward 18.87%
Mr. D.R. Brindley 18.87%
Mrs J.E. Holloway 5.65%
Mr. A.J. Barrington Brown 18.87%
Mr. J. Anzalchi 18.87%
-------
100.00%
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SPACEDEV
3.1 The SpaceDev and the Guarantor severally warrant (to the extent of
$2,500,000 maximum liability to SpaceDev and to the extent of $500,000
maximum liability to Guarantor) to the SIL Shareholders that except as
fairly disclosed in the letter to the SIL Shareholders dated the same date
as this Agreement and delivered prior to its execution (the "SPACEDEV
DISCLOSURE LETTER"), each of the statements set out in this Article 3
below is true and accurate in all material respects.
3.2 Each of the Warranties set out in the several paragraphs of this Article 3
below (the "SPACEDEV WARRANTIES") is separate and independent and except
as expressly provided to the contrary in this Agreement is not limited by
reference to any other paragraphs of Article 3.
3.3 Any claim by the SIL Shareholders in connection with the SpaceDev
Warranties (a "SPACEDEV WARRANTY Claim") will be subject to the following
provisions of this Article.
3.4 the SIL Shareholders acknowledge and agree that:
19
<PAGE>
(a) the SpaceDev Warranties are the only representations, warranties or
other assurances of any kind given by or on behalf of the SpaceDev
Warrantors and on which the SIL Shareholders may rely in entering
into this Agreement;
(b) no other statement, promise or forecast made by or on behalf of the
SpaceDev Warrantors may form the basis of, or be pleaded in
connection with, any claim by the SIL Shareholders under or in
connection with this Agreement; and
(c) at the time of entering into this Agreement the SIL Shareholders are
not aware of any matter or thing which is inconsistent with the
SpaceDev Warranties or constitutes a breach of any of them.
3.5 Organization and Related Matters.
---------------------------------
SpaceDev is a corporation duly organized, validly existing and in good standing
under the laws of the state of Colorado in the United States of America.
SpaceDev has all necessary corporate power and authority to own its properties
and assets and to carry on its business as now conducted. True, correct and
complete copies of the charter documents of SpaceDev as in effect on the date
hereof have been delivered to the SIL Shareholders.
3.6 SpaceDev Shares.
----------------
At the Closing, the SIL Shareholders will acquire good and marketable title and
complete ownership of the SpaceDev Shares, free of any and all covenants,
conditions, or other Encumbrances except for any resale restrictions
requirements made pursuant to 2.24. The authorized capital stock of SpaceDev
consists of twenty five million (25,000,000) shares of common stock and ten
million (10,000,000) shares of convertible preferred stock, of which 4,414,373
common shares and 82,450 convertible preferred shares are issued and
outstanding. There are no outstanding Contracts of SpaceDev to repurchase,
redeem or otherwise acquire any Equity Securities of SpaceDev. All shares of
capital stock of SpaceDev are duly authorized, validly issued and outstanding
and are fully paid and nonassessable and were issued in conformity with
applicable laws. Any Equity Securities of SpaceDev which were issued and
reacquired by SpaceDev were so reacquired (and, if reissued, so reissued) in
compliance with all applicable Laws, and SpaceDev has no outstanding obligation
or liability with respect thereto.
3.7 Financial Statements; Changes; Contingencies.
---------------------------------------------
20
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(a) FINANCIAL STATEMENTS. SpaceDev has delivered to the SIL Shareholders
the unaudited December 31, 1997 balance sheet for SpaceDev and the
related statements of income for the 12 months then ended. All such
interim financial statements have been prepared in accordance with
GAAP consistently applied during the periods covered (except as
disclosed therein), the statements of income present fairly the
results of operations of SpaceDev for the respective periods covered,
and the balance sheets present fairly the financial condition of
SpaceDev as of their respective dates, except that such financial
statements may omit footnote disclosures required by GAAP to the
extent the content thereof would not materially differ in nature or
amount from those disclosures reported in the most recent audited
period, and year-end adjustments to the extent not material.
Notwithstanding the foregoing, all such financial statements reflect
all material adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair
presentation.
(b) NO MATERIAL ADVERSE CHANGES. Since the Statement Date, whether in the
ordinary course of business, there has not been, occurred or arisen:
1. any change in or event affecting SpaceDev, its business or the
Common Stock of SpaceDev that has had or may reasonably be
expected to have a Material Adverse Effect.
2. any agreement (other than a Material Contract listed in the
Disclosure Letter), condition, action or omission which would be
proscribed by (or require consent under) section 4.3 had it
existed, occurred or arisen after the date of this Agreement,
3. any strike or other labor dispute, or
4. any casualty, loss, damage or destruction whether or not covered
by insurance or any material property of SpaceDev.
(c) NO OTHER LIABILITIES OR CONTINGENCIES. SpaceDev does not have any
material liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable
of assertion or not, that, in accordance with GAAP applied on a
consistent basis, should have been but were not reflected or
disclosed in the financial statements (including the notes thereto)
referred to in subsection 3.7(a) and (b) above, except liabilities
which were incurred after Statement Date, in the ordinary course of
business which do not exceed $10,000 exclusive of current payroll and
payroll taxes for the payroll period ending immediately prior to
Closing.
3.8 Authorization; No Conflicts.
----------------------------
The execution, delivery and performance of this Agreement and or related
agreements by SpaceDev and the Guarantor have been duly and validly authorized
by the Board of Directors of SpaceDev and by all other necessary corporate
action on the part of SpaceDev and by the Guarantor. SpaceDev and the Guarantor
have the full capacity, right, power and authority to enter into this Agreement
and any related agreements to which they are parties. The execution, delivery
and performance of this Agreement by SpaceDev and the Guarantor and the
execution, delivery and performance of any related agreements or contemplated
transactions by SpaceDev and the Guarantor will not violate, or constitute a
breach or default (whether upon lapse of time and/or the occurrence of any act
or event or otherwise) under, the Articles of Incorporation or by-laws of
SpaceDev or any Material Contract, result in the imposition of any Encumbrance
against any asset or properties of SpaceDev, or violate any Law. The
consummation of the transactions contemplated by this Agreement does not, to the
knowledge of SpaceDev and the Guarantor require any filings under the
Hart-Scott-Rodino Act.
21
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3.9 [Reserved]
3.10 Corporate Records.
------------------
The official records and minute books of SpaceDev accurately reflect all
material actions and proceedings taken to date by its shareholders, board of
directors and committees, and such minute books contain true and complete copies
of the charter documents of SpaceDev and all related amendments. The stock
record books of SpaceDev reflect accurately all transactions in its capital
stock of all classes.
3.11 Compliance with Law.
--------------------
(a) SpaceDev is organized and has conducted its businesses in accordance
with applicable Laws in all material respects, and the forms,
procedures and practices of SpaceDev are in compliance with all such
Laws, to the extent applicable, in all material respects.
(b) The use and operation of the assets of SpaceDev are in compliance in
all material respects with all applicable Laws and there is no
material violation of any of such Laws.
3.12 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of SpaceDev or any of its respective
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions.
3.13 Dividends.
----------
SpaceDev has not declared or paid any dividends of any kind nor declared or made
any other distributions of any kind whatsoever including, without limitation, by
way of redemption or repurchase or reduction of authorized capital.
22
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3.14 Tax and Other Reports and Regulatory Matters
--------------------------------------------
The United States Securities and Exchange Commission (SEC) has issued an Order
Instituting Proceedings for a Cease and Desist order to be issued against
SpaceDev alleging the Company has made statement contained in press releases and
on the Company's web site including information published by the Company
relating to its projected revenues and earnings, the nature and status of the
Company's relationship with the National Aeronautics and Space Administration,
and the nature of the Company's relationship with an underwriter which violate
the securities laws. The SEC has requested an order issued against the Company
to cease and desist making these and similar statements. The Company disagrees
with the SEC's position and believes their position is without merit. A hearing
will be held before an Administrative Law Judge to determine the merits of the
allegations made by the SEC. The Company has issued a news release relating to
these matters which, along with the Order Instituting Proceedings issued by the
SEC are contained in the Disclosure Letter. The SIL Shareholders agree that they
have not relied on any information published by SpaceDev or any information
which is contained in the SEC Order Instituting Proceedings. The SIL
Shareholders have completed their own independent investigation of SpaceDev
prior to entering into this Agreement and have received and reviewed all
information they feel necessary regarding the SEC matter during their
investigation.
3.15 The liability of the SpaceDev Warrantors under this Agreement shall be
limited as follows:
-------------------
(a) there shall be disregarded for all purposes any breach of this
Agreement unless the amount of damages to which the SIL Shareholders
would otherwise be entitled is an amount in excess of $15,000;
(b) the SIL Shareholders shall not be entitled to recover any damages in
respect of any breach or breaches of the SpaceDev Warranties unless
the aggregate loss or damage amount in respect of all such breach or
breaches for which the SpaceDev Warrantors are liable exceeds
$15,000, in which event a claim in respect of the excess over $15,000
may be made;
(c) the maximum liability of SpaceDev in respect of the aggregate of all
the claims made by the SIL Shareholders in respect of any breach of
this Agreement shall not exceed two million five hundred thousand
dollars ($2,500,000). The maximum liability of the Guarantor in
respect of the aggregate of all the claims made by the SIL
Shareholders in respect of any breach of this Agreement shall not
exceed five hundred thousand dollars ($500,000).
3.16 SpaceDev may not bring any claim for breach of the provisions of this
Agreement unless written notice of the claim shall have been given to the
SpaceDev Warrantors accompanied by reasonable particulars of the claim,
including the amount of the claim:
(a) in the case of any claim under the SpaceDev Warranties, within 12
months of the date of this Agreement; and
(b) in the case of any other claim, within 3 months of the date of this
Agreement, provided that the liability of the SpaceDev Warrantors in
respect of any SpaceDev Warranty Claim shall absolutely terminate if
proceeding in respect of it have not been commenced with 2 months of
service of notice of that claim.
23
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3.17 The SpaceDev Warrantors shall not be liable and no claim or claims shall
be made against them in respect of any SpaceDev Warranty Claim:
(a) if the fact, omission, circumstance or occurrence giving rise to or
forming the basis of the claim has been fairly disclosed to the SIL
Shareholders in the SpaceDev Disclosure Letter;
(b) to the extent that provision or allowance for the matter or liability
has been made in the SpaceDev Financial Statements or is otherwise
taken account of, or reflected in, the SpaceDev Financial Statements;
(c) to the extent that the claim would not have arisen but for a change
in legislation made after the date of this Agreement (whether
relating to taxation, rates of taxation or otherwise) or the
withdrawal of any extra-statutory concession previously made by the
IRS or other taxing authority (whether or not the change purports to
be effective retrospectively in whole or in part);
(d) if the matter giving rise to the claim is provided for under the
terms of this Agreement or carried out in the implementation of it;
(e) to the extent the liability of the SpaceDev Warrantors in respect of
the claim is affected by any voluntary act (other than in the
ordinary course of business of SpaceDev) of SpaceDev or of SIL
carried out on, or after the date of this Agreement;
(f) if the claim arises from any act, matter or thing done or omitted to
be done by SpaceDev or SIL at the request or with the approval of
SIL;
(g) if the claim arises from SpaceDev or SIL disclaiming any part of the
benefit of capital or other allowances against taxation claimed or
proposed to be claimed on or before the date of this Agreement of
which particulars have been given to SIL; or
(h) if the claim arises from any change in accounting policy or practice
of SpaceDev or SIL introduced or having effect after Closing.
3.18 If the SIL Shareholders become aware of a matter which could give rise to
a claim under the other provisions of this Agreement, the SpaceDev
Warrantors shall not be liable in respect of it unless written notice of
the relevant facts is given by the SIL Shareholders to the SpaceDev
Warrantors as soon as reasonably practicable and in any event within 30
days of the SIL Shareholders becoming aware of those facts.
24
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3.19 Without prejudice to the SIL Shareholders' duty to mitigate any loss in
respect of any breach of the SpaceDev Warranties, any damages for such
breach shall be assessed on the basis of the diminution in value of the
SpaceDev Shares (which value shall not be taken to be greater than the
Consideration) directly attributable to the breach in question (after
taking into account all compensating factors) and not on the basis of the
loss of or cost to SpaceDev in respect of the matter giving rise to the
claim.
3.20 Without prejudice to any duty they may have at common law or otherwise,
the SIL Shareholders shall use all reasonable endeavors to mitigate any
loss or damage which they may suffer in consequence of any breach by the
SpaceDev Warrantors of the SpaceDev Warranties or other provisions of this
Agreement.
3.21 If in respect of any matter which could give rise to a breach of the
SpaceDev Warranties the SIL Shareholders, SpaceDev or SIL is entitled to
claim under any policy of insurance (or would have been so entitled had it
maintained in force the insurance cover current at Closing) no such matter
shall be the subject of a claim unless and until the SpaceDev or SIL shall
have made a claim against its insurers and the amount of such claim (or of
any claim which could have been made had such policies or their
equivalents been maintained in effect after Closing) shall then reduce or
extinguish any such claim.
3.22 If any claim for breach of any of the SpaceDev Warranties is based upon a
liability of SpaceDev which is contingent only, the SpaceDev Warrantors
shall not be liable to make any payment to the SIL Shareholders unless and
until such contingent liability becomes an actual liability and is
discharged.
3.23 If any of the SpaceDev Warrantors makes any payment by way of damages in
respect of a SpaceDev Warranty Claim (the "DAMAGES PAYMENT") and within 12
months of the making of the Damages Payment SIL or SpaceDev receives any
benefit otherwise than from that SpaceDev Warrantor which it would not
have received but for the circumstance giving rise to the claim in respect
of which the Damages Payment was made, the SIL Shareholders shall, once
they or SIL have received such benefit, forthwith repay to that SpaceDev
Warrantor the Damages Payment in so far as it does not exceed the value of
the benefit recovered from the third party.
3.24 Any liability of the SpaceDev Warrantors will take account of any
corresponding savings or benefits accruing to SpaceDev or SIL as a result
of the circumstances giving rise to the SpaceDev Warranty Claim. If any
provision in the SpaceDev Financial Statements for taxation proves to be
an over-provision, the amount of the over-provision will be set off
against any liability of the SpaceDev Warrantors under this Agreement.
3.25 Subject to the other provisions of this Article 3, it is hereby agreed
that each SpaceDev Warrantor shall have no liability in respect of any
claim made by the SIL Shareholders for breach of any of the provisions of
this Agreement if such claim or claims shall have arisen by reason of
fraud, dishonesty or deliberate non-disclosure on the part of any other
SpaceDev Warrantor.
25
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ARTICLE 4
GENERAL
4.1 Amendments; Waivers.
--------------------
This Agreement and any schedule or exhibit attached hereto may be amended only
by agreement in writing of all parties. No waiver of any provision nor consent
to any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
4.2 Schedules; Exhibits; Integration.
---------------------------------
Each schedule and exhibit delivered pursuant to the terms of this Agreement
shall be in writing and shall constitute a part of this Agreement, although
schedules need not be attached to each copy of this Agreement. This Agreement,
together with such schedules and exhibits, constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings of the parties in connection therewith.
4.3 Best Efforts; Further Assurances.
---------------------------------
Except as otherwise expressly provided herein, each party will use its best
efforts to cause all conditions to its obligations hereunder to be timely
satisfied and to perform and fulfill all obligations on its part to be performed
and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable. The parties shall cooperate
with each other in such actions and in securing requisite Approvals. Each party
shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
4.4 Governing Law and Jurisdiction
------------------------------
(a) Any dispute, controversy or claim arising under, out of or relating to
this Agreement and any subsequent amendments of this Agreement, including
without limitation, its formation, validity, binding effect,
interpretation, performance, breach or termination, as well as
non-contractual claims, shall be submitted to a three member arbitration
tribunal which shall apply UNCITRAL rules.
26
<PAGE>
(b) Both the claimant and respondent shall have the right to appoint one
arbitrator ("appointed arbitrators"). The appointed arbitrators shall have
the exclusive right and responsibility to jointly select one arbitrator to
serve with the appointed arbitrators on the tribunal and to act as the
chairperson of the proceedings.
(c) The choice of forum and the choice of law shall be the jurisdiction of the
respondent to the claim of action. All decisions rendered by the Tribunal
shall be binding upon the parties. The prevailing party shall be entitled
to reasonable attorney fees, costs and expenses, including the costs of
arbitration, incurred in connection with such action.
4.5 No Assignment.
--------------
Neither this Agreement nor any rights or obligations under it may be assigned
except that SpaceDev may assign its rights, and delegate its obligations,
hereunder (including but not limited to its rights under Article 1 to any
wholly-owned subsidiary of SpaceDev) and SpaceDev may assign this Agreement to
an affiliate to whom it has transferred the SIL shares.
4.6 Headings.
---------
The descriptive headings of the Articles, Sections and subsections of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
4.7 Counterparts.
-------------
This Agreement any amendment hereto or any other agreement (or document)
delivered pursuant hereto may be executed in one or more counterparts and by
different parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
4.8 Confidentiality.
----------------
All information disclosed in writing by any party (or its representatives) in
connection with the transactions contemplated by this Agreement to any other
party (or its representatives) shall be kept confidential by such other party
and its representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such information or
disclosure (i) was known by the recipient when received, (ii) is or hereafter
becomes lawfully obtainable from other sources, (iii) is necessary or
appropriate to disclose to a Governmental Entity or stock exchange having
jurisdiction over the parties, or (iv) may otherwise be required by law. If this
Agreement is terminated in accordance with its terms, each party shall use all
reasonable efforts to return upon written request from the other party all
documents (and reproductions thereof) received by it or its representatives from
such other party (and, in the case of reproductions, all such reproductions made
by the receiving party) that include information not within the exceptions
contained in the first sentence of this Section 4.8, unless the recipients
provide assurances reasonably satisfactory to the requesting party that such
documents have been destroyed.
27
<PAGE>
4.9 Parties in Interest.
--------------------
This Agreement shall be binding upon and inure to the benefit of each party, and
nothing in this Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever under or by reason
of this Agreement. Nothing in this Agreement is intended to relieve or discharge
the obligation of any third person to any party to this Agreement.
4.10 Notices.
--------
Any notice or other communication hereunder must be given in writing and (a)
delivered in person, (b) transmitted by telex, telefax or other
telecommunications mechanism or (c) mailed by certified or registered mail,
postage prepaid, receipt request, as follows:
If to SpaceDev:
SpaceDev, Inc.
7940 Silverton Avenue #202
San Diego, California 92126
Attention: James W. Benson, Chief Executive Officer
(619) 693-6932
With a copy to:
Chris Popov
Popov, McCullogh & Cohan LLP
Facsimile 619-457-2950
If to SIL and the SIL Shareholders:
c/o Space Innovations Limited
The Paddock
Hambridge Road
Newbury
Berkshire
With a copy to:
David Byam-Cook
Bird and Bird
Facsimile: 44-171-415-6111
28
<PAGE>
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 4.10 and an appropriate answer back is received; or (ii) if given by any
other means, when actually received at such address.
4.11 Expenses.
---------
The SIL Shareholders and SpaceDev shall each pay their or its own expenses
incident to the negotiation, preparation and performance of this Agreement and
the transactions contemplated hereby, including but not limited to the fees,
expenses and disbursements of their respective advisors, accountants and
counsel.
4.12 Remedies; Waiver.
-----------------
All rights and remedies existing under this Agreement and any related agreements
or documents are cumulative to and not exclusive of, any rights or remedies
otherwise available. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof, nor shall any
single or partial exercise preclude any further or other exercise of such or any
other right.
4.13 Knowledge Convention.
---------------------
Whenever any statement herein or in any schedule, exhibit, certificate or other
documents delivered to any party pursuant to this Agreement is made "to its
knowledge" or "to its best knowledge" or words of similar intent or effect of
any party or its representative, such person shall make such statement only
after conducting a diligent investigation of the subject matter thereof, and
each statement shall be deemed to include a representation that such
investigation has been conducted.
4.14 Representation by Counsel; Interpretation.
------------------------------------------
The SIL Shareholders, SpaceDev and the Guarantor respectively acknowledge that
each party to this Agreement has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of Law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
29
<PAGE>
4.15 Severability.
-------------
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable by any Governmental Entity, the remaining provisions of this
Agreement to the extent permitted by Law shall remain in full force and effect
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner materially adverse to any party.
30
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officers as of the day and year first above
written.
/s/ Guglielmo Aglietti
- ------------------------------------
SIGNED by Guglielmo Aglietti
/s/ Javad Anzalchi
- ------------------------------------
SIGNED by Javad Anzalchi
/s/ Antony James Barrington Brown
- ------------------------------------
SIGNED by Antony James Barrington Brown
/s/ Dennis Robert Brindley
- ------------------------------------
SIGNED by Dennis Robert Brindley
/s/ Mark Richard Cantrill
- ------------------------------------
SIGNED by Mark Richard Cantrill
/s/ John Leonard Culhane
- ------------------------------------
SIGNED by John Leonard Culhane
/s/ Robert James Ely
- ------------------------------------
SIGNED by Robert James Ely
/s/ Fergus Berkley Stewart Glen
- ------------------------------------
SIGNED by Fergus Berkley Stewart Glen
/s/ Gary Simon Heelas
- ------------------------------------
SIGNED by Gary Simon Heelas
/s/ Joan Ellen Holloway
- ------------------------------------
SIGNED by Joan Ellen Holloway
31
<PAGE>
/s/ Horace Kit Keung Ngan
- ------------------------------------
SIGNED by Horace Kit Keung Ngan
/s/ Roger Stuart Shearman
- ------------------------------------
SIGNED by Roger Stuart Shearman
/s/ Anthony Kim Ward
- ------------------------------------
SIGNED by Anthony Kim Ward
/s/ Peter Charles Watson
- ------------------------------------
SIGNED by Peter Charles Watson
SPACEDEV, INC.,
a Colorado corporation
/s/ James Benson
- ------------------------------------
By James Benson, President
GUARANTOR
/s/ James Benson
- ------------------------------------
SIGNED in his capacity as Guarantor
by JAMES BENSON
SPACE INNOVATIONS LIMITED
a United Kingdom Corporation
- ------------------------------------
Director
32
<PAGE>
SCHEDULE A
SPACE INNOVATIONS LIMITED SHAREHOLDERS
--------------------------------------
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE NUMBER OF
ORDINARY OF TOTAL SPACEDEV
SHARES OF 1(POUND) OUTSTANDING SHARES TO BE
NAME ADDRESS EACH SHARES ISSUED AT
IN THE OWNED CLOSING
COMPANY (rounded to the
nearest
hundredth)
- ---------------------------- ----------------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Guglielmo Aglietti 18 Litchfield Road 1,000 1.22% 12,195
Southampton, Hants
SO18 2BL
Javad Anzalchi 89 Thornbridge Road, 10,000 12.20% 121,951
Iver Health,
Bucks SL0 0QB
Antony James Barrington Peel Cottage, Butt Street, 10,000 12.20% 121,951
Brown Ludgershall, Andover,
Hants SP11 9QQ
Dennis Robert Brindley Greenfields, Water Lane, 10,000 12.20% 121,951
Thatcham, Newbury,
Berks RG19 8SH
Mark Richard Cantrill 16 Chapel Court, 4,000 4.88% 48,780
Hungerford, Berks RG17
0HW
John Leonard Culhane 24 Warnham Road, 10,000 12.20% 121,951
Horsham, Sussex RH12
2QU
Robert James Ely 4 Hurst Close, 6,000 7.32% 73,172
Wallingford, Oxon OX10
9BQ
Fergus Berkley Stewart "Talisker", Graces Lane, 1,000 1.22% 12,195
Chieveley, Newbury,
Berks RG20 8XG
33
<PAGE>
Gary Simon Heelas 10 Windermere Road, 5,000 6.10% 60,976
Reading
Berks RG2 7HP
Joan Ellen Holloway Copperfield, Wildhern 3,000 3.66% 36,586
Andover, Hampshire
SP11 0JE
Horace Kit Keung Ngan 64 Kennedy Road, Hong 10,000 12.20% 121,951
Kong
Roger Stuart Shearman 8 Amport Close, 1,000 1.22% 12,195
Lytchpit, Basingstoke
RG24 8UU
Anthony Kim Ward 31 Sutton Wick Lane, 10,000 12.20% 121,951
Drayton, Abingddon,
Oxon OX14 4HH
Peter Charles Watson 6 Aird Close, Fairacres, 1,000 1.22% 12,195
Woolton Hill, Newbury,
Berks RG20 9UH
TOTAL 82,000 100% 1,000,000
</TABLE>
34
<PAGE>
DISCLOSURES DISCLOSURE SCHEDULES
35
<PAGE>
DISCLOSURE LETTER
-----------------
From: The SIL Warrantors
To: SpaceDev
1st October 1998
Dear Sirs
SPACE INNOVATIONS LIMITED (THE "COMPANY")
This letter is the Disclosure Letter referred to in clause 2.1 of the Common
Stock Exchange Agreement to be entered into today between the SIL Shareholders,
SpaceDev Inc ("PURCHASER"), James Benson and the Company, under which the
Purchaser is to purchase, and the SL Shareholders are to sell, all of the issued
share capital in the Company (the "AGREEMENT").
Unless the contrary intention appears. expressions defined in the Agreement have
the same meaning in this letter.
The warranties in Article 2 of the Agreement (the "WARRANTIES") are made and
given subject to the disclosures in this letter. The SIL Warrantors shall not be
or be deemed to be in breach of any of the Warranties (and no claim shall lie
for any breach of the Warranties) in respect of the matters disclosed in this
letter.
References in this letter to clause numbers are to clauses in the Agreement and
references to paragraph numbers are to paragraphs in the specified schedules to
the Agreement. For convenience, certain disclosures are set out against
particular clauses or paragraphs of particular schedules but any matter which is
disclosed, whether generally or by reference to a particular clause or
paragraph, is disclosed for the purpose of all the Warranties which will be
qualified accordingly.
Any disclosure of any matter or of any document shall not imply the existence of
any representation, warranty or undertaking not expressly given in the
Agreement.
Where any matter is disclosed in respect of a Warranty which is expressed to be
qualified by, or subject to a test of "materiality", the disclosure of that
matter does not imply that it is considered to be material for the purpose of
that Warranty and materiality shall not be construed by reference to any of the
matters disclosed in this letter.
<PAGE>
GENERAL MATTERS
The following facts, matters or documents are deemed to have been disclosed in
this letter and the Purchaser is deemed to purchase the Company with full
knowledge and notice of such facts, matters or documents and of the effect of
all the contents and provisions of such documents:
(a) All information contained in the Agreement (including the recitals and
Schedules to it) and in the documents referred to in the Agreement as
being in the Agreed Terms.
(b) Any matter which is disclosed or expressed to be provided for or noted
in the audited accounts of the Company for the accounting period
ending December 1996, and the unaudited accounts for the accounting
period ending December 1997, and the unaudited management accounts for
the accounting period ending second quarter 1998.
(c) All information contained in:
(i) the documents contained in the files of documents supplied in
relation to the Purchasers' due diligence exercise (the "DUE
DILIGENCE DOCUMENTS") which documents are listed in Schedule 1
to this letter; and
(ii) the disclosure documents ("DISCLOSURE DOCUMENTS") which
documents are listed in Schedule 2 to this letter;
The Due Diligence Documents and the Disclosure Documents form part of
this letter as if they were expressly set out in it. In the event of
any inconsistency between the contents of any Due Diligence Document
or Disclosure Document and any reference to it or summary of it in
this letter, the provisions of the Due Diligence Document or
Disclosure Document are to be taken as correct unless the contrary is
stated. The Due Diligence Documents and the Disclosure Documents
constitute all written information which has been supplied to the
Purchaser or to any of its advisers in the course of negotiation of
the Agreement and any Warranty referring to written information is
therefore given on the basis that it refers only to the documents set
out in Schedules 1 and 2. In the event of any inconsistency between
any of the statements contained in any Disclosure: Document or Due
Diligence Document, the most recently made statement shall be taken as
being correct unless expressly stated in this letter.
(d) All matters in the Memorandum and Articles of Association of the
Company.
<PAGE>
(e) All matters which would have been revealed by inspection of the
Statutory Books or the Minute Books of the Company.
(f) All information contained on the files maintained by the Registrar of
Companies in respect of the Company.
(g) All information relating to the Company which is on public record or
which is otherwise in the public domain.
(h) All information and matters:
(i) which are apparent or which should have been apparent from the
title deeds of the Properties; or
(ii) which are disclosed in Replies to Enquiries; or
(iii) which appear on the Register of Title of H.M. Land Registry,
the Registers maintained under the Land Charges Act 1972, any
Local Land Charges Register maintained by any local authority
in whose district any of the Properties is situated, or by any
other searches and. enquiries which would be undertaken by a
prudent purchaser of the Properties; or
(iv) which would be disclosed by a physical inspection of the
Properties,
whether or not such investigations, searches, enquiries and
inspections have been made.
(i) All matters which would be disclosed by a physical inspection of the
plant, equipment and machinery of the Company and its stocks of raw
materials, work in progress and finished goods.
(j) All information in written correspondence or documents up to and
including the date of this letter passing from the SIL Shareholders or
the Company (including via its agents or advisors) to the Purchaser or
its agents or its advisers and all enclosures to such correspondence.
(k) All matters on public record at any Patent Registry, Trade Mark
Registry or Registered Design Registry anywhere in the world.
<PAGE>
SPECIFIC MATTERS
The following specific matters are disclosed. References in the margin are to
the Warranties contained in the corresponding clause numbers in Article 2 of the
Agreement. A document number in square parentheses is the number of the Due
Diligence Document or Disclosure Document listed in Schedule 1 or 2 to this
letter respectively:
2.7(a) FINANCIAL STATEMENTS.
---------------------
DISPUTE WITH BEGBIES TRAYOR
---------------------------
The 1997 financial accounts are only at 'draft' status because of an
unresolved dispute between SIL and Begbies Traynor, who are the joint
administrative receivers of Satellites International Limited, the
company whose assets and business were purchased by SIL in June 1996.
Schedule 2 Disclosure Documents [1] and [2] refer. As part of the
original agreement. SIL purchased the goodwill of the company under a
complex formula, where the goodwill was defined as the amount of
excess profit accruing from the total of all pre-existing contracts
over and above a predefined threshold. SIL made payments to the
receiver over a period of time in respect of this expected goodwill,
amounting to (pound)21,197. However, as time went on, it became
apparent that there was no excess profit and hence no goodwill.
Accordingly, SIL has demanded that the (pound)21,197 paid to the
receiver should be repaid. At the time of disclosure, the current
position is that the receiver has refused to pay back this amount. It
is possible that in order to reduce legal charges, a compromise may be
reached in due course, whereby the receiver pays back only a portion
of the amount in dispute. The resolution of this matter has a direct
bearing on the financial accounts for 1997.
CASH FLOW SITUATION
-------------------
As explained in the Business, Plans, Schedule 1 documents [1] and [2],
SIL has long been in need of a cash flow buffer, with an amount of
(pound)300k being suggested as appropriate to the type of business
undertaken by the company. One of the principal factors taken into
account by the SIL shareholders in pursuing the Agreement with
SpaceDev was the undertaking by SpaceDev to provide such a buffer.
Prior to completion of the Agreement, SpaceDev has provided $80k as an
unsecured loan. On completion of the Agreement, SIL has an immediate
need of a further $150k in order to help smooth out the uneven cash
flow which is inherent in this type of business. Both these amounts
are seen as part of the $2M which will be provided by SpaceDev over
the acquisition period.
<PAGE>
BANK OVERDRAFT FACILITY
-----------------------
SIL has recently changed bankers to Lloyds Bank in Newbury. The bank
has agreed an unsecured overdraft facility of (pound)50,000 in
accordance with the overdraft facility letter included in Schedule 2,
Document [3]. At present the Bank has agreed verbally to increase the
overdraft to (pound)100k until the end of September 1998. There is
currently no agreement for this increase to be retained beyond this
date. This is one of the reasons for the cash injection requirement
described above.
FINANCIAL FORECASTS
-------------------
The financial forecasts included in the Business Plans, Schedule 1
Documents [1] and [2], are based on an assessment of the potential
market for SIL's products and do not necessarily reflect what is
likely to be achieved due to the constraints resulting from limited
resources in terms of manpower, equipment and facilities. The cash
infusion from SpaceDev should minimise these constraints.
2.7(b) NO MATERIAL ADVERSE CHANGES
---------------------------
CONTRACT CHANGES
----------------
There have been a number of changes to current contracts, mostly
involving extension to delivery times. None of these has been, or is
expected to be, contentious, but for completeness the contracts
involved are:
Ref Customer Work Change
--- -------- ---- ------
506 Alcatel Bell K-band modem chipset Time extension
539 ESTEC CST S-Band transponder Time extension
556 CONAE 5W S-band transmitter Time extension
557 CONAE 3W X-band transmitter Time extension
620 DASA DST modem Time extension
689 Alcatel Bell K-band modem board Time extension
690 Verhaert Spacecraft sub-systems Time extension
725 CAL S-band transponder fot Kistler Time extension
551 CRTS Antenna Auto-tracking Reqmt waived
<PAGE>
2.7(c) NO OTHER LIABILITIES OR CONTINGENCIES.
--------------------------------------
CURRENT LIABILITIES
-------------------
Current liabilities in excess of $10,000.00 to which commitments exist
over and above normal supplier terms of credit, and orders which have
been placed in excess of this figure are:
Supplier Work Amount
-------- ---- ------
Garfield ASIC design and manufacture (pound)105,950
Dornier Replacement of test equipment (pound)9,354
ITC Commission payments (pound)27,872
Hewlett Packard Supply of test equipment (pound)20,660
Prof Ovchinikov Subcontract services (pound)20,606
Pensions Arrears (pound)11,345
Back Pay Withheld from Directors (pound)25,515
Taxes:PAYE/NI Arrears (pound)54,819
Government Loan Loan under UK Government-backed (pound)36,111
Small Firms Loan Guarantee Scheme.
Debenture currently held by Barc1ays
Bank, in process of transferring it to
Lloyds Bank.
2.8 TAX AND OTHER RETURNS AND REPORT
--------------------------------
DISTRAINT ORDER
---------------
In June 1998 the Inland Revenue issued a Distraint Order against
certain material assets of the Company against overdue 1997/8 PAYE and
National Insurance payments. This order was satisfied and fully
discharged in August 1998. The Tax Office has agreed to provide
written confirmation that this has been done. This confirmation will
be sent to SpaceDev as soon as it is available.
TAX AUDIT
---------
HM Customs and Excise and Inland Revenue Tax Inspectors have carried
out their standard statutory tax audits following the Management
Buy-Out of the original company, Satellites International Limited, in
June 1996. No anomalies were found or recorded.
<PAGE>
2.9 MATERIAL CONTRACTS
------------------
All material obligations under all Material Contracts have been or are
being performed with the exception of some delays in delivery dates as
specified in 2.7(b) above.
2.18 EMPLOYEE BENEFITS
-----------------
SIL provides the following benefits to its employees:
PRIVATE HEALTH INSURANCE provided by BUPA
PENSIONS under a group personal pension scheme
COMPANY VEHICLES provided to two Directors
DEATH IN SERVICE provided to beneficiary at 4x annual salary
2.19 CERTAIN INTERESTS; DIVIDENDS
----------------------------
The following persons have personal loans invested in SIL, to which,
the Company has a liability for repayment as follows:
Name Principal Sum Loaned
---- --------------------
J. Anzalchi (pound)12,000
A.J. Barrington Brown ` (pound)10,000
D. R. Brindley (pound)10,000
J.L. Culhane (pound)11,000
J.E. Holloway (pound)5,000
A.K. Ward (pound)10,000
Kindly acknowledge receipt of this letter and all the documents set out in
Schedules 1 and 2 of this letter by signing and returning to us the enclosed
acknowledgement:
Yours faithfully
/s/ A.K. Ward
A.K. Ward
for and on behalf of the SIL Warrantors
<PAGE>
SCHEDULE 1
----------
DUE DILIGENCE DOCUMENTS
-----------------------
1. Business Plan for Investment in SIL, Ref SIL-BP2, Issue 1, 24 Nov 1997.
2. Addendum to Business Plan for Investment in SIL, Ref SIL-BP2/ADD1, Issue
1, 31 March 1998.
3. All email enquiries and responses between SpaceDev and SIL during the
negotiation period.
<PAGE>
SCHEDULE 2
----------
DISCLOSURE DOCUMENTS
--------------------
1. Draft 'Letter Before Action', Ref. LVM\43 SPACI, dated 4 Sept 1998,
concerning the dispute between SIL and the Solicitors acting for Begbies
Traynor who are acting as the joint administrative receivers of
Satellites International Limited, the company whose assets and business
were purchased by SIL in June 1996.
2. Letter from SIL to their solicitors instructing them formally to issue
the letter before action.
3. Overdraft Facility letter from Lloyds Bank, Ref PCR/SS dated 18 August
1998.
<PAGE>
From: SpaceDev
To: The SIL Warrantors
We acknowledge receipt of your Disclosure Letter dated 30th September 1998 and
of the copy documents listed in the attached schedules.
.......................................
Dated September 1998
<PAGE>
DRAFT LETTER
Lovell White Durrant
[DX: ]
4 September 1998
BY FAX AND BY DX
Dear Sirs
SATELLITES INTERNATIONAL LIMITED (IN ADMINISTRATIVE RECEIVERSHIP)
We act for Space Innovations Limited ("SIL"). who purchased the assets and
business of Satellites International Limited ("the Company") on 30 May 1996 from
your clients, D.R.F Sapte and F.E Watson of Begbies Traynor, acting as joint
administrative receivers of the Company.
A dispute has arisen between our respective clients as to the consideration to
be paid for the goodwill of the Company. It is our client's position that the
goodwill of the Company has nil value and therefore the full amount of
(pound)21,196.94 which it has paid on account of the purchase of the goodwill
should be reimbursed by your client.
THE RELEVANT CONTRACTUAL CAUSES
THE SALE AGREEMENT
By an Agreement dated 30 May 1996 between the Company and a shelf company which
is now SIL ("the Sale Agreement"), the Company agreed to transfer to our client
such right, title and interest as it might have in the Company and certain of
the Company's assets. The Vendor is defined as the Company acting by its Joint
Administrative Receivers and the Purchaser is the shelf company which is now
SIL. The following clauses of the Sale Agreement are relied on by our client:
(i) Clause 1.1:-
""Assets" Collectively the Contracts, the Goodwill,..."
(ii) Clause 2.1:-
Continued..../
<PAGE>
"Subject to the provisions of this Agreement, the Vendor shall sell,
and the Purchaser shall purchase, with effect from the Transfer Date,
such right title and interest as the Vendor may have in the Business
and the Assets..."
(iii) Clause 3.1:-
"The consideration for the sale, and purchase, and for the licences
and other facilities mentioned below; shall be agreed between the
Vendor and the Purchaser or, failing that, under clause 24 and; when
so agreed or determined, shall be payable by the Purchaser on demand
by the Vendor."
THE SUPPLEMENTAL AGREEMENT
By a Supplemental Agreement dated 6 June 1996 between the Company and the same
shelf company which is now SIL ("the Supplemental Agreement"), the method by
which the goodwill of the Company would be calculated and purchased was agreed.
The following clauses of the Supplemental Agreement are relied on by our client:
(i) Clause 2:-
""New contracts Vendor's Amounts" The lesser of(pound)20,000 and an
amount equal to the aggregate of
the amount set out in column 8
(WIP) of the final schedule
prepared by the Purchaser to
Clause 3.1.2 of Schedule 1
hereto in the form of the pro
forma calculation set out in
Schedule 3 hereto: ["NCVA"]"
""Vendor's Amounts" The lesser of (pound)43,590 and an
amount equal to the aggregate of
the amounts to be set out in
column 8 (WIP) of the final
schedule prepared by the
Purchaser pursuant to Clause
3.1.1 of Schedule 1 hereto in the
form of the pro forma
calculation set out in Schedule 2
hereto, ["VA"]"
The NCVA and the VA are therefore to be calculated pursuant to the pro forma
calculations respectively set out in Schedules 2 and 3 to the Supplemental
Agreement on the basis of the aggregate amounts set out in column 8 (WIP) of the
final schedules.
-2- Continued..../
<PAGE>
(ii) Schedule 1 Clause 3 provides that SIL shall provide to your client:
"on or before the day 14 days after the end of each three month
period after the Transfer Date (the first such date being 12
September 1996):
3.1.1 a Schedule in the form of Schedule 2 hereto showing the
position as at the previous month end including the position on
the WIP contract's performance costs;
3.1.2 a Schedule in the form of Schedule 3 showing the position
as at the previous month end including the position on the New
Contract's Performance Costs".
This is consistent with the definitions of NCVA and VA set out above.
(iii) The consideration for the Sale and Purchase of the Goodwill of the
Company is calculated under Clause 2.2 as follows:
"In respect of the Goodwill the sum of (pound)1 plus the Vendor's
Amounts as at 30 November 1997 and plus the New Contracts
Vendor's Amounts as at 30 November 1997 subject to and as
calculated and payable in accordance with Schedule 1 hereto".
In addition, Schedule 1 Clause 2 provides that:-
"The Purchaser shall pay to the Vendor as consideration for the
Goodwill (pound)1 plus a sum equal to the aggregate at the
Vendor's Amounts as at 30 November 1997 and the New Contracts
Vendor's Amounts as at 30 November 1997 calculated and payable in
accordance with Clause 4 of this Schedule 1"
OUR CLIENT'S CLAIM
1. CLAUSE 2.2
It is our view that, Clause 2.2 is subject to Schedule 1 Clause 2. Therefore,
even though Clause 2.2 does not explicitly state that the goodwill of the
Company is comprised of the sum of (pound)1 plus a sum equal to the aggregate
value of the NCVA and VA as at 30 November 1997, this is implicit because
Schedule 1 Clause 2.2 provides for an aggregation of the NCVA and the VA as at
that date.
It is also our view that either or both the NCVA or the VA may have a negative
value on the basis that the pro forma calculations set out in Schedules 2 and 3
of the Supplemental Agreement in relation to the NCVA and the VA respectively
contain negative values for a number of the amounts shown in column 8 (WIP) of
those Schedules.
The final schedule for the NCVA prepared pursuant to Clause 2 of the
Supplemental Agreement shows the aggregate of the figures in column 8 (WIP) as
(pound)42,021.
-3- Continued..../
<PAGE>
However, the amount for the NCVA has been capped at (pound)20,000 by that
Clause.
The final schedule for the VA prepared pursuant to Clause 2 of the Supplemental
Agreement shows the aggregate of the figures in column 8 (WIP) as minus
(pound)22,843. As set out above, it is possible for this amount to be a negative
value.
The sum equal to the aggregate of these two amounts ((pound)20,000 + minus
(pound)22,343) is minus (pound)2,843.
The consideration for the purchase of the goodwill of the Company pursuant to
Clause 2,2 is therefore calculated as follows:
consideration provided for (pound)
in clauses 2,2 and
Schedule 1 Clause 2 1
sum equal to the aggregate
of the NCVA and VA as at
30 November 1997 (2,843)
TOTAL (2,842)
It is therefore our client's position that the Company has no goodwill and that
the consideration for the purchase of the goodwill of the Company pursuant to
Clause 2.2 is nil.
2. SCHEDULE 1 CLAUSE 4
As set out above Schedule 1 Clause 2 provides that the sum equal to the
aggregate of the NCVA and VA is:-
"Calculated and payable in accordance with Clause 4 of Schedule 1."
Schedule 1 Clause 4.1.1 provides that:-
"The Purchaser shall make payments on account to the Vendor in six
equal three monthly installments, the first such instalment being paid
on 12 September 1996, and the subsequent instalments being paid at
three monthly intervals thereafter."
Schedule 1 Clause 4.1.2 provides that:
"The amount of each instalment shall be (pound)3,632.50 in respect of
the Vendor's Amount and (pound)1,666.66 in respect of the New Contracts
Vendor's Amounts".
Schedule 1 Clause 4.1.3 provides that:
"The balance of the Vendor's Amounts and the New Contracts Vendor's
Amounts shall be paid by the Purchaser to the Vendor or reimbursed by
the Vendor to the Purchaser (as appropriate) on the date 28 days after
the last of
-4-
<PAGE>
the six three month periods referred to above".
Schedule 1 Cause 4.2 then sets out a number of factors which may affect the
payment of the instalments under Schedule 1 Clause 4.1. The only provision of
Schedule 1 Clause 4.2 which our client relies upon is 4.2.1:
"if either of the schedules produced by the Purchaser pursuant to
clauses 3.1.1 and 3.1.2 of this Schedule 1show a position where the
aggregate total of column 8 is less than (pound)21,795 in the case of
that produced pursuant to clause 3.1.1 or is less than (pound)10,000
in the case of that produced pursuant to clause 3.1.2, the Purchaser
shall be entitled to suspend payment of the relevant instalments."
Pursuant to this clause our client withheld two instalments to be paid under
Schedule 1 Clause 4.1.2.
It is our view that the provisions for payment of the NCVA and the VA in
Schedule 1 Clauses 4.1 and 4.2 are consistent with the method of calculating the
consideration for the purchase of the goodwill of the Company under Clause 2.2
and Schedule 1 Clause 2.
Schedule 1 Clause 4.1.2 differentiates between the amount of each instalment to
be paid for the NCVA and the VA respectively. This does not prevent the
aggregation of the two amounts once the final schedules have been produced
pursuant to Clause 2. Further, Schedule 1 Clause 4.1.3 provides that the balance
of the VA and the NCVA shall be paid by the Purchaser to the Vendor or
reimbursed by the Vendor to the Purchaser "as appropriate". The use of the word
"balance" in the singular implies that one amount will either be paid by the
Purchaser or reimbursed by the Vendor when the final schedules have been
produced. The words "as appropriate" suggest that a further payment will be made
by the Purchaser if the balance of the NCVA and the VA is more than the amount
paid on account or that the Vendor will reimburse the Purchaser where the amount
paid on account is more than the balance of the NCVA and the VA. This Supports
our view that the NCVA and the VA are to be aggregated to calculate the
consideration to be paid under clause 2.2.;
THE GROUNDS FOR OUR CLIENT'S CLAIM
It is our view that our client is entitled to reimbursement of the full amount
of (pound)21,196.64 which they have paid on account for the purchase of the
goodwill of the Company.
There are two grounds on which our client's claim for the reimbursement of the
full amount paid on account is based:-
(i) As the goodwill of the Company is nil, as calculated above,
your client is under a contractual obligation pursuant to
Schedule 1 Clause 4.1.3 to reimburse to our client the full
amount it has paid on account of the purchase of the goodwill.
Your client is in breach of that obligation.
(ii) Pursuant to Clause 2,1 of the. Sale Agreement your client is
under a
-5-
<PAGE>
contractual obligation to sell its right, title and interest
in the assets of the Company, which includes its goodwill. Our
client has paid (pound)21,196.64 on account of the purchase of
the goodwill. The Company has no goodwill therefore our client
has received nothing in return for this payment. Your client
is therefore in breach of its obligations under, inter alia,
Clause 2.1 of the Sale Agreement.
Please confirm that within 14 days of the date of this letter that your client
will reimburse the full amount of (pound)21,196.64 to our client plus interest
under Clause 7 of the Supplemental Agreement. In the event that we do not
receive your confirmation by the above time limit we will advise our client to
commence proceedings against your client. -
Yours faithfully
-6-
<PAGE>
The Paddock
Hambridge Road
Newbury
RG 14 5TQ
England
[SIL logo] Tel: +(44) 07000 SPACE IN
+(44) 07000 772234
+(44) (0) 1635 46254
SPACE INNOVATIONS LIMITED Fax: +(44) (0) 1635 38785
E-mail: [email protected]
Web Site: http://www.sil.com/
Mr Duncan Quinan 22 September 1998
BIRD & BIRD
Solicitors Our ref: AKW/GS
90 Fetters Lane
LONDON EC4A 1JP
Dear Mr Quinan,
SATELLITES INTERNATIONAL LIMITED (IN ADMINISTRATIVE RECEIVERSHIP)
Thank you for your letter of 4 September with the draft letter before action.
The Board has now reviewed these letters and decided that we should instruct you
formally to issue the letter before action - we have no comments on the draft.
I look forward to your confirmation that the letter has been sent and to
receiving a copy.
Many thanks.
Yours sincerely,
/s/ A.K. Ward
A.K. Ward
Managing Director.
Registered in England No 3193413 - Registered Office as above
<PAGE>
Lloyds Bank Plc
Lloyds Bank Third floor
Commercial 5 Bridge Street
Service Newbury
Berkshire RG14 5BQ
Telephone: 01635 521955
Fax: 01635 580615
The Directors
Space Innovations Limited
The Paddock
Hambridge Road
NEWBURY RGI4 5TQ
Your Ref: OurRef: PGR/SS 18 August, 1998
Dear Sirs
OVERDRAFT AND OTHER FACILITY
We Lloyds Bank Plc (the "Bank") are pleased to offer to Space Innovations
Limited an overdraft facility on account number 2028056 on the following terms
and conditions.
AMOUNT
The maximum aggregate amount outstanding under the facility at any one time
(calculated on the basis of cleared funds) shall not exceed (pound)50,000.
AVAILABILITY
Any amounts from time to time owing under to facility are repayable on demand
but it is the Bank's present intention to make the facility available until 28
February, 1999. All moneys from time to time owing to the Bank under this
facility shall be repaid no later than this date or such later date as may from
time to time be advised in writing by the Bank. The amounts owing at any time
may include interest, costs or charges debited to the account in accordance with
the terms of this letter.
INTEREST
Interest is calculated on the cleared daily balance of the account and will- be
payable on amounts owing up to the aforesaid limit at 3 1/2% per annum over the
Bank's Base Rate from time to time (currently 11% per annum in total).
Interest will be payable on amounts owing in excess of the agreed limit at
Lloyds Bank Unauthorised Overdraft Rate (presently 13%).
Interest will be debited to the account monthly in arrears (normally on the 19th
of each month or on the next working day) and additionally on the date upon
which the facility ceases to be available.
<PAGE>
-2-
The Bank's Base Rate may be varied (either up or down) by the Bank at any time.
Notice of changes will be displayed in the branch of the Bank where your account
is held.
COSTS AND CHARGES
Charges will be payable on the account monthly as follows:
70p per entry.
These charges will be debited to the account and may be varied by the Bank at
any time and notice of changes will be advised to you.
The following fees are payable.
Arrangement fee (pound) 500 (to be taken on return of the Facility Letter)
Security fee (pound) 190 (to be taken on perfection of the security)
All costs and expenses incurred by the Bank in creating the security referred to
below in excess of the security fee shall be debited to the account under advice
to you.
All costs and expenses incurred by the Bank in preserving or enforcing the
security referred to below shall be debited to the account under advice to you.
SECURITY
It is a condition of the facility and of the Other Facility referred to below
that amounts owing shall be secured by the following. Any security which is not
already in place is to be provided to the Bank in a form acceptable to the Bank.
An unlimited debenture from the Company.
A deed of postponement of Directors Loan of (pound)10,000 from Antony Kim Ward.
A deed of postponement of Directors Loan of (pound)10,000 from Anthony James
Barrington Brown.
A deed of postponement or Directors Loan of (pound)11,000 from John Leonard
Culhane.
A deed of postponement of Directors Loan of (pound)10,000 from Dennis Robert
Brindley.
A deed of postponement of Directors Loan of (pound)5,000 from Joan Ellen
Holloway.
FINANCIAL INFORMATION
Whilst the facility or the Other Facility remain available you should provide to
the Bank copies of any financial information that the Bank may from time to time
reasonable request, including:
(a) your audited annual accounts, and
<PAGE>
-3-
(b) your monthly management accounts, to include aged debtor analysis,
as soon as possible after the end of the period to which they relate which shall
not be later than 150 days in respect of your annual accounts or 30 days in
respect of your management accounts from the end of each relevant period.
(c) The figures so provided should demonstrate that the Company's. good book
debts under 90 days equal or exceed 400% of the Company's liability to the Bank.
OTHER FACILITY
In addition to the overdraft facility we are pleased to offer to you a Telepay
facility of (pound)100,000 to cover sterling payment instructions telephoned by
you to agents of the Bank in order for the payments to be made by automated
means. The limit detailed above is the maximum total value of such instructions
for payment during any one month.
This additional facility will be available upon such terms and conditions as
shall from time to time be specified by the Bank and may be cancelled by the
Bank at any time, but it is the Bank's present intention to keep this facility
in place for the period of availability of the overdraft facility. Your
liability in respect of any utilisation of this facility may, however, extend
beyond such period of availability.
PERIOD OF OFFER
Please confirm your acceptance of the facilities offered by returning the
attached duplicate of this letter with the acknowledgement signed in accordance
with the bank mandate currently held by Bank. If such confirmation is not
received by Lloyds Bank Commercial Service, Newbury office by 8 September, 1998,
the offer will lapse.
Your faithfully
For and on behalf of Lloyds Bank Plc
/s/ Peter Rose
Peter Rose
Manager
Enc
<PAGE>
EXHIBIT "A"
<PAGE>
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
August 6, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9668
In the Matter of ORDER INSTITUTING PUBLIC
Spacedev, Inc. CEASE-AND-DESIST
and James W. Benson, PROCEEDINGS PURSUANT TO
SECTION 8A OF THE
Respondents. SECURITIES ACT OF 1933
AND SECTION 21C
OF THE SECURITIES
EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission ("Commission") deems it
appropriate and in the public interest that public cease-and-desist proceedings
be, and they hereby are, instituted pursuant to Section 8A of the Securities Act
of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of
1934 ("Exchange Act") against Spacedev, Inc. ("Spacedev") and James W. Benson
("Benson").
II.
As the result of an investigation, the Division of Enforcement ("the
Division") alleges that:
A. Spacedev, Inc. is a publicly-held Colorado corporation headquartered in San
Diego, California. Spacedev is the surviving corporation of the October 1997
merger between a privately-held, Colorado-based holding company named Spacedev,
LLC, and a Colorado shell company named Pegasus Development Group, Inc. In
approximately April 1998, Spacedev made a public offering of its stock pursuant
to Rule 504 of Regulation D under the Securities Act. At all relevant times
Spacedev's common stock was quoted on the OTC Bulletin Board.
B. James W. Benson, age 53, who maintains residences in both Virginia and
Colorado, has been chairman of Spacedev's board of directors since the company's
inception.
<PAGE>
C. Spacedev proposes to engage in the business of commercial space exploration
and development. The company intends to construct and launch an unmanned
spacecraft (the Near Earth Asteroid Prospector or "NEAP") to a targeted near
earth asteroid for the purpose of collecting scientific data. Spacedev intends
to obtain revenue from this project by selling space on the NEAP module to
scientists seeking to transport their own instruments to the asteroid, and by
selling data obtained by instruments attached to the NEAP module by Spacedev.
Spacedev plans to launch the NEAP module no earlier than 2000.
D. From about January 1998 through June 1998, Benson and Spacedev violated
Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and
Rule l0b-5 thereunder in that, directly or indirectly, in or in connection with
the offer, purchase or sale of securities by use of the means or
instrumentalities of transportation or communication in interstate commerce or
by use of the mails, they employed devices, schemes or artifices to defraud;
obtained money or property by means of untrue statements of material facts or
omissions to state material facts necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading or engaged in transactions, practices, or courses of business which
would or did operate as a fraud or deceit upon the sellers and purchasers of
securities, namely common stock of Spacedev.
E. As a part of and in furtherance of the conduct described above in
subparagraph II.D., from approximately January 1998 through June 1998, in press
releases, a newsletter, and over the internet, Spacedev and Benson made untrue
statements of material facts and omitted to state material facts to the public,
to investors and to prospective investors, including those in the Rule 504
offering. In this regard, Spacedev and Benson:
1. Projected for 1998 revenues of $l0 million and earnings of $2
million. These projections had no reasonable basis and were false and misleading
because Benson and Spacedev did not disclose numerous contingencies to its
revenue projections, such as the need for approval of its potential customers'
projects by the National Aeronautics and Space Administration ("NASA");
2. Falsely stated that Spacedev had an agreement with NASA for the use
of its Deep Space Network, a satellite communication system necessary to
accomplish Spacedev's NEAP mission; and
3. Misrepresented the nature of Spacedev's financing agreement with a
broker-dealer, and continued to publicly assert the existence of the agreement
after it was terminated.
III.
In view of the allegations made by the Division, the Commission deems
it necessary and appropriate in the public interest that public cease and desist
proceedings be instituted to determine:
A. Whether the allegations set forth in Section II hereof are true and, in
connection therewith, to afford the Respondents an opportunity to establish any
defenses to such allegations; and
2
<PAGE>
B. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the
Exchange Act, the Respondents should be ordered to cease and desist from
committing or causing violations of and any future violations of Section 17(a)
of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder.
IV.
IT IS HEREBY ORDERED that a public hearing for the purpose of taking
evidence on the questions set forth in Section III hereof be convened not
earlier than thirty (30) days and not later than sixty (60) days from service of
this Order, at a time and place to be fixed, and before an Administrative Law
Judge to be designated, by further Order as provided by Rule 200 of the
Commission's Rules of Practice, 17 C.F.R. ss. 201.200.
IT IS FURTHER ORDERED that Respondents file an Answer to the
allegations contained in this Order within twenty (20) days after service upon
them of said Order as provided by Rule 220 of the Commission's Rules of
Practice, 17 C.F.R. ss. 201.220.
If a Respondent fails to file the directed Answer or fails to appear
at a hearing after being duly notified, he may be deemed in default and the
proceedings may be determined against him upon consideration of the Order, the
allegations of which may be deemed to be true as provided by Rules 155(a), 310
and 220 of the Commission's Rules of Practice, 17 C.F.R. ss.201.155(a), 201.310,
and 201.220.
This Order shall be served upon the Respondents personally or by
certified mail forthwith.
In the absence of an appropriate waiver, no officer or employee of the
Commission engaged in the performance of investigative or prosecuting functions
in this or any factually related proceeding will be permitted to participate or
advise in the decision upon this matter except as witness or counsel in
proceedings held pursuant to notice. Since this proceeding is not "rule making"
with the meaning of Section 4(c) of the Administrative Procedure Act, it is not
deemed subject to the provisions of that Section delaying the effective date of
any Commission action.
By the Commission.
/s/ Jonathan G. Katz
Jonathan G. Katz
Secretary
3
<PAGE>
SERVICE LIST
------------
Rule 141 of the Commission's Rules of Practice provides that the
Secretary, or another duly authorized officer of the Commission, shall serve a
copy of the Order Instituting Public Cease-and-Desist Proceedings Pursuant to
Section 8A of the Securities Act of 1933 and Section 21C of the Securities
Exchange Act of 1934 on each person named as a party in the order and their
legal agent.
The attached Order Instituting Public Cease-and-Desist Proceedings
Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the
Securities Exchange Act of 1934, has been sent to the following parties and
other persons entitled to notice:
Honorable Brenda P. Murray
Chief Administrative Law Judge
Securities and Exchange Commission
450 Fifth Street, NW, STOP 11-6
Washington, D.C. 20549
Division of Enforcement
Securities and Exchange Commission
Attn: Charlotte L. Buford
Branch of Regional Office Assistance
450 Fifth Street, NW, STOP 8-9
Washington, D.C. 20549
Phillip F. Smith, Jr.
Securities and Exchange Commission
Central Regional Office
1801 California Street, Suite 4800
Denver, Colorado 80202-2648
Spacedev, Inc.
James W. Benson, Chairman
7940 Silverton Avenue, Suite 202
San Diego, California 92126
Mr. James W. Benson
Spacedev, Inc.
7940 Silverton Avenue, Suite 202
San Diego, California 92126
Chris Popov, Esq.
Popov, McCulldgh & Cohan LLP
4180 La Jolla Village Drive, Suite 315
La Jolla, California 92037
Attorney for Respondents
James W. Benson and Spacedev, Inc.
<PAGE>
SpaceDev logo
Headquarters
7940 Silverton Ave., Suite 202
San Diego, CA 92126
619.684.3570 fax: 619.693.6932
International Business Development Office
1515 Wilson Blvd., Suite 700
Arlington, VA 22209
703.841.2100 fax: 203.341.0663
[email protected] www.SpaceDev.com
FOR IMMEDIATE RELEASE: August 10,1998
CONTACT: Jim Benson Shirley Thompson, President
CEO Mike Trueblood, Account Executive
SpaceDev, Inc. Carl Thompson Associates, Inc.
(619) 684-3570 (800) 959-9677
SPACEDEV CEO ISSUES STATEMENT ON SEC INQUIRY
San Diego, CA - Jim Benson, SpaceDev (OTC BB: SPDV) founder and president,
responded today to a Securities and Exchange Commission (SEC) administrative
proceeding filed on Thursday, August 6, 1998.
"SpaceDev was disappointed to learn that the SEC has decided to institute an
administrative proceeding," said Mr. Benson. "While the Company disagrees with
the views expressed by the SEC in its Order Instituting Proceedings, the Company
had attempted to resolve the issues raised by the SEC through a settlement. The
Company now intends to vigorously contest the SEC's allegations."
Mr. Benson compared today's action by the SEC to "shooting at ants with an
elephant gun," and expressed confidence that ultimately the SEC's case would be
dismissed and that the Company would be vindicated.
SpaceDev, the world's first commercial space exploration and development
company, intends to launch the first privately financed spacecraft to land on
another planetary body. SpaceDev is selling rides for scientific instruments to
governments and companies to transport their instruments and experiments,
through deep space to a near earth asteroid. SpaceDev intends to sell the data
acquired by its instruments as commercial products. Colorado-based SpaceDev has
offices in San Diego, CA and Washington, D.C.
EXCEPT FOR HISTORICAL FINANCIAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT ARE DEPENDENT ON
CERTAIN RISKS AND UNCERTAINTIES INCLUDING BUT NOT LIMITED TO SUCH FACTORS AS
MARKET DEMAND PRICING, AND CHANGES IN WORLDWIDE ECONOMIC CONDITIONS.
Note: News releases and other information on SpaceDev can be accessed at
http://www.spacedev.com or http://www.ctaonline.com/spdv on the Internet
###
8
MUTUAL RELEASE AND RESCISSION OF AGREEMENT
This MUTUAL RELEASE AND RESCISSION OF AGREEMENT, (the "Agreement")
executed on December 17, 1999, between:
(i) Space Innovations Limited, a company incorporated in England and
Wales, ("SIL") of The Paddock, Hambridge Road, Newbury,
Berkshire RG14, England;
(ii) Persons whose names and address are shown in Exhibit A ("Former
SIL Shareholders");
(iii) SpaceDev, Inc., a company incorporated in Colorado, U.S.A.,
("SpaceDev") of 13855 Stowe Dr., Poway, California, U.S.A.; and
(iv) James W. Benson, an individual
The purposes of this Agreement is intended to effect the extinguishment
of obligations as herein designated.
RECITALS
WHEREAS, Disputes and differences have arisen between the above
referenced Parties with respect to that certain agreement in writing entered
into between the parties on or about October 1, 1998, and entitled "Common Stock
Exchange Agreement" (hereinafter the "Stock Agreement"). Said Stock Agreement is
incorporated by reference, and is hereby made a part of this release;
WHEREAS, The parties desire to resolve their disputes and differences,
and wish to express their interest in working to cooperatively develop mutually
beneficial and positive future working relations;
WHEREAS, The parties recognize that the principal basis for the
disputes and differences underlying this Agreement relate to statutory and
regulatory rules, including those statutes and regulations concerning the
transfer of technology overseas and as between parent and subsidiary
corporations, which adversely effect the ability of the Parties to realize the
benefits contemplated upon execution of the Stock Agreement;
WHEREAS, The parties have agreed to execute this Agreement in
settlement of such disputes and differences with the intent to allow SpaceDev
and SIL to separately continue their business and operations.
WHEREAS, The parties accept that various aspects of the Stock Agreement
have not been performed including the fact that SpaceDev has not been registered
as the holder of the shares in SIL and SpaceDev has not delivered shares to
former SIL shareholders in accordance with the Stock Agreement. Also SIL shares
have not been forwarded to SpaceDev in accordance with the Stock Agreement.
<PAGE>
ARTICLE 1
RELEASE
1.1 In consideration of the mutual relinquishment of their respective
legal rights with reference to the above-mentioned disputes and differences, and
in consideration of the execution of this mutual release, covenants by the
parties and the payment of Two-Hundred and Eight Thousand pounds
((pound)208,000.00 U.K.) according to the terms of the Secured Promissory Note
attached as Exhibit B and incorporated herein by this reference, each Party
expressly releases the other, together with its officers, directors, employees,
trustees, successors, assigns, agents, employees and legal representatives, from
all liability for claims and demands arising out of the Stock Agreement or out
of the management or operation of SpaceDev or SIL up to the date of this
Agreement.
1.2 The Parties acknowledge that they may hereafter discover facts in
addition to or different from those which they now know or believe to be true
with respect to the Stock Agreement, or the subject matter of this Agreement,
but it is their intention to fully and finally and forever settle and release
all matters, disputes and differences, known and unknown, suspected and
unsuspected, which now exist, may exist or heretofore have existed between them.
In furtherance of this intention, the releases herein shall be and will remain
in effect as full and complete general releases, except as otherwise provided
herein, notwithstanding the discovery or existence of any such additional or
different facts.
ARTICLE 2
RESCISSION OF CONTRACT AND COVENANTS
2.1 The Parties mutually agree that the above-mentioned Stock Agreement
entered into between the Parties on or about October 1, 1998, shall be and is
hereby rescinded, terminated and cancelled as of the date first written above.
2.2 Receipts from the assignment of proceeds from the FEDSAT Contract
shall be used to pay down the existing First National Bank ("FNB") line of
credit due and outstanding (principal, accrued interest, and other costs) from
the date of this Agreement. The line of credit shall remain unchanged as
existing between FNB and SIL. SIL agrees that the existing balance will be
reduced by twenty-five percent (25%) of the value of each FedSat invoice payment
processed through the said line of credit until the line is paid down to zero.
SIL agrees that it shall pay all interest expense associated with balance on the
line of credit during the payoff process.
2.3 Upon the full payment of all outstanding amounts related to the
line of credit at First National Bank or any other applicable financial
institution, SIL agrees to cause the extinguishment of any guarantee or
2
<PAGE>
indemnity by SpaceDev and or James W. Benson as the guarantor or indemnitor
provided that, if Clause 2.2 is complied with, neither SpaceDev nor James W.
Benson shall terminate or attempt to terminate or revoke their existing
guarantees in respect to the line of credit.
2.4 All proprietary information, IPR and all technical documentation
previously supplied to SpaceDev or SIL and copies thereof, shall be returned to
the originating party within ten (10) days from the date first written above.
ARTICLE 3
GENERAL PROVISIONS
3.1 In entering and making this Agreement, the Parties assume the risk
of any mistake of fact or law. If the Parties, or any of them, should later
discover that any fact they relied upon in entering this Agreement is not true,
or that their understanding of the facts or law was incorrect, the Parties shall
not be entitled to seek rescission of this Agreement by reason thereof. This
Agreement is intended to be final and binding upon the Parties regardless of any
mistake of fact or law.
3.2 Neither the negotiation nor the execution of this Agreement, nor
anything contained or incorporated herein shall be deemed or otherwise alleged
to constitute, any admission or concession of liability or wrongdoing on the
part of any Party, or any other form of admission with respect to any matter,
thing or dispute whatsoever. Any such liability or wrongdoing is expressly
denied.
3.3 Each Party warrants that it is represented by competent counsel
with respect to this Agreement and all matters covered by it, and it has been
fully advised by said counsel with respect to its rights and obligations and
with respect to the execution of this Agreement. SIL and the former SIL
Shareholders are not conversant on California Laws.
3.4 Each Party warrants that no promise, inducement or agreement not
expressed herein has been made in connection with this Agreement. This Agreement
constitutes the entire agreement between the Parties and supercedes and replaces
all prior negotiations or proposed agreements, written or oral.
3.5 This Agreement may not be altered, amended, modified or otherwise
changed in any respect whatsoever except by a writing duly executed by an
authorized representative of each of the Parties.
3.6 The language of this Agreement shall be construed as a whole,
according to its fair meaning and intendment, and not strictly for or against
any Party, regardless of who drafted or was principally responsible for drafting
the Agreement or any specific term or condition hereof. This Agreement shall be
deemed to have been drafted by all Parties, and no Party shall urge otherwise.
3
<PAGE>
3.7 The headings in this Agreement are for convenience only. They in no
way limit, alter or affect the meaning of this Agreement.
3.8 This Agreement shall be construed and enforced pursuant to the laws
of the State of California and SpaceDev warrants that this Agreement is assumed
enforceable under California laws.
3.9 Should any provision of this Agreement be held illegal, such
illegality shall not invalidate the whole of this Agreement; instead, the
Agreement shall be construed as if it did not contain the illegal part, and the
rights and obligations of the Parties shall be construed and enforced
accordingly.
3.10 This Agreement may be executed in multiple originals, each of
which is equally admissible in evidence and shall be deemed to be one and the
same instrument. This Agreement shall not take effect until each Party has
signed a counterpart. It shall only be necessary to produce one of such
counterpart in making proof of this Agreement. It is further agreed that a
facsimile signature shall be deemed an original.
3.11 Each Party shall pay its own expenses incident to the transaction
contemplated by this Agreement, including but not limited to the fees, expenses
and disbursements of their respective advisors, accountants and counsel.
Further, each Party shall pay its own costs, including any regulatory costs, tax
or duty associated with the transfer or cancellation of any shares contemplated
by this Agreement.
3.12 Each Party represents and warrants that it has the full power and
authority to enter into this Agreement and to perform all transactions, duties
and obligations herein set forth. Each signatory to this Agreement who signs on
behalf of a Party represents and warrants that he or she has the authority to
sign on behalf of that Party.
3.13 Each Party recognizes that certain Former SIL Shareholders who are
intended signatories to this Agreement currently live abroad, outside of the
United States and/or the United Kingdom. Further, each Party recognizes that
receipt of the signatures from said Former SIL Shareholders may delay execution
of the agreement by all Parties, and that accordingly provisions are
appropriately made to address and ameliorate the effects of any delay.
Therefore, the following additional representations and agreements are made.
a) SIL represents, by and through the signature of its agent
below, that all Former SIL Shareholders approve of this Agreement, including all
those Former SIL Shareholders living abroad and/or those whose signatures are
not obtained by Friday, December 17, 1999. Further, SIL represents it will
exercise its best efforts to secure the signatures of all Former SIL
Shareholders, including those living abroad, and that said signatures shall be
obtained by SIL, at its expense, no later than 12:00 am Greenwich, England time
December 24, 1999. Until such time as SIL is able to obtain signatures from all
Former SIL Shareholders, SIL agrees that it will not recapitalize, or offer any
4
<PAGE>
shares of its stock for sale without the express written consent SpaceDev.
Such consent from SpaceDev shall not be unreasonably withheld.
b) Each Party signing this Agreement, whether such signature
is provided in an individual or representative capacity, agrees to be bound and
beholden to the Agreement as against every other Party who has signed this
Agreement, notwithstanding the absence of the signature(s) of one or more Former
SIL Shareholders; provided however that this provision shall remain ineffective
until SIL, SpaceDev and a majority of Former SIL Shareholders have signed this
Agreement.
3.14 On or about the execution date of this Agreement, SpaceDev shall
issue a press release or make a public statement concerning the mutual release
and rescission of the Stock Agreement which shall be previously agreed by SIL as
to its contents and wording. Neither party shall make any announcement of such
transaction or disclose the existence of and/or particulars of any negotiations
related thereto, including, but not limited to, the terms, conditions, or other
facts related to this Agreement or the Stock Agreement without the express
written approval and consent of the other parties. The former SIL Shareholders
hereby authorize SIL to give such consent on their behalf. Notwithstanding the
above condition, should SpaceDev reasonably believe that any information
regarding this Agreement or its prior dealings with SIL must be disclosed due to
SEC Regulations or Rulings, in the sole interpretation of SpaceDev, then
SpaceDev shall be entitled to make any such required public announcement without
the requirement of written consent of SIL. Notwithstanding the above condition,
should SIL reasonably believe that any information regarding this Agreement or
its prior dealings with SpaceDev must be disclosed due to any United Kingdom
Regulations or Rulings, in the sole interpretation of SIL, then SIL shall be
entitled to make any such required public announcement without the requirement
of written consent of SpaceDev.
3.15 Upon the execution of this Agreement, the Parties agree that it
shall not make any defamatory or disparaging statements, either orally or in
writing, about the parties to this Agreement, its businesses, products and
services or officers or directors of the parties or affiliates or subsidiaries.
The word "disparage" shall mean making comments to a person not a party to this
Agreement which would be actionable under legal principles of defamation or
which may materially cause damage to the reputation of a party to this
Agreement.
IN WITNESS HEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officers as of the day and year first
written above.
SPACE INNOVATIONS LIMITED
a United Kingdom Corporation
- ------------------------------------
Director
5
<PAGE>
/s/ Guglielmo Aglietti
- ------------------------------------
Guglielmo Aglietti
/s/ Javad Anzalchi
- ------------------------------------
Javad Anzalchi
/s/ Antony James Barrington Brown
- ------------------------------------
Antony James Barrington Brown
/s/ Dennis Robert Brindley
- ------------------------------------
Dennis Robert Brindley
/s/ Mark Richard Cantrill
- ------------------------------------
Mark Richard Cantrill
/s/ John Leonard Culhane
- ------------------------------------
John Leonard Culhane
/s/ Robert James Ely
- ------------------------------------
Robert James Ely
/s/ Fergus Berkley Stewart Glen
- ------------------------------------
Fergus Berkley Stewart Glen
/s/ Gary Simon Heelas
- ------------------------------------
Gary Simon Heelas
/s/ Joan Ellen Holloway
- ------------------------------------
Joan Ellen Holloway
/s/ Horace Kit Keung Ngan
- ------------------------------------
Horace Kit Keung Ngan
/s/ Roger Stuart Shearman
- ------------------------------------
Roger Stuart Shearman
6
<PAGE>
/s/ Anthony Kim Ward
- ------------------------------------
Anthony Kim Ward
/s/ Peter Charles Watson
- ------------------------------------
Peter Charles Watson
SPACEDEV, INC.,
a Colorado corporation
/s/ James Benson
- ------------------------------------
James Benson, President
James Benson, an individual
/s/ James Benson
- ------------------------------------
JAMES BENSON
7
<PAGE>
EXHIBIT A
FORM SPACE INNOVATIONS LIMITED SHAREHOLDERS
-------------------------------------------
<TABLE>
<CAPTION>
NAME ADDRESS
- ---------------------------------- -------------------------------------------------------
<S> <C>
Guglielmo Aglietti 18 Litchfield Road
Southampton, Hants
SO18 2BL
- ---------------------------------- -------------------------------------------------------
Javad Anzalchi 89 Thornbridge Road, Iver Heath,
Bucks SL0 0QB
- ---------------------------------- -------------------------------------------------------
Antony James Barrington Brown Peel Cottage, Butt Street, Ludgershall, Andover,
Hants SP11 9QQ
- ---------------------------------- -------------------------------------------------------
Dennis Robert Brindley Greenfields, Water Lane, Thatcham, Newbury, Berks
RG19 8SH
- ---------------------------------- -------------------------------------------------------
Mark Richard Cantrill 16 Chapel Court, Hungerford, Berks RG17 0HW
- ---------------------------------- -------------------------------------------------------
John Leonard Culhane 24 Warnham Road, Horsham, Sussex RH12 2QU
- ---------------------------------- -------------------------------------------------------
Robert James Ely 4 Hurst Close, Wallingford, Oxon OX10 9BQ
- ---------------------------------- -------------------------------------------------------
Fergus Berkley Stewart Glen "Talisker", Graces Lane, Chieveley, Newbury, Berks
RG20 8XG
- ---------------------------------- -------------------------------------------------------
Gary Simon Heelas 10 Windermere Road, Reading
Berks RG2 7HP
- ---------------------------------- -------------------------------------------------------
Joan Ellen Holloway Copperfield, Wildhern, Andover, Hampshire SP11 OJE
- ---------------------------------- -------------------------------------------------------
Horace Kit Keung Ngan 64 Kennedy Road, Hong Kong
- ---------------------------------- -------------------------------------------------------
Roger Stuart Shearman 8 Amport Close, Lytchpit, Basingstoke RG24 8UU
- ---------------------------------- -------------------------------------------------------
Anthony Kim Ward 31 Sutton Wick Lane, Drayton, Abingdon, Oxon OX14 4HH
- ---------------------------------- -------------------------------------------------------
Peter Charles Watson 6 Aird Close, Fairacres, Woolton Hill, Newbury, Berks
RG20 9UH
- ---------------------------------- -------------------------------------------------------
</TABLE>
8
<PAGE>
EXHIBIT B
PROMISSORY NOTE
---------------
(pound)208,000.00 DECEMBER 17, 1999
1. AGREEMENT TO PAY. As stated in this Note, for value received, Space
Innovations Limited, a company incorporated in England and Wales, ("Maker").
promises to pay to SpaceDev, Inc., a Colorado corporation ("Holder"), the
principal sum of Two Hundred Eight Thousand Pounds (pound)208,000.00), in
twenty-four (24) monthly equal installments of (pound)8,666.67 beginning March
20, 2000.
2. PREPAYMENT. The privilege is reserved to make, at any time(s), without
penalty or charge, prepayments of the amount due and outstanding.
3. PROMPT PERFORMANCE Upon failure to make a punctual payment required by
this Note, or upon the breach of Maker under the Mutual Release and Rescission
of Agreement of even date herewith. Holder shall give Maker seven (7) days
notice of Holder's intent to declare this Note due in full. If Maker does not
make the required payment within thirty (30) days, then, without further notice
to Maker, Holder may declare the Note due in full and take the appropriate
action deemed by Holder to be in its best interest to enforce the terms of this
Note. Waiver of the right to so accelerate the maturity of obligations hereunder
will be effective only if set forth in a written instrument signed by Holder;
failure to exercise, or delay in exercising, the right will not be construed as
a waiver of the right.
4. LATE CHARGE. Maker acknowledges that if any amount is not paid when due,
Holder will incur additional costs. The exact amount of these additional costs
(which include, but are not limited to, processing and accounting charges as
well as loss of the use of the money due) is difficult and impracticable to
assess. Maker acknowledges that a sum equal to 4% of the late payment is, under
the circumstances existing at the time this Note is made, a reasonable late
charge, and Maker will pay the late charge when due. The late charge will become
immediately due ten (10) days after the mailing to Maker, or any other person
known by Holder to be liable for the payment of this Note, of written notice of
the delinquency of the payment.
5. LAWFUL MONEY, WAIVER, ETC. Payments due under this Note will be paid in
lawful money of the United Kingdom. Every party who is now or hereafter becomes
liable for the payment of this Note waives diligence, presentment. protest,
demand for payment, notice of protest. dishonor and notice of nonpayment of this
Note.
6. ATTORNEYS' FEES. If Holder (i) commences a judicial action or
nonjudicial proceeding on this Note or (ii) engages an attorney to appear in any
judicial action or nonjudicial proceeding commenced by any person concerning
this Note. Maker will pay reasonable attorneys' fees.
7. GENERAL PROVISIONS. "Holder" includes each successor holder of this
Note. Captions in this Note are for convenience only and do not define, describe
or limit the scope or intent of this Note.
MAKER: HOLDER:
SPACE INNOVATIONS LIMITED SPACEDEV, INC.
/s/ Dennis Brindley /s/ James W. Benson
- ----------------------------- -----------------------------
Dennis Brindley, Director James W. Benson, Chairman
SHARE ACQUISITION AGREEMENT
by and among the shareholders of
INTEGRATED SPACE SYSTEMS, INC.,
a California corporation
and
SPACEDEV, INC.,
a Colorado corporation
February 7, 1998
================================================================================
<PAGE>
SHARE ACQUISITION AGREEMENT
AGREEMENT made and entered into this 7th day of February, 1998 by and
among Philip E. Smith ("Smith"), Thomas W. Brown ("Brown"), Jack A. Rubidoux
("JAR"), Wes M. Dreyer ("Dreyer"), Frank L. Macklin ("Macklin") and Michael G.
Veno ("Veno") (Smith, Brown, JAR, Dreyer, Macklin and Veno are collectively
referred to as "ISS Shareholders" unless otherwise specifically identified) and
SpaceDev, Inc., a Colorado corporation ("SpaceDev").
RECITALS
WHEREAS, the ISS Shareholders own in the aggregate all of the issued
and outstanding shares of capital stock (the "ISS Shares") of Integrated Space
Systems, Inc., a California corporation ("ISS"); and
WHEREAS, the ISS Shareholders and SpaceDev have entered a letter of
intent dated as of December 3, 1997 (the "Letter of Intent") setting forth the
principal terms and conditions upon which the ISS Shareholders would exchange
and SpaceDev would acquire, directly or through a wholly owned subsidiary, the
ISS Shares in exchange for 2,000,000 shares of common stock of SpaceDev (the
"SpaceDev Shares"); and
WHEREAS, the ISS Shareholders and SpaceDev wish to enter into this
Agreement for purposes of setting forth the terms and conditions of the
agreement between them and to satisfy the requirement in the Letter of Intent of
a definitive acquisition agreement.
NOW, THEREFORE, the parties hereto each in consideration of the
representations, warranties, covenants and agreements of the other provided for
or contained herein do hereby agree as follows:
ARTICLE 1
DEFINITIONS/ACQUISITION/CLOSING
I.1 Definitions.
------------
For all purposes of this Agreement, except as otherwise
expressly provided unless the context otherwise requires,
(a) the terms defined in this Article 1 have the meaning
assigned to them in this Article 1 and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted accounting principals,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
<PAGE>
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words, "herein," "hereof" and "hereunder" and other
words of similar import as refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Agreement" means this Agreement by and among SpaceDev, ISS as amended
or supplemented together with all Exhibits and Schedules attached or
incorporated by reference.
"Approval" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"Associate" of a Person means
(f) a corporation or organization of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% of
more of any class of equity securities;
(g) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
(h) any relative or spouse of such person or any relative of
such spouse.
"Auditors" means Cordovano & Co. LLP, independent public accountants to
SpaceDev.
"ISS Shares" means all of the issued and outstanding shares of ISS.
"Business" means the business of ISS as currently conducted, and shall
be deemed to include, but not be limited to, any of the following incidents of
such business: income, cash flow, operations, condition (financial or other),
assets, properties, anticipated revenues, prospects, liabilities and personnel.
"Closing" means the consummation of the exchange of the ISS Shares
under this Agreement for the SpaceDev Shares.
<PAGE>
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Disclosure Schedule" means the Disclosure Schedule dated the date
hereof and delivered by ISS and SpaceDev. The Sections of the Disclosure
Schedule shall be numbered to correspond to the applicable Section of this
Agreement and, together with all matters under such heading, shall be deemed to
qualify ONLY that section.
"Employee Plan" means any employee benefit plan, collective bargaining,
employment or severance agreement or other similar arrangement to which either
ISS or SpaceDev is a party or by which it is bound, legally or otherwise.
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Equity Securities" means any capital stock or other equity interest or
any securities convertible into or exchangeable for capital stock or any other
rights, warrants or options to acquire any of the foregoing securities.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"Hazardous Substance" means (but shall not be limited to) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproduction toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
"Indemnifiable Claim" means any Loss for or against which any party is
entitled to indemnification under this Agreement; "INDEMNIFIED PARTY" means the
-3-
<PAGE>
party entitled to indemnity hereunder; and "INDEMNIFYING PARTY" means the party
obligated to provide indemnification hereunder.
"Intangible Property" means any trade secret, secret process or other
confidential information or know-how and any and all Marks.
"IRS" means the Internal Revenue Service or any successor entity.
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified person.
"Mark" means any brand name, copyright, patent, service mark,
trademark, trade name, and all registrations or applications for registration of
any of the foregoing.
"Material Adverse Effect" means any change in or effect on ISS or
SpaceDev that is materially adverse to the Business.
"Material Contract" means those Contracts listed on the Disclosure
Schedule as Material Contracts.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a trust or other entity or organization, including a Governmental
Entity.
"SpaceDev Shares" means 2,000,000 shares of common stock of SpaceDev
being exchanged for the ISS Shares as set forth in paragraph 1.3, below.
"Subsidiary" means any Person in which ISS has a direct or indirect
equity or ownership interest in excess of 5%.
"Tax" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability.
-4-
<PAGE>
"Tax Return" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes.
1.2 Transfer of ISS Shares by the ISS Shareholders.
-----------------------------------------------
Subject to the terms and conditions of this Agreement, each of
the ISS Shareholders who has executed this Agreement agrees to transfer and
convey that number of ISS Shares set forth next to his name below and to deliver
the certificates evidencing such ISS Shares to SpaceDev at the Closing. The
certificates will be properly endorsed for transfer to or accompanied by a duly
executed stock power in favor of SpaceDev or its nominee as SpaceDev may have
directed prior to the Closing Date and otherwise in a form acceptable for
transfer on the books of ISS.
1.3 Acquisition of the ISS Shares by SpaceDev.
------------------------------------------
Subject to the terms and conditions of this Agreement,
SpaceDev agrees to acquire the ISS Shares from the ISS Shareholders and in
exchange therefor to issue, convey, transfer and deliver the SpaceDev Shares to
the ISS Shareholders.
1.4 The Closing.
------------
The Closing will take place at 4180 La Jolla Village Drive,
Suite 315, La Jolla, California 92037, on February 7, 1998 at 2:00 p.m. or on
such other date which SpaceDev and the ISS shareholders may mutually choose.
1.5 Tax Free Exchange
-----------------
It is the intent of the parties this transaction will
constitute a tax free exchange under Internal Revenue Code ' 368(b).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ISS SHAREHOLDERS
Except as otherwise indicated on the Disclosure Schedule, each of ISS
Shareholders represents, warrants and agrees as follows:
2.1 Organization and Related Matters.
---------------------------------
ISS is a corporation duly organized, validly existing and in
good standing under the laws of California. ISS has no Subsidiaries. ISS has all
necessary corporate power and authority to own its properties and assets and to
carry on the Business as now conducted. There are no jurisdictions outside of
California where the character or the location of the assets owned or leased by
ISS or the nature of the Business requires licensing or qualification. True,
correct and complete copies of the charter documents of ISS as in effect on the
date hereof have been delivered to SpaceDev.
-5-
<PAGE>
2.2 ISS Shares.
-----------
The ISS Shareholders own the outstanding shares of capital
stock of ISS beneficially and of record, free and clear of any and all liens,
covenants, conditions, rights or other Encumbrances. At the Closing, SpaceDev
will acquire good and marketable title to and complete ownership of the ISS
Shares, free of any and all covenants, conditions, or other Encumbrances. The
authorized capital stock of ISS consists of 1,000,000 shares of common stock, of
which 72,000 shares are issued and outstanding. There are no outstanding
contracts or other rights to subscribe for or purchase, or Contracts or other
obligations to issue or grant any rights to acquire, any Equity Securities of
ISS, or to restructure or recapitalize ISS. There are no outstanding Contracts
of ISS to repurchase, redeem or otherwise acquire any Equity Securities of ISS.
All shares of capital stock of ISS are duly authorized, validly issued and
outstanding and are fully paid and nonassessable and were issued in conformity
with applicable laws. There are no preemptive rights in respect of any Equity
Securities of ISS, except for such rights held by the ISS Shareholders which
rights shall terminate upon the consummation of the acquisition by SpaceDev of
the ISS Shares under this Agreement. Any Equity Securities of ISS which were
issued and reacquired by ISS were so reacquired (and, if reissued, so reissued)
in compliance with all applicable Laws, and ISS has no outstanding obligation or
liability with respect thereto.
2.3 Financial Statements; Changes; Contingencies.
---------------------------------------------
1. UNAUDITED INTERIM FINANCIAL STATEMENTS. The ISS
Shareholders have delivered to SpaceDev a balance sheet for ISS at December 31,
1997 and the related statements of income for the 12 months then ended. All such
interim financial statements have been prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed therein),
the statements of income present fairly the results of operations of ISS for the
respective periods covered, and the balance sheets present fairly the financial
condition of ISS as of their respective dates, except that such financial
statements may omit footnote disclosures required by GAAP to the extent the
content thereof would not materially differ in nature or amount from those
disclosures reported in the most recent audited period, and year-end adjustments
to the extent not material. Notwithstanding the foregoing, all such financial
statements reflect all adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair presentation.
2. NO MATERIAL ADVERSE CHANGES. Since December 31, 1997,
whether or not in the ordinary course of business, there has not been, occurred
or arisen:
a. any change in or event affecting ISS, the Business or
the ISS Shares that has had or may reasonably be expected to
have a Material Adverse Effect.
b. any agreement (other than a Material Contract listed on
the Disclosure Schedule), condition, action or omission which
would be proscribed by (or require consent under) Section 4.3
had it existed, occurred or arisen after the date of this
Agreement,
c. any strike or other labor dispute, or
-6-
<PAGE>
d. any casualty, loss, damage or destruction whether
or not covered by insurance) or any material property of ISS.
3. NO OTHER LIABILITIES OR CONTINGENCIES. ISS does not have
any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion or not, that,
in accordance with GAAP applied on a consistent basis, should have been but were
not reflected or disclosed in the financial statements (including the notes
thereto) referred to in subsections (a) and (b) above, except liabilities which
were incurred after December 31, 1997, in the ordinary course of business which
do not exceed $10,000 exclusive of current payroll and payroll taxes for the
payroll period ending immediately prior to closing.
2.4 Tax and Other Returns and Reports.
----------------------------------
ISS has filed, or will, on or before the Closing Date, file
all Tax Returns required to be filed by it on or before the Closing Date.
Adequate provision has been made in the books and records of ISS and in the
financial statements referred to in Section 2.3 above or delivered to SpaceDev,
for all Taxes relating to operations through, or property owned on or before,
the date of the most recent of such financial statements. No liability for Taxes
has arisen since such date other than in the ordinary course of ISS's business.
All required Tax Returns including amendments to date, have been prepared in
good faith without negligence or willful misrepresentation and are complete and
accurate in all material respects. No Governmental Entity has, during the past
three years, examined or is in the process of examining any Tax Returns of ISS.
No Governmental Entity has proposed (tentatively or definitively), asserted or
assessed or, to the best knowledge of ISS, threatened to propose or assert, any
deficiency, assessment or claim for Taxes and there would be no basis for any
such delinquency, assessment or claim. The ISS Shareholders have advised
SpaceDev that ISS has elected to be taxed as an "S Corporation" under section
1362 of the Code and under section 23801 of the Revenue and Taxation Code of
California.
2.5 Material Contracts.
-------------------
ISS has duly performed all its obligations under each Material
Contract to the extent that such obligations to perform have accrued; and no
material breach or default, alleged material breach or default, or event which
would (with the passage of time, notice or both) constitute a material breach or
default thereunder by ISS or, to the best knowledge of ISS, by any other party
or obligor with respect thereto, has occurred or as a result of this Agreement
or performance will occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any Person a right to) terminate or modify
any rights of, or accelerate or augment any obligation of, ISS under any
Material Contract.
-7-
<PAGE>
2.6 Tangible Property.
------------------
(a) ISS owns no real property. There is no pending or
threatened action that would materially interfere with the quiet enjoyment of
any leasehold by ISS.
(b) ISS owns or leases all tangible personal property that is
material to the Business free of Encumbrances except for Encumbrances consisting
of liens for Taxes not yet due.
(c) All material leasehold properties held by ISS, as lessee,
are held under valid, binding and enforceable leases, subject only to such
exceptions as are not, individually or in the aggregate, material to the
Business. All material tangible properties of ISS are in a good state of
maintenance and repair (except for ordinary wear and tear) and are adequate for
the Business.
2.7 Intangible Property.
--------------------
ISS owns or licenses Intangible Property, required for use in
connection with the Business.
2.8 Authorization; No Conflicts.
----------------------------
The execution, delivery and performance of this Agreement and
or related agreements by ISS has been duly and validly authorized by the Board
of Directors of ISS and by all other necessary corporate action on the part of
ISS and by the ISS Shareholders. ISS and the ISS Shareholders have the full
capacity, right, power and authority to enter into this Agreement and any
related agreements to which they are parties. The execution, delivery and
performance of this Agreement by the ISS Shareholders and the execution,
delivery and performance of any related agreements or contemplated transactions
by the ISS Shareholders or ISS will not violate, or constitute a breach or
default (whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under, the charter documents or by-laws of ISS or any Material
Contract, result in the imposition of any Encumbrance against any asset or
properties of ISS, or violate any Law. No Permits and Approvals are required to
be obtained by the ISS Shareholders to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the ISS
Shareholders and the performance of this Agreement and any related or
contemplated transactions by the ISS Shareholders or ISS will not, to the
knowledge of ISS, require filing or registration with, or the issuance of any
Permit by, any other third party or Governmental Entity. The consummation of the
transactions contemplated by this Agreement does not, to the knowledge of ISS
require any filings under the Hart-Scott-Rodino Act.
2.9 Legal Proceedings.
------------------
There is no Order or Action pending, or threatened, against or
affecting ISS or any of its properties or assets that individually or when
aggregated with one or more other Orders or Actions has or might reasonably be
expected to have a Material Adverse Effect, or adversely affect the ability of
ISS or the ISS Shareholders to perform this Agreement or any aspect of the
transactions contemplated by this Agreement. There is no matter as to which any
-8-
<PAGE>
of the ISS Shareholders or ISS has received any notice, claim or assertion, or
which otherwise has been threatened against or affecting any director, officer,
employee, agent or representative of ISS or any other Person, in connection with
which any such Person has or may reasonably be expected to have any right to be
indemnified by ISS.
2.10 Minute Books.
-------------
The minute books of ISS accurately reflect all actions and
proceedings taken to date by its shareholders, board of directors and
committees, and such minute books contain true and complete copies of the
charter documents of ISS and all related amendments. The stock record books of
ISS reflect accurately all transactions in its capital stock of all classes.
2.11 Accounting Records; Internal Controls.
--------------------------------------
(a) ACCOUNTING RECORDS. ISS has records that accurately and
validly reflect its transactions, and accounting controls sufficient to insure
that such transactions are (i) executed in accordance with management's general
or specific authorization and (ii) recorded in conformity with GAAP so as to
maintain accountability for assets.
(b) DATA PROCESSING; ACCESS. Such records, to the extent they
contain important information that is not easily and readily available
elsewhere, have been duplicated, and such duplicates are stored safely and
securely pursuant to procedures and techniques utilized by companies of
comparable size in similar lines of business.
2.11 Insurance.
----------
[Intentionally left blank]
2.13 Permits.
--------
ISS each holds all material Permits that are required by any
Governmental Entity to permit them or either of them to conduct its business as
now conducted, and all such permits are valid and in full force and effect and
will remain so upon consummation of the transactions contemplated by this
Agreement. To the best knowledge of the ISS Shareholders, no suspension,
cancellation or termination of any of such Permits is threatened or imminent.
2.14 Compliance with Law.
--------------------
(a) ISS is organized and has conducted its businesses in
accordance with applicable Laws in all material respects, and the forms,
procedures and practices of ISS are in compliance with all such Laws, to the
extent applicable, in all material respects.
(b) The use and operation of the assets of ISS are in
compliance in all material respects with all applicable Laws and there is no
material violation of any of such Laws.
-9-
<PAGE>
2.15 Employee Benefits.
------------------
Except as set forth on the Disclosure Schedule, there are no
employee benefit plans or other employee benefits accruing for the benefit of
any employee of ISS.
2.16 Certain Interests; Dividends.
-----------------------------
Neither ISS, nor any officer or director of ISS, nor any
Associate of ISS has any material interest in any property used in or pertaining
to the Business; no such Person is indebted or otherwise obligated to ISS; and
ISS is not indebted or otherwise obligated to any such Person, except for
amounts due under normal arrangements applicable to all employees generally as
to salary or reimbursement of ordinary business expenses not unusual in amount
or significance. The consummation of the transactions contemplated by this
Agreement will not (either alone, or upon the occurrence of any act or event, or
with the lapse of time, or both) result in any benefit or payment (severance or
other) arising or becoming due from ISS or the successor or assign thereof to
any Person. Except as expressly permitted by this Agreement, there has been no
dividend or other distribution of assets or securities whether consisting of
money, property or any other thing of value, declared, issued or paid to or for
the benefit of the ISS Shareholders subsequent to the date of the most recent
financial statements described in Section 2.3. ISS has paid no special bonuses
to any officer, director or employee.
2.17 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker,
or other Person or firm engaged by or acting on behalf of ISS or any of its
respective Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any brokerage or finder's or similar fee or
other commission as a result of this Agreement or such transactions.
2.18 Environmental Compliance.
-------------------------
ISS has not generated, used, transported, treated, stored,
released or disposed of, or has suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous Substance in
violation of any Laws. There has not been any generation, use, transportation,
treatment, storage, release or disposal of any Hazardous substance in connection
with the conduct of the Business of ISS or the use of any property or facility
of ISS or to the knowledge of ISS any nearby or adjacent properties or
facilities, which has created or might reasonably be expected to create any
liability under any Laws or which would require reporting to or notification of
any Governmental Entity. No asbestos or polychlorinated biphenyl or underground
storage tank is contained in or located at any facility of ISS.
-10-
<PAGE>
2.19 Accuracy of Information.
------------------------
The statements, representations and warranties contained in
the Disclosure Schedule are true, and all lists contained therein are complete
and correct. None of the information expressly required by this Agreement to be
supplied by or on behalf of ISS to SpaceDev, or contained in this Agreement, the
Disclosure Schedule or the documents listed in the Disclosure Schedule, did
contain or will contain, at the respective times such information is or was
delivered and as of the Closing Date, any untrue statement of a material fact or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. If any of such information at any time
subsequent to delivery and prior to Closing become untrue or misleading, in any
material respect, ISS and the ISS Shareholders will promptly notify SpaceDev in
writing of such fact and the reason for such change.
2.20 Investment Representation.
--------------------------
The SpaceDev Shares are restricted securities within the
meaning of the United States federal securities laws, and the ISS Shareholders
are acquiring the SpaceDev Shares for their own account for investment purposes
only and not with a view to or for sale in connection with the distribution
thereof. The certificates evidencing the SpaceDev Shares shall bear a legend
substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR
SECURITIES LAWS AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER, IS AVAILABLE."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SPACEDEV
SpaceDev represents, warrants and agrees as follows:
3.1 Organization and Related Matters.
---------------------------------
SpaceDev is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado. SpaceDev has all
necessary corporate power and authority to carry on its business as now being
conducted. SpaceDev has the necessary corporate power and authority to execute,
deliver and perform this Agreement and any related agreements to which it is a
party.
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<PAGE>
3.2 Authorization.
--------------
The execution, delivery and performance of this Agreement and
any related agreements, by SpaceDev has been duly and validly authorized by the
Board of Directors of SpaceDev and by all other necessary corporate action on
the part of SpaceDev. This Agreement constitutes the legal, valid and binding
obligation of SpaceDev, enforceable against SpaceDev in accordance with its
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
3.3 No Conflicts.
-------------
The execution, delivery and performance of this Agreement and
any related agreements by SpaceDev will not violate the provisions of, or
constitute a breach or default whether upon lapse of time and/or the occurrence
of any act or event or otherwise under (a) the charter documents of SpaceDev,
(b) any Law to which SpaceDev is subject or (c) any Contract to which SpaceDev
is a party that is material to the financial condition, results of operations or
conduct of the business of SpaceDev. The execution and delivery of this
Agreement by SpaceDev and the performance of this Agreement and any related or
contemplated transaction by SpaceDev will not require filing or registration
with, or the issuance of any Permit by, any other third party or Governmental
Entity. The transactions contemplated by this Agreement do not to the knowledge
of SpaceDev require any filings under the Hart-Scott-Rodino Act.
3.4 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker,
or other Person or firm engaged by or acting on behalf of SpaceDev in connection
with the negotiation, execution or performance of this Agreement or the
transactions contemplated by this Agreement, is or will be entitled to any
broker's or finder's or similar fees or other commissions as a result to this
Agreement or such transactions.
3.5 Accuracy of Information.
------------------------
The statements, representations and warranties contained in
the Disclosure Schedule are true, and all lists contained therein are complete
and correct. None of the information expressly required by this Agreement to be
supplied by or on behalf of SpaceDev to ISS, or the ISS Shareholders, or
contained in this Agreement, the Disclosure Schedule or the documents listed in
the Disclosure Schedule, did contain or will contain, at the respective times
such information is or was delivered and as of the Closing Date, any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If any of such
information at any time subsequent to delivery and prior to Closing become
untrue or misleading, in any material respect, SpaceDev will promptly notify ISS
in writing of such fact and the reason for such change.
-12-
<PAGE>
3.6 Investment Representation.
--------------------------
SpaceDev is acquiring the ISS Shares from the ISS Shareholders
for SpaceDev's own account, for investment purposes only and not with a view to
or for sale in connection with the distribution thereof.
3.7 Financial Statements; Changes; Contingencies.
---------------------------------------------
(a) FINANCIAL STATEMENTS. SpaceDev has or will deliver to the
ISS Shareholders balance sheets for SpaceDev as of October 31, 1997, and the
related statements of loss and deficit for the periods then ended. All such
financial statements have been prepared in conformity with GAAP applied on a
consistent basis (except for changes, if any, disclosed therein). Such
statements of loss and deficit present fairly the results of operations and cash
flows of SpaceDev for the respective periods covered, and the balance sheets
present fairly the financial condition of SpaceDev as of their respective dates.
SpaceDev has made available to the ISS Shareholders copies of each management
letter or other letter delivered to SpaceDev, by the Auditors in connection with
such financial statements or relating to any review by the Auditors of the
internal controls of SpaceDev, and has made available for inspection all reports
and working papers produced or developed by the Auditors or management in
connection with their examination of such financial statements, as well as all
such reports and working papers for prior periods for which any tax liability of
SpaceDev has not been finally determined or barred by applicable statutes of
limitation. Since October 31, 1997, there has been no change in any of the
significant accounting policies, practices or procedures of SpaceDev.
(b) NO MATERIAL ADVERSE CHANGES. Except as set forth at end of
this paragraph 3.7(b), whether or not in the ordinary course of business, there
has not been, occurred or arisen:
i. any change in or event affecting SpaceDev or the
Business that has had or may reasonably be expected to have a
Material Adverse Effect.
ii. any agreement, condition, action or omission
which would be proscribed by (or require consent under)
Section 5.1 had it existed, occurred or arisen after the date
of this Agreement,
iii. any strike or other labor dispute, or
iv. any casualty, loss, damage or destruction
(whether or not covered by insurance) or any material property of
SpaceDev.
(c) NO OTHER LIABILITIES OR CONTINGENCIES. To the best of
SpaceDev's knowledge, SpaceDev does not have any liabilities of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, probable of assertion or not, that, in accordance with GAAP applied on a
consistent basis, should have been but were not reflected or disclosed in the
financial statements (including the notes thereto) referred to in subsections
(a) and (b) above, except liabilities which were incurred after October 31,
1997, in the ordinary course of business or disclosed in the Disclosure
Schedule.
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<PAGE>
3.8 Tax and Other Returns and Reports.
----------------------------------
SpaceDev has timely filed or will file, on or before the
Closing Date, all Tax Returns required to be filed by it on or before the
Closing Date and has paid all Taxes due for all periods ending on or before
December 31, 1997, which Taxes are required to be paid by it on or before the
Closing Date. Adequate provision has been made in the books and records of
SpaceDev and in the financial statements referred to in Section 3.7 above or
delivered to the ISS Shareholders, for all Taxes relating to operations through,
or property owned on or before, the date of the most recent of such financial
statements. No liability for Taxes has arisen since such date other than in the
ordinary course of SpaceDev's business. All required Tax Returns including
amendments to date, have been prepared in good faith without negligence or
willful misrepresentation and are complete and accurate in all material
respects. No Governmental Entity has, during the past two years, examined or is
in the process of examining any Tax Returns of SpaceDev. No Governmental Entity
has proposed (tentatively or definitively), asserted or assessed or, to the best
knowledge of SpaceDev, threatened to propose or assert, any deficiency,
assessment or claim for Taxes and there would be no basis for any such
delinquency, assessment or claim.
3.9 Material Contracts.
-------------------
Each Material Contract of SpaceDev is to the knowledge of
SpaceDev valid and subsisting; SpaceDev has duly performed all its obligations
thereunder to the extent that such obligations to perform have accrued; and no
material breach or default, alleged material breach or default, or event which
would (with the passage of time, notice or both) constitute a material breach or
default thereunder by SpaceDev or, to the best knowledge of SpaceDev, by any
other party or obligor with respect thereto, has occurred or as a result of this
Agreement or performance will occur. Consummation of the transactions
contemplated by this Agreement will not (and will not give any Person a right
to) terminate or modify any rights of, or accelerate or augment any obligation
of SpaceDev under any Material Contract.
3.10 Legal Proceedings.
------------------
There is no Order or Action pending, or, to the best knowledge
of SpaceDev, threatened, against or affecting SpaceDev or any of its properties
or assets that individually or when aggregated with one or more other Orders or
Actions has or might reasonably be expected to have a Material Adverse Effect,
or adversely affect SpaceDev's ability to perform this Agreement or any aspect
of the transactions contemplated by this Agreement. There is no matter as to
which SpaceDev has received any notice, claim or assertion, or, to the best
knowledge of SpaceDev, which otherwise has been threatened against or affecting
any director, officer, employee, agent or representative of SpaceDev or any
other Person, in connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by SpaceDev.
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<PAGE>
3.11 Minute Books.
-------------
The minute books of SpaceDev accurately reflect, or as of the
Closing Date will reflect, all actions and proceedings taken to date by its
shareholders, board of directors and committees, and such minute books contain
true and complete copies of the charter documents of SpaceDev and all related
amendments. To the knowledge of SpaceDev the stock record books of SpaceDev
reflect accurately all transactions in its capital stock of all classes.
3.12 Accounting Records; Internal Controls.
--------------------------------------
(a) ACCOUNTING RECORDS. SpaceDev has records that accurately
and validly reflect its transactions, and accounting controls sufficient to
insure that such transactions are (i) executed in accordance with management's
general or specific authorization and (ii) recorded in conformity with GAAP so
as to maintain accountability for assets.
(b) DATA PROCESSING; ACCESS. Such records, to the extent they
contain important information that is not easily and readily available
elsewhere, have been duplicated, and such duplicates are stored safely and
securely pursuant to procedures and techniques utilized by companies of
comparable size in similar lines of business.
3.13 CAPITAL STOCK. The authorized capital of SpaceDev consists of
25,000,000 common shares with a par value of $0.0001, of which a total of
1,755,000 shares have been issued and are outstanding as fully paid and
non-assessable and 10,000,000 shares of Preferred Stock, of which 82,450 shares
of Series B (convertible at any time into 8,245,000 shares of common stock of
SpaceDev) have been issued and are outstanding as fully paid and non-assessable,
except for options to issue: (i) up to 572,700 shares of common stock options
issuable to three consultants at an exercise price of $0.067 per share; and,
(ii) up to 2,500,000 shares of common stock to James W. Benson at exercise
prices ranging from $1.00 to $3.50 per share. Upon the occurrence of certain
events, no person or company has any right, agreement or option, present or
future, contingent or absolute, or any right capable of becoming a right,
agreement, or option:
(a) to require SpaceDev to issue any share in its capital
or to convert any securities of SpaceDev or of any
other company into shares in its capital;
(b) for the issue or allotment of any of SpaceDev's
authorized but unissued shares; or
(c) to require SpaceDev to purchase, redeem or otherwise
acquire any of its issued and outstanding SpaceDev's
shares.
3.14 OTHER STOCK. SpaceDev does not beneficially own, directly or
indirectly, shares of any other corporate or any interest in a partnership,
joint venture or other business.
3.15 DIVIDENDS. SpaceDev has not declared or paid any dividends of any
kind nor declared or made any other distributions of any kind whatsoever
including, without limitation, by way of redemption or repurchase or reduction
of authorized capital.
-15-
<PAGE>
3.16 WAIVER OF RIGHTS. SpaceDev has not waived or surrendered any right
of substantial value and has not made any gift of money or of any of its
property or assets.
3.17 Contracts.
----------
Except as set forth in the Disclosure Schedules there are no
management contracts or consulting contracts to which SpaceDev is a party or by
which it is bound, other than as provided for herein; no amount is payable or
has been agreed to be paid by SpaceDev to any person as remuneration, pension,
bonus, share of profits or other similar benefit, and no director, officer or
member, or former director, officer or member of SpaceDev, nor any associate or
affiliate or any such person, has any claims of any nature against, or is
indebted to, SpaceDev
3.18 Compliance with Law.
--------------------
(a) SpaceDev is organized and has conducted its businesses in
accordance with applicable Laws in all material respects, and the forms,
procedures and practices of SpaceDev are in compliance with all such Laws, to
the extent applicable, in all material respects.
(b) To the knowledge of SpaceDev the sale of any security
previously issued by SpaceDev is in compliance in all material respects with all
applicable Laws and there is no material violation of any of such Laws.
3. 19 Accuracy of Information.
------------------------
The statements, representations and warranties contained in
the Disclosure Schedules are true, and all lists contained therein are complete
and correct. None of the information expressly required by this Agreement to be
supplied by or on behalf of SpaceDev to ISS or the ISS Shareholders, or
contained in this Agreement, the Disclosure Schedule or the documents listed in
the Disclosure Schedule, did contain or will contain, at the respective times
such information is or was delivered and as of the Closing Date, any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If any of such
information at any time subsequent to delivery and prior to Closing become
untrue or misleading, in any material respect, SpaceDev will promptly notify ISS
and the ISS Shareholders in writing of such fact and the reason for such change.
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<PAGE>
ARTICLE 4
COVENANTS WITH RESPECT TO CONDUCT
OF ISS PRIOR TO CLOSING
4.1 Access.
-------
ISS and the ISS Shareholders shall authorize and permit
SpaceDev and its representatives (which term shall be deemed to include its
independent accountants and counsel and representatives of prospective financing
institutions of SpaceDev) to have reasonable access during normal business
hours, upon reasonable notice and in such manner as will not unreasonably
interfere with the conduct of its business, to all of its properties, books,
records, operating instructions and procedures, Tax Returns and all other
information with respect to the Business as SpaceDev may from time to time
request, and to make copies of such books, records and other documents and to
discuss its business with such other Persons, including, without limitation, its
directors, officers, employees, accountants and counsel and its suppliers,
customers and creditors, as SpaceDev considers necessary or appropriate for the
purposes of familiarizing itself with the Business, obtaining any necessary
Approvals of or Permits for the transactions contemplated by this Agreement and
conducting an evaluation of the organization and Business of ISS.
4.2 Material Adverse Changes; Reports; Financial Statements.
--------------------------------------------------------
(a) ISS and the ISS Shareholders will promptly notify SpaceDev
of any event of which ISS, or any of them, obtains knowledge which has had or
might reasonably be expected to have a Material Adverse Effect or which if known
as of the date hereof would have been required to be disclosed to SpaceDev.
(b) ISS will furnish to SpaceDev (i) as soon as available, and
in any event within five days after it is prepared, any report by ISS for
submission to the board of directors of ISS or to the ISS Shareholders and the
working papers related thereto and other operating or financial reports
(including any projections and budgets) prepared for management and the working
papers related thereto, (ii) as soon as available, copies of all nonconfidential
portions of all reports, renewals, filings, certificates, statements and other
documents filed with any Governmental Entity, (iii) monthly and quarterly
(unaudited) balance sheets, statements of earnings and delinquency reports for
ISS, and (iv) such other reports as SpaceDev may reasonably request relating to
ISS. Each of the financial statements delivered pursuant to this Section 4.2(b)
shall be prepared in accordance with GAAP consistently applied during the
periods covered (except as disclosed therein), except that such financial
statements may omit footnote disclosures required by GAAP to the extent the
content thereof would not materially differ in nature or amount from those
disclosures reported in the most recent audited period and year end adjustments
to the extent not material. Each of the financial statements delivered pursuant
to this Section 4.2(b) shall be accompanied by a certificate of the chief
financial officer of ISS to the effect that such financial statement presents
fairly the financial condition and results of operations of ISS for the periods
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covered and reflects all adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair presentation.
4.3 Conduct of Business.
--------------------
ISS shall not, without the prior consent in writing of
SpaceDev which may be withheld for any reason, (a) conduct the Business in any
manner except in the ordinary course consistent with past practices; or (b) pay
special bonuses to any officer, director or employee or declare and/or pay
dividends.
4.4 Notification of Certain Matters.
--------------------------------
ISS shall give prompt notice to SpaceDev, and SpaceDev shall
give prompt notice to ISS, of (i) the occurrence, or failure to occur, of any
event that would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Closing Date and (ii) any failure of
SpaceDev or ISS, as the case may be, to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. Except as provided in Section 7.4, no such
notification shall affect the representations or warranties of the parties or
the conditions to their respective obligations hereunder.
4.5 Permits and Approvals.
----------------------
ISS and SpaceDev each agree to cooperate and use their best
efforts to obtain (and will immediately prepare all registrations, filings and
applications, requests and notices preliminary to) all Approvals and Permits
that may be necessary or which may be reasonably requested by SpaceDev to
consummate the transactions contemplated by this Agreement. To the extent that
the approval of a third party with respect to any Contract is required in
connection with the transactions contemplated by this Agreement, ISS and the ISS
Shareholders and SpaceDev shall each use best efforts to obtain such Approval
prior to the Closing Date.
ARTICLE 5
COVENANTS WITH RESPECT TO CONDUCT OF SPACEDEV
PRIOR TO CLOSING
5.1 SpaceDev will promptly disclose to the ISS Shareholders any change
in or effect on SpaceDev occurring after the date hereof which is material to
its business or financial position prior to the Closing. SpaceDev has advised
the ISS Shareholders that SpaceDev is currently seeking to obtain additional
capital through the sale of securities.
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<PAGE>
ARTICLE 6
CONDITIONS OF PURCHASE
6.1 General Conditions.
-------------------
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by all parties:
(a) NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity, nor shall any Action have been instituted and remain pending at what
would otherwise be the Closing Date, which prohibits or restricts or would (if
successful) prohibit or restrict the transactions contemplated by this Agreement
or (with respect to obligations of SpaceDev only) which would not permit the
Business as presently conducted to continue unimpaired following the Closing
Date. No Governmental Entity shall have notified any party to this Agreement
that consummation of the transactions contemplated by this Agreement would
constitute a violation of any Laws of any jurisdiction and that it intends to
commence proceedings to restrain or prohibit such transactions or force
divestiture or rescission, unless such Governmental Entity shall have withdrawn
such notice and abandoned any such proceedings prior to the time which otherwise
would have been the Closing Date.
(b) APPROVALS. To the extent required by applicable Law, all
Permits and Approvals required to be obtained from any Governmental Entity shall
have been received or obtained on or prior to the Closing Date.
(c) EMPLOYMENT AGREEMENTS. Effective as of the Closing ISS
shall have entered into employment agreements with each of the ISS Shareholders
executing this agreement.
6.2 Conditions to Obligations of SpaceDev.
--------------------------------------
The obligations of SpaceDev to effect the Closing shall be
subject to the following conditions except to the extent waived in writing by
SpaceDev:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE ISS
SHAREHOLDERS. The representations and warranties of the ISS Shareholders herein
contained shall be true at the Closing Date with same effect as though made at
such time; the ISS Shareholders shall have performed all obligations and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; the ISS
Shareholders for themselves and Phillip Smith, as chief executive officer of
ISS, shall have delivered to SpaceDev a certificate in form and substance
satisfactory SpaceDev and dated the Closing Date, to the effect that, to the
best of his knowledge, the representations and warranties of ISS and the ISS
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<PAGE>
Shareholders herein contained shall be true at the Closing Date with the same
effect as though made at such time.
(b) NO MATERIAL ADVERSE EFFECT. There shall not have been any
Material Adverse Effect relating to ISS subsequent to December 31, 1997.
(c) CONSENTS. The ISS Shareholders shall have obtained and
provided to SpaceDev any required Approvals and Permits, each in form and
substance reasonably satisfactory to SpaceDev.
(d) NO RESIGNATION OF DIRECTORS. The Directors of ISS shall
not have submitted their resignations (in such capacity) in writing to ISS nor
orally indicated any intent to do so.
(e) DUE DILIGENCE. SpaceDev shall not, in the course of its
on-going business investigation, have discovered information not previously
disclosed by ISS or the ISS Shareholders, which SpaceDev reasonably believes has
or is likely to have a Material Adverse Effect or is materially inconsistent
with information disclosed to SpaceDev prior to the date hereof.
(f) DELIVERY OF SHARES. The delivery by the Shareholders of
ISS of all of the issued stock.
6.3 Conditions to Obligations of the ISS Shareholders.
--------------------------------------------------
The obligations of the ISS Shareholders to effect the Closing
shall be subject to the following conditions, except to the extent waived in
writing by the ISS Shareholders:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SPACEDEV.
The representations and warranties of SpaceDev herein contained shall be true at
the Closing Date with same effect as though made at such time; SpaceDev shall
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date; SpaceDev shall have delivered to the ISS Shareholders a
certificate of SpaceDev, respectively, in form and substance satisfactory to the
ISS Shareholders and dated the Closing Date, to such effect; and SpaceDev shall
have delivered to the ISS Shareholders a certificate in form and substance
satisfactory to the ISS Shareholders and dated the Closing Date, to the effect
that, to the best of its knowledge, the representations and warranties of
SpaceDev herein contained shall be true at the Closing Date with the same effect
as though made at such time.
(b) NO MATERIAL ADVERSE EFFECT. There shall not have been any
Material Adverse Effect relating to SpaceDev subsequent to October 31, 1997.
(c) CONSENTS. SpaceDev shall have obtained and provided to the
ISS Shareholders any required Approvals and Permits, each in form and substance
reasonably satisfactory to the ISS Shareholders.
-20-
<PAGE>
(d) DUE DILIGENCE. The ISS Shareholders shall not, in the
course of their on-going business investigation, have discovered information not
previously disclosed by SpaceDev which the ISS Shareholders reasonably believe
has or is likely to have a Material Adverse Effect or is materially inconsistent
with information disclosed to the ISS Shareholders prior to the date hereof..
ARTICLE 7
TERMINATION OF OBLIGATIONS; SURVIVAL
7.1 Termination of Agreement.
-------------------------
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this Agreement shall terminate if
the Closing does not occur on or before the close of business on February 18,
1998, unless extended by mutual consent in writing of SpaceDev and the ISS
Shareholders and otherwise may be terminated at any time before the Closing as
follows and in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of SpaceDev
and the ISS Shareholders.
(b) CONDITIONS TO SPACEDEV'S PERFORMANCE NOT MET. By
SpaceDev's written notice to the ISS Shareholders if any event occurs or
conditions exists which would render impossible the satisfaction of one or more
conditions to the obligations of SpaceDev to consummate the transactions
contemplated by this Agreement as set forth in Section 6.1 or 6.2.
(c) CONDITIONS TO THE ISS SHAREHOLDERS' PERFORMANCE NOT MET.
By the ISS Shareholders' written notice to SpaceDev if any event occurs or
condition exists which would render impossible the satisfaction of one or more
conditions to the obligation of the ISS Shareholders to consummate the
transactions contemplated by this Agreement as set forth in Section 6.1 or 6.3.
(d) INACCURATE INFORMATION. By SpaceDev if any material
information expressly required by this Agreement or the Disclosure Schedule to
be delivered by or on behalf of ISS and the ISS Shareholders to SpaceDev is
inaccurate or incomplete in any material respect.
(e) MATERIAL BREACH. By SpaceDev or the ISS Shareholders if
there has been a material misrepresentation or other material breach by the
other party in its representations, warranties and covenants set forth herein;
provided, however, that if such breach is susceptible to cure, the breaching
party shall have five business days after receipt of notice from the other party
of its intention to terminate this Agreement if such breach continues in which
to cure such breach.
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<PAGE>
7.2 Effect of Termination.
----------------------
In the event that this Agreement shall be terminated pursuant
to Section 7.1, all further obligations of the parties under this Agreement
shall terminate without further liability of any party to another; provided that
the obligations of the parties contained in Article 8, Section 9.9 and Section
9.12 shall survive any such termination. A termination under Section 7.1 shall
not relieve any party of any liability for a breach of, or for any
misrepresentation under, this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach or misrepresentation.
7.3 Survival of Representations and Warranties.
-------------------------------------------
The representations and warranties contained in or made
pursuant to this Agreement shall survive the Closing and expire at the end of 18
full calendar months after the Closing, except that (i) the representations and
warranties contained in Section 2.1, 2.2, 2.8, 2.17, 3.1, 3.2 and 3.3 shall
survive the Closing and shall remain in full force and effect indefinitely, (ii)
the representations and warranties contained in Section 2.4 and 3.8 shall
continue through the expiration of the applicable statute of limitations as the
same may be extended (or, if a claim has been asserted prior to such expiration,
until 90 days after the date of its final resolution), and (iii) if a claim or
notice is given under Article 8 with respect to any representation or warranty
prior to the applicable expiration date, such representation or warranty shall
continue, with respect to the facts or circumstances giving rise to such claim,
indefinitely until such claim is finally resolved.
7.4 Effect of Closing Over Known Unsatisfied Conditions.
----------------------------------------------------
If, with actual knowledge of the failure of any condition or
breach of any representation and warranty, either SpaceDev or any of the ISS
Shareholders elects to proceed with the Closing, the condition that is
unsatisfied at the Closing Date shall be deemed to be waived and the electing
party shall so acknowledge by a writing delivered at the Closing; provided,
however, that the foregoing provision shall not limit any party's right not to
waive any condition or right to condition any waiver hereunder upon mutually
acceptable conditions. Such decision and writing shall constitute a waiver of
any liability for breach of or misrepresentation under this Agreement, but only
with respect to, and such waiver shall be limited to the extent of, the facts or
circumstances, actually known by the electing party, giving rise to or in
respect of such waived condition.
ARTICLE 8
INDEMNIFICATION
-22-
<PAGE>
8.1 Obligations of SpaceDev.
------------------------
SpaceDev shall indemnify and hold harmless the ISS
Shareholders from and against any and all Losses of the ISS Shareholders,
directly or indirectly, as a result of, or based upon or arising from:
(a) any inaccuracy in or breach or nonperformance of any of
the representations, warranties, covenants or agreements made by SpaceDev in or
pursuant to this Agreement; or
(b) any other matter as to which SpaceDev in other provisions
of this Agreement has agreed to indemnify the ISS Shareholders.
8.2 Obligations of the ISS Shareholders.
------------------------------------
ISS shall indemnify and hold harmless SpaceDev, its officers,
directors, employees, affiliates, agents and assigns (collectively "SpaceDev
Persons") from and against any Losses of the SpaceDev Persons, directly or
indirectly, as a result of, or based upon or arising from, any inaccuracy in or
breach or nonperformance of any of the representations, warranties, covenants or
agreements made by the ISS Shareholders in or pursuant to this Agreement.
8.3 Procedure.
----------
(a) NOTICE. Any party seeking indemnification with respect to
any Loss shall give notice to the Indemnifying Party.
(b) DEFENSE. If any claim, demand or liability is asserted by
any third party against any Indemnified Party, the Indemnifying Party shall,
upon the written request of the Indemnified Party, defend any actions or
proceedings brought against the Indemnified Party in respect of matters embraced
by the indemnity, but the Indemnified Party shall have the right to conduct and
control the defense, compromise or settlement of any Indemnifiable Claim if the
Indemnified Party chooses to do so, on behalf of and for the account and risk of
the Indemnifying Party who shall be bound by the result so obtained to the
extent provided herein; provided, however, that the Indemnified Party shall not
settle or compromise any Indemnifiable Claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If, after
a request to defend any action or proceeding, the Indemnifying Party neglects to
defend the Indemnified Party, a recovery against the latter suffered by it in
good faith, is conclusive in its favor against the Indemnifying Party; provided,
however, that, if the Indemnifying Party has not received reasonable notice of
the action or proceeding against the Indemnified Party, or is not allowed to
control its defense, judgment against the Indemnified Party is only presumptive
evidence against the Indemnifying Party. The parties shall cooperate in the
defense of all third party claims which may give rise to Indemnifiable Claims
hereunder. In connection with the defense of any claim, each party shall make
available to the party controlling such defense, any books, records or other
documents within its control that are reasonably requested in the course of such
defense.
-23-
<PAGE>
(c) TAX ADJUSTMENTS. Any amount payable by the Indemnifying
Party to or on behalf of an Indemnified Party in respect of a Loss shall be
adjusted as follows:
(i) If such Indemnified Party is liable for any
additional Taxes as a result of the payment of amounts in
respect of an Indemnifiable Claim, the Indemnifying Party will
pay to the Indemnified Party in addition to such amounts in
respect of the Loss within 10 days after being notified by the
Indemnified Party of the payment of such liability (x) an
amount equal to such additional Taxes (the "Tax Reimbursement
Amount") plus (y) any additional amounts required to pay
additional Taxes imposed with respect to the Tax Reimbursement
Amount and with respect to amounts payable under this clause
(y), with the result that the Indemnified Party shall have
received from the Indemnifying Party, net of the payment of
Taxes, an amount equal to the Loss.
(ii) The Indemnified Party shall reimburse the
Indemnifying Party an amount equal to the net reduction in any
year in the liability for payment of Taxes (that are based
upon or measured by income) of the Indemnified Party or any
member of a consolidated or combined tax group of which the
Indemnified Party is, or was at any time, part, which
reduction has been actually realized with respect to any
period after the Closing Date and which reduction would not
have been realized but for the amounts paid (or any audit
adjustment or deficiency with respect thereto, if applicable)
in respect of a Loss, or amounts paid by the Indemnified Party
pursuant to this paragraph (a "net Tax Benefit"). The amount
of any Net Tax Benefit shall be paid not later than 15 days
after the date on which such Net Tax Benefit shall be
realized.
(d) INTEREST. Any amounts payable by the Indemnifying Part to
or on behalf of an Indemnified Party in respect of a Loss shall be paid together
with interest on such amount, from and including date of Loss to the date of
payment, at a rate equal to the Prime Rate; provided, however, that such
interest shall not be payable with respect to Losses which include an interest
factor.
8.4 Notice of Discovered Liabilities.
---------------------------------
The Parties hereto agree to notify each other of any
liabilities, claims or misrepresentations, breaches or other matters covered by
this Article 8 upon discovery or receipt of notice thereof whether before or
after Closing.
8.5 Not Exclusive Remedy.
---------------------
This Article 8 shall not be deemed to preclude or otherwise
limit in any way the exercise of any other rights or pursuit of other remedies
for the breach of this Agreement or with respect to any misrepresentation.
8.6 Limitations on Indemnification.
-------------------------------
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<PAGE>
No party shall be required to indemnify any other Person under
this Article 8 unless the Loss for which indemnity would otherwise be payable by
such party exceeds $5,000 individually or $5,000 in the aggregate, and in such
event, the Indemnifying Party shall be responsible for the full amount of any
Loss.
ARTICLE 9
GENERAL
9.1 Amendments; Waivers.
--------------------
This Agreement and any schedule or exhibit attached hereto may
be amended only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this Agreement shall be
effective unless in writing and signed by the party to be bound and then only to
the specific purpose, extent and instance so provided.
9.2 Schedules; Exhibits; Integration.
---------------------------------
Each schedule and exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith.
9.3 Best Efforts; Further Assurances.
---------------------------------
Except as otherwise expressly provided herein, each party will
use its best efforts to cause all conditions to its obligations hereunder to be
timely satisfied and to perform and fulfill all obligations on its part to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable. The parties shall cooperate
with each other in such actions and in securing requisite Approvals. Each party
shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
9.4 Governing Law.
--------------
This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and performed in such State without
regard to conflicts of law doctrines, except to the extent that certain matters
are preempted by federal law or governed by the law of the jurisdiction of
organization of the respective parties.
-25-
<PAGE>
9.5 No Assignment.
--------------
Neither this Agreement nor any rights or obligations under it
are assignable except that SpaceDev may assign its rights, and delegate its
obligations, hereunder (including but not limited to its rights under Article 8)
to any wholly-owned subsidiary of SpaceDev.
9.6 Headings.
---------
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
9.7 Counterparts.
-------------
This Agreement any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
9.8 Publicity and Reports.
----------------------
The ISS Shareholders and SpaceDev shall coordinate all
publicity relating to the transactions contemplated by this Agreement and no
party shall issue any press release, publicity statement or other public notice
relating to this Agreement, or the transactions contemplated by this Agreement,
without consulting with the other party except to the extent that a particular
action is required by applicable law or stock exchange or regulatory policy.
9.9 Confidentiality.
----------------
All information disclosed in writing by any party (or its
representatives) in connection with the transactions contemplated by this
Agreement to any other party (or its representatives) shall be kept confidential
by such other party and its representatives and shall not be used by any such
Persons other than as contemplated by this Agreement, except to the extent that
such information or disclosure (i) was known by the recipient when received,
(ii) is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity or stock exchange
having jurisdiction over the parties, or (iv) may otherwise be required by law.
If this Agreement is terminated in accordance with its terms, each party shall
use all reasonable efforts to return upon written request from the other party
all documents (and reproductions thereof) received by it or its representatives
from such other party (and, in the case of reproductions, all such reproductions
made by the receiving party) that include information not within the exceptions
contained in the first sentence of this Section 9.9, unless the recipients
provide assurances reasonably satisfactory to the requesting party that such
documents have been destroyed.
-26-
<PAGE>
9.10 Parties in Interest.
--------------------
This Agreement shall be binding upon and inure to the benefit
of each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement except for Sections 8.1 and 9.5 (which are
intended to be for the benefit of the Persons provided for therein and may be
enforced by such Persons). Nothing in this Agreement is intended to relieve or
discharge the obligation of any third person to any party to this Agreement.
9.11 Notices.
--------
Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by telex, telefax or other
telecommunications mechanism or (c) mailed by certified or registered mail,
postage prepaid, receipt request, as follows:
If to SpaceDev:
SpaceDev, Inc.
P.O. Box 2121
31557 Aspen Ridge Road
Steamboat Springs, Colorado 80477
Attention: James W. Benson, Chief Executive Officer
970.879.9889 - telephone
970.879.3226 - telecopier
With a copy to:
Aaron A. Grunfeld, Esq.
Resch Polster Alpert & Berger LLP
10390 Santa Monica Boulevard, Fourth Floor
Los Angeles, California 90025-5058
310.277.8300 - telephone
310.552.3209 - telecopier
If to ISS and the ISS Shareholders:
c/o Integrated Space Systems, Inc.
7940 Silverton Avenue, Suite 202
San Diego, California 92126
619.684.3570 - telephone
619.693.6932 - telecopier
-27-
<PAGE>
With a copy to:
Chris Popov, Esq.
Popov, McCullogh & Cohan
4180 La Jolla Village Drive, Suite 315 La Jolla, California
92037 619.457.2900 - telephone 619.457.2950 - telecopier
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 9.11 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually received at such address.
9.12 Expenses.
---------
The ISS Shareholders and SpaceDev shall each pay their or its
own expenses incident to the negotiation, preparation and performance of this
Agreement and the transactions contemplated hereby, including but not limited to
the fees, expenses and disbursements of their respective advisors, accountants
and counsel.
9.13 Remedies; Waiver.
-----------------
All rights and remedies existing under this Agreement and any
related agreements or documents are cumulative to and not exclusive of, any
rights or remedies otherwise available. No failure on the part of any party to
exercise or delay in exercising any right hereunder shall be deemed a waiver
thereof, nor shall any single or partial exercise preclude any further or other
exercise of such or any other right.
9.14 Attorney Fees.
--------------
In the event of any Action for the breach of this Agreement or
misrepresentation by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses, including the costs of
arbitration, incurred in connection with such action.
9.15 Knowledge Convention.
---------------------
Whenever any statement herein or in any schedule, exhibit,
certificate or other documents delivered to any party pursuant to this Agreement
is made "to its knowledge" or "to its best knowledge" or words of similar intent
or effect of any party or its representative, such person shall make such
statement only after conducting a diligent investigation of the subject matter
-28-
<PAGE>
that of, and each statement shall be deemed to include a representation that
such investigation has been conducted.
9.16 Representation by Counsel; Interpretation.
------------------------------------------
The ISS Shareholders and SpaceDev respectively acknowledge
that each party to this Agreement has been represented by counsel in connection
with this Agreement and the transactions contemplated by this Agreement.
Accordingly, any rule of Law, including but not limited to Section 1654 of the
California Civil Code, or any legal decision that would require interpretation
of any claimed ambiguities in this Agreement against the party that drafted it
has no application and is expressly waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the intent of SpaceDev and
the ISS Shareholders.
9.17 Severability.
-------------
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement to the extent permitted by Law shall remain in full
force and effect provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party.
9.18 Arbitration
-----------
Any controversy, dispute or claim arising out of the
interpretation, performance or breach of this agreement including disputes as to
the jurisdiction of the arbitrator, shall be resolved at the request of any
party hereto directed to the San Diego office of the Judicial Arbitration and
Mediation Service/Endispute ("JAMS/ENDISPUTE") by a binding arbitration
conducted by a single Arbitrator in San Diego County, California in accordance
with the California Code of Civil Procedure section 1280 et. seq. except as
modified by the terms of this Section. The arbitrator shall apply California
substantive law to the matter(s) which are the subject of the arbitration. The
arbitrator shall have the power to grant such legal and equitable remedies and
award such damages as may be granted or awarded by a Judge of the Superior Court
of the County of San Diego, California. The arbitrator shall prepare and provide
to the parties a written decision ("Decision") on all matter(s) which are the
subject of the arbitration, including factual findings and the reasons which
form the basis of the Decision of the arbitrator. The arbitrator shall not have
the power to commit errors of law or legal reasoning and the award may be
vacated or corrected pursuant to California Code of Civil Procedure sections
1286.2 or 1286.6 for any such error. The Decision shall have the effect and be
enforceable in the manner provided by the California Code of Civil Procedure.
Costs of the arbitration shall be borne as directed by the arbitrator. The
parties hereby agree that the Code of Civil Procedure Rules of Arbitration shall
be modified as follows:
(a) If the parties have not agreed to an Arbitrator within
thirty (30) days after Initiation of arbitration, then JAMS/ENDISPUTE shall
appoint a single neutral Arbitrator as soon thereafter as practical.
-29-
<PAGE>
(b) The parties shall be permitted discovery, including
depositions, under the supervision and rules set by the Arbitrator; provided,
however, that discovery shall be completed within forty-five (45) days of
selection or appointment of the Arbitrator. The Arbitrator shall have power to
impose such sanctions as the Arbitrator deems appropriate for failure of a party
or counsel for a party to comply with discovery rules established by the
Arbitrator.
(c) A hearing before the Arbitrator shall be held no later
than ninety (90) days after Initiation of arbitration, unless a hearing is
waived by all parties.
(d) No later than ten (10) days from the date of closing of
the arbitration hearing, or, if an oral hearing has been waived, from the date
of transmitting final statements and proofs to the Arbitrator, the Arbitrator
shall render a written Decision.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
SpaceDev, Inc.,
a Colorado corporation
By /s/ James Benson
---------------------------
James Benson, President
Integrated Space Systems, Inc.,
a California corporation
By /s/ Philip E. Smith
---------------------------
Philip E. Smith, President
Integrated Space Systems, Inc. Shareholders signatures to follow:
-30-
<PAGE>
Integrated Space Systems, Inc. Shareholders:
No. ISS
Shares Owned
--------------
12,000
Philip E. Smith
12,000
Wes M. Dreyer
12,000
Jack A. Rubidoux
12,000
Michael G. Veno
12,000
Frank L. Macklin
12,000
- ------------------------------
Thomas W. Brown
Total: 72,000
==============
* Each ISS Shareholder owns 1/6 of the total shares issued and outstanding.
-31-
<PAGE>
DISCLOSURE SCHEDULE
2.15
NONE
-32-
<PAGE>
DISCLOSURE SCHEDULE
3.17
NONE
-33-
<PAGE>
DISCLOSURE SCHEDULE
3.7(c)
NONE
-34-
<PAGE>
DISCLOSURE SCHEDULE
6.1(a)
NONE
-35-
SUMMIT ENTERPRISES, INC.
OF VIRGINIA
August 14, 1998
Mr. James W. Benson
SpaceDev
7940 Silverton Ave., Suite 202
San Diego, CA 92126
Dear Jim:
Enclosed is the AGREEMENT FOR LICENSE AND PURCHASE OF TECHNOLOGY, along with
schedules A and B. We do not have a signed page 11 under Schedule B -- Form of
Warrant. Please send us a signed copy of page 11.
Sincerely,
/s/ Alan M. Voorhees/AH
Alan M. Voorhees
AMV/ayh
Enclosure
1308 Devils Reach Road, Suite 302, Woodbridge, Va 22192
703/490-5355 (local) 703/643-2481 (metro)
<PAGE>
AGREEMENT FOR LICENSE AND PURCHASE OF TECHNOLOGY
This agreement (the "Agreement") for the license, purchase and sale of
hybrid rocket motor technology and related engineering and trade secrets is
entered into on this _____ day of August 1998, by and between SPACEDEV, INC., a
Colorado corporation (hereinafter referred to as "SpaceDev"); and Alan M.
Voorhees (hereinafter referred to as "Voorhees").
A. Voorhees has acquired certain assets consisting of rocket motor
technology and related models, engineering, drawing, trade secrets and
proprietary information from a company known as AMROC as described on the
attached SCHEDULE A to this Agreement (hereinafter referred to as the
"Technology."
B. Voorhees desires to license and sell the Technology to SpaceDev and
SpaceDev desires to license and purchase such Technology from Voorhees pursuant
to the terms of this Agreement.
THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE OF THE TECHNOLOGY.
------------------------------------
1.1. Subject to the terms and conditions hereinafter set forth,
SpaceDev agrees to purchase from Voorhees and Voorhees agrees to sell to
SpaceDev all tight, title and interest in the Technology including, but not
limited to all the engineering, drawings, designs, formulas and know-how along
with all equipment and other items of tangible personal property required to
further develop, manufacture, sell or make use of the Technology, and all data,
files, documentation, telephone numbers, computer disks, computer tapes,
computer programs and all other data used in connection with the Technology.
1.2. The sale, conveyance, assignment and transfer of the
Technology shall be free and clear of all liens, encumbrances, liabilities or
obligations.
1.3. Notwithstanding anything to the contrary contained in this
Agreement, the transfer of title to the Technology shall become effective only
upon receipt by Voorhees of the Consideration (as defined in Section 4 hereof).
1.4. Voorhees shall be responsible for the payment of any sales
and/or use taxes arising out of the transfer of the Technology. SpaceDev shall
not be responsible for any sales tax, payroll, personal property, occupation,
withholding or similar tax or any taxes of any kind related to Voorhees's prior
ownership or use of the Technology.
2. LIABILITIES.
------------
2.1. SpaceDev shall assume no liabilities in connection with the
Technology.
<PAGE>
3. EXCLUSIVE LICENSE.
------------------
3.1. Until the Consideration described in Section 4 below is paid
according to the terms of that section, Voorhees grants to SpaceDev the
exclusive royalty free right to use, license, sell, apply for patents or
trademarks, market, manufacture and utilize the Technology and any improvements
thereon throughout the world in the sole discretion of SpaceDev (the "License
Rights"). The License Rights may only be canceled pursuant to the termination of
this Agreement as provided in Section 8 hereof.
4. THE CONSIDERATION.
------------------
4.1. In exchange for the license and transfer of Technology as
provided herein, SpaceDev shall pay the following Consideration (the
"Consideration") to Voorhees:
4.1.1. WARRANTS ON EXECUTION. On the execution of this
Agreement, SpaceDev shall issue to Voorhees Warrants to purchase twenty-five
thousand (25,000) shares of SpaceDev common stock, par value $.0001 per share
(the "Common Stock").
4.1.2. CONTINUING WARRANTS. For the first three (3) years of
this Agreement, Voorhees shall receive the greater of the Warrants described in
subparagraphs 4.1.2.1 or 4.1.2.2 below. Commencing with the fourth year of this
Agreement, Voorhees shall only receive the Warrants described in subparagraph
4.1.2.1 below.
4.1.2.1. REVENUE WARRANTS. A warrant to purchase one
(1) share of Common Stock for each one hundred and twenty-five dollars ($125.00)
in Revenue (as defined herein) earned by SpaceDev from the license, sale, use or
other disposition of the Technology. For purposes of this Agreement, "Revenue"
shall mean the income (as determined pursuant to GAAP) received from the
license, sale, use or other disposition of the Technology whether or not
pursuant to the terms of any oral or written agreement, contract or relationship
(a "Contact") between SpaceDev and a third party in which the Technology is part
of the product or service provided. SpaceDev agrees to set forth in each
Contact, if written, a line item description of each product or service sold and
the price charged for each line item setting out the price for the sale or use
of the Technology. The calculation of Revenue will be completed each calendar
quarter, commencing on the first full calendar quarter after the execution of
this Agreement, based on a review of all Contracts by SpaceDev, and if so
requested, by Voorhees.
4.1.2.2. ANNUAL WARRANTS. Warrants to purchase
twenty-five thousand (25,000) shares of SpaceDev Common Stock on the first three
(3) annual anniversaries of the execution of this Agreement.
4.2. MAXIMUM CONSIDERATION. The total Consideration paid pursuant
to this Agreement shall not exceed (1) Warrants to purchase three million
(3,000,000) shares of Common Stock, or (ii) six million dollars ($6,000,000) in
Recognized Value. "Recognized Value" shall mean the sum of (a) the cumulative
difference between the Market Price (as defined herein) of the Common Stock and
the Strike Price (as defined herein) for each Warrant then owned by Voorhees,
and (b) the cumulative difference between the Market Price on the date of
2
<PAGE>
exercise and the Strike Price for each Warrant previously exercised by Voorhees.
The parties will compute the Recognized Value each time Warrants are due to be
issued under this Agreement to determine if the Maximum Consideration has been
reached. "Market Price" shall mean the average of the daily closing prices of
the Common Stock on the Nasdaq Stock Exchange or such other national or regional
stock exchange or over the counter market on which the Common Stock is then
traded for the ten (10) trading days prior to the date on which the Market Price
is being determined. In the event that Recognized Value or Market Price shall be
determined in connection with a Change in Control (as defined herein) the Market
Price shall be determined as of the date ninety (90) days prior to public
knowledge of such Change in Control.
4.3. MAXIMUM PAYOUT TERM. The Consideration shall be deemed paid in
full and all sums due to Voorhees under this Agreement shall be deemed satisfied
on the tenth anniversary of this Agreement, even if the Maximum Consideration
described in Section 4.2 has not been paid by this date.
4.4. TERMS OF THE WARRANTS. All of the Warrants issued pursuant to
this Agreement shall be substantially in the form attached hereto as SCHEDULE B.
All Warrants issued under this Agreement will be immediately exercisable and
will expire on the fifth anniversary of their issuance. The exercise price for
the Warrants (the "Strike Price") shall be an amount equal to fifty percent
(50%) of the Market Price on the date such Warrant is issued.
4.5. PROTECTION AGAINST DILUTION. The Strike Price for the shares
of Common Stock and number of shares of Common Stock issuable upon exercise of
the Warrants is subject to adjustment from time to time as provided in the
Warrant attached hereto as Schedule B.
4.6. FUTURE EQUITY FINANCING. In the event SpaceDev seeks
additional equity financing in the public or private market at a price below the
Strike Price with respect to any Warrants then owned by Voorhees, SpaceDev
agrees to allow Voorhees a right to participate in that financing up to
Voorhees's percentage ownership in the Company on a fully diluted basis.
4.7. STATUTORY WARNING. THE WARRANTS THAT ARE BEING ISSUED BY
SPACEDEV AS THE CONSIDERATION FOR THIS AGREEMENT ARE SECURITIES AS DEFINED BY
THE SECURITIES ACT OF 1933, AS AMENDED. THE WARRANTS AND THE COMMON STOCK THAT
WILL BE ISSUED ON THE EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OF THE UNITED STATES OR WITH ANY STATE
SECURITIES AGENCY. ON THE EXERCISE OF THE WARRANTS THE HOLDER WILL REPRESENT TO
THE COMPANY THAT THE SHARES ARE BEING ACQUIRED FOR HIS/HER OWN ACCOUNT AND NOT
WITH A VIEW TOWARDS RESALE OR OTHER DISTRIBUTION AND ACKNOWLEDGE THE COMMON
STOCK HAS NOT BEEN REGISTERED. THE SALE OR TRANSFER OF ANY WARRANT OR ANY SHARE
OF COMMON STOCK ISSUED PURSUANT TO A WARRANT MAY BE ILLEGAL WITHOUT REGISTRATION
OR QUALIFICATION UNDER AN EXEMPTION FROM REGISTRATION SPACEDEV HAS NO PLANS TO
REGISTER THE SHARES OF
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COMMON STOCK THAT WILL BE ISSUED PURSUANT TO THE WARRANTS DESCRIBED HEREIN
EXCEPT AS SET FORTH IN SECTION 4.8 BELOW.
4.8. REGISTRATION OF SHARES. SpaceDev agrees to undertake
registration with the U.S. Securities and Exchange Commission for the public
sale of the Warrants or shares of Common Stock issued pursuant to such Warrants
at the request of Voorhees. All costs and fees involved in any such registration
shall be at the sole expense of Voorhees.
5. RESERVED.
6. WARRANTIES.
6.1. SpaceDev acknowledges that it has conducted a thorough review
of all aspects of the Technology. Voorhees makes no representations or
warranties concerning the Technology and licenses and transfers the Technology
to SpaceDev all faults. Voorhees shall have no duty to indemnify SpaceDev with
respect to the Technology or with respect to any use that SpaceDev may make
thereof.
7. CONFIDENTIAL TREATMENT OF INFORMATION.
7.1. SpaceDev covenants and agrees that any of the trade secrets
or other confidential or proprietary information related in any way to the
Technology which may from time to time be made available or become known to
SpaceDev (the "Confidential Information") shall be treated as confidential,
shall be used solely in connection with performance under the terms of this
Agreement or any other agreement between Voorhees and SpaceDev and shall not be
disclosed to any persons other than employees of SpaceDev who have a reasonable
need for access thereto in connection with performance of this Agreement by
SpaceDev. SpaceDev shall take all reasonable measures to protect the
confidentiality of the Confidential Information. All memoranda or papers
containing Confidential Information which SpaceDev may receive shall be returned
to Voorhees upon request. To that end, and without limiting the generality of
the foregoing provision, SpaceDev agrees to cause all written materials and
other documents relating to or containing Confidential Information, including
all sketches, drawings, reports and notes, and all copies, reprints, and
reproductions, to be plainly marked to indicate the secret and confidential
nature thereof and to prevent the unauthorized use or reproduction thereof.
8. TERMINATION.
8.1. TERMINATION BY VOORHEES. Voorhees reserves the right in his
sole discretion to cancel this Agreement and terminate all License Rights
granted hereunder if SpaceDev has not received Revenue (as defined herein) in
the sum of three million five hundred thousand dollars ($3,500,000) on or before
the fifth anniversary of the execution of this Agreement. In the event of such
termination, the parties hereto agree that all right, title and interest in the
Licenses Rights and the Technology shall remain to be the property of Voorhees.
8.2. CHANGE IN CONTROL. In the event SpaceDev undergoes a Change in
Control (as defined herein), this Agreement may be terminated at the option of
Voorhees. Subject to
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limitations in Section 4.2, in the event Voorhees elects to terminate this
Agreement upon such Change in Control, SpaceDev shall, at the option of
Voorhees, (i) pay to Voorhees, within 30 days of the Change in Control, the
difference between $6,000,000 and the Recognized Value for all Warrants
previously exercised, computed as of the date of such exercise, or (ii) issue to
Voorhees a number of Warrants or shares of Common Stock equal to the difference
between 3,000,000 shares and the number of shares of Common Stock issuable upon
exercise of the Warrants then owned by Voorhees or previously exercised by
Voorhees. "Change in Control" shall mean any reorganization or consolidation of
SpaceDev with, or any merger of SpaceDev with or into, another entity (other
than a consolidation or merger in which SpaceDev is the surviving corporation)
or any sale or transfer to another entity of the majority of assets of SpaceDev.
9. FURTHER ACTS AFTER CLOSING.
9.1. FURTHER ACTS. Voorhees, at any time after the execution of
this Agreement, will execute, acknowledge and deliver any further documents,
instruments, conveyances and other assurances, documents and instruments of
transfer reasonably requested by SpaceDev for the purpose of assigning,
transferring, granting, conveying and confirming to SpaceDev or reducing to
possession of any or all information or property to be conveyed and transferred
under this Agreement. If requested by SpaceDev, Voorhees further agrees to
prosecute or otherwise enforce in his own name for the benefit of SpaceDev any
patents, trademarks, claims, rights or benefits that are licensed or transferred
to SpaceDev under this Agreement and that require, as a matter of law,
prosecution or enforcement in Voorhees's name. The expense incurred in any
prosecution or enforcement of patent claims, rights, or benefits under this
paragraph shall be borne by the respective parties to such proceeding.
9.2. MUTUAL COOPERATION. The parties hereto agree to reasonably
cooperate in any reasonable effort by either party to extend the current
intellectual property rights associated with the Technology into foreign
jurisdictions or to defend or to pursue any legal action regarding intellectual
property rights associated with the Technology.
10. COVENANT NOT TO COMPETE.
10.1. As consideration for the issuance of the twenty-five thousand
Warrants at the execution of this Agreement, Voorhees will not at any time,
during the term of this Agreement without the written consent of SpaceDev,
individually or jointly, or as a member, employee, or agent of any partnership,
or an agent, shareholder or investor of any other corporation, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation, or control of, or consult with, or permit the use of
their name by, or be conducted in any manner with, any technology which directly
or indirectly competes with the Technology.
10.2. The provisions of and enforcement of this section 10 will be
excluded from the requirement to arbitrate disputes as set forth in Section 11.1
below. Any breach of this Section 10 may be enforced in a court of law or equity
through any equitable or legal remedy
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available including, but not limited to, monetary damages, injunctive relief or
any other relief the court deems just and proper.
11. MISCELLANEOUS.
11.1. ARBITRATION OF DISPUTES.
11.1.1. Any controversy, dispute or claim arising out of the
interpretation, performance or breach of this Agreement, including disputes as
to the jurisdiction of the Arbitrator, but excluding any breach regarding the
Covenant Not To Compete, shall be resolved at the request of any party hereto by
a binding arbitration conducted by a single arbitrator in the Commonwealth of
Virginia in accordance with the American Arbitration Association Commercial
Arbitration Rules (the "Rules") except as modified by the terms of this Section.
The arbitrator shall apply Virginia substantive law to the matter(s) which are
the subject of the arbitration. The parties hereby agree that the Rules are
modified as follows:
11.1.2. If the parties have not agreed to an Arbitrator
within thirty (30) days after initiation of arbitration, then a Judicial
Arbitration and Mediation Service shall appoint a single neutral Arbitrator as
soon thereafter as practical.
11.1.3. The parties shall be permitted discovery, including
depositions, under the supervision and rules set by the arbitrator; provided,
however, that discovery shall be completed within forty-five (45) days of
selection or appointment of the arbitrator. The arbitrator shall have power to
impose such sanctions as the arbitrator deems appropriate for failure of a party
or counsel for a party to comply with discovery rules established by the
arbitrator.
11.1.4. A hearing before the arbitrator shall be held no
later than ninety (90) days after initiation of arbitration, unless a hearing is
waived by all parties.
11.1.5. No later than ten (10) days from the date of closing
of the arbitration hearing, or, if an oral hearing has been waived, from the
date of transmitting final statements and proofs to the arbitrator, the
arbitrator shall render a written Decision.
11.2. ASSIGNABILITY. Neither this Agreement nor any interest herein
shall be assignable by either party without the prior written consent of the
other party.
11.3. ATTORNEYS' FEES AND COSTS. In any action or arbitration
proceeding between the parties for the interpretation, reformation, enforcement
or rescission of this Agreement, the prevailing party will be entitled to
recover from the other party reasonable attorneys' fees and court and other
litigation costs incurred.
11.4. CAPACITY TO SIGN. All parties covenant that they possess all
necessary capacity and authority to sign and enter this Agreement. All
individuals signing this Agreement for a corporation, a partnership, or other
legal entity, or signing under a power of attorney or as a trustee, guardian,
conservator, or in any other legal capacity, covenant that they have the
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necessary capacity and authority to act for, sign, and bind the respective
entity or principal on whose behalf they are signing.
11.5. CAPTIONS. The article and section headings are for reference
only and in no way define, limit, extend or interpret the scope of this
Agreement or of any particular article or section.
11.6. CONSTRUCTION. The language in all parts of this Agreement
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any party.
11.7. COUNTERPARTS, SIGNATURES BY TELECOPY. This Agreement may be
executed in multiple counterparts, all of which taken together shall constitute
one original agreement. The signature of a party which is delivered to the other
party(ies) by telecopy, telegram or other electronic means shall constitute due
delivery, provided that the original signature is delivered to the proper party
by mail or in person within seventy-two (72) hours.
11.8. EFFECTIVE DATE. The effective date of this Agreement shall be
the date above first written.
11.9. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement between the parties with regard to the subject matter hereof. All
agreements, covenants, representations and warranties, express and implied, oral
and written, of the parties with regard to the subject matter hereof are
contained herein, and in the schedules and exhibits hereto and the documents
referred to herein are implementing the provisions hereof. All schedules and
exhibits are incorporated by reference to be a part of this Agreement. No other
agreements, covenants, representations or warranties, express or implied, oral
or written, have been made by either party to the other with respect to the
subject matter of this Agreement. All prior and contemporaneous conversations,
negotiations, possible and alleged agreements and representations, covenants,
and warranties with respect to the subject matter hereof are waived, merged
herein and superseded hereby.
11.10. GOVERNING LAW, EXCLUSIVE JURISDICTION. This Agreement is
being delivered in the Commonwealth of Virginia and shall be construed and
enforced in accordance with the laws thereof. Each party consents to the
exclusive jurisdiction and venue in any state or federal court located within
such state for any action brought or maintained hereunder.
11.11. MODIFICATION. No modification, waiver, or discharge of this
Agreement will be valid unless it is in writing and signed by the party against
whom the enforcement of the modification, waiver or discharge is or may be
sought.
11.12. NO THIRD-PARTY BENEFICIARY. Any agreement to pay any amount
shall be only for the benefit of the parties hereto and their respective heirs,
successors, and assigns, and such agreement and assumption shall not inure to
the benefit of the obligees of any indebtedness or any other party whomsoever,
it being the intention of the parties that no one shall be deemed to be a
third-party beneficiary of this Agreement.
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11.13. NO WAIVER. A party's failure to insist on the strict
performance of any covenant or duty required by the Agreement, or pursue any
remedy under the Agreement, shall not constitute a waiver of the breach of the
remedy.
11.14. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing, and shall be personally delivered or
delivered by overnight commercial carrier or sent by registered or certified
mail, postage prepaid, return receipt requested. Such notice shall be deemed
served on the day actually personally served or the third day after the notice
was placed in the mail or overnight delivery service.
11.15. NUMBER AND GENDER. Where the context in which words are used
in this Agreement indicates that such is the intent, the words in the singular
number shall include the plural and vice versa, and the words in the masculine
gender shall include the feminine and neuter genders and vice versa.
11.16. SEVERABILITY. In the event that any provision of this
Agreement shall be held to be invalid, the same shall not affect in any respect
whatsoever the validity of the remainder of this Agreement.
11.17. TIME OF ESSENCE. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement and
it shall be effective as of the date set forth above.
SPACEDEV INC.
By: /s. James W. Benson /s/ Alan M. Voorhees
--------------------------- ------------------------------
Name: James W. Benson Alan M. Voorhees
Title: President
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SCHEDULE A - DESCRIPTION OF TECHNOLOGY
The TECHNOLOGY shall mean and include all of the assets purchased by Voorhees
from AMROC related to hybrid propulsion systems, including but not limited to
the following:
A. All of the AMROC patents, including, but not limited to: (1)
United States Patent 5,339,625 issued August 23, 1994,
entitled "Hybrid rocket motor solid fuel grain"; (2) United
States Patent 5,119,627 issued Jun. 9, 1992, entitled
"Embedded pressurization system for hybrid rocket motor"; and
(3) United States Patent 5,582,001 issued Dec. 10, 1996,
entitled "Hybrid rocket combustion enhancement".
B. Any and all foreign patents and patent applications as filed
by the American Rocket Company.
C. Any and all engineering, drawings, designs, formulas, computer
models, and know-how along with all equipment and other items
of tangible personal property related to or required to
further develop, manufacture, sell, or make use of the
Technology.
D. Any and all patent rights, applications, trade names,
trademarks, copyrights, business contracts, vendor lists, and
other information and intellectual property concerning the
Technology.
E. Any and all data files, documentation, files, telephone
numbers, computer disks, computer tapes, computer programs and
all other data used in connection with the Technology.
F. All stand alone rocket motor modules derived from the
Technology and integrated launch systems whose primary
propulsion is derived from the Technology.
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SCHEDULE B - FORM OF WARRANT
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER
THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS
THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT, HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SALE OR TRANSFER OF
THIS WARRANT OR ANY STOCK ISSUED PURSUANT TO THIS WARRANT MAY BE ILLEGAL UNLESS
FIRST REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") OR
SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER ONE OF THE COMMISSION'S RULES.
SPACEDEV, INC.
A Colorado Corporation
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that, pursuant to the agreement (the "Agreement") dated August
_____, 1998 by and between Alan M. Voorhees (the "Holder") and SPACEDEV, INC.,
a Colorado corporation (hereinafter called the "Corporation"), the Holder shall
receive Warrants entitling the Holder to purchase from the Corporation shares of
common stock par value $.0001 per share, (the "Common Stock") as set forth
below:
1. WARRANT TO PURCHASE:
Number of Shares: ___________________
Date First Available to be Exercised:_____________________
This Warrant Expires and no shares hereunder may be purchased after (the
"Expiration Date") __________________.
2. EXERCISE PRICE. Holder shall be entitled to exercise the Warrants
at the a price equal to $ _____________ per share of Common Stock.
3. EXERCISE OF WARRANT.
3.1. The rights represented by this Warrant may be exercised by
the Holder, at any time or from time to time prior to the Expiration Date, in
whole or in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Corporation
as it may designate by notice in writing to the Holder hereof at the address of
the Holder appearing on the books of the Corporation, and by payment to the
Corporation of the Warrant Price in cash or by certified or official bank check,
for each share being purchased.
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3.2. In the event of any exercise of the rights represented by
this Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder, or its nominee or other party
designated in the purchase form by the Holder hereof, shall be delivered to the
Holder within sixty (60) business days after the date in which the rights
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired or has been exercised in full, a new Warrant representing
the number of shares (except a remaining fractional share), if any, with respect
to which this Warrant shall not then have been exercised shall also be issued to
the Holder within such time.
3.3. The person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all purposes be
deemed to have become the Holder of record of such shares on the date on which
this Warrant was surrendered and payment of the Warrant Price, except that, if
the date of such surrender and payment is a date on which the stock transfer
books of the Corporation are closed, such person shall be deemed to have become
the Holder of such shares at the close of business on the next succeeding date
on which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would, be
delivered upon such exercise, the Corporation, in lieu of delivery of a
fractional share thereof shall pay to the Holder an amount in cash equal to the
current market price of such fractional share as determined in good faith by the
Board of Directors of the Corporation (the "Board").
4. PROTECTION AGAINST DILUTION. The Exercise Price for the Common
Stock and number of shares of Common Stock issuable upon exercise of the
Warrants is subject to adjustment from time to time as follows:
4.1. DIVIDENDS, SUBDIVISIONS, RECLASSIFICATIONS, ETC. In case at
any time or from time to time after the date of this Warrant, the Corporation
shall (i) take a record of the holders of the Common Stock for the purpose of
entitling them to receive a dividend or a distribution on the Common Stock
payable in Common Stock or other class of securities, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, then, and in each such case, the Exercise Price in
effect at the time of the record date for such dividend or distribution or the
Effective date of such subdivision, combination or reclassification shall be
adjusted in such a manner that the Exercise Price for the shares issuable upon
exercise of the Warrants immediately after such event shall bear the same ratio
to the Exercise Price in effect immediately prior to any such event as the total
number of shares of Common Stock outstanding immediately prior to such event
shall bear to the total number of shares of Common Stock outstanding immediately
after such event.
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4.2. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE. When any
adjustment is required to be made in the Exercise Price under this Section 4,
(i) the number of shares of Common Stock issuable upon exercise of the Warrants
shall be changed (upward to the nearest full share) to the number of shares
determined by dividing (x) an amount equal to the number of shares issuable
pursuant to the exercise of the Warrants immediately prior to the adjustment
multiplied by the Exercise Price in effect immediately prior to the adjustment,
by (y) the Exercise Price in effect immediately after such adjustment, and (ii)
upon exercise of the Warrant, the holder will be entitled to receive the number
of shares or other securities referred to in Section 4.1 that such holder would
have received had the Warrant been exercised prior to the events referred to in
Section 4.1.
4.3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any reorganization or consolidation of the Corporation with, or any
merger of the Corporation with or into, another entity (other than a
consolidation or merger in which the Corporation is the surviving corporation)
or in case of any sale or transfer to another entity of the majority of assets
of the Corporation, the entity resulting from such reorganization or
consolidation or surviving such merger or to which such sale or transfer shall
be made, as the case may be, shall make suitable provision (which shall be fair
and equitable to the holders of Warrants) and shall assume the obligations of
the Corporation hereunder (by written instrument executed and mailed to each
holder of the Warrants then outstanding) pursuant to which, upon exercise of the
Warrants, at any time after the consummation of such reorganization,
consolidation merger or conveyance, the holder shall be entitled to receive the
shares or other securities or property that such holder would have been entitled
to upon consummation if such holder had exercise the Warrants immediately prior
thereto, all subject to further adjustment as provided in this Section 4.
4.4. CERTIFICATE AS TO ADJUSTMENTS. In the event of adjustment as
herein provided in paragraphs of this Section 4, the Corporation shall promptly
mail to each Warrant holder a certificate setting forth the Exercise Price and
number of shares of Common Stock issuable upon exercise after such adjustment
and setting forth the kind and amount of share so other securities or property
into which the Warrants shall be exercisable after any adjustment of the
Exercise Price as provided herein.
4.5. MINIMUM ADJUSTMENT. Notwithstanding the foregoing, no
certificate as to adjustment of the Exercise Price hereunder shall be made if
such adjustment results in a change in the Exercise Price then in effect of less
than two cents ($0.02) and any adjustment of less than two cents ($0.02) of any
Exercise Price shall be carried forward and shall be made at the time of and
together with any subsequent adjustment that, together with the adjustment or
adjustments so carried forward, amounts to two cents ($0.02) or more; provided
however, that upon the exercise of a Warrant, the Corporation shall have made
all necessary adjustments (to the nearest cent) not theretofore made to the
Exercise Price up to and including the date upon which such Warrant is
exercised.
4.6. NO IMPAIRMENT. The Corporation shall not, by amendment of
its organizational documents or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
action, avoid or seek to avoid the
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observance or performance of any of the terms of the Warrants, but will at all
times in good faith take any and all action as may be necessary in order to
protect the rights of the holders of the Warrants against impairment. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issue upon the exercise of this Warrant
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the exercise of this Warrant and other Warrants owned by the
Holder. The Corporation shall from time to time in accordance with applicable
law increase the authorized amount of its Common Stock if at any time the number
of shares of Common Stock remaining unissued and available for issuance shall
not be sufficient to permit exercise of this Warrant and other Warrants owned by
the Holder. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirements of any national securities exchange
upon which the Common Stock of the Corporation may be listed.
4.7. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without deduction to the Holders of this
Warrant for any issuance tax in respect thereof provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of Holder of this Warrant.
4.8. The Corporation will at no time close its transfer books
against the transfer of the shares of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant
5. NOTICE OF RECORD DATES.
5.1. In the event of:
(a) Any taking by the Corporation of a record of the Holders
of any class of securities for the purpose of determining the Holders thereof
who are entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right;
(b) Any capital reorganization of the Corporation, any
reclassification, or recapitalization of the capital stock of the Corporation,
or any transfer of all or substantially all the assets of the Corporation to, or
consolidation or merger of the Corporation with or into any other corporation;
or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
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then and in each such event the Corporation will give notice to the Holder of
this Warrant specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the Holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 10 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933 or to a favorable vote
of shareholders, if either is required.
6. REGISTRATION RIGHTS.
6.1. REGISTRATION OF THE COMMON STOCK. At the request of the
holder, the Corporation agrees to file with the Securities and Exchange
Commission (the "Commission") at the Holder's expense a shelf registration
statement under Rule 415 of the Securities Act or other appropriate registration
statement if a shelf registration is not available under the Securities Act (a
"Registration Statement"), covering the resale of the Warrants and all of the
shares of the Common Stock that may be issued upon exercise of the Warrants
("Warrant Shares") in the event that holders of at least 50,000 Warrants (or
Warrant Shares) request such registration. The holders of Warrants and/or
Warrant Shares may also request "piggyback" registration of their Warrants and
Warrant Shares. Upon any of such requests, the Corporation will:
(a) provide written notice (the "Notice") of such request
within 10 days of the receipt of such request to each holder of Warrants and/or
Warrant Shares not a party to the request;
(b) use its best efforts to have such Registration Statement
declared effective and to keep it effective for a period of 180 days (the
"Effective Period");
(c) give each holder of Warrants and/or Warrant Shares,
their underwriters, if any, and their counsel and accountants a reasonable
opportunity to participate in the preparation of the Registration Statement and
give such persons reasonable access to its books, records, officers and
independent public accountants;
(d) furnish to each holder of Warrants and/or Warrant Shares
such numbers of copies of prospectuses, and supplements or amendments thereto,
and such other documents as such holder reasonably requests;
(e) register or qualify the securities covered by the
Registration Statement under the securities or blue sky laws of such
jurisdictions within the United States as any holder of Warrants and/or Warrant
Shares shall reasonably request, and do such other reasonable acts and things as
may be required of it to enable such holders to consummate the sale or other
disposition in such jurisdictions of the Warrants and/or Warrant Shares;
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(f) furnish, at the request of the holders of Warrants
and/or Warrant Shares, on the date Warrant Shares are delivered to the
Underwriters for sale pursuant to such registration, or, if such Warrants and/or
Warrant Shares are not being sold through underwriters, on the date the
Registration Statement with respect to such Warrants and/or Warrant Shares
becomes effective, (A) a securities opinion of counsel representing the
Corporation for the purposes of such registration covering such legal matters as
are customarily included in such opinions and (B) letters of the firm of
independent public accountants that certified the financial statements included
in the Registration Statement, addressed to the underwriters, covering
substantially the same matters as are customarily covered in accountants'
letters delivered to underwriters in underwritten public offerings of securities
and such other financial matters as such holders (or the underwriters, if any)
may reasonably request;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission;
(h) enter into and perform an underwriting agreement with
respect to the sale of the holders' Warrant Shares with the managing
underwriter, if any, selected by the Holder, containing customary (A) terms of
offer and sale of the securities, payment provisions, underwriting discounts and
commissions and (B) representations, warranties, covenants, indemnities, terms
and conditions; and
(i) keep the holders of the Warrants and/or Warrant Shares
advised as to the initiation and progress of the registration.
The Corporation further agrees to supplement or make amendments to
each Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form utilized by the Corporation or
by the Securities Act or rules and regulations thereunder for such Registration
Statement. Notwithstanding the foregoing, if for any reason the effectiveness of
a Registration Statement is delayed or suspended or it ceases to be available
for sales of Warrants and/or Warrant Shares thereunder, the Effective Period
shall be extended by the aggregate number of days of such delay, suspension or
unavailability.
6.2. LISTING ON SECURITIES EXCHANGE. If the Corporation shall
list or maintain the listing of any shares of Common Stock on any securities
exchange or national market system, it will at its expense and as necessary to
permit the registration and sale of the Warrants and/or Warrant Shares
hereunder, list thereon, maintain and, when necessary, increase such listing to
include such Warrants and/or Warrant Shares.
6.3. REGISTRATION NOT REQUIRED. Notwithstanding the foregoing,
the Corporation shall not be required to file or maintain the effectiveness of a
registration statement relating to Warrants and/or Warrant Shares after the
first date upon which, in the opinion of counsel to the Holder, all of the
Warrants and/or Warrant Shares covered thereby could be sold by the holders
thereof in any period of three months pursuant to Rule 144 under the Securities
Act, or any successor rule thereto.
6.4. INDEMNIFICATION.
6
<PAGE>
(a) In connection with the Registration Statement, the
Corporation agrees to indemnify holders of Warrants and/or Warrant Shares within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
caused by any untrue, or alleged untrue, statement of a material fact contained
in the Registration Statement, preliminary prospectus or prospectus (as amended
or supplemented if the Corporation shall have furnished any amendments or
supplements thereto) or caused by any omission or alleged omission, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement, alleged
untrue statement, omission, or alleged omission based upon information furnished
to the Corporation by the holders of Warrants and/or Warrant Shares expressly
for use therein. The Corporation and each officer, director and controlling
person of the Corporation shall be indemnified by each holder of Warrants and/or
Warrant Shares covered by the Registration Statement for all such losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) caused by any such untrue, or alleged untrue, statement or any
such omission, or alleged omission, based upon information furnished to the
Corporation by the holders of Warrants and/or Warrant Shares expressly for use
therein in a writing signed by the holder.
(b) Promptly upon receipt by a party indemnified under this
Section 6.4 of notice of the commencement of any action against such indemnified
party in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6.4, such indemnified party shall notify
the Corporation in writing of the commencement of such action, but the failure
to so notify the Corporation shall not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 6.4 unless such
failure shall materially adversely affect the defense of such action. In case
notice of commencement of any such action shall be given to the Corporation as
above provided, the Corporation shall be entitled to participate in and, to the
extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the Corporation agrees to pay the same, (ii) the
Corporation fails to assume the defense of such action with counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any such
action (including any impleaded parties) have been advised by such counsel that
representation of such indemnified party and the Corporation by the same counsel
would be inappropriate under applicable standards of professional conduct (in
which case the Corporation shall not have the right to assume the defense of
such action on behalf of such indemnified party). No indemnifying party shall be
liable for any settlement entered into without its consent.
6.5. CONTRIBUTION.
(a) If for any reason the indemnification provisions
contemplated by Section 6.5 are either unavailable or insufficient to hold
harmless an indemnified party in respect
7
<PAGE>
of any losses, claims, damages or liabilities referred to therein, then the
party that would otherwise be required to provide indemnification or the
indemnifying party (in either case, for purposes of this Section 6.5, the
"Indemnifying Party") in respect of such losses, claims, damages or liabilities,
shall contribute to the amount paid or payable by the party that would otherwise
be entitled to indemnification or the indemnified party (in either case, for
purposes of this Section 6.5, the "Indemnified Party") as a result of such
losses, claims, damages, liabilities or expense, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact related to information supplied by the Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party. In no
event shall any holder of Warrants and/or Warrant Shares covered by the
Registration Statement be required to contribute an amount greater than the
dollar amount of the proceeds received by such holder from the sale of Warrants
and/or Warrant Shares pursuant to the registration giving rise to the liability.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.5 were determined by pro
rata allocation (even if the holders or any underwriters or all of them were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person or entity determined to have
committed a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
(c) The contribution provided for in this Section 6.5 shall
survive the termination or exercise of this Warrant and shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Indemnified Party.
7. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Corporation. No provision hereof, in the absence of affirmative action by
the Holder hereof to purchase shares of Common Stock, and no mere enumeration
hereon of the rights or privileges of the Holder hereof shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
8. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Corporation that:
8
<PAGE>
8.1. This Warrant, the Common Stock issuable upon exercise of
this Warrant, and any securities issued with respect to either of them by way of
a stock dividend or stock split or in connection with a recapitalization,
merger, consolidation or other reorganization will be "restricted securities" as
such term is used in the rules and regulations under the Securities Act and that
such securities have not been and will not be registered under the Securities
Act or any state securities law, and that such securities must be held
indefinitely unless registration is effected or transfer can be made pursuant to
appropriate exemptions;
8.2. He has read, and fully understands, the terms of this
Warrant set forth on its face and the attachment hereto, including the
restrictions on transfer contained herein;
8.3. He has either a pre-existing personal or business
relationship with the Corporation or one of its officers, directors or
controlling persons;
8.4. He is receiving this Warrant for investment and for its own
account and not with a view to or for sale in connection with any distribution
of this Warrant or the Common Stock of the Corporation issuable upon exercise of
this Warrant, and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein will prevent Holder from
transferring such securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
8.5. He is an "accredited investor" within the meaning of
paragraph (a) of Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission.
8.6. He has been afforded access to the Corporation's financial
and business information through disclosure meetings or otherwise, and has had
an opportunity to ask the Corporation's officers questions regarding the
Corporation and its financial and business condition and to get independent
advice from a professional or investment advisor concerning the investment; and
it will not exercise the Warrant unless the same is true with respect to its
decision to exercise;
8.7. He has the knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of this
investment and to protect its own interest;
8.8. He acknowledges that an investment in the Corporation and
this Warrant involves a high degree of risk; and
8.9. This Warrant, or any substitution warrant, issued to Holder
(or his assigns) is subject to the following legend condition:
"THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED
HEREIN. THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THIS WARRANT
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<PAGE>
NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933."
8.10. The Corporation may affix the following legend (in addition
to any other legend(s), if any, required by applicable state corporate and/or
securities laws) to certificates for shares of Common Stock (or other
securities) issued upon exercise of this Warrant ("Warrant Shares"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR ANY STATE
SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF THE
COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT"
9. NOTICE OF PROPOSED TRANSFERS. The Holder of this Warrant, by
acceptance hereof, agrees to comply in all respects with the provisions of this
agreement. Prior to any proposed transfer of this Warrant or any Warrant Shares,
unless there is in effect a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering the proposed transfer, the
Holder of such securities shall give written notice to the Corporation of such
Holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall be accompanied (except in transactions in compliance with Rule 144) by
either (1) a written opinion of legal counsel who shall be reasonably
satisfactory to the Corporation addressed to the Corporation and reasonably
satisfactory in form and substance to the Corporation's counsel, to the effect
that the proposal transfer of the Warrant and/or Warrant Shares may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the U.S. Securities and Exchange Commission (the "Commission") to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that enforcement action be taken
with respect thereto, whereupon the Holder of such securities shall be entitled
to transfer such securities in accordance with the terms of the notice delivered
by the Holder to the Corporation. Each new certificate evidencing the Warrant
and/or Warrant Shares so transferred shall bear the appropriate restrictive
legends set forth herein, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for the Corporation, such
legend is not required in order to establish or assist in compliance with any
provisions of the Securities Act or any applicable state securities laws.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated or destroyed. The Warrant shall be at any time enforceable by
anyone.
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<PAGE>
11. PRESENTMENT. Prior to due presentment for registration of transfer
of this Warrant, the Corporation may deem and treat the Holder as the absolute
owner of the Warrant, notwithstanding any notation of ownership or other writing
thereon, for the purpose of any exercise thereof and for all other purposes, and
the Corporation shall not be affected by any notice to the contrary.
12. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at has last known
address as it shall appear in the records of the Corporation, and if to the
Corporation to the Secretary of the Corporation at the registered offices of the
corporation. The Corporation may alter the address to which communications are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section 9 for the giving of notice.
13. GOVERNING LAW. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the Commonwealth of Virginia
without regard to principles of conflicts of laws.
14. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth herein, all the terms and provisions of the Warrant shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
15. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid,
16. GENDER AND NUMBER. In this Warrant, the masculine, feminine and
neuter genders and the singular and plural shall be deemed to include one
another as appropriate.
17. CAPTIONS. The descriptive headings of the various Sections or
parts of this Warrant are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written.
SPACEDEV, INC.
a Colorado corporation
By: /s/ James Benson
-------------------------------
James Benson, President
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<PAGE>
The undersigned Holder agrees and accepts this Warrant and
acknowledges that he has read and confirms each of the representations contained
herein.
/s/ Alan M. Voorhees
----------------------------
Holder
12
Firm Fixed Price Agreement
Number 108252
Between
The Regents of the University of California
And
SpaceDev, Incorporated
This Firm Fixed Price Agreement is executed this 1st day of November 1999 by and
between The Regents of the University of California, a public corporation,
(hereafter referred to as "University"), and SpaceDev, Incorporated, a State of
California corporation (hereafter referred to as "SpaceDev').
WHEREAS, SpaceDev can provide the below defined Statement of Work and University
is desirous of said Statement of Work; and,
WHEREAS it is has been approved by the Federal Sponsoring Agency, National
Aeronautics and Space Administration (NASA), and deemed in the best interest of
the University;
NOW, THEREFORE, the parties, in consideration of the following mutual covenants
and undertakings and other good and valuable consideration, hereby agree as
follows:
BACKGROUND
- ----------
The Cosmic Hot Interstellar Plasma Spectrometer (CHIPS) is a NASA sponsored
University-class Explorer space flight mission. CHIPS will map the sky in 50
degree x 26 degree "resels" in the scientifically critical but virtually
unexplored extreme ultraviolet (EUV) band between 90 and 260 angstrom. The CHIPS
spectrograph will be carried aboard a dedicated mini-satellite (CHIPSat) to be
developed by SpaceDev, Inc. and launched as a secondary payload aboard a
Delta-II booster with a Global Positioning Satellite primary payload. Although
this configuration differs from the flight implementation envisioned in the
original proposal, the scientific goals are unchanged and the data products are
improved.
The University of California Berkeley Space Sciences Laboratory has received
NASA Research Grant Number NAG5-5213 to perform the CHIPS mission. The
University's Principal Investigator for CHIPS is Dr. Mark V. Hurwitz.
The University's largest subcontractor (First Tier) under this grant is
SpaceDev, Incorporated (SpaceDev). SpaceDev shall be responsible for
manufacturing and supplying the spacecraft bus for the CHIPS scientific payload.
During the concept study period, a NASA review committee reviewed and approved
SpaceDev as the spacecraft provider to CHIPS.
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ARTICLE 1. STATEMENT OF WORK
- ----------------------------
This Statement Of Work (SOW) outlines SpaceDev's efforts throughout the Phase
B/C/D/E periods of the CHIPS mission. Under this agreement, and as defined in
this SOW, SpaceDev is required to provide the specified spacecraft bus along
with associated services and defined deliverables to the University in support
of NASA Research Grant NAG5-5213 entitled: COSMIC HOT INTERSTELLAR PLASMA
SPECTROMETER (CHIPS).
1.1 SCOPE OF WORK
The scope of the work encompasses all effort required by SpaceDev to design,
manufacture, integrate, test, and deliver and integrate the CHIPS spacecraft
with the Delta-II launch vehicle. Additionally, SpaceDev shall also support all
meetings and reviews for each phase.
1.2 DELIVERABLES
1.2.1 PHASE B, C, AND D
SpaceDev shall develop, produce, deliver, and maintain the following items for
the Phase B, C, and D portions of the program:
<TABLE>
<CAPTION>
SDRL DESCRIPTION SOW QTY DUE DATE
NO. REF.
- --------------- -------------------------------------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C>
001 Confirmation Review Inputs 1 On or before
Confirmation Review
002 Spacecraft Simulator H/W 1 August, 2000
003 Design Verification Review 1.5.1 1 17, September, 2000
Inputs
004 Spacecraft Bus which H/W 1 1, February, 2000
satisfies verification matrix
005 Spacecraft Bus Acceptance 1.5.4 1 1, February, 2000
Data Package (ADP)
006 Monthly Technical 1.4.4 & 1 As agreed between
Meetings 1.5.5 University and
SpaceDev
007 Semi-Annual Progress 1 Twice yearly, TBD
Report
</TABLE>
2
<PAGE>
1.3 TASKS
1.3.1 MISSION DESIGN
SpaceDev shall support University by performing analyses relating to the launch
vehicle, its orbit, and the preliminary mission timeline. SpaceDev shall develop
and support the communications network to be utilized and the interface
requirements, along with identifying potential impacts or conflicts with other
users of the selected communications resources. SpaceDev shall support
University in developing a traceability matrix showing how the proposed mission
design complies with the stated objectives, requirements, and the constraints of
the proposed investigation.
1.3.2 SPACECRAFT
SpaceDev shall describe the spacecraft design approach particularly as it
relates to new versus existing hardware and redundant versus single-string
hardware. SpaceDev shall fully identify the spacecraft systems and describe the
spacecraft characteristics and requirements. A preliminary description of the
flight system design with a block diagram showing the flight element subsystems
and their interfaces shall be included along with a description of the flight
software and a summary of the estimated performance of the flight system. The
flight heritage or rationale used to select the flight system and its
subsystems, major assemblies, and interfaces shall be described.
Subsystem characteristics and requirements shall be described. These include
mass, volume, power, pointing knowledge, pointing accuracy, new developments
needed, space qualification plan, and logistics support. Design features
incorporated to effect cost savings shall be identified along with the benefits
assumptions, and risks. A summary of the resource elements of the flight system
concept, including key margins, shall be provided.
The rationale for, and derivation of, margin allocations including mass, power,
link, etc., shall be provided. Design margins that are driving costs shall be
identified.
1.3.3 PAYLOAD INTEGRATION
SpaceDev shall support University in the development of the interface
requirements between the spacecraft bus and the instrument. Defined interfaces
shall include volumetric envelope, fields of view, weight, power requirements,
thermal requirements, command and telemetry requirements, sensitivity to, or
generation of, contamination (e.g., electromagnetic interference, gaseous
effluents, etc.), and data processing requirements, as well as the planned
process for physically and analytically integrating them with the flight system.
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<PAGE>
1.3.4 MANUFACTURING, INTEGRATION, AND TEST
SpaceDev shall describe the manufacturing strategy that will be used to produce
and test the hardware/software of the spacecraft bus. This strategy shall
include a description of the main processes/procedures planned in the
fabrication of flight hardware, software, production personnel resources,
incorporation of new technology/materials, and the preliminary test and
verification program. SpaceDev shall describe the approach for the transition
from design to manufacturing and specify data products which will be used to
assure produce ability and adequate tooling.
SpaceDev shall describe the approach, techniques, and facilities planned for the
integration, test and verification, and launch operations as it relates to the
spacecraft bus. SpaceDev shall provide a preliminary schedule for the
manufacturing, integration, and test activities for the spacecraft bus through
delivery to University. SpaceDev shall provide a list and description of the
planned end items, including engineering and qualification hardware and relevant
documentation.
1.4 PHASE B
1.4.1 SPACECRAFT BUS CONFIRMATION REVIEW
SpaceDev shall support the Confirmation Review by providing date that: (i)
Demonstrates that the spacecraft bus preliminary design meets all mission and
system requirements with acceptable risk; (ii) Exhibits that acceptable
spacecraft bus design options have been selected, subsystem-to-subsystem
interfaces are defined in detail, and verification methodologies associated with
each operational, functional, interface, and performance requirement have been
satisfactorily described; (iii) Provides the engineering basis for design
approaches; (iv) Demonstrates that mission requirements are well understood and
the mission design is adequate to meet mission requirements; (v) Management and
system engineering processes are sufficient to develop and operate the mission,
and (vi) Schedules and control processes demonstrate that the mission will
remain within the Firm Fixed Price of the contract.
1.4.2 PROCUREMENT
SpaceDev shall initiate the procurement of critical, long-lead parts, and
components as required to meet schedule requirements established by University.
1.4.3 MONTHLY TECHNICAL MEETINGS
Monthly Technical Meetings shall be held with SpaceDev and University
Representatives. The Monthly Technical Meetings will discuss the status of
significant technical issues associated with the spacecraft bus and/or its
interface with the instrument. These meetings will be held either in person at
SpaceDev or at University or by teleconference by prior arrangement with the
CHIPS Principal Investigator.
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<PAGE>
1.5 PHASES C and D
1.5.1 SPACECRAFT BUS DESIGN
SpaceDev shall provide all resources necessary to develop the spacecraft bus
design through the Design Verification Review (DVR). The DVR shall: (i) Disclose
the complete spacecraft bus systems designs in full detail, and illustrate that
technical problems and design anomalies have been resolved; (ii) Ensure that the
design maturity justifies the decision to proceed with manufacturing,
verification, and integration of the mission hardware and software, and (iii)
Verify the adequacy of the spacecraft bus detailed designs in meeting all
mission requirements. University has identified the Delta-II as the selected
launch vehicle and authorizes SpaceDev to design the spacecraft bus toward the
Delta-II secondary accommodation.
1.5.2 PROCUREMENT
SpaceDev shall complete the procurement of parts and components as required to
meet schedule requirements established by University.
1.5.3 MANUFACTURING, INTEGRATION, AND TEST
SpaceDev shall provide the facilities, services, and personnel necessary for the
successful and on-time implementation of all efforts necessary to produce the
spacecraft bus, integrate the science payload, and integrate the spacecraft with
the Delta-II vehicle.
1.5.4 ACCEPTANCE DATA PACKAGE
SpaceDev shall produce an Acceptance Data Package (ADP) for the spacecraft bus.
At a minimum, the ADP shall contain a cover sheet, signature page, as-built
configuration record, drawing(s) of the spacecraft bus, test data,
nonconformance documentation, waivers, deviations and acceptance test failure
documentation, and inspection records.
1.5.5 MONTHLY TECHNICAL MEETINGS
Monthly Technical Meetings shall be conducted between SpaceDev and University.
The Monthly Technical Meeting will discuss the status of significant technical
issues associated with the spacecraft bus and/or its interface with the
instrument.
1.6 PHASE E
Following successful on-orbit checkout of the spacecraft, SpaceDev shall support
one year of operations, including transfer of data to the University and
spacecraft operations. A more detailed description of operations support will be
amended to this agreement at a later date.
1.6.1 PHASE E FUNDING
The Phase E effort is not currently funded under this Agreement.
5
<PAGE>
1.7 REVIEWS
SpaceDev shall represent the spacecraft bus and interfaces at the following
reviews:
A. Confirmation Review Location: SpaceDev Estimated Date: 02/29/00
B. Design Verification Review Location: TBD Estimated Date: 08/25/00
C. Pre-Ship Review Location: SpaceDev Estimated Date: 12/03/01
D. Flight Readiness Review Location: TBD Estimated Date: 01/29/02
1.8 MODIFICATIONS TO THE STATEMENT OF WORK
University shall at all times maintain control and direction over the Statement
of Work performed under this Agreement and University reserves the right to
change or delete the tasks to be performed by SpaceDev and to alter required due
dates in accordance with Article 10 of this Agreement.
ARTICLE 2. PERIOD OF PERFORMANCE
- --------------------------------
The Period of Performance for this Agreement is:
NOVEMBER 1, 1999 TO DECEMBER 31, 2003
ARTICLE 3. TOTAL PRICE AND PAYMENT
- ----------------------------------
The total Firm Fixed Price of this subcontract is Four Million, Nine Hundred and
Ninety-five Thousand, Eight Hundred and Sixty-eight Dollars ($4,995,868) Net
Thirty (30) Days upon receipt of all invoices.
Total Firm Fixed Price: $4,995,868.
----------------------
3.1. INCREMENTAL FUNDING AND ALLOCATION
The total cost for this Agreement for the period defined in ARTICLE 3. TOTAL
PRICE AND PAYMENT is $4,995.868. The amount currently available for payment and
allocation to this Agreement is $500,000.00 for the period November 1, 1999
through January 31, 2000.
It is understood that the University will allocate additional funds
incrementally to this Agreement to the full Firm Fixed Price, however, such
additional funding is contingent upon receipt by University of funding
increments to the prime award under which this Agreement is made.
6
<PAGE>
3.2. PAYMENT AND SUBMISSION OF INVOICES
SpaceDev shall submit monthly invoices not to exceed the amounts shown in
Attachment VIII to this Agreement. Costs must be identified on each invoice by
line item and conform to the approved SpaceDev Chipsat Cost Summary as shown in
Attachment VIII to this Agreement.
All invoices shall be submitted in triplicate and include University Purchase
Order Number 108252. Invoices shall be submitted on SpaceDev's billing forms to:
University of California, Berkeley
Disbursement Office
400 University Hall
Berkeley, CA 94720-1101
University will make provisional payments on all invoices submitted in
accordance with the terms of this Agreement. Payment of an invoice for receipt
of goods and/or services shall not constitute acceptance of same. The final
invoice, clearly marked Final must be submitted within 60 days after the
expiration date of this Agreement.
NOTE: The final invoice shall include the following certification: "Payment of
this final invoice shall constitute complete satisfaction of all of University's
obligations under this agreement and SpaceDev releases and discharges University
from all further claims and obligations upon payment thereof."
3.3. INCENTIVE PLAN
Included in the Phase A study and approved by NASA, University has proposed, and
hereby effects, that an incentive fee of $250,000.00 - above and beyond the Firm
Fixed Price amount of this Agreement - shall be paid to SpaceDev upon the
successful completion of three (3) months of On-Orbit operations wherein the
spacecraft has performed to all identified requirements.
In addition to the above, University has also agreed to a second incentive fee
of $250,000.00 - above and beyond the Firm Fixed Price amount of this Agreement
- -- that will be paid to SpaceDev upon one full year from the launch date of
On-Orbit operation wherein the spacecraft has performed to all identified
requirements and should sufficient Project Reserve funds exist.
The incentive pool is derived from the CHIPS Project Reserve and represents
approximately 10% of the total cost of the spacecraft bus. Incentive award
distribution is contingent upon availability of Project Reserve funds.
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<PAGE>
ARTICLE 4. KEY PERSONNEL (TECHNICAL)
- ------------------------------------
The following Key Personnel cannot be substituted during the term of this
Agreement without written notification and concurrence of the University:
University: Dr. Mark V. Hurwitz
- ----------- Principal Investigator
University of CA, Berkeley
Space Sciences Laboratory #7450
Berkeley, CA 94720-7450
Tel: (510) 642-1579
Fax: (510) 643-7629
Email: [email protected]
Dr. Michael Sholl
CHIPS Project Manager
University of CA, Berkeley
Space Sciences Laboratory #7450
Berkeley, CA 94720-7450
Tel: (510) 643-2098
Fax: (510) 643-7629
Email: [email protected]
SpaceDev: Jan King
- --------- Vice President for Space Engineering
CHIPSAT Program Manager
SpaceDev, Incorporated
13855 Stowe Drive
Poway, CA 92064
Tel: (858) 375-2000
Fax: (858) 375-1000
Email: [email protected]
ARTICLE 5. INSURANCE
- --------------------
SpaceDev shall maintain, at its expense and throughout the period of this
agreement, insurance acceptable to the University in terms as expressed in
Attachment I, University of California Terms and Conditions of Purchase
(Appendix A), Article 17 -- INSURANCE.
8
<PAGE>
ARTICLE 6. DEBARMENT AND SUSPENSION
- -----------------------------------
SpaceDev, in executing this Agreement, is certifying that it is not currently
debarred, suspended, proposed for debarment, declared ineligible, or voluntarily
excluded from participating in this agreement by any federal department or
agency, as described in Attachment IX, "Certification Regarding Debarment,
Suspension, Ineligibility and Voluntary Exclusion (Attachment IX), which is
hereby incorporated by reference and made a part of this Agreement.
ARTICLE 7. LEVEL OF EFFORT
- --------------------------
The performance of work and services at any tier under this Agreement shall
conform to the highest professional standards. SpaceDev shall perform all
services with a degree of skill and judgment normally exercised by recognized
professional engineers and scientists performing research and development
services of a similar nature.
ARTICLE 8. SOCIO-ECONOMIC CLAUSES
- ---------------------------------
8.1 CIVIL RIGHTS NON-DISCRIMINATION
SpaceDev must comply with applicable provisions of Title VI of the Civil Rights
Act of 1964, as amended; Executive Orders 11246 and 11375; the Age
Discrimination Act of 1975, as amended; Title IX of the Education Amendments of
1972, as amended; and Section 504 of the Rehabilitation Act of 1973, as amended.
8.2 CLEAN AIR AND WATER
SpaceDev shall comply with all applicable standards, orders, or regulations
issued pursuant to the Clean Air Act of 1970, as amended, and the Federal Water
Pollution Control Act, as amended. Violations shall be reported to NASA and the
Regional Office of the Environmental Protection Agency. SpaceDev agrees to
insert the substance of the provisions of this clause into any nonexempt
subaward or subcontract under this Agreement.
8.3 USE OF U.S.- FLAG CARRIERS
If foreign air travel is authorized under this Agreement, U.S.-flag carrier
service shall be used to the extent such service is available, as specified in
NASA Research Grant NAS5-5213. The substance of this clause shall be inserted in
all subcontracts at any tier under this Agreement.
9
<PAGE>
ARTICLE 9. ASSIGNMENT AND SUBCONTRACTING
- ----------------------------------------
This Agreement is assignable by the University provided that no such assignment
shall relieve the assignee of any of the University's obligations to SpaceDev
hereunder. Except as to any payment due hereunder, this Agreement may not be
assigned or subcontracted by SpaceDev without written authorization of the
University. In the event such consent is given, it shall not relieve SpaceDev
from any of the obligations of this Agreement and any transferee or
subcontractor shall be considered the agent of SpaceDev and, as between the
parties hereto, SpaceDev shall be and remain liable as if no such transfer or
subcontracting had been made.
ARTICLE 10. AMENDMENTS
- ----------------------
This Agreement may be amended only with the express written approval of both
parties.
ARTICLE 11. AUDITS/ACCESS TO RECORDS
- ------------------------------------
Upon formal notification to SpaceDev, University, NASA (the Federal Sponsoring
Agency), the Comptroller General of the United States, or any of their duly
authorized representatives, shall have access to any books, documents, paper and
records of SpaceDev which are directly pertinent to this Agreement for the
purpose of making audits, examinations, excerpts and transcription.
ARTICLE 12. SITE VISITS
- -----------------------
University and NASA (the Federal Sponsoring Agency), through authorized
representatives, have the right, at all reasonable times, to make site visits to
review project accomplishments and to provide such technical assistance as may
be required. If any site visit is made on the premises of SpaceDev, SpaceDev
shall provide, and shall require its sub-recipients and subcontractors to
provide, all reasonable facilities and assistance for the safety and convenience
of University and NASA representatives in the performance of their duties. All
site visits and evaluation shall be performed in such a manner as will not
unduly interfere with or delay the work.
ARTICLE 13. NOTICE
- ------------------
Any notice which may be or is required to be given under this Agreement shall be
submitted in writing as follows:
10
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University (Contractual, Non-Technical):
- ----------------------------------------
James Keenan, Buyer IV
University of California, Berkeley
Procurements & Business Contracts
Space Sciences Laboratory #7450
Centennial @ Grizzly Peak Blvd.
Berkeley, CA 94720-7450
Tel: (510) 6424791
Fax: (510) 643-8392
Email:jkeenan@~ssl.berkeley.edu
SpaceDev (Contractual. Non-Technical)
- -------------------------------------
Charles Lloyd
Chief Financial Officer
SpaceDev, Incorporated
13855 Stowe Drive
Poway, CA 92064
Tel: (858) 375-2030
Fax: (858) 375-1000
Email: [email protected]
ARTICLE 14. GOVERNING LAW
- -------------------------
This Agreement is governed by applicable Federal laws and State of California
laws.
ARTICLE 15. ORDER OF PRECEDENCE
- -------------------------------
In the event of a conflict between this agreement and the attachments hereto,
the articles of this Agreement shall prevail.
ARTICLE 16. SEVERABILITY
- ------------------------
If any article, term or provision of this agreement shall be held illegal,
unenforceable or in conflict with any law of a federal, state or local
government having jurisdiction over this agreement, the validity of the
remaining portions or provisions shall not be affected thereby.
11
<PAGE>
ARTICLE 17. ENTIRE AGREEMENT
- ----------------------------
This Agreement, University of California Terms and Conditions of Purchase
(Attachment I); University Purchase Order 108252 (Attachment II); SpaceDev
Proposal to the CHIPS Program (Attachment III); Instrument Description and
Satellite Requirements for the Cosmic Hot Interstellar Plasma Spectrometer
(Attachment IV); SpaceDev CHIPSAT Project Milestones Document (Attachment V);
CHIPS Concept Study (Attachment VI); SpaceDev Inputs to the Concept Review
(Attachment VII); Chipsat Cost Summary (Attachment VIII); Exhibit A.
Certification Regarding Debarment (Attachment IX); Exhibit B. Certification and
Disclosure Regarding Payments to Influence Certain Federal Transactions
(Attachment X); Certificate of Current Cost or Pricing Data (Attachment XI);
Clean Air and Water Certification (Attachment XII), and SpaceDev Certificate of
Insurance (Attachment XIII) constitutes the entire agreement between the parties
regarding the subject matter of this Agreement and supersedes all prior written
or oral agreements with respect to such. This Agreement may not be modified
orally, and no modifications shall be binding unless in writing and signed by
authorized representatives of both parties. In the event of any conflict between
this Agreement and any other document incorporated here either by attachment or
reference, the terms of this Agreement shall take precedence.
IN WITNESS WHEREOF, SpaceDev, Inc. and UNIVERSITY have caused this Agreement to
be executed this 9th day of November 1999.
The Regents of the University of California SpaceDev. Inc.
- ------------------------------------------- --------------
By: /s/ Kurt Libby By: /s/ J.W. Benson
----------------------------- -----------------------------
Name: Kurt Libby Name: J.W. Benson
Title: Director, Material Management Title: President
Date: 11/9/99 Date: 11/9/99
12
<PAGE>
ATTACHMENTS:
Attachment I University of California Terms and Conditions of Purchase
Attachment II University Purchase Order Number 108252
Attachment III SpaceDev Proposal to the CHIPS Program Instrument
Attachment IV SPECIFICATION - Description and Satellite Requirements
for the Cosmic Hot Interstellar Plasma Spectrometer
Attachment V SpaceDev CHIPSAT Project Milestones Document
Attachment VI CHIPS Concept Study
Attachment VII SpaceDev Inputs to the Concept Review
Attachment VIII Chipsat Cost Summary
Attachment IX Exhibit A. Certification Regarding Debarment
Attachment X Exhibit B. Certification and Disclosure Regarding Payments
to Influence Certain Federal Transactions
Attachment XI Certificate of Current Cost or Pricing Data
Attachment XII Clean Air and Water Certification
Attachment XIII SpaceDev Certificate of Insurance
13
<PAGE>
ATTACHMENT I
Appendix A
University of California
TERMS AND CONDITIONS OF PURCHASE
ARTICLE I - The materials, supplies or services covered by this order shall be
furnished by Seller subject to all the terms and conditions set forth in this
order including the following, which Seller, in accepting this order, agrees to
be bound by and to comply with in all particulars and no other terms or
conditions shall be binding upon the parties unless hereafter accepted by them
in writing. Written acceptance or shipment of all or any portion of the
materials or supplies, or the performance of all or any portion of the services,
covered by this order shall constitute unqualified acceptance of all its terms
and conditions. The terms of any proposal referenced to in this order are
included and made a part of the order only in the extent it specifies the
materials, supplies, or services ordered, the price therefor, and the delivery
thereof, and then only to the extent that such terms are consistent with the
terms and conditions of this order.
ARTICLE 2 - INSPECTION. The services, materials and supplies furnished shall be
exactly as specified in this order free from all defects in Seller's
performance, design, workmanship and materials, and, except as otherwise
provided in this order, shall be subject to inspection and test by University at
all times and places. If, prior to final acceptance, any services and any
materials and supplies furnished therewith are found to be incomplete, or not as
specified, University may reject them, require Seller to correct them without
charge, or require delivery of such materials, supplies, or services at a
reduction in price which is equitable under the circumstances. If Seller is
unable or refuses to correct such items within a time deemed reasonable by
University, University may terminate the order in whole or in part, Seller shall
bear all risks as to rejected services and, in addition to any costs for which
Seller may become liable to University under other provisions of this order,
shall reimburse University for all transportation costs, other related costs
incurred, or payments to Seller in accordance with the terms of this order for
unaccepted services and materials and supplies incidental thereto.
Notwithstanding final acceptance and payment, Seller shall be liable for latent
defects, fraud or such gross mistakes as amount to fraud.
ARTICLE 3 - CHANGES. University may make changes within the general scope of
this order in drawings and specifications for specially manufactured supplies,
place of delivery, method of shipment or packing of the order by giving notice
to Seller and subsequently confirming such changes in writing. If such changes
affect the cost of or the time required for performance of this order, an
equitable adjustment in the price or delivery or both shall be made. No change
by Seller shall be allowed without written approval of University. Any claim of
Seller for an adjustment under this Article must be made in writing within
thirty (30) days from the date of receipt by Seller of notification of such
change unless University waives this condition in writing. Nothing in this
Article shall excuse Seller from proceeding with performance of the order as
changed hereunder.
ARTICLE 4 - TERMINATION
A. University may, by written notice stating the extent and effective date,
cancel and/or terminate this order for convenience in whole or in part, at any
time. University shall pay Seller as full compensation for performance until
such termination:
(1) the unit or pro rata order price for the performed and accepted portion; and
(2) a reasonable amount, not otherwise recoverable from other sources by Seller
as approved by University, with respect to the unperformed or unaccepted portion
of this order, provided compensation hereunder shall in no event exceed the
total order price.
B. University may by written notice terminate this order for Seller's default,
in whole or in part, at any time, if Seller refuses or fails to comply with the
provisions of this order, or so fails to make progress as to endanger
performance and does not cure such failure within a reasonable period of time,
or fails to perform the services within the time specified or any written
extension thereof. In such event, University may purchase or otherwise secure
services and, except as otherwise provided herein, Seller shall be liable to
University for any excess costs occasioned University thereby. If, after notice
of termination for default, University determines that the Seller was not in
default or that the failure to perform this order was due to causes beyond the
control and without the fault or negligence of Seller (including, but not
restricted to, acts of God or of the public enemy, acts of University, acts of
Government, fires, floods, epidemics, quarantine restrictions, strikes, freight
embargoes, unusually severe weather, and delays of a subcontractor or supplier
due to such causes and without the fault or negligence of the subcontractor or
supplier), termination shall be deemed for the convenience of University, unless
University shall determine that the services covered by this order were
obtainable by Seller from other sources in sufficient time to meet the required
performance schedule.
C. If University determines that Seller has been delayed in the work due to
causes beyond the control and without the fault or negligence of Seller,
University may extend the time for completion, of the work called for by this
order, when promptly applied for in writing by Seller; any extension granted
shall be effective only if given in writing. If such delay is due to failure of
University, not caused or contributed to by Seller, to perform services or
deliver property in accordance with the terms of the order, the time and price
of the order shall be subject to change under the Changes Article. Sole remedy
of Seller in event of delay by failure of University to perform shall, however,
be limited to any money actually and necessarily expended in the work during the
period of delay, solely by reason of the delay. No allowance will be made for
anticipated profits.
D. The rights and remedies of University provided in this Article shall not be
exclusive and are in addition to any other rights and remedies provided by law
or under this order.
E. As used in this Article, the word Seller includes Seller and its subsuppliers
at any tier.
ARTICLES - LIABILITY FOR UNIVERSITY - FURNISHED PROPERTY. Seller assumes
complete liability for any tooling, articles or material furnished by University
to Seller in connection with this order and Seller agrees to pay for all such
tooling, articles or material damaged or spoiled by it or not otherwise
accounted for to University's satisfaction. The furnishing to Seller of any
tooling, articles, or material in connection with this order shall not, unless
otherwise expressly provided, be construed to vest title thereto in Seller.
ARTICLE 6 - TITLE. Title to the material and supplies purchased hereunder shall
pass directly from Seller to University at the f.o.b. point shown, or as
otherwise specified in this order, subject to the right of University to reject
upon inspection.
ARTICLE 7 - PAYMENT, EXTRA CHARGES, DRAFTS. Seller shall be paid, upon
submission of acceptable invoices, for materials and supplies delivered and
accepted or services rendered and accepted. University will not pay cartage,
shipping, packaging or boxing expenses, unless specified in this order. Drafts
will not be honored. Invoices must be accompanied by shipping documents or
photocopies of such, if transportation is payable and charged as a separate
item.
ARTICLE 8 - CHARACTER OF SERVICES. Seller, as an independent contractor, shall
furnish all equipment, personnel and material sufficient to provide the services
expeditiously and efficiently during as many hours per shift and shifts per week
and at such locations as the University may so require and designate.
ARTICLE 9 - FORCED, CONVICT, AND INDENTURED LABOR
A. By accepting this order, Seller hereby certifies that no foreign-made
equipment, materials, or supplies furnished to the University pursuant to this
order will be produced in whole or its part by forced labor, convict labor, or
indentured labor under penal sanction.
B. Any Seller contracting with the University who knew or should have known that
the foreign-made equipment, materials, or supplies furnished to the University
were produced in whole or in part by forced labor, convict labor, or indentured
labor under penal sanction, when entering into a contract pursuant to the above,
may have any or all of the following sanctions imposed:
(1.) The contract under which the prohibited equipment, materials, or supplies
were provided maybe voided at the option of the University.
(2.) Seller may be removed from consideration for University contracts for a
period not to exceed 360 days.
Rev. 8/99 Page 1 of 3
<PAGE>
Appendix A
ARTICLE 10-INDEMNITY.
A. General. Seller shall defend, indemnify, and hold harmless University, its
officers, employees, and agents, from and against all losses, expenses
(including attorneys' fees), damages, and liabilities of any kind resulting from
or arising out of this agreement and/or Seller's performance hereunder, provided
such losses, expenses, damages and liabilities are due or claimed to be due to
the negligent or willful acts or omissions of Seller, its officers, employees,
agents, subcontractors, or anyone directly or indirectly employed by them, or
any person or persons under Seller's direction and control.
B. Proprietary Rights. Seller shall indemnify, defend, and hold harmless
University, its officers, agents, and employees against all losses, damages,
liabilities, costs, and expenses (including but not limited to attorneys' fees)
resulting from any judgment or proceeding in which it is determined, or any
settlement agreement arising out of the allegation, that Seller's furnishing or
supplying University with parts, goods, components, programs, practices, or
methods under this order or University's use of such parts, goods, components,
programs, practices, or methods supplied by Seller under this order constitutes
an infringement of any patent, copyright, trademark, trade name, trade secret,
or other proprietary or contractual right of any third party. The foregoing
shall not apply unless University has informed Seller as soon as practicable of
the suit or action alleging such infringement. Seller shall not settle such suit
or action without the consent of University. University retains the right to
participate in the defense against any such suit or action.
C. Products. Seller shall fully indemnify, defend, and hold harmless University
from and against any and all claim, action, and liability, for injury, death,
and property damage, arising out of the dispensing or use of any of Seller's
product provided under authorized University orders. In addition to the
liability imposed by law on the Seller for damage or injury (including death) to
persons or property by reason of the negligence, willful acts or ommissions, or
strict liability of the Seller or his agents, which liability is not impaired or
otherwise affected hereby, the Seller hereby assumes liability for and agrees to
save University harmless and indemnify it from every expense, liability or
payment by reason of any damage or injury (including death) to persons or
property suffered or claimed to have been suffered through any act or omission
of the Seller. The University agrees to provide Seller with prompt notice of any
such claims and to permit Seller to defend any claim or suit, and that it will
cooperate fully in such defense.
ARTICLE 11 - DECLARED VALUATION OF SHIPMENTS. Except as otherwise provided on
the face of this order, all shipments by Seller under this order for
University's account shall be made at the maximum declared value applicable to
the lowest transportation rate or classification and the bill of lading shall so
note.
ARTICLE 12 - WARRANTY. Seller agrees that the supplies or services furnished
under this order shall be covered by the most favorable commercial warranties
the Seller gives to any customer for the same or substantially similar supplies
or services, or such other more favorable warranties as specified in this order.
The rights and remedies so provided are in addition to and do not limit any
rights afforded to University by any other article of this order. Such
warranties will be effective notwithstanding prior inspection and/or acceptance
of the services or supplies by the University.
ARTICLE 13 - ASSIGNMENT AND SUBCONTRACTING. This order is assignable by
University. Except as to any payment due hereunder, this order may not be
assigned or subcontracted by Seller without written approval of University. In
case such consent is given, it shall not relieve Seller from any of the
obligations of this Agreement and any transferee or subcontractor shall be
considered the agent of Seller and, as between the parties hereto, Seller shall
be and remain liable as if no such transfer or subcontracting had been made.
ARTICLE 14 - EQUAL OPPORTUNITY AFFIRMATIVE ACTION. Seller shall not maintain or
provide racially segregated facilities for employees at any establishment under
its control. Seller agrees to adhere to the requirements set forth in Executive
Orders 11246 and 11375. and with respect to activities occurring in the State of
California, to the California Fair Employment and Housing Act (Government Code
section 12900 et seq.). Expressly, Seller shall not discriminate against any
employee or applicant for employment because of race, color, religion, sex,
national origin, ancestry, medical condition (as defined by California Code
section 12925f]), marital status, age, physical and mental handicap in regard to
any position for which the employee or applicant for employment is qualified, or
because he or she is a disabled veteran or veteran of the Vietnam era. Seller
shall further specifically undertake affirmative action regarding the hiring,
promotion and treatment of minority group persons, women, the handicapped, and
disabled veterans and veterans of the Vietnam era. Seller shall communicate this
policy in both English and Spanish to all persons concerned within its company,
with outside recruiting services, and the minority community at large. Seller
shall provide the University on request a breakdown of its labor force by
groups, specifying the above characteristics within job categories, and shall
discuss with the University its policies and practices relating to its
affirmative action programs.
ARTICLE 15 - The clauses contained in the following paragraphs of the Federal
Acquisition Regulations are incorporated by reference. The full text is
available upon request:
FAR 52.222-04 Contract Work Hours and Safety Standards Act
FAR 52.222-26 Equal Opportunity
FAR 52.223-02 Clean Air and Water (If order exceeds $100,000)
ARTICLE 16 - WORK ON UNIVERSITY OR GOVERNMENT PREMISES. If Seller's work under
this order involves performance by Seller at University or United States
Government owned sites or facilities, the following provisions shall apply:
A. Liens. Seller agrees that at any time upon request of University he will
submit a sworn statement setting forth the work performed or material furnished
by subcontractors, suppliers and materialmen, and the amount due and to become
due to each, and that before the final payment called for hereunder, will if
requested, submit to University a complete set of vouchers showing what payments
have been made for materials and labor used in connection with the work called
for hereunder.
Seller shall:
(1) Indemnify and hold harmless University from all claims, demands, causes of
action or suits, of whatever nature, arising out of the services, labor and
materials furnished by Seller or its subcontractors under this order, and from
all laborers', materialmen's and mechanics' liens upon the real property upon
which the work is located or any other property of University;
(2) Promptly notify University in writing, of any such claims, demands, causes
of action, or suits brought to its attention. Seller shall forward with such
notification copies of all pertinent papers received by Seller with respect to
any such claims, demands, causes of action or suits and, at the request of
University shall do all things and execute and deliver all appropriate documents
and assignments in favor of University of all Seller's rights and claims growing
out of such asserted claims as will enable University to protect its interest by
litigation or otherwise. The final payment shall not be made until Seller, if
required, shall deliver to University a complete release of all liens arising
out of this order, or receipts in full in lieu thereof as University may
require, and if required in either case, an affidavit that as far as it has
knowledge or information, the receipts include all the labor and materials for
which a lien could be filed; but Seller may, if any subcontractor refuses to
furnish a release or receipt in full, furnish a bond satisfactory to University
to indemnify it against any claim by lien or otherwise. If any lien or claim
remains unsatisfied after all payments are made, Seller shall refund to
University all monies that the latter may be compelled to pay in discharging
such lien or claim, including all costs and reasonable attorneys' fees.
B. Cleaning Up. Seller shall at all times keep University premises where the
work is performed and adjoining premises free from accumulations of waste
material or rubbish caused by its employees or work of any of its
subcontractors, and, at the completion of the work; shall remove all rubbish
from and about the building and all its and its subcontractors tools,
scaffolding, and surplus materials, and shall leave the work "broom clean" or
its equivalent, unless more exactly specified. In case of dispute between Seller
and the subcontractors employed on or about the structure or structures upon
which the work is to be done, as herein provided, as to responsibility for the
removal of the rubbish, or in case the same be not promptly removed as herein
required. University may remove the rubbish and charge the cost to Seller.
C. Employees. Seller shall not employ on the work any unfit person or anyone not
skilled in the work assigned to him or her, and shall devote only its
best-qualified personnel to work under this order. Should University deem anyone
employed on the work incompetent or unfit for his or her duties and so inform
Seller, Seller shall immediately remove such person from work under this order
and he or she shall not again, without written permission of University, be
assigned to work under this order.
Rev. 8/99 Page 2 of 3
<PAGE>
Appendix A
It is understood that if employees of University shall perform any acts for the
purpose of discharging the responsibility undertaken by the Seller in this
Article 15, whether requested to perform such acts by the Seller or not, such
employees of the University while performing such acts shall be considered the
agents and servants of the Seller subject to the exclusive control of the
Seller.
D. Safety, Health and Fire Protection. Seller shall take all reasonable
precautions in the performance of the work under this order to protect the
health and safety of employees and members of the public and to minimize danger
from all hazards to life and property, and shall comply with all health, safety,
and fire protection regulations and requirements (including reporting
requirements) of University. In the event that Seller fails to comply with said
regulations or requirements of University, University may, without prejudice to
any other legal or contractual rights of University, issue an order stopping all
or any part of the work; thereafter a start order for resumption of work may be
issued at the discretion of the University. Seller shall make no claim for
extension of time or for compensation or damages by reason of or in connection
with such work stoppage.
The safety of all persons employed by Seller and its subcontractors on
University premises, or any other person who enters upon University premises for
reasons relating to this order, shall be the sole responsibility of Seller.
Seller shall at all times maintain good order among its employees and shall not
employ on the work any unfit person or anyone not skilled in the work assigned
to him or her. Seller shall confine its employees and all other persons who come
onto University's premises at Seller's request or for reasons relating to this
order and its equipment to that portion of University's premises where the work
under this order is to be performed or to roads leading to and from such work
sites, and to any other area which University may permit Seller to use. Seller
shall take all reasonable measures and precautions at all times to prevent
injuries to or the death of any of its employees or any other person who enters
upon University premises. Such measures and precautions shall include, but shall
not be limited to, all safeguards and warnings necessary to protect workers and
others against any conditions on Owner's premises which could be dangerous and
to prevent accidents of any kind whenever work is being performed in proximity
to any moving or operating machinery, equipment or facilities, whether such
machinery, equipment or facilities are the property of or are being operated by,
the Seller, its subcontractors, the University or other persons.
To the extent compliance is required, Seller shall comply with all University
safety rules and regulations when on University premises.
ARTICLE 17 - INSURANCE
Seller shall defend, indemnify, and hold the University, its officers,
employees, and agents harmless from and against any and all liability, loss,
expense (including reasonable attorneys' fees), or claims for injury or damages
that are caused by or result from the negligent or intentional acts or omissions
of Seller, its officers, agents, or employees.
Seller, at its sole cost and expense, shall insure its activities in connection
with the work under this order and obtain, keep in force, and maintain insurance
as follows:
A. Comprehensive or Commercial Form General Liability Insurance (contractual
liability included) with limits as follows:
Each Occurrence $ 1,000,000.00
Products/Completed Operations
Aggregate $ 2,000,000.00
Personal and Advertising Injury $ 1,000,000.00
General Aggregate (Not applicable
to the Comprehensive Form) $ 2,000,000.00
If this insurance is written on a claims-made form, it shall continue for three
years following termination of this Agreement. The insurance shall have a
retroactive date of placement prior to or coinciding with the effective date of
this Agreement.
B. Business Automobile Liability Insurance for owned, scheduled, non-owned or
hired automobiles with a combined single limit not less than N/A dollars
($______) per occurrence. (REQUIRED ONLY IF SELLER DRIVES ON UNIVERSITY PREMISES
IN THE COURSE OF PERFORMING WORK FOR UNIVERSITY.)
C. Professional Liability Insurance with a limit of 1,000,000 dollars
($1,000,000) per occurrence with an aggregate of not less than $1,000,000
dollars ($1,000,000). If this insurance is written on a claims-made form, it
shall continue for three years following termination of this Agreement. The
insurance shall have a retroactive date of placement prior to or coinciding with
the effective date of this Agreement.
D. Workers Compensation as required by California State law.
It is understood that the coverage and limits referred to under a., b., and c.
above shall not in any way limit the liability of Seller. Seller shall furnish
the University with certificates of insurance evidencing compliance with all
requirements prior to commencing work under this Agreement. Such certificates
shall:
(1) Provide for thirty (30)-days advance written notice to the University of any
modification, change, or cancellation of any of the above insurance coverage.
(2) Indicate that The Regents of the University of California has been endorsed
as an additional insured for the coverage referred to under a. and b. This
provision shall only apply in proportion to and to the extent of the negligent
acts or omissions of Seller, its officers, agents, or employees.
(3) Include a provision that the coverage will be primary and will not
participate with nor be excess over any valid and collectible insurance or
program of self-insurance carried or maintained by the University.
ARTICLE 18 - PERMITS. Seller agrees to procure all necessary permits or licenses
and abide by all applicable laws, regulations and ordinances of the United
States and of the state, territory and political subdivision in which the work
under this order is performed. Seller shall be liable for all damages and shall
indemnify and save University harmless from and against all damages and
liability which may arise out of failure of Seller to secure and pay for any
such licenses or permits or to comply fully with any and all applicable laws,
ordinances and regulations.
ARTICLE 19-COOPERATION. Seller and its subcontractors, if any, shall cooperate
with University and other vendors and contractors on the premises and shall so
carry on their work that other cooperating vendors and contractors shall not be
hindered, delayed or interfered with in the progress of their work, and so that
all of such work shall be a finished and complete job of its kind.
ARTICLE 20 - WAIVER OF DEFAULT. Any failure of University at any time, or from
time to time, to enforce or require the strict keeping and performance by Seller
of any of the terms or conditions of this order shall not constitute a waiver by
University of a breach of any such terms or conditions and shall not affect or
impair such terms or conditions in any way, or the right of University at any
time to avail itself of such remedies as it may have for any such breach or
breaches of such terms or conditions.
ARTICLE 21 - TAXES. Seller shall pay all contributions, taxes and premiums
payable under federal, state and local laws measured upon the payroll of
employees engaged in the performance of work under this order, and all
applicable sales, use, excise, transportation, privilege, occupational and other
taxes applicable to materials and supplies furnished or work performed hereunder
and shall save University harmless from liability for any such contributions,
premiums, and taxes.
ARTICLE 22 - OTHER APPLICABLE LAWS. Any provision required to be included in a
contract of this type by any applicable and valid federal, state or local law,
ordinance, rule or regulations shall be deemed to be incorporated herein.
ARTICLE 23 - GOVERNING LAW. The law of the State of California shall control
this Appendix and any document to which it is appended.
Rev. 8/99 Page 3 of 3
<PAGE>
ATTACHMENT II
PURCHASE ORDER
UNIVERSITY OF CALIFORNIA, BERKELEY P.O. No.: 1-000108252
Rev.:
Date: 10/26/99
Vendor: SPACEDEV, INCORPORATED Bill To: DISBURSEMENT OFFICE
13855 STOWE DRIVE 400 UNIVERSITY HALL
POWAY, CA 92064 BERKELEY, CA 94720-1101
USA USA
DEPARTMENT CONTACT NAME/PHONE: James Keenan 510-642-4791
Ship To: UNIVERSITY OF CALIFORNIA, BERKELEY Resale/Tax Exempt No.:
SPACE SCIENCES LABORATORY ROOM 170
MC#7450 Payment Terms: NET 30
CENTENNIAL AT GRIZZLY PEAK BLVD Freight Terms: Not Applicable
BERKELEY, CA 9472O-7450 Ship Via: Not Applicable
USA
Item Description Due Date Quantity UOM Unit Price Extended Amt
1 CHIPS Spacecraft Bus 01/31/00 1.0 EA 500,000.00 500,000.00
Tax 0.00% 0.00
Total Amount of this Firm Fixed Price Purchase Order is $4,995,868.00
Period of Performance: November 1, 1999 through December 31, 2003
The initial Purchase Order Allotment Amount is $500,000.00
The Period of Performance for this initial allotment amount is
November 1, 1999 through January 31, 2000.
Sub total $500,000.00
Tax $0.00
------------------------
Total $500,000.00
------------------------
This Purchase Order (Attachment II to University Agreement Number 108252)
is established for payment purposes only. The Purchase Order number must
appear on all invoices and shipping documents. All terms and conditions are
in accordance with the Firm Fixed Price Agreement Number 108252 between The
Regents of the University of California and SpaceDev Incorporated.
For internal use by the University:
449580 23892 8 7300 475,000.00
449580 23892 8 7305 25,000.00
Purchase Order number must appear on all documents,
packages, packing slips, bills of lading, and freight
bills. Invoices sent without purchase order number /s/ James P. Keenan
will be returned. No variations, deletions, price --------------------
increases, changes or modifications shall be Buyer: Keenan, James
effective without written approval of Buyer. 10/27/99
[SpaceDev Logo Here]
STOCK OPTION PLAN OF 1999
1. PURPOSE OF THE PLAN.
--------------------
a. Under the Stock Option Plan of 1999 (the "Plan") of
SpaceDev Inc. (the "Company"), Incentive Stock Options,
Supplemental Stock Options, and Stock Bonuses may be granted
to eligible persons to purchase shares of the Company's common
stock. The Plan is designed to enable the Company to attract,
retain and motivate its directors, officers, employees, and
Affiliates (as defined below) by providing for or increasing
the proprietary interest in the Company.
b. The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f), respectively, of
the Internal Revenue Code of 1986, as amended ("the Code").
c. The Company intends that the rights issued under the Plan
("Stock Awards") shall, in the discretion of the Board of
Directors of the Company (the "Board") or any committee to
which responsibility for administration of the Plan has been
delegated pursuant to subparagraph 2.c., be either (i) stock
options granted pursuant to paragraph 5 hereof, including
incentive stock options as that term is used in Section 422 of
the Code ("Incentive Stock Options"), or options which do not
qualify as Incentive Stock Options ("Supplemental Stock
Options") (together hereinafter referred to as "Options"), or
(ii) stock bonuses or rights to purchase restricted stock
granted pursuant to paragraph 6 hereof. All Options shall be
separately designated Incentive Stock Options or Supplemental
Stock Options at the time of grant, and in such form as issued
pursuant to paragraph 5, and a separate certificate or
certificates shall be issued for shares purchased on exercise
of each type of Option. An Option designated as a Supplemental
Stock Option shall not be treated as an Incentive Stock
Option.
2. ADMINISTRATION.
---------------
a. The Plan shall be administered by the Board unless and
until the Board delegates administration to a committee, as
provided in subparagraph 2.c.
b. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
(i) To determine from time to time which of the
persons eligible under the Plan shall be granted
Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive
Stock Option, a Supplemental Stock Option, a stock
bonus, a right to purchase restricted stock, or a
combination of the foregoing; the provisions of each
Stock Award granted (which need not be identical),
including the time or times when a person shall be
permitted to purchase or receive stock pursuant to a
Stock Award; and the number of shares with respect to
which Stock Awards shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend, and
revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct
any defect, omission, or inconsistency in the Plan or
in any Stock Award, in a manner and to the extent it
shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan as provided in paragraph 15.
(iv) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or
expedient to promote the best interests of the
Company.
c. The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members (the
"Committee"), both of the members of which Committee shall be
disinterested persons, if required and as defined by the
provisions of subparagraph 2.d. If administration is delegated
to a Committee, the Committee shall have, in connection with
the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the
administration of the Plan. From time to time, the Board of
Directors may increase the size of the Committee and appoint
additional members thereof, remove members (with or without
cause) and appoint new member in substitution therefor, or
fill vacancies however caused.
d. The term "disinterested person," as used in the Plan, shall
mean a director: (i) who was not during the one (1) year prior
to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of
the Company or any of its affiliates entitling the
participants therein to acquire equity securities of the
Company or any of its affiliates; or (ii) who is otherwise
considered to be a "disinterested person" in accordance with
Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any other rules,
regulations, or interpretations of the Securities and Exchange
Commission. Any such person shall otherwise comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act.
e. Any requirement that an administrator of the Plan be a
"disinterested person" shall not apply if the Board or the
Committee expressly declares that such requirement shall not
apply.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
3. SHARES SUBJECT TO THE PLAN.
---------------------------
a. Subject to the provisions of paragraph 11 relating to
adjustments upon changes in stock, the stock that may be
issued pursuant to Stock Awards granted under the Plan shall
not exceed in the aggregate One Million (1,000,000) shares of
the Company's common stock. If any Stock Award granted under
the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased
under such Stock Award shall again become available for the
Plan.
b. The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
c. An Incentive Stock Option may be granted to an eligible
person under the Plan only if the aggregate fair market value
(determined at the time the Option is granted) of the stock
with respect to which incentive stock options (as defined in
the Code) are exercisable for the first time by such optionee
during any calendar year under all Incentive Stock Option
plans of the Company and its Affiliates does not exceed One
Hundred Thousand Dollars ($100,000). If it is determined that
an entire Option or any portion thereof does not qualify for
treatment as an Incentive Stock Option by reason of exceeding
such maximum, such Option or the applicable portion shall be
considered a Supplemental Stock Option.
4. ELIGIBILITY.
------------
a. Incentive Stock Options may be granted only to full time
(minimum 35 hours per week) employees (including officers) of
the Company or its Affiliates. A director of the Company shall
not be eligible to receive Incentive Stock Options unless such
director is also an employee (including an officer) of the
Company or any Affiliate. Stock Awards other than Incentive
Stock Options may be granted only to employees (including
officers) of, directors of, or consultants to the Company or
its Affiliates.
b. A director shall in no event be eligible for the benefits
of the Plan unless at the time discretion is exercised in the
selection of the director as a person to whom Stock Awards may
be granted, or in the determination of the number of shares
which may be covered by Stock Awards granted to the director:
(i) the Board has delegated its discretionary authority over
the Plan to a Committee which consists solely of
"disinterested persons" as defined in subparagraph 2.d. or
(ii) the Plan otherwise complies with the requirements of Rule
16b-3 promulgated under the Exchange Act, as from time to time
in effect. The Board shall otherwise comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act,
as from time to time in effect. This subparagraph 4.b. shall
not apply if the Board or Committee expressly declares that it
shall not apply.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
c. No person shall be eligible for the grant of an Option
under the Plan if, at the time of grant, such person owns (or
is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is
at least one hundred ten percent (110%) of the fair market
value of such stock at the date of grant and the term of the
Option does not exceed five (5) years from the date of grant.
5. OPTION PROVISIONS
-----------------
Each Option shall be in such form and shall contain such terms
and conditions the Board or the Committee shall deem appropriate. The
provisions of separate Options need not be identical, but each Option
shall include (through incorporation of provisions hereof by reference
in the Option or otherwise) the substance of each of the following
provisions:
a. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
b. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the fair market
value of the stock subject to the Option on the date the
Option is granted. The exercise price of each Supplemental
Stock Option shall be not less than eighty-five (85%) of the
fair market value of the stock subject to the Option on the
date the Option is granted.
c. The purchase price of stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is
exercised, or (ii) at the discretion of the Board or the
Committee, either at the time of the grant or exercise of the
Option, (A) by delivery to the Company of other common stock
of the Company, (B) according to a deferred payment or other
arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of
the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subparagraph
5(d), or (C) in any other form of legal consideration that may
be acceptable to the Board or the Committee.
In the case of any deferred payment arrangement, interest
shall be payable at least annually and shall be charged at
the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
d. An Option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable
during the lifetime of the person to whom the Option is
granted only by such person.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
e. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which
may, but need not, be equal). From time to time during each of
such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all
of the shares allotted to such period and/or any prior period
as to which the Option was not fully exercised. During the
remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the Option may be
exercised from time to time with respect to any shares then
remaining subject to the Option. The provisions of this
subparagraph 5(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option
may be exercised.
f. The Company may require any optionee, or any person to whom
an Option is transferred under subparagraph 5(d), as a
condition of exercising any such Option, (1) to give written
assurances satisfactory to the Company as to the optionee's
knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising
the Option; and (2) to give written assurances satisfactory to
the Company stating that such person is acquiring the stock
subject to the Option for such person's own account and not
with any present intention of selling or otherwise
distributing the stock. These requirements, and any assurances
given pursuant to such requirements, shall be inoperative if
(i) the issuance of the shares upon the exercise of the Option
has been registered under and then currently effective
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the
Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
g. An Option shall terminate three (3) months after
termination of the optionee's employment or relationship as a
consultant or director with the Company or an Affiliate,
unless (i) such termination is due to such person's permanent
and total disability, within the meaning of Section 422(c)(6)
of the Code, in which case the Option may, but need not,
provide that it may be exercised at any time within one (1)
year following such termination of employment or relationship
as a consultant or director; or (ii) the optionee dies while
in the employ of or while serving as a consultant or director
to the Company or an Affiliate, or within not more than three
(3) months after termination of such relationship, in which
case the Option may, but need not, provide that it may be
exercised at any time within eighteen (18) months following
the death of the optionee by the person or person to whom the
optionee's rights under such Option pass by will or by the
laws of descent and distribution; or (iii) the Option by its
terms specifies either (a) that it shall termination sooner
than three (3) months after termination of the optionee's
employment or relationship as a consultant or director or (b)
that it may be exercised more than three (3) months after
termination of the relationship wit the Company or an
Affiliate. This subparagraph 5(g) shall not be construed to
extend the term of any Option or to permit anyone to exercise
the Option after expiration of its term, nor shall it be
construed to increase the number of shares as to which any
Option is exercisable form the amount exercisable on the date
of termination of the optionee's employment or relationship as
a consultant or director.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
h. The Option may, but need not, include a provision whereby
the optionee may elect at any time during the term of his or
her employment or relationship as a consultant or director
with the Company or any Affiliate to exercise the Option as to
any part or all of the shares subject to the Option prior to
the stated vesting date of the Option or of any installment or
installments specified in the Option. Any shares so purchased
from any unvested installment or Option may be subject to a
repurchase right in favor of the Company or to any other
restriction the Board or the Committee determines to be
appropriate.
i. In the event an optionee shall cease to be employed by or
serve as a consultant or director to the Company or an
Affiliate, for any reason or no reason, with our without
cause, the Company shall have the right, at any time within
180 days after the date the optionee ceases to be an employee
of or a consultant or director to the Company, to purchase
from the optionee or his personal representative, as the case
may be, at the then current fair market value (the "FMV"), as
hereinafter defined, up to the number of shares of common
stock purchased by optionee upon exercise of any vested
Options (the "repurchase Option"); provided, however, that, in
the event of termination of the optionee's employment or
relationship as a consultant or director to the Company or an
Affiliate as described in paragraph 5(g) hereof, the Company
shall have the right to exercise the Repurchase Option at any
time within 90 days following the expiration of the exercise
period as set forth therein. Notwithstanding anything to the
contrary, this subparagraph 5(i) shall not apply to Options
granted after the closing of the initial public offering
pursuant to an effective registration statement under the
Securities Act covering the offer and sale of common stock to
the public.
For the purpose of the foregoing paragraph, the FMV of the
common stock shall be deemed to be (i) if traded on a
securities exchange, or the NASDAQ National Market System, the
closing price of the security on the date of termination, (ii)
if actively traded over-the-counter, the closing ask price on
the date of termination, or (iii) if there is no active public
market, such price that is reasonably determined by the Board
of Directors.
(j) To the extent provided by the terms of an Option, the
optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such Option
by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the
Company to withhold from the shares of the common stock
otherwise issuable to the participant as a result of the
exercise of the Option a number of shares having a fair market
value less than or equal to the amount of the withholding tax
obligation; or (3) delivering to the Company owned and
unencumbered shares of the common stock having a fair market
value less than or equal to the amount of the withholding tax
obligation.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
6. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
---------------------------------------------------------
Each stock bonus or restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the
Board or the Committee shall deem appropriate. The terms and conditions
of stock bonus or restricted stock purchase agreements may change from
time to time, and the terms and conditions of separate agreements need
not be identical, but each stock bonus or restricted stock purchase
agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
a. The purchase price under each stock purchase agreement
shall be such amount as the Board and Committee shall
determine and designate in such agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that
eligible participants in the Plan may be awarded stock
pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
b. No rights under a stock bonus or restricted stock purchase
agreement shall be assignable by any participant under the
Plan, either voluntarily or by operation of law, except where
such assignment is required by law or expressly authorized by
the terms of the applicable stock bonus or restricted stock
purchase agreement.
c. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board of the
Committee, according to a deferred payment or other
arrangement with the person to whom the stock is sold; or
(iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in their discretion.
Notwithstanding the foregoing, the Board or the Committee to
which administration of the Plan has been delegated may award
stock pursuant to a stock bonus agreement in consideration for
past services actually rendered to the Company or for its
benefit.
d. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the
Company in accordance with a vesting schedule to be determined
by the Board or the Committee.
e. In the event a person ceases to be an employee of or ceases
to serve as a consultant to the Company or an Affiliate, the
Company may repurchase or otherwise reacquire any or all of
the shares of stock held by that person which have not vested
as of the date of termination under the terms of the stock
bonus or restricted stock purchase agreement between the
Company and such person.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
7. COVENANTS OF THE COMPANY
------------------------
a. During the terms of the Stock Awards granted under the
Plan, the Company shall keep available at all times the number
of shares of stock required to satisfy such Stock Awards.
b. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock
under the Stock Awards granted under the Plan; provided,
however, that this undertaking shall not require the Company
to register under the Securities Act wither the Plan, any
Stock Award granted under the Plan or any stock issued or
issuable pursuant to any such Stock Award.
If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall
be relieved from any liability for failure to issue and sell
stock upon exercise of such Stock Awards unless and until such
authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
---------------------------
Proceeds from the sale of stock pursuant to Stock Awards under
the Plan shall constitute general funds for the Company.
9. MISCELLANEOUS.
--------------
a. The Board or the Committee shall have the power to
accelerate the time during which a Stock Award may be
exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock
Award state the time during which it may be exercised or the
time during which it will vest.
b. Neither an optionee nor any person to whom an Option is
transferred under subparagraph 5(d) shall be deemed to be the
holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Option unless and until
such person has satisfied all requirements for exercise of the
Option pursuant to its terms.
c. Throughout the term of any Option granted pursuant to the
Plan, the Company shall make available to the holder of such
Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option
term, upon request, such financial and other information
regarding the Company as comprises the annual report to the
stockholders of the Company provided for in the bylaws of the
Company.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
d. Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any eligible
employee, consultant, director, or holder of Stock Awards
under the Plan any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a
consultant or director) or shall affect the right of the
Company or any Affiliate to terminate the employment or
consulting relationship or directorship of any eligible
employee, consultant, director or holder of Stock Awards under
the Plan with or without cause. In the event that a holder of
Stock Awards is permitted or otherwise entitled to take a
leave of absence, the Company shall have the unilateral right
to (i) determine whether such leave of absence will be treated
as a termination of employment or relationship as consultant
or director for purposes of paragraphs 5(g) or 6(e) hereof and
corresponding provisions of any outstanding Stock Awards, and
(ii) suspend or otherwise delay the time or times at which
exercisability or vesting would otherwise occur with respect
to any outstanding Stock Awards under the Plan.
10. CANCELLATION AND RE-GRANT OF OPTIONS.
-------------------------------------
The Board or the Committee shall have the authority to effect,
at any time and from time to time, with the consent of the affected
optionees, (i) the repricing of any or all outstanding Options under
the Plan and/or (ii) the cancellation of any or all outstanding Options
under the Plan and the grant in substitution therefor of new Options
under the Plan covering the same or different number of shares of
common stock, but having an exercise price per share not less than
eighty-five percent (85%) of the fair market value (one hundred percent
(100%) of the fair market value in the case of an Incentive Stock
Option or, in the case of a 10% stockholder (as defined in subparagraph
4(c), not less than on hundred and ten percent (110%) of the fair
market value) per share of common stock on the new grant date.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
----------------------------------
a. If any change is made in the stock subject to the Plan, or
subject to any Stock Award granted under the Plan (through
merger, consolidation, reorganization, recaptitalization,
stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange
of shares, change incorporate structure or otherwise), the
Plan and outstanding Stock Awards will be appropriately
adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price
per share of stock subject to outstanding stock awards.
b. In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is
not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger
into other property, whether in the form of securities, cash
or otherwise then to the extent permitted by applicable law:
(i) any surviving corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such
Stock Awards shall continue in full force and effect. In the
event any surviving corporation refuses to assume or continue
such Stock Awards, or to substitute similar Stock Awards for
those outstanding under the Plan, then, with respect to Stock
Awards held by persons then performing services as employees
or as consultants or directors for the Company, as the case
may be, the time during which such Stock Awards become vested
or may be exercised shall be accelerated and the Stock Awards
terminated if not exercised prior to such event.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
12. RIGHTS IN SHARES BEFORE ISSUANCE AND DELIVERY.
----------------------------------------------
No person shall be entitled to the privileges of stock
ownership unless and until such shares have been issued to such person.
13. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES.
-------------------------------------------
By accepting the Incentive Shares, the Issuee shall represent
for himself or herself and his or her transferees by will or the laws
of descent and distribution that, unless a registration statement under
the Securities Act of 1933 is in effect as to the shares issued under
this Plan, any and all shares so issued shall be received for his or
her personal account and not with a view to or for sale in connection
with any distribution.
No certificate or certificates for the Incentive Shares shall
be issued and delivered prior to the admission of such shares to
listing on notice of issuance on any stock exchange on which shares of
that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered
without causing the Company to be in violation of or incur any
liability under any federal, state or other securities law, any
requirement of any securities exchange listing agreement to which the
Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
14. RESTRICTED SHARES WITH LEGEND.
------------------------------
The Company Shares are restricted securities within the
meaning of the United States federal securities laws. The certificates
evidencing the Shares received pursuant to this Plan shall bear a
legend substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR
SECURITIES LAWS AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR SUCH STATE LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT."
15. AMENDMENT OF THE PLAN.
----------------------
a. The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 11 relating to
adjustments upon changes in stock, no amendment shall be
effective unless approved by the stockholders of the Company
within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
<PAGE>
(i) Increase the number of shares reserved for
Stock Awards under the Plan;
(ii) Modify the requirements as to eligibility
for participation in the Plan to the extent
such modification requires stockholder
approval in order for the Plan to satisfy
the requirements of Section 422(b) of the
Code or to comply with the requirements of
Rule 16b-3 promulgated under the Exchange
Act; or
(iii) Modify the Plan in any other way if such
modification requires stockholder approval
in order for the Plan to satisfy the
requirements of Section 422(b) of the Code
or to comply with the requirements of 16b-3
promulgated under the Exchange Act.
b. It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to
provide optionees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
c. Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be altered or impaired by any
amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Stock Award was granted and
(ii) such person consents in writing.
d. The Board shall have the authority necessary to adopt such
modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign
countries in which the company of its Subsidiaries may operate
to assure the viability of the benefits from Options granted
to Employees employed in such countries and to meet the
objectives of the Plan.
16. TERMINATION OR SUSPENSION OF THE PLAN.
--------------------------------------
a. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on December
31, 2009. No Stock Awards may be granted under the Plan while
the Plan is suspended or after it is terminated.
b. Rights and obligations under any Stock Award granted while
the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except with the consent
of the person to whom the Stock Award was granted.
17. EFFECTIVE DATE OF PLAN
----------------------
The Plan shall become effective as determined by the Board,
but no Stock Awards granted under the Plan shall be exercisable unless
and until the Plan has been approved by the stockholders of the
Company, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
TO THE MOON, ASTEROIDS AND MARS, AND BEYOND TO THE STARS
Optionee:_______________________ Date:____________________
SPACEDEV, INC.
INCENTIVE STOCK OPTION AGREEMENT
SpaceDev, Inc. (the "Company"), pursuant to its 1999 Stock Option Plan (the
"Plan") has this day granted to the undersiged optionee, an option to purchase
shares of the common stock of the Company ("Common Stock") as described herein.
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). This option is subject to all of the terms and
conditions as set forth herein and on Attachment I hereto, which is incorporated
herein in its entirety.
Number of Shares Subject to Option: ______________
VESTING SCHEDULE:
Number of Shares (installment) Date of Earliest Exercise (vesting)
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
Exercise Price Per Share:_______________1 Expiration Date:________________2
SpaceDev, Inc.
By:______________________________ Optionee:_____________________
Duly authorized on behalf of the Board
Of Directors Address:______________________
______________________
OPTIONEE:
1. Acknowledges receipt of the option as described herein and the attachments
referenced therein and understands that all rights and liabilities with
respect to this option are set forth in the option and the Plan; and
2. Acknowledges that as of the date of grant of this option, it sets forth the
entire understanding between the undersigned optionee and the Company and
its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of the following agreements only:
None___________ Other___________________________________
(Initial)
1 Not less than the fair market value of the Common Stock on the date of grant
of this option.
2 Less than then (10) years from the date of grant of this option.
<PAGE>
ATTACHMENT I
TERMS OF INCENTIVE STOCK OPTION
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers) and is intended to comply with the provisions of Rule 701
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is set
forth on the first page of the Incentive Stock Option Agreement. Subject to
the limitations contained herein, this option shall be exercisable with
respect to each installment indicated in the Vesting Schedule on the first
page of the Incentive Stock Option Agreement on or after the date of
vesting applicable to such installment.
2. a. The Exercise Price of this option is set forth on the first page of
the Incentive Stock Option Agreement and is not less than the fair
market value of the Common Stock on the date of grant of this option.
b. Payment of the Exercise Price per share is due in full in cash
(including bank check) upon exercise of all or any part of each
installment which has become exercisable by you; provided, however,
that if at the time of exercise the Company's Common Stock is publicly
traded and quoted regularly in the Wall Street Journal, payment of the
exercise price, to the extent permitted by applicable statutes and
regulations, may be made by delivery of already-owned shares of Common
Stock, or a combination of cash and already-owned Common Stock. Such
Common Stock (i) shall be valued at its fair market value on the date
of exercise, (ii) if originally acquired from the Company, must have
been owned by you for at least six (6) months, and (iii) must be owned
free and clear of any liens, claims, encumbrances, or security
interests. Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board which results in the receipt of cash (or bank
check) by the Company prior to the issuance of Common Stock.
3. The minimum number of shares with respect to which this option may be
exercised at any time is One Thousand (1,000) except (a) as to an
installment subject to exercise, as set forth in paragraph 1, which amounts
to fewer than One Thousand (1,000) shares, in which case, as to the
exercise of that installment, the number of shares in such installment
shall be the minimum number of shares, and (b) with respect to the final
exercise of this option, this paragraph 3 shall not apply.
4. Notwithstanding anything to the contrary contained herein, this option may
not be exercised unless the shares issuable upon exercise of this option
are then registered under the Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Act.
<PAGE>
5. The term of this option commences on the date hereof and, unless sooner
terminated as set forth below or in the Plan, terminates on the Expiration
Date (which date shall be no more than ten (10) years from the date this
option is granted). This option shall terminate prior to the expiration of
its terms as follows: three (3) months after the termination of your
employment with the Company or an affiliate of the Company (as defined in
the Plan) for any reason or for no reason unless:
a. such termination of employment is due to your permanent and
total disability (within the meaning of Section 422(c)(6) of
the Code), in which event the option shall terminate on the
earlier of the termination date set forth above or one (1)
year following such termination of employment; or
b. such termination is due to your death, in which event the
option shall terminate on the earlier of the termination date
set forth above or eighteen (18) months after your death; or
c. during any part of such three (3) month period the option
is not exercisable solely because of the condition set forth
in paragraph 4 above, in which event the option shall not
terminate until the earlier of the termination date set forth
above or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of
employment; or
d. exercise of the option within three (3) months after
termination of your employment with the Company or with an
affiliate would result in liability under section 16(b) of the
Securities and Exchange Act of 1934, in which case the option
will terminate on the earlier of the termination date set
forth above, the tenth (10th) day after the last date upon
which exercise would result in such liability, or six (6)
months and ten (10) days after the termination of your
employment with the Company or an affiliate.
However, this option may be exercised following termination of
employment only as to that number of shares as to which it was exercisable on
the date of termination of employment under the provisions of paragraph 1 of
this option.
6. a. This option may be exercised, to the extent specified above, by delivering
a notice of exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subparagraph
5(f) of the Plan.
b. By exercising this option, you agree that:
(i) the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of the
exercise of this option; the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of
exercise; or the disposition of shares acquired upon such
exercise; and
<PAGE>
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the
shares of the Common Stock issued upon exercise of this option
that occurs within two (2) years after the date of this option
grant or within one (1) year after such shares of Common Stock
are transferred upon exercise of this option.
7. This option is not transferable, except by will or by the laws of descent
and distribution, and is exercisable during your life only by you.
8. This option is not an employment contract, and nothing in this option shall
be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company.
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case
of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified herein or at such other address as you hereafter designate by
written notice to the Company.
10. This option is subject to all the provisions of the Plan, a copy of which
is attached hereto, and its provisions are hereby made a part of this
provisions, including without limitation the provisions of paragraph 5 of
the Plan relating to option provisions, and is further subject to all
interpretations, amendments, rules, and regulations, which may from time to
time be promulgated and adopted pursuant to the Plan. In the event of any
conflict between the provisions of this option and those of the Plan, the
provisions of the Plan shall control.
Attachments:
1999 Stock Option Plan
Notice of Exercise
<PAGE>
NOTICE OF EXERCISE
SpaceDev, Inc.
13855 Stowe Drive
Poway, CA 92064 Date of Exercise:___________
To Whom It May Concern:
This constitutes notice under SpaceDev, Inc. (the "Company") stock option
granted to me on ______________ (the "Option") that I elect to purchase the
number of shares for the price set forth below:
Type of option (check one) Incentive ______ Supplemental ______
Number of shares as to
which option is exercised: _______________________
Certificates to be issued
in name of: _______________________
Social Security Number: _______________________
Total exercise price: _______________________
Cash payment delivered herewith: _______________________
By this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the Company's 1999 Stock Option Plan; (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this Option; and
(iii) if this exercise related to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this Option that occurs within
two (2) years after the date of grant of this Option or within one (1) year
after such shares of Common Stock are issued upon exercise of this Option.
Sincerely,
------------------------------
Signature
------------------------------
Print Name
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
24th day of November, 1997, by and between Pegasus Development Group, Inc., a
Colorado corporation (the "Company or "PSDM"), and James W. Benson ("Employee").
A. The Company is engaged in the business of commercializing space
exploration and initially intends to develop, design, construct, test and launch
an unmanned spacecraft to a targeted near-earth asteroid residing beyond earth's
orbit for the purpose of collecting and selling scientific data.
B. The Company is in the development stage and requires substantial
additional funds to implement its business plan.
C. The Company desires to retain Employee as President and Chief
Executive Officer of the Company, and Employee desires to accept such employment
on the terms and conditions set forth herein.
NOW, THEREFORE, based upon the following covenants, conditions and
promises the parties hereto do hereby agree as follows:
1. EMPLOYMENT AND DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee,
-1-
<PAGE>
and Employee hereby accepts such employment with the Company, as the President
and Chief Executive Officer of PSDM, and his duties shall be consistent with
such positions.
2. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall commence on and as of the date hereof and shall continue
hereafter for a period of 60 months, subject to early termination as provided
for elsewhere in this Agreement. The "term" of this Agreement shall mean and
refer to such 60-month period (or any earlier termination thereof pursuant to
Paragraph 5 hereof).
3. EXTENT OF SERVICE. During the term hereof, Employee agrees to
devote, during regular business hours, his full time to the performance of his
duties hereunder, it being the intent of the parties hereto that Employee shall
devote his best efforts to furthering, promoting and developing the business and
activities of the Company.
4. COMPENSATION.
(a) As compensation for the services which Employee is to render
the Company hereunder, the Company shall pay Employee an aggregate annual salary
for and with respect to each year (annual periods ending with the anniversary
date of the date of this Agreement) during the term hereof as follows:
-2-
<PAGE>
(i) An annual salary of $72,000 commencing 30 days after the
Company has secured and received additional equity capital of not less than
$900,000;
(ii) An annual salary of $84,0000 commencing 30 days after the
Company has secured and received additional equity capital of $3,500,000;
(iii) An annual salary of $96,000 commencing 30 days after the
Company has secured and received additional equity capital of $7,000,000.
Employee's salary during each of such years shall be paid in accordance with the
normal payroll practices of the Company. At the end of each year during the term
hereof, the Board of Directors of the Company may review the compensation of
Employee hereunder and if it, in its sole discretion, believes it to be
justified, may pay to Employee a cash bonus and/or common stock for and with
respect to such year.
(b) The Company will also provide Employee with a reasonable
automobile allowance in the aggregate amount set forth on Exhibit A and such
other fringe benefits as are within the Company's policy as approved by the
Board of Directors of the Company. Additionally, the Company shall reimburse
Employee for expenses reasonably incurred by him in carrying out his duties
-3-
<PAGE>
hereunder, including travel, lodging and reasonable entertainment expenses,
promptly after presentation to the Company of receipts or other documents
evidencing the incurrence of such expenses.
(c) The Company hereby grants to Employee options to purchase up to
2,500,000 shares of Common Stock, subject to the vesting conditions and at the
exercise prices set forth below:
Number of Exercise Price
Shares Vesting Upon the Company's Per Share
- --------------- -------------------------------------- ---------------
500,000 Currently vested $1.00
500,000 Obtaining $6,500,000 additional $1.50
equity capital
500,000 Financing and executing $2.00
definitive space launch agreement
500,000 Launching initial mission $2.50
500,000 Spacecraft rendezvous with target $3.00
asteroid
- ---------------
2,500,000
- ---------------
All options shall expire 60 months from the date of this Agreement.
5. TERMINATION OF EMPLOYMENT FOR GOOD CAUSE. The Company may terminate
the employment of Employee for "good cause" by giving written notice thereof to
Employee. For the purposes of this Agreement, "good Cause" shall mean only
Employee's (i) drug, alcohol or other substance abuse during regular business
hours or to such extent as to materially affect the performance of his duties
hereunder, (ii) commission of a crime directly related to his employment
hereunder, (iii) conviction of a felony involving moral turpitude, (iv) gross
negligence, gross mismanagement or
-4-
<PAGE>
material willful misconduct in the management of the business and affairs of the
Company or failure to perform such duties as may reasonably be directed by the
Board of Directors and as may be reasonably consistent with the duties and
obligations of Employee's office, or (v) breach of any material provision of
this Agreement. In the event the employment of the Employee is terminated
pursuant to this Paragraph 5, the Company shall have no further liability to
Employee other than for compensation earned but not yet paid. In the event the
company contends that it had good cause to terminate the employment of Employee
pursuant to clause (i), (ii) or (iii) of this Paragraph 5, the Company shall
specify in said written notice the effective date of termination of Employee's
employment, which date may, in the Company's sole discretion, be the date of
such notice. In the event the Company contends that it has good cause to
terminate the employment of Employee pursuant to clause (iv) or (v) of this
Paragraph 5, the Company shall set forth in said written notice reasonable
details of Employee's acts or conduct which the Company alleges constitutes a
willful and gross mismanagement of business and affairs of the Company or a
breach of material provision of this Agreement, as the case may be. The written
notice Shall also specify what, if anything, Employee could do to cure or
eliminate the alleged "good cause" for termination if the matter is susceptible
of cure. If Employee performs the required services or modifies Employee's
performance to correct the matters complained of within sixty (60) days of
receipt of the notice, Employee's breach will be deemed cured. However, if the
-5-
<PAGE>
nature of the matters complained of are such that more than sixty (60) days are
reasonably required to correct the matters complained of, then his breach will
be deemed cured if he commences to correct such matters within the sixty (60)
day period and thereafter diligently prosecutes such correction to completion,
but not to exceed one additional sixty (60) day period. If Employee does not
modify his performance to correct or commence to correct the matter complained
of within the sixty (60) day period or any extension thereof, the Company shall
have the right to terminate this Agreement at the end of such sixty (60) day
period or any extension thereof. It is understood that Employee's performance
hereunder shall not be deemed unsatisfactory solely on the basis of any economic
performance of the Company because such performance will depend in part on a
variety of factors over which Employee has little control.
6. TERMINATION BY DEATH OR INCAPACITY. The Company may terminate the
employment of Employee by written notice to Employee if, during the term of this
Agreement, Employee shall become incapable of fulfilling his obligations
hereunder because of injury or physical or mental illness which shall exist or
may reasonably be anticipated to exist for a period of six (6) consecutive
months or for an aggregate of six (6) months during any twelve (12) month
period. The death of Employee shall automatically terminate the term of
Employee's employment. In the event the employment of Employee is terminated by
Employee's death or by the Company
-6-
<PAGE>
pursuant to this Paragraph 6 because of injury or physical or mental illness,
the Company shall pay Employee, or Employee's heir(s) (in the event of death),
all compensation of Employee earned but not yet paid up to and through the day
upon which Employee's death occurs or this Agreement is terminated by the
Company due to Employee's incapacity, as applicable, or in accordance with any
written policy applicable to other executives of the Company in effect at the
time of Employee's death or incapacity, if more favorable.
7. NONCOMPETITION; NONSOLICITATION; CONFIDENTIAL INFORMATION.
(a) Employee covenants and agrees that, during the term of this
Agreement, he will not, directly or indirectly, whether individually or as an
officer, director, employee or consultant, become employed by, or become a
partner in or a stockholder owning more than one percent (1%) of, any business
which is engaged in the similar business of commercializing outer space and
other related consulting or any other business which is similar to or
competitive with the business now or at any time during the term of this
Agreement being conducted by the Company, including any of its subsidiaries.
(b) Employee acknowledges that it is the policy of the Company to
maintain as secret and confidential all valuable and
-7-
<PAGE>
unique information heretofore or hereafter acquired, developed or used by the
Company relating to the business, operations, employees, tenants, vendors,
Consultants and/or clients of the Company, which gives the Company a competitive
advantage in its industry, including, without limitation, information about net
costs, profits, markets, suppliers, key personnel, bidding and pricing policies,
operational methods, engineering and technical processes and other business
affairs and methods and other information not readily available to the public
and plans for future developments, operating manuals, financial statements,
forecasts and operating data and business plans (all such information is
hereinafter referred to as "Confidential Information"). Employee recognizes that
the services to be performed by Employee are special and unique, and that by
reason of his duties, he will acquire Confidential Information. Employee
recognizes that all such Confidential Information is the property of the
Company. In consideration of the Company's entering into this Agreement,
Employee agrees that: (i) Employee shall never, directly or indirectly, use,
publish, disseminate or otherwise disclose any Confidential Information obtained
during his employment by the Company (whether obtained prior to, during or after
the term of this Agreement) without the prior written consent of the Company's
Board of Directors; and (ii) during the term of this Agreement, he shall
exercise all due and diligent precautions to protect the integrity of the
Company's vendor, consultant, and customer lists and sources thereof,
statistical data and
-8-
<PAGE>
compilations, agreements, contracts, manuals or other documents embodying any
Confidential Information. Upon termination of Employee's employment by the
Company and at any other time upon request of the Company, he shall return all
such documents (and copies thereof) embodying any Confidential Information in
his possession or control. Employee agrees that the provisions of this
subparagraph (b) are reasonable and necessary to protect the proprietary rights
of the Company in the Confidential Information and its trade secrets, goodwill
and reputation. The provisions of this subparagraph (b) shall not apply to
Confidential information (i) which is known generally to the public, (ii) which
otherwise comes into the public domain without the fault of Employee, (iii)
which Employee obtains from sources other than the Company, or (vi) which the
Company purchases or obtains in connection with any acquisitions of companies or
assets.
(c) For a period of one year after the termination of this
Agreement for any reason (or for such a lesser period of time as may be
determined by a court of law or equity to be a reasonable limitation on
Employee), Employee shall not solicit, directly or indirectly, any director,
officer or employee of the Company to discontinue that individual's status of
employment with the company, nor to become employed in any activity similar to
or competitive with the business of the company being conducted at the time of
termination of this Agreement within a radius of 2,500 miles of Denver,
Colorado, nor will he solicit or cause or
-9-
<PAGE>
authorize, directly or indirectly to be solicited, for or on behalf of himself
or any third party, from others who are vendors or customers of the Company, any
business which is competitive with the Company within a radius of 2,500 miles of
Denver, Colorado.
(d) If the covenants contained in this Paragraph 7 are violated, or
threatened to be violated, Employee acknowledges and agrees that such violation
or threatened violation will cause irreparable damage to the Company, that the
remedy at law of the Company will be inadequate and that the Company shall, in
addition to, but not in limitation of, any other rights or remedies available at
law or in equity, be entitled to temporary and permanent injunctive relief
and/or specific performance without the necessity of proving actual damage.
(e) The parties hereto acknowledge that the provisions of this
Paragraph 7 shall survive the termination of this Agreement.
8. EMPLOYEE'S RIGHTS AND BENEFITS PERSONAL. Except as may herein
otherwise be specifically provided, the rights, benefits and obligations of
Employee under this agreement are personal to Employee, and no such rights or
benefits shall be subject to voluntary or involuntary alienation, assignment or
transfer.
-10-
<PAGE>
9. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior written or oral agreements,
representations, understandings and/or discussion between the parties relating
thereto. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party making the waiver.
10. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or three (3) business days after deposit in the United States mail, by
registered or certified mail (or air mail, if notice shall be sent outside the
United States), return receipt requested, postage prepaid, or two (2) days after
delivery to a nationally known air courier or delivery company, addressed to the
applicable party hereto at the address specified below (or as otherwise directed
in a notice given in accordance herewith):
If to Company, to: Pegasus Development Group, Inc.
c/o SpaceDev
P.0. Box 2121
31557 Aspen Ridge Road
Steamboat Springs, Colorado 80477
-11-
<PAGE>
If to Employee, to: James W. Benson
Pegasus Development Group, Inc.
c/o SpaceDev
P.0. Box 2121
31557 Aspen Ridge Road
Steamboat Springs, Colorado 80477
11. EFFECT OF HEADINGS. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
12. ARBITRATION; ATTORNEYS' FEES. Any controversy or claim arising out
of or to this Agreement, or the breach hereof, shall be resolved by
JAMS/ENDispute in accord with its rules and regulations and judgment on the
award so rendered may be entered in any court having jurisdiction thereof. Any
such proceeding shall be had in Denver, Colorado. If any action or proceeding is
brought to enforce any provisions of this Agreement, the prevailing party shall
be entitled to its costs and expenses in connection therewith, including without
limitation reasonable attorneys' fees.
13. INJUNCTIVE RELIEF. Employee hereby recognizes, acknowledges and
agrees that in the event of any breach by Employee of any of his covenants,
agreements, duties or obligations hereunder, the Company would suffer great and
irreparable harm,
-12-
<PAGE>
injury and damage, the Company would encounter extreme difficulty in attempting
to prove the actual amount of damages suffered by the Company as a result of
such breach, and the company would not be reasonably or adequately compensated
by an award of damages in any action at law. Employee therefore acknowledges and
agrees that, in addition to any other remedy the Company may have at law, in
equity, by statute or otherwise, in the event of any breach by Employee of any
of his covenants, agreements, duties or obligations hereunder, the Company shall
be entitled to seek and receive temporary, preliminary and permanent injunctive
and other equitable relief from any court of competent jurisdiction to enforce
any of the rights of the Company, or any of the covenants, agreements, duties or
obligations of Employee hereunder, and/or otherwise to prevent the violation of
any of the terms or provisions hereof, all without the necessity of proving the
amount of any actual damage to the Company or any affiliate thereof resulting
therefrom; provided, however, that nothing contained in this Section 13 shall be
deemed or construed in any manner whatsoever as a waiver by the Company of any
of the rights which the Company may have against Employee at law, in equity, by
statute or otherwise arising out of, in connection with or resulting from the
breach by Employee of any of his covenants, agreements, duties or obligations
hereunder.
14. APPLICABLE LAW. The validity, interpretation and enforcement of
this Agreement shall be governed by the laws of the
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<PAGE>
State of Colorado except that the Federal Arbitration Act shall govern any
arbitration proceeding.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same Agreement.
16. SEVERABILITY. If any provision of this Agreement shall be declared
invalid, illegal and/or unenforceable, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
17. SUCCESSOR AND ASSIGNS. The provisions hereof shall inure to the
benefit of, be binding upon, and be enforceable by the successors and assigns of
the Company.
18. ASSIGNMENT; SUCCESSORS; AFFILIATES. The Company may assign this
Agreement (or the interest of the Company herein) to any affiliate of the
Company or to any entity which is a party to a merger, reorganization, or
consolidation with the Company or to a subsidiary of the Company or to an entity
or entities acquiring substantially all of the assets of the Company or of any
division with respect to which Employee is providing services (providing any
such assignee assumes the Company's obligation under the Agreement). Employee
shall, if requested by the Company, perform
-14-
<PAGE>
Employee's services and duties, as specified in this Agreement, to or for the
benefit of any affiliate of the Company, including, without limitation, any
parent or subsidiary of the Company or any other subsidiary of any parent of the
Company. Upon such assignment, acquisition, merger, consolidation, or
reorganization, the term "Company" as used herein shall be deemed to refer to
such assignee or such successor entity. Employee shall not have the right to
assign Employee's interest in this Agreement, any rights under this Agreement or
any duties imposed under this Agreement nor shall Employee (or Employee's
spouse, heirs, beneficiaries, administrators or executors) have the right to
pledge, hypothecate or otherwise encumber Employee's right to receive
compensation hereunder without the consent of the Company.
19. FURTHER ASSURANCES. The Company and Employee each agree to execute
and deliver any and all additional instruments and to perform any and all
additional acts deemed by either party to be
-15-
<PAGE>
necessary or proper to carry into effect the terms, conditions and provisions of
this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
EMPLOYEE: THE COMPANY:
/s/ James W. Benson Pegasus Development Group, Inc.
- ----------------------------- a Colorado corporation
James W. Benson
By /s/ signature
----------------------------
Its President and Chief
Executive Officer
-16-
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
7th day of February, 1998, by and between Integrated Space Systems, Inc., a
California corporation (the "Company"), and Thomas W. Brown ("Employee").
RECITALS
A. The Company is principally engaged in the business of providing
engineering analysis, design, test support and field engineering for
aerospace-related projects.
B. Effective this date, SpaceDev, Inc., a Colorado corporation ("SPDV")
has acquired all of the issued and outstanding capital stock of the Company (the
"Acquisition"). In connection with and as a material condition to completion of
the Acquisition, certain shareholders and management employees of the Company,
including Employee, have agreed to enter into employment agreements with the
Company.
C. The Company desires to retain Employee as Chief Financial Officer of
the Company, and Employee desires to accept such employment on the terms and
conditions set forth herein.
NOW, THEREFORE, based upon the following covenants, conditions and
promises the parties hereto do hereby agree as follows:
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1. EMPLOYMENT AND DUTIES. Subject to the terms and conditions set forth
herein, the Company hereby employs Employee, and Employee hereby accepts such
employment with the Company, as the Chief Financial Officer of the Company, and
his duties shall be consistent with such positions.
2. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall commence on and as of the date hereof and shall continue
hereafter for a period of 36 months, subject to early termination as provided
for elsewhere in this Agreement. The "term" of this Agreement shall mean and
refer to such 36-month period (or any earlier termination thereof pursuant to
Section 5 hereof).
3. EXTENT OF SERVICE. During the term hereof, Employee agrees to and
shall devote his full time to the performance of his duties hereunder, it being
the intent of the parties hereto that Employee shall devote his best efforts to
furthering, promoting and developing the business, activities and interests of
the Company. Employee acknowledges that the "interests of the Company" include
the business, activities and interests of SPDV, its subsidiaries and affiliates,
and as a result, Employee may also be requested by the Chief Executive Officer
or Board of Directors of the Company to undertake various management
responsibilities on a full- or part-time basis for or on behalf of SPDV for all
or part of the term.
4. COMPENSATION. As compensation for the services which Employee is to
render hereunder, the Company shall pay Employee the following aggregate annual
salary for and with respect to each year (annual periods ending with the
anniversary date of the date of this Agreement) during the term hereof: $60,000
for the first year, $80,000 for the second year and $100,000 for the third year.
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Employee's salary during each of such years shall be paid in accordance with the
normal payroll practices of the Company. At the end of each year during the term
hereof, the Board of Directors of the Company may review the compensation of
Employee hereunder and if it, in its sole discretion, believes it to be
justified, may pay to Employee a cash bonus for and with respect to such year.
(a) The Company will provide Employee with such fringe
benefits as are within the Company's policy as approved by the Board of
Directors of the Company. The Company shall also reimburse Employee for expenses
reasonably incurred by him in carrying out his duties hereunder, including
travel, lodging and reasonable entertainment expenses, promptly after
presentation to the Company of receipts or other documents evidencing the
incurrence of such expenses providing that such expenses have been approved in
advance by the Chief Executive Officer of the Company or are otherwise
consistent with policy on such matters as established by the Company's Board of
Directors.
(b) The Company shall cause SPDV to grant to Employee options
to purchase shares of common stock of SPDV in the amounts and upon the terms set
forth in Exhibit A attached hereto and incorporated herein by this reference.
5. TERMINATION OF EMPLOYMENT FOR GOOD CAUSE. The Company may terminate
the employment of Employee for "good cause" by giving written notice thereof to
Employee. For the purposes of this Agreement, "good cause" shall mean only
Employee's (i) drug, alcohol or other substance abuse during regular business
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hours or to such extent as to materially affect the performance of his duties
hereunder, (ii) commission of a crime directly related to his employment
hereunder, (iii) conviction of a felony involving moral turpitude, (iv)
negligence, gross mismanagement or willful misconduct in the management of the
business and affairs of the Company or failure to perform such duties as may
reasonably be directed by the Board of Directors and as may be reasonably
consistent with the duties and obligations of Employee's office, or (v) breach
of any material provision of this Agreement. In the event the employment of the
Employee is terminated pursuant to this Section 5, the Company shall have no
further liability to Employee other than for compensation earned but not yet
paid. In the event the Company contends that it had good cause to terminate the
employment of Employee pursuant to clause (i), (ii) or (iii) of this Section 5,
the Company shall specify in said written notice the effective date of
termination of Employee's employment, which date may, in the Company's sole
discretion, be the date of such notice. In the event the Company contends that
it has good cause to terminate the employment of Employee pursuant to clause
(iv) or (v) of this Section 5, the Company shall set forth in said written
notice reasonable details of Employee's acts or conduct which the Company
alleges constitutes a willful and gross mismanagement of business and affairs of
the Company or a breach of material provision of this Agreement, as the case may
be. The written notice shall also specify what, if anything, Employee could do
to cure or eliminate the alleged "good cause" for termination if the matter is
susceptible of cure. If Employee performs the required services or modifies
Employee's performance to correct the matters complained of within sixty (60)
days of receipt of the notice, Employee's breach will be deemed cured. However,
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if the nature of the matters complained of are such that more than sixty (60)
days are reasonably required to correct the matters complained of, then his
breach will be deemed cured if he commences to correct such matters within the
sixty (60) day period and thereafter diligently prosecutes such correction to
completion, but not to exceed one additional sixty (60) day period. If Employee
does not modify his performance to correct or commence to correct the matter
complained of within the sixty (60) day period or any extension thereof, the
Company shall have the right to terminate this Agreement at the end of such (60)
day period or any extension thereof. It is understood that Employee's
performance hereunder shall not be deemed unsatisfactory solely on the basis of
any economic performance of the Company because such performance will depend in
part on a variety of factors over which Employee has little control.
6. TERMINATION BY DEATH OR INCAPACITY. The Company may terminate the
employment of Employee by written notice to Employee if, during the term of this
Agreement, Employee shall become incapable of fulfilling his obligations
hereunder because of injury or physical or mental illness which shall exist or
may reasonably be anticipated to exist for a period of six (6) consecutive
months or for an aggregate of six (6) months during the term hereof. The death
of Employee shall automatically terminate the term of Employee's employment. In
the event the employment of Employee is terminated by Employee's death or by the
Company pursuant to this Section 6 because of injury or physical or mental
illness, the Company shall pay Employee, or Employee's heir(s) (in the event of
death), all compensation of Employee earned but not yet paid up to and through
the day upon which Employee's death occurs or this Agreement is terminated by
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the Company due to Employee's incapacity, as applicable, or in accordance with
any written policy applicable to other executives of the Company in effect at
the time of Employee's death or incapacity, if more favorable.
7. TERMINATION WITHOUT CAUSE. The Company may terminate the employment
of Employee without cause at any time in which event Employee and the Company
agree that the sole amounts due and owing to Employee hereunder (whether as
"severance pay" or otherwise) shall be $100,000, $70,000 or $60,000 for a
termination of employment without cause during year one, year two or year three
of the term, respectively.
8. NONCOMPETITION; NONSOLICITATION; CONFIDENTIAL INFORMATION.
(a) Employee covenants and agrees that, during the term he will not,
directly or indirectly, whether individually or as an officer, director,
employee or consultant, become employed by, or become a partner in or a
stockholder owning more than one percent (1%) of, any business which is engaged
in the business of providing aerospace engineering services and other related
consulting or any other business which is similar to or competitive with the
business now or at any time during the term of this agreement being conducted by
SPDV and/or the Company.
(b) Employee acknowledges that it is the policy of the Company (for
purposes of this subsection 8 (b) the term ACompany@ shall also, refer to SPDV,
any subsidiary, parent or other affiliate of the Company or of SPDV) to maintain
as secret and confidential all valuable and unique information heretofore or
hereafter acquired, developed or used by the Company relating to the business,
operations, employees and/or clients of the Company, including SPDV, which gives
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the Company a competitive advantage in its industry, including, without
limitation: information about net costs, profits, markets, suppliers,
technology, key personnel and consultants, pricing policies, operational
methods, designs, technical and systems processes, relationships with
universities, the National Aeronautics and Space Administration and other
governmental agencies, and other business affairs and methods and other
information not readily available to the public, plans for future developments,
operating manuals, financial statements, forecasts and operating data and
business plans (all such information is hereinafter referred to as "Confidential
Information"). Employee recognizes and acknowledges that the services heretofore
performed by Employee and those to be performed by Employee are special and
unique, and that by reason of his duties, he has acquired and will acquire
Confidential Information. Employee recognizes that all such Confidential
Information is the property of the Company. In consideration of the Company's
entering into this Agreement, Employee agrees that: (i) Employee shall never,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained during his employment by the Company (whether
obtained prior to, during or after the term of this Agreement) without the prior
written consent of the Company's Board of Directors; and (ii) during the term of
this Agreement, he shall exercise all due and diligent precautions to protect
the integrity of the Company's designs, processes, systems, know-how,
statistical data and compilations, agreements, contracts, manuals or other
documents embodying any Confidential Information. Upon termination of Employee's
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employment by the Company and at any other time upon request of the Company, he
shall return all such documents (and copies thereof) embodying any Confidential
Information in his possession or control. Employee agrees that the provisions of
this subparagraph (b) are reasonable and necessary to protect the proprietary
rights of the Company in the Confidential Information and its trade secrets,
goodwill and reputation. The provisions of this subparagraph (b) shall not apply
to Confidential Information (i) which is known generally to the public, (ii)
which otherwise comes into the public domain without the fault of Employee, or
(iii) which Employee obtains from sources other than the Company.
(c) For a period of 36 months after the termination of this Agreement
for any reason other than a termination by the Company under Section 7 (or for
such a lesser period of time as may be determined by a court of law or equity to
be a reasonable limitation on Employee), Employee shall not: (i) solicit,
directly or indirectly, any director, officer or employee of the Company to
discontinue that individual's status of employment with the Company; (ii) become
employed in any activity similar to or competitive with the business of the
Company or of SPDV being conducted at the time of termination of this Agreement
anywhere in the world; or (iii) solicit or cause or authorize, directly or
indirectly to be solicited, for or on behalf of himself or any third party, from
customers, clients, consultants or other providers of goods and services (all of
whom are collectively referred to as "Company Clients") of the Company or of
SPDV, any business which is competitive with the Company or with SPDV anywhere
in the world. "Clients" shall also include persons whom or entities which the
Company has identified and targeted (at or prior to the date of termination of
this Agreement) as intended customers or clients of SPDV:
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(d) In the event of a termination by the Company under Section 7 of
this agreement clauses (ii) and (iii) of subsection 8 (c) above shall be
adjusted as follows:
(1) Employee shall not, for a period of 18 months following
such termination: (i) become an officer or director, or maintain an ownership
interest of more than one percent in any company that is directly competitive
with the business of SPDV; or (ii) be employed by or consult to any business
which is directly competitive with SPDV anywhere in the world. Nothing set forth
herein shall prevent Employee following termination of this Agreement from
securing any engineering related employment at any aerospace or other company,
or division thereof, which is not competitive with the business of SPDV.
(2) Employee shall not, for a period of 24 months following
such termination solicit or cause or authorize directly or indirectly to be
solicited for or on behalf of himself or any third party any customer of SPDV to
provide to that customer goods or services directly competitive with the goods
or services provided to that customer by SpaceDev. Nothing set forth herein
shall prevent Employee following termination of this Agreement from securing any
engineering related employment at any aerospace or other company, or division
thereof, which is not competitive with or providing services to SPDV.
(e) If the covenants contained in this Section 8 are violated, or
threatened to be violated, Employee acknowledges and agrees that such violation
or threatened violation will cause irreparable damage to the Company and SPDV,
that the remedy at law of the Company or of SPDV will be inadequate and that the
Company and SPDV shall, in addition to, but not in limitation of, any other
rights or remedies available at law or in equity, be entitled to temporary and
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permanent injunctive relief and/or specific performance without the necessity of
proving actual damage.
(f) Employee acknowledges that the provisions of this Section 8 are
fair and equitable and are required in connection with the Acquisition and
continued employment hereunder. The parties hereto acknowledge that the
provisions of this Section 8 shall survive the termination of this Agreement.
9. EMPLOYEE'S RIGHTS AND BENEFITS PERSONAL. Except as may herein
otherwise be specifically provided, the rights, benefits and obligations of
Employee under this Agreement are personal to Employee, and no such rights or
benefits shall be subject to voluntary or involuntary alienation, assignment or
transfer.
10. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior written or oral agreements,
representations, understandings and/or discussion between the parties relating
thereto. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party making the waiver.
11. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or three (3) business days after deposit in the United States mail, by
registered or certified mail (or air mail, if notice shall be sent outside the
United States), return receipt requested, postage prepaid, or two (2) days after
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delivery to a nationally known air courier or delivery company, addressed to the
applicable party hereto at the address specified below (or as otherwise directed
in a notice given in accordance herewith):
If to the Company, to: Integrated Space Systems, Inc.
7940 Silverton Avenue, Suite 202
San Diego, California 92126
If to SPDV, to: SpaceDev, Inc.
P. O. Box 2121
Steamboat Springs, Colorado 80477
Attn: James W. Benson,
Chief Executive Officer
If to Employee, to: Thomas W. Brown, CFO
14923 Whitebutte Drive
Poway, California 92064
12. EFFECT OF HEADINGS. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
13. ARBITRATION; ATTORNEYS' FEES. Any controversy or claim arising out
of or to this Agreement, or the breach hereof, shall be resolved by
JAMS/ENDispute in accord with its rules and regulations and judgment on the
award so rendered may be entered in any court having jurisdiction thereof. Any
such proceeding shall be had in the County of San Diego, State of California. If
any action or proceeding is brought to enforce any provisions of this Agreement,
the prevailing party shall be entitled to its costs and expenses in connection
therewith, including without limitation reasonable attorneys' fees.
14. INJUNCTIVE RELIEF. Employee hereby recognizes, acknowledges and
agrees that in the event of any breach by Employee of any of his covenants,
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agreements, duties or obligations hereunder, the Company would suffer great and
irreparable harm, injury and damage, the Company would encounter extreme
difficulty in attempting to prove the actual amount of damages suffered by the
Company as a result of such breach, and the Company would not be reasonably or
adequately compensated by an award of damages in any action at law. Employee
therefore acknowledges and agrees that, in addition to any other remedy the
Company may have at law, in equity, by statute or otherwise, in the event of any
breach by Employee of any of his covenants, agreements, duties or obligations
hereunder, the Company shall be entitled to seek and receive temporary,
preliminary and permanent injunctive and other equitable relief from any court
of competent jurisdiction to enforce any of the rights of the Company, or any of
the covenants, agreements, duties or obligations of Employee hereunder, and/or
otherwise to prevent the violation of any of the terms or provisions hereof, all
without the necessity of proving the amount of any actual damage to the Company
or any affiliate thereof resulting therefrom; PROVIDED, HOWEVER, that nothing
contained in this Section 14 shall be deemed or construed in any manner
whatsoever as a waiver by the Company of any of the rights which the Company may
have against Employee at law, in equity, by statute or otherwise arising out of,
in connection with or resulting from the breach by Employee of any of his
covenants, agreements, duties or obligations hereunder.
15. APPLICABLE LAW. The validity, interpretation and enforcement of
this Agreement shall be governed by the laws of the State of California except
that the Federal Arbitration Act shall govern any arbitration proceeding.
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16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same Agreement.
17. SEVERABILITY. If any provision of this Agreement shall be declared
invalid, illegal and/or unenforceable, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
18. SUCCESSOR AND ASSIGNS. The provisions hereof shall inure to the
benefit of, be binding upon, and be enforceable by the successors and assigns of
the Company.
19. ASSIGNMENT; SUCCESSORS; AFFILIATES. The Company may assign this
Agreement (or the interest of the Company herein) to any affiliate of the
Company or to any entity which is a party to a merger, reorganization, or
consolidation with the Company or to a subsidiary of the Company or to an entity
or entities acquiring substantially all of the assets of the Company or of any
division with respect to which Employee is providing services (providing any
such assignee assumes the Company's obligation under the Agreement). Employee
shall, if requested by the Company, perform Employee's services and duties, as
specified in this Agreement, to or for the benefit of any affiliate of the
Company, including, without limitation, any parent or subsidiary of the Company
or any other subsidiary of any parent of the Company. Upon such assignment,
acquisition, merger, consolidation, or reorganization, the term "Company" as
used herein shall be deemed to refer to such assignee or such successor entity.
Employee shall not have the right to assign Employee's interest in this
Agreement, any rights under this Agreement or any duties imposed under this
Agreement nor shall Employee (or Employee's spouse, heirs, beneficiaries,
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administrators or executors) have the right to pledge, hypothecate or otherwise
encumber Employee's right to receive compensation hereunder without the consent
of the Company.
20. FURTHER ASSURANCES. The Company and Employee each agree to execute
and deliver any and all additional instruments and to perform any and all
additional acts deemed by either party to be necessary or proper to carry into
effect the terms, conditions and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
EMPLOYEE: THE COMPANY:
Integrated Space Systems, Inc.,
- ---------------------------- a California corporation
Thomas W. Brown
By
----------------------------
Its President and Chief
Executive Officer
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- --------------------------------------------------------------------------------
THE ISSUANCE AND TRANSFER OF THE STOCK REPRESENTED BY THIS OPTION IS SUBJECT TO
RESTRICTIONS. THIS OPTION HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF
THE HOLDER THAT THE STOCK WILL BE ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS OPTION NOR
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS OPTION, HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT
SpaceDev, Inc. (the "Company"), desiring to afford an opportunity to
the Grantee named below to purchase certain shares of the Company's common
stock, to provide the Grantee with an added incentive as an employee of the
Company, hereby grants to Grantee, and the Grantee hereby accepts, an option to
purchase the number of such shares optioned as specified below (the "Option"),
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option as specified below, at
the option exercise price specified below, subject to and upon the following
terms and conditions.
1. IDENTIFYING PROVISIONS. As used in this Option, the following
terms shall have the following respective meanings:
(a) Grantee: Thomas W. Brown
(b) Date of Grant shall be February 7, 1998.
(c) Number of shares optioned, shall mean that number of
shares set forth in section 2 below.
(d) Each option exercise price per share shall be the sum
amount set forth next to each of the respective
Triggering Events as defined in section 2 below:
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2. VESTING AND TERM OF OPTION. This Option is not exercisable in any
part until one (1) year after the Date of Grant, and then only upon achievement
of the Triggering Events set forth below:
(a) After the Company has constructed, completed and tested its first
spacecraft and certified that it is "ready to launch," the Option shall vest in
the Grantee to the extent of 20,000 shares optioned hereunder at an exercise
price of $1.50 per share;
(b) When the Company has generated $750,000 in pretax profits in any
one fiscal year from customers and business developed from the Integrated Space
Systems' ("ISS") base of business and/or business developed from such base or
services, the Option shall vest in the Grantee to the extent of an additional
20,000 shares optioned hereunder at an exercise price of $ 2.00 per share;
(c) On the successful launch of the Company's first Spacecraft, the
Option shall vest in the Grantee to the extent of an additional 20,000 shares
optioned hereunder at an exercise price of $2.50 per share;
(d) On the successful completion of the rendezvous and completion of
the "Minimum Mission," as defined therefor, the Option shall vest in the Grantee
to the extent of an additional 20,000 shares optioned hereunder at an exercise
price of $3.00 per share;
(e) When the Company has achieved fifteen percent (15%) profit margin
(as determined by the Company's independent certified public accountants) for
two (2) consecutive fiscal years from customers or business developed from the
Integrated Space Systems' ("ISS") base of business and/or business developed
from such base or services (and not from any other business of the Company), the
Option shall vest in the Grantee to the extent of an additional 20,000 shares
optioned hereunder at an exercise price of $3.50 per share;
Upon the occurrence of any Triggering Event, subject to the other
provisions of this Option, Grantee may exercise this Option for all or any
portion of the number of shares optioned for which the Option is then vested.
Subject to the other provisions hereof, each Option shall have a total term of
seven (7) years from Date of Grant, and upon expiration of such seven (7) year
term, any Option not exercised in full shall expire and may thereafter no longer
be exercised.
3. RESTRICTIONS ON EXERCISE. The following additional restrictions
shall apply to the exercise of the Option:
(a) TERMINATION OF EMPLOYMENT. If the Grantee's employment by
the Company or any of its subsidiaries is terminated for any reason other than
death, only that portion of this Option exercisable at the date of such
termination of employment may thereafter be exercised, and it may not be
exercised more than three (3) months after such date of termination nor after
the expiration date of this Option, whichever date is sooner, unless such
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termination is due to the Grantee's permanent and total disability, in which
case such period of three (3) months shall be extended to one (1) year. In all
other respects, this Option shall terminate upon such termination of employment.
(b) DEATH OF GRANTEE. If the Grantee shall die during the term
of this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate law, shall have the right to exercise this Option,
but only for the number of shares as to which the Grantee was entitled to
exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such termination of employment.
4. NON-TRANSFERABLE. The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferable, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercised during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. ADJUSTMENTS AND CORPORATE REORGANIZATIONS. If the outstanding shares
of the class then subject to this Option are increased or decreased, or are
changed into or exchanged for a different number or kind of shares or
securities, as a result of one or more reorganizations, recapitalizations, stock
splits, reverse stock splits, stock dividends or the like, appropriate
adjustments shall be made in the number and/or kind of shares or securities for
which the unexercised portions of this Option may thereafter be exercised, all
without any change in the aggregate exercise price applicable to the unexercised
portions of this Option, but with a corresponding adjustment in the exercise
price per share or other unit. No fractional share of stock shall be issued
under this Option or in connection with any such adjustment. Such adjustments
shall be made by or under authority of the Company's Board of Directors whose
determinations as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to this Option are changed into
or exchanged for cash or property or securities not of the Company's issue, or
upon a sale of substantially all the property of the Company to, or the
acquisition of stock representing more than eighty percent (80%) of the voting
power of the stock of the Company then outstanding by another corporation or
person, this Option shall terminate, unless provision be made in writing in
connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of any options covering the stock
of a successor corporation, or a parent or subsidiary thereof, which appropriate
adjustments as to the number and kind of shares and prices, in which event this
Option shall continue in the manner and under the terms so provided. If this
Option shall terminate pursuant to the foregoing sentence, the Grantee shall
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have the right, at such time prior to the consummation of the transaction
causing such termination to exercise the unexercised portions of this Option.
6. MANNER OF EXERCISE. This Option may be exercised by the Grantee or
other person then entitled to exercise it by giving four (4) business days'
written notice of exercise to the Company specifying the number of shares to be
purchased and the total purchase price, accompanied by a check to the order of
the Company in payment of such price. If the Company is required to withhold on
account of any present or future tax imposed as a result of such exercise, the
notice of exercise shall be accompanied by a check to the order of the Company
in payment of the amount of such withholding.
7. ALTERNATIVE PAYMENT WITH STOCK. Notwithstanding the foregoing
provisions requiring payment by check, payment of such purchase price or any
portion thereof may be made with shares of stock of the same class as the shares
then subject to this Option, if shares of that class are then publicly traded
(as defined below), such shares to be credited toward such purchase price on the
valuation basis set forth below, in which event the stock certificates
evidencing the shares so to be used shall accompany the notice of exercise and
shall be duly endorsed or accompanied by duly executed stock powers to transfer
the same to the Company; provided, however, that such payment in stock instead
of cash shall not be effective and shall be rejected by the Company if (i) the
Company is then prohibited from purchasing or acquiring shares of the class of
its stock thus tendered to it, or (ii) the right or power of the person
exercising the Option to deliver such shares in payment of said purchase price
is subject to the prior interests of any other person (excepting the Company),
as indicated by legends upon the certificate(s) or as known to the Company. For
purposes of this paragraph: (a) "publicly traded" shares are those which are
listed or admitted to unlisted trading privileges on a national securities
exchange or as to which bid and offer quotations are reported in the automated
quotation system ("NASDAQ") operated by the National Association of Securities
Dealers, Inc. ("NASD") and (b) for credit toward the purchase price, shares so
surrendered shall be valued as of the day immediately preceding the delivery to
the Company of the certificate(s) evidencing such shares (or, if such day is not
a trading day in the U.S. securities markets, on the nearest preceding trading
day), on the basis of the closing price of stock of the class as reported with
respect to the market (or the composite of the markets, if more than one) in
which such shares are then traded or, if no such closing prices are reported,
the lowest independent offer quotation reported therefor in Level 2 of NASDAQ,
or, if no such quotations are reported, on the basis of the most nearly
comparable valuation method acceptable to the Company.
8. RIGHTS IN SHARES BEFORE ISSUANCE AND DELIVERY. No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.
9. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. By accepting this
Option, the Grantee represents and agrees for himself and his transferees by
will or the laws of descent and distribution that, unless a registration
statement under the Securities Act of 1933 is in effect as to shares purchased
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upon any exercise of this Option, (i) any and all shares so purchased shall be
acquired for his personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not with a view to
or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased
upon exercise of this Option shall be issued and delivered prior to the
admission of such shares to listing on notice of issuance on any stock exchange
on which shares of that class are then listed, nor unless and until, in the
opinion of counsel for the Company, such securities may be issued and delivered
without causing the Company to be in violation of or incur any liability under
any federal, state or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
10. EMPLOYMENT BY THE COMPANY. Nothing contained in this Option shall
be construed to confer upon Grantee any right to be continued in the employ of
the Company or any of its subsidiaries, or to limit the right of the Company or
any subsidiary to retire, request the resignation of or discharge Grantee as an
employee at any time, with or without cause.
11. STOCK OPTION PLAN. This Option is subject to, and the Company and
the Grantee agree to be bound by, all of the terms and conditions of any Plan
adopted by the Board of Directors and Shareholders for this Option to qualify
under a corporate Stock Purchase Plan Option or Incentive Stock Option as
defined in Internal Revenue Code sections 421, 422, 423, provided that no such
plan adopted by the Company shall deprive Grantee, without his consent, of this
Option or any of his rights hereunder. If all or any part of the Options shall
not qualify under any such future Plan adopted by the Company the Options shall
nevertheless be valid and carried into effect. The Board of Directors of the
Company or its Committee established for the purpose of adopting such a Plan is
vested with final authority to adopt, interpret and construe any such Plan. A
copy of any such Plan, and any future amendments thereto, shall be distributed
to the Grantee immediately upon adoption and be available for inspection during
business hours by the Grantee or other persons entitled to exercise this Option
at the Company's principal office.
12. RESTRICTED STOCK. Grantee agrees, recognizes, and acknowledges that
any stock issued to him pursuant to his exercise of this Option shall be subject
to the terms and conditions as may be issued by the Securities and Exchange
Commission in connection with future public offering of the stock of the
Company.
13. NOTICES. Any notice to be given to the Company shall be addressed
to the Company in care of its Secretary at its principal office, and any notice
to be given to the Grantee shall be addressed to him at the address given
beneath his signature hereto or at such other address as the Grantee may
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hereafter designate in writing to the Company. Any such notice shall be deemed
duly given when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified mail, and deposited, postage and registry or
certification fee prepaid, in a post office or branch post office regularly
maintained by the United States Postal Service.
IN WITNESS WHEREOF, the Company has granted this Option on the Date of
Grant specified above.
SPACEDEV, INC.
BY: /s/ James Benson
-------------------------------------
James Benson, Chief Executive Officer
ACCEPTED AND AGREED:
GRANTEE:
- -------------------------------------
NAME
ADDRESS
Page 6
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
7th day of February, 1998, by and between Integrated Space Systems, Inc., a
California corporation (the "Company"), and Philip Smith ("Employee").
RECITALS
A. The Company is principally engaged in the business of providing
engineering analysis, design, test support and field engineering for
aerospace-related projects.
B. Effective this date, SpaceDev, Inc., a Colorado corporation ("SPDV")
has acquired all of the issued and outstanding capital stock of the Company (the
"Acquisition"). In connection with and as a material condition to completion of
the Acquisition, certain shareholders and management employees of the Company,
including Employee, have agreed to enter into employment agreements with the
Company.
C. The Company desires to retain Employee as Chief Operating Officer of
the Company, and Employee desires to accept such employment on the terms and
conditions set forth herein.
NOW, THEREFORE, based upon the following covenants, conditions and
promises the parties hereto do hereby agree as follows:
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1. EMPLOYMENT AND DUTIES. Subject to the terms and conditions set forth
herein, the Company hereby employs Employee, and Employee hereby accepts such
employment with the Company, as the Chief Operating Officer of the Company, and
his duties shall be consistent with such positions.
2. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall commence on and as of the date hereof and shall continue
hereafter for a period of 36 months, subject to early termination as provided
for elsewhere in this Agreement. The "term" of this Agreement shall mean and
refer to such 36-month period (or any earlier termination thereof pursuant to
Section 5 hereof).
3. EXTENT OF SERVICE. During the term hereof, Employee agrees to and
shall devote his full time to the performance of his duties hereunder, it being
the intent of the parties hereto that Employee shall devote his best efforts to
furthering, promoting and developing the business, activities and interests of
the Company. Employee acknowledges that the "interests of the Company" include
the business, activities and interests of SPDV, its subsidiaries and affiliates,
and as a result, Employee may also be requested by the Chief Executive Officer
or Board of Directors of the Company to undertake various management
responsibilities on a full- or part-time basis for or on behalf of SPDV for all
or part of the term.
4. COMPENSATION. As compensation for the services which Employee is to
render hereunder, the Company shall pay Employee the following aggregate annual
salary for and with respect to each year (annual periods ending with the
anniversary date of the date of this Agreement)during the term hereof: $60,000
for the first year, $90,000 for the second year and $110,000 for the third year.
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Employee's salary during each of such years shall be paid in accordance with the
normal payroll practices of the Company. At the end of each year during the term
hereof, the Board of Directors of the Company may review the compensation of
Employee hereunder and if it, in its sole discretion, believes it to be
justified, may pay to Employee a cash bonus for and with respect to such year.
(a) The Company will provide Employee with such fringe
benefits as are within the Company's policy as approved by the Board of
Directors of the Company. The Company shall also reimburse Employee for expenses
reasonably incurred by him in carrying out his duties hereunder, including
travel, lodging and reasonable entertainment expenses, promptly after
presentation to the Company of receipts or other documents evidencing the
incurrence of such expenses providing that such expenses have been approved in
advance by the Chief Executive Officer of the Company or are otherwise
consistent with policy on such matters as established by the Company's Board of
Directors.
(b) The Company shall cause SPDV to grant to Employee options
to purchase shares of common stock of SPDV in the amounts and upon the terms set
forth in Exhibit A attached hereto and incorporated herein by this reference.
5. TERMINATION OF EMPLOYMENT FOR GOOD CAUSE. The Company may terminate
the employment of Employee for "good cause" by giving written notice thereof to
Employee. For the purposes of this Agreement, "good cause" shall mean only
Employee's (i) drug, alcohol or other substance abuse during regular business
hours or to such extent as to materially affect the performance of his duties
hereunder, (ii) commission of a crime directly related to his employment
hereunder, (iii) conviction of a felony involving moral turpitude, (iv)
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negligence, gross mismanagement or willful misconduct in the management of the
business and affairs of the Company or failure to perform such duties as may
reasonably be directed by the Board of Directors and as may be reasonably
consistent with the duties and obligations of Employee's office, or (v) breach
of any material provision of this Agreement. In the event the employment of the
Employee is terminated pursuant to this Section 5, the Company shall have no
further liability to Employee other than for compensation earned but not yet
paid. In the event the Company contends that it had good cause to terminate the
employment of Employee pursuant to clause (i), (ii) or (iii) of this Section 5,
the Company shall specify in said written notice the effective date of
termination of Employee's employment, which date may, in the Company's sole
discretion, be the date of such notice. In the event the Company contends that
it has good cause to terminate the employment of Employee pursuant to clause
(iv) or (v) of this Section 5, the Company shall set forth in said written
notice reasonable details of Employee's acts or conduct which the Company
alleges constitutes a willful and gross mismanagement of business and affairs of
the Company or a breach of material provision of this Agreement, as the case may
be. The written notice shall also specify what, if anything, Employee could do
to cure or eliminate the alleged "good cause" for termination if the matter is
susceptible of cure. If Employee performs the required services or modifies
Employee's performance to correct the matters complained of within sixty (60)
days of receipt of the notice, Employee's breach will be deemed cured. However,
if the nature of the matters complained of are such that more than sixty (60)
days are reasonably required to correct the matters complained of, then his
breach will be deemed cured if he commences to correct such matters within the
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sixty (60) day period and thereafter diligently prosecutes such correction to
completion, but not to exceed one additional sixty (60) day period. If Employee
does not modify his performance to correct or commence to correct the matter
complained of within the sixty (60) day period or any extension thereof, the
Company shall have the right to terminate this Agreement at the end of such (60)
day period or any extension thereof. It is understood that Employee's
performance hereunder shall not be deemed unsatisfactory solely on the basis of
any economic performance of the Company because such performance will depend in
part on a variety of factors over which Employee has little control.
6. TERMINATION BY DEATH OR INCAPACITY. The Company may terminate the
employment of Employee by written notice to Employee if, during the term of this
Agreement, Employee shall become incapable of fulfilling his obligations
hereunder because of injury or physical or mental illness which shall exist or
may reasonably be anticipated to exist for a period of six (6) consecutive
months or for an aggregate of six (6) months during the term hereof. The death
of Employee shall automatically terminate the term of Employee's employment. In
the event the employment of Employee is terminated by Employee's death or by the
Company pursuant to this Section 6 because of injury or physical or mental
illness, the Company shall pay Employee, or Employee's heir(s) (in the event of
death), all compensation of Employee earned but not yet paid up to and through
the day upon which Employee's death occurs or this Agreement is terminated by
the Company due to Employee's incapacity, as applicable, or in accordance with
any written policy applicable to other executives of the Company in effect at
the time of Employee's death or incapacity, if more favorable.
-5-
<PAGE>
7. TERMINATION WITHOUT CAUSE. The Company may terminate the employment
of Employee without cause at any time in which event Employee and the Company
agree that the sole amounts due and owing to Employee hereunder (whether as
"severance pay" or otherwise) shall be $100,000, $70,000 or $60,000 for a
termination of employment without cause during year one, year two or year three
of the term, respectively.
8. NONCOMPETITION; NONSOLICITATION; CONFIDENTIAL INFORMATION.
(a) Employee covenants and agrees that, during the term he will not,
directly or indirectly, whether individually or as an officer, director,
employee or consultant, become employed by, or become a partner in or a
stockholder owning more than one percent (1%) of, any business which is engaged
in the business of providing aerospace engineering services and other related
consulting or any other business which is similar to or competitive with the
business now or at any time during the term of this agreement being conducted by
SPDV and/or the Company.
(b) Employee acknowledges that it is the policy of the Company (for
purposes of this subsection 8 (b) the term "Company" shall also, refer to SPDV,
any subsidiary, parent or other affiliate of the Company or of SPDV) to maintain
as secret and confidential all valuable and unique information heretofore or
hereafter acquired, developed or used by the Company relating to the business,
operations, employees and/or clients of the Company, including SPDV, which gives
the Company a competitive advantage in its industry, including, without
limitation: information about net costs, profits, markets, suppliers,
technology, key personnel and consultants, pricing policies, operational
methods, designs, technical and systems processes, relationships with
universities, the National Aeronautics and Space Administration and other
-6-
<PAGE>
governmental agencies, and other business affairs and methods and other
information not readily available to the public, plans for future developments,
operating manuals, financial statements, forecasts and operating data and
business plans (all such information is hereinafter referred to as "Confidential
Information"). Employee recognizes and acknowledges that the services heretofore
performed by Employee and those to be performed by Employee are special and
unique, and that by reason of his duties, he has acquired and will acquire
Confidential Information. Employee recognizes that all such Confidential
Information is the property of the Company. In consideration of the Company's
entering into this Agreement, Employee agrees that: (i) Employee shall never,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained during his employment by the Company (whether
obtained prior to, during or after the term of this Agreement) without the prior
written consent of the Company's Board of Directors; and (ii) during the term of
this Agreement, he shall exercise all due and diligent precautions to protect
the integrity of the Company's designs, processes, systems, know-how,
statistical data and compilations, agreements, contracts, manuals or other
documents embodying any Confidential Information. Upon termination of Employee's
employment by the Company and at any other time upon request of the Company, he
shall return all such documents (and copies thereof) embodying any Confidential
Information in his possession or control. Employee agrees that the provisions of
this subparagraph (b) are reasonable and necessary to protect the proprietary
rights of the Company in the Confidential Information and its trade secrets,
goodwill and reputation. The provisions of this subparagraph (b) shall not apply
-7-
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to Confidential Information (i) which is known generally to the public, (ii)
which otherwise comes into the public domain without the fault of Employee, or
(iii) which Employee obtains from sources other than the Company.
(c) For a period of 36 months after the termination of this Agreement
for any reason other than a termination by the Company under Section 7 (or for
such a lesser period of time as may be determined by a court of law or equity to
be a reasonable limitation on Employee), Employee shall not: (i) solicit,
directly or indirectly, any director, officer or employee of the Company to
discontinue that individual's status of employment with the Company; (ii) become
employed in any activity similar to or competitive with the business of the
Company or of SPDV being conducted at the time of termination of this Agreement
anywhere in the world; or (iii) solicit or cause or authorize, directly or
indirectly to be solicited, for or on behalf of himself or any third party, from
customers, clients, consultants or other providers of goods and services (all of
whom are collectively referred to as "Company Clients") of the Company or of
SPDV, any business which is competitive with the Company or with SPDV anywhere
in the world. "Clients" shall also include persons whom or entities which the
Company has identified and targeted (at or prior to the date of termination of
this Agreement) as intended customers or clients of SPDV
(d) In the event of a termination by the Company under Section 7 of
this agreement clauses (ii) and (iii) of subsection 8 (c) above shall be
adjusted as follows:
(1) Employee shall not, for a period of 18 months following
such termination: (i) become an officer or director, or maintain an ownership
interest of more than one percent in any company that is directly competitive
-8-
<PAGE>
with the business of SPDV; or (ii) be employed by or consult to any business
which is directly competitive with SPDV anywhere in the world. Nothing set forth
herein shall prevent Employee following termination of this Agreement from
securing any engineering related employment at any aerospace or other company,
or division thereof, which is not competitive with the business of SPDV.
(2) Employee shall not, for a period of 24 months following
such termination solicit or cause or authorize directly or indirectly to be
solicited for or on behalf of himself or any third party any customer of SPDV to
provide to that customer goods or services directly competitive with the goods
or services provided to that customer by SpaceDev. Nothing set forth herein
shall prevent Employee following termination of this Agreement from securing any
engineering related employment at any aerospace or other company, or division
thereof, which is not competitive with or providing services to SPDV.
(e) If the covenants contained in this Section 8 are violated, or
threatened to be violated, Employee acknowledges and agrees that such violation
or threatened violation will cause irreparable damage to the Company and SPDV,
that the remedy at law of the Company or of SPDV will be inadequate and that the
Company and SPDV shall, in addition to, but not in limitation of, any other
rights or remedies available at law or in equity, be entitled to temporary and
permanent injunctive relief and/or specific performance without the necessity of
proving actual damage.
(f) Employee acknowledges that the provisions of this Section 8 are
fair and equitable and are required in connection with the Acquisition and
continued employment hereunder. The parties hereto acknowledge that the
provisions of this Section 8 shall survive the termination of this Agreement.
-9-
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9. EMPLOYEE'S RIGHTS AND BENEFITS PERSONAL. Except as may herein
otherwise be specifically provided, the rights, benefits and obligations of
Employee under this Agreement are personal to Employee, and no such rights or
benefits shall be subject to voluntary or involuntary alienation, assignment or
transfer.
10. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior written or oral agreements,
representations, understandings and/or discussion between the parties relating
thereto. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party making the waiver.
11. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or three (3) business days after deposit in the United States mail, by
registered or certified mail (or air mail, if notice shall be sent outside the
United States), return receipt requested, postage prepaid, or two (2) days after
delivery to a nationally known air courier or delivery company, addressed to the
applicable party hereto at the address specified below (or as otherwise directed
in a notice given in accordance herewith):
If to the Company, to: Integrated Space Systems, Inc.
7940 Silverton Avenue, Suite 202
San Diego, California 92126
If to SPDV, to: SpaceDev, Inc.
P. O. Box 2121
Steamboat Springs, Colorado 80477
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<PAGE>
Attn: James W. Benson,
Chief Executive Officer
If to Employee, to: Philip Smith
8684 Somerset Avenue
San Diego, California 92123
12. EFFECT OF HEADINGS. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
13. ARBITRATION; ATTORNEYS' FEES. Any controversy or claim arising out
of or to this Agreement, or the breach hereof, shall be resolved by
JAMS/ENDispute in accord with its rules and regulations and judgment on the
award so rendered may be entered in any court having jurisdiction thereof. Any
such proceeding shall be had in the County of San Diego, State of California. If
any action or proceeding is brought to enforce any provisions of this Agreement,
the prevailing party shall be entitled to its costs and expenses in connection
therewith, including without limitation reasonable attorneys' fees.
14. INJUNCTIVE RELIEF. Employee hereby recognizes, acknowledges and
agrees that in the event of any breach by Employee of any of his covenants,
agreements, duties or obligations hereunder, the Company would suffer great and
irreparable harm, injury and damage, the Company would encounter extreme
difficulty in attempting to prove the actual amount of damages suffered by the
Company as a result of such breach, and the Company would not be reasonably or
adequately compensated by an award of damages in any action at law. Employee
therefore acknowledges and agrees that, in addition to any other remedy the
Company may have at law, in equity, by statute or otherwise, in the event of any
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breach by Employee of any of his covenants, agreements, duties or obligations
hereunder, the Company shall be entitled to seek and receive temporary,
preliminary and permanent injunctive and other equitable relief from any court
of competent jurisdiction to enforce any of the rights of the Company, or any of
the covenants, agreements, duties or obligations of Employee hereunder, and/or
otherwise to prevent the violation of any of the terms or provisions hereof, all
without the necessity of proving the amount of any actual damage to the Company
or any affiliate thereof resulting therefrom; PROVIDED, HOWEVER, that nothing
contained in this Section 14 shall be deemed or construed in any manner
whatsoever as a waiver by the Company of any of the rights which the Company may
have against Employee at law, in equity, by statute or otherwise arising out of,
in connection with or resulting from the breach by Employee of any of his
covenants, agreements, duties or obligations hereunder.
15. APPLICABLE LAW. The validity, interpretation and enforcement of
this Agreement shall be governed by the laws of the State of California except
that the Federal Arbitration Act shall govern any arbitration proceeding.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same Agreement.
17. SEVERABILITY. If any provision of this Agreement shall be declared
invalid, illegal and/or unenforceable, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
18. SUCCESSOR AND ASSIGNS. The provisions hereof shall inure to the
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benefit of, be binding upon, and be enforceable by the successors and assigns of
the Company.
19. ASSIGNMENT; SUCCESSORS; AFFILIATES. The Company may assign this
Agreement (or the interest of the Company herein) to any affiliate of the
Company or to any entity which is a party to a merger, reorganization, or
consolidation with the Company or to a subsidiary of the Company or to an entity
or entities acquiring substantially all of the assets of the Company or of any
division with respect to which Employee is providing services (providing any
such assignee assumes the Company's obligation under the Agreement). Employee
shall, if requested by the Company, perform Employee's services and duties, as
specified in this Agreement, to or for the benefit of any affiliate of the
Company, including, without limitation, any parent or subsidiary of the Company
or any other subsidiary of any parent of the Company. Upon such assignment,
acquisition, merger, consolidation, or reorganization, the term "Company" as
used herein shall be deemed to refer to such assignee or such successor entity.
Employee shall not have the right to assign Employee's interest in this
Agreement, any rights under this Agreement or any duties imposed under this
Agreement nor shall Employee (or Employee's spouse, heirs, beneficiaries,
administrators or executors) have the right to pledge, hypothecate or otherwise
encumber Employee's right to receive compensation hereunder without the consent
of the Company.
20. FURTHER ASSURANCES. The Company and Employee each agree to execute
and deliver any and all additional instruments and to perform any and all
additional acts deemed by either party to be necessary or proper to carry into
effect the terms, conditions and provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
EMPLOYEE: THE COMPANY:
INTEGRATED SPACE SYSTEMS, INC.,
a California corporation
- -----------------------------------
Philip Smith
By
-----------------------------------
Its President and Chief
Executive Officer
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STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
THE ISSUANCE AND TRANSFER OF THE STOCK REPRESENTED BY THIS OPTION IS SUBJECT TO
RESTRICTIONS. THIS OPTION HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF
THE HOLDER THAT THE STOCK WILL BE ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS OPTION NOR
THE SHARES ISSUABLE UPON THE EXERCISE OF THIS OPTION, HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS
- --------------------------------------------------------------------------------
SpaceDev, Inc. (the "Company"), desiring to afford an opportunity to the Grantee
named below to purchase certain shares of the Company's common stock, to provide
the Grantee with an added incentive as an employee of the Company, hereby grants
to Grantee, and the Grantee hereby accepts, an option to purchase the number of
such shares optioned as specified below (the "Option"), during the term ending
at midnight (prevailing local time at the Company's principal offices) on the
expiration date of this Option as specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions.
1. IDENTIFYING PROVISIONS. As used in this Option, the following
terms shall have the following respective meanings:
(a) Grantee: Philip E. Smith
(b) Date of Grant shall be February 7, 1998.
(c) Number of shares optioned, shall mean that number of
shares set forth in section 2 below.
(d) Each option exercise price per share shall be the sum
amount set forth next to each of the respective
Triggering Events as defined in section 2 below:
2. VESTING AND TERM OF OPTION. This Option is not exercisable in any
part until one (1) year after the Date of Grant, and then only upon achievement
of the Triggering Events set forth below:
(a) After the Company has constructed, completed and tested its first
spacecraft and certified that it is "ready to launch," the Option shall vest in
the Grantee to the extent of 20,000 shares optioned hereunder at an exercise
price of $1.50 per share;
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(b) When the Company has generated $750,000 in pretax profits in any
one fiscal year from customers and business developed from the Integrated Space
Systems' ("ISS") base of business and/or business developed from such base or
services, the Option shall vest in the Grantee to the extent of an additional
20,000 shares optioned hereunder at an exercise price of $ 2.00 per share;
(c) On the successful launch of the Company's first Spacecraft, the
Option shall vest in the Grantee to the extent of an additional 20,000 shares
optioned hereunder at an exercise price of $2.50 per share;
(d) On the successful completion of the rendezvous and completion of
the "Minimum Mission," as defined therefor, the Option shall vest in the Grantee
to the extent of an additional 20,000 shares optioned hereunder at an exercise
price of $3.00 per share;
(e) When the Company has achieved seventeen percent (17%) profit margin
(as determined by the Company's independent certified public accountants) for
two (2) consecutive fiscal years from customers or business developed from the
Integrated Space Systems' ("ISS") base of business and/or business developed
from such base or services (and not from any other business of the Company), the
Option shall vest in the Grantee to the extent of an additional 20,000 shares
optioned hereunder at an exercise price of $ 3.50 per share;
Upon the occurrence of any Triggering Event, subject to the other
provisions of this Option, Grantee may exercise this Option for all or any
portion of the number of shares optioned for which the Option is then vested.
Subject to the other provisions hereof, each Option shall have a total term of
seven (7) years from Date of Grant, and upon expiration of such seven (7) year
term, any Option not exercised in full shall expire and may thereafter no longer
be exercised.
3. RESTRICTIONS ON EXERCISE. The following additional restrictions
shall apply to the exercise of the Option:
(a) TERMINATION OF EMPLOYMENT. If the Grantee's employment by
the Company or any of its subsidiaries is terminated for any reason other than
death, only that portion of this Option exercisable at the date of such
termination of employment may thereafter be exercised, and it may not be
exercised more than three (3) months after such date of termination nor after
the expiration date of this Option, whichever date is sooner, unless such
termination is due to the Grantee's permanent and total disability, in which
case such period of three (3) months shall be extended to one (1) year. In all
other respects, this Option shall terminate upon such termination of employment.
(b) DEATH OF GRANTEE. If the Grantee shall die during the term
of this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate law, shall have the right to exercise this Option,
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<PAGE>
but only for the number of shares as to which the Grantee was entitled to
exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such termination of employment.
4. NON-TRANSFERABLE. The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferable, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercised during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. ADJUSTMENTS AND CORPORATE REORGANIZATIONS. If the outstanding shares
of the class then subject to this Option are increased or decreased, or are
changed into or exchanged for a different number or kind of shares or
securities, as a result of one or more reorganizations, recapitalizations, stock
splits, reverse stock splits, stock dividends or the like, appropriate
adjustments shall be made in the number and/or kind of shares or securities for
which the unexercised portions of this Option may thereafter be exercised, all
without any change in the aggregate exercise price applicable to the unexercised
portions of this Option, but with a corresponding adjustment in the exercise
price per share or other unit. No fractional share of stock shall be issued
under this Option or in connection with any such adjustment. Such adjustments
shall be made by or under authority of the Company's Board of Directors whose
determinations as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to this Option are changed into
or exchanged for cash or property or securities not of the Company's issue, or
upon a sale of substantially all the property of the Company to, or the
acquisition of stock representing more than eighty percent (80%) of the voting
power of the stock of the Company then outstanding by another corporation or
person, this Option shall terminate, unless provision be made in writing in
connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of any options covering the stock
of a successor corporation, or a parent or subsidiary thereof, which appropriate
adjustments as to the number and kind of shares and prices, in which event this
Option shall continue in the manner and under the terms so provided. If this
Option shall terminate pursuant to the foregoing sentence, the Grantee shall
have the right, at such time prior to the consummation of the transaction
causing such termination to exercise the unexercised portions of this Option.
6. MANNER OF EXERCISE. This Option may be exercised by the Grantee or
other person then entitled to exercise it by giving four (4) business days'
written notice of exercise to the Company specifying the number of shares to be
purchased and the total purchase price, accompanied by a check to the order of
the Company in payment of such price. If the Company is required to withhold on
Page 3
<PAGE>
account of any present or future tax imposed as a result of such exercise, the
notice of exercise shall be accompanied by a check to the order of the Company
in payment of the amount of such withholding.
7. ALTERNATIVE PAYMENT WITH STOCK. Notwithstanding the foregoing
provisions requiring payment by check, payment of such purchase price or any
portion thereof may be made with shares of stock of the same class as the shares
then subject to this Option, if shares of that class are then publicly traded
(as defined below), such shares to be credited toward such purchase price on the
valuation basis set forth below, in which event the stock certificates
evidencing the shares so to be used shall accompany the notice of exercise and
shall be duly endorsed or accompanied by duly executed stock powers to transfer
the same to the Company; provided, however, that such payment in stock instead
of cash shall not be effective and shall be rejected by the Company if (i) the
Company is then prohibited from purchasing or acquiring shares of the class of
its stock thus tendered to it, or (ii) the right or power of the person
exercising the Option to deliver such shares in payment of said purchase price
is subject to the prior interests of any other person (excepting the Company),
as indicated by legends upon the certificate(s) or as known to the Company. For
purposes of this paragraph: (a) "publicly traded" shares are those which are
listed or admitted to unlisted trading privileges on a national securities
exchange or as to which bid and offer quotations are reported in the automated
quotation system ("NASDAQ") operated by the National Association of Securities
Dealers, Inc. ("NASD") and (b) for credit toward the purchase price, shares so
surrendered shall be valued as of the day immediately preceding the delivery to
the Company of the certificate(s) evidencing such shares (or, if such day is not
a trading day in the U.S. securities markets, on the nearest preceding trading
day), on the basis of the closing price of stock of the class as reported with
respect to the market (or the composite of the markets, if more than one) in
which such shares are then traded or, if no such closing prices are reported,
the lowest independent offer quotation reported therefor in Level 2 of NASDAQ,
or, if no such quotations are reported, on the basis of the most nearly
comparable valuation method acceptable to the Company.
8. RIGHTS IN SHARES BEFORE ISSUANCE AND DELIVERY. No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.
9. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. By accepting this
Option, the Grantee represents and agrees for himself and his transferees by
will or the laws of descent and distribution that, unless a registration
statement under the Securities Act of 1933 is in effect as to shares purchased
upon any exercise of this Option, (i) any and all shares so purchased shall be
acquired for his personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not with a view to
or for sale in connection with any distribution.
Page 4
<PAGE>
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any
federal, state or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
10. EMPLOYMENT BY THE COMPANY. Nothing contained in this Option shall
be construed to confer upon Grantee any right to be continued in the employ of
the Company or any of its subsidiaries, or to limit the right of the Company or
any subsidiary to retire, request the resignation of or discharge Grantee as an
employee at any time, with or without cause.
11. STOCK OPTION PLAN. This Option is subject to, and the Company and
the Grantee agree to be bound by, all of the terms and conditions of any Plan
adopted by the Board of Directors and Shareholders for this Option to qualify
under a corporate Stock Purchase Plan Option or Incentive Stock Option as
defined in Internal Revenue Code sections 421, 422, 423, provided that no such
plan adopted by the Company shall deprive Grantee, without his consent, of this
Option or any of his rights hereunder. If all or any part of the Options shall
not qualify under any such future Plan adopted by the Company the Options shall
nevertheless be valid and carried into effect. The Board of Directors of the
Company or its Committee established for the purpose of adopting such a Plan is
vested with final authority to adopt, interpret and construe any such Plan. A
copy of any such Plan, and any future amendments thereto, shall be distributed
to the Grantee immediately upon adoption and be available for inspection during
business hours by the Grantee or other persons entitled to exercise this Option
at the Company's principal office.
12. RESTRICTED STOCK. Grantee agrees, recognizes, and acknowledges that
any stock issued to him pursuant to his exercise of this Option shall be subject
to the terms and conditions as may be issued by the Securities and Exchange
Commission in connection with future public offering of the stock of the
Company.
13. NOTICES. Any notice to be given to the Company shall be addressed
to the Company in care of its Secretary at its principal office, and any notice
to be given to the Grantee shall be addressed to him at the address given
beneath his signature hereto or at such other address as the Grantee may
hereafter designate in writing to the Company. Any such notice shall be deemed
duly given when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified mail, and deposited, postage and registry or
certification fee prepaid, in a post office or branch post office regularly
maintained by the United States Postal Service.
Page 5
<PAGE>
IN WITNESS WHEREOF, the Company has granted this Option on the Date of
Grant specified above.
SpaceDev, Inc.
By: /s/ James Benson
-------------------------------------
James Benson, Chief Executive Officer
ACCEPTED AND AGREED:
GRANTEE:
- -----------------------------------
NAME
ADDRESS
Page 6
EMPLOYMENT AGREEMENT
This Agreement, dated as of ________________1998, is between SpaceDev Inc. a
Colorado Corporation ("the Company" or "SPDV"), with offices in Washington DC
and San Diego, California; and Jan A. King ("King").
WHEREAS
SPDV and King wish to enter into an employment relationship on the following
terms and conditions.
A. SPDV considers the services of King to be provided under this Agreement to be
unique, extraordinary, and/or of intellectual character.
B. SPDV has spent significant time, effort, and money to develop certain
Proprietary Information (as defined below), which SPDV considers vital to its
business and goodwill.
C. The Proprietary Information will necessarily be communicated to or acquired
by King in the course of his employment with SPDV, and SPDV wishes to hire King
only if, in doing so, it can protect its Proprietary Information and goodwill.
D. SPDV anticipates that certain Invention/Ideas (as defined below) will be
conceived, developed, or reduced to practice by King during the course of his
employment by SPDV.
E. SPDV wishes to hire King only if, in doing so, it can provide for the
disclosure, assignment, and protection of these Invention/Ideas as provided in
this Agreement.
ACCORDINGLY, the parties agree as follows:
1. Period of Employment.
(a) Basic Term. SPDV shall employ King to render services to SPDV in the
position and with the duties and responsibilities described in Section 2 for the
period (the "Period of Employment") commencing on the date of this Agreement
and, unless this agreement is extended by mutual written agreement, ending as
set forth in Section 4.
(b) Renewal. Subject to Section 4, King's employment will be renewed
automatically for additional one (1) year periods (without any action by
either party) on the Term Date and on each anniversary thereof, unless one
party gives to the other written notice thirty (30) days in advance of the
beginning of any one-year renewal period that the Period of Employment is
to be terminated. Either party may elect not to renew this Agreement with
or without cause, in which case this Section 1(b) shall govern King's
termination and not Section 4 (except for King's termination obligations
<PAGE>
set forth in Section 4(h), which shall remain in effect). Nothing stated
in this Agreement or represented orally or in writing to either party
shall create an obligation to renew this Agreement.
(c)
2. Position and Responsibilities.
(a) Position. King accepts employment with SPDV in the position of
Vice President - Space Engineering. As such, King will be
responsible for the following job functions, in addition to
those as assigned by the president:
1. The Vice President - Space Engineering will report
to the president of SpaceDev. The chief engineer(s) and their
staff will report to the Vice President - Space Engineering.
The Vice President - Space Engineering will be responsible for
hiring the technical staff for SpaceDev who will have the
responsibility to design and develop the space and ground
segments of the NEAP-1 system, and who may simultaneously be
given the title and responsibilities of Spacecraft Engineer
for the NEAP mission. Vice President - Space Engineering will
assist the marketing staff by evaluating customer instruments
and assuring their compatibility with the spacecraft and the
ground system elements. The Vice President - Space Engineering
will be responsible for presentations to new potential
customers, investors and due diligence committee
representatives; be responsible for the procurement of all
necessary government licenses associated with the use of the
radio spectrum, launch vehicles as well as other technical
documents as needed; the preparation of any FCC or NTIA
filing(s) that may be required and preparation of technical
documents necessary in the procurement of the launch vehicles
required for SpaceDev missions; assist in negotiations on
major contracts where technical input is required; protecting
and optimizing the use of the company's intellectual property
rights (IPR) which are developed/generated by the company,
it's consultants and/or contractors. As a necessary part of
these duties, the Vice President - Space Engineering will be
required to remain informed of current and emerging technology
in the small, low cost spacecraft field and be required to
institute suitable means of obtaining access to key
technologies for SpaceDev as they become available to enhance
performance, increase reliability and reduce cost of SpaceDev
space missions. Where applicable and as approved by the
president and the Board of Directors of SpaceDev the Vice
President - Space Engineering would implement IR&D activities
that will assure key technologies are available for SpaceDev
mission in a timely manner.
2. King shall devote reasonable efforts and full-time attention to the
performance of his duties. King shall be subject to the direction of SPDV, which
shall retain full control of the means and methods by which he performs the
above services and of the place(s) at which all services are rendered. King
<PAGE>
shall report to the President of SPDV. It is expected that King will be expected
to travel (within reason) if necessary or advisable in order to meet the
obligations of his position.
(a) Other Activity. Except with the prior written consent of SPDV, King
(during the Period of Employment) shall not (1) accept any other
employment; or (2) engage, directly or indirectly, in any other
business venture for pecuniary gain, which relates to SPDV's primary
business. This subsection shall not prohibit the participation by King
in any trade associations or groups formed purely for recreation or the
advancement of the group members career, education, know-how,
association with other group members or groups or other purpose where
group members are not compensated for their participation.
<PAGE>
(b) Representations. King represents and warrants (1) that he believes he
is fully qualified and competent to perform the responsibilities for
which he is being hired pursuant to the terms of this Agreement; and
(2) that King's execution of this Agreement, his employment with SPDV,
and the performance of his proposed duties under this Agreement shall
not violate any obligations he may have to any former employer, Public
Law or restriction due to his prior government service, including any
obligations with respect to proprietary or confidential information of
any other person or entity.
3. Compensation and Benefits.
(a) Salary. In consideration of the services to be rendered under this
Agreement, SPDV shall pay King One Hundred Thirty-two Thousand Dollars
($132,000) per year, payable semi-monthly, pursuant to the procedures regularly
established, and as they may be amended, by SPDV in its sole discretion, during
the Period of Employment.
(b) Corporate Stock. As additional consideration King shall be issued Common
Stock in SPDV as follows:
(1) 5,000 shares on execution of this agreement;
(2) 5000 shares per year commencing at the end of the second
anniversary of this agreement and each year thereafter of successfully completed
employment under the terms of this agreement. (e.g. The 5000 shares for the
second year will be issued at the end of the second year (July 2000) and
thereafter at the end of each twelve month term completed
(3) 10,000 shares upon the successful completion of the NEAP space
craft. Completion shall be deemed to have occurred for purposes of this section
when the spacecraft is built, tested and certified as ready for launch within
time, mass and fiscal budgets. For purposes of this section, King and SpaceDev
will agree in writing prior to the commencement of the NEAP space craft project
as to the time, mass and fiscal budgets which will be acceptable to both parties
for King to qualify for the issuance of shares under this subsection;
(4) 15,000 shares for the successful launch into cruise phase by the
Company of the NEAP space craft;
(5) 25,000 shares for the successful completion of the NEAP mission.
(c) All shares issued under subsections 3(b) may have a restriction on transfer
at the sole discretion of SPDV which shall not exceed one year; except that, if
the NASD requires a longer restriction in connection with any offering the
<PAGE>
Company makes in connection with a Registered Offering, the shares shall be
restricted as required by the NASD, any underwriter or the Company.
(d) With the exception of shares issued pursuant to Section 3(b)(1), the
issuance of all stock under this Section is conditioned on this agreement being
in full force and effect. In the event this agreement is terminated for any
reason all rights to receive the stock compensation set forth is subsections
3(b)(2) through 3(b)(5) shall terminate.
(e) THE COMMON STOCK TO BE ISSUED AS CONSIDERATION UNDER THIS AGREEMENT ARE
CLASSIFIED AS SECURITIES UNDER THE SECURITIES AND EXCHANGE ACT OF 1933 (ACT) AND
HAVE NOT BEEN QUALIFIED OR REGISTERED WITH THE COMMISSIONER OF CORPORATIONS OF
ANY STATE OR THE SECURITIES AND EXCHANGE COMMISSION (SEC). THE SALE OR TRANSFER
OF THOSE SECURITIES MAY BE UNLAWFUL UNLESS REGISTERED OR EXEMPT FROM
REGISTRATION UNDER REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. THE
COMPANY HAS NO PLANS AT THIS TIME TO REGISTER THE STOCK.
(f) Benefits. King shall be entitled to three weeks of vacation leave in
accordance with SPDV's standard policies. King shall receive, as additional
compensation: (1) a term life insurance policy payable to a beneficiary of his
election, at a value of two times his annual salary as set forth in subparagraph
3 (a) above; and, (2) a policy of disability insurance ("Policy") which pays a
sum on disability, (after the "waiting period" and for any "disability" as both
are defined in the Policy) equal to King's salary compensation as set forth in
subsection 3(a) above. As King becomes eligible therefor, King shall have the
right to participate in and to receive benefits from all present and future
benefit plans specified in SPDV's Employee Handbook and generally made available
to similarly situated employees of SPDV. The stock compensation set forth in
subsections 3(b) shall be in addition to any incentive stock option or other
stock compensation plan offered to all employees under a plan approved or
adopted by the Company. The amount and extent of benefits to which King is
entitled shall be governed by the specific benefit plan, as amended. King also
shall be entitled to any benefits or compensation tied to termination as
described in Section 4. Nothing stated in this Agreement shall prevent SPDV from
changing or eliminating any benefit, except for salary, stock, vacation period,
and insurances as provided in Section 3 of this Agreement, during the Period of
Employment as SPDV, in its sole discretion, may deem necessary or desirable. No
statement concerning benefits or compensation to which King is entitled shall
alter in any way the term of this Agreement, any renewal thereof, or its
termination. All compensation and comparable payments to be paid to King under
this Agreement shall be less withholdings required by law.
(g) Expenses. SPDV shall reimburse King for reasonable travel and other business
expenses incurred by King in the performance of his duties, in accordance with
SPDV's policies, as they may be amended in SPDV's sole discretion. Upon the
execution of this agreement SpaceDev will pay King a one time relocation
allowance of $5500.00.
<PAGE>
4. Termination of Employment
(a) By Death. The Period of Employment shall terminate automatically upon the
death of King. SPDV shall pay to and deliver to King's beneficiaries or estate,
as appropriate, any compensation and shares of stock then due and owing,
including payment for accrued unused vacation, if any. Thereafter, all
obligations of SPDV under this Agreement shall cease. Nothing in this Section
shall affect any entitlement of King's heirs to the benefits of any life
insurance plan or other applicable benefits.
(b) By Disability. If King, in the opinion of SPDV's physician or other medical
consultant has been or will be prevented from properly performing his duties
under this Agreement for more than sixty (60) days in any twelve month period as
a result of any physical or mental incapacity then, to the extent permitted by
law, SPDV may terminate the Period of Employment upon two (2) weeks' advance
written notice. SPDV shall pay and deliver to King all compensation and shares
of stock to which he is entitled up through the last business day of the notice
period; thereafter, all obligations of SPDV under this Agreement shall cease.
Nothing in this Section shall affect King's rights under any applicable SPDV
corporate disability plan, if one exists at the time of Kings' termination.
(c) By Employer Not For Cause. At any time, SPDV may terminate King for any
reason, with or without cause, by providing King thirty (30) days' advance
written notice. SPDV shall have the option, in its complete discretion, to
terminate King at any time prior to the end of such notice period, provided SPDV
pays and delivers to King all compensation and shares of stock due and owing
through the last day actually worked, plus an amount equal to the base salary
and shares of stock under Section 3 King would have earned through the balance
of the above notice period; thereafter, all of SPDV's obligations under this
Agreement shall cease. SPDV may dismiss King without cause notwithstanding
anything to the contrary contained in or arising from any statements, policies,
or practices of SPDV relating to the employment, discipline, or termination of
its employees.
(d) By Employer For Cause. At any time, and without prior notice, SPDV may
terminate King for Cause (as defined below). SPDV shall pay and deliver to King
all compensation and shares of stock then due and owing; thereafter, all of
SPDV's obligations under this Agreement shall cease. Termination shall be for
"Cause" if King: (1) acts in bad faith and to the detriment of SPDV; (2) refuses
or fails to act in accordance with any specific appropriate direction or order
of SPDV; (3) exhibits in regard to his employment unfitness or unavailability
for service, misconduct, dishonesty, habitual neglect, or incompetence; (4) is
convicted of a crime. If termination is due to King's disability, Section 4(b)
above shall control, and not this subsection on termination for Cause.
<PAGE>
(e) By Employee Not for Cause. At any time, King may terminate his employment
for any reason, with or without cause, by providing SPDV thirty (30) days'
advance written notice. SPDV shall have the option, in its complete discretion,
to make King's termination effective at any time prior to the end of such notice
period, provided SPDV pays and delivers to King all compensation, including
stock earned under Section 3, due and owing through the last day actually
worked, plus an amount equal to the base salary King would have earned through
the balance of the above notice period, not to exceed thirty (30) days;
thereafter, all of SPDV's obligations under this Agreement shall cease.
(f) By Employee for Good Reason. King may terminate, without liability, the
Period of Employment for Good Reason (as defined below), provided King gives
SPDV thirty (30) days' advance written notice of the reason for termination and
his intent to terminate this Agreement. So long as the reason is not SPDV's
failure to pay the salary due under subsection 3 (a) above or failure to issue
the stock pursuant to subsection 3(b) above. SPDV shall have an opportunity
during the 30 day notice period to correct the condition constituting Good
Reason. If the condition is remedied within this period, King's notice to
terminate shall be rescinded automatically; if not remedied, termination shall
become effective upon expiration of the above notice period. King shall have the
right to terminate this agreement with 48 hours notice to SPDV in the event SPDV
fails to pay the consideration due under subsections 3(a) or 3(b) above. In any
event of termination under this subsection SPDV shall pay King all compensation
due and owing through the last day actually worked, plus a lump-sum severance
payment equal to one (1) month base salary, which payments shall be in lieu of
any damages under this Agreement for any alleged breach. The parties agree that
at the time of the making of this agreement the damages which King may suffer as
a result of the Good Reason not being cured by SPDV are speculative, unknown and
difficult or impossible to determine. They agree at this time the one months
severance pay is a reasonable estimate at the time this contract is made to
compensate King as Liquidated Damages for all damages which King would suffer as
a result of a breach of this agreement. After making such payment of one months
severance pay, all of SPDV's obligations under this Agreement, and all payment
obligations of the Company shall cease. SPDV shall also have the option, in its
complete discretion, to make King's termination effective at any time prior to
the end of the notice period, provided that SPDV pays King all compensation due
and owing through the balance of the notice period (not to exceed thirty (30)
days), in addition to the payment of six (6) months' then current base salary.
King shall be entitled to exercise his right to terminate this Agreement for
Good Reason only if he gives the required notice not more than ten (10) days
after the occurrence of the event that is the basis for the Good Reason.
Termination shall be for "Good Reason" if: (1) there is a material and adverse
change in King's position, duties, responsibilities, or status with SPDV; (2)
there is a reduction in King's salary then in effect, other than a reduction
comparable to reductions generally applicable to similarly situated employees of
<PAGE>
SPDV; (3) there is a material reduction in King's benefits, other than a
reduction comparable to reductions generally applicable to similarly situated
employees of SPDV; or (4) SPDV materially breaches this Agreement. King shall
not be entitled to terminate this Agreement for Good Reason if an event occurs
that would otherwise constitute Good Reason, except that it results from a
change in SPDV's status as defined in Section 4(g).
(g) Change in Employer Status. To the extent permitted by law, SPDV, in its sole
discretion, may terminate the Period of Employment (in which case all of SPDV's
obligations under this Agreement shall cease after payment of all compensation
due and owing) upon any formal action of SPDV's management to terminate SPDV's
existence or otherwise wind up its affairs, to sell all or substantially all of
its assets, or to merge with or into another entity.
(h) Termination Obligations.
(1) King agrees that all property, including, without limitation, all
equipment, tangible Proprietary Information (as defined below), documents,
books, records, reports, notes, contracts, lists, computer disks (and other
computer-generated files and data), and copies thereof, created on any medium
and furnished to, obtained by, or prepared by King in the course of or incident
to his employment, belongs to SPDV and shall be returned promptly to SPDV upon
termination of the Period of Employment.
(2) All benefits to which King is otherwise entitled shall cease upon
King's termination, unless explicitly continued either under this Agreement or
under any specific written policy or benefit plan of SPDV.
(3) Upon termination of the Period of Employment, King shall be deemed
to also be terminated from all offices and directorships then held with SPDV or
any Affiliate.
(4) The representations and warranties contained in this Agreement,
SPDV's responsibilities under subsection 3(a) and 3(b) to pay salary and issue
stock and, King's obligations under this Section 4(h) on Termination
Obligations, Section 5 on Proprietary Information, and Section 6 on Inventions
and Ideas shall survive the termination of the Period of Employment and the
expiration of this Agreement.
(5) Following any termination of the Period of Employment, King shall
fully cooperate with SPDV in all matters relating to the winding up of pending
work on behalf of SPDV and the orderly transfer of work to other employees of
SPDV. At the Company's expense, King shall also cooperate in the defense of any
action brought by any third party against SPDV that relates in any way to King's
acts or omissions while employed by SPDV.
(i) SPDV agrees to provide King indemnify as provided for in California
Corporations Code section 317 against any action brought by a third party that
relates to King's duties as described above in subsection 2 (a).
<PAGE>
5. Proprietary Information.
(a) Defined. "Proprietary Information" is all information and any idea in
whatever form, tangible or intangible, pertaining in any manner to the business
of SPDV, or any Affiliate, or its employees, clients, consultants, or business
associates, which was produced by any employee of SPDV in the course of his or
her employment or otherwise produced or acquired by or on behalf of SPDV.
Without limiting the foregoing definition, Proprietary Information and
Proprietary Information shall include, but not be limited to: (1) formulas,
teaching and development techniques, processes, trade secrets, computer
programs, electronic codes, inventions, improvements, and research projects; (2)
information about costs, profits, markets, sales, and lists of customers or
clients; (3) business, marketing, and strategic plans; and (4) employee
personnel files and compensation information. King should consult any SPDV
procedures instituted to identify and protect certain types of Proprietary
Information, which are considered by SPDV to be safeguards in addition to the
protection provided by this Agreement. Nothing contained in those procedures or
in this Agreement is intended to limit the effect of the other.
Proprietary information does not include:
a) Any information disseminated to the public by the Company or
which becomes part of the public domain through no wrongful
act of King.
b) Any information King knew prior to providing any consulting
services to SPDV, which are protected by a separate
non-disclosure agreement, currently in effect.
c) Any information received by King without any wrong doing from
someone outside the Company who obtained that information in a
lawful manner and who does not have any obligation to keep the
information confidential or proprietary.
(b) General Restrictions on Use. During the Period of Employment, King shall use
Proprietary Information, and shall disclose Proprietary Information, only for
the benefit of SPDV and as is necessary to carry out his responsibilities under
this Agreement. Following termination, King shall neither, directly or
indirectly, use any Proprietary Information nor disclose any Proprietary
Information, except as expressly and specifically authorized in writing by SPDV
for a period of three years after termination. The publication of any
Proprietary Information through literature or speeches must be approved in
advance in writing by SPDV.
(c) Location and Reproduction. King shall maintain at his work station and/or
any other place under his control only such Proprietary Information as he has a
current "need to know." King shall return to the appropriate person or location
or otherwise properly dispose of Proprietary Information once that need to know
no longer exists. King shall not make copies of or otherwise reproduce
<PAGE>
Proprietary Information unless there is a legitimate business need for
reproduction.
(d) Prior Actions and Knowledge. King represents and warrants that from the time
of his first contact with SPDV, he has held in strict confidence all Proprietary
Information and has not disclosed any Proprietary Information, directly or
indirectly, to anyone outside of SPDV, or used, copied, published, or summarized
any Proprietary Information, except to the extent otherwise permitted in this
Agreement.
(e) Third-Party Information. King acknowledges that SPDV has received and in the
future will receive from third parties their Proprietary information subject to
a duty on SPDV's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. King agrees that he owes SPDV and such
third parties, during the Period of Employment and thereafter, a duty to hold
all such Proprietary information in the strictest confidence and not to disclose
or use it except as necessary to perform his obligations hereunder and as is
consistent with SPDV's agreement with such third parties.
(f) Competitive Activity. King acknowledges that the pursuit of the activities
forbidden by this subsection would necessarily involve the use or disclosure of
Proprietary Information in breach of the preceding subsections, but that proof
of such a breach would be extremely difficult. To forestall such disclosure,
use, and breach, and in consideration of the employment under this Agreement,
King agrees that for a period of one (1) year after termination of the Period of
Employment, he shall not, directly or indirectly, (1) divert or attempt to
divert from SPDV (or any Affiliate) any business of any kind in which it is
engaged, including, without limitation, the solicitation of or interference with
any of its customers; (2) employ or solicit for employment any person currently
employed by SPDV (or any subsidiary of SPDV); or (3) engage in any business
activity that is or may be competitive with SPDV (or any subsidiary of SPDV) in
any state where SPDV conducts its business, unless King can prove that any
action taken in contravention of this subsection was done without the use in any
way of Proprietary Information.
6. Inventions and Ideas.
(a) Defined; Statutory Notice. The term "Invention/Idea" includes any and all
ideas, processes, trademarks, service marks, inventions, technology, computer
hardware or software, original works of authorship, designs, formulas,
discoveries, patents, copyrights, products, and all improvements, know-how,
rights, and claims related to the foregoing, that are conceived, developed, or
reduced to practice by King (alone or with others), during the Period of
Employment, except to the extent that California Labor Code Section 2870
lawfully prohibits the assignment of rights in such intellectual property.
<PAGE>
King acknowledges that he understands that this definition includes only those
rights that may be lawfully assigned pursuant to California Labor Code Section
2870, which provides:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable."
Nothing in this Agreement is intended to expand the scope of protection provided
King by Sections 2870 through 2872 of the California Labor Code.
(c) Disclosure. King agrees to maintain adequate and current written records on
the development of all Invention/Ideas and to disclose promptly to SPDV all
Invention/Ideas and relevant records, which records will remain the sole
property of SPDV. King further agrees that all information and records
pertaining to any ideas, processes, trademarks, service marks, inventions,
technology, computer hardware or software, original works of authorship,
designs, formulas, discoveries, patents, copyrights, products, and all
improvements, know-how, rights, and claims related to the foregoing
("Intellectual Property"), that King does not believe to be an Invention/Idea,
but that is conceived, developed, or reduced to practice by King (alone or with
others) during the Period of Employment (or during the post-employment period
set forth in Section 6(e) below), shall be disclosed promptly to SPDV (such
disclosure to be received in confidence). SPDV shall examine such information to
determine if in fact the Intellectual Property is an Invention/Idea subject to
this Agreement.
(d) Assignment. King agrees to assign to SPDV his entire right, title, and
interest (throughout the United States and in all foreign countries), free and
clear of all liens and encumbrances, in and to each Invention/Idea, which shall
be the sole property of SPDV, whether or not patentable. In the event any
Invention/Idea is deemed by SPDV to be patentable or otherwise registrable, King
shall assist SPDV (at its expense) in obtaining letters patent or other
applicable registrations thereon and shall execute all documents and do all
other things necessary or proper thereto (including testifying at SPDV's
<PAGE>
expense) and to vest SPDV, or any entity or person specified by SPDV, with full
and perfect title thereto or interest therein. At SPDV's expense, King shall
also take any action necessary or advisable in connection with any
continuations, renewals, or reissues thereof or in any related proceedings or
litigation. Should SPDV be unable to secure King's signature on any document
necessary to apply for, prosecute, obtain, or enforce any patent, copyright, or
other right or protection relating to any Invention/Idea, whether due to King's
mental or physical incapacity or any other cause, King irrevocably designates
and appoints SPDV and each of its duly authorized officers and agents as King's
agent and attorney in fact, to act for and in King's behalf and stead and to
execute and file any such document, and to do all other lawfully permitted acts
to further the prosecution, issuance, and enforcement of patents, copyrights, or
other rights or protections with the same force and effect as if executed,
delivered, and/or done by King.
(e) Exclusions. Except as described in Exhibit A1 attached to this Agreement, to
the best of King's knowledge, there is no existing contract in conflict with
this Agreement and there is no contract to assign any Intellectual Property that
is now in existence between King and any other person or entity.
(f) Post-Termination Period. Because of the difficulty of establishing when any
Intellectual Property is first conceived or developed by King, or whether it
results from access to Proprietary Information or SPDV's equipment, supplies,
facilities, or data, King agrees that any Intellectual Property shall be
presumed to be an Invention/Idea, if reduced to practice by King or with the aid
of King within one (1) year after termination of the Period of Employment. King
can rebut the above presumption if he proves that the Intellectual Property (1)
was developed entirely on King's own time without using SPDV's equipment,
supplies, facilities, or trade secret information; (2) was not conceived or
reduced to practice during the Period of Employment, or, if conceived or reduced
to practice during this period, did not, at the time of conception or reduction
to practice, relate to SPDV's business or actual or demonstrably anticipated
research or development; and (iii) did not result from any work performed by
King for SPDV.
7. Arbitration.
(a) Arbitrable Claims. Disputes between King (and his attorneys, successors, and
assigns) and SPDV (and its Affiliates, shareholders, directors, officers,
employees, agents, successors, attorneys, and assigns) relating in any manner
whatsoever to the employment or termination of King, with the exception of a
breach by King of any responsibility under Section 5, 6 or 15 of this agreement,
but including, without limitation, all disputes regarding the duties of the
parties arising under this Agreement, ("Arbitrable Claims") shall be resolved by
arbitration. All persons and entities specified in the preceding sentence (other
- ---------------
1 Exhibit A is included as a separate document, forwarded with these
modifications to the Employment Agreement
<PAGE>
than SPDV and King) shall be considered third-party beneficiaries of the rights
and obligations created by this Section on Arbitration. Arbitrable Claims shall
include, but are not limited to, contract (express or implied) and tort claims
of all kinds, as well as all claims based on any federal, state, or local law,
statute, or regulation, excepting only claims under applicable workers'
compensation law and unemployment insurance claims. Arbitration shall be final
and binding upon the parties and shall be the exclusive remedy for all
Arbitrable Claims, except that SPDV may, at its option, seek injunctive relief
and damages in court of law or equity for any breach of Sections 5 and 6, or
under the provisions of Section 15 of this Agreement. Subject to the foregoing
sentence, THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN
REGARD TO ARBITRABLE CLAIMS.
(b) Procedure. Arbitration of Arbitrable Claims shall be in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association
("AAA Employment Rules"), except as provided otherwise in this Agreement. Prior
to resorting to arbitration, the complaining party must first exhaust the
procedures specified in any SPDV Employment Manual. Arbitration shall be
initiated by providing written notice to the other party with a statement of the
claim(s) asserted, the facts upon which the claim(s) are based, and the remedy
sought. This notice shall be provided to the other party within six (6) months
of the acts or omissions complained of. Any claim not initiated within this
limitation period shall be null and void. EACH PARTY WAIVES ALL RIGHTS UNDER
STATUTES OF LIMITATIONS OF DIFFERENT DURATION. In any arbitration, the burden of
proof shall be allocated as provided by applicable law. Either party may bring
an action in court to compel arbitration under this Agreement and to enforce an
arbitration award. Otherwise, neither party shall initiate or prosecute any
lawsuit or administrative action in any way related to any Arbitrable Claim. All
arbitration hearings under this Agreement shall be conducted in San Diego,
California. The provisions of California Code of Civil Procedure section 1280
et. seq. shall govern the interpretation and enforcement of this Section 7.
(c) Arbitrator Selection and Authority. All disputes involving Arbitrable Claims
shall be decided by a single arbitrator. The arbitrator shall be selected by
mutual agreement of the parties within thirty (30) days of the effective date of
the notice initiating the arbitration. If the parties cannot agree on an
arbitrator, then the complaining party shall notify the AAA and request
selection of an arbitrator in accordance with the AAA Employment Rules. The
arbitrator shall have the authority to award equitable relief, damages, costs,
and fees as provided by law for the particular claim(s) asserted. The fees of
the arbitrator shall be split between both parties equally. The arbitrator shall
have exclusive authority to resolve all Arbitrable Claims, including, but not
limited to, any claim that all or any part of this Agreement is void or
unenforceable.
(d) Confidentiality. All proceedings and all documents prepared in connection
with any Arbitrable Claim shall be confidential and, unless otherwise required
by law, the subject matter thereof shall not be disclosed to any person other
<PAGE>
than the parties to the proceedings, their counsel, witnesses and experts, the
arbitrator, and, if involved, the court and court staff. All documents filed
with the arbitrator or with a court shall be filed under seal. The parties shall
stipulate to all arbitration and court orders necessary to effectuate fully the
provisions of this subsection concerning confidentiality.
(e) Continuing Obligations. The rights and obligations of King and SPDV set
forth in this Section on Arbitration shall survive the termination of King's
employment and the expiration of this Agreement.
8. Notices. Any notice under this Agreement must be in writing and shall be
effective upon delivery by hand, upon facsimile transmission to the number
provided below (if one is provided), or three (3) business days after deposit in
the United States mails, postage prepaid, certified or registered, and addressed
to SPDV or to King at the corresponding address below. King shall be obligated
to notify SPDV in writing of any change in his address. Notice of change of
address shall be effective only when done in accordance with this Section.
SPDV's Notice Address:
SpaceDev Inc.
Attn: President
7940 Silverton Ave. Suite 202
San Diego, California 92126
King's Notice Address:
Jan A. King
8444 Capricorn Way, Apt. 69
San Diego, California 92126
9. Action by SPDV. All actions required or permitted to be taken under this
Agreement by SPDV, including, without limitation, exercise of discretion,
consents, waivers, and amendments to this Agreement, shall be made and
authorized only by the President or by his or her representative specifically
authorized to fulfill these obligations under this Agreement.
10. Integration. This Agreement is intended to be the final, complete, and
exclusive statement of the terms of King's employment by SPDV. This Agreement
may not be contradicted by evidence of any prior or contemporaneous statements
or agreements. To the extent that the practices, policies, or procedures of
SPDV, now or in the future, apply to King and are inconsistent with the terms of
this Agreement, the provisions of this Agreement shall control.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by each of the parties. No
<PAGE>
failure to exercise and no delay in exercising any right, remedy, or power under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, or power under this Agreement preclude
any other or further exercise thereof, or the exercise of any other right,
remedy, or power provided herein or by law or in equity.
12. Assignment; Successors and Assigns. King agrees that he will not assign,
sell, transfer, delegate, or otherwise dispose of, whether voluntarily or
involuntarily, or by operation of law, any rights or obligations under this
Agreement. Any such purported assignment, transfer, or delegation shall be null
and void. Nothing in this Agreement shall prevent the consolidation of SPDV
with, or its merger into, any other entity, or the sale by SPDV of all or
substantially all of its assets, or the otherwise lawful assignment by SPDV of
any rights or obligations under this Agreement. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective heirs, legal representatives, successors, and permitted
assigns, and shall not benefit any person or entity other than those
specifically enumerated in this Agreement.
13. Severability. If any provision of this Agreement, or its application to any
person, place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction to be invalid, unenforceable, or void, such provision shall be
enforced to the greatest extent permitted by law, and the remainder of this
Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.
14. Attorneys' Fees. In any legal action, arbitration, or other proceeding
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs and the
fees and costs of any arbitration itself.
15. Injunctive Relief. If (1) King refuses to perform the responsibilities
outlined in Section 2 on Position and Responsibilities within the agreed upon
Period of Employment, and King has no right to terminate the employment
relationship pursuant to Section 4 on Termination of Employment, or (2) King
breaches or threatens to breach any of the covenants in Section 5 on Proprietary
Information and Section 6 on Inventions and Ideas, the parties acknowledge that
the damage or imminent damage to SPDV's business or its goodwill would be
irreparable and extremely difficult to estimate, making any remedy at law or in
damages inadequate. Accordingly, SPDV shall be entitled to injunctive relief or
other equitable remedy provided by a court of equity against King in the event
of any breach or threatened breach of such provisions by King, in addition to
any other relief (including damages) available to SPDV under this Agreement or
under law.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of California. Venue for any dispute shall
be in San Diego County California.
<PAGE>
17. Interpretation. This Agreement shall be construed as a whole, according to
its fair meaning, and not in favor of or against any party. By way of example
and not in limitation, this Agreement shall not be construed in favor of the
party receiving a benefit nor against the party responsible for any particular
language in this Agreement.
18. Employee Acknowledgment. King acknowledges that he has had the opportunity
to consult legal counsel in regard to this Agreement, that he has read and
understands this Agreement, that he is fully aware of its legal effect
(including notice of his statutory rights under Section 2870 of the California
Labor Code, as set forth in the above Section on Inventions and Ideas), and that
he has entered into it freely and voluntarily and based on his own judgment and
not on any representations or promises other than those contained in this
Agreement.
The parties have duly executed this Agreement as of the date first written
above.
Jan A. King SpaceDev Inc.
By:
- ------------------------------- -------------------------------
President
<PAGE>
EXHIBIT A
PATENTS/INVENTIONS AND OTHER INTELLECTUAL PROPERTY
OF JAN A. KING
EXCLUDED FROM EMPLOYMENT AGREEMENT
The following are patents or inventions not patented, but reduced to practice
and works authored by me that I consider excluded from my SpaceDev employment
agreement:
Method and Apparatus for Deploying a Satellite Network, U.S. Patent 5199672,
dated April 6, 1993. NOTE: This patent has been fully assigned to Orbital
Sciences Corp. of Dulles, VA.
Development of the Microsat Spacecraft Concept. A technology developed jointly
by me and the Radio Amateur Satellite Corp. (AMSAT). This technology has
been reduced to practice in 1989 and has been contributed by me to AMSAT,
however, the rights to the technology remain with me and others who
developed the technology. The technology is being held as a trade secret.
AMSAT has sub licensed the technology to industry and to non-profit
organizations.
M/N Series Resonant Orbits. A body of knowledge developed in a series of papers
written by me. The papers describe the properties of a family of orbits
most suitable when used for communications and certain remote sensing
satellites.
Inverse Pseudolite Position Determination. A method of using a GPS Pseudolite in
a reverse roll as a means of tracking lost or stolen objects. The technique
uses the GPS constellation and sites similar to cellular radio base
stations to locate a TAG carrying a pseudolite transmitter. The transmitter
transmits a CDMA code identical to that of the GPS constellation (C/A
only). The technique was invented by myself, Michael Carpenter and Gordon
Hardman. The invention is currently being held as a trade secret. A similar
technique seems to have been developed by the United States Air Force and
the University of Vancouver, B.C.. A patent may or may not be filed by the
inventors based on whether we can claim the invention.
Alternative Method of Spectrum Allocation and Assignment Coupled with a Spectrum
Use Measurement System. This is a method of assigning users of the radio
spectrum to channels, based on priority and demand and not based on the
category of service concept (as is currently done). The technique is
intended to capitalize on various changes taking place in
telecommunications today, on a national and global basis. These include the
increasing utilization of Spread Spectrum technology (CDMA) and the
practice of "selling" radio spectrum to certain categories of users. In
order to make such a scheme practical, a land/air/space based monitoring
system would be utilized. This approach to monitoring the use of the radio
spectrum would avoid spectrum "warehousing" and illegal usage of frequency
bands. Both practices are common today. This technique was developed by Mr.
Gordon Hardman, Mr. Bruce Ferguson and myself and is being kept as a trade
secret at this time.
[ISS logo here]
EMPLOYMENT AGREEMENT
INTEGRATED SPACE SYSTEMS, INC.
A WHOLLY OWNED SUBSIDIARY OF SPACEDEV, INC.
AND
CHARLES H. LLOYD
<PAGE>
TABLE OF CONTENTS
1. Period of Employment....................................................1
2. Position and Responsibilities...........................................1
3. Compensation and Benefits...............................................2
4. Termination of Employment...............................................3
5. Proprietary Information.................................................6
6. Prior Knowledge and Information.........................................7
7. Arbitration.............................................................7
8. Notices.................................................................9
9. Action by Company.......................................................9
10. Integration.............................................................9
11. Amendments; Waivers.....................................................9
12. Assignment; Successors and Assigns.....................................10
13. Severability...........................................................10
14. Attorneys' Fees........................................................10
15. Injunctive Relief......................................................10
16. Governing Law..........................................................11
17. Interpretation.........................................................11
18. Employee Acknowledgment................................................11
<PAGE>
This Employment Agreement (the "Agreement"), dated as of November 2,
1999, is between Integrated Space Systems, Inc. (referred to as the "Company" or
"ISS") a wholly owned subsidiary of SpaceDev, Inc., a Colorado corporation, and
Charles H. Lloyd ("Executive").
RECITALS
WHEREAS, Executive has the experience to provide services to Company of
an extraordinary character which gives such services a unique value, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law.
WHEREAS, Company desires to retain the services of Executive, and
Executive desires to be employed by Company for the term of this Agreement.
NOW AND THEREFORE, in consideration of the mutual representation and
covenants, the parties agree as follows:
1. PERIOD OF EMPLOYMENT.
BASIC TERM. Company shall employ Executive to render services to
Company in the position and with the duties and responsibilities described in
Section 2 for the period (the "Period of Employment") commencing on the date of
this Agreement and ending upon the date of termination in accordance with
Section 4.
2. POSITION AND RESPONSIBILITIES.
(a) POSITION. Executive accepts employment with Company as Chief
Executive Officer and shall perform all services appropriate and related to
raising equity financing for ISS, overseeing the development of the Micro Launch
Vehicle, preparing ISS for an Initial Public Offering, and as such other
services as may be assigned by Company. Executive shall devote his best efforts
and full-time attention to the performance of his duties. Executive shall be
subject to the direction of Company, which shall retain full control of the
means and methods by which he performs the above services and of the place(s) at
which all services are rendered. Executive shall report to the Chairman of the
Board of Directors of Company. Executive shall be expected to travel if
necessary or advisable in order to meet the obligations of his position.
(b) OTHER ACTIVITY. Except upon the prior written consent of
Company, Executive (during the Period of Employment) shall not (i) accept any
other employment; or (ii) engage, directly or indirectly, in any other business,
commercial, or professional activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with Company, that might create a
conflict of interest with Company, or that otherwise might interfere with the
business of Company, or any Affiliate. An "Affiliate" shall mean any person or
entity that directly or indirectly controls, is controlled by, or is under
common control with Company. So that Company may be aware of the extent of any
other demands upon Executive's time and attention, Executive shall disclose in
confidence to Company the nature and scope of any other business activity in
which he is or becomes engaged during the Period of Employment.
1
<PAGE>
(c) REPRESENTATIONS. Executive represents and warrants (i) that he
is fully qualified and competent to perform the responsibilities for which he is
being hired pursuant to the terms of this Agreement; and (ii) that Executive's
execution of this Agreement, his employment with Company, and the performance of
his proposed duties under this Agreement shall not violate any obligations he
may have to any former employer (or other person or entity), including any
obligations with respect to proprietary or confidential information of any other
person or entity.
(d) INDEMNIFICATION. Executive agrees to indemnify Company, its
officers, directors and affiliates for all cost and expenses including out of
pocket loss, and reasonable attorney fees for any and all claims by third
parties for any action or conduct by the Executive which occurred prior to the
date of this Agreement.
3. COMPENSATION AND BENEFITS.
(a) COMPENSATION. In consideration of the services to be rendered
under this Agreement, Company shall pay Executive a base salary of Sixty
Thousand Dollars ($60,000) for the first twelve (12) months of this Agreement,
payable pursuant to the Company's established payroll procedures, and as may be
amended, by Company in its sole discretion, during the Period of Employment. In
the event this Agreement is in effect beginning the first anniversary date of
this Agreement, Company shall pay executive a base salary of Two Hundred
Thousand Dollars ($200,000) per year. Thereafter Company shall review annually
Executive's compensation in accordance with Company's established administrative
practice for adjusting salaries for similarly situated employees.
(b) STOCK OPTIONS OR CASH BONUS. As additional consideration for
the services to be rendered under this Agreement and to provide Executive with
additional incentive to raise equity financing for the Company, Executive may
elect either of the following two methods:
(i) SpaceDev shall provide stock options to Executive
upon the execution of this Agreement in the amount
not to exceed 200,000 common shares of SpaceDev with
an exercise price equal to the value at the date of
grant and subject to forfeiture and vesting. The
stock options shall vest upon the Company raising and
acquiring a minimum equity financing of Three Million
Dollars with a maxim equity financing of Ten Million
Dollars ($10,000,000) within the first nine (9)
months of Executive's employment. For each One
Million Dollars ($1,000,000) in equity financing
obtained by the Company, Executive's stock options
representing 20,000 common shares of Space will vest
and shall not be subject to forfeiture. In the event,
the Company does not receive any funds or receives
funds less than the Three Million Dollars within the
first nine months of Executive's employment, then
that portion of stock options which have not vested,
shall be immediately forfeited and cancelled. OR
2
<PAGE>
(ii) Executive shall receive a cash bonus equal to two
percent (2%) of the equity financing acquired by the
Company within the first nine months of Executive
employment. Cash bonus payment, which shall not
exceed $200,000, shall be paid to Executive when
Company receives funds in excess of Three Millions
Dollars ($3,000,000). In the event, the Company does
not receive any funds or receives funds less than the
Three Million Dollars within the first nine months of
Executive's employment, then no cash bonus shall
accrue to Executive.
(c) INCENTIVE STOCK OPTION. Executive shall be eligible to participate
in the SpaceDev's Incentive Stock Option Plan (the "Plan"), a copy of which is
provided to Executive concurrently with this Agreement. Executive will receive
incentive stock options to purchase up to 1,000,000 SpaceDev common shares
granted in four equal installments and expiring ten (10) years from the Grant
Date, as follows:
<TABLE>
<CAPTION>
GRANT DATE STOCK OPTIONS EXERCISE PRICE VESTING
- -------------------------- ----------------- ------------------- ---------------------------
<S> <C> <C> <C>
Execution of Agreement 250,000 FMV at Grant Date 3 mos. after Grant Date
3 mos. Agreement Date 250,000 FMV at Grant Date 3 mos. after Grant Date
6 mos. Agreement Date 250,000 FMV at Grant Date 3 mos. after Grant Date
9 mos. Agreement Date 250,000 FMV at Grant Date 3 mos. after Grant Date
</TABLE>
The stock options issued to Executive under this section shall be
subject to the terms and conditions of the Plan. Executive acknowledges that he
has received and had an opportunity to review the Plan.
(d) BENEFITS. Executive shall be entitled to vacation leave in
accordance with Company's standard policies. As Executive becomes eligible
therefor, Executive shall have the right to participate in and to receive
benefits from all present and future benefit plans specified in Company's
policies and generally made available to similarly situated employees of
Company. The amount and extent of benefits to which Executive is entitled shall
be governed by the specific benefit plan, as amended. Executive also shall be
entitled to any benefits or compensation tied to termination as described in
Section 4. Nothing stated in this Agreement shall prevent Company from changing
or eliminating any benefit during the Period of Employment as Company, in its
sole discretion, may deem necessary or desirable. No statement concerning
benefits or compensation to which Executive is entitled shall alter in any way
the term of this Agreement, any renewal thereof, or its termination. All
compensation and comparable payments to be paid to Executive under this
Agreement shall be less withholdings required by law.
(e) EXPENSES. Company shall reimburse Executive for reasonable travel
and other business expenses incurred by Executive in the performance of his
duties, in accordance with Company's policies, as they may be amended in
Company's sole discretion.
4. TERMINATION OF EMPLOYMENT.
(a) BY DEATH. The Period of Employment shall terminate automatically
upon the death of Executive. Company shall pay to Executive's beneficiaries or
estate, as appropriate, any compensation and benefits then due and owing,
including payment for accrued unused vacation, if any. Thereafter, all
obligations of Company under this Agreement shall cease. Nothing in this Section
shall affect any entitlement of Executive's heirs to the benefits of any life
insurance plan or other applicable benefits.
3
<PAGE>
(b) BY DISABILITY. If, by reason of any physical or mental incapacity,
Executive has been or will be prevented from properly performing his duties
under this Agreement for more than ninety (90) days in any one (1) year period,
then, to the extent permitted by law, Company may terminate the Period of
Employment upon two (2) weeks' advance written notice. Company shall pay
Executive all compensation to which he is entitled up through the last business
day of the notice period; thereafter, all obligations of Company under this
Agreement shall cease. Nothing in this Section shall affect Executive's rights
under any applicable Company disability plan.
(c) BY EMPLOYER NOT FOR CAUSE. At any time, Company may terminate
Executive for any reason, with or without cause, by providing Executive sixty
(60) days written notice. Company shall have the option, in its complete
discretion, to terminate Executive at any time prior to the end of such notice
period, provided Company pays Executive all compensation and benefits due and
owing through the above notice period. In the event this Agreement is in effect
after Executive's one year anniversary, then in addition to the compensation and
benefits due and owing, Company shall pay Executive a severance in the amount of
Eight Thousand Dollars ($8,000) per month payable over a twelve month period;
Upon termination, all of Company's obligations under this Agreement shall cease.
Company may dismiss Executive without cause notwithstanding anything to the
contrary contained in or arising from any statements, policies, or practices of
Company relating to the employment, discipline, or termination of its employees.
(d) BY EMPLOYER FOR CAUSE. At any time, and without prior notice,
Company may terminate Executive for Cause (as defined below). Company shall pay
Executive all compensation then due and owing; thereafter, all of Company's
obligations under this Agreement shall cease. Termination shall be for "Cause"
if Executive: (i) acts in bad faith and to the detriment of Company; (ii)
refuses or fails to act in accordance with any specific direction or order of
Company; (iii) exhibits in regard to his employment unfitness or unavailability
for service, unsatisfactory performance, misconduct, dishonesty, habitual
neglect, or incompetence; (iv) is convicted of a crime involving dishonesty,
breach of trust, or physical or emotional harm to any person; (v) is selected
for layoff pursuant to a bona fide reduction in force; or (vi) breaches any
material term of this Agreement. If termination is due to Executive's
disability, Section 4(b) above shall control, and not this subsection on
termination for Cause.
(e) BY EMPLOYEE NOT FOR CAUSE. At any time, Executive may terminate his
employment for any reason, with or without cause, by providing Company thirty
(30) days' written notice. Company shall have the option, in its complete
discretion, to make Executive's termination effective at any time prior to the
end of such notice period, provided Company pays Executive all compensation due
and owing through the last day actually worked, plus an amount equal to the base
salary Executive would have earned through the balance of the above notice
period, not to exceed thirty (30) days; thereafter, all of Company's obligations
under this Agreement shall cease.
4
<PAGE>
(f) BY EMPLOYEE FOR GOOD REASON. Executive may terminate, without
liability, the Period of Employment for Good Reason (as defined below), provided
Executive gives Company thirty (30) days' advance written notice of the reason
for termination and his intent to terminate this Agreement. During this period,
Company shall have an opportunity to correct the condition constituting Good
Reason. If the condition is remedied within this period, Executive's notice to
terminate shall be rescinded automatically; if not remedied, termination shall
become effective upon expiration of the above notice period. In this event,
Company shall pay Executive all compensation due and owing through the last day
actually worked, plus a lump-sum payment equal to six (6) months' base salary,
which payments shall be in lieu of any damages under this Agreement for any
alleged breach. Thereafter, all of Company's obligations under this Agreement
shall cease. Company shall also have the option, in its complete discretion, to
make Executive's termination effective at any time prior to the end of the
notice period, provided that Company pays Executive all compensation due and
owing through the balance of the notice period (not to exceed thirty (30) days),
in addition to the payment of six (6) months' base salary described above.
Executive shall be entitled to exercise his right to terminate this Agreement
for Good Reason only if he gives the required notice not more than forty-five
(45) days after the occurrence of the event that is the basis for the Good
Reason.
Termination shall be for "Good Reason" if: (i) there is a material and
adverse change in Executive's position, duties, responsibilities, or status with
Company; (ii) there is a reduction in Executive's salary then in effect, other
than a reduction comparable to reductions generally applicable to similarly
situated employees of Company; (iii) there is a material reduction in
Executive's benefits, other than a reduction comparable to reductions generally
applicable to similarly situated employees of Company; or (iv) Company
materially breaches this Agreement. Executive shall not be entitled to terminate
this Agreement for Good Reason if an event occurs that would otherwise
constitute Good Reason, except that it results from a change in Company's status
as defined in Section 4(g).
(g) CHANGE IN EMPLOYER STATUS. To the extent permitted by law, Company,
in its sole discretion, may terminate this Agreement (in which case all of
Company's obligations under this Agreement shall cease after payment of all
compensation due and owing) upon any formal action of Company's management to
terminate Company's existence or otherwise wind up its affairs, to sell all or
substantially all of its assets, or to merge with or into another entity.
(h) TERMINATION OBLIGATIONS.
(i) Executive agrees that all property, including, without
limitation, all equipment, tangible Proprietary Information (as defined
below), documents, books, records, reports, notes, contracts, lists,
computer disks (and other computer-generated files and data), and
copies thereof, created on any medium and furnished to, obtained by, or
prepared by Executive in the course of or incident to his employment,
belongs to Company and shall be returned promptly to Company upon
termination of the Period of Employment.
(ii) All benefits to which Executive is otherwise entitled
shall cease upon Executive's termination, unless explicitly continued
either under this Agreement or under any specific written policy or
benefit plan of Company.
5
<PAGE>
(iii) Upon termination of the Period of Employment, Executive
shall be deemed to have resigned from all offices and directorships
then held with Company or any Affiliate.
(iv) The representations, indemnification and warranties
contained in this Agreement shall survive the termination of the Period
of Employment and the expiration of this Agreement.
(v) Following any termination of the Period of Employment,
Executive shall fully cooperate with Company in all matters relating to
the winding up of pending work on behalf of Company and the orderly
transfer of work to other employees of Company. Executive shall also
cooperate in the defense of any action brought by any third party
against Company that relates in any way to Executive's acts or
omissions while employed by Company.
5. PROPRIETARY INFORMATION.
(a) DEFINED. "Proprietary Information" is all information and any idea
in whatever form, tangible or intangible, pertaining in any manner to the
business of Company, or any Affiliate, or its employees, clients, consultants,
or business associates, which was produced by any employee of Company in the
course of his or her employment or otherwise produced or acquired by or on
behalf of Company. All Proprietary Information not generally known outside of
Company's organization, and all Proprietary Information so known only through
improper means, shall be deemed "Confidential Information." Without limiting the
foregoing definition, Proprietary Information and Confidential Information shall
include, but not be limited to: (i) teaching and development techniques,
processes, confidential or secret designs, and trade secrets; (ii) information
about costs, profits, markets, sales, and lists of customers or clients; (iii)
business, marketing, and strategic plans; (iv) employee personnel files and
compensation information; and (v) research, systems, protocols, programs, plans,
and devices and software. Executive should consult any Company procedures
instituted to identify and protect certain types of Confidential Information,
which are considered by Company to be safeguards in addition to the protection
provided by this Agreement. Nothing contained in those procedures or in this
Agreement is intended to limit the effect of the other.
(b) CONFIDENTIALITY. Executive will not disclose any Proprietary
Information to any third party for any reason whatsoever. Executive will not
disclose any Proprietary Information to any person unless that person is a
director, officer, Executive, advisor or representative of Company who needs
such information for the purpose of evaluating any possible transaction (it
being understood that those directors, officers, employees, advisors and
representatives shall be informed by Executive of the confidential nature of the
Proprietary Information and shall be directed by Executive to treat such
information confidentially). In any event, no Proprietary Information shall be
disclosed without the prior written consent of Company. Executive will not
utilize any Proprietary Information he receives for the benefit of anyone other
than Company. Executive will promptly and fully disclose to Company the name of
any person receiving any Proprietary Information of Company. This Section
5(b)shall survive the termination of employment and Executive agrees that this
agreement shall remain in full force and effect for a period of one (1) year
after termination of employment with Company. In the event of a breach of this
Section 5(b), Executive acknowledges that, in addition to any other damages,
Company reserves the right to seek injunctive relief in a court of equity
against Executive, and/or any other parties to prevent further breaches from
occurring and/or minimize Company's damages due to a breach subsequent to the
time Company discovers the breach has occurred. Nothing in this Section 5(b)
shall be construed to constitute the grant of a license to Executive under any
trademark, patent, patent application, or Proprietary Information.
6
<PAGE>
(c) COMPETITIVE ACTIVITY. Executive acknowledges that the pursuit of
the activities forbidden by this section would necessarily involve the use or
disclosure of Confidential Information in breach of the preceding subsections,
but that proof of such a breach would be extremely difficult. To forestall such
disclosure, use, and breach, and in consideration of the employment under this
Agreement, Executive agrees that for a period of one (1) year after termination
of the Period of Employment, he shall not, directly or indirectly, (i) divert or
attempt to divert from Company (or any Affiliate) any business of any kind in
which it is engaged, including, without limitation, the solicitation of or
interference with any of its customers; (ii) employ, solicit for employment, or
recommend for employment any person employed by Company (or any Affiliate); or
(iii) engage in any business activity that is or may be competitive with Company
(or any Affiliate) in any state where Company conducts its business, unless
Executive can prove that any action taken in contravention of this subsection
was done without the use in any way of Confidential Information.
(d) COMPANY MANUAL. Employee acknowledges that he has received a copy
of the SpaceDev Employee Manual ("Manual") and has read and agrees to comply
with the terms and conditions contained in the Manual. Employee further
understands that violation of any provision of the Manual shall be cause for
immediate termination of this Agreement and constitute "For Cause" as described
in section 4 (d) above
6. PRIOR KNOWLEDGE AND INFORMATION.
Executive acknowledges that he may have certain proprietary information
that was obtained during the course of his former employment or business
dealings with other third parties. Executive agrees and represents that he will
not use or disclose, and that Company has not requested that Executive use or
disclose, any third party proprietary information which would be in violation of
any laws. Furthermore, Executive agrees to indemnify Company for the cost,
expenses and loss related to any action or claim arising from the
misappropriation of proprietary information of third parties.
7
<PAGE>
7. ARBITRATION.
(a) ARBITRABLE CLAIMS. All disputes between Executive (and his
attorneys, successors, and assigns) and Company (and its Affiliates,
shareholders, directors, officers, employees, agents, successors, attorneys, and
assigns) relating in any manner whatsoever to the employment or termination of
Executive, including, without limitation, all disputes arising under this
Agreement, ("Arbitrable Claims") shall be resolved by arbitration. All persons
and entities specified in the preceding sentence (other than Company and
Executive) shall be considered third-party beneficiaries of the rights and
obligations created by this Section on Arbitration. Arbitrable Claims shall
include, but are not limited to, contract (express or implied) and tort claims
of all kinds, as well as all claims based on any federal, state, or local law,
statute, or regulation, excepting only claims under applicable workers'
compensation law and unemployment insurance claims. Arbitration shall be final
and binding upon the parties and shall be the exclusive remedy for all
Arbitrable Claims, except that Company may, at its option, seek injunctive
relief and damages in court for any breach of Sections 5 and 6 of this
Agreement. Subject to the foregoing sentence, THE PARTIES HEREBY WAIVE ANY
RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.
(b) PROCEDURE. Arbitration of Arbitrable Claims shall be in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association ("AAA Employment Rules"), except as provided otherwise
in this Agreement. Prior to resorting to arbitration, the complaining party must
first exhaust the procedures specified in the Company Employment Manual Section
3.4. Arbitration shall be initiated by providing written notice to the other
party with a statement of the claim(s) asserted, the facts upon which the
claim(s) are based, and the remedy sought. This notice shall be provided to the
other party within six (6) months of the acts or omissions complained of. Any
claim not initiated within this limitation period shall be null and void. EACH
PARTY WAIVES ALL RIGHTS UNDER STATUTES OF LIMITATIONS OF DIFFERENT DURATION. In
any arbitration, the burden of proof shall be allocated as provided by
applicable law. Either party may bring an action in court to compel arbitration
under this Agreement and to enforce an arbitration award. Otherwise, neither
party shall initiate or prosecute any lawsuit or administrative action in any
way related to any Arbitrable Claim. All arbitration hearings under this
Agreement shall be conducted in San Diego, California. The Federal Arbitration
Act shall govern the interpretation and enforcement of this Section 7.
(c) ARBITRATOR SELECTION AND AUTHORITY. All disputes involving
Arbitrable Claims shall be decided by a single arbitrator. The arbitrator shall
be selected by mutual agreement of the parties within thirty (30) days of the
effective date of the notice initiating the arbitration. If the parties cannot
agree on an arbitrator, then the complaining party shall notify the AAA and
request selection of an arbitrator in accordance with the AAA Employment Rules.
The arbitrator shall have the authority to award equitable relief, damages,
costs, and fees as provided by law for the particular claim(s) asserted. The
fees of the arbitrator shall be split between both parties equally. The
arbitrator shall have exclusive authority to resolve all Arbitrable Claims,
including, but not limited to, any claim that all or any part of this Agreement
is void or unenforceable.
(d) CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter thereof shall not be disclosed to any person
other than the parties to the proceedings, their counsel, witnesses and experts,
the arbitrator, and, if involved, the court and court staff. All documents filed
with the arbitrator or with a court shall be filed under seal. The parties shall
stipulate to all arbitration and court orders necessary to effectuate fully the
provisions of this subsection concerning confidentiality.
8
<PAGE>
(e) CONTINUING OBLIGATIONS. The rights and obligations of
Executive and Company set forth in this Section on Arbitration shall survive the
termination of Executive's employment and the expiration of this Agreement.
8. NOTICES.
Any notice under this Agreement must be in writing and shall be
effective upon delivery by hand, upon facsimile transmission to the number
provided below (if one is provided), or three (3) business days after deposit in
the United States mails, postage prepaid, certified or registered, and addressed
to Company or to Executive at the corresponding address below. Executive shall
be obligated to notify Company in writing of any change in his address. Notice
of change of address shall be effective only when done in accordance with this
Section.
Company's Notice Address: 13855 Stowe Drive
Poway, California 92064
(858) 375-1000
Attention: James Benson
Executive's Notice Address: 12611 Fairbrook Road
San Diego, CA 92131
(858) 653-0140
Attention: Charles H. Lloyd
9. ACTION BY COMPANY.
All actions required or permitted to be taken under this Agreement by
Company, including, without limitation, exercise of discretion, consents,
waivers, and amendments to this Agreement, shall be made and authorized only by
the Chairman of the Board of Directors or by his or her representative
specifically authorized to fulfill these obligations under this Agreement.
10. INTEGRATION.
This Agreement is intended to be the final, complete, and exclusive
statement of the terms of Executive's employment by Company. This Agreement may
not be contradicted by evidence of any prior or contemporaneous statements or
agreements. To the extent that the practices, policies, or procedures of
Company, now or in the future, apply to Executive and are inconsistent with the
terms of this Agreement, the provisions of this Agreement shall control.
9
<PAGE>
11. AMENDMENTS; WAIVERS.
This Agreement may not be modified, amended, or terminated except by an
instrument in writing, signed by each of the parties. No failure to exercise and
no delay in exercising any right, remedy, or power under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power under this Agreement preclude any other or further
exercise thereof, or the exercise of any other right, remedy, or power provided
herein or by law or in equity.
12. ASSIGNMENT; SUCCESSORS AND ASSIGNS.
Executive agrees that he will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement. Any such purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other entity, or the sale by Company of all or substantially all of its
assets, or the otherwise lawful assignment by Company of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement shall
be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement.
13. SEVERABILITY.
If any provision of this Agreement, or its application to any person,
place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction to be invalid, unenforceable, or void, such provision shall be
enforced to the greatest extent permitted by law, and the remainder of this
Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.
14. ATTORNEYS' FEES.
In any legal action, arbitration, or other proceeding brought to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs.
15. INJUNCTIVE RELIEF.
If (i) Executive refuses to perform the responsibilities outlined in
Section 2 on Position and Responsibilities within the agreed upon Period of
Employment, and Executive has no right to terminate the employment relationship
pursuant to Section 4 on Termination of Employment, or (ii) Executive breaches
or threatens to breach any of the covenants in Section 5 on Proprietary
Information and Section 6 on Prior Knowledge and Information, the parties
acknowledge that the damage or imminent damage to Company's business or its
goodwill would be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, Company shall be entitled
to injunctive relief against Executive in the event of any breach or threatened
breach of such provisions by Executive, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
10
<PAGE>
16. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the law of the State of California.
17. INTERPRETATION.
This Agreement shall be construed as a whole, according to its fair
meaning, and not in favor of or against any party. By way of example and not in
limitation, this Agreement shall not be construed in favor of the party
receiving a benefit nor against the party responsible for any particular
language in this Agreement.
18. EMPLOYEE ACKNOWLEDGMENT.
Executive acknowledges that he has had the opportunity to consult legal
counsel in regard to this Agreement, that he has read and understands this
Agreement, that he is fully aware of its legal effect (including notice of his
statutory rights under Section 2870 of the California Labor Code, as set forth
in the above Section on Inventions and Ideas), and that he has entered into it
freely and voluntarily and based on his own judgment and not on any
representations or promises other than those contained in this Agreement.
IN WITNESS WHEREOF, The parties have duly executed this Agreement as of
the date first written above.
COMPANY:
INTEGRATED SPACE SYSTEMS EXECUTIVE
/s/ James W. Benson /s/ Charles H. Lloyd
- ---------------------------- ------------------------------
James W. Benson Charles H. Lloyd
Chairman of the Board
11
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