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As filed with the Securities and Exchange Commission on May 30, 1997
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
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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
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SYMPLEX COMMUNICATIONS CORPORATION
(Name of Small Business Issuer in its charter)
Delaware 38-3338110
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Research Drive, Ann Arbor, Michigan 48103
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (313) 995-1555
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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
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
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(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GLOSSARY
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<C> <S>
bandwidth A measure of how fast a network can move information, usually measured
in millions or billions of bits, or units of data, per second. The greater the
bandwidth, the greater the speed of transmission information capacity.
backbone A centralized high-speed network that connects smaller, independent
networks.
bps Bits per second, the basic unit of data communications rate measurement.
Usually refers to the rate of information bits transmitted.
bridge A device that connects two networks using the same standards.
client/server In its simplest form, this is an architecture in which one computer (the
server) stores and manages data and another computer (the client) sends
requests for that data to the server, and processes it and presents it to the
end user in response to requests. When implemented over a WAN,
client/server architecture is described as "distributed".
compression A technique to reduce the overall number of bits needed to transmit
information so as to permit more signals to use the same channel. A
technique for reducing the bandwith necessary to carry information
signals.
digital A form of representation in which objects (digits) or bits are used to denote
something so that counting and other operations such as communication
technique can be performed precisely.
distributed computing The process by which data and applications are distributed to multi-user
computers, workstations and personal computers within a network rather
than maintained on a centralized computer.
ethernet - fast ethernet Ethernet is a wiring system and network access protocol originally
developed by Xerox and used for LANs. Ethernet transmits information
between computers at speeds of 10 million bits per second. Fast ethernet,
first developed for backbone networks but now entering into desktops,
accommodates transmission speeds up to 100 million bits per second.
firewall A gateway between two networks that buffers and screens all information
passing between them.
frame relay An interface standard that defines how computing devices connect to a
data network which is optimized for the transmission of data packets.
Frame relay shifts responsibility for the integrity of the data away from the
network and onto the end computing devices.
host A computer connected to a network that provides services to other
computers. A host computer is generally, but not necessarily a mainframe.
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<TABLE>
<CAPTION>
<C> <S>
hub Hubs are boxes that connect and funnel network wiring, and are among the
most widely used types of networking hardware. Hubs enable fault-
tolerant interconnect of loops by centralizing the wiring and allowing loop
operations and recovery even if nodes fail.
IP Internet Protocol. A set of rules used by data communications devices to
exchange data among networks or computer systems. The Internet
Protocol permits dissimilar networks to communicate.
Integrated Services Digital Network A switched digital communications network that uses internationally
(ISDN) recognized standards to transmit data, voice and images over digital lines.
Internet An open global network of interconnected individual, commercial,
educational and governmental computer networks which utilize a common
communications protocol, TCP/IP.
internetworking The process of connecting LANs together.
inverse multiplexing A technique for taking multiple low speed channels and combining them
into a channel of higher speed.
kilobit (Kb) A thousand bits. Kbps refers to kilobits per second, and describes the speed
with which data is transmitted.
Local Area Network (LAN) A network that is located in a small geographic area, such as an office, a
building, a complex of buildings, or a campus, and whose communications
technology provides a high bandwidth, low-cost medium to which many
nodes can be connected. These networks typically do not use public
network circuits.
Mbps A million (Mega) bits per second.
multiplexing The division of a channel in time or frequency so that more than one signal
can be sent simultaneously over one physical channel. Multiplexing is
accomplished by a device called a multiplexer.
multiprotocol Multiprotocol devices are devices that can route or otherwise handle
several protocols simultaneously.
node A node is a connection point in a network that can create, receive or repeat
a message.
PBX (Private Branch Exchange) A PBX is a telephone switching system that generally supports more than
100 users.
packet A block of data sent over a network that contains the message and the
identities of the sending and receiving devices and information used.
protocol/standard A formal set of conventions governing the format and control of inputs and
outputs between two communicating devices. This includes the rules by
which these two devices communicate.
router A device that connects LANs. It also chooses the best route between two
networks when there are multiple paths between them by dividing
networks into segments and permitting only traffic destined for a particular
segment of a network to be routed to that segment.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
server Software that allows a computer to offer a service to another computer.
Other computers contact the server program by means of matching client
software. The term also refers to the computer on which the server
software runs.
statistical multiplexing The dynamic combination of data from several channels or inputs
according to the amount of activity on each, resulting in a combined single
data output.
switch A device used to route information to different destinations within a
network. A traffic controller for communications networks. A switched
network is any network that uses switches for directing messages from the
sender to the recipient.
E3 A European standard for a data communications line capable of
transmission speeds of 2.064 Mbps.
T1 A North American standard for a data communications line capable of
transmission speeds of 1.54 Mbps.
T3 A North American standard for a data communications line capable of
transmission speeds of 45 Mbps.
TCP/IP Transmission Control Protocol/Internet Protocol. A compilation of
network and transport level protocols that allows computers with different
architectures and operating system software to communicate with other
computers on the Internet.
Wide Area Network (WAN) A network covering a large geographical area. Its nodes can span city,
provincial/state or national boundaries, and it typically uses circuits
provided by common carriers such as telephone companies.
</TABLE>
CORPORATE HISTORY
Symplex Communications Corporation ("Symplex" or the "Company") is a Delaware
corporation based in Ann Arbor, Michigan. It was formed on February 28, 1997
through the merger of a California corporation of the same name that was
incorporated and commenced business in 1982, into Symplex Acquisition
Corporation, a Delaware corporation formed in November 1996 for the sole purpose
of implementing the merger. In connection with the merger, Symplex Acquisition
Corporation changed its name to Symplex Communications Corporation. In this
Registration Statement, all references to "Symplex" or "the Company" include
references to the predecessor California corporation. Concurrent with the
effective date of this Registration Statement, the Company will have completed
its initial public offering in British Columbia, Canada (the "Canadian IPO"),
selling 3,500,000 shares of Common Stock at a price to public anticipated to be
$1.25.
BUSINESS OF THE COMPANY
Symplex designs, develops, manufactures and markets remote access
communications switching systems and data compression devices that enhance the
performance of existing LANs and WANs. The Company's products facilitate
migration to cost effective communications networks such as frame relay and
ISDN. The Company's switches and compression platforms are based on a
distributed and modular architecture that currently combines WAN switching,
compression and routing in a single product family.
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Symplex products support LAN, client server and host based applications with the
ability to switch and compress data onto public or private networks.
With a view to positioning the Company for future growth, Symplex has during
the past twelve months undertaken a comprehensive restructuring, reallocating
its limited resources, eliminating operational inefficiencies, and supplementing
and reorganizing its management team. The current senior management is either
newly hired or has assumed new responsibilities. Gary Brock became Chief
Executive Officer and President of the Company on May 27, 1997. Thomas
Radigan, the Chief Financial Officer, is an interim officer, assisting the
Company to redesign its organizational infrastructure, ensure effective cash
management, restructure its balance sheet, complete the Canadian IPO and
facilitate the transition to permanent senior management. The Company is
engaged in a search for a permanent Chief Financial Officer. Thomas Mayer, a
director of the Company, provides executive management consulting services to
the Company, and prior to May 27, 1997 served as President and Chief Executive
Officer on an interim basis. George Nagy has recently been appointed to the
position of Executive Vice President of Marketing and North American Sales,
concentrating on global marketing and North American sales.
The Company offers two internetworking product lines. "Datamizer", first
introduced in 1983 and now in its fourth generation, with initial product
introduction of the fifth generation Datamizer V currently scheduled for the
third quarter of 1997, consists of a series of data transmission products.
Datamizer units have been installed worldwide, resulting in cumulative sales
revenues of approximately $138,000,000 through December 31, 1996. For the three
months ended March 31, 1997 Datamizer revenues were approximately $698,000.
DirectRoute, first introduced in October 1994, consists of a wide range of ISDN
WAN access switches. To December 31, 1996, DirectRoute products have generated
cumulative sales revenues of approximately $3,600,000. In the three months
ended March 31, 1997, DirectRoute revenues were approximately $471,000. A
second generation of DirectRoute products, DirectRoute II, is under development
with initial product introduction currently scheduled for the fourth quarter of
1997.
Symplex products have been purchased by a broad variety of enterprises,
including Digital Equipment Corporation, Dow Chemical Co., Hewlett-Packard, IBM
Corporation, Eastman Kodak Co., The Coca-Cola Co., Goodyear Tire & Rubber Co.,
Metropolitan Life, Rockwell International, Merrill Lynch, Deutsche Bank AG,
Daimler-Benz AG, and Matsushita Corporation.
In North America Symplex markets and sells its products to organizations with
a requirement for internetworking and data compression technology, through
direct sales, distributors such as Tech Data Corporation, and resellers. The
Company also has an office in the Netherlands to support European sales. The
Company has entered into non-exclusive distribution agreements covering a
variety of geographic regions in Asia (including Japan, Malaysia, and Taiwan)
and Europe (including the United Kingdom, Belgium, and the Netherlands), and in
Saudi Arabia, Brazil, and Colombia.
The Company's North American headquarters are located in Ann Arbor, Michigan.
INDUSTRY BACKGROUND
General
The Symplex family of products is designed to respond to a need that
originates in several major trends over the past decade which have affected the
computer and communications industries generally.
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The first trend has been the growth of distributed computing. Traditional
"mainframe" computing systems, based on closed, centralized, expensive,
relatively uniform and proprietary computer hardware and software, have been
displaced by decentralized server and PC based computer systems, with differing
operating systems, and often connected in either or both local area networks
("LANs") and wide area networks ("WANs"). This shift in emphasis to
"distributed computing" created a demand for seamless internetworking across
geographically dispersed areas among differing computer operating systems, both
within organizations and in their connections to external networks. Initially,
this was achieved by using dial-up modems through the public telephone lines.
These operated slowly, however, leading to the leasing of dedicated telephone
lines which had to be paid for whether or not used.
The second trend consisted of changes in telecommunications transmission
technology. By the early 1990s, telephone companies in most of the
industrialized countries were able to provide high speed, error-free digital
services and many companies took advantage of this to build private networks
using digital telephone lines leased from the telephone companies, combined with
their own control systems. These networks consist of high-speed digital
circuits, such as 56 Kbps, T1 and T3, as well as specialized networking
equipment, such as bridges, routers, channel service units ("CSUs"), digital
service units ("DSUs"), private branch exchanges ("PBXs") and T1 multiplexers,
and typically transmit large quantities of voice, video and data traffic.
Because of their expense and the high cost of managing them, however, private
digital networks have traditionally interconnected only larger corporate sites.
The growing availability of faster and less expensive personal computers,
workstations and portable PCs, has increased the number of remote offices,
telecommuters and mobile computer users. This has placed new demands on
networks, since smaller sites require connectivity to corporate backbone
networks. Satisfying these demands, given the high cost and inflexibility of
dedicated digital circuits and low speed of modems, is costly for many remote
offices and users and for the applications for which such offices and users
require connectivity.
The third trend has been the dramatic growth in the Internet, an open global
network of interconnected individual, commercial, educational and governmental
computer networks using TCP/IP as a common communications protocol. Internet
access providers can now provide reliable, high quality and relatively low-cost
access to the Internet across a range of bandwidths. Router-based networks,
however, lacked the ability to switch communications vehicles. This made it
necessary to divide network into separate and relatively inflexible segments,
and this in turn limited flexible and cost-efficient access to Internet and
intranet information. In addition, as is evident from the recent Internet
failures resulting from demand overload, there is a need for routed networks to
implement automatic failure recovery systems and to cost-effectively compress
data so as to utilize network bandwidth more efficiently and cost effectively.
There is also a demand for remote access intelligent switching systems to
retrieve and collect data throughout an enterprise and to support branch
offices, power users and mobile users.
These developments have led to an increase in demand for both switched LAN
and WAN networking components. In response, network carriers in the United
States, such as AT&T Corporation ("AT&T"), MCI Telecommunications Corporation,
Sprint Corporation and the regional Bell operating companies ("RBOCs"), and
numerous international carriers, have introduced switched digital network
services which allow users to access end-to-end digital circuits on an as-needed
basis, similar in concept to making a standard telephone call. These services
typically have data rates of 56 Kbps, 64 Kbps or 128 Kbps, with other rates
available in limited areas.
In addition to the introduction of these switched digital services, cost
effective digital access lines that provide access to these services from a
customer's location have become increasingly available from the network
carriers, permitting the creation of switched public networks. These access
lines take the form of
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T1 (1.5 Mbps), E1 (2 Mbps), switched 56 (56 Kbps), ISDN Basic Rate Interface
(two 64 Kbps channels) and ISDN Primary Rate Interface (twenty-three 64 Kbps
channels) and frame relay services.
It has recently been independently estimated in a leading industry trade
publication that worldwide spending on networking products and services in 1996
was approximately $109 billion, up 21% from the previous year total of $90
billion. The United States accounted for approximately 58% of the worldwide
market, or $63 billion. It was also estimated that the comparable figures for
1997 will be $135 billion globally and $78 billion in the United States,
representing increases of 24% and 23%, respectively, over 1996.
In relation to the market segments currently addressed by Symplex products
and services, the same independent industry report gave the following global
revenue estimates for the years 1995 and 1996, and projections for 1997:
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<CAPTION>
1996 GROWTH 1997 REVENUES 1997 GROWTH
1995 REVENUES 1996 REVENUES RATE (PROJECTED) RATE (PROJECTED)
PRODUCT ($ MILLIONS) ($ MILLIONS) (%) ($ MILLIONS) (%)
- ------------------------------- ------------- ------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Remote access 858 2,157 151 4,308 100
Frame relay switches and access
devices 776 1,057 36 1,373 30
Multiprotocol gateways 402 469 16 551 17
Multiplexers 1,617 1,450 -10 1,248 -14
Routers 3,549 5,023 42 6,500 31
</TABLE>
In 1992 the Company anticipated that the multiplexer market in which
Datamizer IV is sold would contract, and accordingly developed the DirectRoute
product family to address the remote access, frame relay and multiprotocol
gateway markets. Additionally, the Datamizer V will specifically address the
frame relay and router markets. Moreover, the Company expects to leverage and
address its installed base of Datamizer III and IV customers who are moving from
traditional leased-line point-to-point networks to multipoint frame relay
networks using both the public and private networks.
Industry gross margins for network hardware have been gradually increasing,
in sharp contrast to other computer products. An independent market research
guide published in May 1996 estimated that the compound annual rate of growth in
margins for network hardware has increased on average 1.4% over the past three
years to approximately 59%. In comparison, PC margins have suffered a decline
in compound annual growth rate of 10.1% to approximately 26% for the same
period. Symplex, consistent with most industry experts, expects decreasing gross
margins in both the multiplexer and low end access markets. The Company's
strategy, therefore, is to continue to emphasize the development of high end
products for the frame relay, remote access and routing markets, which currently
offer margins approaching 60%.
Evolving Applications Requirements
The growing availability of competitively priced switched digital services
and digital access lines has been accompanied by the development of user
applications with specific bandwidth requirements,
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including the ability to establish a connection, transfer data and thereupon
terminate the connection, to establish connections to different sites on a call-
by-call basis and to provide variable amounts of bandwidth during a call or on a
call-by-call basis. Switched digital services permitting access to digital
circuits as and to the extent needed are a highly effective transmission
mechanism for such applications.
Examples of such applications include remote LAN access and telecommuting
applications, integrated access, and dedicated network back-up. Backbone
networks are being extended beyond the dedicated digital circuit boundaries to
include remote offices, telecommuters, vendors and customers. Cost effective
remote LAN access requires solutions whose duration, ability to reach multiple
destinations and capacity for file transfers, database operations and other
applications are flexible enough to meet the application needs of a diversity of
users. Many large organizations now use dedicated digital circuits for their
private networks. Integrated access technologies can be combined to result in an
overall reduction in the cost of these networks. Switched digital networks can
also provide a complementary service to existing dedicated networks.
Communications equipment that provides not only bandwidth-on-demand but also
high performance, secure interoperability with existing routers and hub
networks, permits established networks to increase capacity during periods of
peak load, and to provide back-up and disaster coverage of the corporate network
to areas previously proven uneconomical when served by a dedicated private line.
The Company's Focus: Switched Network Access
The Company's business is focused on the "switched network access" segment of
the internetworking industry. Symplex products are utilized for remote LAN
access, integrated access and digital network extensions. The technologies
involved are designed to reduce reliance on dedicated leased lines to satisfy
internetworking needs, and to provide high speed, reliable and secure access to
a network for individual remote users as and only to the extent required. The
Company's products allow network customers to use the public telephone lines
automatically when and if needed, rather than connecting a router to an
expensive dedicated line. Phone line usage charges may thus be reduced.
PRODUCTS AND TECHNOLOGY
Symplex designs, manufactures and sells two core technology platforms. The
DirectRoute product line addresses Internet access, routing and switching access
systems; and the current Datamizer product line provides statistical and inverse
multiplexing and compression technology connected to private and/or public
networks to enable customers to utilize leased line networks more effectively.
The Company's product development staff consists of a Director of Engineering, 8
software engineers, 2 hardware engineers and 4 support staff technicians.
DirectRoute
DirectRoute products are stand-alone hardware and software units which enable
a Local Area Network ("LAN") to efficiently route and switch data and
communications to enterprise-wide networks (WANs) and the Internet. The
DirectRoute product line, on which Symplex's development expenditures to date
aggregate approximately $7,000,000, offers a platform for WAN switching and
routing functionality, and combines dynamic scaleable bandwidth and connection-
oriented internetworking with switched digital telecommunications services such
as ISDN. The DirectRoute product family ranges from entry level, branch office
installed solutions, to flexible, robust solutions for the corporate backbone.
While certain versions of DirectRoute can be used for telecommuting and Internet
access, the product line has been positioned initially as a flexible WAN access
switch giving high performance LAN-to-LAN connectivity. Currently, the platform
incorporates ethernet connectivity via frame relay, dedicated ISDN, and
traditional leased line WAN services. Through the utilization of switched
digital services, DirectRoute
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allows LANs to communicate with one another quickly, efficiently and cost
effectively. The product architecture allows LAN users to access remote sites
easily.
DirectRoute products combine a number of performance enhancing features
embodying Symplex's proprietary technologies. They allow up to 10 remote office
users to connect via DirectRoute using a single IP address; minimize the amount
of needless "chatter" in the WAN thus eliminating lines which are left connected
but are not actually transmitting data; and automatically open and close lines
to ensure maximum utilization and minimum cost of each open line. DirectRoute
also uses bandwidth management to optimize the connections that are open to meet
customers' specific networking goals, whether by reducing cost through optimal
line usage, or increasing performance through maximum throughput, and has built
in, easy to control network security functions and network management software.
DirectRoute products also feature Symplex's most advanced data compression
techniques. Data compression reduces or compresses the amount of data
characters sent over a communications link in a given time, thus enabling the
use of lower-speed and less costly links for the same amount of traffic. By
reducing the overall number of bits needed to transmit data, compression reduces
the bandwidth required, thus increasing efficiency and reducing cost.
DirectRoute optimizes compression on a destination-by-destination basis using a
variety of compression schemes, permitting the products to select the most
efficient technique automatically, based on the specifics of the traffic
patterns encountered. The Symplex compression scheme features ongoing
diagnostics to ensure real time optimization.
DirectRoute products can be used with existing networking software and
equipment. They can therefore be incorporated into existing leased line router-
based networks to add functionality, flexibility and an alternative transmission
mode. New locations which would not be cost effective to connect to an existing
network backbone can be linked through a DirectRoute unit. DirectRoute can also
be added to sites which are running out of bandwidth on an existing leased line
to reduce overall transmission costs and increase the performance of the entire
network, obviating the need to add additional leased lines.
Large complex internetworking on-line services have from time to time
experienced severe outages due to an inability to provide instantaneous, high
speed recovery systems. Currently, manufacturers offer DSU/CSU recovery at
56Kbps for networks that are using speeds up to 45 Mbps. DirectRoute provides a
lower cost, high performance alternative through a proprietary network recovery
technology, with recovery speeds from 128 Kbps to 2.048 Mbps. This technology
permits DirectRoute to transparently monitor the health of network connections
via the ethernet and backup the network.
Finally, DirectRoute does not require lengthy set-up time since all
initialization functions are built into the unit. The user simply answers five
basic questions to make DirectRoute operational.
The next generation of DirectRoute II products is currently scheduled for
initial introduction in the last quarter of 1997.
The DirectRoute RO-1 and DR-1 products have suggested end-user prices ranging
from $599 to $4,999 depending on the model, volume and upgrades.
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Datamizer
Datamizer products are bandwidth enhancers which can increase the data
transmission capacity ("throughput") of existing WAN links or be used to
maintain throughput of an existing link with a more efficient configuration.
They achieve high-speed transmission by taking advantage of proven data
communications technologies, including inverse multiplexing, statistical
multiplexing, data compression and automatic link restoration. Datamizer units
have been installed worldwide, many in Fortune 1000 environments. The Company
developed Datamizer in 1983 to respond to user requirements for higher
performance over existing transmission links. It is now in its fourth product
generation, with the fifth generation Datamizer V currently scheduled for
initial introduction in the third quarter of 1997.
Inverse multiplexing enables multiple lower-speed links to be combined for
transmission to the same location. Statistical multiplexing enables multiple
data inputs to be sent over the same link, thus reducing the need for more
circuits. Link restoration software enables a link failure or decrease in link
performance to automatically force the creation of a second or backup link.
The current version of Datamizer was first shipped in 1992, and supports data
compression on point-to-point connections at speeds up to 1 Mbps. It is an
open-ended scaleable platform with upgradeable performance enhancements, snap-in
interfaces and reconfigurable ports.
The fifth generation Datamizer V, currently due for initial introduction in
the third quarter of 1997, is designed to extend the WAN access capabilities to
full T1/E1 speeds (up to 2 Mb), and provide data compression. It will also be
compatible with the most recent advances in frame relay technology. While frame
relay networks allow companies to use the public infrastructure to access
information rather than building costly point to point leased line routed
networks, the packet-based method of charging for frame relay networks has
resulted in an explosion in the monthly cost of frame relay networks. Datamizer
V is designed to reduce companies' monthly public network bill, providing
significant cost savings while enhancing overall network reliability. Symplex
considers that the biggest potential market for Datamizer V is multinational
corporations using international public networks. The Company also expects to
be able to leverage market access with its large installed base of Datamizer III
and IV customers who are moving to frame relay networks.
The Datamizer III and IV products have suggested end-user prices ranging from
$5,950 to $7,950 depending on the model, volume and upgrades. The Company has
not yet established the pricing for the Datamizer V product.
BUSINESS STRATEGY
The Company's principal business objective is to establish itself as a leader
in the development, distribution and support of high performance remote access
communications switching systems and data compression devices to enhance the
performance of existing LANs and WANs.
There are six broad elements to the Company's product development, marketing
and sales strategies:
1. Complete Development and Commercial Release of Datamizer V and
DirectRoute II
In the short term Symplex plans to complete the development and commercial
release of the next generation of each of its Datamizer and DirectRoute product
lines. Initial product introduction of Datamizer V is currently scheduled for
the third quarter of 1997, and of DirectRoute II for the fourth quarter of 1997.
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2. Enhancing Existing Products
The Company intends to continue to invest in product development with a view
to enhancing and adding to its current product portfolio. The development
effort consists of (i) establishing broad product requirements and
specifications, (ii) developing specific functional specifications based on
market knowledge and customer feedback, (iii) developing design documentation,
(iv) performing design review to verify product requirements, (v) fabricating
and testing a product prototype, and (vi) commencing production and delivery.
Symplex plans to develop and integrate its core competency by continuing to
enhance its existing product lines through development of switching devices
incorporating industry standards. The Company plans to continue to develop and
integrate core technologies, which include:
. Fast Ethernet. DirectRoute II will support the new emerging standard of
fast ethernet. DirectRoute will incorporate this interface as well as have an
option for an integrated fast ethernet switching hub which will allow customers
to converge many technologies into one single managed platform.
. Switching. Symplex's current and future platforms are based on an
innovative, scalable IP switching and routing architecture. Since IP is now an
industry standard protocol for both enterprise and Internet networks, and is the
basis for radically changing the cost, function and performance of Internet
Exchanges ("IX"), Network Access Points ("NAPs"), and enterprise networks.
Symplex intends to continue with its open systems architecture which allows for
interoperability with all major internetworking vendors including Ascend
Communications, Inc. ("Ascend"), Bay Networks, Inc. ("Bay"), Cisco Systems, Inc.
("Cisco"), Digital Equipment ("Digital") and 3Com Corporation ("3Com").
Cascade Communications, Inc., IBM and 3Com have formed an alliance to promote
IP switching platforms. This legitimizes the path that Symplex is pursuing, and
allows the Company to innovate by providing the combination of software with
switching hardware without the cost of special purpose "IP Hardware".
This architecture differs from that currently used by most competitors which
requires either that expensive IP hardware be built into or slow and cumbersome
routing software be installed in their switches. IP optimized switching allows
customers to build innovative IP networks that interoperate with their current
vendors by providing higher performance at lower cost than traditional network
hardware providers such as Ascend, Bay, Cisco, Digital or 3Com.
. Routing. Routing is a technology which is implemented into devices such
as routers, bridges and switches, and permits them to choose the best route
between two networks when there are multiple paths between them, by dividing the
networks into segments, with only traffic destined for a particular segment
being routed to it. This core technology is paramount in building complex,
scalable and flexible networks.
. IPV6. Due to its commitment to open standards architecture, the Company
expects that DirectRoute II will be among the first products capable of
interfacing with the equipment of other vendors using Internet Protocol Version
6 ("IPV6"), a new standard developed to facilitate a solution to the problem of
the limited availability of Internet addresses.
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. Secure Tunneling. Secure tunneling allows companies to utilize the
Internet as a backbone technology while providing secure tunneling from their
facilities to other company locations. It uses both firewall and other software
to initiate secure paths across the Internet. DirectRoute II will include secure
tunneling technology, a feature which is expected to give the Company immediate
access to Internet Service Providers ("ISP") due to existing demand from
corporate network users.
3. Developing Alliances with Third Parties
The cost of technology development is high and market conditions are
constantly changing and evolving. Because the Company has, in comparison to
some of its major competitors, relatively fewer resources, it plans to seek out
and license third party technology to round out its product lines and fill
product gaps. The Company may seek to develop strategic relationships with
companies that can provide emerging technologies, such as gigabit ethernet
technology, and may seek licensing relationships with original equipment
manufacturers. The Company may also seek to expand its own product portfolio
through licensing or other arrangements with suppliers of such products.
4. Expanding and Strengthening Sales and Marketing Team
With a view to reach its potential North American and international markets
effectively, Symplex plans to strengthen and expand its sales and marketing team
by increasing its direct sales force, adding technical sales support in the
field, inside sales support staff, and marketing personnel. As of March 31,
1997, the Company had five sales representatives, two inside sales support and
two marketing support personnel, all in the Ann Arbor office, and six people in
its European office. Symplex plans by June 30, 1998 to increase its complement
of sales and marketing personnel to a total of 28, consisting of twelve sales
representatives, six European office personnel, three inside sales support
personnel, four marketing support personnel, and three systems engineers to
support large and multinational accounts in the design and support of their
complex networks. The expected incremental monthly salary cost of these
additional sales and marketing personnel is anticipated to be approximately
$80,000.
5. Managing Expenses Effectively
During the fiscal years ended December 31, 1994, 1995 and 1996, Symplex's
annual revenue constantly declined, being $10.9 million, $9.4 million and $6.1
million respectively. The revenue decline was most acute in the Datamizer
product line with annual revenues of $10.8 million, $8.0 million and $4.0
million respectively. The DirectRoute family of products was launched in 1994,
generating revenues of $107,000, which grew to $1.4 million in 1995 and $2.1
million in 1996. The Company expects its principal revenue growth to result
from worldwide DirectRoute sales, from Datamizer V, and incremental sales
emphasis on Datamizer IV applications. In the next twelve months, the Company's
operating expenses will exceed the gross margin contribution generated by its
revenue stream unless and until it is able to increase existing revenues with
product sales from current products and new products under development. The
proceeds of the Canadian IPO are expected to be adequate to meet the Company's
projected working capital and other cash requirements for at least the twelve
months following the completion of the Canadian IPO, and to enable it to meet
its principal short-term objectives as described above. Management will monitor
operating performance closely and, if it appears that the previously defined
strategies will not generate the desired revenues within a reasonable period,
will reduce expenses accordingly. Any such reduction will involve scaling back,
delaying or postponing those development activities which are not essential to
the attainment of short term objectives, with a view to ensuring that the
proceeds of the Canadian IPO are adequate to meet the Company's projected
working capital and other cash requirements for at least 18 months following
completion of the Canadian
11
<PAGE>
IPO. As the Company will require additional financing to satisfy its longer term
working capital and other cash requirements, however, it will continually
evaluate the availability and appropriateness of various methods of raising such
additional funds. There can be no assurance that such financing will be
available, or that, if it is, it will not have the effect of diluting the
ownership interests of existing shareholders, or of diluting the value of those
interests.
6. Enhancing and Extending Relationships with Distributors
To augment the efforts of its direct sales organization, the Company plans to
attempt to enhance its existing relationships with distributors, and build new
relationships with resellers and systems integrators (organizations that package
different technology together to provide solutions) with a view to the inclusion
of Symplex products in their product offerings. To accomplish this objective,
the Company will increase spending for advertising, attend trade shows, and
increase other promotional activities designed to generate demand for the
Company's products and services. These marketing activities will be designed to
shorten the Company's sales cycle.
PRODUCT MANUFACTURING
The Company does not operate or own any large scale manufacturing facilities.
The manufacture of the DirectRoute product line is subcontracted to IEC
Electronics Corp., under a Manufacturing Services Agreement dated July 5, 1995
(the "IEC Agreement"). The IEC Agreement has an initial term of three years and
is renewable automatically for successive 12 month periods unless notice of non-
renewal is given by any party at least 60 days prior to the end of any such
renewal term.
The Datamizer product line is assembled by component vendors in the Ann
Arbor, Michigan, area. Final product testing and software loading is performed
by Symplex at its headquarters location.
The Company's reliance upon third parties for product manufacture and
assembly carries with it a number of risks, including the lack of adequate
capacity, the unavailability of, or interruption in access to, certain process
technologies and reduced control over delivery schedules, manufacturing yields
and costs. The Company has occasionally experienced and may in the future
experience delays in delivery of its products, and this could have a material
adverse effect on its business, financial condition and results of operations.
MARKETING AND SALES
Sales Plans
The Company has historically sold its products and services in North and
Latin America with a centralized sales force located in Ann Arbor, Michigan.
The Company has recently added three North American sales representatives (for a
total of four) in the field, responsible for both direct and indirect sales
through distributors, value added resellers and systems integrators. In Europe,
sales are currently made through selected distributors supported by a sales
support staff of six based in The Hague, in the Netherlands. Asian and Latin
American sales are also undertaken through selected distributors who are
supported by one international sales representative.
The Company has entered into non-exclusive distribution agreements with
distributors in North America, Japan, and a wide variety of other regions
including the United Kingdom, several countries in Europe, Asia, and Central and
South America. Among the parties with whom Symplex has such
12
<PAGE>
agreements are Tech Data Corporation, of Clearwater, Florida, a major North
American distributor of networking products, Oki Electronic Industry Co. Ltd.,
of Tokyo, Japan, and Kanematsu Corporation, also of Tokyo. While none of these
distributor agreements is presently material to Symplex, the Company expects to
devote substantial efforts to strengthening its existing distributorship
arrangements and to developing further such relationships and opportunities.
Several such opportunities have been identified which Symplex believes represent
a significant potential market to be approached through established
distributors. The distribution agreements generally provide for non-exclusive
distribution rights in a defined geographic area with a term of one year,
automatically renewable for successive one year terms, generally to a maximum of
two renewals.
Marketing Plans
The Company intends to sell its products through direct and indirect sales
organizations, worldwide. To enhance its sales organization, Symplex plans to
implement a number of marketing programs, principally including regional
seminars in the United States, attendance at trade shows, direct mail campaigns,
advertising through the Internet and trade publications, focusing on how
Symplex's products enhance scalability, availability, ease of use and cost of
ownership. The Company plans to market the seminars through Internet
advertising, direct mail and a focused telemarketing effort. It also plans to
enhance its Internet site to enable sales representatives to make presentations
to potential customers through this medium. During the twelve months following
completion of the Canadian IPO, Symplex expects to make average monthly
expenditures of approximately $400,000 on sales and marketing activity.
The Company plans to market its products indirectly through its efforts to
establish relationships with resellers and system integrators, taking advantage
of the credibility it developed with the existing Datamizer installed base, and
through extensive advertising and integrated marketing programs.
PRODUCT LIABILITY
The Company's agreements with its distributors typically contain provisions
designed to limit the Company's exposure to potential product liability claims.
There can be no assurance that such provisions will protect the Company from
such claims in the markets in which it sells its products. In addition, while
Symplex maintains product liability insurance under an umbrella liability policy
with a general aggregate limit of $7,000,000 and a separate general liability
policy which limits aggregate coverage to $2,000,000 with a policy limit of
$1,000,000 for each occurrence, a successful product liability claim brought
against it resulting in liability in excess of its insurance coverage could have
a material adverse effect upon the Company's business, results of operations and
prospects.
COMPETITION AND COMPETITIVE STRATEGY
The market for network switching products is extremely competitive and
subject to frequent product introductions with improved price/performance
characteristics, rapid technological change and continued emergence of new
industry standards. Many networking companies, including Ascend Communications,
Inc., Bay Networks, Inc., Cabletron Systems, Inc., Cisco Systems, Inc., FORE
Systems, Inc., and 3Com Corporation have introduced or have announced their
intention to develop products in the network switching business. Many of
Symplex's large competitors offer customers a broader product line which
provides a more comprehensive solution than the Company currently offers.
Symplex expects that other companies will also enter markets in which the
Company competes such as data compression and multiplexing technology.
13
<PAGE>
Additionally, Symplex expects to face competition from other vendors in the
networking market who may incorporate switching, routing or compression
technology into their products or provide alternative network solutions. Many
of the large competitors have substantially greater financial, technical, sales,
marketing and other resources, as well as greater name recognition and a larger
customer installed base than Symplex, and as a result may be able to devote
greater resources to the development, promotion, sale and support of their
products and services. In addition, competitors with a larger customer
installed base may have a competitive advantage when selling similar products or
alternative networking solutions to their customers. Increased competition
could result in downward price pressure, reduced profit margins or loss of
market share, any of which could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully against either current or
potential competitors.
DirectRoute
The market for internetworking products is highly competitive. The principal
competition for DirectRoute consists of products manufactured by ISDN equipment
manufacturers and by internetworking equipment manufacturers.
In the ISDN market, competing products are manufactured by many companies,
including Cisco Systems Inc., Ascend Communications, Inc., ADTRAN, Inc., Digi
International and Motorola. The products of these manufacturers are currently
addressed to the single telecommuter and small office markets, typically limit
the number of connectable PCs to fewer than four, and have maximum transmission
speeds of 128 Kbps. In contrast, DirectRoute, depending on configuration, can
handle from 25 to 1000 or more users transmitting simultaneously at speeds up to
512 Kbps, and incorporates the Company's proven data compression algorithms.
Symplex believes that compared to the offerings of its competitors in this
market area, the enhanced capabilities of DirectRoute will make it attractive to
small and medium-sized businesses as well as telecommuters.
In the high-end internetworking market, the Company's products compete with
bridges, routers and switches designed by, among others, Cisco Systems, 3Com
Corporation, and Bay Networks. Symplex believes that DirectRoute is currently
more flexible than competing routers, bridges and switches and offers the
possibility of high-bandwidth applications at a lower cost, taking advantage of
switched digital ISDN connectivity without the need for a full network support
structure. In addition, DirectRoute has the ability to establish and disable
connections, which enables connectivity speeds equal to a leased line T1 router
network at a lower cost through the use of multiple ISDN lines. DirectRoute
incorporates in one comprehensive platform multiple carrier services such as
ISDN, frame relay and dedicated leased lines.
The following table depicts the theoretical best performance of the
DirectRoute product family, subject to specific applications and the quality of
telecommunications networks, contrasted with competitors in the ISDN and
internetworking market segments.
14
<PAGE>
<TABLE>
<CAPTION>
56KBPS
28.8 KBPS LEASED LINE
FILE TYPE FILE SIZE DIAL-UP ROUTER DIRECTROUTE
- ------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
E-Mail
MS-Word MS- 1-90 Kbytes 15-40 seconds 0.14-12.8 3.1-14.2
Excel seconds seconds
(64Kbps)
Graphics Files 3 Mbytes 14.1 minutes 7.14 minutes 52 seconds
(512Kbps)
X-ray
Power Point 37-400 Mbytes 2.8-30.8 hours 1.47-15.9 9.8 minutes to
Files hours 1.7 hours
(512Kbps)
</TABLE>
This performance additionally allows for potential cost savings over leased
line routers due to the ISDN switch capability. Since DirectRoute is able to
dial up remote locations and disconnect when the file transfer is completed, it
obviates the need for expensive leased line networks. Due to limited fixed
costs and time-based charging for ISDN by most providers, the ongoing cost of
DirectRoute solutions is expected to be less than the current cost of comparable
traditional leased line router networks.
Datamizer
Without a more extensive sales effort, Datamizer does not have substantial
market demand, and therefore little competition has entered the market in the
past several years. While Symplex management believes that there are competing
products offering some of the functions of the Datamizer product line, these
functions are handled by discreetly housed components performing narrowly
defined tasks. Competing products in the data compression market are
manufactured by Telco Systems, Inc., and in the inverse multiplexing market by
Ascend Communications, Inc.
INTELLECTUAL PROPERTY PROTECTION
The Company's ability to compete may be affected by its ability to protect
its intellectual property. It does not currently hold any patents nor does it
have any patent applications pending, and relies primarily on a combination of
common law copyrights in its software and design, trademark and trade secret
laws, confidentiality procedures, contractual provisions and the complex nature
of the technologies to protect its intellectual property. While the Company
believes that its products and technologies are adequately protected against
infringement, there can be no assurance of effective protection. Monitoring and
identifying unauthorized use of the Company's technology may prove difficult,
and the prohibitive cost of litigation may impair the Company's ability to
prosecute any infringement. The commercial success of the Company may also
depend upon its products not infringing any intellectual property rights of
others and upon no claims for infringement being made against the Company. The
Company believes that it is not infringing any intellectual property rights of
third parties, but there can be no assurance that such infringement will not
occur. An infringement claim against the
15
<PAGE>
Company by a third party, even if it were eventually found to be invalid, could
have a material adverse effect on the Company because of the cost of defending
against such a claim.
RESEARCH AND DEVELOPMENT
Research and development expense approximated $1,322,000 in 1996 compared
to approximately $1,627,000 in 1995 reflecting a declining investment in new
product development due to cash constraints. The rate of research and
development spending is expected to increase in 1997 following the Canadian IPO.
EMPLOYEES
At March 31, 1997 the Company employed 50 persons (including six in The
Netherlands), all of whom are full-time. Of these, 15 are engaged in product
development work, seven in manufacturing, 15 in sales and marketing, six in
customer support and seven in finance and administration. None of the Company's
employees is represented by a labor union nor is the Company a party to any
collective agreement. The Company considers its relations with its employees to
be good. Symplex has not entered into employment agreements with any of its
officers or employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the financial
statements and accompanying notes included elsewhere in this Prospectus.
BACKGROUND AND OVERVIEW
The Company was incorporated in California in 1982 and commenced operations
immediately thereafter. On February 28, 1997 it merged with Symplex Acquisition
Corporation, a Delaware corporation which was subsequently renamed Symplex
Communications Corporation. Initially and through October 1983 when it first
generated revenue, the Company was a development stage entity with activities
focused on business planning, product research and development, organizational
infrastructure and hiring. Symplex is now a two product family company. These
two products families are Datamizer and, since 1994, DirectRoute. Annual
revenues from the Datamizer product family increased from $130,000 in 1983 to a
high of $21,700,000 in 1989. Since that date, Datamizer revenues have continued
to decline, reaching a low point in 1996 of $4,022,000, with the Company
realizing a pretax profit in only one of the last five years. Historically,
Datamizer generated gross margins in excess of 70%. While the majority of the
Company's DirectRoute sales have been low-end products with correspondingly
lower margins, the Company expects that its selling emphasis will be on middle
to high-end DirectRoute products, and that this may moderate gross margin
erosion that might otherwise occur. As of December 31, 1996, Symplex had a
negative shareholders' equity of ($247,245). At March 31, 1997, the
shareholders' equity was $1,612,548.
In fiscal years prior to 1997, Symplex elected to be taxed as an S-
Corporation reporting entity for U.S. federal income tax purposes with the
result that, in lieu of corporation income taxes, the shareholders were taxed on
their proportionate share of the Company's taxable income. Accordingly, the
financial statements make no provision for corporate income taxes. On February
28, 1997, Symplex terminated its S-Corporation status and will be subject to
corporate income taxes after that date.
16
<PAGE>
FISCAL QUARTER ENDED MARCH 31, 1997 AND 1996
RESULTS OF OPERATIONS
For the quarter ended March 31, 1997, the Company incurred a loss from
operations of $810,399, and, after other income of $2,912, amortization of
discount on notes payable of $40,000 and interest expense of $78,044, a net loss
of $925,531 as compared to the quarter ended March 31, 1996 loss from operations
of $621,844, and, after other income of $256 and interest expense of $3,174, a
net loss of $624,762.
Sales
The Company had total first quarter sales in 1997 of approximately
$1,169,000, of which $698,000 was generated by Datamizer and $471,000 by
DirectRoute. The comparable amounts in the first quarter of 1996 were
$1,818,000, $1,338,000 and $480,000, respectively. 57% of total sales in each of
the quarters ended March 31, 1997 and 1996, respectively, were generated outside
the United States with Japanese sales representing approximately $122,000 in the
first quarter of 1997 and $266,000 in the same period in 1996. European sales
approximated $332,000 in the first three months of 1997 and $574,000 in
comparable period of 1996. Datamizer revenue includes sales of maintenance
contracts and service generated, worldwide.
Gross margins at March 31, 1997 approximated $616,000 or 52.7% compared to
approximately $1,152,000 or 63.4% at March 31, 1996. Margins in the later
period were adversely impacted by cost overruns resulting from declining volumes
and higher component costs and from competitive price pressure in selected
markets. Additionally, in the first quarter of 1997, sales included a higher
percentage of lower-margin DirectRoute products.
Product Development
Research and development expenses approximated $285,000 in the first three
months of 1997 as compared to $386,000 in the corresponding period of 1996.
This reflected a declining investment in new product development due to cash
constraints. Sales and marketing costs in the first quarter of 1997 were
approximately $433,000, compared to $718,000 in the same quarter of the prior
year, reflecting decreased investment in sales activities resulting from severe
cash constraints.
General and Administrative Expenses
General and administrative expenses for the first three months of 1997 were
$555,000 as compared to approximately $484,000 in the corresponding period in
the prior year. This increase resulted primarily from the recognition of
compensation expense related to the termination of the stock appreciation right
("SAR") plan. Engineering expenses declined to approximately $62,000, and
service costs to $91,000 in first quarter of 1997 compared to $87,000 and
$99,000, respectively, in the comparable period in 1996. In both instances the
decline was due to operating expense reductions mandated by cash constraints.
Other Income/Expense
Interest expense in the first three months of 1997 increased to
approximately $78,000 from approximately $3,000 in corresponding period in 1996
due to the full utilization by 1997 of the
17
<PAGE>
$1,000,000 bank line of credit and the costs associated with the restructuring
of this debt. In the first quarter of 1996, the Company borrowed $300,000 on its
bank line of credit.
FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
RESULTS OF OPERATIONS
For the year ended December 31, 1996, Symplex incurred a loss from
operations of $3,503,549, and, after other income of $7,825 and interest expense
of $148,913, a net loss of $3,644,637 as compared to the year ended December 31,
1995 in which the loss from operations was $2,209,448, which, after other income
of $37,458 and interest expense of $2,197, resulted in a net loss of $2,174,187.
Sales
Symplex recorded total 1996 sales of approximately $6,081,000, of which
$4,022,000 was generated by Datamizer and $2,059,000 by DirectRoute. This
compared to total 1995 sales of approximately $9,368,000 with Datamizer
accounting for $7,966,000, and DirectRoute for $1,402,000. 61% and 71% of total
sales in 1996 and 1995, respectively, were generated outside the United States
with Japanese sales representing $905,000 in 1996 and $908,000 in 1995.
European sales approximated $1,851,000 in 1996 and $4,682,000 in 1995.
Datamizer revenues includes sales of maintenance and service contracts which in
1996 generated approximated $188,000 as compared to approximately $300,000 in
1995.
Gross margins in 1996 approximated $2,953,000 or 48.6% compared to
approximately $6,374,000 or 68.0% in 1995. Margins were adversely impacted by
cost overruns resulting from declining product volume and higher component costs
and from a product mix shift that included a greater volume of lower margin
DirectRoute products. In addition, the 1996 margin was adversely impacted by an
increase in the reserve for obsolete inventory, of approximately $642,000.
Product Development
Research and development expense approximated $1,322,000 in 1996 compared
to approximately $1,627,000 in 1995 reflecting a declining investment in new
product development due to cash constraints. Sales and marketing costs declined
to approximately $2,522,000 in 1996 from approximately $4,079,000 in 1995
reflecting reduced commission expenses and a declining investment in sales
activities also due to cash constraints. The rate of research and development
spending is expected to increase in 1997 following the Canadian IPO.
General and Administrative Expenses
General and administrative expenses approximated $1,834,000 in 1996 as
compared to approximately $1,961,000 in 1995. This decline resulted from
general cost controls required by cash constraints. Engineering expenses
declined to approximately $394,000 in 1996 compared to $463,000 in 1995.
Service costs declined to approximately $385,000 in 1996 compared to $453,000 in
1995.
18
<PAGE>
Other Income/Expense
Interest expense increased in 1996 to approximately $149,000 from
approximately $2,000 in 1995 due to significant utilization of a $1,000,000 line
of credit.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred losses during the first quarter of 1997. It has
financed its operating losses during this period principally through the
proceeds of $1,867,635 (before expenses) of a private placement, and a second
cash infusion of $100,000 from a private investment group. In addition, in the
three month period to March 31, 1997 existing accrued liabilities to
shareholders totaling $341,500 were converted into 170,750 shares. The
5,748,268 shares outstanding at March 31, 1997 include 3,395,700 shares issued
in connection with the private placement, 454,545 shares issued through the
conversion of debt to equity, the issuance of a further 727,273 shares to the
private investment group in satisfaction of indebtedness of $400,000, and the
issuance of 86,871 shares in connection with the termination of the Company's
Stock Appreciation Rights Plan.
In the two years ended December 31, 1996 Symplex incurred losses and
financed its operations principally through capital contributions of its
stockholders, an advance from an outside lender and a bank line of credit.
Cash utilized in operating activities in the three month period ended March
31, 1997 amounted to approximately $952,000 compared to approximately $380,000
in the corresponding period in 1996. In the years ended December 31, 1996 and
1995 cash utilized in operating activities totaled approximately $1,279,000 and
$1,104,000.
Cash generated by financing activities in 1996 totaled approximately
$1,543,000 as compared to cash utilized by financing activities of approximately
$7,000 in 1995. In 1996 the Company's major borrowings included notes payable to
a stockholder and an investor totaling $550,000 and a fully utilized $1,000,000
secured bank line of credit. In 1995, the Company had no bank debt and was
principally funded from accumulated retained earnings previously undistributed
to stockholders.
As of March 31, 1997, the Company's principal sources of liquidity were
cash of approximately $1,210,000, trade receivables approximating $807,000 and
current and long-term liabilities of approximately $1,988,000. The accumulated
deficit at that date amounted to $1,252,000. As of December 31, 1996, Symplex's
principal sources of liquidity represented cash of approximately $320,000, trade
receivable approximating $529,000 and current and long term liabilities
approximating $2,870,000. The accumulated deficit at that date was $326,000.
As of December 31, 1995, Symplex's principal sources of liquidity were comprised
of cash of approximately $93,000, trade receivables of approximately $1,652,000
and current and long term liabilities aggregating approximately $1,081,000. As
at December 31, 1995 the Company had retained earnings of $3,318,000.
As of March 31, 1997 the Company had net working capital of approximately
$1,710,000. In the opinion of the management, the proceeds from the Canadian
IPO, the existing sources of liquidity
19
<PAGE>
and the funds generated from future operations will be sufficient to meet the
Company's projected working capital and other cash requirements for at least
twelve months following consummation of the Canadian IPO. There can be no
assurance of this, however, and management will continue to evaluate additional
means of financing, including debt or equity infusions, as well as collaborative
or other arrangements with strategic partners, and favorable arrangements with
suppliers and customers, all with a view toward satisfying the Company's long
term working capital and other cash requirements.
* * *
FORWARD-LOOKING STATEMENTS
This Registration Statement contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such forward-
looking statements be subject to the safe harbors for such statements under such
sections. The forward-looking statements herein are based on current
expectations that involve a number of risks and uncertainties. Such forward-
looking statements are based on numerous assumptions, including, but not limited
to, the assumption: that the new management team will function effectively; that
significant increases in sales and marketing personnel and expenditures will
result in increased sales; that the new generation Datamizer product will result
in increased sales in the Datamizer product line; that the new generation of
Datamizer and DirectRoute products will be developed on schedule and will
provide the level of performance and reliability demanded by the marketplace;
that focusing sales efforts on multinational companies in North America will
generate revenue growth internationally; that the Company can successfully
compete with larger, more established competitors; that market segments targeted
by the Company will continue to grow; that the Company will be successful in
emphasizing the mid- and high-range components of the DirectRoute product line;
that pricing and other competitive pressures worldwide will not cause margins to
erode significantly; and that currency fluctuations worldwide will not cause
adverse pricing pressures.
The foregoing assumptions are based on judgments with respect to, among other
things, future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control. Accordingly, although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any such assumption could prove to be inaccurate and therefore
there can be no assurance that the results contemplated in forward-looking
statements will be realized. The forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those set forth in or implied by the forward-looking statements, including,
but not limited to, the risk: associated with new management teams; that
increased sales and marketing personnel and expenditures will not increase sales
sufficiently to cover the associated costs; that the new generation of Datamizer
and DirectRoute products will experience development or product roll-out
problems; that the Company's current product line, the new generation Datamizer
and DirectRoute products, or future products will not keep up with the rapid
technological change in the marketplace or will otherwise not be well-accepted
in the market; that competitive conditions in the internetworking industry will
change adversely or otherwise become more intense; that changes in technology or
consumer preference could cause the growth rate in the markets the Company
serves to slow or halt; that demand for the DirectRoute product line will slow;
that sales of mid- and high-range DirectRoute components are not the significant
portion of DirectRoute sales; that worldwide pricing and other competitive
pressures could adversely affect the Company's margins; or that currency
fluctuations could
20
<PAGE>
result in international pricing pressures or could reduce the value in U.S.
dollar terms of the Company's international sales.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's head office and principal place of business is at 5 Research
Drive, Ann Arbor, Michigan 48103, where it leases approximately 26,000 square
feet under a month-to-month lease, at a gross monthly rent of $27,414. The
Company's product development, marketing and sales, and financial and
administrative functions are principally carried on from this location. In
addition, the Company leases a small office in The Hague, Netherlands, from
which its European sales and sales support efforts are carried on.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company for each director and
director nominee of the Company, for the Chief Executive Officer, for its
executive officers who were paid more than $100,000 in 1996, for all directors
and executive officers of the Company as a group, and for each shareholder who
is known by the Company to own more than 5% of the Company's Stock as of
_______________ [EFFECTIVE DATE OF REGISTRATION STATEMENT], 1997.
-----------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- ---------------- ------------------ -------------------
<S> <C> <C>
Opus Capital, LLP...................... 2,181,000/(1)/ 18.6%
1113 Spruce Street, Ste. 400
Boulder, CO 80302
Opus Capital Fund, LLC................. 1,131,000/(2)/ 10.6%
1113 Spruce Street, Ste. 400
Boulder, CO 80302
George Brostoff........................ 896,868/(3)/ 8.4%
5 Research Drive
Ann Arbor, MI 48103
Gary R. Brock.......................... 200,000 1.9%
5 Research Drive
Ann Arbor, MI 48103
Simeon Iliev........................... 127,907 1.2%
5 Research Drive
Ann Arbor, MI 48103
George J. Nagy......................... 95,000 *
5 Research Drive
Ann Arbor, MI 48103
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- ---------------- ------------------ -------------------
<S> <C> <C>
Thomas R. Mayer........................ 62,500 *
5 Research Drive
Ann Arbor, MI 48103
Nabil Sousou /(4)/..................... 38,219 *
1240 Bending
Ann Arbor, MI 48103
Thomas Radigan......................... 31,250 *
5 Research Drive
Ann Arbor, MI 48103
Patricia Kalmbach...................... 0 --
5 Research Drive
Ann Arbor, MI 48103
Herbert Amster......................... 0 --
5 Research Drive
Ann Arbor, MI 48103
All directors and executive officers
as a group (7 persons)................ 1,285,618 12.1%
- ------------------------------
</TABLE>
*Less than one percent.
(1) Includes options to purchase 1,050,000 shares which are currently
exercisable or become exercisable within 60 days. Opus Capital, LLP is the
manager of Opus Capital Fund, LLC (the "Fund"). Includes 931,000 shares
owned by the Fund and warrants held by the Fund to purchase 200,000 shares
which are currently exercisable or become exercisable within 60 days.
(2) Includes warrants to purchase 200,000 shares which are currently
exercisable or become exercisable within 60 days.
(3) Includes warrants to purchase 125,000 shares which are currently
exercisable or become exercisable within 60 days.
(4) Mr. Sousou resigned from the Company in March 1997.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Following are the names and ages of the directors, executive officers,
director and officer nominees and other key employees of the Company:
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<C> <C> <S>
Gary R. Brock 47 Chief Executive Officer, President and Director
George J. Nagy 38 Vice President - Marketing and North American
Sales
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<C> <C> <S>
Thomas Radigan 53 Acting Chief Financial Officer, Treasurer and
Secretary
George Brostoff 38 Chairman of the Board
Herbert Amster 62 Director
Patricia Kalmbach 38 Director
Thomas R. Mayer 62 Director
KEY EMPLOYEES
Constance Brown 50 Director of Operations
Simeon Iliev 48 Director of Engineering
</TABLE>
Gary R. Brock has been Chief Executive Officer, President and a director of
the Company since May 27, 1997. From October 1994 to May 1997 Mr. Brock was
Regional Vice President of General DataComm, Inc. a data communication company.
From 1991 to 1994 Mr. Brock was Vice President of Marketing of Ascom-Timeplex,
Inc., a telecommunications company. He has over 25 years experience in the
computer, telecommunications and data networking industry, with over 13 years of
such experience in senior sales and marketing management positions.
George J. Nagy has been Executive Vice-President of Marketing and North
American Sales since February 1997. From 1994 to February 1997, Mr. Nagy was
Regional Director of the Network Products Division for Digital Equipment
Corporation. From 1993 to 1994, Mr. Nagy held executive sales management
positions at National TechTeam, Inc., a systems integration and training
company. From 1989 to 1993 he was a national account manager with AT&T Paradyne,
an AT&T Corporation subsidiary, a data communications equipment provider. He has
over thirteen years of sales management experience with a background in
internetworking, systems integration technology and complex data networks for
large multinational clients.
Thomas Radigan was appointed Acting Secretary, Treasurer and Chief
Financial Officer in February 1997. For the past nine years, Mr. Radigan has
been an independent financial consultant providing financial and related
services on a contract basis to several companies, mostly in high technology
industries. Such services have been provided through Business of Finance, Inc.,
a financial consulting firm wholly-owned by Mr. Radigan. Mr. Radigan performs
Chief Financial Officer services on a contract basis to Opus Capital, LLP, a
firm that provides management and financial consulting services to the Company.
Mr. Radigan is a Certified Public Accountant.
George Brostoff is one of the co-founders of the Company and served as its
President and Chief Executive Officer and as a member of the Board of Directors
from its inception to his resignation in January 1997 upon being appointed the
non-executive Chairman of the Board of Directors. Mr. Brostoff is now an
independent business consultant and provides consulting services to the Company
principally in relation to sales, marketing and strategic planning. Mr.
Brostoff was named "Michigan 1990 Entrepreneur of the Year" by Inc. Magazine,
Ernst & Young, and Merrill Lynch.
Herbert Amster, an independent business consultant, was appointed a
director of the Company in March 1997. Mr. Amster served as President of Irwin
Magnetic Systems Inc., of Ann Arbor, Michigan from 1983 to 1984, and as its
Chairman and Chief Executive Officer from 1984 to May 1989. Between May 1989
and February 1990, Mr. Amster served as Senior Vice President of Cipher Data
Products Inc., following its acquisition of Irwin Magnetic Systems and, upon the
merger of Cipher Data Products into
23
<PAGE>
Archive Data Corp. in March 1990, became a Senior Vice President of Archive Data
Corp. He held that position until his retirement from active business in
September 1990. He was a director of Cipher Data Products Inc. from September
1989 to March 1990. Since September 1990 Mr. Amster has served as an independent
consultant. He currently holds the position of Chairman of the Industrial
Technology Institute in Ann Arbor, Michigan. Mr. Amster is a director of several
private companies, and of the following public companies: Mechanical Dynamics,
Inc., Jacobson Stores, Inc., and TriMas Corporation.
Patricia Kalmbach has been a director of the Company since 1995. For more
than five years Ms. Kalmbach has been President of Avis Enterprises, Inc., a
holding company that owns or has owned a variety of businesses, including
condominium conversion, land development, construction, auto dealerships, and
distribution and manufacturing companies. Currently, Ms. Kalmbach holds director
and officer positions in several corporations owned by Avis Enterprises, Inc.
Thomas R. Mayer has been a director of the Company since February 1997.
From February 1997 to May 26, 1997, he served as Acting President and Chief
Executive Officer of the Company. Since November 1995, Mr. Mayer has provided
business management consulting services as President of TRM Consultants, Inc.
From April 1992 to October 1995, Mr. Mayer was the Chairman, President and Chief
Executive Officer of Syntellect, Inc., a Phoenix, Arizona company devoted to the
development and sale of voice processing technology.
Constance Brown is Director of Operations for the Company, responsible for
general administration, including human resources, and production/shipping,
banking, accounting and inventory. Prior to joining the Company in 1983 Ms.
Brown was a sales associate with ARC Electronics.
Simeon Iliev, Director of Engineering, has managed product design and
development for Symplex since joining the Company in 1992. He built the
Company's product development department and was responsible for the development
of the DirectRoute product line, and has over twenty years of experience in data
communication engineering. From May 1990 to August 1992, Mr. Iliev was
Engineering Manager for Network Express, Inc., and prior to that served for nine
years as Engineering Manager for Bell Northern Research.
All executive officers are appointed by the Board of Directors and serve at
the Board's discretion.
ITEM 6. EXECUTIVE COMPENSATION
Gary R. Brock became Chief Executive Officer and President of the Company
on May 27, 1997. Mr. Brock's annual salary is $150,000 and he is eligible for a
quarterly cash bonus of $31,250 if the Company meets mutually agreed upon
performance goals, which may include, among other things, revenue, gross margin,
operating profit and revenue growth. Mr. Brock received a non-statutory stock
option for the purchase of 200,000 shares of common stock at $.30 per share.
Mr. Brock exercised the option and paid the exercise price by delivery of a non-
recourse promissory note. The shares are subject to repurchase by the Company,
with vesting in equal monthly installments over thirty-six months. Upon
completion of the Canadian IPO, the Company is to grant to Mr. Brock a non-
statutory option under the April 1997 plan to purchase 100,000 shares of common
stock at the Canadian IPO price to public, estimated to be $1.25 per share. The
option will vest 1/6 after six months from grant, with 1/30th of the remainder
vesting each month thereafter, to be fully exercisable three years after grant.
The option expires five years after the date of grant.
24
<PAGE>
Thomas Mayer, President and Chief Executive Officer of the Company prior to
May 27, 1997, and Thomas Radigan, Chief Financial Officer, were each appointed
to their respective positions in February 1997. Mr. Mayer currently provides
executive management consulting services to the Company on an interim basis.
Messrs. Mayer and Radigan serve the Company in such positions pursuant to an
agreement between the Company and Opus Capital, LLP ("Opus"), which provides
consulting services to the Company. Messrs. Mayer and Radigan are paid directly
by Opus and neither receives any cash compensation from the Company. See "Item
7. Certain Relationships and Related Transactions".
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and its executive officers who were paid more than $100,000 in
salary and bonus during the year ended December 31, 1996 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> Long Term
Compensation
Annual Compensation Awards
--------------------------------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary ($) Bonus($) Compensation($) Options/SARS (#)
--------------------------- ---- ---------- -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
George Brostoff /(1)/................... 1996 327,493/(2)/
Chief Executive Officer and President
Nabil Sousou/ (3)/...................... 1996 180,955
Vice President--International Sales
Simeon Iliev............................ 1996 110,000/(4)/
Director of Engineering
- -------------
</TABLE>
(1) Mr. Brostoff resigned as Chief Executive Officer and President in
January 1997 at which time he was appointed Chairman of the Board.
(2) Of this amount, $142,683 was paid and $184,810 was accrued. The accrued
amount was satisfied subsequent to December 31, 1996 by the issuance to Mr.
Brostoff of 92,405 shares of Common Stock at a price of $2.00 per share.
(3) Mr. Sousou resigned from the Company in March 1997.
(4) Upon effectiveness of this Registration Statement, Mr. Iliev's compensation
will be $125,000 per year.
George Nagy, Vice President--Marketing and North American Sales, is
eligible to receive a quarterly cash bonus if mutually agreed Company sales
targets are achieved, as follows: $7,500 if sales are at least 85% but less than
100% of target, $15,000 if sales are greater than 100% but less than 120% of
target, $20,250 if sales are 120% of target, and an additional $1,500 for each
additional 10% by which Company sales exceed the target.
There were no individual grants of options to purchase Common Stock of the
Company made during the fiscal year ended December 31, 1996 for the Named
Executive Officers.
No Named Executive Officers held any options to purchase Common Stock at
December 31, 1996 and no Named Executive Officers exercised any such options
during the year ended December 31, 1996.
25
<PAGE>
DIRECTOR COMPENSATION
Directors of the Company do not receive compensation as such, but are
reimbursed for travel costs and expenses incurred in attending Board and
Committee meetings. The Board of Directors has approved a one-time grant of
stock options under the April 1997 Plan to non-employee directors as follows:
30,000 each for directors Patricia Kalmbach and Herbert Amster and 40,000 to
George Brostoff, Chairman of the Board. The options are to be granted after
completion of the Canadian IPO, to be exercisable at the Canadian IPO price to
public, and will expire five years from the date of grant. Upon grant, the
options granted to directors Kalmbach and Amster will be treated as vested as to
8,000 shares each as of April 30, 1997, with the balance to vest at the rate of
1,000 shares for each meeting of directors attended after such date. Upon
grant, the option granted to George Brostoff will be treated as vested as to
8,832 shares as of April 30, 1997, with the balance to vest at the rate of 1,416
shares for each meeting of directors attended after such date. The Board of
Directors meets monthly.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company is a party to a Letter Agreement dated March 6, 1997 (the
"Brostoff Agreement") with George Brostoff, Chairman of the Board of the
Company, pursuant to which Mr. Brostoff agreed to make his services available
to the Company on an as needed basis, in the fields of sales, marketing and
investor relations. The Brostoff Agreement expires on June 30, 1997. It
provides for the payment to Mr. Brostoff of a daily or weekly fee of $500 or
$2,500 respectively, depending on the length of the engagement to be performed.
In addition, Mr. Brostoff is entitled to a commission of 10% on all sales
initiated by him; and 5% on all sales initiated by the Company with his
assistance. Compensation terms for other engagements are to be separately
negotiated from time to time as appropriate. As of March 31, 1997, the Company
had paid a total of $5,250 to Mr. Brostoff pursuant to the Brostoff Agreement.
STOCK OPTION PLANS
February 1997 Option Plan
The Company's Nonstatutory Stock Option Plan (the "February 1997 Option
Plan") was adopted by the Board of Directors of the Company in February 1997,
and was amended on April 11, 1997. The February 1997 Option Plan permits the
granting of non-statutory stock options only. The February 1997 Option Plan
is administered by a committee appointed by the Board which determines optionees
and the terms of options granted, including the exercise price, number of shares
subject to the option, and the exercisability thereof.
The Board of Directors capped the number of shares of the Company's Common
Stock reserved for issuance pursuant to options granted under the February 1997
Option Plan at 1,228,535. In April and May 1997 the Company granted an aggregate
of 1,185,145 options to purchase Common Stock under the February 1997 Option
Plan, and options to purchase 43,390 shares remain available for grant under
such plan. All options were granted at exercise prices of $.30 or $.55 per share
and by their terms expire on April 1, 2002 or upon the Company's initial public
offering. In April and May 1997 holders of an aggregate of 1,185,145 options
under the February 1997 Option Plan exercised their options. The purchase price
for all such option exercises was paid by recourse or non-recourse promissory
notes from the optionees to the Company, secured by the underlying shares.
1,068,200 of such shares are subject to vesting and repurchase by the Company
under the terms described in the following paragraph. 116,945 of such shares
were purchased by delivery of six-month interest-free recourse promissory notes
and are subject to repurchase by the Company in the event of termination of
employment prior to September 15, 1997.
26
<PAGE>
Options under the February 1997 Option Plan generally vest in equal monthly
installments over 36 months provided, however, that in the event of either (i)
the sale of all or substantially all of the assets of the Company, or (ii) the
death of the employee while employed by the Company, all options will be fully
vested. The options expire on April 1, 2002, provided, however, that if the
Company contemplates a public offering of its securities and gives notice of
this to the holders of these options, all such options, even if not vested, must
be exercised or forfeited. If the Company gives such notice, the holder of the
option has the right to pay the exercise price by delivery to the Company of a
recourse or non-recourse promissory note, due in three years and bearing
interest at 6.5%, and the shares issued pursuant to such exercise will be held
in escrow pending payment in full of the principal amount of the note and
accrued interest. The employee has the right to prepay monthly 1/36th of the
amount due under the note and to obtain release from escrow of the appropriate
number of shares. If prior to the due date under the note the participant's
employment or other service to the Company is terminated for any reason other
than death and there is a balance due under the note, the Company has the right
to repurchase the shares held in escrow to the extent not vested, at the
exercise price per share plus interest, to be paid and satisfied by set-off
against the balance due under the Note. The Company's repurchase right does not
apply in the event of a sale of all or substantially all of the assets of the
Company, or in the event of the death of the employee while in employment, in
which event the note will become immediately due and payable and the employee's
estate will have the right to prepay the note at any time and obtain release of
the shares from escrow.
Stock options under the February 1997 Option Plan were granted to and
exercised by the Named Executive Officers as follows: George Brostoff, 0 shares;
Simeon Iliev, 21,818 shares at $.55 per share and 95,000 shares at $.30 per
share; Nabil Sousou, 0 shares. In addition, 62,500 shares under the February
1997 Option Plan were granted to and exercised by Thomas Mayer at $.30 per
share, 31,250 shares were granted to and exercised by Thomas Radigan at $.30 per
share, and 200,000 shares were granted to and exercised by Gary Brock at $.30
per share. Shares purchased by Messrs. Mayer and Radigan are subject to vesting
and repurchase as follows: one-twelfth of the shares vest for each full month of
employment after January 1, 1997; provided, however, that if the holder's
employment is involuntarily terminated for any reason prior to July 31, 1997,
the holder will be vested as to seven-twelfths of such shares. All other terms
are as described in the prior paragraph.
April 1997 Option Plan
The Company's IPO Stock Option Plan (the "April 1997 Plan") was adopted by
the Board of Directors of the Company on April 29, 1997. The April 1997 Plan
provides that the aggregate number of shares reserved for issuance under the
April 1997 Plan, when added to shares reserved for issuance under any other
stock compensation arrangement, including other stock option plans and options
not granted under an option plan, may not exceed in the aggregate 2,250,000.
The April 1997 Plan provides for grants of non-statutory stock options only to
executive and other key employees (including officers who may be members of the
Board of Directors) of the Company, or any subsidiary or parent corporations of
the Company. The April 1997 Plan is administered by a committee appointed by
the Board which determines optionees and the terms of options granted, including
the exercise price, number of shares subject to the option, and the
exercisability thereof. The terms of options granted under the April 1997 Plan
generally may not exceed five years and the exercise price of stock options
granted under the April 1997 Plan must be at least equal to the fair market
value of the underlying shares on the date of grant. An option may not be
granted under the April 1997 Plan to any person if, as the result of such grant,
such person would at the time of such grant hold options, under the April 1997
Plan and any other stock option plan, to acquire in the aggregate more than five
percent (5%) of the issued and outstanding shares of Common Stock of the
Company.
The Board of Directors has approved the grant of 533,595 options under the
April 1997 Plan, to be granted after completion of the Canadian IPO. Of these,
100,000 have been approved for grant to non-employee directors, and the balance
to employees. 100,000 of the 533,595 options approved under
27
<PAGE>
the April 1997 Plan have been committed to Gary Brock, Chief Executive Officer
and President of the Company, 30,000 have been committed to Simeon Iliev,
Director of Engineering, 30,000 have been committed to George Nagy, Vice
President--Marketing and North American Sales, 20,835 have been committed to
Thomas Mayer, a director of and consultant to the Company, and 10,410 have been
committed to Thomas Radigan, Acting Chief Financial Officer. These options will
be exercisable at the Canadian IPO price to public (anticipated to be $1.25),
and will expire five years from the date of grant. With the exception of Messrs.
Mayer and Radigan, options approved for grant to employees are to vest at the
rate of one-sixth after six months from the date of grant with 1/30th of the
remainder vesting each month thereafter in which the employee continues in the
employment of the Company. Options granted to Messrs. Mayer and Radigan will
vest as follows: one-twelfth for each full month of employment after January 1,
1997; provided, however, that if the recipient's employment is involuntarily
terminated for any reason prior to July 31, 1997, the option will be vested as
to seven-twelfths of such shares.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the last quarter of 1996 George Brostoff, Chairman of the Board of
the Company, advanced an aggregate of $250,000 to the Company, which loan was
subsequently converted into 454,545 shares of Common Stock at $0.55 per share.
In consideration for these advances, the Company granted Mr. Brostoff a warrant
to purchase up to 125,000 shares of Common Stock at $0.55 per share. The warrant
expires March 5, 1999.
On March 5, 1997, the Company issued to George Brostoff 92,405 shares of
Common Stock at a value of $2.00 per share in satisfaction of arrears of salary
in the amount of $184,809 due to him as President and Chief Executive Officer of
the Company prior to his resignation from those positions in January 1997.
The Company is a party to a Letter Agreement with George Brostoff
pursuant to which he provides consulting services to the Company. See Part I,
Item 6 -Executive Compensation -Employment Agreements.
By a letter agreement dated February 12, 1997 (the "Opus Capital
Agreement"), Opus Capital, LLP ("Opus") agreed to provide a variety of
consulting and related services for the Company. These services included (i) the
preparation of an operating plan, (ii) making recommendations on executive
staffing and board composition, (iii) making available to the Company, pending
the filling of these positions on a permanent basis, the services of certain
executives associated with Opus, to serve as President and Chief Executive
Officer of the Company, and as its Chief Financial Officer, (iv) assisting in
the completion of a private placement, (v) introducing the Company to potential
underwriters with a view to their acting as its agents in connection with a
public offering in Canada, (vi) providing analytical coverage and investor
introductions following completion of such public offering, and (vii) arranging
interim loan financing on certain terms and conditions.
Pursuant to the Opus Capital Agreement, Opus has made available to
Symplex the services of Thomas A. Mayer as Acting President and Chief Executive
Officer, and of Thomas Radigan as Acting Chief Financial Officer. Neither Mr.
Mayer nor Mr. Radigan receives any cash compensation from Symplex. Both of them
are compensated directly by Opus.
In addition, as contemplated by the Opus Capital Agreement, Opus (a)
caused Opus Capital Fund, LLC to advance an aggregate of $400,000 to the Company
as bridge financing (the "Bridge Loan") which loan was subsequently converted
into 727,273 shares of Common Stock at $0.55 per share, (b) assisted the Company
in March 1997 in completing a private placement of 3,395,700 shares of Common
Stock (of which Opus Capital Fund, LLC purchased 203,727 shares) at a price of
$0.55 per share, and (c) introduced the Company to the agent for the Canadian
IPO. In consideration for the Bridge Loan,
28
<PAGE>
the Company issued to Opus Capital Fund, LLC a warrant (the "Opus Debt
Consideration Warrant") to purchase 200,000 shares of Common Stock at a price of
$0.55 per share, exercisable at any time prior to March 5, 1999.
Pursuant to the Opus Capital Agreement the Company (i) agreed to
reimburse Opus for its out of pocket expenses, including reasonable living and
travel expenses for Messrs. Mayer and Radigan, and to pay Opus a per diem fee of
$800 in respect of their services, (ii) granted Opus options to purchase 700,000
shares of Common Stock at a price of $0.55 per share, expiring March 5, 1999
(the "Opus Services Options"), and (iii) agreed to issue to Opus at the closing
of the Canadian IPO a warrant (the "Opus Services Warrant") to purchase 350,000
shares of Common Stock at the price to public, anticipated to be $1.25 per
share, expiring 24 months from the date of issue.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock
("shares") with a par value of $0.01. The holders of the shares are entitled to
vote at all meetings of shareholders, to receive dividends if, as and when
declared by the directors, and to participate ratably in any distribution of
property or assets on the liquidation, winding up or other dissolution of the
Company. The shares have no preemptive or conversion rights. As at the date of
this Prospectus, 6,933,413 shares have been issued and are outstanding.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Prior to they effective time of this Registration Statement there has
been no established public market for the Company's Common Stock. Concurrent
with the effectiveness of this Registration Statement the Company will complete
its initial public offering of Common Stock (the "Canadian IPO") in British
Columbia, Canada. The price to the public in the Canadian IPO is expected to be
US$1.25. Effectiveness of this Registration Statement will be coordinated with
completion of the Canadian IPO. Upon completion of the Canadian IPO, the Common
Stock will be listed on the Vancouver Stock Exchange under the symbol
"___________," and such exchange will be the primary market for the Common
Stock.
Upon completion of the Canadian IPO, the Company will have 10,503,413
shares of Common Stock outstanding. Of such shares, the 3,500,000 sold in the
Canadian IPO will be freely tradable in British Columbia, Canada, and such
shares will be subject to Regulation S under the Securities Act.
Prior to effective date of this Registration Statement, the Company had
6,933,413 shares of Common Stock issued and outstanding. A total of 2,522,264
of such shares are "restricted securities" under Rule 144 under the Securities
Act, 1,160,145 will be available for resale pursuant to Rule 701, and the
remaining 3,251,004 shares were offered and sold by the Company in reliance on
Regulation S promulgated under the Securities Act. As of the date of this
Registration Statement, 913,129 of the restricted securities have been held for
the two-year period under Rule 144. An additional 1,609,135 shares will satisfy
the Rule 144 one-year holding period on dates between February 28 and May 13,
1998.
29
<PAGE>
A total of 1,185,145 shares issued in April and May 1997 upon exercise of
stock options are subject to repurchase by the Company pursuant to the terms set
forth in the description of the February 1997 Option Plan detailed herein under
Part I, Item 6 - Executive Compensation - Stock Option Plans .
The Common Stock issued and outstanding prior to the Canadian IPO is also
subject to resale restrictions pursuant to the rules of the Vancouver Stock
Exchange ("VSE"). The application of these rules to the shares of the Company
issued and outstanding at the date of this Registration Statement has the
following results: (a) an aggregate of 1,083,879 shares may be resold upon the
date (the "Listing Date") the shares are listed, posted and called for trading
on the VSE; (b) an aggregate of 1,029,083 additional shares may be resold
following the expiration of three months from the Listing Date; (c) an aggregate
of 1,296,133 additional shares may be resold following the expiration of six
months from the Listing Date; (d) an aggregate of 1,462,383 additional shares
may be resold following the expiration of nine months from the Listing Date; (e)
an aggregate 1,462,385 additional shares may be resold following the expiration
of twelve months from the Listing Date; (f) an aggregate of 433,300 additional
shares may be resold following the expiration of 15 months from the Listing
Date; and (g) an aggregate of 166,250 additional shares may be resold following
the expiration of 18 months from the Listing Date.
STOCK OPTIONS AND WARRANTS
The Company is authorized to issue options to purchase 1,228,535 shares
under the February 1997 Option Plan. As of the date of this Registration
Statement, 1,185,145 options have been granted, 1,185,145 of such options have
been exercised, and 43,390 remain available for grant under the February 1997
Option Plan. No further options will be granted under the February 1997 Option
Plan. The number of options the Company is authorized to issue under the April
1997 Plan is computed as follows: 2,250,000 minus the number of shares of Common
Stock reserved for issuance under any other stock compensation arrangement,
including other stock option plans and options not granted under an option plan.
As of the date of this Registration Statement, no options have been granted
under the April 1997 Plan, but the Board has approved the grant of 533,595
options under such plan, to be granted after completion of the Canadian IPO.
The Company has also issued options outside the February 1997 Option Plan and
the April 1997 Plan for the purchase of 700,000 shares of Common Stock and
warrants to purchase 325,000 shares. 350,000 of such 700,000 options will be
available for resale under Rule 701. The options and warrants were issued in
exchange for services and in connection with financings.
The Company has agreed to issue a warrant to purchase 350,000 shares of
Common Stock to Opus Capital, LLP upon completion of the Canadian IPO,
exercisable at the Canadian IPO price to public (anticipated to be $1.25),
expiring 24 months from the date of issue.
The Company has agreed to grant the agent (underwriter) for the Canadian
IPO (the "Agent") a non-transferable warrant (the "Agent's Warrant") to acquire
up to 400,000 shares of Common Stock. The Agent's Warrant will be exercisable at
the price to public in the Canadian IPO, expected to be $1.25 per share, and
will expire 365 days from the date upon which the shares are listed and posted
for trading on the VSE. Upon completion of the Canadian IPO, the Company has
also agreed to issue 70,000 shares of Common Stock to the Agent.
30
<PAGE>
SHAREHOLDERS AND DIVIDEND POLICY
Prior to the Canadian IPO there were approximately 86 holders of the
Common Stock. Upon completion of the Canadian IPO, the Company estimates there
will be approximately __________________ holders of record of the Common Stock.
No dividends were paid in the 1995 or 1996 fiscal years. The Company
intends for the foreseeable future to retain all future earnings, if any, for
the development of its business. The payment of future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, capital requirements, the Company's financial
condition, and general business conditions.
ITEM 2. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company did not sell any securities in 1996, 1995 or 1994.
The Company sold the following unregistered securities in 1997.
(1) On March 5, 1997, the Company issued to George Brostoff, Chairman of the
Board of the Company, a warrant to purchase 125,000 shares of Common Stock at an
exercise price of $0.55 per share in connection with his loan of $250,000 to the
Company in the fourth quarter of 1996.
(2) On March 5, 1997, the Company issued to Opus Capital Fund, LLC a warrant
to purchase 150,000 shares of Common Stock at an exercise price of $0.55 per
share in connection with its loan of $300,000 to the Company in December 1996.
(3) On March 5, 1997, the Company issued to Opus Capital Fund, LLC a warrant
to purchase 50,000 shares of Common Stock at an exercise price of $0.55 per
share in connection with its loan of $100,000 to the Company.
The Company believes these transactions were private in nature and was exempt
from the registration requirements of Section 5 of the Securities Act by virtue
of the exemption contained in Section 4(2) of the Securities Act.
31
<PAGE>
(4) On March 5, 1997, the Company sold in a private placement (the "Private
Placement") 3,395,700 shares of Common Stock to 16 accredited investors, 15 of
whom were Canadian residents and one of whom was a U.S. resident, for an
aggregate purchase price of US$1,867,635.
The Company believes this sale was exempt from the registration requirements of
Section 5 of the Securities Act by virtue of the exemptions provided by Section
4(2) and Regulation S of the Securities Act.
(5) On March 5, 1997, in connection with the Private Placement, the Company
issued 86,871 shares of Common Stock to current and former employees upon
conversion of stock appreciation rights held at the time by such persons.
(6) On March 5, 1997, the Company issued 454,545 shares of Common Stock to
George Brostoff upon conversion of a $250,000 convertible promissory note.
(7) On March 5, 1997, the Company issued 727,273 shares of Common Stock to
Opus Capital Fund, LLC upon conversion of $400,000 of convertible promissory
notes.
(8) On March 5, 1997, the Company issued an aggregate of 170,750 shares of
Common Stock in consideration for the cancellation of $341,500 of obligations
for accrued royalties, wages and expenses of four employees and directors. The
shares were issued as follows: George Brostoff, 92,405; Connie Brown, 28,125;
Warren Avis, 5,558; Cyrus Azar, 44,662.
(9) On March 5, 1997, pursuant to an agreement with Opus Capital, LLP, the
Company granted to Opus Capital, LLP an option to purchase 700,000 shares of
Common Stock at $.55 per share, expiring March 5, 1999.
(10) On April 15, 1997, the Company sold 116,945 shares of Common Stock to for
aggregate consideration of $64,320 in principal amount of promissory notes. The
shares were sold to employees and directors of the Company upon exercise of
stock options under the February 1997 Option Plan.
(11) In May 1997, the Company sold 1,068,200 shares of Common Stock to for
aggregate consideration of $320,460 in principal amount of promissory notes. The
shares were sold to employees and directors of the Company upon exercise of
stock options under the February 1997 Option Plan.
The Company believes each of these transactions was private in nature and was
exempt from the registration requirements of Section 5 of the Securities Act of
1933 (the "Securities Act") by virtue of the exemption contained in Section 4(2)
of the Securities Act.
(12) On [EFFECTIVE DATE OF IPO], the Company completed its initial public
-------------------------
offering of Common Stock in British Columbia, Canada, selling 3,500,000 shares
of Common Stock for aggregate proceeds of US$__________. The purchasers were
all non-U.S. residents. In connection with such issuance, the Company paid
commissions and underwriters discounts equal to _________% of the aggregate
proceeds and issued 70,000 shares of Common Stock and warrants to purchase
400,000 shares of Common Stock exercisable at the price to public.
The Company believes this transaction was exempt from the registration
requirements of Section 5 of the Securities Act by virtue of the exemption
provided by Regulation S of the Securities Act.
32
<PAGE>
(13) On [effective date of IPO] , 1997, pursuant to the Company's
-----------------------------
February 12, 1997 Letter Agreement with Opus Capital, LLP, the Company issued to
Opus Capital, LLP an option to purchase 350,000 shares of Common Stock
exercisable at $ [IPO price] .
-------------
The Company believes this transaction was private in nature and was exempt from
the registration requirements of Section 5 of the Securities Act of 1933 (the
"Securities Act") by virtue of the exemption contained in Section 4(2) of the
Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware contains
provisions permitting corporations organized thereunder to indemnify directors,
officers and other representatives from liabilities in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person was or is a director, officer, employee or agent of the corporation,
against liabilities arising in any such action, suit or proceeding, expenses
incurred in connection therewith, and against certain other liabilities.
Article Twelve of the Registrant's Certificate of Incorporation provides that
the personal liability of the directors of the Registrant to the Registrant or
its stockholders for monetary damages for a breach of fiduciary duty as a
director is eliminated to the maximum extent permitted by Delaware law. Article
Six of the Registrant's Bylaws provides for indemnification of the Registrant's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act of 1933.
33
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEETS AS OF MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
AND STATEMENTS OF OPERATIONS, STOCKHOLDERS' EQUITY AND
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
AND 1996 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995:
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficiency in Assets) F-4
Statements of Cash Flows F-5-6
Notes to Financial Statements F-7-13
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Symplex Communications Corporation
Ann Arbor, Michigan
We have audited the accompanying balance sheet of Symplex Communications
Corporation (the "Company") as of December 31, 1996, and the related statements
of operations, stockholders' equity (deficiency in assets) and cash flows for
the years ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1996, and the
results of its operations and its cash flows for the years ended December 31,
1996 and 1995 in conformity with accounting principles generally accepted in the
United States.
May 1, 1997
(May 29, 1997 as to Note 16)
F-1
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
BALANCE SHEETS
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $1,210,441 $ 320,290
Trade receivables, less allowance for doubtful
accounts of $30,000 806,742 529,180
Inventories (Note 2) 1,221,329 1,312,734
Prepaid expenses and other current assets 39,112 98,174
---------- ----------
Total current assets 3,277,624 2,260,378
PROPERTY AND EQUIPMENT:
Machinery and equipment 2,694,644 2,692,465
Office equipment 1,017,118 1,017,118
Leasehold improvements 188,853 188,853
---------- ----------
Total 3,900,615 3,898,436
Less accumulated depreciation 3,577,754 3,535,910
---------- ----------
Net property and equipment 322,861 362,526
---------- ----------
TOTAL ASSETS (Notes 3 and 4) $3,600,485 $2,622,904
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES:
Trade payables $ 667,898 $ 782,749
Accrued expenses (Note 7) 320,039 575,763
Notes payable - revolving (Note 3) 500,000 500,000
Notes payable - current portion (Note 3) 80,000 20,000
Notes payable - with detachable warrants (Note 4) 510,000
Current portion of capital lease obligations 1,637
---------- ----------
Total current liabilities 1,567,937 2,390,149
NOTES PAYABLE - LESS CURRENT PORTION (Note 3) 420,000 480,000
---------- ----------
Total liabilities 1,987,937 2,870,149
COMMITMENTS (Note 15)
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS):
Common stock, $.01 par value; 20,000,000 shares
authorized and 5,748,268 shares issued at
March 31, 1997 and 913,129 shares issued at
December 31, 1996 (Notes 4, 8, 9, 10, 13, 14 and 16) 57,483 39,150
Additional paid-in capital 2,666,991
Additional paid-in capital - warrants 140,000 40,000
Retained earnings (accumulated deficit) (1,251,926) (326,395)
---------- ----------
Total stockholders' equity (deficiency in assets) 1,612,548 (247,245)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,600,485 $2,622,904
========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1996 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
3 MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ------------------------
1997 1996 1996 1995
(UNAUDITED) (UNAUDITED)
NET SALES AND REVENUES
(Note 12):
Manufactured products $1,125,603 $1,766,669 $ 5,893,325 $9,068,247
Maintenance contracts
and service 43,841 51,432 187,800 299,838
---------- ---------- ----------- -----------
Total net sales
and revenues 1,169,444 1,818,101 6,081,125 9,368,085
COSTS AND EXPENSES:
Cost of products sold 553,164 665,949 3,127,809 2,994,569
Selling and marketing 433,239 717,916 2,522,327 4,078,754
General and administrative
(Note 8) 554,997 484,053 1,834,230 1,961,020
Research and development 284,944 385,953 1,321,709 1,627,486
Engineering 62,266 86,578 393,915 462,567
Service 91,233 99,496 384,684 453,137
---------- ---------- ----------- -----------
Total costs and expenses 1,979,843 2,439,945 9,584,674 11,577,533
---------- ---------- ----------- -----------
OPERATING LOSS (810,399) (621,844) (3,503,549) (2,209,448)
---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (78,044) (3,174) (148,913) (2,197)
Amortization of discount on
notes payable (40,000)
Other income 2,912 256 7,825 37,458
---------- ---------- ----------- -----------
Total other income and
expenses (115,132) (2,918) (141,088) 35,621
---------- ---------- ----------- -----------
NET LOSS (Note 11) $ (925,531) $ (624,762) $(3,644,637) $(2,174,187)
========== ========== =========== ===========
LOSS PER COMMON SHARE $ (0.18) $ (0.12) $ (0.72) $ (0.43)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES 5,072,128 5,072,128 5,072,128 5,072,128
========== ========== =========== ===========
See notes to financial statements.
F-3
<PAGE>
SYMPLEX COMMUNICATIONS CORPORTATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
PAID-IN ADDITIONAL EARNINGS
NUMBER COMMON CAPITAL PAID-IN (ACCUMULATED
OF SHARES STOCK WARRANTS CAPITAL DEFICIT)
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 913,129 $ 39,150 $ 5,492,429
Net loss (2,174,187)
--------- --------- ------------
BALANCE AT DECEMBER 31, 1995 913,129 39,150 3,318,242
Issuance of detachable warrants $ 40,000
Net loss (3,644,637)
--------- --------- --------- ------------
BALANCE AT DECEMBER 31, 1996 913,129 39,150 40,000 (326,395)
--------- --------- --------- ------------
Statutory merger with wholly
owned subsidiary (Note 9) (30,019) $ 30,019
Issuance of common stock, net-
private placement (Note 13) 3,395,700 33,957 100,000 1,612,088
Conversion of notes payable
to common stock (Note 4) 1,181,818 11,818 638,182
Conversion of accrued
liabilities to common stock
(Note 7) 170,750 1,708 339,792
Issuance of common stock -
SAR plan termination (Note 8) 86,871 869 46,910
Net loss (925,531)
--------- --------- --------- ---------- ------------
BALANCE AT MARCH 31, 1997 5,748,268 $ 57,483 $ 140,000 $2,666,991 $(1,251,926)
========= ========= ========= ========== ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1996 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------
1997 1996 1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (925,531) $ (624,762) $(3,644,637) $(2,174,187)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation 41,846 57,892 234,296 327,842
Amortization of discount of notes
payable 40,000
Compensation for termination of SAR
plan 47,779
Changes in assets and liabilities
that provided (used) cash:
Trade receivables (277,562) 92,009 1,122,805 521,887
Inventories 91,405 (369,401) 753,691 (131,342)
Prepaid expenses and other current
assets 59,062 26,814 (30,177) (24,086)
Trade payables (114,851) 461,217 152,810 345,865
Accrued expenses 85,776 (23,684) 132,462 30,032
---------- ---------- ----------- -----------
Total adjustments (26,545) 244,847 2,365,887 1,070,198
---------- ---------- ----------- -----------
Net cash used in operating
activities (952,076) (379,915) (1,278,750) (1,103,989)
CASH FLOWS USED IN INVESTING ACTIVITIES -
Purchases of property and equipment (2,181) (11,869) (37,833) (110,364)
---------- ---------- ----------- -----------
Net cash used in investing
activities (2,181) (11,869) (37,833) (110,364)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 300,000 1,000,000
Borrowings of notes payable 100,000 510,000
Issuance of detachable warrants 40,000
Distribution to stockholders
Proceeds from issuance of common stock 1,746,045
Common stock redemption
Payments on capital lease obligations (1,637) (1,637) (6,548) (6,549)
---------- ---------- ----------- -----------
Net cash provided by (used in)
financing activities 1,844,408 298,363 1,543,452 (6,549)
---------- ---------- ----------- -----------
(Continued)
</TABLE>
F-5
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1996 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- --------------------------
1997 1996 1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ 890,151 $ (93,421) $ 226,869 $(1,220,902)
CASH AT BEGINNING OF PERIOD 320,290 93,421 93,421 1,314,323
---------- ---------- ----------- -----------
CASH AT END OF PERIOD $1,210,441 $ $ 320,290 $ 93,421
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the year
for interest $ 650,000 $ 3,174 $ 139,580 $ 2,197
========== ========== =========== ==========
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations
Conversion of amortized balance of
notes payable to common stock $ 650,000
==========
Conversion of accrued liabilities
to common stock $ 341,500
==========
Issuance of common stock for SAR
plan termination $ 47,779
==========
See notes to financial statements. (Concluded)
</TABLE>
F-6
<PAGE>
SYMPLEX COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Symplex Communications Corporation (the "Company")
designs, manufactures and sells specialized data communications equipment
primarily used to create computer networks and send information
electronically.
The financial statements have been prepared on a basis consistent with
accounting principles generally accepted in the United States.
SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
INVENTORIES - Inventories are stated at the lower of cost (determined on the
first-in, first-out method) or market (net realizable value).
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is provided using the straight-line method over the estimated
useful life of the asset. The costs of major remodeling and improvements on
leased property are capitalized as leasehold improvements. Capital leases
are recorded at fair market value of the assets. The estimated service lives
used to compute depreciation are five years for equipment and two to fifteen
years for leasehold improvements.
RESEARCH AND DEVELOPMENT - Research and development costs related to new data
communications products are expensed as incurred. Total research and
development costs of approximately $285,000 and $386,000 for the three months
ended March 31, 1997 (unaudited) and 1996 (unaudited) and $1,322,000 and
$1,627,000 for the years ended December 31, 1996 and 1995 were expensed to
operations, respectively.
PRODUCT WARRANTY COSTS - Sales agreements provide for necessary warranty
service for one year on new installations. The estimated future costs of
warranty service for products sold as of March 31, 1997 (unaudited) and as of
December 31, 1996 is $30,000 which is included in accrued expenses.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company has determined that the
carrying value of its financial instruments is a reasonable estimate of their
fair values.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of asset and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES - Prior to March 1, 1997, the Company was taxed as an S
corporation under the U.S. Internal Revenue code. The Company merged with its
wholly owned subsidiary on February 28, 1997 forming one Delaware-based C
corporation (Notes 9 and 10).
F-7
<PAGE>
LOSS PER COMMON SHARE - Earnings (loss) per share is computed using the
weighted average number of shares of common stock and common stock
equivalents. In accordance with Securities and Exchange Staff Accounting
Bulletin 83, common stock and common stock equivalents issued at prices below
an initial public offering price during the twelve months immediately
preceding the initial filing date are included in this calculation as if they
were outstanding for all periods presented using the treasury stock method
and the initial public offering price (assumed to be $1.25) as the repurchase
price. Under this guidance, earnings (loss) per share is calculated without
regard to antidilution. The following common stock equivalents have been
included in the weighted average number of common shares outstanding as if
issued for all periods presented:
<TABLE>
<CAPTION>
COMMON
STOCK
EQUIVALENT
<S> <C>
Common stock issued under private placement (Note 13) 1,901,592
Conversion of notes payable (Note 4) 661,818
Common stock exchanged for SAR Plan termination (Note 8) 48,648
Stock options issued under key employee plan (Note 14) 65,489
Stock options issued under employee purchase plan (Note 14) 811,832
Accrued liabilities converted to common stock (Note 7) 95,620
Warrants issued with convertible debt (Note 10) 182,000
Warrants issued to private investment group (Note 10) 392,000
---------
Total common stock equivalents 4,158,999
---------
</TABLE>
2. INVENTORIES
Inventories as of March 31, 1997 and December 31, 1996 consist of the
following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials $ 99,425 $ 104,955
Work-in-process 261,743 386,735
Finished goods 860,161 821,044
----------- ------------
Total $ 1,221,329 $ 1,312,734
=========== ============
</TABLE>
3. NOTES PAYABLE
At December 31, 1996, the Company had a line of credit agreement which
provided for borrowings up to $1,000,000 at 2% above the bank's prime rate,
secured by all assets of the Company. The Company had borrowings against
this line of credit of $1,000,000 and $0 at December 31, 1996.
The agreements for the line of credit contain restrictive covenants, the most
significant of which require the Company to 1) maintain certain levels of
tangible net worth, as defined; 2) maintain certain levels of working
capital; and 3) maintain a certain level of total liabilities to net worth.
F-8
<PAGE>
In March 1997, the Company restructured its bank line of credit agreement.
Under the new agreement, $500,000 of the December 31, 1996 balance was
converted to a term note payable, with $500,000 remaining as the amount
available under the line of credit. The term note matures December 1, 1999
and requires quarterly principal payments, beginning September 1, 1997, of
$10,000 for the first two payments, and $60,000 for the remaining eight.
Both the new term agreement and the line of credit require monthly interest
payments at a variable rate of 2% above the bank's prime rate. Both
agreements are secured by all assets of the Company and contain restrictive
covenants.
4. NOTES PAYABLE - WITH DETACHABLE WARRANTS
At December 31, 1996, notes payable consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Convertible subordinated note payable with detachable
warrants to a private investment group. Bears interest
at the prime rate (8.25% effective rate at December 31,
1996), and is due on March 15, 1997. Secured by all
assets and subordinate to the security interest
previously granted to the bank. $ 300,000
Convertible subordinated note payable with detachable
warrants to a stockholder. Bears interest at the prime
rate (8.25% effective rate at December 31, 1996), and
is due on March 31, 1997. The note is subordinate to
the security interest previously granted to the bank. 250,000
---------
Total 550,000
Unamortized discount 40,000
Less current maturities 510,000
---------
Long-term portion None
=========
</TABLE>
In February 1997, the Company received an additional $100,000 from a private
investment group in exchange for a convertible subordinated note payable with
detachable warrants. The associated warrants allow the purchase of 50,000
shares of voting, $.01 par value common stock. The warrants are exercisable
at $0.55 per share and expire March 5, 1999. On March 5, 1997, in
conjunction with the private placement, this debt and the previously issued
$300,000 note were converted to 727,273 shares of $.01 par value common stock
(Note 13).
On March 5, 1997, in conjunction with the private placement, the $250,000
debt to a shareholder was converted to 454,545 shares of $.01 par value
common stock (Note 13).
5. LEASES
The Company leases building space under an operating lease. Total rent
expense was $80,678 and $84,203 for the three months ended March 31, 1997 and
1996, respectively, and $323,541 and $338,166, for the years ended 1996 and
1995, respectively. The lease expired on December 31, 1996, and the Company
is currently leasing the space on a month to month basis.
F-9
<PAGE>
6. EMPLOYEE SAVINGS AND RETIREMENT PLAN
The Company has a 40l(k) Employee Savings and Retirement Plan, a defined
contribution plan, covering substantially all employees under which the
Company matches 50% per dollar of employee contributions up to 4% of the
employees' eligible compensation. The Plan also allows for additional
discretionary employer contributions. Total expense for this Plan was
$17,000 and $14,000 for the three months ended March 31, 1997 and 1996,
respectively, and $54,000 and $67,000 for the years ended 1996 and 1995,
respectively.
7. RELATED PARTY TRANSACTIONS
The Company has an agreement with a stockholder under which it annually pays
royalties in the amount of 2% of qualified sales or $150,000, whichever is
the lesser amount. The Company incurred royalty expense of $76,000 in 1996
and $150,000 in 1995. The total royalty expense for the three months ended
March 31, 1997 and 1996 was $13,000 and $25,000, respectively.
A subordinated note payable to a stockholder was converted to common stock in
March 1997 (Note 4).
In March 1997, certain stockholders converted $341,500 in accrued expenses to
equity as approved by the Board in November 1996. The stockholders received
one share of no-par, common stock for every $2 of indebtedness or 170,750
shares.
8. STOCK APPRECIATION RIGHTS
The Company had previously adopted a stock appreciation right ("SAR") plan
granting certain selected employees incentive bonuses based on the
performance of the Company's stock and as determined according to the Plan.
In general, such rights were not exercisable except in the event of an
initial public offering, a merger, or a sale of 50% or more of the Company's
voting stock.
In March 1997, in conjunction with the private placement, the SAR plan was
terminated. The selected employees received 86,871 shares of $.01 par value
common stock valued at $0.55 per share. Compensation expense of $47,779 has
been recognized for the three months ended March 31, 1997.
9. COMMON STOCK
During 1996, the Board amended the articles of incorporation authorizing an
additional 2,970,000 shares of no-par common stock. In conjunction with the
amendment, a stock split was also approved by the Board, providing for the
issuance of approximately 31 shares of new, no-par common stock for one share
of the previously outstanding, no par common stock. All years presented have
been restated to reflect the stock split.
On November 28, 1996, the Company formed a wholly owned subsidiary in the
State of Delaware, "Symplex Acquisition Corporation," with authorized capital
of 10,000,000 $.01 par value common stock. On February 28, 1997, the Company
statutorily merged with its wholly owned subsidiary, forming one Delaware
based C-corporation. Concurrent with the merger, the Articles of
Incorporation were amended to increase the authorized shares of $.01 par
value common stock from 10,000,000 to 20,000,000. Each outstanding share of
the former company was converted into one share of the new company's common
stock.
F-10
<PAGE>
10. WARRANTS
In connection with the issuance of various convertible subordinated notes
(Note 4), the Company issued warrants allowing the holders to purchase
325,000 shares of voting, no par common stock. The holders may fund the
purchase of shares through the delivery of a recourse or non-recourse
promissory note, bearing interest at the Applicable Federal Rate ("AFR").
The AFR is the minimum allowable interest rate that can be used before
imputed interest is required by the Internal Revenue Service. Under the non-
recourse note, the Company's sole recourse shall be to cancel any shares
that are being held in escrow. The warrants are currently exercisable at
$0.55 per share and expire March 5, 1999.
In February 1997, the Board granted warrants to purchase 700,000 shares of
$.01 par value common stock to a private investment group in consideration
for services performed in conjunction with the private placement (Note 13).
The holders may fund the purchase of shares through the delivery of a
recourse or non-recourse promissory note, bearing interest at the Applicable
Federal Rate. Under the non-recourse note, the Company's sole recourse shall
be to cancel any shares that are being held in escrow. These warrants are
exercisable at $0.55 per share and expire March 5, 1999.
In February 1997, the Company entered into an agreement with the same
private investment group to assist the Company with a Canadian initial
public offering. In consideration for the assistance, the Company agreed to
issue warrants to purchase 350,000 shares of $.01 par value common stock at
$1.25 per share, contingent upon completion of an initial public offering
raising at least $3 million and expiring two years from the effective date
of the initial public offering.
11. INCOME TAXES
The Company's provision for income taxes for the three months ended March
31, 1997 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Federal:
Current provision $ 0
Deferred provision (389,000)
Increase in valuation allowance 389,000
---------
Total $ 0
=========
</TABLE>
The net deferred income tax assets in the accompanying balance sheet include
the following:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets $ 389,000
Valuation allowance (389,000)
---------
Total $ 0
=========
</TABLE>
Deferred tax assets result primarily from timing in the recognition of
certain allowances and accrued expenses for tax and financial statement
purposes, and net operating loss carryforwards.
A valuation allowance has been provided for the deferred tax assets because
of the uncertainty surrounding their realization.
F-11
<PAGE>
Prior to March 1, 1997, the Company was taxed as an S corporation under the
U.S. Internal Revenue Code which provides that, in lieu of corporate income
taxes, the stockholders are taxed on their proportional share of the
Company's net income. Accordingly, the financial statements for all periods
presented prior to the quarter ended March 31, 1997 do not include a
provision for corporate income taxes. Had the S election not been in place,
the provision (tax benefit) for corporate income taxes would have been as
follows based upon the statutory rate of 34%:
<TABLE>
<CAPTION>
<S> <C>
Year Ended December 31:
1995 $(289,000)
1996 0
</TABLE>
12. EXPORT SALES
Export sales for the three months ended March 31, 1997 (unaudited) and 1996
(unaudited) and for the years ended December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------- ------------------------
1997 1996 1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
U.S. $ 500,738 $ 773,251 $2,368,729 $2,707,298
Germany 33,881 93,326 145,866 1,072,805
Belgium 190,295 338,710 942,109
Japan 122,435 133,783 905,035 908,918
Netherlands 153,151 31,580 405,923 252,692
Other 359,239 463,583 1,916,862 3,484,263
---------- --------- ---------- ----------
Total sales $1,169,444 $1,818,101 $6,081,125 $9,368,085
========== ========== ========== ==========
</TABLE>
13. PRIVATE PLACEMENT
In March 1997, the Company completed a private placement offering of
3,395,700 shares of no-par common stock for a total of $1,746,045, net of
offering costs of approximately $121,000. These shares were offered pursuant
to the exemption from registration under the Federal Securities Act of 1933
afforded by Regulation D, Rule 505 and Regulation S of the United States
Securities and Exchange Commission and pursuant to applicable exemptions in
Canada.
14. STOCK OPTIONS
In February 1997, the Board approved an employee share purchase stock option
plan. This plan grants certain employees the right to purchase common stock
of the Company for $.30 per share. The employees may fund the purchase of
shares through the delivery of a recourse or non-recourse promissory note,
bearing interest at the Applicable Federal Rate. Under the non-recourse
note, the Company's sole recourse shall be to cancel any shares that are
being held in escrow. Options granted under this plan expire prior to the
submission of a prospectus for an initial public offering. Certain
restrictions on the stock exist for a three-year period. A total of
1,111,590 shares of common stock have been reserved for issuance under this
plan. Subsequent to March 31, 1997, 1,068,200 options were granted and
exercised (Note 16).
F-12
<PAGE>
In February 1997, the Board approved a key employee stock option plan to
certain employees if they elect to reduce their compensation. One option to
purchase a share of $.01 par value common stock would be awarded for every
$0.55 of net after tax compensation. A total of 116,945 shares of common
stock have been reserved for issuance under this plan. Subsequent to March
31, 1997, 116,945 options were granted and exercised (Note 16).
15. COMMITMENTS
On May 16, 1997, the Company filed a prospectus with the British Columbia
Securities Commission.
16. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, options to purchase 1,068,200 shares of common
stock were issued (Note 14) and exercised at $.30 per share. In accordance
with the provision of the plan, the stock was paid for through the issuance
of individual non-recourse promissory notes totaling $320,460.
Subsequent to March 31, 1997, options to purchase 116,945 shares of common
stock were issued (Note 14) and exercised at $.55 per share. In accordance
with the provision of the plan, the stock was paid for through the issuance
of individual recourse promissory notes totaling $64,320.
Subsequent to March 31, 1997, the Board approved an IPO stock option plan.
This plan allows the Company to grant certain employees the right to
purchase common stock of the company at a price not less than the fair
market value of the stock on the date of grant. A total of 2,250,000 shares
of common stock have been reserved for issuance under the plan.
Subsequent to March 31, 1997, the Board committed to grant 533,595 options
to certain employees and non-employee Board members under the IPO stock
option plan. The options shall be granted as of the listing date of stock of
the Company on the Vancouver Stock Exchange, and the option price for the
shares shall be the initial price for shares of stock of the Company on the
listing date.
******
F-13
<PAGE>
PART III
INDEX TO EXHIBITS
Exhibit Description Page No.
----------- --------
Number
- ------
2.1 Certificate of Incorporation of the Company, as amended by
Agreement of Merger by and between the Company and Symplex
Communications Corporation, a California corporation.
2.2 Bylaws of the Company.
3.1* Form of Common Stock Certificate.
6.1 Symplex Communications Corporation Amended and Restated
Nonstatutory Stock Option Plan.
6.2 Symplex Communications Corporation IPO Stock Option Plan.
6.3 Letter Agreement dated March 6, 1997 between the Company
and George Brostoff.
6.4 Letter Agreement dated February 12, 1997 between the Company
and Opus Capital, LLP.
6.5 Manufacturing Services Agreement dated July 5, 1995 between
the Company and IEC Electronics Corp.
6.6 Restructure Agreement dated March 25, 1997 between the Company
and Michigan National Bank.
6.7 Business Loan Agreement and Addendum to Business Loan Agreement,
each dated March 25, 1997, between the Company and Michigan
National Bank.
6.8* Form of Agency Agreement.
6.9* Form of Sponsorship Agreement.
_______________________
(*) To be filed by amendment
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SYMPLEX COMMUNICATIONS CORPORATION
By: /s/ Thomas Radigan
---------------------------------------
Thomas Radigan, Chief Financial Officer
Date: May 30, 1997
<PAGE>
Exhibit 2.1
State of Delaware
Office of Secretary of State
______________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "SYMPLEX ACQUISITION CORPORATION" FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF NOVEMBER, A.D. 1996, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
-----------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8214863
2688606 8100
DATE: 12-02-96
960348061
<PAGE>
CERTIFICATE OF INCORPORATION
OF
SYMPLEX ACQUISITION CORPORATION
ARTICLE I
The name of the corporation is Symplex Acquisition Corporation (the
"Corporation").
ARTICLE II
The address of its registered office in the State of Delaware is The
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total authorized capital stock is 10,000,000 shares of common stock,
having a par value of $0.01 per share. All of the authorized shares are of the
same class and have equal voting powers, each share being equal to every other
share.
ARTICLE V
The name and mailing address of the incorporator are as follows:
James A. Schriemer, Esq.
Conlin, McKenney & Philbrick, P.C.
350 S. Main Street, Suite 400
Ann Arbor, Michigan 48104
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
<PAGE>
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend or rescind
any or all of the Bylaws of the Corporation.
ARTICLE VIII
Section 1. The number of directors of the Corporation shall be fixed
from time to time by a Bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
Section 2. Vacancies occurring on the Board of Directors for any reason
may be filled by vote of a majority of the remaining members of the Board of
Directors, although less than a quorum, at a meeting of the Board of Directors.
A person so elected by the Board of Directors to fill a vacancy shall hold
office until the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly elected and
qualified.
ARTICLE IX
Elections of directors at an annual or special meeting need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE XII
To the fullest extent permitted by Delaware General Corporation Law, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article shall eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
2
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true, and accordingly, has
hereunto set his hand this 26th day of November, 1996.
/s/ James A. Schriemer
-------------------------------------
James A. Schriemer
3
<PAGE>
AGREEMENT OF MERGER
-------------------
THIS AGREEMENT OF MERGER is made and entered into this 19th day of
February, 1997, by and between Symplex Communications Corporation, a California
corporation ("Communications") and Symplex Acquisition Corporation, a Delaware
corporation ("Acquisition").
BACKGROUND FACTS:
A. Communications was incorporated in 1982 under the laws of California
and on the date hereof its authorized capital stock of common shares consists of
3,000,000 shares of Common Stock without par value, of which 1,083,879 shares
are issued and outstanding.
B. Acquisition was incorporated in 1996 under the laws of Delaware solely
for the purpose of merging with Communications and on the date hereof its
authorized capital stock consists of 10,000,000 shares of Common Stock, of which
100 shares are issued and outstanding and all are owned by Communications.
C. The Boards of Directors of Communications and Acquisition have
determined that for the purpose of effecting the re-incorporation of
Communications in the State of Delaware, it is advisable and to the advantage of
Communications and Acquisition and their shareholders that Communications merge
into Acquisition upon the terms and conditions provided herein.
D. The Boards of Directors of Communications and Acquisition together
with the shareholders of Communications and Acquisition have approved this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
provisions set forth herein, Communications and Merger hereby agree to merge as
follows:
1. Merger. In accordance with the provisions of the General Corporation
------
Law of Delaware and the General Corporation Law of California, on the effective
date of the merger, Communications shall be merged with and into Acquisition
(the "Merger") and Acquisition shall be the surviving corporation in the Merger
(hereinafter Acquisition may sometimes be referred to as the "Surviving
Corporation").
2. Effective Date. The Merger shall become effective February 28, 1997,
--------------
hereinafter referred to as the "Effective Date."
3. Articles of Incorporation. Except as amended in Section 4 below, the
-------------------------
Articles of Incorporation of the Surviving Corporation in effect on the
Effective Date shall continue in full force and effect until altered, amended or
repealed as provided therein or as provided by law.
<PAGE>
4. Amendment to Articles of Incorporation. The Articles of Incorporation
--------------------------------------
of the Surviving Corporation shall be amended as follows:
Article I. The name of the corporation is Symplex Communications
Corporation (the "Corporation").
Article IV. The total authorized capital is 20,000,000 shares of
common stock, having a par value of $0.01 per share. All of the authorized
shares are of the same class and have equal voting powers, each share being
equal to every other share.
5. Bylaws. The Bylaws of the Surviving Corporation in effect on the
------
Effective Date shall continue in full force and effect until altered, amended or
repealed as provided therein or as provided by law.
6. Directors. Upon the effective date, the directors of the Surviving
---------
Corporation shall be George Brostoff, Chairman, Thomas R. Mayer and Patricia
Kalmbach.
7. Officers. Upon the effective date, the officers of the Surviving
--------
Corporation shall be as follows:
Thomas R. Mayer - President & Chief Executive Officer
Thomas Radigan - Secretary, Treasurer and Chief Financial Officer
8. Terms of the Exchange.
---------------------
(a) Upon the Effective Date, and without any action on the part of
the holder thereof, each outstanding share of the Common Stock of Communications
shall be converted into one share of the Common Stock of the Surviving
Corporation.
(b) Upon the Effective Date, each outstanding share of Common Stock
of the Surviving Corporation (all of which outstanding shares are owned by
Communications) shall be cancelled and retired and no shares of the Surviving
Corporation shall be issued in respect thereof.
9. Stock Certificates. On and after the Effective Date, all of the
------------------
outstanding certificates which prior to such date represented shares of Common
Stock of Communications shall be deemed for all purposes to evidence ownership
of and to represent the respective shares of the Surviving Corporation into
which the shares represented by such certificate have been converted as provided
2
<PAGE>
in this Agreement.
10. Further Assurances. From time to time, as and when required by the
------------------
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of Communications such documents and instrument, and
there shall be taken or caused to be taken by Communications such further and
other action, as shall be appropriate or necessary, in order to vest or confirm
to the Surviving Corporation title to and possession of the rights, properties,
assets and business of Communications. The officers and directors of the
Surviving Corporation are fully authorized in the name of and on behalf of
Communications or otherwise to take all such action and to execute and deliver
all such documents and instruments necessary to effectuate the purposes of this
Agreement.
11. Abandonment of Merger. At any time before the Effective Date, this
---------------------
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of Communications notwithstanding approval of this Agreement by the
shareholders of Communications or shareholders of Acquisition or both.
IN WITNESS WHEREOF, Communications and Acquisition have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
SYMPLEX COMMUNICATIONS CORPORATION,
a California corporation
By: /s/ Thomas R. Mayer
------------------------------------
Thomas R. Mayer, President
By: /s/ Constance L. Brown
------------------------------------
Constance L. Brown, Secretary
SYMPLEX ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Thomas R. Mayer
------------------------------------
Thomas R. Mayer, President
By: /s/ Constance L. Brown
------------------------------------
Constance L. Brown, Secretary
3
<PAGE>
EXHIBIT 2.2
BYLAWS OF
---------
SYMPLEX COMMUNICATIONS CORPORATION
----------------------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be fixed in the Certificate
of Incorporation of the corporation.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETING
----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, by the president or by the
chief executive officer, or by one or more stockholders holding shares in the
aggregate entitled to cast not less than a majority of the votes at that
meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer, or the secretary of the corporation. No business may be
transacted at such special
<PAGE>
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.6, that a meeting
will be held at the time requested by the person or persons who called the
meeting, not less than 35 nor more than 60 days after the receipt of the
request. If the notice is not given within 20 days after the receipt of the
request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 2.3 shall be construed as
limiting, fixing or affecting the time when a meeting of stockholders called by
action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these bylaws not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notice shall specify the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than 90 days prior to the meeting;
provided, however, that in the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. To be in
proper form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends
to make the nominations, and the name and address of the person
or persons to be nominated or the nature of the business to be
proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or by
proxy at the meeting to nominate the person
2
<PAGE>
or persons specified in the notice or introduce the business
specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, or the
matter been proposed, or intended to be proposed by the board of
directors; and
(v) if applicable, the consent of each nominee to serve
as director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairman of the meeting, or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
3
<PAGE>
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise required, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Sections 2.12 and 2.14 of these
bylaws, subject to the provisions of the General Corporation Law of Delaware
relating to voting rights of fiduciaries, pledgors and joint owners of stock and
to voting trusts and other voting agreements.
Except as may be otherwise provided in the Certificate of Incorporation,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote of the stockholders. Any stockholder entitled
to vote on any matter may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or, except when the matter is the
election of directors, may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
2.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, 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 stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
4
<PAGE>
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
If the board of directors does not so fix a record date, the fixing of such
record date shall be governed by the provisions of the General Corporation Law
of Delaware.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after 3 years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy
5
<PAGE>
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of the General Corporation Law of Delaware.
6
<PAGE>
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The stock ledger shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
-------------------
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the chief executive officer, if any, or in
his absence by the president, or in his absence by a vice president, or in the
absence of the foregoing persons by a chairman designated by the board of
directors, or in the absence of such designation by a chairman chosen at the
meeting. The secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting. The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such matters as
the regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
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The number of directors of the corporation shall be seven (7) until changed
by a proper amendment of this Section 3.2. No reduction of the authorized
number of directors shall have the effect of removing any director before that
director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
The directors shall be divided into three (3) classes as follows: the first
class shall consist of three (3) directors and the second and third classes
shall consist of two directors each. The term of office of the directors of the
first class shall end on the first annual shareholders' meeting after their
election; the term of office of the second class shall end on the second annual
shareholders' meeting after their election; and the term of office of the third
class shall end on the third annual shareholders' meeting after their election.
Beginning in 1998, at each annual meeting a number of directors equal to the
number of the class whose term expires at the time of the meeting shall be
elected to hold office until the third succeeding annual shareholders' meeting
after their election.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
Stockholders may remove directors with or without cause. Any vacancy occurring
in the board of directors with or without cause may be filled by a majority of
the remaining members of the board of directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected
by all of the stockholders having the right to vote as a single
class may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining
director.
(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by
the provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series
may be filled by a majority of the directors elected
8
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by such class or classes or series thereof then in office, or by
a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may apply to the Court of Chancery for a decree summarily
ordering an election as provided in the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least 10% of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office as aforesaid, which election shall be
governed by the provisions of Section 211 of the General Corporation Law of
Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
----------------
9
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Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least 4 days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.11
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
Certificate of Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, 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
10
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meeting of the directors, or members of a committee of directors, need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
11
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3.12 CONDUCT OF BUSINESS
-------------------
Meetings of the board of directors shall be presided over by the chairman
of the board, if any, or in his absence by the chief executive officer, or in
their absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
--------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.14 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.15 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.16 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any directors or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. If at any time a class or
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<PAGE>
series of shares is entitled to elect one or more directors, the provisions of
this Article 3.16 shall apply to the vote of that class or series and not to the
vote of the outstanding shares as a whole.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
share of any other class or classes or any other series of the same or any other
class or classes of stock of the corporation), (ii) adopt an agreement of merger
or consolidation, (iii) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment),
Section 3.12 (conduct of business) and 3.13 (action without a meeting), with
such changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not consistent with the provisions of
these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a chief executive officer, one or
more vice presidents, a secretary and a chief financial officer. The
corporation may also have, at the discretion of the board of directors, a
chairman of the board, a president, a chief operating officer, one or more
executive, senior or assistant vice presidents, assistant secretaries and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
--------------------
Except as otherwise provided in this Section 5.2, the officers of the
corporation shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment. The board of directors may
appoint, or empower an officer to appoint, such officers and agents of the
business as the corporation may require (whether or not such officer or agent is
described in this Article V), each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine. Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors or may be filled by the officer, if any, who appointed such officer.
5.3 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen
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<PAGE>
by the board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
another officer, by such other officer.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no chief
executive officer, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.5 of these bylaws.
5.5 CHIEF EXECUTIVE OFFICER
-----------------------
The chief executive officer of the corporation shall, subject to the
control of the board of directors, have general supervision, direction and
control of the business and the officers of the corporation. He or she shall
preside, in the absence or nonexistence of a chairman of the board, at all
meetings of the board of directors and at all meetings of the stockholders. He
or she shall have the general powers and duties of management usually vested in
the chief executive officer of a corporation, including general supervision,
direction and control of the business and supervision of other officers of the
corporation, and shall have such other powers and duties as may be prescribed by
the board of directors or these bylaws.
The chief executive officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation.
5.6 PRESIDENT
---------
Subject to such supervisory powers as may be given by these bylaws or the
board of directors to the chairman of the board or the chief executive officer,
if there be such officers, the president shall have general supervision,
direction and control of the business and supervision of other officers of the
corporation, and shall have such other powers and duties as may be prescribed by
the board
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<PAGE>
of directors or these bylaws. In the event a chief executive officer shall not
be appointed, the president shall have the duties of such office.
5.7 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all duties of
the chief executive officer and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the chief executive officer. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the chief executive officer or the chairman of the board.
5.8 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.9 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director.
16
<PAGE>
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
chief executive officer and directors, whenever they request it, an account of
all of his transactions as treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
5.10 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.11 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated form time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors
17
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and officers) against expenses (including attorneys' fees), judgments, finds,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
---------
The corporation may 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
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
-----------------------
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Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The Court may summarily order the corporation
to permit the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extracts therefrom. The Court
may, in its discretion, prescribe any limitations or conditions with reference
to the inspection, or award such other and further relief as the Court may deem
just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the chief executive officer, any vice president,
the chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or the
chief executive officer or a vice president, is authorized to vote, represent,
and exercise on behalf of this corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATION CONTRACTS AND INSTRUMENTS
--------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
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The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vide-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that except
as otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements there may be set forth on the face or back
of the certificate that the corporation shall issue to represent such class or
series of stock a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, the designations, the preferences,
and the relative, participating, optional or other special rights of each class
of stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the
20
<PAGE>
same time. The corporation may issue a new certificate of stock or
uncertificated shares in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to
21
<PAGE>
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
22
<PAGE>
EXHIBIT 6.1
SYMPLEX COMMUNICATIONS CORPORATION
AMENDED AND RESTATED
NONSTATUTORY STOCK OPTION PLAN
WHEREAS, SYMPLEX COMMUNICATIONS CORPORATION, (hereinafter called the
"Company"), a California corporation, wishes to provide favorable opportunities
for certain selected key employees, consultants and/or members of the Board of
Directors of the Company and any subsidiaries or parent corporation to purchase
shares of common stock of the Company, thereby encouraging them to acquire
proprietary and vested interests in the performance of the Company's common
stock; and
WHEREAS, the Company wishes to increase its ability to attract and retain
individuals of exceptional talent upon whom the sustained progress, growth and
profitability of the Company depend;
NOW, THEREFORE, the Company hereby establishes this Amended and Restated
Nonstatutory Stock Option Plan (sometimes hereinafter called the "Plan")
effective the 11th day of April, 1997 which amends and restates the Company's
Nonstatutory Stock Option Plan effective February 6, 1997.
ARTICLE I
DEFINITIONS
-----------
For Plan purposes, except where the context might clearly indicate
otherwise, the following terms shall have the meaning set forth below:
A. "Board" shall mean the Board of Directors of the Company.
B. "Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder.
C. "Committee" shall mean the committee appointed by the Board to
administer the Plan. The Committee shall consist of not less than two (2) nor
more than five (5) members as selected by the Board, provided that any Committee
which, pursuant to Article II hereof, determines the eligibility of any officer
or Director of the Company to participate in this Plan shall consist solely of
disinterested persons. The term "disinterested persons" means persons who are
not at the time of determination of that status, and who have not been at any
time within one (1) year prior thereto, eligible employees (as defined in
Article V hereof) or eligible for selection as persons to whom stock may be
allocated or to whom stock options may be granted pursuant to any other plan of
the Company, or any of its affiliates, which entitles the participants therein
to acquire stock or stock options of the Company or any of its affiliates. If a
Committee is not appointed by the Board, the Board shall function as the
Committee.
D. "Common Stock" shall mean the common stock of the Company.
<PAGE>
E. "Corporation" shall include any parent or subsidiary of the Company as
those terms are defined in Sections 425(e) and (f) of the Code, respectively,
and any predecessor corporation of any such corporation, as that term is defined
in proposed Income Tax Regulation Section 422A-2(f)(2).
F. "Exchange" means the Vancouver Stock Exchange and any other stock
exchange or stock quotation system on which the Common Stock trades.
G. "Fair Market Value" means, as of any date, the value of the Common
Shares, determined as follows:
(i) if the Common Stock is listed on the Vancouver Stock Exchange,
the Fair Market Value shall be the closing sales price for such
shares (or the closing bid, if no sales were reported) as quoted
on such exchange for the ten market trading days immediately
prior to the date of determination less any discount permitted by
the Vancouver Stock Exchange;
(ii) if the Common Stock is listed on an Exchange other than the
Vancouver Stock Exchange, the fair market value shall be the
closing sales price of such shares (or the closing bid, if no
sales were reported) as quoted on such Exchange for the last
market trading day prior to the time of determination; and
(iii) if the Common Stock is not listed on an Exchange, the Fair Market
Value shall be determined in good faith by the Committee.
H. "Option Agreement" means such option agreement or agreements as is
approved from time to time by the Committee and as is not inconsistent with the
terms of this Plan.
I. "Option Date" means the date of grant of a Stock Option to an Optionee.
J. "Option Price" is the price at which the Optionee is entitled pursuant
to the Plan and the Option Agreement to acquire Option Shares.
K. "Option Shares" means, subject to the provisions of Article VII of this
Plan, the Common Stock which the Optionee is entitled to acquire pursuant to
this Plan and the applicable Option Agreement.
L. "Stock Option" shall mean a stock option to purchase common stock which
is intended not to meet or comply with requirements for an incentive stock
option as set forth in Section 422A of the Code. Also included in this
definition is any other form or forms of tax-qualified, discriminatory stock
options which may be incorporated within the Code as it may from time to time be
amended.
2
<PAGE>
M. "Optionee" shall mean an individual who has been granted one or more
Stock Options under the Plan.
ARTICLE II
ADMINISTRATION
--------------
A. Meetings of the Committee shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting. In addition, the Committee may take any
action otherwise proper under the Plan by the affirmative vote, taken without a
meeting, of a majority of its members.
B. The Committee shall administer the Plan, and accordingly, it shall have
full power to grant stock options, construe and interpret the Plan, establish
rules and regulations and perform all other acts, including the delegation of
administrative responsibilities, it believes reasonable and proper.
C. The determination of those eligible to receive stock options, and the
amount, type and timing of each Stock Option, and the terms and conditions of
the respective Stock Option agreements shall rest in the sole discretion of the
Committee, subject to the provisions of the Plan.
D. Notwithstanding anything to the contrary in the Plan, if the Committee
finds by a majority vote, after full consideration of the facts presented on
behalf of both the Company and the Optionee, that the Optionee has engaged in
fraud, embezzlement, theft, commission of a felony, or proven dishonesty in the
course of his employment by the Company which resulted in damage to the Company,
or if Optionee disclosed trade secrets of the Company, the Optionee shall
forfeit all unexercised Stock Options and all exercised Stock Options under
which the Company has not yet delivered the certificates and which had
previously been granted to the Optionee by the Committee. The decision of the
Committee as to the cause of an Optionee's discharge and the damage done to the
Company shall be final. No decision of the Committee, however, shall affect the
finality of the discharge of such Optionee by the Company in any manner.
E. The Board, or the Committee, may correct any defect, supply any
omission or reconcile any inconsistency in the Plan, or in any granted Stock
Option, in the manner and to the extent it shall deem necessary to carry it into
effect.
F. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
G. No member of the Board or Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his
own part, including but not limited
3
<PAGE>
to the exercise of any power or discretion given to him under the Plan, except
those resulting from his own gross negligence or willful misconduct.
ARTICLE III
SHARES SUBJECT TO THE PLAN
--------------------------
The aggregate number of Option Shares reserved for issuance under the Plan,
Common Stock reserved for issuance under any other share compensation
arrangement granted or made available by the Company from time to time (the
"Other Plans") and Common Stock reserved for issuance under stock options not
granted under the Plan or the Other Plan, may not exceed in aggregate TWO
MILLION TWO HUNDRED FIFTY THOUSAND (2,250,000) shares of Common Stock. A Stock
Option may not be granted to any person if, as the result of such grant, such
person would at the time of such grant hold options under the Plan and the Other
Plans to acquire in aggregate more than 5% of the issued and outstanding shares
of Common Stock of the Company. In the event that any outstanding Stock Option
for any reason shall expire or terminate by reason of the death or severance of
employment of the Optionee, the surrender of the Option Shares allocable to the
unexercised portion of such Stock Option shall be available for future grants of
Stock Options.
ARTICLE IV
AUTHORITY TO GRANT OPTIONS
--------------------------
The Committee may grant from time to time to such eligible individuals, as
it shall from time to time determine, a Stock Option or options to buy a stated
number of shares of common stock under the terms and conditions of the Plan.
The Committee, subject only to any applicable limitations set forth elsewhere in
the Plan, shall determine the number of shares of common stock covered by any
Stock Option.
ARTICLE V
ELIGIBILITY
-----------
The individuals who shall be eligible to participate in the Plan shall be
such executive and other key employees (including officers who may be members of
the Board of Directors) of the Company, or of any subsidiary or parent
corporations as the Committee may determine from time to time. Non-employee
members of the Board and non-employee consultants shall be eligible for Stock
Option grants.
ARTICLE VI
STOCK OPTION TERMS AND CONDITIONS
---------------------------------
All Stock Options granted under the Plan shall be evidenced by Stock Option
Agreements which shall be subject to applicable provisions of the Plan, and such
other provisions as the Committee may adopt, including the following provisions:
4
<PAGE>
A. PRICE: The Option Price shall be determined by the Committee, provided
-----
that such price shall not be lower than the Fair Market Value of the Option
Shares on the date of grant of the Option.
B. DURATION OF OPTION: Except as otherwise provided elsewhere in this
------------------
Plan, the Stock Options shall be exercisable for a period, or in percentage
installments over a period, to be determined in each instance by the Committee,
provided that if the Common Stock is listed on the Vancouver Stock Exchange, the
exercise period shall not exceed five (5) years from the Option Date. The Stock
Options must be exercised in accordance with this Plan and the Option Agreement.
C. VESTING: The Committee may establish vesting periods for a Stock
-------
Option, such that the option becomes fully vested and exercisable in a series of
cumulating portions. The Committee may also accelerate the vesting of any Stock
Option in its sole discretion.
D. EXERCISE: A valid, outstanding, and vested Stock Option shall be
--------
exercised, in part or as a whole, by the delivery of written Notice of Exercise
to the Company setting forth the number of shares with respect to which the
Stock Option is to be exercised and the address to which the certificates
representing shares of the stock issuable upon the exercise of such Stock Option
shall be mailed. In order to be effective, such written Notice shall be
accompanied at the time of its delivery to the Company by payment of the option
price of such shares. Such Notice shall be delivered in person to the Secretary
of the Company or shall be sent by registered mail, return receipt requested, to
the Secretary of the Company, in which case, delivery shall be deemed made on
the date such Notice is deposited in the mail. In its sole and absolute
discretion, the Committee may require as an additional condition to the issuance
of stock upon exercise of a Stock Option that the Optionee furnish the Committee
with an executed copy of a Stock Purchase Agreement in such form as may be
required by the Committee at the time Notice of Exercise is delivered to the
Company.
As promptly as practicable after the receipt by the Company of:
(i) such written notice from the Optionee setting forth the number
of shares with respect to which such option is to be exercised,
(ii) payment of the option price of such shares in the form required
by the provisions of this Article VI, and
(iii) a fully executed Stock Purchase Agreement in the form required
by the Committee, if any is so required.
The Company shall cause to be delivered to such Optionee (or to a specified
escrow agent if so required under the terms of any applicable Stock Purchase
Agreement) certificates representing the number of shares with respect to which
such Stock Option has been so exercised. Until the shares of common stock
represented by an exercised Stock Option are issued to an Optionee, he shall
have none of the rights of a share owner.
5
<PAGE>
E. PAYMENT: The price of an exercised Stock Option, or portion thereof,
-------
may be paid:
(i) in United States dollars in cash or by check, bank draft or
money order payable to the order of the Company, or
(ii) at the discretion of the Committee, through the delivery of
shares of common stock, with an aggregate fair market value, equal to
the option price, provided such tendered shares have been owned by the
Optionee for at least one (1) year prior to such exercise, or
(iii) by a combination of both (i) and (ii) above.
The Committee shall determine acceptable methods for tendering common stock
as payment upon exercise of a Stock Option and may impose such limitations and
prohibitions on the use of common stock to exercise a Stock Option as it deems
appropriate.
F. TERMINATION OF EMPLOYMENT OF THE OPTIONEE: In the event an Optionee
-----------------------------------------
who is an employee shall cease to be employed by the Corporation while he is
holding one or more Stock Options, or in the event an Optionee who is a Director
shall cease to be a member of the Board of Directors while he or she is holding
one or more Stock Options, then the vested portion of such Stock Options, and
the non-vested portion of such Stock Options, shall (except as otherwise
provided in the Stock Option Agreement) expire at the earlier of the expiration
of the Stock Option's term or the following:
(i) Optionee's Death - all Stock Option(s) shall become fully
----------------
vested and shall be forfeited if not exercised within one (1) year
after such death.
(ii) Optionee's Termination Other Than For Cause - the non-vested
-------------------------------------------
portion of the Stock Option(s) shall expire immediately and the fully
vested portion shall be forfeited if not exercised within thirty (30)
days after the effective date of such termination.
(iii) Optionee's Termination For Cause - all Stock Option(s), whether
--------------------------------
vested or non-vested, shall expire immediately. The phrase
"termination for cause" is hereby defined to be a termination by the
Corporation because of the Optionee's fraud or dishonest conduct with
respect to the Corporation, or in the event of an employee (Optionee's
consistent failure) to carry out the reasonable terms of his
employment as determined by the Committee.
In the event of the death of an Optionee following termination of
employment (in the event of an employee) or following termination of the
Optionee's service on the Board of Directors, while any portion of a Stock
Option remains exercisable, the Committee, in its discretion, may provide for an
extension of the exercise period of up to one year after the Optionee's death.
After the death of the Optionee, his executors, administrators, or any persons
to whom the Stock Option may be transferred
6
<PAGE>
by will or by the laws of descent and distribution shall have the right at any
time prior to the end of the exercise period described in the previous sentence
to exercise the Stock Option in whole or in part.
For the purpose of determining the employment relationship between the
Company and the Optionee, employment by any corporation in which the Company
owns, directly or indirectly, stock possessing more than fifty percent (50%) of
the total combined voting power of all classes of stock shall be considered
employment by the Company.
G. EFFECT OF LEAVES OF ABSENCE: For the purpose of this section, it shall
---------------------------
not be considered a termination of employment when an Optionee is placed by the
Corporation on military or sick leave or such other type of leave of absence
which is considered as continuing intact the employment relationship of the
Optionee. In case of such leave of absence, the employment relationship shall
be continued until the later of the date when such leave equals ninety (90) days
or the date when the Optionee's right to reemployment with the Corporation shall
no longer be guaranteed either by statute or contract.
ARTICLE VII
CHANGES IN CAPITAL STRUCTURE OF THE COMPANY
-------------------------------------------
In the event of a stock dividend, stock split or other subdivision,
consolidation, reorganization or change in the shares of common stock or capital
structure of the Company, the number of shares of common stock available for
options and subject to outstanding stock options shall be the option price per
share of outstanding stock options appropriately adjusted.
The existence of outstanding Stock Options shall not affect, in any way,
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or offsetting the stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
ARTICLE VIII
MERGER, CONSOLIDATION OR TENDER OFFER
-------------------------------------
A. If the Company shall be a party to a binding agreement to any merger,
consolidation or reorganization or sale of substantially all of the assets of
the Company, each outstanding Stock Option shall pertain and apply to the
securities and/or property which a share owner of the number of shares of common
stock subject to the Stock Option would be entitled to receive pursuant to such
merger, consolidation or reorganization or sale of assets.
B. If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or if the
Company is liquidated
7
<PAGE>
or sells or otherwise disposes of substantially all of its assets to another
corporation while unexercised options remain outstanding under the Plan:
(i) subject to the provisions of Subparagraph (iii) below, after
the effective date of such merger, consolidation or sale, as the case
may be, each holder of an outstanding Stock Option shall be entitled,
upon exercise of a vested Stock Option, to receive in lieu of shares
of stock, shares of such stock or other securities as the holders of
shares of stock receive pursuant to the terms of the merger,
consolidation or sale;
(ii) the Board of Directors may waive any limitation set forth in or
imposed pursuant to this Plan so that all Stock Options from and after
the date prior to the effective date of such merger, consolidation,
liquidation or sale, as the case may be, specified by the Board of
Directors, shall be vested and exercisable in full; and
(iii) all outstanding Stock Options may be cancelled by the Board of
Directors as of the effective date of any such merger, consolidation,
liquidation or sale provided that notice of such cancellation shall be
given to each holder of a stock option, and each holder of a Stock
Option shall have the right to exercise any vested Stock Option in
full (without regard to any limitation set forth in or imposed
pursuant to this Plan) during a thirty (30) day period preceding the
effective date of any such merger, consolidation, liquidation, sale or
acquisition.
C. Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class for cash or property or for labor or services either upon direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustments by reason thereof
shall be made with respect to, the number, class or price of shares of stock
then subject to outstanding Stock Options.
ARTICLE IX
AMENDMENT OR TERMINATION OF PLAN
--------------------------------
A. The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, but an amendment may not be made without shareholder
approval if such approval is necessary to comply with any applicable regulatory
requirement.
B. No amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Stock Option theretofore granted to her or him under the Plan.
ARTICLE X
REQUIREMENTS OF LAW
-------------------
8
<PAGE>
The Company shall not be required to sell or issue any shares under any
Stock Option if the issuance of such shares shall constitute or result in a
violation by the Optionee or the Company of any provisions of any law, statute
or regulation of any governmental authority. Specifically, in connection with
the Securities Act of 1933, upon exercise of any Stock Option, the Company shall
not be required to issue such shares unless the Committee has received evidence
satisfactory to it to the effect that the holder of such Stock Option will not
transfer such shares except pursuant to a registration statement in effect under
such Act or unless an opinion of counsel satisfactory to the Company has been
received by the Company to the effect that such registration is not required.
Any determination in this connection by the Committee shall be final, binding
and conclusive. The Company may, but shall in no event be obligated to register
any securities covered hereby pursuant to the Securities Act of 1933. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of a Stock Option or the issuance of shares pursuant thereto
to comply with any law or regulation of any governmental authority.
ARTICLE XI
NO RIGHTS AS STOCKHOLDER
------------------------
No Optionee shall have rights as a stockholder with respect to shares
covered by this stock option until the date of issuance of a stock certificate
for such shares; and except as otherwise provided in Article VII hereof, no
adjustment for dividends or otherwise shall be made if the record date therefor
is prior to the date of issuance of such certificate.
ARTICLE XII
WRITTEN AGREEMENT
-----------------
Each Stock Option granted hereunder shall be embodied in a written Stock
Option Agreement which shall be subject to the terms and conditions described
herein and shall be signed by the Optionee and by the President or any Vice
President of the Company for and in the name and on behalf of the Company. Such
a Stock Option Agreement shall contain such other provisions as the Committee,
in its discretion shall deem advisable.
ARTICLE XIII
INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS
-----------------------------------------------------------
In addition to such other rights of indemnifications as they may have as
members of the Board or the Committee, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to indemnity from the Company for all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Committee and the Board of Directors,
whether or not he continues to be such member of the Committee and the Board of
9
<PAGE>
Directors at the time of incurring such expenses; provided, however, that such
indemnity shall not include an expenses incurred by any such member of the
Committee and the Board of Directors (i) in respect of matters as to which he
shall be finally adjudged in any such action, suit or proceeding to have been
guilty of gross negligence or willful misconduct in the performance of his duty
as such member of the Committee and the Board of Directors; or (ii) in respect
of any matter in which any settlement is effected to an amount in excess of the
amount approved by the Company on the advice of its legal counsel; and provided
further that no right of indemnification under the provisions set forth herein
shall be available to or enforceable by any such member of the Committee and the
Board of Directors unless within sixty (60) days after institution of any such
action, suit, or proceeding, he shall have offered the Company in writing the
opportunity to handle and defend same at its own expense. The foregoing right
of indemnification shall inure to the benefit of the heirs, executors, or
administrators of each such member of the Committee and the Board of Directors
and shall be in addition to all other rights to which such member of the
Committee and the Board of Directors may be entitled to as a matter of law,
contract or otherwise.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
------------------------
A. RIGHT TO CONTINUED EMPLOYMENT: No person shall have any claim or right
-----------------------------
to be granted a Stock Option under the Plan, and the grant of a Stock Option
under the Plan shall not be construed as giving an Optionee the right to be
retained in the employ of the Company.
B. NONTRANSFERABILITY: Except by will or the laws of descent and
------------------
distribution, no right or interest of any stock option granted under the Plan
shall be assignable or transferable by the Optionee. In addition, such option
shall be exercised only by him, and no right or interest of any Optionee shall
be liable for, or subject to, any lien, obligation or liability of such
Optionee.
C. WITHHOLDING TAXES: The Company shall have the right to require a
-----------------
payment from an Optionee to cover applicable withholding for income and
employment taxes in the event of the exercise of a Stock Option. Upon the
exercise of a Stock Option requiring tax withholding, an Optionee may make a
written election to have shares of common stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee.
D. PLAN EXPENSES: Any expenses of administering this Plan shall be borne
-------------
by the Company.
E. USE OF EXERCISE PROCEEDS: The payment received from Optionees from the
------------------------
exercise of Stock Options under the Plan shall be used for the general corporate
purposes of the Company.
F. CONSTRUCTION OF PLAN: The place of administration of the Plan shall be
--------------------
in the State of Michigan, and the validity, construction, interpretation,
administration and effect of the Plan and of
10
<PAGE>
its rules and regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of the State of Michigan.
G. FOREIGN NATIONALS: Without amending the Plan, grants may be made to
-----------------
employees of the Corporation who are foreign nationals or employed outside the
United States or both, on such terms and conditions, consistent with the Plan's
purpose, different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to create equitable opportunities given
differences in tax laws in other countries.
IN WITNESS WHEREOF, SYMPLEX COMMUNICATIONS CORPORATION, has caused this
Amended and Restated Nonstatutory Stock Option Plan to be executed this 11th
day of April, 1997.
Symplex Communications Corporation
a Delaware corporation
/s/ Thomas R. Mayer
____________________________
By: Thomas R. Mayer
Its: President
ATTEST:
/s/ Thomas Radigan
____________________________
Thomas Radigan, Secretary
11
<PAGE>
EXHIBIT 6.2
SYMPLEX COMMUNICATIONS CORPORATION
IPO STOCK OPTION PLAN
WHEREAS, SYMPLEX COMMUNICATIONS CORPORATION, (hereinafter called the
"Company"), a California corporation, wishes to provide favorable opportunities
for certain selected key employees, consultants and/or members of the Board of
Directors of the Company and any subsidiaries or parent corporation to purchase
shares of common stock of the Company, thereby encouraging them to acquire
proprietary and vested interests in the performance of the Company's common
stock; and
WHEREAS, the Company wishes to increase its ability to attract and retain
individuals of exceptional talent upon whom the sustained progress, growth and
profitability of the Company depend;
NOW, THEREFORE, the Company hereby establishes this IPO Stock Option Plan
(sometimes hereinafter called the "Plan") effective the 29th day of April,
1997.
ARTICLE I
DEFINITIONS
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For Plan purposes, except where the context might clearly indicate
otherwise, the following terms shall have the meaning set forth below:
A. "Board" shall mean the Board of Directors of the Company.
B. "Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder.
C. "Committee" shall mean the committee appointed by the Board to
administer the Plan. The Committee shall consist of not less than two (2) nor
more than five (5) members as selected by the Board, provided that any Committee
which, pursuant to Article II hereof, determines the eligibility of any officer
or Director of the Company to participate in this Plan shall consist solely of
disinterested persons. The term "disinterested persons" means persons who are
not at the time of determination of that status, and who have not been at any
time within one (1) year prior thereto, eligible employees (as defined in
Article V hereof) or eligible for selection as persons to whom stock may be
allocated or to whom stock options may be granted pursuant to any other plan of
the Company, or any of its affiliates, which entitles the participants therein
to acquire stock or stock options of the Company or any of its affiliates. If a
Committee is not appointed by the Board, the Board shall function as the
Committee.
D. "Common Stock" shall mean the common stock of the Company.
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E. "Corporation" shall include any parent or subsidiary of the Company as
those terms are defined in Sections 425(e) and (f) of the Code, respectively,
and any predecessor corporation of any such corporation, as that term is defined
in proposed Income Tax Regulation Section 422A-2(f)(2).
F. "Exchange" means the Vancouver Stock Exchange and any other stock
exchange or stock quotation system on which the Common Stock trades.
G. "Fair Market Value" means, as of any date, the value of the Common
Shares, determined as follows:
(i) if the Common Stock is listed on the Vancouver Stock Exchange,
the Fair Market Value shall be the closing sales price for such
shares (or the closing bid, if no sales were reported) as quoted
on such exchange for the ten market trading days immediately
prior to the date of determination less any discount permitted by
the Vancouver Stock Exchange;
(ii) if the Common Stock is listed on an Exchange other than the
Vancouver Stock Exchange, the fair market value shall be the
closing sales price of such shares (or the closing bid, if no
sales were reported) as quoted on such Exchange for the last
market trading day prior to the time of determination; and
(iii) if the Common Stock is not listed on an Exchange, the Fair Market
Value shall be determined in good faith by the Committee.
H. "Option Agreement" means such option agreement or agreements as is
approved from time to time by the Committee and as is not inconsistent with the
terms of this Plan.
I. "Option Date" means the date of grant of a Stock Option to an Optionee.
J. "Option Price" is the price at which the Optionee is entitled pursuant
to the Plan and the Option Agreement to acquire Option Shares.
K. "Option Shares" means, subject to the provisions of Article VII of this
Plan, the Common Stock which the Optionee is entitled to acquire pursuant to
this Plan and the applicable Option Agreement.
L. "Stock Option" shall mean a stock option to purchase common stock which
is intended not to meet or comply with requirements for an incentive stock
option as set forth in Section 422A of the Code. Also included in this
definition is any other form or forms of tax-qualified, discriminatory stock
options which may be incorporated within the Code as it may from time to time be
amended.
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M. "Optionee" shall mean an individual who has been granted one or more
Stock Options under the Plan.
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ARTICLE II
ADMINISTRATION
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A. Meetings of the Committee shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting. In addition, the Committee may take any
action otherwise proper under the Plan by the affirmative vote, taken without a
meeting, of a majority of its members.
B. The Committee shall administer the Plan, and accordingly, it shall have
full power to grant stock options, construe and interpret the Plan, establish
rules and regulations and perform all other acts, including the delegation of
administrative responsibilities, it believes reasonable and proper.
C. The determination of those eligible to receive stock options, and the
amount, type and timing of each Stock Option, and the terms and conditions of
the respective Stock Option agreements shall rest in the sole discretion of the
Committee, subject to the provisions of the Plan.
D. Notwithstanding anything to the contrary in the Plan, if the Committee
finds by a majority vote, after full consideration of the facts presented on
behalf of both the Company and the Optionee, that the Optionee has engaged in
fraud, embezzlement, theft, commission of a felony, or proven dishonesty in the
course of his employment by the Company which resulted in damage to the Company,
or if Optionee disclosed trade secrets of the Company, the Optionee shall
forfeit all unexercised Stock Options and all exercised Stock Options under
which the Company has not yet delivered the certificates and which had
previously been granted to the Optionee by the Committee. The decision of the
Committee as to the cause of an Optionee's discharge and the damage done to the
Company shall be final. No decision of the Committee, however, shall affect the
finality of the discharge of such Optionee by the Company in any manner.
E. The Board, or the Committee, may correct any defect, supply any
omission or reconcile any inconsistency in the Plan, or in any granted Stock
Option, in the manner and to the extent it shall deem necessary to carry it into
effect.
F. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
G. No member of the Board or Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his
own part, including but not limited to the exercise of any power or discretion
given to him under the Plan, except those resulting from his own gross
negligence or willful misconduct.
ARTICLE III
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SHARES SUBJECT TO THE PLAN
--------------------------
The aggregate number of Option Shares reserved for issuance under the Plan,
Common Stock reserved for issuance under any other share compensation
arrangement granted or made available by the Company from time to time (the
"Other Plans") and Common Stock reserved for issuance under stock options not
granted under the Plan or the Other Plan, may not exceed in aggregate TWO
MILLION TWO HUNDRED FIFTY THOUSAND (2,250,000) shares of Common Stock. A Stock
Option may not be granted to any person if, as the result of such grant, such
person would at the time of such grant hold options under the Plan and the Other
Plans to acquire in aggregate more than 5% of the issued and outstanding shares
of Common Stock of the Company. In the event that any outstanding Stock Option
for any reason shall expire or terminate by reason of the death or severance of
employment of the Optionee, the surrender of the Option Shares allocable to the
unexercised portion of such Stock Option shall be available for future grants of
Stock Options.
ARTICLE IV
AUTHORITY TO GRANT OPTIONS
--------------------------
The Committee may grant from time to time to such eligible individuals, as
it shall from time to time determine, a Stock Option or options to buy a stated
number of shares of common stock under the terms and conditions of the Plan.
The Committee, subject only to any applicable limitations set forth elsewhere in
the Plan, shall determine the number of shares of common stock covered by any
Stock Option.
ARTICLE V
ELIGIBILITY
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The individuals who shall be eligible to participate in the Plan shall be
such executive and other key employees (including officers who may be members of
the Board of Directors) of the Company, or of any subsidiary or parent
corporations as the Committee may determine from time to time. Non-employee
members of the Board and non-employee consultants shall be eligible for Stock
Option grants.
ARTICLE VI
STOCK OPTION TERMS AND CONDITIONS
---------------------------------
All Stock Options granted under the Plan shall be evidenced by Stock Option
Agreements which shall be subject to applicable provisions of the Plan, and such
other provisions as the Committee may adopt, including the following provisions:
A. PRICE: The Option Price shall be determined by the Committee, provided
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that such price shall not be lower than the Fair Market Value of the Option
Shares on the date of grant of the Option.
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B. DURATION OF OPTION: Except as otherwise provided elsewhere in this
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Plan, the Stock Options shall be exercisable for a period, or in percentage
installments over a period, to be determined in each instance by the Committee,
provided that if the Common Stock is listed on the Vancouver Stock Exchange, the
exercise period shall not exceed five (5) years from the Option Date. The Stock
Options must be exercised in accordance with this Plan and the Option Agreement.
C. VESTING: The Committee may establish vesting periods for a Stock
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Option, such that the option becomes fully vested and exercisable in a series of
cumulating portions. The Committee may also accelerate the vesting of any Stock
Option in its sole discretion.
D. EXERCISE: A valid, outstanding, and vested Stock Option shall be
--------
exercised, in part or as a whole, by the delivery of written Notice of Exercise
to the Company setting forth the number of shares with respect to which the
Stock Option is to be exercised and the address to which the certificates
representing shares of the stock issuable upon the exercise of such Stock Option
shall be mailed. In order to be effective, such written Notice shall be
accompanied at the time of its delivery to the Company by payment of the option
price of such shares. Such Notice shall be delivered in person to the Secretary
of the Company or shall be sent by registered mail, return receipt requested, to
the Secretary of the Company, in which case, delivery shall be deemed made on
the date such Notice is deposited in the mail. In its sole and absolute
discretion, the Committee may require as an additional condition to the issuance
of stock upon exercise of a Stock Option that the Optionee furnish the Committee
with an executed copy of a Stock Purchase Agreement in such form as may be
required by the Committee at the time Notice of Exercise is delivered to the
Company.
As promptly as practicable after the receipt by the Company of:
(i) such written notice from the Optionee setting forth the number of
shares with respect to which such option is to be exercised,
(ii) payment of the option price of such shares in the form required
by the provisions of this Article VI, and
(iii) a fully executed Stock Purchase Agreement in the form required
by the Committee, if any is so required.
The Company shall cause to be delivered to such Optionee (or to a specified
escrow agent if so required under the terms of any applicable Stock Purchase
Agreement) certificates representing the number of shares with respect to which
such Stock Option has been so exercised. Until the shares of common stock
represented by an exercised Stock Option are issued to an Optionee, he shall
have none of the rights of a share owner.
E. PAYMENT: The price of an exercised Stock Option, or portion thereof,
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may be paid:
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(i) in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company, or
(ii) at the discretion of the Committee, through the delivery of
shares of common stock, with an aggregate fair market value, equal to
the option price, provided such tendered shares have been owned by the
Optionee for at least one (1) year prior to such exercise, or
(iii) by a combination of both (i) and (ii) above.
The Committee shall determine acceptable methods for tendering common stock
as payment upon exercise of a Stock Option and may impose such limitations and
prohibitions on the use of common stock to exercise a Stock Option as it deems
appropriate.
F. TERMINATION OF EMPLOYMENT OF THE OPTIONEE: In the event an Optionee
-----------------------------------------
who is an employee shall cease to be employed by the Corporation while he is
holding one or more Stock Options, or in the event an Optionee who is a Director
shall cease to be a member of the Board of Directors while he or she is holding
one or more Stock Options, then the vested portion of such Stock Options, and
the non-vested portion of such Stock Options, shall (except as otherwise
provided in the Stock Option Agreement) expire at the earlier of the expiration
of the Stock Option's term or the following:
(i) Optionee's Death - all Stock Option(s) shall become fully vested
----------------
and shall be forfeited if not exercised within one (1) year after such
death.
(ii) Optionee's Termination Other Than For Cause - the non-vested
-------------------------------------------
portion of the Stock Option(s) shall expire immediately and the fully
vested portion shall be forfeited if not exercised within thirty (30)
days after the effective date of such termination.
(iii) Optionee's Termination For Cause - all Stock Option(s), whether
--------------------------------
vested or non-vested, shall expire immediately. The phrase
"termination for cause" is hereby defined to be a termination by the
Corporation because of the Optionee's fraud or dishonest conduct with
respect to the Corporation, or in the event of an employee (Optionee's
consistent failure) to carry out the reasonable terms of his
employment as determined by the Committee.
In the event of the death of an Optionee following termination of
employment (in the event of an employee) or following termination of the
Optionee's service on the Board of Directors, while any portion of a Stock
Option remains exercisable, the Committee, in its discretion, may provide for an
extension of the exercise period of up to one year after the Optionee's death.
After the death of the Optionee, his executors, administrators, or any persons
to whom the Stock Option may be transferred by will or by the laws of descent
and distribution shall have the right at any time prior to the end of the
exercise period described in the previous sentence to exercise the Stock Option
in whole or in part.
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For the purpose of determining the employment relationship between the
Company and the Optionee, employment by any corporation in which the Company
owns, directly or indirectly, stock possessing more than fifty percent (50%) of
the total combined voting power of all classes of stock shall be considered
employment by the Company.
G. EFFECT OF LEAVES OF ABSENCE: For the purpose of this section, it shall
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not be considered a termination of employment when an Optionee is placed by the
Corporation on military or sick leave or such other type of leave of absence
which is considered as continuing intact the employment relationship of the
Optionee. In case of such leave of absence, the employment relationship shall
be continued until the later of the date when such leave equals ninety (90) days
or the date when the Optionee's right to reemployment with the Corporation shall
no longer be guaranteed either by statute or contract.
ARTICLE VII
CHANGES IN CAPITAL STRUCTURE OF THE COMPANY
-------------------------------------------
In the event of a stock dividend, stock split or other subdivision,
consolidation, reorganization or change in the shares of common stock or capital
structure of the Company, the number of shares of common stock available for
options and subject to outstanding stock options shall be the option price per
share of outstanding stock options appropriately adjusted.
The existence of outstanding Stock Options shall not affect, in any way,
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or offsetting the stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
ARTICLE VIII
MERGER, CONSOLIDATION OR TENDER OFFER
-------------------------------------
A. If the Company shall be a party to a binding agreement to any merger,
consolidation or reorganization or sale of substantially all of the assets of
the Company, each outstanding Stock Option shall pertain and apply to the
securities and/or property which a share owner of the number of shares of common
stock subject to the Stock Option would be entitled to receive pursuant to such
merger, consolidation or reorganization or sale of assets.
B. If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or if the
Company is liquidated or sells or otherwise disposes of substantially all of its
assets to another corporation while unexercised options remain outstanding under
the Plan:
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<PAGE>
(i) subject to the provisions of Subparagraph (iii) below, after the
effective date of such merger, consolidation or sale, as the case may
be, each holder of an outstanding Stock Option shall be entitled, upon
exercise of a vested Stock Option, to receive in lieu of shares of
stock, shares of such stock or other securities as the holders of
shares of stock receive pursuant to the terms of the merger,
consolidation or sale;
(ii) the Board of Directors may waive any limitation set forth in or
imposed pursuant to this Plan so that all Stock Options from and after
the date prior to the effective date of such merger, consolidation,
liquidation or sale, as the case may be, specified by the Board of
Directors, shall be vested and exercisable in full; and
(iii) all outstanding Stock Options may be cancelled by the Board of
Directors as of the effective date of any such merger, consolidation,
liquidation or sale provided that notice of such cancellation shall be
given to each holder of a stock option, and each holder of a Stock
Option shall have the right to exercise any vested Stock Option in full
(without regard to any limitation set forth in or imposed pursuant to
this Plan) during a thirty (30) day period preceding the effective date
of any such merger, consolidation, liquidation, sale or acquisition.
C. Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class for cash or property or for labor or services either upon direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustments by reason thereof
shall be made with respect to, the number, class or price of shares of stock
then subject to outstanding Stock Options.
ARTICLE IX
AMENDMENT OR TERMINATION OF PLAN
--------------------------------
A. The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, but an amendment may not be made without shareholder
approval if such approval is necessary to comply with any applicable regulatory
requirement.
B. No amendment, suspension or termination of this Plan shall, without the
Optionee's consent, alter or impair any of the rights or obligations under any
Stock Option theretofore granted to her or him under the Plan.
ARTICLE X
REQUIREMENTS OF LAW
-------------------
The Company shall not be required to sell or issue any shares under any
Stock Option if the issuance of such shares shall constitute or result in a
violation by the Optionee or the Company of any provisions of any law, statute
or regulation of any governmental authority. Specifically, in connection
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<PAGE>
with the Securities Act of 1933, upon exercise of any Stock Option, the Company
shall not be required to issue such shares unless the Committee has received
evidence satisfactory to it to the effect that the holder of such Stock Option
will not transfer such shares except pursuant to a registration statement in
effect under such Act or unless an opinion of counsel satisfactory to the
Company has been received by the Company to the effect that such registration is
not required. Any determination in this connection by the Committee shall be
final, binding and conclusive. The Company may, but shall in no event be
obligated to register any securities covered hereby pursuant to the Securities
Act of 1933. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of a Stock Option or the issuance of
shares pursuant thereto to comply with any law or regulation of any governmental
authority.
ARTICLE XI
NO RIGHTS AS STOCKHOLDER
------------------------
No Optionee shall have rights as a stockholder with respect to shares
covered by this stock option until the date of issuance of a stock certificate
for such shares; and except as otherwise provided in Article VII hereof, no
adjustment for dividends or otherwise shall be made if the record date therefor
is prior to the date of issuance of such certificate.
ARTICLE XII
WRITTEN AGREEMENT
-----------------
Each Stock Option granted hereunder shall be embodied in a written Stock
Option Agreement which shall be subject to the terms and conditions described
herein and shall be signed by the Optionee and by the President or any Vice
President of the Company for and in the name and on behalf of the Company. Such
a Stock Option Agreement shall contain such other provisions as the Committee,
in its discretion shall deem advisable.
ARTICLE XIII
INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS
-----------------------------------------------------------
In addition to such other rights of indemnifications as they may have as
members of the Board or the Committee, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to indemnity from the Company for all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Committee and the Board of Directors,
whether or not he continues to be such member of the Committee and the Board of
Directors at the time of incurring such expenses; provided, however, that such
indemnity shall not include an expenses incurred by any such member of the
Committee and the Board of Directors (i) in respect of matters as to which he
shall be finally adjudged in any such action, suit or proceeding
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<PAGE>
to have been guilty of gross negligence or willful misconduct in the performance
of his duty as such member of the Committee and the Board of Directors; or (ii)
in respect of any matter in which any settlement is effected to an amount in
excess of the amount approved by the Company on the advice of its legal counsel;
and provided further that no right of indemnification under the provisions set
forth herein shall be available to or enforceable by any such member of the
Committee and the Board of Directors unless within sixty (60) days after
institution of any such action, suit, or proceeding, he shall have offered the
Company in writing the opportunity to handle and defend same at its own expense.
The foregoing right of indemnification shall inure to the benefit of the heirs,
executors, or administrators of each such member of the Committee and the Board
of Directors and shall be in addition to all other rights to which such member
of the Committee and the Board of Directors may be entitled to as a matter of
law, contract or otherwise.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
------------------------
A. RIGHT TO CONTINUED EMPLOYMENT: No person shall have any claim or right
-----------------------------
to be granted a Stock Option under the Plan, and the grant of a Stock Option
under the Plan shall not be construed as giving an Optionee the right to be
retained in the employ of the Company.
B. NONTRANSFERABILITY: Except by will or the laws of descent and
------------------
distribution, no right or interest of any stock option granted under the Plan
shall be assignable or transferable by the Optionee. In addition, such option
shall be exercised only by him, and no right or interest of any Optionee shall
be liable for, or subject to, any lien, obligation or liability of such
Optionee.
C. WITHHOLDING TAXES: The Company shall have the right to require a
-----------------
payment from an Optionee to cover applicable withholding for income and
employment taxes in the event of the exercise of a Stock Option. Upon the
exercise of a Stock Option requiring tax withholding, an Optionee may make a
written election to have shares of common stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an
Optionee shall be at the sole discretion of the Committee.
D. PLAN EXPENSES: Any expenses of administering this Plan shall be borne
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by the Company.
E. USE OF EXERCISE PROCEEDS: The payment received from Optionees from the
------------------------
exercise of Stock Options under the Plan shall be used for the general corporate
purposes of the Company.
F. CONSTRUCTION OF PLAN: The place of administration of the Plan shall be
--------------------
in the State of Michigan, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of the State of Michigan.
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G. FOREIGN NATIONALS: Without amending the Plan, grants may be made to
-----------------
employees of the Corporation who are foreign nationals or employed outside the
United States or both, on such terms and conditions, consistent with the Plan's
purpose, different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to create equitable opportunities given
differences in tax laws in other countries.
IN WITNESS WHEREOF, SYMPLEX COMMUNICATIONS CORPORATION, has caused this IPO
Stock Option Plan to be executed this 29th day of April, 1997.
Symplex Communications Corporation
a Delaware corporation
/s/ Thomas R. Mayer
__________________________
By: Thomas R. Mayer
Its: President
ATTEST:
/s/ Thomas Radigan
____________________________
Thomas Radigan, Secretary
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<PAGE>
Exhibit 6.3
[LETTERHEAD]
March 6, 1997
George Brostoff
7594 Base Lake Dr.
Dexter, MI 48130
George,
Symplex is pleased to be able to use the services you have generously offered.
Symplex feels it can most effectively utilize your expertise in the areas of
sales, marketing, and investor relations. Although, from time to time, we may
have other specific tasks where we can also utilize your expertise. The
following remuneration plan for your efforts and assistance is effective January
1 thru June 30, 1997:
. Consultant pay @ $500 per day or $2500 per week depending on length of
engagement.
. These consulting engagements will be agreed upon by George Brostoff and
Tom Mayer.
. Commission of 10% on all sales initiated directly by George Brostoff
payable 45 days after shipment. Commission of 5% will be paid on all sales
activity initiated by Symplex and assisted by George Brostoff. The State
Farm sale of Datamizer II inventory will be commissioned at 10%.
. All reasonable expenses will be covered by Symplex for out of town travel.
. Taxes and medical insurance will be the responsibility of George Brostoff.
. OEM/alliance relationship contracts will be negotiated on an individual
occurrence.
. From time to time, this consulting agreement will be renegotiated by both
parties.
Acknowledged by:
/s/ Tom Mayer /s/ George Brostoff
- ----------------------------------- ----------------------------------
Tom Mayer, CEO George Brostoff
<PAGE>
Exhibit 6.4
OPUS CAPITAL, L.L.P.
1113 Spruce Street
Boulder, CO 80302
February 12, 1997
Mr. George Brostoff
President
Symplex Communications Corp
5 Research Drive
Ann Arbor, MI 48104
Dear Mr. Brostoff:
The purpose of this letter is to confirm the terms and conditions of the
engagement of Opus Capital, L.L.P. ("Opus") by Symplex Communications
("Symplex"). This letter summarizes various prior communications with you
regarding the funding and operation of the company (dated 11/8/96 and 12/11/96).
Opus will provide operational, financial and strategic advisory services,
subject to regulatory approval and securities laws, in connection with a
proposed private placement in the United States, followed by a public offering
in Canada. In connection with this engagement, the parties agree as follows:
1. Opus has been and will continue to provide consulting services to
Symplex and the Board of Directors of Symplex in connection with
preparing the company for a private placement not to exceed
US$2,275,050. Opus consulting services will include recommendation on
executive staffing, composition of the Board of Directors, an updated
operating plan and an updated executive summary. In addition, until a
permanent President/CEO and a permanent CFO have been appointed, Opus
will provide Opus affiliated executives to fill these positions. Opus
will assist the company in closing the private placement per the
attached terms as soon as possible.
2. Opus Capital Fund, LLC has advanced the company a bridge loan in the
amount of $300,000. Opus agrees to arrange for additional bridge
financing as may be required to meet the short terms capital
requirements of Symplex through March 7, 1997 or the date, if earlier,
when Opus give written notice to the Company that it no longer intends
to complete the private placement. Simultaneously with the closing of
the private placement, the Convertible Subordinated Debenture
evidencing the $300,000 bridge loan will be amended to provide for a
conversion rate of $.55 per share, and the warrant that has been
issued in connection with the $300,000 bridge loan will be amended to
specific an exercise price of $.55 per share. Any additional bridge
loan financing will be evidenced by a Convertible Subordinated
Debenture substantially the same as the Convertible Subordinated
Debenture given as evidence of the $300,000 bridge loan, with
conversion being at the
<PAGE>
rate of $.55 per share. A new bridge loan will also entitle the lender
to receive a warrant to purchase one share of Symplex stock for each
$2.00 of the loan amount, the exercise price to be $.55 per share.
3. The prior common stock at the price of the planned private placement.
The exercise price of the existing warrants shall be reduced to the
private placement price (expected to be $.55 per share) and any
additional bridge loans shall all require equivalent warrants. All
stock, warrants and options outstanding as of the date of the
submission of the prospectus for the Canadian IPO will have the same
rights, restrictions or exclusions (other than restrictions or
exclusions which may be imposed by the rules of the Exchange upon
which the stock is to be listed).
4. Opus has introduced the company to several Canadian underwriters, with
the objective of raising between $3 and $5 million in Canadian public
offering to continue funding the implementation of the Symplex
business plan. Assuming continued progress on Symplex meeting its
business objectives as well as a reasonably receptive IPO market, such
an underwriting could be completed by the July 1997 time frame.
5. If required subsequent to the Canadian IPO, Opus will provide
analytical coverage via further research reports as well as organizing
investor meetings and financial presentations to broaden the investor
base of Symplex.
6. In consideration of Opus' services to Symplex as described above and
subject to compliance with appropriate securities laws and
regulations, Symplex shall:
a. Pay Opus its out of pocket expenses during the term of this
engagement. These expenses will include reasonably living,
housing and travel expenses for the Opus affiliated executives
identified above.
b. Pay Opus a fee of $800 per day for Symplex related services
provided by the affiliated executives on site as well as off
site. All fees and expenses will be paid within ten days after
receipt of monthly invoices.
c. Immediately grant Opus a fully vested two year, transferable
option to acquire 350,000 shares of Symplex at $.55 share.
d. Immediately grant Opus a two year, transferable option to acquire
350,000 shares at $.55 per share, to be fully vested upon
completion of a private placement raising at least $1.75 million.
e. Immediately grant Opus a two year, transferable option to
purchase 350,000 shares at the price of the planned IPO, to be
fully vested upon completion of an IPO, raising at least $3
million.
<PAGE>
f. Agree that shares purchased pursuant to the options in section
c., d., and e. above as well as shares underlying the warrants
attached to the bridge loans provided by Opus Capital Fund shall
have customary demand and piggyback registration rights, to be
defined in a separate document. If Opus or its assignees elect to
exercise any options prior to the Canadian IPO, Symplex will
permit such purchase to be funded through delivery of a
promissory note, bearing interest at the applicable Federal rate
and due and payable in full within two years from the date of
grant of the option.
g. Agree that the Opus affiliated executives have the right to
acquire shares or exercise options reserved for the respective
positions, i.e., President/CEO and CFO. The options are in
addition to any Symplex options which Opus affiliates executives
may receive from Opus.
7. Symplex shall make available to Opus all information concerning the
assets, operations and financial condition of Symplex which Opus
reasonably requests in connection with its financial advisory
services. Symplex acknowledges and agrees that Opus will rely on the
accuracy and completeness of such information without independent
verification. Symplex will not willfully provide false information to
Opus and, during the term of this engagement, will promptly correct
any information that Symplex determines to be incorrect. Opus agrees
to keep confidential all nonpublic information provided by or on
behalf of Symplex except as required by Symplex or as contemplated by
this engagement letter. Opus also agrees to be bound by the terms of
any confidentiality obligation owed to third parties known to it
relating to information provided by Symplex and Opus agrees to be
responsible for the compliance of its employees, officer, directors,
affiliated executives and agents with all such confidentiality
obligations.
8. Symplex agrees to indemnify and hold harmless Opus and its officers,
directors, employees, associates, affiliated executives and agents to
the fullest extent permitted by law, from and against any and all
losses, claims, expenses (including reasonable fee and expenses of
counsel), damages, liabilities, joint or several, actions, proceedings
or investigations (formal or informal) or threats thereof, to which
Opus or any such person incurs or becomes subject under federal or
state statute, regulation, common law or otherwise, arising out of, in
connection with, or based upon any action or omission of Symplex or
upon information provided by Symplex that Opus reasonably relied upon,
whether or not resulting in any such liability. Symplex will also
reimburse Opus and any such person as and when incurred for any
reasonable legal or other expenses incurred by Opus or such other
person in connection with investigating or defending against any such
loss, claim, damage, liability, action, proceeding, investigation or
threat thereof or in providing evidence, producing documents, or
taking any other action in respect thereto (whether or not Opus or
such other person is a defendant in, or target of, such action,
proceeding or investigation); provided, however, that Opus shall first
give notice to Symplex of any such proposed expenses to be incurred
and Symplex shall have the right to take such
<PAGE>
action in indemnifying and defending Opus as Symplex shall reasonably
determine to be required. Symplex will not settle any claim, action,
proceeding or investigation in respect of which indemnification is
sought without the prior written consent of Opus, which shall not be
unreasonably withheld.
9. Opus agrees to indemnify and hold harmless Symplex and its officers,
directors, employees, associates, affiliated executives and agents to
the fullest extent permitted by law, from and against any and all
losses, claims, expenses (including reasonable fee and expenses of
counsel), damages, liabilities, joint or several, actions, proceedings
or investigations (formal or informal) or threats thereof, to which
Symplex or any such person incurs or becomes subject under federal or
state statute, regulation, common law or otherwise, arising out of, in
connection with, or based upon any action or omission of Opus or any
inaccurate or misleading information regarding Symplex provided by
Opus to third parties, whether or not resulting in any such liability.
Opus will also reimburse Symplex and any such person as and when
incurred for any reasonable legal or other expenses incurred by
Symplex or such other person in connection with investigating or
defending against any such loss, claim, damage, liability, action,
proceeding, investigation or threat thereof or in providing evidence,
producing documents, or taking any other action in respect thereto
(whether or not Symplex or such other person is a defendant in, or
target of, such action, proceeding or investigation); provided,
however, that Symplex shall first give notice to Opus of any such
proposed expenses to be incurred and Symplex shall have the right to
take such action in indemnifying and defending Opus as Symplex shall
reasonably determine to be required. Opus will not settle any claim,
action, proceeding or investigation in respect of which
indemnification is sought without the prior written consent of
Symplex, which shall not be unreasonably withheld.
10. The Board may continue to solicit proposals for the sale of all or a
substantial portion of the assets of Symplex, or a merger of Symplex
until such time as the private placement has been completed, provided
however, that Opus Capital will have the right to approve any proposal
for a sale or merger of the Company, which right will expire upon the
earlier of the completion of the private placement or March 7, 1997.
The Board will hold in strictest confidence all matters related to the
potential sale or merger of the Company and make reasonable efforts to
ensure that these activities are not communicated to any employees of
the Company, or to any shareholders of the Company, unless, and until,
shareholder approval of such transaction is required.
11. George Brostoff will be engaged as a paid consultant to the company in
accordance with a separate agreement.
12. The views, advice and opinions of Opus which are provided to you or
the Symplex Board of Directors with respect to this engagement will
not be referred to, summarized, circulated, publicized, reproduced or
provided to any party, except with the prior written consent of Opus,
or as required by law.
<PAGE>
13. This agreement may not be amended or modified except in writing by all
the parties hereto and shall be governed by and construed in
accordance with the laws of the State of Colorado. Any dispute arising
under this engagement shall be resolved by binding arbitration in
Boulder, Colorado under the Commercial Arbitration Rules of the
American Arbitration Association, and the prevailing party shall be
entitled to an award for its reasonable attorneys' fees and costs
incurred, in addition to any other damages.
14. This letter contains the entire agreement between the parties with
respect to the engagement described herein, and supersedes all prior
agreements, written or oral, with respect thereto, including the
November 8, 1996 letter agreement between the parties. The benefits of
this agreement shall inure to the respective successors and assigns of
the parties hereto and of the indemnified parties and to the heirs and
personal representatives of those of the indemnified persons who are
natural persons, and the obligations and liabilities assumed in this
agreement by the parties shall be binding upon their respective
successors and assigns.
On behalf of Symplex, please confirm that this letter is in accordance with our
understanding as to the terms of this engagement by signing and returning the
duplicate of this letter enclosed herewith.
Sincerely yours,
OPUS CAPITAL, LLP
/s/ K. Dieter Heidrich
K. Dieter Heidrich
Managing Director
Accepted and agreed to as per the terms set forth above, this 12th day of
February 1997,
Symplex Communications Corporation
By: /s/ George Brostoff
-----------------------------------------
George Brostoff
Chairman
Attachment
<PAGE>
EXHIBIT 6.5
MANUFACTURING SERVICES AGREEMENT
BETWEEN
SYMPLEX COMMUNICATIONS CORP.
AND
IEC ELECTRONICS CORP.
This agreement is entered into as of 7/5/95 between SYMPLEX (hereinafter
referred to as "Buyer") with offices at Ann Arbor Michigan, and IEC Electronics
Corp. (hereinafter referred to as "Seller" with offices at 105 Norton Street,
Newark, NY 14513.
The parties hereto agree to the following terms for the purchase by Buyer of
Products and Services listed on Exhibits "A" and "B", attached hereto, from
Seller.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. SCOPE 3
II. PRICING 3
III. QUANTITIES 3
IV. GENERAL WORKMANSHIP REQUIREMENTS 3
V. INSPECTION OF PRODUCTION QUANTITIES 4
VI. SPECIFICATIONS AND CHANGES 4
VII. PACKAGING REQUIREMENTS 4
VIII. REPORTING 5
IX. PURCHASE ORDERS AND FORECAST QUANTITIES 5
X. RESCHEDULES 5
XI. CANCELLATION 6
XII. OTHER TERMS AND CONDITIONS 7
XIII. AMENDMENTS 7
XIV. WARRANTY 7
XV. DATA AND PROPRIETARY INFORMATION 7
XVI. GOVERNING LAW 8
XVII. NOTICE IN WRITING 8
XVIII. EXHIBITS 8
XIX. ASSIGNMENT 8
XX. TERMINATION 9
XXI. FORCE MAJEURE 9
XXII. FORMAL MATTERS 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
XXIII. ENTIRE AGREEMENT 10
XXIV. APPLICABLE TERMS 11
XXV. BUYERS PROPERTY AND INSURANCE 11
XXVI. LIMITED LIABILITY 11
XXVII. TOOLING 12
</TABLE>
<PAGE>
I. SCOPE
-----
During the term of this Agreement, all agreements between the parties for
the sale and purchase of Products and replacement parts shall include and
be governed exclusively by the terms and conditions of this Agreement. In
case of any conflict between this Agreement and any purchase order,
acceptance, correspondence, memoranda or other document forming part of any
order for the Products placed by Buyer and accepted by Seller or any
acceptance of such order by seller during the terms of this Agreement, this
Agreement shall govern and prevail and the printed terms and conditions of
any such document shall not be binding upon Buyer and Seller.
II. PRICING
-------
A. All prices stated in Exhibit "A" are F.O.B. Newark, NY, USA at which
point title and risk of loss shall pass to Buyer. Buyer will specify
the carrier and Seller shall use its best efforts to use the carrier
so specified.
B. Prices for the part number and quantities as stated in Exhibit "A" are
firm fixed prices with the exception of component/material cost
variances resulting from sole source or industry wide conditions and
which are outside IEC control. Any variances shall be submitted to
Buyer for approval prior to commitment.
C. Payment terms are 1/2% ten days net 30 days after shipment.
D. Seller shall maintain a cost reduction program to ensure that pricing
---------------------------------------------------------------------
is as competitive as possible at all times based on scheduled lead
------------------------------------------------------------------
times and other prevailing conditions. Buyer and Seller shall meet
-------------------------------------------------------------------
otherwise determined to review prevailing costs.
-----------------------------------------------
III. QUANTITIES
----------
The schedules listed in Exhibit "B" represent Buyer's contracted quantities
----------
for 4 months and estimated delivery requirements for the next 8 months,
-----------------------------------------------------------------------
which shall be updated monthly by Buyer.
----------------------------------------
IV. GENERAL WORKMANSHIP REQUIREMENTS
--------------------------------
Seller agrees that all Products delivered under this Agreement shall be
fabricated in accordance with requirements as specified in IPC Standard 610
Class II, unless they are contrary to specific Engineering drawing
requirements or are otherwise excepted from being applicable by Buyer.
<PAGE>
V. INSPECTION OF PRODUCTION QUANTITIES
-----------------------------------
A. It is understood and agreed that the quality of all items to be
delivered under this Agreement is the responsibility of the Seller and
compliance to all specifications will be verified by the Seller prior
to shipment. As such, Buyer does not assume the responsibility for
verifying the quality of incoming product. Buyer retains the right to
inspect Products purchased hereunder, to assure conformance with the
specifications which have been furnished to Seller by Buyer and
incorporated by mutual agreement.
B. Seller agrees that (1) initial inspection (e.g., examination of
shipping container for damage), and (2) payment of Seller's invoices
do not constitute final inspection and acceptance. If, after receipt,
previously undetected nonconforming Products or conditions are
uncovered and reported to the Seller during a more comprehensive
inspection, within thirty (30) days of product receipt, the prior
payment or inspection will not prejudice the Buyer's right to return
the items for repair or replacement. Nothing in this Article V B shall
in any way limit Sellers warranty obligations set forth in Article
XIV.
VI. SPECIFICATIONS AND CHANGES
--------------------------
A. Seller agrees that it will not make any changes in: (1) Products or,
(2) specified qualified vendors for all components without the prior
written approval of Buyer.
B. ECO Implementation Process - Seller agrees to furnish the following
information, within 15 working days after receiving Buyer's
Engineering Change Order (ECO):
1. Cost impact of change, if any (to be negotiated)
2. Sorting and inspection impact, if any
3. Recommended implementation (via lot number) schedule
4. Work-in-process status
VII. PACKAGING REQUIREMENTS
----------------------
A. Seller agrees that all Products delivered under this Agreement shall
be prepared and packed for shipment in a manner that protects such
Products from damage in accordance with good commercial practice.
B. Seller shall label each shipping container with the following
information:
1. Buyer and Seller's Name and Address
2. Part Number and Revision Level
3. Package Quantity
<PAGE>
4. Complete Purchase Order Number
5 Carton ____ of _____
6. Gross Weight of each Package
7. Date
VIII. REPORTING
---------
Seller will supply open order status reports weekly consisting of each
product scheduled for shipment and quantity of each product shipped on a
timely basis consistent with control of this manufacturing program.
IX. PURCHASE ORDERS AND FORECAST QUANTITIES
---------------------------------------
Buyer shall purchase products by issuing to Seller purchase orders
containing as a minimum the mutually agreed quantity, price, delivery
schedule, part number and revision level of the assembly. Purchase
order(s) shall cover delivery requirements for four months initially with
additional order(s) to be issued every 30 days to cover an additional 30
day requirement. Each order issued shall be governed by the terms and
conditions of this agreement and no additional or different provisions
(including those on the reverse side of a purchase order or on acknowledge
forms) shall apply. Any change in terms from this agreement must be by
mutual agreement in writing. Buyer shall provide forecasted quantities for
an additional 8 months (total 12 month period) which shall be updated every
30 days to enable Seller to plan and manage its' resources.
X. RESCHEDULES
-----------
Buyer may make changes without penalty, to the delivery schedules on
existing purchase orders in accordance with the following chart. However,
--------
in order to avoid cancellation charges as provided in Article XI., Buyer
------------------------------------------------------------------------
must take delivery of all products subject to existing purchase orders
----------------------------------------------------------------------
within three (3) months of the original scheduled delivery date for such
------------------------------------------------------------------------
products. Increases in volume will be accommodated in a best efforts
---------------------------------------------------------------------
manner by Seller and any potential increases in unit cost to meet a
-------------------------------------------------------------------
requested increase in schedule by Buyer shall be submitted to Buyer for
-----------------------------------------------------------------------
approval prior to any commitment to vendors by Seller.
------------------------------------------------------
Number of Calendar Days % Decrease
Prior to Scheduled Delivery Dates
120 + Days 100%
90 + Days 75%
60 + Days 50%
<PAGE>
30 + Days 25%
First 30 Days 0%
XI. CANCELLATION
------------
A. Buyer may, prior to delivery of applicable Products pursuant to
Buyer's purchase orders, cancel the orders for its own convenience, in
whole or with respect to any particular orders or any portion thereof,
provided that:
1. Buyer shall give notice to Seller in writing of such cancellation
and the extent thereof;
2. Buyer shall pay a cancellation charge for canceled Products which
shall constitute Buyer's maximum liability to Seller and Seller's
sole and exclusive remedy with respect to the canceled Products,
and this agreement as follows:
Cancellation charges include all costs which are incurred by
Seller as a result of cancellation of Buyer's contracted
quantity, including labor, material, burden and profit. Total
cancellation charges shall not exceed the unit price of ordered
units scheduled for delivery within 60 days of cancellation
notice plus material and material burden charges for product
scheduled for delivery in the following 60 days. Seller shall
minimize any such cost on a best efforts basis and cancellation
charges may be subject to audit.
Applicable cancellation charges shall be invoiced by Seller and
payable within 30 days of invoice. Buyer and Seller shall
complete any audit activity requested by Buyer within said 30
days.
3. IEC utilizes a highly automated manufacturing process, which
requires components to be taped and reeled. Pricing as stated
does not include the cost of full reels amortized. IEC desires a
long-term business relationship, however, should the customer
elect not to procure additional units which would utilize this
inventory, the remaining material (partial reels) will be
packaged, shipped and invoiced at the end of the contract.
XII. OTHER TERMS AND CONDITIONS
--------------------------
It is understood and agreed that the terms and conditions contained in
this agreement including the Exhibits attached hereto shall be the sole
terms and conditions governing this Agreement and each and every order is
issued thereunder.
XIII. AMENDMENTS
----------
<PAGE>
This Agreement may not be and shall not be deemed or construed to have been
modified, amended rescinded, canceled or waived in whole or in part, except
by written instruments signed by the parties hereto.
XIV. WARRANTY
--------
Seller warrants that upon delivery the Products shall be free from liens
and other encumbrances and for a period of 24 (twenty-four) months after
shipment, the Products shall be free from manufacturing defects, and shall
meet the applicable specifications. The above warranty does not extend to
any items which have been subjected to misuse, abuse, neglect, accident,
improper installation or application, alternation or negligence in use,
storage, transportation or handling or are related to design deficiency or
any third party contingent liability. Seller shall remedy all such defects
by repair or replacement of defective items, at the Seller's option, within
30 (thirty) day after receipt of defective Products.
THE ABOVE WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, AND ALL OTHER WARRANTIES ARE HEREBY
EXPRESSLY EXCLUDED AND NEGATED.
Buyer's exclusive remedy with respect to any defective Products shall be as
set forth in this Article XIV.
XV. DATA AND PROPRIETARY INFORMATION
--------------------------------
Each party agrees, in the event it receives information of the other that
is identified in writing as proprietary, to take all reasonable steps to
protect and hold such information in confidence, to prevent its disclosure
to third parties and to restrict its use to those purposes for which it was
disclosed for a period of 3 (three) years from the date of each disclosure.
The obligation of confidentiality shall terminate in the event and to the
extent that any such information:
A. is or becomes available to the public or to the industry without the
fault or negligence of the recipient;
B. was alreacd in possession of recipient;
C. is subsequently received from a third party without notice of
restriction on further disclosure;
D. has been independently developed by recipient;
E. is not in writing and is not subsequently reduced to writing within 10
(ten) calendar days after its oral disclosure, said writing indicating
the portions that are proprietary, private or confidential, or
<PAGE>
F. is required to be disclosed by any law or regulation or by the decree
of any competent tribunal.
XVI. GOVERNING LAW
-------------
This Agreement shall be governed by and construed according to the
domestic laws of New York State for contracts made and wholly performable
in such state exclusive of the conflict or choice of law principles which
might otherwise be applicable.
XVII. NOTICE WRITING
--------------
All notices required to be sent from either party to this Agreement to
the other shall be in writing and sent by telex or facsimile to the
address of the other party hereto, as set forth below.
As to Buyer: Symplex Conununications Corp.
5 Research Drive
Ann Arbor, MI 48103
Attn: Gary Teper
As to Seller: EFC Electronics Corp.
105 Norton St.
Newark, NY 14513
Attn: Ex. VP or Program Mgr. [Initials]
XVIII. EXHIBITS
--------
The following exhibits form an integral part of this Agreement and are
hereby incorporated by reference.
Exhibit "A" Part Number, Prices
Exhibit "B" Quantity, Schedule
XIX. ASSIGNMENT
----------
This Agreement shall not be assigned, in whole or in part, by either
party (whether by operation of law or otherwise) without the prior
written consent of the other party provided, however, in the event of an
assignment by Buyer, Seller shall not unreasonably withhold or delay its
consent. Any assignment contrary to the terms hereof shall be null and
void and of no force and effect.
<PAGE>
XX. TERMINATION
-----------
Agreement and any purchase order hereunder may be terminated by either
party after receipt of written notice to the other:
(a) In the event of a material breach by the other party of terms and
conditions of the Agreement and the failure to cure such breach within
30 days (thirty) after receipt of written notice;
----------------
(b) In the event that performance of the Agreement by either party shall
have been rendered impossible or impractical for a period of 6 (six)
consecutive months by reason of the happening of 1 (one) or more
events referred to in Article XXI hereof; or
(c) At any time upon or after the filing by other party of a petition in
bankruptcy or insolvency or upon any adjudication that the other party
is insolvent, or upon or after the filing by the other party of any
petition or answer seeking reorganization, readjustment or
rearrangement of the business of the other party under any law
relating to bankruptcy or insolvency, or upon the or after the
appointment of a receiver for all or substantially all of the property
of the other party, or upon or after making by the other party of any
assignment or attempted assignment for the benefit of its creditors,
or upon or after the institution of any proceeding for the liquidation
of winding up of the other party's business or for the termination of
its corporate charter.
(d) the termination of this Agreement shall not affect or impair rights
and obligations of either party under any accepted purchase order in
existence prior to such termination or expiration, nor relieve any
party of any obligation or liability accrued hereunder or thereunder
prior to such termination or expiration nor affect or impair the
rights of either party arising under this Agreement prior to such
termination or expiration, except as expressly provided herein.
(e) in the event this Agreement shall be terminated as a result of the
default of Seller, Buyer shall have no obligation to purchase any
parts purchased by Seller to meet Buyer's forecasted requirements.
XXI. FORCE MAJEURE
-------------
Neither party hereto shall be liable for delay or failure in the perfomance
of this Agreement and/or individual purchase order hereunder arising from
any of the following events provided the party claiming relief under this
Article provides the other party written notice of such claimed relief
within 48 (forty-eight) hours of the event giving rise to such claimed
relief.
(i) Acts of God, or public enemy or war (declared or undeclared).
(ii) Acts of governmental or quasi governmental authorities or any
political subdivision thereof, or of any department or agency
thereof, or regulations or restrictions imposed by law or by court
action.
(iii) Acts of person engaged in subversive activities or sabotage.
<PAGE>
(iv) Fires, floods, explosion or other catastrophes.
(v) Epidemic or quarantine restrictions, or
(vi) Any other causes, similar or dissimilar, beyond the control of the
party concerned. In the event of a force majeure claim for relief,
the time for performance by such party shall be extended by the
period of any such delay.
XXII. FORMAL MATTERS
--------------
The relationship between Seller and Buyer is solely that of vendor and
vendee. Neither party, nor its agents, and employees shall, under any
circumstances, be deemed agents or servants of the other party for any
purpose whatsoever, and neither party shall have any right or authority
to enter into any contract or commitment in the name of or on behalf of
the other or to bind or purport to bind the other in any manner
whatsoever.
The failure of Buyer or Seller in any one or more instances to exercise
any right or privilege set forth in this Agreement or the waiver of any
breach by Buyer or Seller of any terms and conditions of this Agreement
shall not be construed as waiving any such terms and conditions, on any
subsequent occasion.
Any clause of this Agreement held to be invalid shall not invalidate the
entire Agreement and the remaining clauses of this Agreement shall remain
in full force and effect. Any clauses of this Agreement intended to
survive this Agreement shall survive the termination date of this
Agreement. All notices required hereunder shall be in the English
language. The heading set forth in each of the sections of this Agreement
have been inserted only for the convenience of the parties and shall not
be considered in the interpretation or enforcement of the provisions of
the Agreement.
Except as otherwise expressly set forth in this Agreement, the specified
remedies herein provided, in case of Seller's or Buyer's default in the
performance of any of its obligations under this Agreement or any
purchase order under this Agreement, are cumulative and the exercise of
any right or remedy herein provided shall be without prejudice to any
other right or remedy provided under this Agreement or at law or in
equity.
XXIII. ENTIRE AGREEMENT
----------------
This Agreement with its Exhibits sets forth and shall constitute the
entire Agreement between Buyer and Seller with respect to the subject
matter hereof, and shall supersede any and all prior agreements,
understandings, promises, and representations made by either party to the
other concerning the subject matter hereof and the terms and conditions
applicable thereto. The term of this agreement shall be for 3 years,
commencing on the date Buyer executes this Agreement (Effective Date).
This Agreement will be automatically renewed at the conclusion of the
initial three (3) year period for successive twelve (12) month periods
unless one of the parties indicates by written notice to the other party
not less than sixty (60) days prior to the end of any such twelve (12)
month
<PAGE>
period that it does not intend to renew the Agreement. Notwithstanding
the foregoing, the Agreement shall remain in full force and effect and
shall be applicable to any Order(s) issued by Buyer to Seller during the
term of this Agreement until any and all obligations of the parties under
such Order(s) have been fulfilled. The Agreement may not be released,
supplemented or modified in any manner except by an instrument in writing
signed by a duly authorized representative of each of the parties hereto.
XXIV. APPLICABLE TERMS
----------------
Unless otherwise specifically and mutually provided, it is agreed that
sales by purchase order referencing this Agreement are made on the terms,
conditions, and warranties contained herein. This Agreement supersedes
any terms and conditions which may appear on the reverse side of Buyer's
purchase order form and Sellr's acknowledgment form. Unless expressly
accepted in writing by the party sought to be charged therewith, no terms
and/or conditions, appearing on the reverse side of Buyer's purchase
order form or Seller's acknowledgment form shall be of any force of
effect.
XXV. BUYERS PROPERTY AND INSURANCE
-----------------------------
Buyers Property and Insurance:
(a) All materials (e.g. raw stork, components, etc.), special tools and
equipment furnished or paid for by Buyer to Seller in connection
with this Agreement shall remain Buyer's property including all
special tools and equipment either identified as a reimbursable
item in the Agreement. All of Buyers property shall be (i) used
only in filling orders for Buyer, (ii) kept segregated and clearly
marked as Buyer's property, (iii) maintained in good condition
normal wear and tear being accepted, and (iv) surrendered to the
Buyer upon demand.
(b) While Buyer-owned property of whatever kind is in Seller's
possession or control, Seller shall be responsible for all loss or
damage and shall, at its expense, secure or maintain extended
insurance coverage in a amount to cover replacement cost.
XXVI. LIMITED LIABILITY
-----------------
Neither party shall be liable to the other party for any incidental,
consequential, special, or punitive damages of any kind howsoever caused,
arriving from or as a consequence of this Agreement including without
limitation any breach or termination of this Agreement whether
liabilities asserted in contract or in tort (including negligence or
strict product liability), and irrespective of whether the parties have
advised or been advised of the possibility of any such loss or damage.
XXVII. TOOLING
-------
<PAGE>
It is acknowledged that Buyer owns all tooling for the Products and upon
termination of this Agreement, for any reason, such tooling shall be
immediately delivered to Buyer in good condition, ordinary wear and tear
expected. In addition, Seller shall deliver to Buyer, at Buyer's request,
such documents as Buyer shall deem necessary to confirm Buyer's sole
right and interest in and to the tooling.
<PAGE>
ACCEPTANCE
IEC ELECTRONICS CORP. SYMPLEX COMMUNICATIONS
(SELLER) (BUYER)
Accepted: Accepted:
By: [Ilegible] By: [Illegible]
---------------------------- --------------------------------
Title: President Title: CEO
------------------------- ------------------------------
Date: 7/5/95 Date: 6/30/95
-------------------------- -------------------------------
Approved:
By:_________________________________
Title:______________________________
Date:_______________________________
<PAGE>
EXHIBIT 6.6
RESTRUCTURE AGREEMENT
---------------------
THIS RESTRUCTURE AGREEMENT ("Agreement") dated this 25th day of March, 1997
among SYMPLEX COMMUNICATIONS CORPORATION, ("BORROWER"), a Delaware corporation,
with chief executive offices located at 5 Research Drive, Ann Arbor, Michigan
48103 and MICHIGAN NATIONAL BANK, a national banking association, of 27777
Inkster Road (10-60), Farmington Hills, Michigan 48333-9065, Attention: Eric
Johnson ("LENDER").
RECITALS:
A. On February 19, 1997 Symplex Communications Corporation, a California
corporation ("SCC"), merged into Symplex Acquisition Corporation, a Delaware
corporation, pursuant to the terms of an Agreement of Merger, with a merger
effective date of February 28, 1997 (the "Merger Date"). At the same time
Symplex Acquisition Corporation changed its name to Symplex Communications
Corporation. The term "Borrower" in this Agreement shall mean SCC when
referring to events prior to the Merger Date, and shall mean the Borrower
defined above (the surviving entity) for events on and after the Merger Date.
B. On December 9, 1994 Borrower executed and delivered to Lender a
certain Business Loan Agreement ("Loan Agreement") and Addendum to Loan
Agreement ("Addendum").
C. The Loan Agreement and Addendum set forth the terms and conditions
under which Lender extended to Borrower a Line of Credit loan in the original
principal amount of $4,000,000.00. The Loan Agreement and Addendum were amended
on December 15, 1995 to provide for, among other things, a reduction in the line
of credit to $2,500,000.00. The Loan Agreement and Addendum were further
amended on April 3, 1996 by a Second Amendment of Business Loan Agreement to,
among other things, extend the maturity date to June 1, 1996. Contemporaneous
with the execution of the Second Amendment of Business Loan Agreement, the
Borrower executed an Amended And Restated Promissory Note in the amount of
$1,250,000.00, dated April 3, 1996, effective April 1, 1996, with a Due Date of
June 1, 1996. The Second Amendment of Business Loan Agreement was further
amended on June 17, 1996 by an Extension Agreement to, among other things,
extend the maturity date to September 1, 1996. Contemporaneous with the
execution of the Extension Agreement, the Borrower executed a Second Amended and
Restated Line of Credit Note in the amount of $1 million, dated June 17, 1996
with a due date of September 1, 1996. Thereafter the parties entered into a
Second Extension Agreement on November 7, 1996. Pursuant to the Second
Extension Agreement, Borrower executed and delivered to Lender a Third Amended
And Restated Line Of Credit Note (the "Restated Line of Credit Note"). The
Restated Line Of Credit Note matured on January 1, 1997.
D. The Restated Line of Credit Note is secured by properly perfected
security interest in all of the personal property assets of Borrower pursuant to
a Security Agreement dated December 9, 1994.
<PAGE>
E. As of March 25, 1997, there is due and owing Lender from Borrower the
following, the Grand Total of which together with interest, expenses and fees
accrued and unpaid through closing of this Agreement, will be referred to
hereinafter as the "Indebtedness":
<TABLE>
<CAPTION>
<S> <C> <C>
RESTATED LINE OF CREDIT NOTE Principal $1,000,000.00
Interest $ 23,631.94
-------------
GRAND TOTAL $1,023,631.94
</TABLE>
F. Borrower and Lender have agreed to restructure the Indebtedness under
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above recitals of fact (which
recitals are incorporated as covenants of the parties hereto) and the several
promises and agreements hereinafter set forth, Borrower and Lender agree as
follows:
AGREEMENTS OF BORROWER
----------------------
1. Affirmation of Indebtedness. Borrower acknowledges and agrees that
---------------------------
the obligations under the Restated Line of Credit Note have matured and that the
Indebtedness is accurately and correctly stated in the above recitals.
2. Release and Waiver. Borrower acknowledges and agrees that it has no
------------------
defense to the full and timely payment of the Indebtedness and has no offsets
thereto, nor claims of any kind against Lender. Borrower on its behalf and on
behalf of its respective successors and assigns, representatives and heirs, as
the case may be, hereby releases and forever discharges Lender and its
shareholders, officers, successors, employees, attorneys and affiliated entities
of and from any and all manner of claims, actions, causes of action, suits,
damages and demands whatsoever, at law or in equity, arising out of or relating
in any manner to the loans which are the subject matter of this Agreement,
including the above referenced loan documents, the Restated Line of Credit Note
and any and all documents, negotiations and other matters relating thereto, and
arising out of or relating in any manner to the business relationships between
Borrower and Lender, as Borrower now has or may ever have, as of the date of
this Agreement.
3. Repayment of Indebtedness. Borrower agrees to pay the interest
-------------------------
component of the Indebtedness at closing of this Agreement, together with
attorney fees of $770.00 and a restructure fee of $20,000.00.
Borrower agrees to repay the principal component of the Indebtedness
pursuant to a Business Loan Agreement executed with this Agreement.
4. Reaffirmation of Prior Agreements. Borrower acknowledges and
---------------------------------
reaffirms the terms and conditions of all security interests previously granted
to Lender and agrees they shall continue to secure all of the present
Indebtedness and as restructured herein. Borrower agrees to
<PAGE>
execute any additional documentation deemed necessary by Lender to effectuate
the provisions of this Agreement.
AGREEMENTS OF LENDER
--------------------
5. Restructure. In consideration of the agreements and undertakings of
-----------
Borrower set forth above and in reliance thereon, Lender hereby consents and
agrees to accept repayment as provided herein.
MUTUAL AGREEMENTS
-----------------
6. Entire Agreement. Borrower and Lender each agree with the other that
----------------
this Agreement, the security documents and any documents executed in connection
therewith or referenced therein, constitute the entire agreements made by and
between the parties, and no other agreements, either written or oral, express or
implied, have been made and entered into or agreed to between the parties. The
parties also agree, each with the other, that the agreements between the parties
may be modified or amended only by subsequent written agreement executed by all
of the parties hereto.
7. Jury Trial Waiver. Borrower and Lender acknowledge that the right to
-----------------
trial by jury is a constitutional right, but that this right may be waived.
Lender and Borrower each hereby knowingly, voluntarily and without coercion,
waive all rights to a trial by jury of all disputes arising out of or in
relation to this Agreement or any other agreements between the parties. No
party shall be deemed to have relinquished this waiver of jury trial unless such
relinquishment is in a written instrument signed by the party to which such
relinquishment will be charged.
8. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
WITNESSES: BORROWER
SYMPLEX COMMUNICATIONS
CORPORATION
a Delaware corporation
/s/ Constance L. Brown By: /s/ Thomas Radigan
------------------------- ------------------------------
[Illegible] Its: CFO
- -------------------------- --------------------
<PAGE>
LENDER
MICHIGAN NATIONAL BANK,
a national banking association
/s/ L. Susan Hayward By: [Illegible]
- ------------------------- ----------------------------------
[Illegible] Its: CAM
- ------------------------- -----------------------------
<PAGE>
EXHIBIT 6.7
BUSINESS LOAN AGREEMENT
The undersigned, SYMPLEX COMMUNICATIONS CORPORATION, a Delaware
corporation, with its chief executive offices located at 5 Research Drive, Ann
Arbor, Michigan (the"Borrower"), has requested from MICHIGAN NATIONAL BANK, A
NATIONAL BANKING ASSOCIATION, of 27777 Inkster Road, (10-60), Farmington Hills,
Michigan 48333-9065 (the "Bank"), and Bank agrees to make, or has made, the
loan(s) described below (the "Loans") under the terms and conditions set forth
in this Business Loan Agreement ("Agreement").
I. LOANS.
The following Loans and any amendments, extensions, renewals or
refinancings thereof are subject to this Agreement:
<TABLE>
<CAPTION>
INTEREST MATURITY LOAN
TYPE OF LOAN RATE NOTE AMOUNT DATE DATE
<S> <C> <C> <C> <C> <C>
A. Line of Credit MNBP + 2% $500,000.00 01/05/98 03/25/97
B. Term Loan MNBP + 2% $500,000.00 12/31/99 03/25/97
</TABLE>
Purpose of Loans listed above:
A. Working capital liquidity.
B. Term out a portion of existing line of credit.
II. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank, all of which representations and
warranties shall be continuing until all of the Indebtedness is fully paid
to Bank and Borrower's obligations under this Agreement and the Related
Documents are fully performed, as follows:
A. BORROWER'S EXISTENCE AND AUTHORITY. Borrower is a California corporation,
and the Person executing this Agreement has full power and complete authority to
execute this Agreement and all Related Documents.
B. VALIDITY OF INDEBTEDNESS AND AGREEMENT. Borrower's Indebtedness to Bank,
this Agreement, and all Related Documents are valid, binding upon, and fully
enforceable against Borrower in accordance with their respective terms.
C. NATURE OF BORROWER'S BUSINESS. The nature of Borrower's business is:
Design, manufacture and sales of data communication equipment.
<PAGE>
D. FINANCIAL INFORMATION. All financial information provided to Bank has been
prepared and will continue to be prepared in accordance with generally accepted
accounting principles ("GAAP"), consistently applied, and fully and fairly
present the financial condition of Borrower. There has been no material adverse
change in Borrower's business, Property, or financial condition since the date
of Borrower's latest Financial Statements provided to Bank.
E. TITLE AND ENCUMBRANCES. Borrower owns and has good title to all of its
Property, and there are no liens or encumbrances on any of the Property except
as have been disclosed to Bank in writing prior to the date of this Agreement
and as are identified and listed in an attachment to this Agreement
(the"Permitted Encumbrances"). Borrower agrees that Borrower shall not obtain
further loans, leases, or extensions of credit from any Person identified in the
Permitted Encumbrances list or otherwise without Bank's prior written consent.
F. NO LITIGATION. There are no suits or proceedings pending before any court,
government agency, arbitration panel, or administrative tribunal, or, to
Borrower's knowledge, threatened against Borrower, which may result in any
material adverse change in the business, Property or financial condition of
Borrower.
G. NO MISREPRESENTATIONS. All representations and warranties in this
Agreement and the Related Documents are true and correct and no material fact
has been omitted.
H. EMPLOYEE BENEFIT PLANS. Borrower has not incurred any material accumulated
funding deficiency within the meaning of ERISA, and has not incurred any
material liability to the PBGC in connection with any employee benefit plan
established or maintained by Borrower, and no reportable event or prohibited
transaction, as defined in ERISA, has occurred with respect to such plans.
I. ENVIRONMENTAL COMPLIANCE. Borrower is in full compliance and conformity
with all applicable Environmental Laws and Borrower (and all Obligors) agree to
indemnify and hold Bank harmless from all costs and expenses, including
reasonable attorney fees, incurred by Bank related to any Borrower violation of
any Environmental Laws.
III. AFFIRMATIVE COVENANTS.
As of the date of this Agreement and continuing until Borrower's
obligations under this Agreement and the Related Documents are fully performed
and the Indebtedness is fully repaid to Bank, Borrower SHALL AT ALL TIMES:
------------------
A. FINANCIAL REQUIREMENTS.
1. Maintain a Current Ratio of not less than 1.0 to 1;
2. Maintain a Net Worth of not less $750,000.00.
<PAGE>
B. BOOKS AND REPORTS.
1. FINANCIAL STATEMENTS. Within one hundred twenty (120) days after
------------------ ---
the end of each fiscal YEAR, furnish to Bank, in form acceptable
to Bank, AUDITED Financial Statements prepared and certified by a
CERTIFIED PUBLIC ACCOUNTANT acceptable to Bank.
2. FINANCIAL STATEMENTS. Within thirty (30) days after the end of
------ --
each fiscal month, furnish to Bank, in form acceptable to Bank,
compiled Financial Statements, prepared by management.
3. ACCOUNTS PAYABLE AGINGS. At Bank's request, furnish Bank a
report signed by Borrower's Treasurer or chief financial officer,
showing the number and dollar sum of all of Borrower's accounts
payable outstanding and unpaid for more than 30, 60, and 90 days.
All of Borrower's accounts payable reports shall be in form
satisfactory to Bank and, upon Bank's request, Borrower agrees to
immediately provide Bank such additional information with respect
to any account payable as Bank shall request, including, but not
limited to, a list with the name, address and amount of each
account payable.
4. OTHER. Promptly furnish to Bank such other information and
reports concerning the Borrower's business, Property, and
financial condition as are provided to Borrower's owners or as
Bank shall request, and permit Bank to inspect, confirm, and copy
Borrower's books and records at any time during Borrower's normal
business hours.
C. NOTICE OF ADVERSE EVENTS. Promptly notify Bank in writing of any
litigation, governmental proceeding, default or any other occurrence which
could have a material adverse effect on Borrower's business, Property or
financial condition.
D. MAINTAIN BUSINESS EXISTENCE AND OPERATIONS. Do all things necessary to
keep in full force and effect Borrower's corporate, partnership,
proprietorship, trust, or other existence, as the case may be, and to
continue its business described in Paragraph II C. as presently conducted.
Borrower shall not change its corporate, partnership, proprietorship,
trust, or other existence, nor sell or merge Borrower's business, in whole
or in part, to or with any other Person, without the prior written consent
of Bank.
E. INSURANCE. Maintain adequate fire and extended risk coverage, business
interruption, workers disability compensation, public liability,
environmental, flood, and such other insurance coverages as may be required
by law or as may be required by Bank. All insurance policies shall be in
such amounts, upon such terms, in form, and carried with such insurers, as
are acceptable to Bank. Borrower shall provide evidence satisfactory to
<PAGE>
Bank of all insurance coverages and that the policies are in full force and
effect, and for all insurance coverages upon any Property which is
Collateral, the insurance policy shall be endorsed to provide Bank with a
standard loss payable clause with not less than thirty (30) days advance
written notice to Bank by the insurer of any cancellations or modification
of coverage (CF12181185). Any failure by Borrower to maintain insurance as
provided in this Agreement shall be an Event of Default and Bank may obtain
insurance, without obligation to do so, and all amounts so expended by Bank
shall be added to the Indebtedness or shall be payable on demand, at Bank's
option.
F. PAYMENT OF TAXES. Promptly pay all taxes, levies and assessments due to
all local, State and Federal agencies. Except to the extent that Borrower
has established a cash reserve and is actively pursuing a tax appeal, any
failure by Borrower to promptly pay any taxes, levies and assessments due
shall be an Event of Default.
G. EMPLOYEE BENEFIT PLANS.
1. At all times meet the minimum funding requirements of ERISA
concerning all of Borrower's employee benefit plans subject to
ERISA.
2. At no time allow any event to occur or condition concerning any
employee benefit plan subject to ERISA which might constitute
grounds for termination of the plan or for the appointment of a
trustee to administer the plan.
3. At no time allow any employee benefit plan subject to ERISA to be
the subject of voluntary or involuntary termination proceeding.
H. ENVIRONMENTAL LAWS COMPLIANCE/NOTICES/INDEMNITY. Strictly comply with all
Environmental Laws applicable to Borrower's business. Borrower agrees to
notify Bank, not later than ten (10) days after Borrower's receipt, of any
summons, notice, lawsuit, citation, letter, or other advice received by
Borrower from any Federal, State, or local agency or unit of government or
other Person, which asserts that Borrower is in violation of any
Environmental Laws. Borrower (and the Obligors) agree to indemnify and
hold Bank harmless from all violations by Borrower of any Environmental
Laws, which indemnity shall include all costs and expenses incurred by
Bank, including legal fees, which are related to any violation by Borrower
of any Environmental Laws, whether or not the Indebtedness has been paid at
the time any such proceeding, claim, or action is instituted against Bank.
Borrower further agrees that Bank may at any time, at Borrower's sole cost
and expense, hire or require Borrower to hire and provide Bank with an
environmental audit prepared by an independent environmental engineering
firm acceptable to Bank to confirm the continuing truth and accuracy of
Borrower's environmental representations, warranties, and agreements set
forth in this Agreement.
I. USE OF PROCEEDS; PURPOSE OF LOANS. Use the proceeds of the Loan(s) only
for
<PAGE>
Borrower's business described in Paragraph II C, and only for those
purposes stated in Paragraph I.
J. MAINTENANCE OF RECORDS; CHANGE IN PLACE OF BUSINESS OR NAME. Keep all of
its books and records at the address set forth in this Agreement, and give
the Bank prompt written notice of any change in its principal place of
business, in the location of Borrower's books and records, in Borrower's
name, and of any change in the location of the Collateral. Provided,
however, that Borrower shall not relocate its headquarters or operations
outside the state of Michigan without the written approval of Bank.
K. EMPLOYMENT LAWS. Strictly comply with all Federal and State laws
pertaining to Borrower's employees, including by way of illustration but
not of limitation, the Michigan Workers' Disability Compensation Act, MCL
418.101 et seq., as amended, Michigan Employment Security Act, MCL 421.1 et
------ --
seq., as amended, and the Fair Labor Standards Act, 29 USC 201 et seq., as
--- -------
amended.
L. GENERAL COMPLIANCE WITH LAW. At all times operate Borrower's business in
strict compliance with all applicable Federal, State, and local laws,
ordinances and regulations, and refrain from and prevent Borrower's
partners, owners, directors, officers, employees and agents from engaging
in any civil or criminal activity proscribed by Federal, State or local
law.
IV. NEGATIVE COVENANTS.
Until all of Borrower's obligations under this Agreement and the Related
Documents are fully performed and the Indebtedness is fully repaid,
Borrower shall not:
---------
A. INVESTMENT IN FIXED ASSETS. Invest in fixed assets in excess of $50,000.00
in any twelve (12) month period, without Bank's prior written consent.
B. LEASES. Enter into any lease of personal or real property which would
cause Borrower's aggregate annual rental obligations to exceed $50,000.00
without Bank's prior written consent.
C. NO BORROWINGS, GUARANTEES, OR LOANS. Borrower money or act as guarantor of
any loan or other obligation or lend any money to any Person without Bank's
prior written consent. Any sale of Borrower's accounts receivable shall be
deemed the borrowing of money.
D. LIENS AND ENCUMBRANCES; TRANSFER OF ASSETS. Mortgage, assign, or encumber
any of its Property except to Bank, nor sell, transfer or assign any
Property except in the ordinary course of business.
E. DIVIDENDS, DISTRIBUTIONS; CAPITAL STRUCTURE. Pay dividends or make capital
distributions without Bank's prior written consent. If Borrower is a
corporation, it shall
<PAGE>
not purchase, sell, or retire any of its shares, nor alter or amend its
capital structure without Bank's prior written consent, provided, however,
with respect to any year in which Borrower is taxed by the Internal Revenue
Service as an "S" Corporation, Borrower may make a distribution of profits
to its shareholders not to exceed an amount necessary to enable its
shareholders to pay their personal State and Federal taxes directly
attributable to the profits earned by Borrower in such year. Bank consents
and acknowledges to the proposed Canadian IPO to be concluded during 1997.
F. LONG TERM CONTRACTS. Enter into any contracts exceeding one year in
duration for operating, capital or financing leases.
V. SECURITY FOR LOANS.
A. SECURITY INTERESTS. Borrower has previously granted security interests in
all of its personal property assets, as more fully described in a
Restructure Agreement of even date herewith, and hereby restates and
reaffirms the same.
VI. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an Event of
Default under this Agreement:
A. FAILURE TO PAY AMOUNTS DUE. Any principal or interest on any Indebtedness
to Bank is not paid when due.
B. MISREPRESENTATION; FALSE FINANCIAL INFORMATION. Any statement, warranty or
representation of Borrower in connection with or contained in this
Agreement, the Related Documents, or any Financial Statements now or
hereafter furnished to the Bank by or on behalf of the Borrower, is false
or misleading.
C. NONCOMPLIANCE WITH BANK AGREEMENTS. Borrower breaches any covenant, term,
condition or agreement stated in this Agreement or any other agreement
including, but not limited to the Related Documents.
D. CESSATION/TERMINATION OF EXISTENCE. Borrower shall cease doing business or
Borrower's existence is terminated by death, sale, dissolution, merger or
otherwise.
E. BANKRUPTCY OR RECEIVERSHIP. Any conveyance is made of substantially all of
Borrower's assets, any assignment is made for the benefit of creditors, any
receiver is appointed, or any insolvency, liquidation or reorganization
proceeding under the Bankruptcy Code or otherwise shall be filed by or
against Borrower.
F. ATTACHMENTS; TAX LIENS. Any attachment, execution, levy, forfeiture, tax
lien or similar writ or process is issued against the Collateral.
<PAGE>
G. INDICTMENT. The institution of any criminal proceeding against Borrower,
Borrower's management, or any Obligor.
H. AUTHORITY TO CHARGE INTEREST RATE ADVERSELY AFFECTED. Bank shall
determine the Loans interest rate is usurious or is otherwise unlawful or
limited.
I. MATERIAL ADVERSE CHANGE. Any material adverse change occurs or is
imminent the effect of which would be to substantially diminish Borrower's
or any Obligor's financial condition, business, ability to perform their
agreements with the Bank, or the value of the Collateral.
J. OTHER LENDER DEFAULT. Any other indebtedness to the Bank or any other
creditor becomes due and remains unpaid after acceleration of the maturity
or after the maturity stated.
VII. REMEDIES ON DEFAULT.
A. ACCELERATION. Upon the occurrence of any Event of Default, the Loans and
all Indebtedness to Bank may, at the option of Bank, and without demand or
notice of any kind, be declared to be immediately due and payable.
B. REMEDIES CUMULATIVE. The remedies provided for in this Agreement are
cumulative and not exclusive, and Bank may exercise any remedies available
to it at law or in equity, and as are provided in this Agreement, the
Related Documents, and any other agreement between Borrower and Bank.
C. NO WAIVER. No delay or failure of Bank in exercising any right, remedy,
power or privilege hereunder shall affect that right, remedy, power or
privilege, nor shall any single or partial exercise thereof preclude the
exercise of any other right, remedy, power or privilege. No delay or
failure of Bank to demand strict adherence to the terms of this Agreement
shall be deemed to constitute a course of conduct inconsistent with the
Bank's right to at any time, before or after any Event of Default, demand
strict adherence to the terms of this Agreement and the Related Documents.
D. BANK'S RIGHT OF SET-OFF. Upon the occurrence of any Event of Default,
Bank shall have the right to apply any or all of Borrower's and any
Obligor's bank accounts or any other Property held by Bank against any
Indebtedness of Borrower to Bank.
VIII. CROSS-COLLATERALIZATION/CROSS DEFAULT.
Borrower agrees that all Collateral is security for the Loans under this
Agreement and for all other Indebtedness of Borrower to Bank, whether or
not such Indebtedness is related by class or kind and whether or not
contemplated by the parties at the time of executing each evidence of
Indebtedness. Any Borrower default under the terms of any Indebtedness to
Bank shall constitute an Event of Default under this Agreement. Any
<PAGE>
Event of Default under this Agreement shall be a default under any
Indebtedness of Borrower to Bank.
IX. MISCELLANEOUS.
A. COMPLIANCE WITH BANK AGREEMENTS. Borrower acknowledges that it has read,
and agrees to fully comply with this Agreement, the Related Documents, and
all other agreements between Borrower and Bank.
B. EXPENSES. Borrower agrees to pay all of Bank's expenses incidental to
perfecting Bank's security interests and liens, the Bank's payment of any
insurance premiums, Uniform Commercial Code search fees, Environmental Laws
inspections and audits, appraisals, and fees incurred by Bank for audits,
inspection, and copying of Borrower's books and records. Borrower also
agrees to pay all costs and expenses of Bank, including reasonable attorney
fees, in connection with the enforcement of the Bank's rights and remedies
under this Agreement, the Related Documents and any other agreement, and in
connection with the preparation of any amendments, modifications, waivers
or consents with respect to this Agreement.
C. FURTHER ACTION. Borrower agrees, from time to time upon Bank's request, to
make, execute, acknowledge, and deliver to Bank such further and additional
instruments, documents, and agreements, and to take such further action as
may be required to carry out the intent and purpose of this Agreement and
repayment of the Loans.
D. GOVERNING LAW, PARTIAL ILLEGALITY. This Agreement and the Related
Documents shall be interpreted and the rights of the parties determined
under the laws of the State of Michigan. Should any part, term, or
provision of this Agreement be adjudged illegal or in conflict with any law
of the United States or State of Michigan, the validity of the remaining
portion or provisions of the Agreement shall not be affected.
E. WRITINGS CONSTITUTE ENTIRE AGREEMENT; MODIFICATIONS ONLY IN WRITING. This
Agreement, the Related Documents and all other written agreements between
Borrower and Bank, constitute the entire agreement of the parties, and
there are no other agreements, express or implied. This Agreement
supersedes any and all commitment letters or term sheets heretofore issued
in connection with this Loan. None of the parties shall be bound by
anything not expressed in writing, and neither this Agreement, the Related
Documents, nor any other agreement can be modified except by a writing
executed by Borrower and by the Bank. This Agreement shall inure to the
benefit of and shall be binding upon all of the parties to this Agreement
and their respective successors, estate representatives, and assigns,
provided however, that Borrower cannot assign or transfer its rights or
obligations under this Agreement without Bank's prior written consent.
F. CREDIT INQUIRIES. Borrower hereby authorizes Bank to respond to any credit
inquiries received by Bank from trade creditors to other credit granting
institutions.
<PAGE>
G. RELEASE OF CLAIMS AGAINST BANK. In consideration of the Bank's making the
Loans described in this Agreement, Borrower and the Obligor(s) do each
hereby release and discharge Bank of and from any and all claims, harm,
injury, and damage of any and every kind, known or unknown, legal or
equitable, which Borrower or any of the Obligor(s) have against the Bank
from the date of their respective first contact with Bank up to the date of
this Agreement. Borrower and the Obligor(s) confirm to Bank that they have
reviewed the effect of this release with competent legal counsel of their
choice, or have been afforded the opportunity to do so, prior to execution
of this Agreement and the Related Documents and do each acknowledge and
agree that Bank is relying upon this release in extending the Loans to
Borrower.
H. WAIVER OF JURY TRIAL. Borrower and the Obligor(s) do each knowingly,
voluntarily and intelligently waive their constitutional right to a trial
by jury with respect to any claim, dispute, conflict or contention, if any,
as may arise under this Agreement or under the Related Documents, and agree
that any litigation between the parties concerning this Agreement and the
Related Documents shall be heard by a court of competent jurisdiction
sitting without a jury. Borrower and the Obligor(s) hereby confirm to Bank
that they have reviewed the effect of this waiver of jury trial with
competent legal counsel of their choice, or have been afforced the
opportunity to do so, prior to signing this Agreement and the Related
Documents and do each acknowledge and agree that Bank is relying upon this
waiver in extending the Loans to Borrower.
I. HEADINGS. All section and paragraph headings in this Agreement are
included for convenience only and do not constitute a part of this
Agreement.
J. TERM OF AGREEMENT. Unless superseded by a later Business Loan Agreement,
this Agreement shall continue in full force and effect until all of
Borrower's obligations to Bank are fully satisfied and the Loans and
Indebtedness are fully repaid.
X. DEFINITIONS.
The following words shall have the following meanings in this Agreement:
A. "AVERAGE INVESTABLE BALANCE" shall mean the average daily ledger balance in
Borrower's deposit account referred to in Paragraph III K. of this
Agreement, less (i) average daily uncollected deposits, (ii) Bank's reserve
requirement, and (iii) amounts necessary to offset applicable services
charges, for the period covered by the account analysis statement provided
by Bank, as shown on such account analysis statement.
B. "BASE RATE" or "PRIME RATE" shall mean that variable rate of interest from
time to time established by the bank designated in the Loan promissory
note(s) and Section I. of this Agreement as its base or prime commercial
lending rate.
C. "BANK" shall mean Michigan National Bank, a national banking association,
and any successor or assign.
<PAGE>
D. "COLLATERAL" shall mean that Property which Borrower and any other Obligor
has pledged, mortgaged, or granted Bank a security interest in, wherever
located and whether now owned or hereafter acquired, together with all
replacements, substitutions, proceeds and products thereof.
E. "CURRENT RATIO" shall mean that ratio obtained by dividing total current
assets by total current liabilities as determined under GAAP.
F. "DEBT SERVICE COVERAGE RATIO" shall mean that ratio obtained by dividing
the sum of Borrower's (i) net income after taxes and distributions, (ii)
interest expense, (iii) depreciation expenses, and (iv) amortization
expense, by the sum of Borrower's interest expense plus current maturities
of long-term debt, all as determined under GAAP.
G. "ENVIRONMENTAL LAWS" shall mean all laws, regulations, and rules of the
United States of America, State of Michigan, and local authorities which
pertain to the environment, including but not limited to, the Clean Air Act
(42 USC 7401 et seq.), Clean Water Act (33 USC 1251 et seq.), Resource
------- -------
Conservation and Recovery Act of 1976 (42 USC 6901 et seq.), Comprehensive
-------
Environmental Response, Compensation, and Liability Act of 1980 (42 USC
9601 et seq.), Hazardous Materials Transportation Act (49 USC 1801 et
------ --
seq.), Solid Waste Disposal Act (42 USC 6901 et seq.), Toxic Substances
------
Control Act (15 USC 2601 et seq.), Michigan Resource Recovery Act (MCL
------
299.501 et seq.), Environmental Response Act (MCL 299.601), and Underground
------
Storage Tank Regulatory Act (MCL 299.701 et seq. and 299.801 et seq.), as
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each of said statutes have been or are hereafter amended, together with all
rules and regulations promulgated by the Environmental Protection Agency
and Michigan Department of Natural Resources and all additional
environmental laws, rules, and regulations in effect on the date of this
Agreement and as may be enacted and effective.
H. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor act.
I. "EVENT OF DEFAULT" shall mean any of the events described in Section VI of
this Agreement or in the Related Documents.
J. "FINANCIAL STATEMENTS" shall mean all balance sheets, cash flows, earnings
statements, and other financial information (whether of the Borrower or an
Obligor) which have been, are now, or are in the future furnished to Bank.
K. "GAAP" shall mean "generally accepted accounting principles" consistently
applied, as set forth from time to time in the Opinion of the Accounting
Principles Board of the American Institute or Certified Public Accountants
and the Financial Accounting Standards Board, or which have other
substantial authoritative support.
L. "INDEBTEDNESS" OR "OBLIGATIONS" shall mean all Loans, indebtedness, and
obligations of Borrower to the Bank, including but not limited to, any Bank
advances for payments of
<PAGE>
insurance, taxes, amounts advanced by Bank to protect its interest in the
Collateral, overdrafts in deposit accounts with Bank, and all other
indebtedness, obligations and liabilities of Borrower to Bank, whether
matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising.
M. "MICHIGAN NATIONAL BANK PRIME RATE" or "MNB PRIME" shall mean that variable
rate of interest so designated and from time to time established as the
Michigan National Bank prime commercial lending rate or such other prime
commercial lending rate.
N. "N/A" shall mean not applicable.
O. "NET WORTH" shall mean the difference between Borrower's total assets and
total liabilities, as determined under GAAP.
P. "OBLIGOR" shall mean any person having any obligation to Bank, whether for
the payment of money or otherwise, under this Agreement or under the
Related Documents, including but not limited to any guarantors of
Borrower's Indebtedness.
Q. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any Person
succeeding to the powers and functions of the Pension Benefit Guaranty
Corporation.
R. "PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock
company, government, municipality, political subdivision, agency or other
entity.
S. "PROPERTY" shall mean all of Borrower's (or other Obligor's, as applicable)
assets, tangible and intangible, real and personal.
T. "QUICK RATIO" shall mean the total of Borrower's cash marketable securities
and accounts receivable, divided by current liabilities, as determined
under GAAP.
U. "RELATED DOCUMENTS" shall mean any and all documents, promissory notes,
security agreements, leases, mortgages, guaranties, pledges, and any other
documents or agreement executed in connection with this Agreement. The
term shall include documents existing before, at the time of execution of,
this Agreement, and documents executed after the date of this Agreement.
V. "WORKING CAPITAL" shall mean the excess of Borrower's current assets over
current liabilities, determined under GAAP.
XI. ADDITIONAL PROVISIONS:
Borrower shall not sell, transfer or otherwise dispose of any asset or
segment of Borrower's business in excess of $50,000.00 which is out of
Borrower's ordinary course
<PAGE>
of business without Bank's written consent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this
25th day of March, 1997.
WITNESSES: BORROWER
SYMPLEX COMMUNICATIONS
CORPORATION
a Delaware corporation
/s/ Constance L. Brown By: /s/ Thomas Radigan
------------------------------- --------------------------------
Its:CFO
-------------------------------
[Illegible]
-------------------------------
BANK
MICHIGAN NATIONAL BANK
a national banking association
/s/ L. Susan Hayward By: [Illegible]
------------------------------- --------------------------------
Its: CAM
-------------------------------
[Illegible]
-------------------------------
<PAGE>
ADDENDUM TO
BUSINESS LOAN AGREEMENT
(LINE OF CREDIT)
This Addendum Agreement ("Addendum") is an integral part of the Business
Loan Agreement executed by Borrower, and each and all of the terms, conditions,
provisions and agreements set forth in the Business Loan Agreement are
incorporated by this reference into this Addendum.
I. LINE OF CREDIT LOAN
Under those terms and conditions set forth in the Business Loan Agreement
and in this Addendum, and provided there shall exist no Event of Default, Bank
agrees to loan to Borrower, from time to time at Borrower's request, up to but
not to exceed THE LESSER OF the principal sum of FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($500,000.00)or the maximum of Advances allowable under the
Advance Formula set forth in Section IV of this Addendum (the "Line of Credit
Loan").
II. LINE OF CREDIT NOTE
The Line of Credit Loan shall be signified by Borrower's execution and
delivery to Bank of a promissory note in the amount of the Line of Credit Loan
(the "Line of Credit Note").
III. EXPIRATION OR SUSPENSION OF BANK'S COMMITMENT
Bank's obligation to Advance any sum to Borrower under the Line of Credit
Loan and Line of Credit Note shall automatically (a) cease and terminate upon
the maturity date stated in the Line of Credit Note, and (b) suspend or
terminate (at Bank's option), upon the occurrence of any Event of Default unless
Bank agrees in writing to waive said Event of Default. No subsequent Advance by
Bank shall be construed as a waiver by Bank of the benefit of this provision,
nor shall Bank be estopped thereby to refuse any subsequent Borrower Advance
request.
IV. ADVANCE FORMULA
All Advances to Borrower under the Line of Credit Note shall be made under
the following Loan Advance Formula:
A. 70% of Borrower's Eligible Accounts, plus
B. 25% of Borrower's Eligible Inventory.
V. BORROWING PROCEDURE
<PAGE>
A. Borrower may request an Advance on any day the Bank is open for business,
and Bank will promptly make the Advance available to Borrower by crediting
Borrower's general deposit account number 4800105225 in the amount
requested, or in such other manner as Borrower shall request in writing,
unless:
(1) Bank's commitment to Borrower under the Line of Credit Loan has
expired; or
(2) The requested Advance, when aggregated with all of Borrower's previous
unpaid Advances, would cause the unpaid principal balance of the Line
of Credit Note to exceed the lesser of the Line of Credit Loan Amount
or the maximum Advance amount determined by use of the above Advance
Formula.
VI. BORROWER REPORTS
Until all Advances under the Line of Credit Note, together with accrued
interest thereon, are fully repaid to Bank, Borrower agrees promptly to provide
Bank with the following periodic reports:
A. ACCOUNT AGING REPORT. If the above Advance Formula is computed in whole or
in part by the use of a percentage of Eligible Accounts, Borrower shall
furnish to Bank, not later than the 25th day of each calendar month, a
report signed by Borrower's Treasurer or chief financial officer, showing
the number and dollar sum of all of Borrower's Accounts outstanding and
unpaid at the end of Borrower's preceding month, together with an aging
schedule showing the number and dollar amounts of all Accounts outstanding
and unpaid for more than 30, 60, and 90 days. All of Borrower's Account
reports shall be in form satisfactory to the Bank, and upon Bank's request
Borrower agrees immediately to provide to Bank such additional Accounts
information as Bank shall request, including but not limited to, a list of
the name, address, and amount of each Account Debtor's indebtedness to
Borrower.
B. ELIGIBLE INVENTORY. If the above Advance Formula is computed in whole or
in part as a percentage of Eligible Inventory, Borrower shall furnish to
Bank, not later than the 25th day of each calendar month, a report of
Borrower's Eligible Inventory for the preceding month, signed by Borrower's
Treasurer or chief financial officer, in a report form satisfactory to
Bank.
C. VERIFICATION OF ACCOUNTS. Bank, at its option, may verify Borrower's
Accounts with Account Debtors, and Borrower agrees to promptly take
whatever action and execute such documents as in Bank's determination may
be necessary to aid Bank in such verification.
VII. DETERMINATION OF ELIGIBLE ACCOUNTS AND ELIGIBLE INVENTORY
Upon receipt of Borrower's above Accounts and Inventory reports, Bank shall
determine which Accounts and Inventory shall be eligible for inclusion in the
Advance Formula.
<PAGE>
A. ELIGIBLE ACCOUNTS. For an Account to be eligible for an Advance, it must
have the characteristics listed in this sub-paragraph VII-A. Borrower
represents, warrants to, and agrees with Bank, as of the date of this
Addendum and continuing until all of Borrower's obligations under this
Addendum and the Business Loan Agreement are fully satisfied and all
Advances and accrued interest due under the Line of Credit Note are fully
repaid, that:
1. Each Account arose in the ordinary course of Borrower's business from the
sale or lease of goods or services which have been delivered to and
accepted by the Account Debtor, and is represented by an invoice delivered
to the Account Debtor;
2. Accounts outstanding for 90 days or more after the original invoice date,
shall be excluded from the Advance Formula; if more than ten percent (10%)
of any Account Debtor's Accounts with Borrower remain unpaid for more than
90 days after the original invoice date, all Accounts with respect to that
Account Debtor shall be excluded from the Advance Formula.
3. Each Account is an unconditional, valid, legal and enforceable claim due
and owing to Borrower by the Account Debtor in the amount represented on
the Accounts report(s);
4. The unpaid balance of each Account is not subject to any defense,
counterclaim, setoff, credit, or adjustment for returned or damaged goods
or inferior services and there is no agreement between Borrower and the
Account Debtor or any other person for any rebate, concession, discount, or
release of liability, in whole or in part, except as has been disclosed to
Bank in writing.
5. Each Account is subject to no security interest or claim other than Bank's
security interest;
6. Borrower has no knowledge of the insolvency of any Account Debtor or of any
proceeding with respect to bankruptcy or other debtor relief by or against
any Account Debtor;
7. The Account Debtor is not an Affiliate of the Borrower;
8. The Account Debtor is not an Account Debtor whom Bank has, in the exercise
or Bank's reasonable discretion, determined to be an ineligible Account
Debtor, and as to whom the Bank has given notice to Borrower that such
Account Debtor shall be considered ineligible.
9. Each Account is either an eligible domestic Account or an eligible foreign
Account secured with Exim Bank insurance or approved by the International
Department of Bank.
B. ELIGIBLE INVENTORY. For Inventory to be eligible for an Advance, each item
of Inventory must have the characteristics listed in this subparagraph VII-
B. Borrower represents and
<PAGE>
warrants to, and agrees with Bank, as of the date of this Addendum and
continuing until all of Borrower's obligations under this Addendum and the
Business Loan Agreement are fully satisfied and all Advances and accrued
interest due under the Line of Credit Note are fully repaid, that:
1. The Inventory is of good and merchantable quality, is salable by Borrower
in the ordinary course of Borrower's business, and is not obsolete;
2. The Inventory is subject to no security interest or claim other than Bank's
security interest;
3. The Inventory is located at the location or locations disclosed in writing
to Bank and at no other location;
4. All Inventory has been valued at the lesser of cost or fair market value on
Borrower's Inventory report to Bank.
VIII. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event of
Default under the Addendum:
A. Any Event of Default under the Business Loan Agreement of which this
Addendum is a part;
B. Any Borrower breach of any provision or agreement in this Addendum;
C. Any representation or warranty made under this Addendum is or becomes false
or misleading in any material respect;
D. The aggregate unpaid principal amount of all Advances under the Line of
Credit Note exceeds the maximum Advances available as determined under the
Advance Formula.
IX. REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default under this Addendum, Bank shall
have all remedies as are provided by law or by the Business Loan Agreement, the
Line of Credit Note, or any mortgage, security or other collateral agreement.
X. DEFINITIONS.
As used in this Addendum the following terms shall have the following
meanings:
A. "ACCOUNTS", "INVENTORY" and "ACCOUNT DEBTOR" shall each have the meanings
statutorily provided in Article 9 of the Michigan Uniform Commercial Code.
<PAGE>
B. "ADVANCE" or "ADVANCES" shall mean a loan or loans of money from Bank to
Borrower.
C. "ADVANCE FORMULA" shall mean Bank's computation of the maximum aggregate
Advances to which Borrower from time to time will be entitled under the
Line of Credit Loan, by application of the percentages set forth in Section
IV above to Borrower's Eligible Accounts and/or Inventory determined under
Section VII above.
D. "AFFILIATE" shall mean any Person which directly or indirectly controls or
is controlled by, or is under common control with Borrower, and all
shareholders, directors, and officers of Borrower.
XI ADDITIONAL PROVISIONS. ____________________________________________________
________________________________________________________________________________
_____________________________.
IN WITNESS WHEREOF, the parties have executed this Addendum on this 25th
day of March, 1997.
BORROWER
SYMPLEX COMMUNICATIONS
CORPORATION,
a Delaware corporation
By: /s/ Thomas Radigan
------------------------
Its: CFO
------------------------
BANK
MICHIGAN NATIONAL BANK,
a national banking association
By: [Illegible]
--------------------------
Its: CAM
--------------------------
