<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------
AMERICAN MULTIPLEXER CORPORATION
(Exact name of Registrant as specified in its charter)
--------------------
NORTH CAROLINA 56-2006165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
575 NORTH PASTORIA AVENUE
SUNNYVALE, CALIFORNIA 94086
(Address of Principal Executive Offices)
408-730-8200
(Registrant's Telephone Number, Including Area Code)
--------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
--------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:
COMMON STOCK, NO PAR VALUE
(Title of Class)
--------------------
================================================================================
<PAGE> 2
ITEM 1. BUSINESS.
This discussion contains forward-looking statements that involve risks and
uncertainties. Please review the information in light of the risk factors and
other cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements. In particular, please see "Risk Factors."
OVERVIEW
American Multiplexer Corporation intends to become a provider of
high-speed, global, interactive, multimedia services to corporate, Small Office
Home Office ("SOHO") and institutional customers by using a combination of
satellite and terrestrial based networks.
We also intend to provide secure Virtual Private Networks ("VPNs") by using
the public Internet. A VPN utilizes the Internet to provide secure networking
rather than a public switched network. Historically, customers have paid
comparatively higher prices to get dedicated switched services from telephone
companies to insure security. VPNs compete against dedicated networks by using
the Internet, coupled with new technology in order to provide security at a
lower cost.
We intend to generate initial revenue by bundling our services and value
added applications with terrestrial Internet access through a co-location
agreement with Level 3 Communications, a tier one fiber optic bandwidth
provider.
Our customers will access our services through a secure e-commerce web site
located at our Network Operating Center ("NOC"). A NOC is a physical location
where a network of customer premise equipment is managed and services are
enabled. For example, a NOC can originate video content from broadcast studio
feeds or tapes. Our NOC will also host the e-commerce web servers that customers
will be able to log on to receive services.
We were incorporated on April 8, 1996 under the laws of the State of North
Carolina. During 1996 we were not yet operational and conducted no business
activity. Our operations commenced January 7, 1997, when we acquired the assets
and technology of Temasek Telephone, Inc. We initially focused on developing
multiplexers and high-speed Digital Subscriber Line ("DSL") devices for Internet
use. Multiplexers are equipment that can combine many different kinds of
information (video, data, and voice) into one integrated waveform for delivery
to a customer.
In May 1998, we made strategic changes in our business and focused on
acquiring additional technologies to bolster our satellite communication
development expertise. In September 1998, we acquired the assets of SatCom Media
Corporation after that company had filed for bankruptcy, and have since worked
on developing our high-speed services.
We plan to introduce our services in the U.S. through our Sunnyvale,
California NOC in the first quarter of the year 2000. Our initial service
offerings are anticipated to include high-speed Internet access, IP data
multicast and IP video multicast. Additional services may be introduced later in
the year 2000. Our plan of operation for the first two quarters of the year 2000
is focused on attaining our initial revenues from the sale of the initial
service offerings. We intend to pursue international markets following the
introduction of services in the U.S. In order to provide our services on a
global basis, we plan to deploy additional NOCs which will access multiple
satellites in conjunction with tier one bandwidth service providers. We
currently anticipate deploying such additional NOCs during 2000--2001.
<PAGE> 3
STRATEGY
As the Internet takes on increased importance as an information source and
e-commerce vehicle, we anticipate large growth in the demand for interactive
high-speed services, cost-effective Internet access and multimedia applications.
Today, business customers must choose between low-speed analog connections,
complex Integrated Services Digital Network ("ISDN") dial access, comparatively
expensive T1 leased-line services at 1.54 Mbps (Megabits per second) and
distance limited DSL services.
One of the greatest challenges facing service providers offering high-speed
DSL data access for business customers has been the inconsistent quality of
service from local exchange carriers as the third-party connectivity for the
"last mile" solution. The last mile, or the distance from the local exchange
switching office to the customer, is often referred to as the local access
bottleneck. Our solution is designed to bypass the local exchange carrier,
providing a connection to the customer directly via satellite. This will avoid
the bottleneck problems and provide major corporate users, institutional users
and the lucrative small and mid-sized "middle-market" businesses with a solution
for their high-speed communication needs.
We plan to expand network solutions for high-speed broadband applications
by leveraging technologies for Internet Protocol ("IP") encapsulation and
encryption, conditional access security, hybrid spread spectrum,
error-correction, modulation and radio frequency ("RF") techniques. Conditional
access is a form of security encryption of the DVB signal that authorizes a
customer to receive content. An example is pay per view in the entertainment
broadcast market. Spread spectrum is a way to provide communications between
many users without interference limitations. It is currently used in the U.S.
PCS cellular market. Hybrid spread spectrum is a modification of this standard
to improve the number of customers that can use a satellite without
interference. Through these and other enabling technologies we plan to deliver
content and provide low cost, high-speed, Internet access and broadcast or
multicast services via satellite.
Our objective is to deliver services by establishing NOCs that will be
co-located with major carriers, Competitive Local Exchange Carriers ("CLECs") or
teleports that have backbone fiber networks and local loop access. In the
future, we intend to maximize market penetration and optimize network
technologies for interactive broadband applications through strategic alliances
and joint ventures with manufacturers, communications companies, enterprise
sales and consulting organizations, content providers and Internet Service
Providers ("ISPs").
PRODUCT SERVICES
AMC NETWORK
The network architecture for our initial service offering will have a
terrestrial line from the customer to our NOC, and satellite download from our
NOC to the customer. The customer request path (customer to our NOC) is
terrestrial for our services within the U.S., however, a 64-384 Kilobits per
second ("Kbps") satellite link is planned for introduction in the year 2000,
primarily for markets outside the U.S. where the infrastructure is either not
available or costs as much as ten times the price of the same service in the
U.S.
The satellite return (customer to our NOC) path utilizes a hybrid spread
spectrum technology that provides connectivity to customers who are
geographically unable to obtain adequate bandwidth connections to support
multicast services. Typically the return path requires much less bandwidth than
the NOC to customer path.
Our network infrastructure is designed to deliver motion picture quality
video along with IP based multicast video, voice, and data traffic to corporate
Local Area Networks ("LANs"), as well as to television. Our network uses the
internationally accepted DVB/MPEG-2 and Internet TCP/IP standards that will
-2-
<PAGE> 4
interface with legacy systems. Digital Video Broadcast ("DVB") is an
international standard to deliver entertainment video for broadcasting. MPEG-2
is an International standard for compressing the signal in order to be able to
transmit more information in the bandwidth available.
THE AMC NOC
The AMC NOC will be the central controller of our system. Our NOC
communicates with the satellite, manages the network, performs accounting and
billing services tailored to customer requirements, originates content (see
"Content"), and provides end-users with access to public networks and the web.
The NOCs will be co-located with carriers and teleports to provide connectivity
directly to the terrestrial backbone. Video servers, cache, multicast and other
application servers will be installed in the NOC, which shall be scaleable for
linear growth.
Multicast is a new technology that enables communications from "one to
many" simultaneously. This is as opposed to broadcast that is "one to everyone."
Multicast enables large data file transfers to be distributed to a multiplicity
of customer sites simultaneously. This is as opposed to "one by one" in today's
existing communications infrastructure. Multicast uses Internet protocols to
deliver video, data, and voice. A teleport is a satellite communication station.
There are thousands of teleports located all over the world. Their business is
reselling the bandwidth and facilities to customers. Their business is primarily
carrying information between two points such as the U.S. and South America.
A NOC can provide traffic reports and throughput statistics for each
customer. If a subscriber regularly hits peak utilization rates, the NOC can
then migrate the user upon request to a higher speed service, at a
correspondingly higher billing rate.
The AMC NOC consists of the following equipment:
- The satellite uplink and downlink equipment including an antenna and RF
transceiver;
- The gateway equipment including the video processing equipment, IP
encoders, IP gateway, modulators, demodulators, MPEG encoders, network
management system, and billing and encryption system; and
- The servers and service delivery and monitoring equipment.
We currently have a NOC co-located at Level 3 Communications ("Level 3"),
in Sunnyvale California. Level 3 operates a national Internet tier one backbone
in the U.S. that rides on a fiber-optic infrastructure. Installation of our AMC
NOC at Level 3 began in September 1999 and we plan to offer our initial
commercial services (High-speed Internet Access, IP Data Multicast and IP Video
Multicast) from the Level 3 NOC beginning in the first quarter of the year 2000.
We presently are testing the delivery of these services via our research and
development NOC located at our corporate headquarters. However, the service from
our corporate NOC is intended to gain customer feed back on the service and
reliability, and is not a revenue generating service.
SPACE SEGMENT
We will provide our services through existing KU Band and C Band
geosynchronous satellites that are stationed in fixed orbit over the equator.
Satellite service is presently being provided by the Satmex 5 satellite, which
is part of the Loral Global Alliance.
-3-
<PAGE> 5
Ku Band Satellites are satellites that operate in the FCC designated Ku
frequency band 14-14.5 Gbps (Billion cycles per second) up to the satellite and
11.7 - 12.2 Gbps down from the satellite. C Band Satellites operate in the FCC
designated C frequency band 5.5 - 6.2 Gbps up and 3.7 - 4.2 Gbps down.
We have entered into an agreement with Satelites Mexicanos S.A. de C.V.
("Satmex") to lease two KU Band transponders on the Satmex 5 satellite for
delivering services over the next five years. We have contracted initially for
one satellite transponder covering the U.S. and one transponder covering South
America. This relationship is intended to provide the initial capacity to cover
contemplated services beginning in the first quarter of the year 2000 in the
U.S. followed by service in South America.
Ku Band transponders are how Ku Band Satellites are partitioned for serving
different customers and applications. There are 24 transponders on the Satmex 5
satellite, each is 36 MHz (million cycles per second) or approximately 31 Kbps.
We also intend to take advantage of the Loral Global Alliance worldwide
network of satellite services, of which Satmex is a member. The Loral Global
Alliance provides a network of regional and global satellites through
owner/operators including Satmex, EuropeStar and Loral Skynet.
CUSTOMER PREMISE EQUIPMENT ("CPE")
Each customer location subscribing to our services will require a satellite
terminal which will consist of the following equipment:
- Satellite Dish (.65 to 1.8 meter) with a Low Noise Block amplifier
("LNB");
- Transceiver (only used for 2-way satellite return channel);
- Satellite Router Box (for Enterprise LAN applications).
Our satellite dish with LNB will be installed at each customer site,
pointed in a southerly direction. A cable will then be run to our satellite
router box, which is typically located in the customer's equipment room, and is
connected to the LAN. This will enable the customer to request information via
their terrestrial lines and receive information via satellite.
As previously discussed, there is a need outside the U.S. for a customer to
NOC path over the satellite (via a 2-way satellite return channel) rather than
the terrestrial link. We are in the process of developing a proprietary
technology for such a 2-way satellite return channel. We expect this technology
to be completed over the next twelve to eighteen months. We will initially focus
on the U.S. and major Latin American commercial centers where the existing
infrastructure is more advanced.
CUSTOMER EQUIPMENT SUPPLY
AMC will purchase off the shelf customer equipment to build our systems and
do software design modifications and software integration for our customers. We
are providing development support to Philips Corporation, which may become a
provider of our satellite router box, to achieve better product performance for
our satellite terminals located on the customer site.
-4-
<PAGE> 6
CUSTOMER EQUIPMENT INSTALLATION
Third party installation and channel market companies will be used to
install the customer equipment. Our own service and support engineers will train
the third party installers. Negotiations are in process with a third party
installation company to cover the U.S.
CONTENT
Video broadcast content may be provided by companies that produce content
for their target markets and applications. Corporate content may be originated
by corporations. Corporations that wish to disseminate full motion video or
infomercial content via their Web sites may use AMC to co-produce "infomercial"
type or other content. Content can be aggregated at our NOC, and delivered as
multicast or broadcast services direct to multiple sites or stored on our video
servers for scheduled or on-demand delivery. Customers, strategic alliance
partners and other content aggregators that we enter into future relationships
with will be responsible for obtaining the rights to any content they want to be
delivered from our NOC. There are currently no agreements in place for the
rights to deliver content at this time.
THIRD PARTY APPLICATIONS
Application software packages such as movies on demand, distance learning
and video conferencing may be developed in the future by AMC, by subcontractors
or by strategic partners for selected vertical markets. No development contracts
are currently in place for developing specific applications, however, standard
software packages for applications such as meetings and collaboration are
available at this time.
REGULATIONS
We have FCC transmission license approval for the research and development
NOC currently located at our facility and the Level 3 co-location facility that
is planned to be operational in the first quarter of the year 2000. We plan to
contract on a case by case basis with one of our subcontractors to obtain any
necessary approvals both in the U.S. and internationally as new NOCs are
deployed and new satellites are included in the network for delivering services.
INTELLECTUAL PROPERTY
We will attempt to select the "best of breed" technology available from
outside vendors and to integrate their products into our current network.
Through this integration activity we are developing a unique network that will
optimize the efficiency and number of users on the network.
To reduce costs, improve efficiency, increase performance and serve areas
that do not have high-speed terrestrial services we are currently developing a
proprietary system for future 2-way satellite services. We intend to implement
direct sequence spread spectrum waveforms specifically developed for wideband
applications. As currently envisioned, the system will use a special form of
synchronous Frequency Division Multiple Access ("FDMA") and Code Division
Multiple Access ("CDMA") integrated with Global Positioning System ("GPS")
timing for maximum satellite bandwidth utilization.
The external specifications and feasibility simulation studies have been
completed for the development system. The Hybrid CDMA modems and controllers,
including the Application Specific integrated circuit ("ASIC") chip design will
be implemented through a contract with a third party end-to-end design house. A
third party company will develop the Ku band radio to our specifications. Two
patent applications relating to this technology have are being prepared and we
intend to submit these or other
-5-
<PAGE> 7
applications to the U.S. Patent and Trademark Office at some time in the future.
We currently expect to have this system available for deployment in the fourth
quarter of the year 2000.
HIGH-SPEED SERVICES
High-Speed is defined as being able to offer a customer up to 10 Mega bits
per second ("Mbps") of bandwidth across their corporate LAN. It is especially
important to provide sufficient bandwidth when delivering Internet-based full
motion video. Today's SOHO users and small to medium-sized businesses desire the
same speed and services that large corporations and institutions enjoy through
their dedicated networks. These SOHO and medium-sized business users require a
cost-effective solution that is easy to install and which operates
transparently, with little intervention or on-going technical support required.
For users without access to cable modems, T1 lines or analog DSL who want
the high-speed capability to receive VCR quality video or large data files, the
multicast capability of a satellite connection is an attractive option. Many
customer sites can receive data base information simultaneously, while using the
satellite bandwidth only once. We are developing the AMC system to integrate
with existing wireline networks to provide high-speed services to the desktop PC
or television simultaneously.
Dial-up access solutions are too slow to support high quality video or
large data files transfers. ISDN's 128 kbps dial-up is often cumbersome and
inadequate, high-speed leased-line alternatives are cost-prohibitive for most
small and medium-sized businesses, and DSL service has a distance limitation.
The AMC alternative will give the user the benefits of a leased line, including
instant network access, at what is hoped to be a substantially lower cost than a
dedicated network.
We will provide an end-to-end IP solution for the high-speed service
requirements of our customers. Through programs with providers such as Level 3,
we can include terrestrial lines as part of our service offering. The AMC
business model is based on selling services rather than hardware, however, our
Customer Premise Equipment is required to receive the services that are
delivered from our NOC.
Contracts with vendors and the necessary equipment are in place to deliver
the following high-speed services beginning in first quarter of the year 2000:
- High-speed Internet Access (1.5Mbps download through the satellite
terminal). This service uses the customer's existing ISP and terrestrial
line to request information over the Internet, and the information from
the Internet will be delivered via satellite. The request path typically
is low speed, which can be done over the phone, but there is usually a
lot of information coming to the customer, which requires high speed. The
request line may be over a relatively slow 28.8 Kbps modem and our
high-speed delivery at 1.5 Mbps;
- Multicast IP Data (10Mbps download to multiple users). This service is
one-to-many, which means one location can send a large file (100 Mbytes
for example) through our NOC to multiple users, simultaneous, at very
high speed (up to 10Mbps);
- Multicast IP Video (1Mbps, MPEG1 video streaming to multiple users). This
service will deliver video at the quality the customers requires, from
500Kbps MPEG 1 to full motion MPEG 2 at 6Mbps;
- Video Broadcast (MPEG1 or MPEG2). This refers to video broadcast, rather
than IP as described above.
-6-
<PAGE> 8
OTHER SERVICES AND VALUE ADDED APPLICATIONS
We intend to offer other services and value added applications following
the introduction of the above referenced services.
Low cost high-speed services and value added applications have become a
competitive requirement for today's "push" and "pull" business applications.
These services and applications include Intranets, Extranets, VPN services,
email, electronic commerce, Web hosting, video conferencing, collaborative
computing, multimedia and more. The corporate TCP/IP Intranet has become the
information highway along which business is conducted.
We intend to offer Intranet/Extranet market solutions for target business
and government users. We envision that our solutions will support the ongoing
transformation of communication networks within large and medium sized
businesses, including employee training and communication, division to
headquarters ordering and logistics tracking, customer support, marketing and ad
distribution, and international cross-border communication. The standardization
brought by electronic distribution for business-to-business communication has
found its way into internal company use to communicate between various corporate
platforms.
Intranets are corporate collaborative infrastructures whereby information
within a company is disseminated via the corporate secure Web Servers.
Financial, accounting, collaborative engineering, manufacturing, and sales can
be managed anyplace the Internet is available.
Extranets are an extension of the corporate Intranets to include suppliers
and vendors to improve collaboration between a corporation's internal operations
and the "outside" world of their business connections. In order to expedite
information flow and order processing, a limited trust is defined and
established between the networked computer resources of two or more companies.
This arrangement is a secured hybrid link between the relatively unsecured
Internet and the secured Intranet. The Wide Area Networking ("WAN")
internetworking is a fixed or virtual link, depending upon traffic volume. With
the improvement in IP security, including firewalls and VPN tools, Extranets are
emerging as the preferred interconnectivity vehicle between business partners.
Some illustrative uses of our projected corporate Intranet/Extranet
services are product announcements, promotional announcements with visual
displays and ad layouts, product placement and shelving diagrams. Our services
may include delivery information and tracking, just-in-time inventory response
to logistics and problems, and collaborative forecasting and control of imports
and exports. These service areas facilitate reduction of delivery lead times and
inventory that result in substantial cost savings to potential business and
government end users.
DISTANCE LEARNING
For distance learning applications, the AMC network can enable an
instructor located at his home site, equipped with the latest teaching aids, to
broadcast a live teaching session to students located in remote classrooms or
offices thousands of miles away. In the classrooms or at their desktop, students
would be able to watch the teacher on a television screen or computer monitor
and ask or respond via video conferencing, IP text window, or IP Voice call
interaction. The teacher could then remotely control the video camera in the
classroom to zoom in or pan the classroom. The teacher could also take the
classroom to an internet website, representing the subject discussed, by
hyperlinking to the site, thus facilitating further instructional interactivity.
The students may take web-based tests with real-time interaction with the remote
teacher. Enhanced features such as file transfer of instructional notes that
have been converted into electronic form via voice recognition software, as well
as help desks, fax, and remote printing are a few of the service features
-7-
<PAGE> 9
that may be delivered by our system. The distance learning capability can
enhance learning productivity and help reduce training costs.
MARKETS AND CUSTOMERS
We intend to develop our customers through vertical market channels such as
integrators, consulting companies, marketing companies, trade associations,
broadband data service providers, content providers, CLECs that wish to enhance
their data service offerings and ISPs that are developing application packages
and targeting special markets and corporate users. We also intend to pursue
direct accounts.
Our users fall into three categories:
1. Corporate users. These customers will typically subscribe to our
high-speed services to reduce their telecommunications costs, improve
their Intranet or Extranet networks, and to implement applications that
they cannot do at this time due to bandwidth and network limitations.
Many of these customers will be implementing high-speed services for the
first time, as opposed to the large corporations that have implemented
private business networks in the past.
2. Institutional users. These users are schools, hospitals or government
institutions that want to implement applications such as distance
learning or telemedicine.
3. SOHO users. These are small businesses or remote offices of corporations
that operate out of their home.
REVENUE RECOGNITION POLICIES
Service agreements will be signed with customers for our services. Revenue
should be generated 30 days following the signing of the service agreement. No
revenue has been generated to date, however, we anticipate that revenue will
begin in the first quarter of the year 2000 from the following sources:
- High-speed Internet access;
- Data and video multicast services;
- Maintenance and support services; and
- Selling and installing equipment for use on customers' premises.
We anticipate that revenues will be recognized as follows:
- Internet access revenue billed on a monthly basis;
- Data and video content based on usage;
- Maintenance and support contracts over the applicable contractual period,
billed on a monthly basis; and
- Customer premise equipment upon installation.
-8-
<PAGE> 10
COMPETITION
Our competition for "connectivity" services, which are basic access
services such as T1 or DSL comes from both satellite and terrestrial network
solution providers. AMC plans to differentiate itself by bundling high-speed
services and value added applications, going beyond only connectivity to provide
total interactive solutions for specific applications. With regard to
connectivity services, currently major fiber and cable suppliers and carriers
are striving to complete new fiber terrestrial network infrastructures. Many
carriers and ISPs are promoting high-speed connectivity through Asynchronous
Digital Subscriber Line ("ADSL") services. However, in order to have a 1.5 Mbps
ADSL line, which is only a fraction of the 7 Mbps data rate that is provided by
the ADSL modems, the user must be within 2 to 3 miles of the local phone
company's central office. Many customer locations are more than 2 miles from the
central office. Also, these ADSL and fiber lines require a large capital
investment by the local and long distance carriers.
The key to rapid deployment of new services is to provide a "last mile"
bypass of this wiring infrastructure. The AMC system will bypass the local
exchange carrier via satellite. The "last mile" refers to the connection between
the customer and the local exchange carrier. The term "last mile" does not refer
to a physical mile.
We do not compete directly with terrestrial service suppliers, but instead,
compliment them by delivering services that they cannot provide due to "last
mile" or critical technology limitations. AMC services will be particularly
attractive to distributed enterprises or at sites in sparsely populated areas
with limited terrestrial telecommunication infrastructure because satellite
network connections can be established in a fraction of the time and generally
at much less cost than terrestrial networks. Delivery of multicast video and
data via the AMC network, integrated with their terrestrial network, may in many
cases be the most cost-effective solution for the user. For example, High-speed
Internet access will almost always utilize the terrestrial request line, and
delivery of video content may use a high-speed terrestrial connection to our
NOC.
Hughes Network Systems offers high-speed connectivity and IP based services
delivered over a proprietary satellite transport system, and could be considered
a dominant competitor. We are focusing on providing Web-enabled end-to-end
solutions on corporate LANs, and have implemented the DVB compliant open
architecture transport system, which should result in developers and
manufacturers providing us with industry standard equipment and software to
reduce costs in the future.
RESEARCH AND DEVELOPMENT
Our product service development and engineering efforts focus on the design
and development of new technologies and product services to increase the speed
and efficiency of satellite communications and to increase the number of users
on our network. Our research and development expenses for the period from April
1996 (inception) to December 31, 1996, the years ended December 31, 1997 and
1998 and the nine months ended September 30, 1999 were $0, $306,637, $507,082
and $2,016,260.
EMPLOYEES
As of September 30, 1999, we employed 23 employees and two independent
contractors located in our Sunnyvale, California headquarters. Our employees are
not covered by any collective bargaining agreements. We believe that its current
employee relations are satisfactory. There is significant competition in the San
Francisco Bay Area for employees with the managerial, technical, marketing,
sales and other skills required to operate our business. Our future success will
depend in significant part upon its ability to attract, retain and motivate
employees.
-9-
<PAGE> 11
AVAILABLE INFORMATION
Prior to the effectiveness of this Registration Statement, we have not been
required to file periodic reports with the Securities and Exchange Commissions.
-10-
<PAGE> 12
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing elsewhere in this
Registration Statement. The statement of operations data set forth below for the
years ended December 31, 1996, 1997 and 1998, and the balance sheet data at
December 31, 1997 and 1998 are derived from our audited financial statements
included elsewhere in this Registration Statement. The statement of operations
data for the nine-month periods ended September 30, 1998 and 1999 and the
balance sheet data as of September 30, 1999 are derived from unaudited financial
statements included elsewhere in this Registration Statement. Other annual and
quarterly statement of operations data set forth below is derived from our
unaudited annual and quarterly financial statements not included elsewhere
herein. In our opinion, these unaudited financial statements have been prepared
on the same basis as our audited financial statements and reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our results of operations and financial position for these
periods. The historical results are not necessarily indicative of results to be
expected for any future period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------------- -------------------------
1994(1) 1995(1) 1996(1) 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales ............................. $ 46 $ 157 $ -- $ -- $ -- $ -- $ --
Cost of goods sold ................ (14) (47) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit (loss) ............... 32 110 -- -- -- -- --
Operating expenses:
Selling and marketing ............. 90 47 193 1,715 587 394 1,601
General and administrative......... 324 137 191 520 1,188 418 3,335
Research and development........... -- -- 29 307 507 92 2,016
Write-off of inventory ............ -- -- -- -- 1,283 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses .......... 414 184 413 2,542 3,565 904 6,952
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from operations .............. (382) (74) (413) (2,542) (3,565) (904) (6,952)
Other income ...................... -- -- 56 3 16 1 398
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss .......................... $ (382) $ (74) $ (357) $ (2,539) $ (3,549) $ (903) $ (6,554)
=========== =========== =========== =========== =========== =========== ===========
Historical basic and diluted
loss per share(2) ........... $ (0.02) $ -- $ (0.02) $ (0.13) $ (0.16) $ (0.04) $ (0.22)
=========== =========== =========== =========== =========== =========== ===========
Shares used to compute
historical basic and
diluted loss per share ...... 17,919,800 17,919,800 17,919,800 19,671,300 21,589,772 21,215,350 30,296,893
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------- -------------------
1994(1) 1995(1) 1996(1) 1997 1998 1998 1999
------- ------- ------- ---- ---- ----- ------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .............. 0 17 85 1 6 -- 20,100
Working capital ........................ (35) (59) 114 (48) (289) 881 20,194
Total assets ........................... 71 52 765 824 712 1,690 21,913
Long term debt and capital lease
obligations ...................... 16 6 6 -- -- -- --
Total stockholders' equity ............. 8 38 691 89 205 1,138 21,800
</TABLE>
(1) Predecessor company (see Note A to the financial statements appearing
elsewhere in this Registration Statement).
(2) Please see the financial statements and the notes to such statements
appearing elsewhere in this Registration Statement for the determination of
shares used in comparing basic and diluted net loss per share.
-11-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Registration Statement contains forward-looking statements, the
accuracy of which involves risks and uncertainties. We use words such as
"anticipates," "believes," "plans," "expects," "future," "intends," and similar
expressions to identify forward-looking statements. The discussion and analysis
of financial condition and results of operations is based upon and should be
read in conjunction with the financial statements of the Company and the notes
thereto included elsewhere in this Registration Statement, as well as the
information contained under the headings, "Business" and "Risk Factors."
OVERVIEW
Our Company plans to offer broadcast, multicast and high-speed Internet
access services to consumers and corporate users as well as allow for these
users to provide Internet and Intranet connectivity to remote locations through
Virtual Private Networks ("VPNs"). The market for the Company's product services
is rapidly evolving and is characterized by an increasing number of new
technologies, which include both satellite and terrestrial network solution
providers. The Company and its prospects must be considered in light of the
risks, expenses and difficulties encountered by companies in the new and rapidly
evolving market for our product services. See "Risk Factors," generally.
We have experienced accumulated net losses from operations of
$12,642,164 or $0.56 per share (basic and diluted), since inception in April,
1996 through September 30, 1999. We anticipate that we will continue to incur
net losses into the year 2000. These losses have developed mainly from our
activities to develop our product services and establish brand recognition
through the development of a viable sales channel.
We have not yet generated revenue. We intend our revenue to be generated
in the future from the sale of high speed Internet access, the delivery of
content and the provision of installation maintenance and support services. We
intend to market to various channels, including multiple business and dwelling
units and manufacturing companies. Our policy is to recognize revenue as earned
on either monthly or yearly bases or as usage charges are incurred. We expect to
provide allowance for returns and price adjustments at the point of revenue
recognition.
We originally began operations by developing multiplexers and high-speed
DSL devices for Internet use. In May 1998, we made the strategic decision to
abandon the sales and marketing efforts behind our MUX-6 Multiplexer and DigiCop
internet connector products to pursue other lines of business. We have written
down all of the finished inventory and the parts and raw materials related to
these product services to their estimated net realizable value. The total amount
of write downs related to the abandonment was $1,362,976.
We continue to expend substantial resources on sales and marketing in
our attempts to establish our product services as a viable alternative in the
MSP market. There can be no assurances, however, that we will achieve or sustain
profitability or positive cash flow from our operations. See "Risk Factors--We
Have a Limited Operating History," "--We May Have Insufficient Capital For
Future Operations," and "--We Face Obstacles Relating To Market Acceptance and
Distribution."
Sales and marketing expenses consist primarily of compensation, costs of
promotional material, travel and advertising. Since inception in April 1996
through September 30, 1999, sales and marketing expenses have been $3,903,158.
During 1997 and 1998, we expended considerable resources in Asia in an attempt
to establish a distribution channel and secure contracts with vendors for the
MUX-6 and DigiCop product, which included governments and private companies. Our
sales and marketing expenses will grow rapidly as we
-12-
<PAGE> 14
expand the sales and marketing efforts nationwide and internationally. We expect
to hire additional sales personnel in the first quarter of the year 2000.
General and administrative expenses consist primarily of costs
associated with the internal costs of pursuing capital investment in the
Company, accounting and human resources needs, professional expenses, leasing of
facilities, insurance, legal, depreciation expenses, and compensation. Since
inception in April 1996 through September 30, 1999, general and administrative
expenses amounted to $5,043,245.
As of December 31, 1998, we had operating loss carry forwards of
approximately $5,845,000 for federal purposes and $2,922,000 for state purposes.
The federal and state net operating loss carry forwards expire on various dates
through 2018. We have provided full valuation allowance against our deferred tax
assets, consisting primarily of net operating loss carry forwards, because of
the uncertainty regarding their realization. Further, such net operating loss
carry forwards could be subject to limitations due to changes in our ownership
resulting from equity financings.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenue. We have not recognized any revenues for the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999.
Research and development expenses. Research and development expenses
were $2,016,260 for the nine months ended September 30, 1999, an increase from
$92,104 for the nine months ended September 30, 1998. Research and development
expenses for September 30, 1998 related to DigiCop and September 30, 1999
related primarily to the effort to complete the development and testing our NOCs
and the 2-way system under development which we expect to have available for
implementation in the fourth quarter of the year 2000. The increase resulted
primarily from additional costs related to new employees, transponder fees, rent
and compensation costs of approximately $1,100,000 related to the issuance of
warrants.
Sales and marketing expenses. Sales and marketing expenses were
$1,600,980 for the nine months ended September 30, 1999, an increase from
$394,109 for the nine months ended September 30, 1998. This increase resulted
primarily from the hiring of additional sales and marketing personnel and the
sales and marketing to develop the business, including compensation costs of
approximately $1,100,000 related to the issuance of warrants.
General and administrative expenses. General and administrative expenses
were $3,335,023 for the nine months ended September 30, 1999, an increase from
$417,576 for the nine months ended September 30, 1998. This increase was
primarily due to increases in administrative personnel, professional fees,
facility expenses to support the growth of operations, including higher rent,
supplies and other office expenses, including compensation costs of
approximately $1,100,000 related to the issuance of warrants.
Warrants on up to 3,000,000 shares of our common stock were issued to
three of our employees in November 1998. One employee is the engineering
director, another is the marketing director and the third is the operations
director. Half of these warrants are exercisable based upon target prices of our
common stock. The other half are exercisable based upon the achievement of
certain research and development milestones. Amounts are expensed in each
category, based upon the nature of the warrant and the work performed by the
individual.
Other income. Other income was $398,432 for the nine months ended
September 30, 1999, an increase of $397,682. This increase was due to higher
interest income.
-13-
<PAGE> 15
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenue. We have not recognized any revenues for the years ended
December 31, 1997 and 1998.
Research and development expenses. Research and development costs in
1998 were $507,082, an increase from $306,637 in 1997. This increase was
primarily due to the purchase, in the fourth quarter of 1998, of certain
technologies in the form of in-process research and development, from SatCom
Media Corporation. Related expenses of $406,000 were charged to research and
development because the technology acquired and related products were in the
early stages of development and had not yet achieved technological feasibility.
The change from 1997 to 1998, net of the $406,000 charge, decreased due to the
fact that in 1997 the DigiCop product incurred extensive development costs while
the significant costs related to the DVB/IP network did not begin until the
first quarter of 1999.
Sales and marketing expenses. Sale and marketing expenses were $586,529
in 1998, a decrease from $1,715,649 in 1997. This decrease was primarily due to
the significant costs incurred in 1997 in an attempt to secure contracts and
commitments in Asia. The costs included consulting fees related to establishing
a contract with the Republic of China for our multiplexer product. Sales and
marketing expenses for 1998 related primarily to the attempt to sell our
multiplexer product and Digicop products through May 1998.
General and administrative expenses. General and administrative expenses
were $1,188,071 in 1998, an increase from $520,151 in 1997. This increase was
primarily due to increases in the number of administrative personnel,
professional services fees and facility expenses to support the growth of our
operations, including higher rent, supplies and other office expenses.
In January 1997 we acquired certain assets and rights to the MUX-6
multiplexer product from Temasek Telephone, Inc. Temasek Telephone, Inc. was
deemed to be a predecessor corporation, and accordingly, their statement of
operations and cash flows for the year ended December 31, 1996 are included
herein. There was little activity by the predecessor corporation in 1996, due to
lack of capital. The expenses primarily related to personnel, business
development and facilities costs.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity as of September 30, 1999 consisted of
$20,099,066 in cash and cash equivalents.
Since inception in April 1996, we have financed ourselves primarily
through private equity financing. During the years ended December 31, 1997 and
1998, we received aggregate proceeds from the sale of stock of approximately
$4,500,000. During the nine months ended September 30, 1999, we received net
proceeds of approximately $27,400,000 from the sale of common and preferred
stock.
Cash utilized by operating activities was $2,222,028 in the nine months
ended September 30, 1999, $2,357,027 in the year ended December 31, 1998 and
$1,205,354 in the year ended December 31, 1997. The cash utilized in each of
these periods was due to net losses, as well as working capital required to fund
our growth in operations.
Cash used in investing activities consisted primarily of capital
expenditures of $1,248,188 and advances to shareholders of $3,797,755 in the
nine months ended September 30, 1999, $441,025 and $25,000 in the year ended
December 31, 1998 and $38,359 and $100,000 in the year ended December 31, 1997,
respectively. The nature of the capital expenditures was NOC equipment, lab
equipment and equipment and furnishings for our facility. The advances were all
made to the president of the Company.
-14-
<PAGE> 16
Cash provided by financing activities was $27,361,976 for the nine
months ended September 30, 1999, and $1,344,740 and $3,233,686 for the years
ended December 31, 1997 and 1998, respectively. Cash provided by financing
activities has been provided primarily from the sale of common and preferred
stock.
In light of our capital raising activities in 1999, we believe our
existing cash and cash equivalents will be sufficient to meet our short term and
long term needs. However, we may be required, or could elect, to seek additional
funding from the capital markets prior to that time. Our future capital
requirements will depend on many factors, including the rate of revenue
generation and growth, the timing and extent of spending to support development
efforts and expansion of sales and marketing, the timing of introductions of new
product services and enhancements to existing product services, and marketing
acceptance of our product services. We cannot assure you that additional equity
or debt financing, if required, will be available on acceptable terms or at all.
YEAR 2000 COMPLIANCE
Many computers, software, and other equipment are coded to accept only
two digit entries in the date code field. Beginning in the year 2000, these code
fields will need to accept four digit entries to distinguish between the year
2000 and 21st century dates from other 20th century dates. As a result, computer
systems and/or software products used by many companies may need to be upgraded
to solve this problem.
Assessment. The year 2000 problem may affect the computers, software,
and other equipment that we use, operate or maintain for our operations. Based
on inquiries that we have made of the third party suppliers of products that we
use, we believe that all computer driven equipment within our infrastructure is
Y2K compliant.
External Infrastructure. We rely on the general communications
infrastructure maintained by the established telecommunications companies to
transmit our data to a NOC uplink site, to uplink to a satellite, and for
rebroadcast by the satellite to our customers. Accordingly, if the
telecommunications companies and satellite operators do not have their systems
year 2000 compliant, then we and our customers could suffer the consequences of
the failure of one or more components of the telecommunications infrastructure
in common with other users. The consequences could be that customers will refuse
to pay for our product services and we could suffer a decline in revenues. In
addition, costs would go up as we would seek to mitigate any problems.
Product Services. To date, we are not aware of any problems with our
existing product services prior to releasing them to customers. We currently do
not expect any year 2000 problems to arise with our product services.
Possible consequences of year 2000 problems by external infrastructures.
We expect to identify and resolve all year 2000 problems that could adversely
affect our business operations. However, we believe that it is not possible to
determine with complete certainty that all year 2000 problems affecting us have
been identified and corrected. The number of devices that could be affected and
the interactions among these devices are simply too numerous. In addition, no
one can predict the how many year 2000 problem-related failures will occur or
the severity, duration or financial consequences of the year 2000 related
failures. In general, we believe that that any year 2000 problems will occur in
the telecommunications infrastructure. As a result, we believe that the
following consequences are possible:
- a significant number of operational inconveniences and inefficiencies
for us, our contract manufacturers and our customers that will divert
management's time and attention and financial resources from ordinary
business activities;
-15-
<PAGE> 17
- business disputes or penalties due to year 2000 related problems; and
- business disputes alleging that we failed to comply with the terms of
contracts or industry standards of performance, some of which could
result in litigation or contract termination.
Contingency plans. We have only made generalized contingency plans for
year 2000 contingencies and have not spent any funds in connection with year
2000 compliance. If such problems occur which interrupt our services to our
customers, we intend to immediately seek to obtain such services from
telecommunications companies that are able to continue offering services. We may
also seek to replace on an accelerated basis, any affected equipment or
software. We may also have increased work hours for our personnel and hire
additional contract personnel to correct any year 2000 problems on an
accelerated basis.
Additional Factors. The discussion of our efforts and expectations
relating to year 2000 compliance are forward-looking statements. Our ability to
achieve year 2000 compliance and the level of incremental costs associated
therewith, could be adversely affected by, among other things, availability and
cost of programming and testing resources third party suppliers' ability to
modify proprietary software, and other unanticipated problems.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note A to the financial statement appearing elsewhere in this
Registration Statement.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the nature of our short-term investments, we have
concluded that there is no material market risk exposure. Therefore, no
quantitative tabular disclosures are required.
-16-
<PAGE> 18
RISK FACTORS
You should carefully consider the risks applicable to our company
described below. The risks and uncertainties described below are not the only
ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
investors may lose all or part of their investment.
This Form 10 Registration Statement also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us described below and
elsewhere herein.
WE HAVE A LIMITED OPERATING HISTORY
Because we recently began operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging. We were incorporated on April 8, 1996 and did
not begin any activity until 1997 and have a limited operating history.
Furthermore, our prospects must be evaluated in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
the early stage of their development. We may not be successful in addressing
these risks and our business strategy may not be successful. These risks include
our ability to:
- develop new product services equal to or superior to those of our
competitors;
- attract customers and maintain strong relationships with them;
- execute our sales and marketing strategy;
- expand our market share;
- expand our domestic and international operations;
- reduce our costs of equipment used to provide services;
- respond to competitive pressures; and
- continue to attract, retain and motivate highly qualified personnel,
particularly in the areas of engineering, sales and marketing.
WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES
We have incurred losses since we commenced operations in April, 1996. We
incurred net losses of $2,539,237 in 1997, $3,549,096 in 1998 and $6,553,831 for
the nine months ended September 30, 1999. As of September 30, 1999 we had an
accumulated deficit of $12,642,164. We have not yet generated any revenue or
achieved profitability and we cannot be certain that we will realize sufficient
revenue to achieve profitability in the future. Even if we do achieve
profitability, we cannot make any assurances that we can sustain or increase
profitability on a quarterly or annual basis in the future. If future revenues
fail to materialize or grows slower than we anticipate, if gross margins are not
generated in the future or if operating expenditures exceed our expectations or
cannot adjust accordingly, we may continue to experience significant losses on a
quarterly basis. Accordingly, we are dependent upon the successful completion of
future capital
-17-
<PAGE> 19
infusions to continue operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
WE EXPECT TO CONTINUE TO EXPERIENCE NEGATIVE CASH FLOW FROM OPERATIONS AND MAY
BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS THROUGH THE ISSUANCE OF
ADDITIONAL SECURITIES
Since inception in April, 1996, we have experienced negative cash flow
from operations and we expect to continue to experience negative cash flow from
operations for the foreseeable future. Therefore, we have relied primarily on
issuances of equity securities to fund our operations to date. We currently
anticipate that our existing cash balances and net proceeds from recent equity
offerings will be sufficient to meet our anticipated needs for working capital
and capital expenditures through at least the next 12 months. We may need to
raise additional funds if our estimates of revenue, working capital and/or
capital expenditure requirements change or prove inaccurate or in order for us
to respond to unforeseen technological or marketing hurdles or to take advantage
of unanticipated opportunities. We cannot be certain that additional financing,
through the issuance of equity securities or otherwise, will be available to us
on favorable terms when required, or at all. Furthermore, if we raise additional
funds through the issuance of equity, equity-related or debt securities, such
securities may have rights, preferences or privileges senior to those of the
rights of our common and preferred stock and our stockholders may experience
additional dilution. If adequate funds are not available, or are not available
on acceptable terms, we may not be able to take advantage of market
opportunities, develop new product services or otherwise respond to competitive
pressures which could adversely affect our ability to achieve and sustain
positive cash flow and profitability in the future. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OUR FINANCIAL RESULTS FROM PERIOD TO PERIOD MAY FLUCTUATE AS A RESULT OF SEVERAL
FACTORS, ANY OF WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE
We believe that period to period comparisons of our operating results
are not a good indication of our future performance. It is possible that in some
future periods our operating results may be below the expectations of investors.
In this event, the price of our common stock may fall. Our revenue and operating
results may vary significantly from period to period due to a number of factors,
many of which are not in our control. These factors include:
- continued market acceptance of our product services;
- fluctuations in demand for our product services;
- variations in the timing of orders;
- the timing of new product and service introductions by us or our
competitors;
- the mix of product services sold and the mix of distribution channels
through which they are sold;
- our ability to obtain sufficient supplies of sole or limited source
components for our product services;
- unfavorable changes in the prices of the components we purchase;
- our ability to achieve required cost reductions;
- our ability to attain and maintain quality levels for our product
services; and
-18-
<PAGE> 20
- our ability to integrate new technologies we develop or acquire into
our product services.
We cannot assure you that we will be able to sustain or improve our
financial results in the future, or that we will be able to offset future price
declines with cost reductions. As a result, we may experience substantial period
to period fluctuations in future operating results and adversely affected
financial results. A variety of factors affect our financial results, including
the following:
- the type of distribution channel through which we sell our product
services;
- the volume of product services offered and sold;
- our product service sales mix;
- the average selling prices of our product services; and
- the effectiveness of our cost reduction efforts.
We also anticipate that orders for our product services may vary
significantly from period to period for various reasons, including the success
of our sales and marketing efforts. As a result, operating expenditures and
inventory levels in any given period could be disproportionately high. In some
circumstances, customers may delay purchasing our current product services in
favor of next-generation product services, which could affect our operating
results in any given period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for detailed information on our
period to period operating results.
THE MARKET IN WHICH WE SELL OUR PRODUCT SERVICES IS INTENSELY COMPETITIVE AND
OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF WE FAIL TO DEVELOP OR RETAIN MARKET
SHARE OR OTHERWISE FAIL TO SUCCESSFULLY COMPETE IN THIS MARKET
We compete with many other companies. We will face competition from
numerous sources, including terrestrial and satellite-based online and Internet
service providers and others with the technical capabilities and expertise which
would encourage them to develop and commercialize competitive product services.
Many of our competitors are substantially larger than we are and have
significantly greater financial, sales and marketing, technical, manufacturing
and other resources and more established distribution channels. These
competitors may be able to respond more rapidly to new or emerging technologies
and changes in customer requirements or devote greater resources to the
development, promotion and sale of their product services than we can.
Furthermore, some of our competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties to
increase their ability to rapidly gain market share by addressing the needs of
our prospective customers. These competitors may enter our existing or future
markets with solutions that may be less expensive, provide higher performance or
additional features or be introduced earlier than our solutions. Given the
market opportunity in our market, we also expect that other companies may enter
our market with better product services and technologies. If any technology that
is competing with ours is more reliable, faster, less expensive or has other
advantages over our technology, then the demand for our product services would
decrease, which would seriously harm our business.
We expect our competitors to continue to improve the performance of their
current product services and introduce new product services or new technologies
as industry standards and customer requirements evolve that may supplant or
provide lower cost alternatives to our product services. Successful new product
service introductions or enhancements by our competitors could reduce the sales
or market acceptance of our product services, perpetuate intense price
competition or make our product services obsolete. To be
-19-
<PAGE> 21
competitive, we must continue to invest significant resources in research and
development, sales and marketing and customer support. We cannot be sure that we
will have sufficient resources to make such investments or that we will be able
to make the technological advances necessary to be competitive. As a result, we
may not be able to compete effectively against our competitors. Our failure to
maintain and enhance our competitive position within the market may seriously
harm our business.
Increased competition is likely to result in price reductions, longer
sales cycles and loss of market share, any of which would seriously harm our
business and results of operations once we begin to generate revenue. We cannot
be certain that we will be able to compete successfully against current or
future competitors or that competitive pressures will not seriously harm our
business.
IF WE FAIL TO ENHANCE OUR EXISTING PRODUCT SERVICES OR DEVELOP AND INTRODUCE NEW
PRODUCT SERVICES AND FEATURES IN A TIMELY MANNER TO MEET CHANGING CUSTOMER
REQUIREMENTS AND EMERGING INDUSTRY STANDARDS, OUR ABILITY TO GROW OUR BUSINESS
WILL SUFFER
The MSP market is characterized by rapidly changing technologies and
short product life cycles. Our future success will depend in large part upon our
ability to:
- identify and respond to emerging technological trends in the market;
- develop and maintain competitive product services;
- enhance our product services by adding innovative features that
differentiate our product services from those of our competitors;
- bring product services to market on a timely basis at competitive
prices;
- respond effectively to new technological changes or new product
service announcements by others; and
- respond to emerging broadband access technologies such as DSL,
wireless and cable modems.
We will not be competitive unless we continually introduce new product
services and product service enhancements that meet these emerging standards. In
the future we may not be able to effectively address the compatibility and
interoperability issues that arise as a result of technological changes and
evolving industry standards.
The technical innovations required for us to remain competitive are
inherently complex, require long development cycles and are dependent in some
cases on sole source suppliers. We will be required to continue to invest in
research and development in order to attempt to maintain and enhance our
existing technologies and product services, but we may not have the funds
available to do so. Even if we have sufficient funds, these investments may not
serve the needs of customers or be compatible with changing technological
requirements or standards. Most development expenses must be incurred before the
technical feasibility or commercial viability of new or enhanced product
services can be ascertained. Revenue from future product services or product
service enhancements may not be sufficient to recover the associated development
costs.
WE DEPEND ON OUR KEY PERSONNEL WHO MAY NOT CONTINUE TO WORK FOR US
Our future success depends in large part upon the continued services of
our key technical, sales and senior management personnel, none of whom is bound
by an employment agreement. The loss of any of our
-20-
<PAGE> 22
senior management or other key research, development, sales and marketing
personnel, particularly if lost to competitors, could harm our business. In
particular, the services of Edward Tan, President and Chief Executive Officer,
Ronald Everoski, Chief Technical Officer and Vice President of Research and
Development and Douglas Hanson, Vice President of Sales and Marketing, would be
difficult to replace. We do not maintain "key person" life insurance for any of
our personnel. See "Directors and Executive Officers" for more detailed
information on our key personnel.
IF WE ARE NOT SUCCESSFUL IN EXPANDING OUR BUSINESS IN INTERNATIONAL MARKETS, OUR
GROWTH WILL SUFFER
We intend to expand our operations domestically and internationally, and
will seek to expand the range of our product services and penetrate new
geographic markets; however, we have no experience in effectuating rapid
expansion or in managing operations which are geographically dispersed. Although
we believe we have an adequate infrastructure, there can be no assurance that
our current management, personnel and other corporate infrastructure will be
adequate to manage our growth.
As part of our strategy to address the global needs of our customers and
partners, we have committed significant resources to expanding our international
sales and support channels in advance of revenue. We cannot assure you that our
efforts to develop international sales and support channels will be successful.
Moreover, international sales are subject to a number of risks, including
changes in foreign government regulations and communications standards, export
license requirements, tariffs and taxes, other trade barriers, difficulty in
collecting accounts receivable, difficulty in managing foreign operations, and
political and economic instability. To the extent our customers may be impacted
by currency devaluations or general economic crises, the ability of these
customers to purchase our product services could be adversely affected. Payment
cycles for international customers are typically longer than those for customers
in the United States. We cannot assure you that foreign markets for our product
services will not develop more slowly than currently anticipated. In addition,
if the relative value of the U.S. dollar in comparison to the currency of our
foreign customers should increase, the resulting effective price increase of our
product services to these foreign customers could result in decreased sales.
We anticipate that our foreign sales will generally be invoiced in U.S.
dollars and, accordingly, we do not currently plan to engage in foreign currency
hedging transactions. However, as we expand our international operations, we may
allow payment in foreign currencies and exposure to losses in foreign currency
transactions may increase. We may choose to limit any currency exposure through
the purchase of forward foreign exchange contracts or other hedging strategies.
We cannot assure you that any currency hedging strategy we may adopt would be
successful in avoiding exchange-related losses.
OUR PRODUCT SERVICES MUST COMPLY WITH COMPLEX GOVERNMENT REGULATIONS WHICH MAY
PREVENT US FROM GENERATING OUR REVENUE OR ACHIEVING PROFITABILITY
In the United States, our product services must comply with various
regulations and standards defined by the Federal Communications Commission and
Underwriters Laboratories. Internationally, product services that we develop may
be required to comply with standards established by telecommunications
authorities in various countries as well as with recommendations of the
International Telecommunications Union. If we fail to obtain timely domestic or
foreign regulatory approvals or certificates, we would not be able to sell our
product services where these regulations apply, which may prevent us from
generating our revenue or achieving profitability.
-21-
<PAGE> 23
IF INTERNET USAGE DECLINES OR THE INTERNET INFRASTRUCTURE IS NOT ADEQUATELY
MAINTAINED AND EXPANDED, DEMAND FOR OUR PRODUCT SERVICES MAY DECLINE
The Internet has recently begun to develop and is rapidly evolving. As a
result, the commercial market for product services designed to enable high-speed
access to the Internet has only recently begun to develop. Our success will
depend in large part on increased use of the Internet and other networks based
on Internet protocol by corporate telecommuters and small offices. Critical
issues concerning the commercial use of the Internet remain unresolved and are
likely to affect the development of the market for our product services. These
issues include security, reliability, cost, ease of access, government
regulation and quality of service. The adoption of the Internet for commerce and
communications, particularly by enterprises that have historically relied upon
alternative means of commerce and communications, generally requires the
acceptance of a new method of conducting business and exchanging information.
The recent growth in the use of the Internet has caused frequent periods of
performance degradation that have prompted efforts to upgrade the Internet
infrastructure. Any perceived degradation in the performance of the Internet as
a whole could undermine the benefits of our product services. Potentially
increased performance and other benefits provided by our product services and
the product services of others are ultimately limited by, and are reliant upon,
the speed and reliability of the Internet backbone itself. Consequently, the
emergence and growth of the market for our product services will depend on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OTHER
COMPANIES MAY USE OUR INTELLECTUAL PROPERTY TO DEVELOP COMPETITIVE PRODUCT
SERVICES THAT MAY REDUCE DEMAND FOR OUR PRODUCT SERVICES
We currently rely on a combination of copyright, trademark and trade
secret laws and restrictions on disclosure to protect our intellectual property
rights. We have two pending U.S. trademark applications for trademarks relating
to our system hardware and product services.
We also enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and control access to and
distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our product services or technology.
We cannot assure you that these precautions will prevent misappropriation or
infringement of our intellectual property. Monitoring unauthorized use of our
product services is difficult, and we cannot assure you that the steps we have
taken will prevent misappropriation of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT ARE COSTLY
TO DEFEND AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE FUTURE
Our industry is characterized by the existence of a large number of
patents and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the data
communications and networking markets have extensive patent portfolios with
respect to modem and networking technology. From time to time, third parties,
including these leading companies, have asserted and may assert exclusive
patent, copyright, trademark and other intellectual property rights to
technologies and related standards that are important to us. We expect that we
may increasingly be subject to infringement claims as the numbers of product
services and competitors in the small office market for shared Internet access
solutions grow and the functionality of product services overlaps.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights to determine the scope and validity
of our proprietary rights. Any such claims, with or
-22-
<PAGE> 24
without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel, or require us to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on acceptable
terms, if at all. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing technology or license the
proprietary rights on a timely basis, our business would be harmed.
WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH TRYING TO BECOME YEAR 2000
COMPLIANT
Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. As a
result, computer systems and software used by many companies and governmental
agencies may need to be upgraded to comply with year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities. These problems are widely expected to increase in frequency and
severity as the year 2000 approaches, and are commonly referred to as the "year
2000 problem." While we have passed the year 2000 effective date, there may
still be as yet unknown risks associated with being year 2000 compliant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
INSIDERS HAVE SUBSTANTIAL CONTROL OVER AMERICAN MULTIPLEXER CORPORATION THAT
COULD DELAY OR PREVENT A CHANGE IN OUR CORPORATE CONTROL
Our executive officers, and directors and their affiliates will, in the
aggregate, own approximately 24% our outstanding common stock. As a result, our
officers, directors and affiliates will have the ability to influence the
election of our board of directors and the outcome of corporate actions
requiring stockholder approval. This concentration of ownership may have the
effect of delaying or preventing a change in our corporate control. We do not
have cumulative voting in the election of directors; and the minority
shareholders will not be able to elect any director to our Board of Directors.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE
Sales of a substantial number of shares of common stock after the filing
of this Form 10 could adversely affect the market price of our common stock and
could impair our ability to raise capital through the sale of additional equity
securities. As of September 30, 1999 we had 37,643,866 shares of common stock
outstanding.
WE MAY HAVE INSUFFICIENT CAPITAL FOR FUTURE OPERATIONS AFTER THE YEAR 2000
We anticipate, based on current proposed plans and assumptions relating
to its operations, that current cash reserves, together with projected cash flow
from operations, will be sufficient to satisfy our contemplated cash
requirements through the fourth quarter of the year 2000. Thereafter, we will
require substantial additional financial resources to fund our operations. The
expansion into new product areas will also require substantial financial
funding. The failure to acquire additional funding when required will have a
material adverse effect on the our business prospects.
WE FACE OBSTACLES RELATING TO MARKET ACCEPTANCE AND DISTRIBUTION
We are at an early stage of development and our earnings growth depends
primarily upon market acceptance of our product services. There can be no
assurance that our product service development efforts will progress further
with respect to any potential new product services or that they will be
successfully completed. In addition, there can be no assurance that our
potential new product services will be capable of
-23-
<PAGE> 25
being produced in commercial quantities at reasonable costs or that these
potential product services, if introduced, will be successfully marketed or will
achieve customer acceptance.
We do not have sufficient experience in marketing our product services
to determine the optimum distribution methods. Accordingly, we might be in a
position requiring change in our sales, distribution, and marketing strategies
and implementation.
WE WILL BE DEPENDENT ON NEW PRODUCTS AND PRODUCT ENHANCEMENT INTRODUCTIONS,
PRODUCT DELAYS MAY NEGATIVELY AFFECT OUR BUSINESS
Our success in our business depends on, among other things, the timely
introduction of successful new product services or enhancements of existing
product services to replace declining revenues from product services at the
latter stage of a product service cycle. Consumer preferences for product
services are difficult to predict, and few product services achieve sustained
market acceptance. If revenues from new product services or enhancements do not
replace declining revenues from existing product services, our business,
operating results and financial condition could be materially adversely
affected. The process of developing broadband services is extremely complex and
is expected to become more complex. A significant delay in the introduction of
one or more new product services or enhancements could have a material adverse
effect on our ultimate success of such product services and on our business,
operating results and financial condition.
WE ARE PARTICIPATING IN A DEVELOPING MARKET, NEW ENTRANTS MAY DOMINATE THE
MARKET SEGMENT
The MSP market is rapidly evolving and is characterized by an increasing
number of market entrants who have introduced or developed product services.
Although we currently believe that the diverse segments of the market will
provide opportunities for more than one supplier of product services similar to
ours, it is possible that a single supplier may dominate one or more market
segment.
ITEM 3. PROPERTIES.
The Company is headquartered in Sunnyvale, California, where it leases
approximately 12,400 square feet of space in a single building. The lease for
the Company's facility expires on November 30, 2003 and the Company has an
option to extend the term for an additional five-year period at such time,
provided that it is not then in default of any material provisions of its lease.
The Company believes that its facility provides adequate space for its
anticipated needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's voting stock as of September 30, 1999 by
(i) all persons known by the Company to beneficially own more than 5% of any
class of the Company's voting securities, (ii) each director and Named Executive
Officer of the Company and (iii) all directors and executive officers of the
Company as a group. As of September 30, 1999, the Company had outstanding
200,000 shares of Series A Preferred Stock and 37,643,866 shares of common
stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director and officer is
c/o American Multiplexer Corporation, 575 North Pastoria Avenue, Sunnyvale,
California 94086. Except as indicated by footnote, and subject to applicable
community property laws, the persons named in the table have sole voting and
investment power with respect to all shares of stock shown as beneficially owned
by them. The number of shares of common stock outstanding used in calculating
the percentage for each listed person includes the shares of common stock
underlying options or warrants held by
-24-
<PAGE> 26
such person that are exercisable within 60 days of September 30, 1999, but
excludes shares of common stock underlying options or warrants held by any other
person.
-25-
<PAGE> 27
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
------------------------ ---------- ----------
<S> <C> <C>
5% Beneficial Owners
Series A Preferred Stock
Montblanc International Ltd.(1) ...................... 100,000 50.0%
Merrill Lynch Bank (Suisse) S.A.
Stockerstrasse
CH-8001 Zurich
Switzerland
Wegelin & Co.(1) ..................................... 100,000 50.0%
Bohl 17
CH-9004 St. Gallen
Switzerland
Common Stock
Karl Schleicher....................................... 4,000,000 10.6
Credit Suisse
Ch-Zurich-Oerlikon
Switzerland
E-Yan Betty Lau....................................... 3,450,000 9.2
4A Lermit Road
Singapore 258637
On Kei Leong.......................................... 2,000,000 5.3
12 Repulse Bay Drive
Hong Kong
Wegelin & Co.......................................... 1,900,000 5.0
Bohl 17
CH-9004 St. Gallen
Switzerland
Officers and Directors
Edward S.C. Tan(2).................................... 15,000,000 34.4
Douglas Hanson(3)..................................... 1,001,000 2.6
Louk Wilem Jurgens.................................... 20,000 *
All directors and executive officers as a group
(4 persons)(4)...................................... 17,022,000 37.3
</TABLE>
- ----------
* Less than one percent (1%).
(1) Refers to numerical and percentage ownership of the Company's outstanding
preferred stock.
(2) Includes 6,000,000 shares of common stock issuable upon exercise of a
warrant presently exercisable.
(3) Includes 1,000,000 shares of common stock issuable upon exercise of a
warrant exercisable within 60 days of September 30, 1999.
(4) Includes an aggregate of 8,000,000 shares of common stock issuable upon
exercise of warrants presently exercisable or exercisable within 60 days of
September 30, 1999, provided certain conditions are met.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information with respect to each
of the directors and executive officers of the Company:
-26-
<PAGE> 28
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Edward S.C. Tan......... 51 Chief Executive Officer, President and
Chairman of the Board
Ronald Everoski......... 55 Chief Technology Officer and Vice President of
Research and Development
James Ernest Graber..... 57 Chief Financial Officer
Douglas Hanson.......... 59 Vice President of Sales & Marketing and Director
Louk Wilem Jurgens...... 55 Director
</TABLE>
Edward S.C. Tan, the Company's founder, has served as its President and
Chief Executive Officer and as a director since January 1997. From September
1991 to December 1996 he was the President and Chief Executive Officer and a
director of Temasek Telephone, Inc., a telecommunications equipment company. In
January 1997, the Company acquired certain assets of Temasek Telephone, Inc. in
exchange for shares of the Company's common stock.
Ronald Everoski has served as the Company's Chief Technology Officer and
Vice President of Research and Development since November 1998. From February
1996 to July 1998 he was the Chief Technology Officer for Satcom Media
Corporation,(1) a multimedia company and from January 1990 to April 1994 he was
the Chief Executive Officer of Global Telesys, a telecommunications company.
Douglas Hanson has served as the Company's Vice President of Sales and
Marketing since November 1998 and as a director since June 1999. From June 1995
to July 1998 he was the Vice President of Marketing for Satcom Media
Corporation,(1) a multimedia satellite communications company and from January
1994 to June 1995 he was Senior Vice President for the EIC Group, a real estate
investment company.
James Ernest Graber was appointed Chief Financial Officer in December
1999. From May 1997 until December 1999 he was Chief Financial Officer for Cats
Software, Inc. a software company. From 1991 to 1997 he operated Graber
Associates, a company which provided Chief Financial Officer services to
corporations and educational institutions.
Louk Wilem Jurgens has served as a director of the company since May
1999. In April 1999 he founded Jurgens & Associates, a consulting firm focusing
on satellite communications. From April 1998 to April 1999 he was Vice President
of Business Development for Loral-Orion Asia Pacific, a satellite communications
company in Singapore. From April 1995 to December 1997 he was an Executive
Director for PT Satelindo, a satellite communications company in Indonesia. From
October 1993 until April 1995 he was Managing Director of PT PSN in Jakarta,
Indonesia, a satellite communications company.
The Company's Bylaws provide that directors shall be appointed by the
shareholders and hold office until the next annual meeting of the shareholders
or until such director's successor is duly elected and qualified. The Company's
Articles of Incorporation and Bylaws currently contain no provisions for a
classified board.
-27-
<PAGE> 29
Executive officers are appointed by the board of directors, serve at the
board's pleasure and may be removed from office at any time without cause. There
are no family relationships among any of the Company's directors or executive
officers.
(1) Mr. Everoski and Mr. Hanson were executive officers of Satcom Media
Corporation when that company filed for bankruptcy under the Federal bankruptcy
laws.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the total compensation earned for
services to the Company in all capacities during the fiscal year ended December
31, 1998 by our Chief Executive Officer, President and Chairman of the Board,
also referred to as the Named Executive Officer. No other executive officer
employed by us earned salary and bonus in excess of $100,000 during the fiscal
year ended December 31, 1998. The Named Executive Officer did not receive any
grants of stock options during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY
- --------------------------- ---- ------------
<S> <C> <C>
Edward S.C. Tan................................. 1998 $140,000
</TABLE>
The directors of the Company do not receive compensation for their
services as directors but may be reimbursed for their reasonable expenses for
attending Board meetings.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On November 30, 1998 the Company loaned $125,000 to Edward S.C. Tan, its
President, Chief Executive Officer and Chairman of the Board pursuant to a
promissory note payable upon demand which bore interest at the rate of nine
percent. This promissory note was repaid in January, 1999.
On March 31, 1999 the Company loaned $250,000 to Edward S.C. Tan, its
President, Chief Executive Officer and Chairman of the Board pursuant to a
promissory note due and payable on December 31, 1999. The loan bears interest at
the rate of nine percent. The full amount of this note is currently outstanding.
On May 14, 1999 the Company granted to Edward S.C. Tan, its President,
Chief Executive Officer and Chairman of the Board a warrant exercisable up to
five years from the date of issuance covering 6,000,000 shares of the Company's
Common Stock at an exercise price of $5.06 per share.
On June 2, 1999 the Company loaned $3,375,000 to Edward S.C. Tan, its
President, Chief Executive Officer and Chairman of the Board pursuant to a
promissory note due and payable on December 31, 1999. The loan bears interest at
the rate of nine percent. The full amount of this note is currently outstanding.
The proceeds of this loan were used by Mr. Tan to purchase an aggregate 807,960
shares of the Company's Common Stock in a series of transactions made through a
designee. These purchases were made between May 18, 1999 and October 15, 1999 at
prices ranging from $4.15 to $5.73 per share.
On July 1, 1999 the Company loaned $725,000 to Edward S.C. Tan, its
President, Chief Executive Officer and Chairman of the Board pursuant to a
promissory note due and payable on December 31, 1999. The loan bears interest at
the rate of nine percent. The full amount of this note is currently outstanding.
-28-
<PAGE> 30
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any current pending legal proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been traded on the OTC Bulletin Board
under the trading symbol "AMUT." The following table sets forth the high and low
bid prices for the Company's Common Stock since it began trading in the fourth
quarter of 1997 through the second quarter of 1999. The Company's Common Stock
has been ineligible for listing on the OTC Bulletin Board since July 1, 1999.
The quotations below reflect inter-dealer prices, with no retail mark-up,
mark-down or commissions and may not represent actual transactions. The
information presented has been obtained from the National Quotation Bureau, LLC.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
1997 FISCAL YEAR
Fourth Quarter 6 2 5/8
1998 FISCAL YEAR
First Quarter 3 5/8 1 1/8
Second Quarter 3 9/16 1 7/16
Third Quarter 1 7/16 3/4
Fourth Quarter 2 7/8 11/16
1999 FISCAL YEAR
First Quarter 1 13/16 1 3/16
Second Quarter 6 1/8 1 5/16
</TABLE>
As of September 30, 1999, there were 223 holders of record of the
Company's Common Stock.
The Company has never declared a dividend on its Common Stock, and it is
anticipated that any earnings which might be available for distribution as
Common Stock dividends will be retained for the Company's operations for the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years prior to the date of filing of this Form 10, the
Company has issued and sold the following unregistered securities:
(1) Issued 17,919,800 shares of common stock in exchange for certain assets
at $0.01 per share on January 7, 1997.
(2) Issued 600,000 shares of common stock for services at $0.85 per share on
April 10, 1997.
(3) Issued 500,000 shares of common stock for services at $0.85 per share on
April 10, 1997.
(4) Issued 500,000 shares of common stock for services at $0.85 per share on
April 10, 1997.
-29-
<PAGE> 31
(5) Issued 2,000 shares of common stock to charity at $0.85 per share on
April 10, 1997.
(6) Issued 20,000 shares of common stock for services at $0.85 per share on
April 10, 1997.
(7) Issued 800,000 shares of common stock for cash through a private
placement at $1.25 per share on May 1, 1997 for aggregate proceeds of
$1,000,000.
(8) Issued 2,500 shares of common stock for cash at $0.86 per share on May
12, 1997 for aggregate proceeds of $2,150.
(9) Issued 24,000 shares of common stock for cash at $1.50 per share on
January 12, 1998 for aggregate proceeds of $36,000.
(10) Issued 32,000 shares of common stock for cash at $1.56 per share on
January 12, 1998 for aggregate proceeds of $50,000.
(11) Issued 75,000 shares of common stock for cash at $1.50 per share on
January 12, 1998 for aggregate proceeds of $112,500.
(12) Issued 20,000 shares of common stock for cash at $1.50 per share on
January 12, 1998 for aggregate proceeds of $30,000.
(13) Issued 46,000 shares of common stock for cash at $1.41 per share on
January 12, 1998 for aggregate proceeds of $65,000.
(14) Issued 58,000 shares of common stock for cash at $1.12 per share on
January 12, 1998 for aggregate proceeds of $65,000.
(15) Issued 10,000 shares of common stock for cash at $2.00 per share on
March 12, 1998 for aggregate proceeds of $20,000.
(16) Issued 10,000 shares of common stock for cash at $2.00 per share on
March 12, 1998 for aggregate proceeds of $20,000.
(17) Issued 30,000 shares of common stock for cash at $2.00 per share on
March 12, 1998 for aggregate proceeds of $60,000.
(18) Issued 25,000 shares of common stock for cash at $2.00 per share on
March 12, 1998 for aggregate proceeds of $50,000.
(19) Issued 66,666 shares of common stock for cash at $1.50 per share on
March 12, 1998 for aggregate proceeds of $100,000.
(20) Issued 94,000 shares of common stock for cash at $1.12 per share on
March 12, 1998 for aggregate proceeds of $105,000.
(21) Issued 16,000 shares of common stock for cash at $1.25 per share on
March 12, 1998 for aggregate proceeds of $20,000.
(22) Issued 25,000 shares of common stock for cash at $2.00 per share on
March 12, 1998 for aggregate proceeds of $50,000.
-30-
<PAGE> 32
(23) Issued 200,000 shares of common stock for cash at $1.00 per share on
March 12, 1998 for aggregate proceeds of $200,000.
(24) Issued 100,000 shares of common stock for cash at $1.25 per share on
April 16, 1998 for aggregate proceeds of $125,000.
(25) Issued 6,000 shares of common stock for cash at $2.50 per share on April
16, 1998 for aggregate proceeds of $15,000.
(26) Issued 25,000 shares of common stock for cash at $1.00 per share on
April 16, 1998 for aggregate proceeds of $25,000.
(27) Issued 30,000 shares of common stock for cash at $2.00 per share on
April 16, 1998 for aggregate proceeds of $60,000.
(28) Issued 90,000 shares of common stock for cash at $1.00 per share on
April 16, 1998 for aggregate proceeds of $90,000.
(29) Issued 1,000 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $2,992.
(30) Issued 4,500 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $13,490.
(31) Issued 5,000 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $15,000.
(32) Issued 1,000 shares of common stock for cash at $1.00 per share on July
16, 1998 for aggregate proceeds of $1,000.
(33) Issued 1,000 shares of common stock for cash at $1.00 per share on July
16, 1998 for aggregate proceeds of $1,000.
(34) Issued 1,000 shares of common stock for cash at $1.00 per share on July
16, 1998 for aggregate proceeds of $1,000.
(35) Issued 10,000 shares of common stock for cash at $1.00 per share on July
16, 1998 for aggregate proceeds of $10,000.
(36) Issued 100,000 shares of common stock for cash at $1.00 per share on
July 16, 1998 for aggregate proceeds of $100,000.
(37) Issued 40,500 shares of common stock for cash at $1.00 per share on July
16, 1998 for aggregate proceeds of $40,500.
(38) Issued 10,000 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $29,994.
(39) Issued 10,000 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $29,985.
-31-
<PAGE> 33
(40) Issued 10,000 shares of common stock for cash at $3.00 per share on July
16, 1998 for aggregate proceeds of $29,985.
(41) Issued 120,000 shares of common stock for cash at $1.25 per share on
August 3, 1998 for aggregate proceeds of $149,982.
(42) Issued 4,000 shares of common stock for cash at $1.00 per share on
August 3, 1998 for aggregate proceeds of $4,000.
(43) Issued 182,000 shares of common stock for cash at $1.15 per share on
July 31, 1998 for aggregate proceeds of $234,185.
(44) Issued 394,000 shares of common stock for cash at $1.15 per share on
November 12, 1998 for aggregate proceeds of $429,792.
(45) Issued 28,000 shares of common stock for cash at $1.13 per share on
November 12, 1998 for aggregate proceeds of $31,607.
(46) Issued 40,000 shares of common stock for cash at $1.28 per share on
November 12, 1998 for aggregate proceeds of $51,250.
(47) Issued 100,000 shares of common stock for cash at $1.00 per share on
November 12, 1998 for aggregate proceeds of $100,000.
(48) Issued 8,000 shares of common stock for cash at $1.25 per share on
November 12, 1998 for aggregate proceeds of $9,990.
(49) Issued 20,000 shares of common stock for cash at $0.93 per share on
November 12, 1998 for aggregate proceeds of $18,500.
(50) Issued 5,000 shares of common stock for cash at $0.85 per share on
November 12, 1998 for aggregate proceeds of $4,250.
(51) Issued 1,000 shares of common stock for cash at $1.00 per share on
November 12, 1998 for aggregate proceeds of $1,000.
(52) Issued 48,000 shares of common stock for cash at $1.23 per share on
November 12, 1998 for aggregate proceeds of $59,100.
(53) Issued 10,000 shares of common stock for cash at $1.00 per share on
November 12, 1998 for aggregate proceeds of $9,984.
(54) Issued 20,000 shares of common stock for cash at $1.25 per share on
November 12, 1998 for aggregate proceeds of $25,000.
(55) Issued 100,000 shares of common stock for cash at $1.20 per share on
November 30, 1998 for aggregate proceeds of $119,985.
(56) Issued 50,000 shares of common stock for cash at $1.00 per share on
November 30, 1998 for aggregate proceeds of $50,000.
-32-
<PAGE> 34
(57) Issued 400,000 shares of common stock for cash at $1.20 per share on
November 30, 1998 for aggregate proceeds of $479,985.
(58) Issued 50,000 shares of common stock for cash at $1.00 per share on
November 30, 1998 for aggregate proceeds of $50,000.
(59) Issued 20,000 shares of common stock for cash at $1.00 per share on
November 30, 1998 for aggregate proceeds of $20,000.
(60) Issued warrants on an aggregate 3,000,000 shares of common stock to
certain employees on November 5, 1998.
(61) Issued 50,000 shares of common stock for cash at $1.00 per share on
March 10, 1999 for aggregate proceeds of $50,000.
(62) Issued 100,000 shares of common stock for cash at $1.00 per share on
March 10, 1999 for aggregate proceeds of $100,000.
(63) Issued 110,000 shares of common stock for cash at $1.00 per share on
March 10, 1999 for aggregate proceeds of $110,000.
(64) Issued 5,200 shares of common stock for cash at $1.24 per share on March
10, 1999 for aggregate proceeds of $6,441.
(65) Issued 4,000 shares of common stock for cash at $1.25 per share on March
10, 1999 for aggregate proceeds of $5,000.
(66) Issued 8,000 shares of common stock for cash at $1.00 per share on March
10, 1999 for aggregate proceeds of $8,000.
(67) Issued 12,600 shares of common stock for cash at $1.25 per share on
March 10, 1999 for aggregate proceeds of $15,730.
(68) Issued 16,000 shares of common stock for cash at $1.25 per share on
March 10, 1999 for aggregate proceeds of $20,000.
(69) Issued 45,000 shares of common stock for cash at $0.82 per share on
March 10, 1999 for aggregate proceeds of $37,000.
(70) Issued 5,000 shares of common stock for cash at $1.00 per share on March
10, 1999 for aggregate proceeds of $5,000.
(71) Issued 10,000 shares of common stock for cash at $1.00 per share on
March 10, 1999 for aggregate proceeds of $10,000.
(72) Issued 10,000 shares of common stock for cash at $1.81 per share on
March 18, 1999 for aggregate proceeds of $18,100.
(73) Issued 20,000 shares of common stock for cash at $1.25 per share on
March 18, 1999 for aggregate proceeds of $25,000.
-33-
<PAGE> 35
(74) Issued 1,000 shares of common stock for cash at $1.25 per share on March
18, 1999 for aggregate proceeds of $1,250.
(75) Issued 20,000 shares of common stock for cash at $0.80 per share on
March 18, 1999 for aggregate proceeds of $16,000.
(76) Issued 5,000 shares of common stock for cash at $0.80 per share on March
18, 1999 for aggregate proceeds of $4,000.
(77) Issued 23,000 shares of common stock for cash at $1.81 per share on
March 18, 1999 for aggregate proceeds of $41,630.
(78) Issued 100,000 shares of common stock for cash at $1.61 per share on
March 18, 1999 for aggregate proceeds of $160,627.
(79) Issued 400,000 shares of common stock for cash at $2.50 per share on May
5, 1999 for aggregate proceeds of $999,982.
(80) Issued 100,000 shares of common stock for cash at $2.50 per share on May
5, 1999 for aggregate proceeds of $249,980.
(81) Issued 50,000 shares of common stock for cash at $2.50 per share on May
5, 1999 for aggregate proceeds of $124,985.
(82) Issued 1,000,000 shares of common stock for cash at $2.50 per share on
May 5, 1999 for aggregate proceeds of $2,499,970.
(83) Issued 1,000,000 shares of common stock for cash at $2.50 per share on
May 5, 1999 for aggregate proceeds of $2,499,970.
(84) Issued 400,000 shares of common stock for commissions on sale of common
stock at $2.50 per share on May 5, 1999 for aggregate proceeds of
$1,000,000.
(85) Issued 1,000,000 shares of common stock for cash at $1.00 per share on
May 5, 1999 for aggregate proceeds of $999,960.
(86) Issued 500,000 shares of common stock for cash at $1.00 per share on May
5, 1999 for aggregate proceeds of $500,000.
(87) Issued 2,000 shares of common stock for cash at $1.00 per share on May
5, 1999 for aggregate proceeds of $2,000.
(88) Issued 1,000 shares of common stock for cash at $1.50 per share on May
5, 1999 for aggregate proceeds of $1,500.
(89) Issued 260,000 shares of common stock for services at $4.50 per share on
May 5, 1999.
(90) Issued 3,000 shares of common stock for cash at $1.50 per share on May
5, 1999 for aggregate proceeds of $4,500.
(91) Issued 3,000 shares of common stock for cash at $1.50 per share on May
5, 1999 for aggregate proceeds of $4,500.
-34-
<PAGE> 36
(92) Issued 4,000 shares of common stock for cash at $1.50 per share on May
5, 1999 for aggregate proceeds of $6,000.
(93) Issued 1,450,000 shares of common stock for cash at $2.50 per share on
May 5, 1999 for aggregate proceeds of $3,623,020.
(94) Issued 1,000,000 shares of common stock for cash at $1.00 per share on
May 5, 1999 for aggregate proceeds of $1,000,000.
(95) Issued 1,000,000 shares of common stock for cash at $0.25 per share on
May 5, 1999 for aggregate proceeds of $249,985.
(96) Issued 2,000 shares of common stock for commissions on sale of common
stock at $2.50 per share on June 8, 1999 for aggregate proceeds of
$5,000.
(97) Issued 4,000,000 shares of common stock for cash at $2.50 per share on
June 8, 1999, net of commissions for aggregate proceeds of $8,260,529.
(98) Issued 20,000 shares of common stock for cash at $2.50 per share on June
8, 1999 for aggregate proceeds of $49,980.
(99) Issued 10,000 shares of common stock for cash at $2.50 per share on June
8, 1999 for aggregate proceeds of $25,994.
(100) Issued 20,000 shares of common stock for commissions on sale of common
stock at $2.50 per share on June 8, 1999 for aggregate proceeds of
$50,000.
(101) Issued 123,000 shares of common stock for commissions on sale of common
stock at $2.50 per share on June 8, 1999 for aggregate proceeds of
$307,500.
(102) Issued 204,500 shares of common stock for cash at $2.50 per share on
June 8, 1999 for aggregate proceeds of $511,250.
(103) Issued 58,300 shares of common stock for cash at $2.50 per share on June
8, 1999 for aggregate proceeds of $125,750.
(104) Issued 277,000 shares of common stock for commissions on sale of common
stock at $2.50 per share on June 8, 1999 for aggregate proceeds of
$692,500.
(105) Issued 800,000 shares of common stock for cash at $2.50 per share on
June 8, 1999 for aggregate proceeds of $1,999,985.
(106) Issued 198,900 shares of common stock for commissions on sale of common
stock at $2.38 per share on September 8, 1999.
(107) Issued 29,900 shares of common stock for commissions on sale of common
stock at $2.38 per share on September 8, 1999.
(108) Issued 500 shares of common stock for cash at $2.50 per share on
September 8, 1999 for aggregate proceeds of $1,250.
-35-
<PAGE> 37
(109) Issued 30,000 shares of common stock for cash at $2.50 per share on
September 8, 1999 for aggregate proceeds of $75,000.
(110) Issued 30,000 shares of common stock for cash at $2.50 per share on
September 8, 1999 for aggregate proceeds of $75,000.
(111) Issued 1,000 shares of common stock for cash at $2.50 per share on
September 15, 1999 for aggregate proceeds of $2,500.
Unless otherwise noted, the sales of the above securities were deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act, or Regulation D or Regulation S promulgated thereunder as
transactions by an issuer not involving a public offering.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock, each with no par value.
As of September 30, 1999, there were 37,643,866 shares of Common Stock
outstanding which were held of record by 223 shareholders and 200,000 shares of
Preferred Stock outstanding.
The following summary description of all of the material terms relating
to the capital stock of the Company does not purport to be complete and is
qualified in its entirety by reference to the Company's Articles of
Incorporation and bylaws. The Company's Articles of Incorporation and bylaws are
included as exhibits to this Form 10
COMMON STOCK
The Company's common shareholders receive one vote for each share held
on all matters upon which shareholders have the right to vote. The Company's
common shareholders are entitled to such dividends as may be declared from time
to time by the board of directors out of funds legally available for that
purpose. Upon a dissolution, the Company's common shareholders are entitled to
share pro rata in our assets remaining after payment in full of all of our
liabilities and obligations, including payment of the liquidation preference if
any, of any preferred stock then outstanding.
The Company's common shareholders have dissenters' rights to appraisal
with respect to their shares as provided by statute in connection with certain
types of merger or share exchange transactions. Dissenters' rights are also
available with respect to certain sales of all or substantially all of our
property and certain amendments to our articles of incorporation that materially
and adversely affect certain enumerated rights of a dissenter's shares. The
Company's common shareholders do not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights.
PREFERRED STOCK
The Company's preferred shareholders receive one vote for each preferred
share held on all matters upon which the Company's shareholders have the right
to vote. The Company's preferred shareholders are entitled to receive, in
addition to all dividends offered to holders of the Company's common stock,
when, if and as declared by the Board of Directors, out of funds legally
available therefore and in preference to any dividends on common stock: (i) in
the year 2000, a dividend of $1.50 per share of preferred stock held, up to a
maximum aggregate dividend payable by the Company of $6,000,000; (ii) in the
year 2001, a dividend of $2.50 per share of preferred stock held, up to a
maximum aggregate dividend payable by the Company of $10,000,000; and (iii) in
the year 2002, a dividend of $3.50 per share of preferred stock held, up to a
-36-
<PAGE> 38
maximum aggregate dividend payable by the Company of $14,000,000. Dividends on
the Company's preferred stock are cumulative and the right to such dividends
shall accrue to holders of preferred stock until declared by the Board of
Directors. Each share of the Company's preferred stock is convertible at any
time, at the option of the holder thereof, into two (2) shares of the Company's
common stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that the Company's
directors shall not have personal liability arising out of action by or in the
right of the Company or otherwise for monetary damages for breach of any duty as
a director; except as to (i) acts or omissions that such director at the time of
such breach knew of believed were clearly in conflict with the best interests of
the Company, (ii) any liability under Section 55-8-33 of the North Carolina
Business Corporation Act (the "NCBCA") or any successor provision, (iii) any
transaction from which such director derived an improper personal benefit, or
(iv) acts or omissions occurring prior to the date of the effectiveness of the
Articles of Incorporation. "Improper personal benefit" is defined so as not to
include a director's reasonable compensation or other reasonable incidental
benefit for or on account of his or her services as a director, officer,
employee, independent contractor, attorney, or consultant of the Company.
In general, Sections 55-8-50 through 55-8-58 of the NCBCA allow a
corporation to indemnify its directors, officers, employees or agents under
nonexclusive statutory and nonstatutory schemes of indemnification. Under the
statutory scheme, a corporation may, with certain exceptions, indemnify a
director, officer, employee or agent of the corporation who was, is, or is
threatened to be made, a party to any threatened, pending, or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative, because of the fact that such person is or was a director,
officer, agent or employee of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or enterprise. This indemnity may include the obligation to pay any
judgment, settlement, penalty, fine (including an excise tax assesses with
respect to an employee benefit plan) and reasonable expenses incurred in
connection with a proceeding (including counsel fees), but no such
indemnification may be granted unless such director, officer, agent or employee
(i) conducted himself in good faith, (ii) reasonably believed (x) that any
action taken in his official capacity with the corporation was in the best
interest of the corporation or (y) that in all other cases his conduct at least
was not opposed to the corporation's best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. Whether a director has met the requisite standard of conduct for the
type of indemnification set forth above is determined by the board of directors,
a committee of directors, special legal counsel or the shareholders in
accordance with Section 55-8-55. A corporation may not indemnify a director
under the statutory scheme in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation or
in connection with a proceeding in which a director was adjudged liable on the
basis of having received an improper personal benefit.
Section 55-8-57 of the NCBCA permits a corporation to include in its
articles of incorporation or bylaws a provision indemnifying any of its
directors, officers, employees or agents against liability and expenses
(including attorneys' fees) in any proceeding (including proceedings brought by
or on behalf of the corporation) arising out of their status as such or their
activities in any of the foregoing capacities; provided, however, that a
corporation may not indemnify or agree to indemnify a person against liability
or expenses such person may incur on account of activities that were clearly in
conflict with the best interests of the corporation. The Company's bylaws
provide for indemnification to the fullest extent permitted under the NCBCA.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation, unless
its articles of incorporation provide otherwise, to indemnify a director or
officer who has been wholly successful, on the merits or otherwise, in the
defense of any proceeding to which such director or officer was a party. Unless
prohibited
-37-
<PAGE> 39
by the Articles of Incorporation, a director or officer also may make
application and obtain court-ordered indemnification if the court determines
that such director or officer is fairly and reasonably entitled to such
indemnification as provided in Sections 55-8-54 and 55-8-56. The Company's
Articles of Incorporation do not contain any prohibition of this type of
indemnification.
Section 55-8-57 of the NCBCA provides that a corporation may purchase
and maintain insurance on behalf of any individual who is or was a director,
officer, employee or agent of the corporation against certain liabilities
incurred by such persons, whether or not the corporation is otherwise authorized
by the NCBCA to indemnify such party. Our directors and officers are not
currently covered under such directors' and officers' insurance policies.
The foregoing summaries of North Carolina law dealing with
indemnification of directors and officers are not intended to be complete
descriptions of the relevant statutory provisions. They are qualified in their
entirety by reference to Sections 55-8-50 through 55-8-58 of the NCBCA, which
contain the specific indemnification provisions.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 15.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-38-
<PAGE> 40
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
American Multiplexer Corporation
We have audited the accompanying balance sheets of American Multiplexer
Corporation (a development stage company), successor to Temasek Telephone, Inc.,
as of December 31, 1997 and 1998 and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998, and for the period January 1, 1997 through December 31,
1998. 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 generally accepted auditing
standards. 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, the financial statements referred to above present
fairly, in all material respects, the financial position of American Multiplexer
Corporation (a development stage company), successor to Temasek Telephone, Inc.,
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, and for
the period January 1, 1997 through December 31, 1998, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
San Francisco, California
February 12, 1999 (except for note E as
to which the date is June 14, 1999)
F-1
<PAGE> 41
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
------------------------------- SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 1,027 $ 5,661 $ 20,099,666
Accounts receivable 6,749 9,043 --
Prepaid expenses -- 27,658 34,775
Notes receivable from stockholder 100,000 125,000 122,755
Inventory 579,319 50,000 50,000
------------ ------------ ------------
Total current assets 687,095 217,362 20,307,196
PROPERTY AND EQUIPMENT, NET 56,445 465,922 1,544,355
OTHER ASSETS
Intangible asset - net of amortization of $20,000 80,000 -- --
Other noncurrent assets -- 29,004 61,498
------------ ------------ ------------
80,000 29,004 61,498
------------ ------------ ------------
$ 823,540 $ 712,288 $ 21,913,049
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 504,773 $ 165,181 $ 112,797
Accrued liabilities -- 300,000 --
Deposit received in advance for purchase of common stock 230,000 41,630 --
------------ ------------ ------------
Total current liabilities 734,773 506,811 112,797
STOCKHOLDERS' EQUITY
Preferred stock - authorized 10,000,000 shares, no par value;
issued and outstanding, 200,000 shares in 1999 -- -- 821,238
Common stock - authorized 50,000,000 shares, no par value;
issued and outstanding shares: 1997, 20,344,300; 1998,
23,120,966; and 1999, 37,643,866 2,628,004 6,293,810 37,421,178
Accumulated deficit during the development stage (2,539,237) (6,088,333) (12,642,164)
Notes receivable from stockholder -- -- (3,800,000)
------------ ------------ ------------
Total stockholders' equity 88,767 205,477 21,800,252
------------ ------------ ------------
$ 823,540 $ 712,288 $ 21,913,049
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 42
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1997 THROUGH
-------------------------------------------- DECEMBER 31,
1996* 1997 1998 1998**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ -- $ -- $ -- $ --
Operating expenses
Selling and marketing 192,652 1,715,649 586,529 2,302,178
General and administrative 191,190 520,151 1,188,071 1,708,222
Research and development 29,072 306,637 507,082 813,719
Write down of inventory -- -- 1,282,975 1,282,975
------------ ------------ ------------ ------------
412,914 2,542,437 3,564,657 6,107,094
------------ ------------ ------------ ------------
Operating loss (412,914) (2,542,437) (3,564,657) (6,107,094)
Other income 56,064 3,200 15,561 18,761
------------ ------------ ------------ ------------
NET LOSS $ (356,850) $ (2,539,237) $ (3,549,096) $ (6,088,333)
============ ============ ============ ============
Net loss attributable to
common shares
Net loss $ (356,850) $ (2,539,237) $ (3,549,096) $ (6,088,333)
Preferred dividends -- -- -- --
------------ ------------ ------------ ------------
$ (356,850) $ (2,539,237) $ (3,549,096) $ (6,088,333)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.02) $ (0.13) $ (0.16) $ (0.30)
============ ============ ============ ============
Shares used in calculation of net
loss per share 17,919,800 19,671,300 21,589,772 20,630,532
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
NINE MONTHS ENDED FROM
SEPTEMBER 30, JANUARY 1,
---------------------------- 1997 THROUGH
1998 1999 SEPTEMBER 30, 1999**
------------ ------------ --------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net sales $ -- $ -- $ --
Operating expenses
Selling and marketing 394,109 1,600,980 3,903,158
General and administrative 417,576 3,335,023 5,043,245
Research and development 92,104 2,016,260 2,829,979
Write down of inventory -- -- 1,282,975
------------ ------------ ------------
903,789 6,952,263 13,059,357
------------ ------------ ------------
Operating loss (903,789) (6,952,263) (13,059,357)
Other income 750 398,432 417,193
------------ ------------ ------------
NET LOSS $ (903,039) $ (6,553,831) $(12,642,164)
============ ============ ============
Net loss attributable to
common shares
Net loss $ (903,039) $ (6,553,831) $(12,642,164)
Preferred dividends -- (228,261) (228,261)
------------ ------------ ------------
$ (903,039) $ (6,782,092) $(12,870,425)
============ ============ ============
Basic and diluted net loss per share $ (0.04) $ (0.22) $ (0.56)
============ ============ ============
Shares used in calculation of net
loss per share 21,215,350 30,296,893 23,094,786
============ ============ ============
</TABLE>
* Predecessor company (see note A)
** Excluding the predecessor company
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 43
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
Two years ended December 31, 1998 and nine months ended September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE
------------------ ------------------------ ACCUMULATED FROM
SHARES AMOUNT SHARES AMOUNT DEFICIT SHAREHOLDER TOTAL
------- -------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock in
exchange for certain assets
at $0.01 per share on
01/07/1997 -- -- 17,919,800 247,154 -- -- 247,154
Issuance of common stock for
services at $0.85 per share
on 04/10/1997 -- -- 600,000 510,000 -- -- 510,000
Issuance of common stock for
services at $0.85 per share
on 04/10/1997 -- -- 500,000 425,000 -- -- 425,000
Issuance of common stock for
services at $0.85 per share
on 04/10/1997 -- -- 500,000 425,000 -- -- 425,000
Issuance of common stock to
charity at $0.85 per share
on 04/10/1997 -- -- 2,000 1,700 -- -- 1,700
Issuance of common stock for
services at $0.85 per share
on 04/10/1997 -- -- 20,000 17,000 -- -- 17,000
Issuance of common stock for
cash through a private
placement at $1.25 per share
on 05/01/1997 -- -- 800,000 1,000,000 -- -- 1,000,000
Issuance of common stock for
cash at $0.86 per share on
05/12/1997 -- -- 2,500 2,150 -- -- 2,150
Net loss -- -- -- -- (2,539,237) -- (2,539,237)
------- -------- ---------- ----------- ------------ ----------- ------------
Balance at December 31, 1997 -- -- 20,344,300 2,628,004 (2,539,237) -- 88,767
Issuance of common stock for
cash at $1.50 per share on
01/12/1998 -- -- 24,000 36,000 -- -- 36,000
Issuance of common stock for
cash at $1.56 per share on
01/12/1998 -- -- 32,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.50 per share on
01/12/1998 -- -- 75,000 112,500 -- -- 112,500
Issuance of common stock for
cash at $1.50 per share on
01/12/1998 -- -- 20,000 30,000 -- -- 30,000
Issuance of common stock for
cash at $1.41 per share on
01/12/1998 -- -- 46,000 65,000 -- -- 65,000
Issuance of common stock for
cash at $1.12 per share on
01/12/1998 -- -- 58,000 65,000 -- -- 65,000
Issuance of common stock for
cash at $2.00 per share on
03/12/1998 -- -- 10,000 20,000 -- -- 20,000
Issuance of common stock for
cash at $2.00 per share on
03/12/1998 -- -- 10,000 20,000 -- -- 20,000
Issuance of common stock for
cash at $2.00 per share on
03/12/1998 -- -- 30,000 60,000 -- -- 60,000
Issuance of common stock for
cash at $2.00 per share on
03/12/1998 -- -- 25,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.50 per share on
03/12/1998 -- -- 66,666 100,000 -- -- 100,000
Issuance of common stock for
cash at $1.12 per share on
03/12/1998 -- -- 94,000 105,000 -- -- 105,000
Issuance of common stock for
cash at $1.25 per share on
03/12/1998 -- -- 16,000 20,000 -- -- 20,000
Issuance of common stock for
cash at $2.00 per share on
03/12/1998 -- -- 25,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.00 per share on
03/12/1998 -- -- 200,000 200,000 -- -- 200,000
Issuance of common stock for
cash at $1.25 per share on
04/16/1998 -- -- 100,000 125,000 -- -- 125,000
Issuance of common stock for
cash at $2.50 per share on
04/16/1998 -- -- 6,000 15,000 -- -- 15,000
Issuance of common stock for
cash at $1.00 per share on
04/16/1998 -- -- 25,000 25,000 -- -- 25,000
Issuance of common stock for
cash at $2.00 per share on
04/16/1998 -- -- 30,000 60,000 -- -- 60,000
Issuance of common stock for
cash at $1.00 per share on
04/16/1998 -- -- 90,000 90,000 -- -- 90,000
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 1,000 2,992 -- -- 2,992
</TABLE>
F-4
<PAGE> 44
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE
------------------ ------------------------ ACCUMULATED FROM
SHARES AMOUNT SHARES AMOUNT DEFICIT SHAREHOLDER TOTAL
------- -------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 4,500 13,490 -- -- 13,490
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 5,000 15,000 -- -- 15,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 1,000 1,000 -- -- 1,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 1,000 1,000 -- -- 1,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 1,000 1,000 -- -- 1,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 10,000 10,000 -- -- 10,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 100,000 100,000 -- -- 100,000
Issuance of common stock for
cash at $1.00 per share on
07/16/1998 -- -- 40,500 40,500 -- -- 40,500
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 10,000 29,994 -- -- 29,994
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 10,000 29,985 -- -- 29,985
Issuance of common stock for
cash at $3.00 per share on
07/16/1998 -- -- 10,000 29,985 -- -- 29,985
Issuance of common stock for
cash at $1.25 per share on
08/03/1998 -- -- 120,000 149,982 -- -- 149,982
Issuance of common stock for
cash at $1.00 per share on
08/03/1998 -- -- 4,000 4,000 -- -- 4,000
Issuance of common stock for
cash at $1.15 per share on
07/31/1998 -- -- 182,000 234,185 -- -- 234,185
Issuance of common stock for
cash at $1.15 per share on
11/12/1998 -- -- 394,000 429,792 -- -- 429,792
Issuance of common stock for
cash at $1.13 per share on
11/12/1998 -- -- 28,000 31,607 -- -- 31,607
Issuance of common stock for
cash at $1.28 per share on
11/12/1998 -- -- 40,000 51,250 -- -- 51,250
Issuance of common stock for
cash at $1.00 per share on
11/12/1998 -- -- 100,000 100,000 -- -- 100,000
Issuance of common stock for
cash at $1.25 per share on
11/12/1998 -- -- 8,000 9,990 -- -- 9,990
Issuance of common stock for
cash at $0.93 per share on
11/12/1998 -- -- 20,000 18,500 -- -- 18,500
Issuance of common stock for
cash at $0.85 per share on
11/12/1998 -- -- 5,000 4,250 -- -- 4,250
Issuance of common stock for
cash at $1.00 per share on
11/12/1998 -- -- 1,000 1,000 -- -- 1,000
Issuance of common stock for
cash at $1.23 per share on
11/12/1998 -- -- 48,000 59,100 -- -- 59,100
Issuance of common stock for
cash at $1.00 per share on
11/12/1998 -- -- 10,000 9,984 -- -- 9,984
Issuance of common stock for
cash at $1.25 per share on
11/12/1998 -- -- 20,000 25,000 -- -- 25,000
Issuance of common stock for
cash at $1.20 per share on
11/30/1998 -- -- 100,000 119,985 -- -- 119,985
Issuance of common stock for
cash at $1.00 per share on
11/30/1998 -- -- 50,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.20 per share on
11/30/1998 -- -- 400,000 479,985 -- -- 479,985
Issuance of common stock for
cash at $1.00 per share on
11/30/1998 -- -- 50,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.00 per share on
11/30/1998 -- -- 20,000 20,000 -- -- 20,000
Issuance of common stock
warrants on 11/05/1998 -- - -- 243,750 -- -- 243,750
Net loss -- -- -- -- (3,549,096) -- (3,549,096)
------- -------- ---------- ----------- ------------ ----------- ------------
Balance at December 31, 1998 -- -- 23,120,966 6,293,810 (6,088,333) -- 205,477
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 50,000 50,000 -- -- 50,000
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 100,000 100,000 -- -- 100,000
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 110,000 110,000 -- -- 110,000
</TABLE>
F-5
<PAGE> 45
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE
------------------ ------------------------ ACCUMULATED FROM
SHARES AMOUNT SHARES AMOUNT DEFICIT SHAREHOLDER TOTAL
------- -------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
cash at $1.24 per share on
03/10/1999 -- -- 5,200 6,441 -- -- 6,441
Issuance of common stock for
cash at $1.25 per share on
03/10/1999 -- -- 4,000 5,000 -- -- 5,000
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 8,000 8,000 -- -- 8,000
Issuance of common stock for
cash at $1.25 per share on
03/10/1999 -- -- 12,600 15,730 -- -- 15,730
Issuance of common stock for
cash at $1.25 per share on
03/10/1999 -- -- 16,000 20,000 -- -- 20,000
Issuance of common stock for
cash at $0.82 per share on
03/10/1999 -- -- 45,000 37,000 -- -- 37,000
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 5,000 5,000 -- -- 5,000
Issuance of common stock for
cash at $1.00 per share on
03/10/1999 -- -- 10,000 10,000 -- -- 10,000
Issuance of common stock for
cash at $1.81 per share on
03/18/1999 -- -- 10,000 18,100 -- -- 18,100
Issuance of common stock for
cash at $1.25 per share on
03/18/1999 -- -- 20,000 25,000 -- -- 25,000
Issuance of common stock for
cash at $1.25 per share on
03/18/1999 -- -- 1,000 1,250 -- -- 1,250
Issuance of common stock for
cash at $0.80 per share on
03/18/1999 -- -- 20,000 16,000 -- -- 16,000
Issuance of common stock for
cash at $0.80 per share on
03/18/1999 -- -- 5,000 4,000 -- -- 4,000
Issuance of common stock for
cash at $1.81 per share on
03/18/1999 -- -- 23,000 41,630 -- -- 41,630
Issuance of common stock for
cash at $1.61 per share on
03/18/1999 -- -- 100,000 160,627 -- -- 160,627
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 400,000 999,982 -- -- 999,982
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 100,000 249,980 -- -- 249,980
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 50,000 124,985 -- -- 124,985
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 1,000,000 2,499,970 -- -- 2,499,970
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 1,000,000 2,499,970 -- -- 2,499,970
Issuance of common stock for
commissions on sale of common
stock at $2.50 per share on
05/05/1999 -- -- 400,000 1,000,000 -- -- 1,000,000
Issuance of common stock for
cash at $1.00 per share on
05/05/1999 -- -- 1,000,000 999,960 -- -- 999,960
Issuance of common stock for
cash at $1.00 per share on
05/05/1999 -- -- 500,000 500,000 -- -- 500,000
Issuance of common stock for
cash at $1.00 per share on
05/05/1999 -- -- 2,000 2,000 -- -- 2,000
Issuance of common stock for
cash at $1.50 per share on
05/05/1999 -- -- 1,000 1,500 -- -- 1,500
Issuance of common stock for
services at $4.50 per share
on 05/05/1999 -- -- 260,000 1,170,000 -- -- 1,170,000
Issuance of common stock for
cash at $1.50 per share on
05/05/1999 -- -- 3,000 4,500 -- -- 4,500
Issuance of common stock for
cash at $1.50 per share on
05/05/1999 -- -- 3,000 4,500 -- -- 4,500
Issuance of common stock for
cash at $1.50 per share on
05/05/1999 -- -- 4,000 6,000 -- -- 6,000
Issuance of common stock for
cash at $2.50 per share on
05/05/1999 -- -- 1,450,000 3,623,020 -- -- 3,623,020
Issuance of common stock for
cash at $1.00 per share on
05/05/1999 -- -- 1,000,000 1,000,000 -- -- 1,000,000
Issuance of common stock for
cash at $0.25 per share on
05/05/1999 -- -- 1,000,000 249,985 -- -- 249,985
Issuance of common stock for
commissions on sale of
common stock at $2.50 per
share on 06/08/1999 -- -- 2,000 5,000 -- -- 5,000
Issuance of common stock for
cash at $2.50 per share on
06/08/1999, net of commissions -- -- 4,000,000 8,260,529 -- -- 8,260,529
</TABLE>
F-6
<PAGE> 46
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE
------------------ ------------------------ ACCUMULATED FROM
SHARES AMOUNT SHARES AMOUNT DEFICIT SHAREHOLDER TOTAL
------- -------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
cash at $2.50 per share on
06/08/1999 -- -- 20,000 49,980 -- -- 49,980
Issuance of common stock for
cash at $2.50 per share on
06/08/1999 -- -- 10,000 25,994 -- -- 25,994
Issuance of common stock for
commissions on sale of
common stock at $2.50 per
share on 06/08/1999 -- -- 20,000 50,000 -- -- 50,000
Issuance of common stock for
commissions on sale of
common stock at $2.50 per
share on 06/08/1999 -- -- 123,000 307,500 -- -- 307,500
Issuance of common stock for
cash at $2.50 per share on
06/08/1999 -- -- 204,500 511,250 -- -- 511,250
Issuance of common stock for
cash at $2.50 per share on
06/08/1999 -- -- 58,300 125,750 -- -- 125,750
Issuance of common stock for
commissions on sale of
common stock at $2.50 per
share on 06/08/1999 -- -- 277,000 692,500 -- -- 692,500
Issuance of common stock for
cash at $2.50 per share on
06/08/1999 -- -- 800,000 1,999,985 -- -- 1,999,985
Issuance of common stock for
commissions on sale of
common stock at $2.38 per
share on 09/08/1999 -- -- 198,900 -- -- -- --
Issuance of common stock for
commissions on sale of
common stock at $2.38 per
share on 09/08/1999 -- -- 29,900 -- -- -- --
Issuance of common stock for
cash at $2.50 per share on
09/08/1999 -- -- 500 1,250 -- -- 1,250
Issuance of common stock for
cash at $2.50 per share on
09/08/1999 -- -- 30,000 75,000 -- -- 75,000
Issuance of common stock for
cash at $2.50 per share on
09/08/1999 -- -- 30,000 75,000 -- -- 75,000
Issuance of common stock for
cash at $2.50 per share on
09/15/1999 -- -- 1,000 2,500 -- -- 2,500
Issuance of common stock
warrants valued at 9/30/99 -- -- -- 3,375,000 -- -- 3,375,000
Net loss -- -- -- -- (6,552,831) -- (6,477,794)
Note receivable from
shareholder -- -- -- -- -- (3,800,000) (3,800,000)
------- -------- ---------- ----------- ------------ ----------- ------------
Balance at September 30,
1999 (unaudited) 200,000 $821,238 37,643,866 $37,421,178 $(12,642,164) $(3,800,000) $ 21,800,252
======= ======== ========== =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE> 47
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JANUARY 1,
YEAR ENDED 1997
YEAR ENDED DECEMBER 31, THROUGH
------------------------------------------------ DECEMBER 31,
1996* 1997 1998 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (356,850) $ (2,539,237) $ (3,549,096) $ (6,088,333)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 16,477 26,914 31,548 58,462
Write down of intangible assets -- 80,000 80,000
Write down of inventory -- -- 1,282,976 --
Write down of purchased in-process research
and development -- -- 406,000 406,000
Provision for bad debts -- -- 331,500 331,500
Common stock issued for services -- 1,377,000 -- 1,377,000
Common stock warrants issued for compensation -- -- 243,750 243,750
Common stock issued to charity -- 1,700 -- 1,700
Changes in operating assets and liabilities:
Accounts receivable (8,205) (6,749) (333,794) (340,543)
Inventory -- (569,755) (753,657) (1,323,412)
Prepaid expenses -- -- (27,658) (27,658)
Other noncurrent assets 270 -- (29,004) (29,004)
Accounts payable 709 504,773 (339,592) 165,181
Accrued liabilities (1,976) -- 300,000 300,000
------------ ------------ ------------ ------------
Net cash used in operating activities (349,575) (1,205,354) (2,357,027) (3,562,381)
Cash flows from investing activities
Purchase of in-process research and development -- -- (406,000) (406,000)
Purchase of property and equipment (56,920) (38,359) (441,025) (479,384)
Advance on notes receivable from shareholder-net (604,100) (100,000) (25,000) (125,000)
------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities (661,020) (138,359) (872,025) (1,010,384)
Cash flows from financing activities
Proceeds from issuance of common stock 1,102,355 1,114,740 3,422,056 4,536,796
Proceeds from issuance of preferred stock -- -- -- --
Cash deposit received for sale of common stock -- 230,000 (188,370) 41,630
------------ ------------ ------------ ------------
Net cash provided by financing activities 1,102,355 1,344,740 3,233,686 4,578,426
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 91,760 1,027 4,634 5,661
Cash at beginning of period (6,411) -- 1,027 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 85,349 $ 1,027 $ 5,661 $ 5,661
============ ============ ============ ============
Supplemental cash flow disclosures
Cash paid for interest $ -- $ 324 $ 3,354 $ 3,678
Cash paid for income taxes $ -- $ 800 $ 800 $ 1,600
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JANUARY 1,
NINE MONTHS ENDED 1997
SEPTEMBER 30, THROUGH
------------------------------ SEPTEMBER 30,
1998 1999 1999**
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (903,039) $ (6,553,831) $(12,642,164)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,457 169,755 228,217
Write down of intangible assets -- 80,000
Write down of inventory -- -- 1,282,976
Write down of purchased in-process research
and development -- -- 406,000
Provision for bad debts -- -- 331,500
Common stock issued for services -- 1,170,000 2,547,000
Common stock warrants issued for compensation -- 3,375,000 3,618,750
Common stock issued to charity -- -- 1,700
Changes in operating assets and liabilities:
Accounts receivable 2,862 9,043 (331,500)
Inventory (968,104) -- (1,323,412)
Prepaid expenses -- (7,117) (34,775)
Other noncurrent assets (82,418) (32,494) (61,498)
Accounts payable (272,790) (52,384) 112,797
Accrued liabilities 232,699 (300,000) --
------------ ------------ ------------
Net cash used in operating activities (1,987,333) (2,222,028) (5,784,409)
Cash flows from investing activities
Purchase of in-process research and development -- -- (406,000)
Purchase of property and equipment (41,294) (1,248,188) (1,727,572)
Advance on notes receivable from shareholder-net 75,000 (3,797,755) (3,922,755)
------------ ------------ ------------
Net cash provided by (used in) investing
activities 33,706 (5,045,943) (6,056,327)
Cash flows from financing activities
Proceeds from issuance of common stock 1,952,600 26,582,368 31,119,164
Proceeds from issuance of preferred stock -- 821,238 821,238
Cash deposit received for sale of common stock -- (41,630) --
------------ ------------ ------------
Net cash provided by financing activities 1,952,600 27,361,976 31,940,402
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (1,027) 20,094,005 20,099,666
Cash at beginning of period 1,027 5,661 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ -- $ 20,099,666 $ 20,099,666
============ ============ ============
Supplemental cash flow disclosures
Cash paid for interest $ 65 $ 20 $ 3,678
Cash paid for income taxes $ -- $ -- $ 1,600
</TABLE>
Supplemental schedule of noncash investing and financing activities
Issuance of common stock in 1997 in exchange for cash
of $112,590 and:
<TABLE>
<S> <C>
Inventory $ 9,564
Equipment 25,000
Intellectual property 100,000
</TABLE>
* Predecessor company (see note A)
**Excluding the predecessor company
The accompanying notes are an integral part of these statements.
F-8
<PAGE> 48
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Multiplexer Corporation (the "Company"), a development stage
company, was incorporated on April 16, 1996 and had no activities through
December 31, 1996. In January 1997, the Company commenced operations through the
issuance of 17,919,800 shares of common stock in exchange for certain assets and
rights to the product, the MUX-6 Multiplexer. The Multiplexer was designed to
expand underground cable capacity by allowing six different telephone numbers to
be carried on a single pair of copper wire. In 1998, the Company abandoned the
marketing of the MUX-6 Multiplexer and has refocused its efforts in the area of
satellite communications.
The Company will provide high speed Internet access and broadband
interactive services for corporate, institutional and Small Office Home Office
("SOHO") users through its satellite and terrestrial based network.
A summary of the Company's significant accounting policies follows:
Basis of Presentation
With the acquisition of certain assets and rights of the product, the
MUX-6, Temasek Telephone, Inc. was deemed to be a predecessor corporation, and
accordingly, their statements of operations and cash flows for the year ended
December 31, 1996 are included in these financial statements.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company is a development stage
company and has not generated any revenues and has net losses since inception
through December 31, 1998 and such losses continued through the unaudited
nine-month period ended September 30, 1999. Subsequent to December 31, 1998, the
Company issued shares of common and preferred stock resulting in net proceeds of
approximately $27,400,000. The Company's continued existence is ultimately
dependent upon its ability to use the funds to develop and market services and
the success of future operations. There can be no assurance that the Company
will achieve profitability or positive cash flow from operations.
Cash and Cash Equivalents
All liquid investments instruments with an original maturity of three
months or less are considered cash and cash equivalents.
The Company maintains cash balances at financial institutions, which are
insured by the Federal Deposit Insurance Corporation up to $100,000. The Company
has not experienced any losses in such cases and believes it is not exposed to
significant risk or loss.
F-9
<PAGE> 49
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market. All inventory as of December 31, 1998, was reduced to salvage value as
it related to products that are no longer being developed.
Property and Equipment
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated lives of three to ten years. All
capital expenditures less than $500 are expensed as incurred. Maintenance and
repairs are charged to operations as incurred.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using current enacted tax rates. A valuation allowance is
established if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Fair Value of Financial Instruments
The fair value of cash, accounts receivable, notes receivable, accounts
payable and accrued liabilities approximate carrying value due to the short-term
nature of such instruments.
Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting For The Impairment of Long-Lived Assets and For
Long-Lived Assets To Be Disposed Of, which requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes indicate that the carrying amount of an asset may not be recoverable.
The Company's policy is to review the recoverability of all intangible assets at
a minimum on an annual basis, and in addition whenever events or changes
indicate that the carrying amount of an asset may not be recoverable.
F-10
<PAGE> 50
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Net Loss Per Share
Basic loss per share is computed by dividing net income by the weighted
average common shares outstanding for the period. Diluted loss per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
However, due to the Company's' net loss position for all periods presented,
diluted loss per share excludes common equivalent shares, as their effect is
anti-dilutive. The weighted average common shares outstanding used to compute
net loss per share for the year ended December 31, 1996 was based on the shares
issued in January 1997 in exchange for the net assets acquired.
Stock-Based Compensation
The Company accounts for stock-based awards to employees using the
intrinsic value method in accordance with Accounting Principle Board Opinion No.
25, "Accounting For Stock Issued to Employees."
Stock Pricing
All per share sales prices for the Company's common and preferred stock
were approved by the Board of Directors of the Company.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which requires an enterprise to
report, by major components and as a single total, the change in its net assets
during the period from non-owned sources and SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which establishes annual and
interim reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
The Company has no comprehensive income items to report for the period from
January 1, 1997 (inception) to December 1998, or for the six-month period ended
June 30, 1999. The Company currently has no reportable segments under SFAS No.
131.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. SFAS No. 133, as amended by SFAS No. 137, is
effective for the Company in fiscal 2002. Although the Company has not fully
assessed the implications of SFAS Nos. 133 and 137, the Company does not believe
that the adoption of this statement will have a material impact on the Company's
financial position or results of operations.
F-11
<PAGE> 51
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statement, as
well as revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Unaudited Interim Financial Information
The financial information for the nine months ended September 30, 1999
and 1998 is unaudited, but includes all adjustments (consisting only of normal
recurring adjustments) that the Company considers necessary for fair
presentation of the financial position at such dates and the results of
operations and cash flows for the periods then ended. Operating results for the
nine months ended September 30, 1999 are not necessarily indicative of results
that may be expected for the entire year.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment comprise the following:
<TABLE>
<CAPTION>
December 31,
-------------------------- September 30,
1997 1998 1999
---------- ---------- -------------
(Unaudited)
<S> <C> <C> <C>
Automobile $ 25,000 $ 25,000 $ 5,000
Equipment 34,756 438,145 1,307,891
Furniture and fixtures 3,603 41,239 439,681
---------- ---------- ----------
63,359 504,384 1,752,572
Less accumulated depreciation 6,914 38,462 208,217
---------- ---------- ----------
$ 56,445 $ 465,922 $1,544,355
========== ========== ==========
</TABLE>
NOTE C - PURCHASE OF CERTAIN ASSETS
During November 1998, the Company purchased certain assets from a
company that was controlled by the courts under Chapter 7 bankruptcy
proceedings. The total purchase price was $805,000. Of this amount, $505,000 was
paid in November 1998, and the balance was paid by June 30, 1999. The purchase
price was allocated among equipment, furniture and in-process research and
development.
At the time of purchase, the Company determined that the technological
feasibility of the purchased research and development had not yet been
established and that such technology had no future alternative uses. As such,
the Company expensed all of the purchased in-process research and development.
F-12
<PAGE> 52
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE D - INCOME TAXES
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforward $ 952,214 $ 2,191,719
Compensation expense-common
stock warrants -- 99,938
Less valuation allowance (952,214) (2,291,657)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
At December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $5,845,000 and $2,922,000, respectively,
available to offset future taxable income. The Company's federal and state net
operating loss carryforwards expire through 2018 and 2003, respectively.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined, utilization of the carryforwards could be restricted.
NOTE E - RELATED PARTY TRANSACTIONS
An interest free demand note receivable, in the amount of $100,000, was
issued to a stockholder on June 5, 1997. The outstanding balance of the note was
$100,000 at December 31, 1997. The note was repaid during 1998.
A demand note receivable, in the amount of $125,000, was issued to a
stockholder on November 30, 1998. The note was repaid in January 1999.
In March 1999, a demand note receivable in the amount of $250,000,
bearing interest at 9% per annum, was issued to a stockholder, of which $225,000
was repaid in April and July 1999.
In June 1999, the Company loaned a stockholder of the Company the sum of
$3,375,000. The amount due is in the form of a note receivable that is due and
payable, with interest, on December 31, 1999. The note bears interest at 9% per
annum. Certain of the funds were used to purchase common stock of the Company.
Accordingly, the note receivable from shareholder at June 30, 1999 has been
included in stockholders' equity.
F-13
<PAGE> 53
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE F - PREFERRED STOCK
The Company has authorized the issuance of 10,000,000 shares of Series A
Preferred Stock ("the Preferred shares"). The Preferred shares have no par value
and may be converted into two shares of the Company's common stock at any time
subsequent to issuance. The Preferred shares are entitled to cumulative
dividends, payable only when, if and as declared by the Board of Directors of
the Company, which are cumulative, at a rate of $1.50, $2.50 and $3.50 per share
for the years ending December 31, 2000, 2001 and 2002, respectively.
Additionally, Preferred shareholders are entitled to the full amount of any
common stock dividends. The preferred shares have full voting privileges with
regard to matters submitted to the shareholders for a vote and, with proper
notice, have the right to cumulate votes for the election of Directors of the
Company. In calculating the loss per share effect of the preferred dividends,
the total of all cumulative dividends have been allocated over the period from
the date of issuance through December 31, 2002.
NOTE G - STOCK WARRANTS
In November 1998 the Company issued warrants for the purchase of
3,000,000 shares of common stock to three employees of the Company. The exercise
price of each warrant is $1.00 per share of common stock. Warrants to purchase
1,500,000 shares of common stock are exercisable upon the Company's common stock
price reaching certain price levels and warrants to purchase 1,500,000 shares of
common stock are exercisable upon the Company reaching certain milestones
related to the development and marketing of certain product lines and service.
Once the contingencies have been satisfied, the warrants can be exercised over
three years. These warrants will be accounted for under variable plan
accounting.
NOTE H - STOCK OPTION PLAN
In February 1999, the Board of Directors approved a stock option plan
(the "Plan") intended to qualify as an incentive stock option plan as defined in
Section 422 of the Internal Revenue Code. The Plan is accounted for under the
provisions of APB No. 25 and generally provides that exercise prices will not be
less than fair market value per share on the date the option is granted. Options
granted prior to adoption of the Plan were issued at fair market value.
Therefore, no compensation cost has been recognized for the options granted. The
options are exercisable cumulatively, to the extent of 25% on the one-year
anniversary date and an additional 1/36 on the last day of each calendar month.
F-14
<PAGE> 54
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE H - STOCK OPTION PLAN (continued)
Had compensation cost for the options granted been determined based on
the fair value of the options at the grant dates consistent with the method
prescribed in SFAS No. 123, Accounting for Stock-Based Compensation, the
Company's net losses would have been increased to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
Year ended
December 31,
1998
-----------
<S> <C>
Net loss
As reported $(3,549,096)
Pro forma $(4,663,636)
Pro forma net loss per share $ (0.22)
</TABLE>
The fair value of each option grant is determined on the date of grant
using the Black-Scholes options-pricing model with the following weighted
average assumptions used: no expected dividends: expected volatility of 99.7%;
risk-free interest rate of 5%; an expected forfeiture rate of zero; and expected
lives of 4 years. A summary of the status of the options outstanding is
presented as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
-------- --------------
<S> <C> <C>
Outstanding at January 1, 1998 -- $ --
Granted (weighted average fair value
per share, $1.22) 700,000 1.54
Exercised -- --
------- ------
Outstanding at December 31, 1998 700,000 $ 1.54
======= ======
</TABLE>
The Company issued options to purchase 150,000 shares of common stock at
a weighted average exercise price of $2.47 per share through September of 1999.
F-15
<PAGE> 55
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE H - STOCK OPTION PLAN (continued)
The following information applies to options outstanding at December 31,
1998. No options are exercisable at December 31, 1998.
<TABLE>
<CAPTION>
1998 Options Outstanding
-----------------------------------------
Number Remaining
Exercise outstanding Contractual
Price at 12/31/98 Life (in years)
-------- ----------- ---------------
<S> <C> <C> <C>
$1.00 450,000 9.91
1.88 100,000 9.91
2.88 100,000 9.91
3.06 50,000 9.91
-------
700,000
=======
</TABLE>
NOTE I - RETIREMENT PLAN
On January 1, 1999, the Company adopted the AMC 401(k) Plan (the "Plan")
which is a standardized profit sharing and trust under section 401(k) of the
Internal Revenue Code. The Plan allows for employees with at least six months of
service, to contribute to the Plan the maximum amount of salary as permitted
under Section 401(k). The Company may make discretionary contributions to the
Plan. All such contributions are 100% vested at the time the contribution is
made. Employees can borrow against their account balances for hardship or
financial necessity for a minimum of $1,000 and a maximum of $50,000. Upon the
retirement age of 60, employees receive a lump sum distribution of their account
value.
NOTE J - COMMITMENTS
The Company is presently leasing office space under leases expiring at
various dates through 2003. Rent expense was $82,965, $34,551 and $28,008 for
the years ended December 31, 1998, 1997 and 1996, respectively.
F-16
<PAGE> 56
AMERICAN MULTIPLEXER CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998 and 1997
(information relating to the period January 1, 1999
through September 30, 1999 is unaudited)
NOTE J - COMMITMENTS (continued)
Future minimum lease payments under these noncancellable operating
leases are as follows at December 31, 1998:
Year ending December 31,
<TABLE>
<S> <C>
1999 $ 336,825
2000 310,412
2001 322,828
2002 335,741
2003 319,110
----------
$1,624,916
==========
</TABLE>
NOTE K - SUBSEQUENT EVENTS (unaudited)
In May 1999, the Company issued warrants to purchase 6,000,000 shares of
common stock to an officer of the Company. Each warrant entitles the holder to
purchase one share of common stock at $5.06 per share, which is equal to the
fair value per share of common stock at the date of issue. The warrants are
exercisable at any time through May 14, 2004.
In July 1999, the Company loaned a stockholder of the Company the sum of
$725,000. The amount is in the form of a note receivable that was due and
payable, with interest, on December 31, 1999. The note bears interest at 9% per
annum.
In September 1999, the Company signed an agreement to purchase
transponder time from a provider for five years for a total of $19 million,
payable approximately $3.7 million annually. The Company has an option to
purchase additional transponder time.
In December 1999, the Company loaned a corporation affiliated with one
of its stockholders the sum of $2 million pursuant to a loan agreement. The
stockholder has personally guaranteed this loan. The loan bears interest at 6%
per annum and the principal is due and payable on December 31, 2000, with
interest payable monthly.
F-17
<PAGE> 57
SIGNATURES
Pursuant to the requirements of 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.
AMERICAN MULTIPLEXER CORPORATION
(Registrant)
Date: February 2, 2000 By /s/ Edward S.C. Tan
-------------------------------------------
Edward S.C. Tan, Chief Executive Officer
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 Articles of Incorporation of American Multiplexer Corporation
3.2 Bylaws of American Multiplexer Corporation
4.1 Form of Common Stock Certificate of American Multiplexer Corporation
10.1 Lease Agreement with SCP-I
10.2 Warrant to Purchase Common Shares
10.3 Form of Incentive Stock Option Agreement
10.4 Form of Restricted Stock Warrant Agreement
10.5 Interim Agreement with Sistema de Satelites Mexicanos dated September 1, 1999
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
FILED
8:35 AM
MAY 28 1997
ARTICLES OF RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
AMERICAN MULTIPLEXER CORPORATION
Pursuant to Section 55-10-07 of the General Statutes of North Carolina, the
undersigned corporation does hereby submit the following for the purpose of
restating its Articles of Incorporation:
1. The name of the corporation is American Multiplexer Corporation.
2. The text of the Restated Articles of Incorporation is attached.
3. The Restated Articles of Incorporation, which contain an amendment
requiring shareholder approval, were approved by shareholder action, and
shareholder approval was obtained as required by Chapter 55 of the North
Carolina General Statutes on April 28, 1997.
4. The Restated Articles of Incorporation do not contain an amendment
providing for an exchange, reclassification, or cancellation of issued
shares.
This the 28 day of April, 1997.
AMERICAN MULTIPLEXER CORPORATION
By: /s/ EDWARD S. C. TAN
----------------------------
Edward S. C. Tan, President
1
<PAGE> 2
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN MULTIPLEXER CORPORATION
ARTICLE I
The name of the corporation is American Multiplexer Corporation.
ARTICLE II
The corporation shall have authority to issue Twenty Five Million
(25,000,000) shares of Common Stock.
ARTICLE III
The mailing and street address and county of the registered office of the
corporation in North Carolina is 4011 Westchase Blvd., Suite 400, Wake County,
North Carolina 27607.
ARTICLE IV
The name of the registered agent at the address of the registered office
is Merrill M. Mason.
ARTICLE V
No director of the corporation shall have personal liability arising out
of an action whether by or in the right of the corporation or otherwise for
monetary damages for breach of any duty as a director; provided, however, that
the foregoing shall not limit or eliminate the personal liability of a director
with respect to (i) acts or omissions that such director at the time of such
breach knew or believed were clearly in conflict with the best interests of the
corporation, (ii) any liability under Section 55-8-33 of the North Carolina
General Statutes or any successor provision, (iii) any transaction from which
such director derived an improper personal benefit, or (iv) acts or omissions
occurring prior to the date of the effectiveness of this Article. As used in
this Article, the term "improper personal benefit" does not include a
director's reasonable compensation or other reasonable incidental benefit for
or on account of his or her services as a director, officer, employee,
independent contractor, attorney, or consultant of the corporation.
Furthermore, notwithstanding the foregoing provision, in the event that
Section 55-2-02 or any other provision of the North Carolina General Statutes
is amended or enacted to permit further limitation or elimination of the
personal liability of the director, the personal liability of the corporation's
directors shall be limited or eliminated to the fullest extent permitted by the
applicable law.
This Article shall not affect a provision permitted under the North
Carolina General Statutes in the articles of incorporation, bylaws or contract
or resolution of the corporation indemnifying or
2
<PAGE> 3
agreeing to indemnify a director against personal liability. Any repeal or
modification of this Article shall not adversely affect any limitation hereunder
on the personal liability of the director with respect to acts or omissions
occurring prior to such repeal or modification.
ARTICLE VI
The number of Directors of the corporation may be fixed by the bylaws.
3
<PAGE> 4
SS-BCA-08 0-0394072
STATE OF NORTH CAROLINA ---------
98 357 5090 F I L E D
DEPARTMENT OF THE SECRETARY OF STATE 10:45 AM
JAN 07 1999
EFFECTIVE _______
ELAINE F. MARSHALL
ARTICLES OF AMENDMENT SECRETARY OF STATE
NORTH CAROLINA
Pursuant to SS55-10-06 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: American Multiplexer Corporation.
2. The text of each amendment adopted is as follows: (State below or attach).
The corporation is authorized to issue forty million (40,000,000) shares of
Stock, all of one class, designated as common.
3. The date of adoption of each amendment was as follows:
December 14, 1998.
4. (Check either a, b, c or d, whichever is applicable):
a. The amendment(s) was (were) duly adopted by the incorporators
----- prior to the issuance of shares.
b. The amendment(s) was (were) duly adopted by the Board of
----- Directors prior to the issuance of shares.
c. The amendment(s) was (were) duly adopted by the Board of
----- Directors without shareholder approval as shareholder approval
was not required.
d. X The amendment(s) was (were) approved by shareholders action, and
----- such shareholder approval was obtained as required by Chapter 55
of the North Carolina Statutes.
5. These articles will be effective upon filing.
<PAGE> 5
This the 15th day of December 1998.
American Multiplexer Corporation
Name of Corporation
/s/ DENNIS E. BURT
----------------------------
Signature
Dr. Dennis Burt, Secretary
NOTES:
1. Filing fee is $50. One executed original and one exact or conformed copy
of these articles must be filed with the Secretary of State.
o If more than one voting group [defined at NCGS SS55-1-40(26)] exist,
attach schedule setting forth the required information for each voting
group.
<PAGE> 6
SS-BCA-08 COR ID#0394072
99 082 5016 FILED
140PM
APR 13 1999
Effective_________
ELAINE F. MARSHALL
SECRETARY OF STATE
NORTH CAROLINA
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
Pursuant to Section 55-10-06 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: American Multiplexer Corporation.
2. The text of each amendment adopted is as follows: (State below or attach)
The corporation is authorized to issue ten million (10,000,000) shares of
convertible preferred stock
These 10,000,000 convertible preferred stock are in addition to the
authorized 40,000,000 common stock on record
3. The date of adoption of each amendment was as follows:
4. (Check either a, b, c, or d, whichever is applicable):
a. The amendment(s) was (were) duly adopted by the incorporators
----- prior to the issuance of shares.
b. X The amendment(s) was (were) duly adopted by the board of
----- directors prior to the issuance of shares.
c. The amendment(s) was (were) duly adopted by the board of
----- directors without shareholder approval as shareholder approval
was not required.
d. The amendment(s) was (were) approved by shareholder action, and
----- such shareholder approval was obtained as required by Chapter
55 of the North Carolina General Statutes.
5. These articles will be effective upon filing.
<PAGE> 7
This the 16th day of March, 1999.
---- -----
American Multiplexer Corporation
------------------------------------
/s/ DENNIS E. BURT
------------------------------------
Signature
Dennis E Burt, Secretary
------------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. One executed original and one exact or conformed copy
of these articles must be filed with the Secretary of State.
* If more than one voting group [defined at NCGS Section 55-1-40(26)]
exist, attach schedule setting forth the required information for each
voting group.
<PAGE> 8
CORP ID # ILLEGIBLE
FILED
11:00 PM
JUN 16 1999
EFFECTIVE _______
ELAINE F. MARSHALL
SECRETARY OF STATE
NORTH CAROLINA
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
Pursuant to Section 55-10-6 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: American Multiplexer Corporation.
2. The text of each amendment adopted is as follows: (State below or attach)
The corporation is authorized to issue fifty million (50,000,000) shares
of common stock (increase of 10,000,000) This is in addition to the
10,000,000 Convertible Preferred Stock.
3. The date of adoption of each amendment was as follows:
4. (Check either a, b, c, or d, whichever is applicable):
a. The amendment(s) was (were) duly adopted by the incorporators prior
--- to the issuance of shares.
b. X The amendment(s) was (were) duly adopted by the board of directors
--- prior to the issuance of shares.
c. The amendment(s) was (were) duly adopted by the board of directors
--- without shareholder approval as shareholder approval was not
required.
d. The amendment(s) was (were) approved by shareholder action, and
--- such shareholder approval was obtained as required by Chapter 55 of
the North Carolina General Statutes.
5. These articles will be effective upon filing.
<PAGE> 9
This the 14th day of May, 1999.
---- ----
American Multiplexer Corporation
---------------------------------
Name of Corporation
/s/ DENNIS E. BURT
----------------------------------
Signature
Dennis E. Burt, Secretary
----------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. One executed original and one exact or conformed copy of
these articles must be filed with the Secretary of State.
If more than one voting group [defined at NCGS Section 55-1-40(25)] exist,
attach schedule setting forth the required information for each voting
group.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AMERICAN MULTIPLEXER CORPORATION
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place, within or without the State of North Carolina,
as shall be determined from time to time by the Board of Directors and as shall
have been so designated most recently in the annual report of the Corporation
or amendment thereto, filed with the North Carolina Secretary of State pursuant
to the North Carolina Business Corporation Act.
Section 1.2 REGISTERED OFFICE. The Corporation shall maintain a
registered office in the State of North Carolina as required by law, which may
be, but need not be, identical with the principal office.
Section 1.3 OTHER OFFICES. The Corporation may have offices at such
other places, either within or without the State of North Carolina, as the
Board of Directors may from time to time determine, or as the affairs of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 PLACE OF MEETINGS. All meetings of shareholders shall be
held at the principal office of the Corporation, or at such other place, either
within or without the State of North Carolina, as shall be designated by the
Board of Directors or the Chief Executive Officer of the Corporation.
Section 2.2 ANNUAL MEETINGS. The annual meeting of the shareholders
shall be held each year at such date and time as shall be designated by the
Board of Directors or the Chief Executive Officer of the Corporation, for the
purpose of electing directors of the Corporation and for the transaction of
such other business as may be properly brought before the meeting.
Section 2.3 SUBSTITUTE ANNUAL MEETING. If the annual meeting shall not
be held on the day provided for by these Bylaws, a substitute meeting may be
called in accordance with the provisions of Section 2.4. A meeting so called
shall be designated and treated for all purposes as the annual meeting.
<PAGE> 2
Section 2.4 SPECIAL MEETINGS. Special Meetings of the shareholders may be
called at any time by or at the request of the Chief Executive Officer or the
Board of Directors. Unless the Corporation is a "public corporation" (as defined
in the North Carolina Business Corporation Act), a special meeting of the
shareholders shall also be called upon the written demand or demands of the
holders of at least ten percent (10%) of all votes entitled to be cast on any
issue proposed to be considered at such meeting pursuant to such demand or
demands, provided such demand or demands describe the purpose or purposes for
which said special meeting is to be held and are signed, dated and delivered to
the Secretary of the Corporation. Notice of a special meeting called at the
demand of shareholders shall be given within thirty (30) days after the date of
receipt by the Secretary of the demand or demands requiring the call of such
special meeting.
Section 2.5 NOTICE OF MEETINGS. Written or printed notice stating the
date, time and place of the meeting shall be given not less than ten (10) nor
more than sixty (60) days before the date thereof, either personally or by
mail, at the direction of the person or persons calling the meeting, to each
shareholder entitled to vote at such meeting and each other shareholder
entitled to notice pursuant to the Articles of Incorporation or applicable law.
In the case of a special meeting, the notice of meeting shall specifically
state the purpose or purposes for which the meeting is called. In the case of
an annual meeting, the notice of meeting need not specifically state the
purpose or purposes thereof or the business to be transacted thereat unless
such statement is expressly required by the provisions of these Bylaws or by
applicable law.
If a meeting is adjourned for 120 days after the date fixed for the original
meeting, or if a new record date is fixed for the adjourned meeting, or if the
date, time and place for the adjourned meeting is not announced prior to
adjournment, then notice of the adjourned meeting shall be given as in the case
of an original meeting; otherwise, it is not necessary to give any notice of
the adjourned meeting other than by announcement at the meeting at which the
adjournment is taken.
A shareholder's attendance at a meeting constitutes a waiver by such
shareholder of (1) objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting, and (b) objection
to consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the notice of the meeting, unless the
shareholder objects to considering the matter before it is voted upon.
Section 2.6 RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of
-2-
<PAGE> 3
shareholders or any adjournment thereof, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for one or more voting groups for any such
determination of shareholders, such record date in any case to be not more than
seventy (70) days immediately preceding the date of the meeting or the date on
which the particular action, requiring such determination of shareholders, is to
be taken.
If no record date is fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, the close of business on
the day before the date on which notice of the meeting is first mailed to
shareholders shall be the record date for such determination of shareholders.
A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date for the adjourned meeting, which it
must do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting.
Section 2.7 SHAREHOLDERS' LIST. Not later than two (2) business days after
the date that notice of a meeting of shareholders is first given, the Secretary
or other officer or person having charge of the stock transfer books of the
Corporation shall prepare an alphabetical list of the shareholders entitled to
notice of such meeting, with the address of and number of shares held by each,
arranged by voting group (and by class or series of shares within each voting
group), which list shall be kept on file at the principal office of the
Corporation (or such other place in the city where the meeting is to be held as
may be identified in the notice of the meeting) for the period commencing two
(2) business days after notice of the meeting is first given and continuing
through such meeting, and which list shall be available for inspection by any
shareholder, or his or her agent or attorney, upon his or her demand, at any
time during regular business hours. This list shall also be produced and kept
open at the time and place of the meeting and shall be subject to inspection by
any shareholder, or his or her agent or attorney, during the whole time of the
meeting and any adjournment thereof.
Section 2.8 QUORUM. The holders of shares entitled to a majority of votes
entitled to be cast by a voting group (as described in Section 2.10), present
in person or represented by proxy, shall constitute a quorum of such voting
group at all meetings of shareholders for purposes of acting on any matter for
which action by such voting group is required. If there is no quorum at the
opening of a meeting of shareholders, such meeting may be adjourned from time to
time by the vote of a majority of the shares voting on the motion to adjourn;
and, at any adjourned meeting at which a quorum is present, any business may be
-3-
<PAGE> 4
transacted which might have been transacted at the original meeting.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment thereof unless a new record date is or must be set for that
adjourned meeting.
Section 2.9 ORGANIZATION. Each meeting of shareholders shall be presided
over by the Chief Executive Officer, or, in the absence or at the request of
the Chief Executive Officer, by such other officer as the Chief Executive
Officer or the Board of Directors may designate, or in their absence and in the
absence of such designation, by any person selected to preside by plurality
vote of the shares represented and entitled to vote at the meeting, with each
share having the same number of votes to which it would be entitled on any
other matter on which all shares represented and entitled to vote at the
meeting would be entitled to vote. The Secretary, or in the absence or at the
request of the Secretary, any person designated by the person presiding at the
meeting, shall act as secretary of the meeting.
Section 2.10 VOTING OF SHARES. Except as otherwise provided in the
Articles of Incorporation of the Corporation, each outstanding share,
regardless of class, having the right to vote on a matter or matters submitted
to a vote at a meeting of shareholders shall be entitled to one vote on each
such matter. A shareholder may vote in person or by proxy.
Except in the election of directors (as provided for in Section 3.4), if a
quorum of a voting group exists, action on a matter by such voting group is
approved by such voting group if the votes cast within such voting group
favoring the action exceed the votes cast within such voting group opposing the
action, unless a greater number of affirmative votes is required by law or the
Articles of Incorporation or a Bylaw adopted by the shareholders. If the
Articles of Incorporation, a Bylaw adopted by the shareholders or applicable
law provides for voting on a matter by two or more voting groups, action is
taken on that matter only when approved by each of those voting groups counted
separately; provided, that action may be taken by one voting group on a matter
even though no action is taken at the same time by another voting group
entitled to vote on the matter.
Voting on all matters including the election of directors shall be by
voice vote or by a show of hands unless, as to any matter, the holders of
shares entitled to at least twenty-five percent (25%) of the votes of shares
represented at the meeting and entitled to vote on that matter shall demand,
prior to the voting on such matter, a ballot vote on such matter.
As used in these Bylaws, the term "voting group" means all
-4-
<PAGE> 5
shares of one or more classes or series that, under the Articles of
Incorporation or applicable law, are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders. All shares entitled by
the Articles of Incorporation or applicable law to vote generally on the matter
are for that purpose a single voting group. So long as the Corporation shall
have only one class of shares outstanding and the voting rights of all shares
of such class are identical, then all such outstanding shares shall constitute
a single voting group and the sole voting group, except to the extent that
applicable law or the Articles of Incorporation requires that any of such
shares be treated as a separate voting group.
Section 2.11 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the shareholders may be taken without a meeting if one
or more written consents, describing the action so taken, shall be signed by
all of the persons who would be entitled to vote upon such action at a meeting,
whether before or after the action so taken, and shall be delivered to the
Corporation to be included in the corporate minute book or be filed with the
corporate record. Such consent has the same effect as a meeting vote and may be
described as such in any document. In the case of any action proposed to be so
taken by written consent that, if to be taken at a meeting, would require that
notice to be given to nonvoting shareholders, the Corporation shall give such
nonvoting shareholders written notice of the proposed action at least ten (10)
days before the action is taken, which notice shall contain or be accompanied
by the same material that, under applicable law, would have been required to be
sent to nonvoting shareholders in a notice of such a meeting.
Section 2.12 INFORMAL ACTION BY SHAREHOLDERS. Any action which may be
taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, describing forth the action so taken, shall be signed by
all of the persons who would be entitled to vote upon such action at a meeting,
and filed with the Secretary of the Corporation to be kept in the corporate
minute book.
ARTICLE III
DIRECTORS
Section 3.1 GENERAL POWERS. All corporate powers of the Corporation shall
be exercised by or under the authority of, and the business affairs of the
Corporation shall be managed under the direction of, the Board of Directors.
Section 3.2 NUMBER, TERM AND QUALIFICATIONS. The number of directors of
this Corporation shall consist of such number, not less than three (3) nor more
than seven (7), as shall be determined
-5-
<PAGE> 6
from time to time by resolution of the shareholders or the Board of Directors.
No such resolution reducing the number of directors below the number of
directors then in office shall of itself have the effect of removing any
director prior to the expiration of such director's term of office. Any
positions on the Board of Directors created by an increase in the number of
directors pursuant to such a resolution and not filled by the shareholders
shall be treated as vacancies to be filled by and in the discretion of the
Board of Directors. The number of directors fixed pursuant to such a resolution
shall be deemed to be the number of directors prescribed by these Bylaws.
The terms of initial directors and the term of any director elected to
fill a vacancy shall expire at the next shareholders' meeting at which
directors are elected. Otherwise, the term of each director shall be the period
from the effective date of his or her election to the next annual meeting of
shareholders. Notwithstanding the stated terms of directors, a director shall
continue to serve after expiration of his or her stated term until his or her
successor is elected and qualifies or there is a decrease in the number of
directors eliminating his or her position, and a director shall cease to serve
as such and his or her position shall be deemed vacant upon his or her death,
resignation, removal of disqualification.
Directors need not be residents of the State of North Carolina or
shareholders of the Corporation.
Section 3.3 ELECTION OF DIRECTORS. Except as provided in Section 3.6,
directors other than the initial directors shall be elected at the annual
meeting of shareholders.
Section 3.4 VOTING FOR DIRECTORS. Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Except as provided in the
Articles of Incorporation or required by applicable law, shareholders have no
right to cumulate their votes for directors.
Section 3.5 REMOVAL. Except as otherwise provided in the Articles of
Incorporation or by applicable law, a director may be removed from office with
or without cause by a vote of shareholders of the voting group entitled to
elect such directors, provided a quorum exists and the number of votes cast in
favor of such removal exceeds the number of votes cast against such removal. A
director may not be removed by the shareholders at a meeting unless the notice
of the meeting states that a purpose of the meeting is removal of such
director. If any directors are so removed, new directors may be elected at the
same meeting.
Section 3.6 VACANCIES. A vacancy occurring in the Board of Directors,
including positions not filled by the shareholders or
-6-
<PAGE> 7
those resulting from an increase in the number of directors, may be filled by a
majority of the remaining directors, though less than a quorum, or by the sole
remaining director. The shareholders may elect a director at any time to fill
any vacancy not filled by the directors.
Section 3.7 COMPENSATION. The Board of Directors, in its discretion, may
compensate directors for their services as such and may provide for the payment
of all expenses incurred by the directors in attending regular and special
meetings of the Board or of any Committee or in the performance of their other
duties as directors. Nothing herein contained, however, shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 3.8 COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the number of directors then in office, may designate and appoint
from among its members one or more Committees, each consisting of two or more
directors, who shall serve as members of such Committee at the pleasure of the
Board of Directors. Each such Committee, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors in the management of the Corporation, except that no such Committee
shall have authority to: (a) authorize dividends or other distributions not
permitted by applicable law to be authorized by a Committee; (b) approve or
propose to shareholders action that applicable law requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or on any Committee;
(d) amend the Articles of Incorporation; (e) adopt, amend or repeal bylaws; (f)
approve a plan of merger not requiring shareholder approval; (g) authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; (h) authorize or approve reacquisition of
shares, except according to a formula or method prescribed by the Board of
Directors; (h) authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights, preferences and
limitations of a class or series of shares (except that the Board of Directors
may authorize a Committee or a senior executive officer to do so within limits
specifically prescribed by the Board of Directors); or (i) amend or repeal any
resolution of the Board of Directors that by its terms provides that it is not
so amendable or repealable. Nothing herein shall preclude the Board of
Directors from establishing and appointing any committee, whether of directors
or otherwise, not having or exercising the authority of the Board of Directors.
ARTICLE IV
MEETINGS OF DIRECTORS
Section 4.1 REGULAR MEETINGS. A regular annual meeting of the Board of
Directors shall be held immediately after, and at the
-7-
<PAGE> 8
same place as, the annual meeting or substitute annual meeting of shareholders.
In addition, the Board of Directors may provide, by resolution, the time and
place, either within or without the State of North Carolina, for the holding of
additional regular meetings.
Section 4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board (if there shall
be a person holding such office), the Chief Executive Officer or any two
directors. Such meetings may be held within or without the State of North
Carolina.
Section 4.3 NOTICE OF MEETINGS. Regular meetings of the Board of
Directors may be held without notice.
The person or persons calling a special meeting of the Board of Directors
shall, at least two days before the meeting, give notice thereof by any usual
means of communication. Such notice need not specify the purpose for which the
meeting is called.
A director's attendance at or participation in a meeting shall constitute
a waiver by such director of notice of such meeting, unless the director at the
beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to the transaction of business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
Section 4.4 QUORUM. A majority of the number of directors fixed or
prescribed by these Bylaws shall be required for, and shall constitute, a
quorum for the transaction of business at any meeting of the Board of Directors.
Section 4.5 MANNER OF ACTING. Except as otherwise provided in these Bylaws
or required by applicable law, the affirmative vote of a majority of the
directors present at a meeting of the Board of Directors shall be the act of
the Board of Directors, if a quorum is present when the vote is taken.
Section 4.6 ORGANIZATION. Each meeting of the Board of Directors shall be
presided over by the Chairman of the Board (if there shall be a person holding
such office), or, in the absence or at the request of the Chairman of the
Board, by the Chief Executive Officer, and in their absence or at their
request, by any person selected to preside by vote of a majority of the
directors present. The Secretary, or in the absence or at the request of the
Secretary, any person designated by the person presiding at the meeting, shall
act as secretary of the meeting.
Section 4.7 ACTION WITHOUT MEETING. Action required or permitted to be
taken by the Board of Directors or a Committee at a meeting may be taken
without a meeting if one or more written consents describing the action taken
are signed by each of the directors or members of the Committee, as the case
may be, whether before or after the action so taken, and filed with corporate
-8-
<PAGE> 9
records or the minutes of the proceedings of the Board or Committee. Action so
taken is effective when the last consent specifies a different effective date.
Such consent has the effect of a meeting vote and may be described as such in
any document.
Section 4.8 PARTICIPATION BY CONFERENCE TELEPHONE. Any one or more
directors or members of a Committee may participate in a meeting of the Board
of Directors or Committee by means of a conference telephone or similar
communications device that allows all persons participating in the meeting to
simultaneously hear each other during the meeting, and such participation in a
meeting shall be deemed presence in person at such meeting.
ARTICLE V
OFFICERS
Section 5.1 GENERAL. The officers of the Corporation shall consist of a
Chief Executive Officer (who shall be either the Chairman of the Board or the
President, as provided in these Bylaws), a President, a Secretary, a Treasurer,
and may also include a Chairman of the Board, a Chief Operating Officer, and
such Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers as may be appointed by the Board of Directors or otherwise provided in
these Bylaws. Any two or more offices may be simultaneously held by the same
person, but no person may act in more than one capacity where action of two or
more officers is required. The title of any officer may include any additional
designation descriptive of such officer's duties as the Board of Directors may
prescribe.
Section 5.2 APPOINTMENT AND TERM. The officers of the Corporation shall
be appointed from time to time by the Board of Directors; provided, that the
Board of Directors may authorize a duly appointed officer to appoint one or
more other officers or assistant officers, other than appointment of the Chief
Executive Officer, the Chairman of the Board, the President or the Chief
Operating Officer. Each officer shall serve as such at the pleasure of the
Board of Directors.
Section 5.3 REMOVAL. Any officer may be removed by the Board of Directors
at any time with or without cause; but such removal shall not itself affect the
contract rights, if any, of the person so removed.
Section 5.4 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by, or in the manner prescribed by, the Board of
Directors.
Section 5.5 CHIEF EXECUTIVE OFFICER. If there is a Chairman of the Board
and the Board of Directors designates the Chairman of the Board as the Chief
Executive Officer, then the Chairman of the
-9-
<PAGE> 10
Board shall be the Chief Executive Officer of the Corporation. Otherwise, the
President shall be the Chief Executive Officer of the Corporation. Subject to
the direction and control of the Board of Directors, the Chief Executive
Officer shall supervise and control the management of the Corporation and shall
have such duties and authority as are normally incident to the position of
chief executive officer of a corporation and such other duties and authority as
may be prescribed from time to time by the Board of Directors or as are
provided for elsewhere in these Bylaws. The title of the Chairman of the Board
or President, as the case may be, serving as the Chief Executive Officer may,
but need not, also refer to his or her position as Chief Executive Officer.
Section 5.6 CHAIRMAN OF THE BOARD. The Board of Directors may, but need
not, appoint from among its members an officer designated as the Chairman of
the Board. If there is appointed a Chairman of the Board and such Chairman of
the Board is also designated by the Board of Directors to be the Chief
Executive Officer, then the Chairman of the Board shall have all of the duties
and authority of the Chief Executive Officer and shall also, when present,
preside over meetings of the Board of Directors. If there is a Chairman of the
Board but such Chairman of the Board is not also designated as the Chief
Executive Officer, then the Chairman of the Board shall, when present, preside
over meetings of the Board of Directors and shall have such other duties and
authority as may be prescribed from time to time by the Board of Directors or
as are provided for elsewhere in these Bylaws.
Section 5.7 CHIEF OPERATING OFFICER. If there is appointed a Chairman of
the Board who is also the Chief Executive Officer, then the President shall be
the Chief Operating Officer. If the President is the Chief Executive Officer,
then the President shall also serve as the Chief Operating Officer unless the
Board of Directors shall designate some other officer of the Corporation as the
Chief Operating Officer. Subject to the direction and control of the Chief
Executive Officer and the Board of Directors, the Chief Operating Officer shall
supervise and control the operations of the Corporation, shall have such duties
and authority as are normally incident to the position of chief operating
officer of a corporation and such other duties as may be prescribed from time
to time by the Chief Executive Officer of the Board of Directors, and, in the
absence of disability of the Chief Executive Officer, shall have the authority
to perform the duties of the Chief Executive Officer. The title of the
President or other officer serving as the Chief Operating Officer may, but need
not, also refer to his or her position as Chief Operating Officer.
Section 5.8 PRESIDENT. Unless there is appointed a Chairman of the Board
who is also designated the Chief Executive Officer, the President shall be the
Chief Executive Officer of the Corporation and shall have all of the duties and
authority of that office. If the President is not the Chief Executive Officer,
then
-10-
<PAGE> 11
the President shall be the Chief Operating Officer and shall have all of the
duties and authority of that office. If the President shall be the Chief
Executive Officer and no other officer shall have been designated by the Board
of Directors as the Chief Operating Officer, then the President shall also have
all of the duties and authority of the Chief Operating Officer. The President
shall also have such other duties and authority as may be prescribed from time
to time by the Board of Directors.
Section 5.9 VICE PRESIDENT. The Vice President, and if there be more
than one, the Executive Vice President or other Vice President designated by
the Board of Directors, shall, in the absence or disability of the President,
have the authority and perform the duties of said office (including the duties
and authority of the President as either Chief Executive Officer or Chief
Operating Officer or both, if the President serves as such). In addition, each
Vice President shall perform such other duties and have such other powers as
are normally incident to the office of the Vice President or as shall be
prescribed by the Chief Executive Officer, the Chief Operating Officer or the
Board of Directors.
Section 5.10 SECRETARY. The Secretary shall have the responsibility and
authority to maintain and authenticate the records of the Corporation; shall
keep, or cause to be kept, accurate records of the acts and proceedings of all
meetings of shareholders, directors and Committees; shall give, or cause to be
given, all notices required by law and by these Bylaws; shall have general
charge of the corporate books and records and of the corporate seal, and shall
affix the corporate seal to any lawfully executed instrument requiring it;
shall have general charge of the stock transfer books of the Corporation and
shall keep, or cause to be kept, all records of shareholders as are required by
applicable law or these Bylaws; shall sign such instruments as may require the
signature of the Secretary; and, in general, shall perform all duties incident
to the office of the Secretary and such other duties as may be assigned to him
or her from time to time by the Chief Executive Officer, the Chief Operating
Officer, or the Board of Directors.
Section 5.11 TREASURER. The Treasurer shall have custody of all funds
and securities belonging to the Corporation and shall receive, deposit or
disburse the same under the direction of the Board of Directors; shall keep, or
cause to be kept, full and accurate accounts of the finances of the Corporation
in books especially provided for that purpose, and shall generally have charge
over the Corporation's accounting and financial records; shall cause a true
statement of its assets and liabilities as of the close of each fiscal year,
and of the results of its operations and of cash flows for such fiscal year,
all in reasonable detail, including particulars as to convertible securities
then outstanding, to be made as soon as practicable after the end of
-11-
<PAGE> 12
such fiscal year. The Treasurer shall also prepare and file, or cause to be
prepared and filed, all reports and returns required by Federal, State or local
law and shall generally perform all other duties incident to the Office of the
Treasurer and such other duties as may be assigned to him or her from time to
time by the Chief Executive Officer, the Chief Operating Officer or the Board of
Directors.
Section 5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and Assistant Treasurers, if any, shall, in the absence or
disability of the Secretary or the Treasurer, respectively, have all the powers
and perform all of the duties of those offices, and they shall in general
perform such other duties as shall be assigned to them by the Secretary or the
Treasurer, respectively, or by the Chief Executive Officer, the Chief Operating
Officer or the Board of Directors.
ARTICLE VI
CONTRACTS, LOANS AND DEPOSITS
Section 6.1 CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any document or instrument on behalf of the Corporation, and such authority may
be general or confined to specific instances. Any resolution of the Board of
Directors authorizing the execution of documents by the proper officers of the
Corporation or by the officers generally and not specifying particular officers
shall be deemed to authorize such execution by the Chief Executive Officer, the
Chief Operating Officer, the Chairman of the Board, the President, or any Vice
President, or by any other officer if such execution is within the scope of the
duties and of such other office. The Board of Directors may by resolution
authorize such execution by means of one or more facsimile signatures.
Section 6.2 LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 6.3 CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation, and in such manner, as
shall from time to time be determined by resolution of the Board of Directors.
Section 6.4 DEPOSITS. All funds of the Corporation not otherwise employed
or invested shall be deposited from time to time to the credit of the
Corporation in such depositories as the Board of Directors direct.
-12-
<PAGE> 13
ARTICLE VII
SHARE CERTIFICATES
Section 7.1 CERTIFICATES FOR SHARES. Unless the Board of Directors
authorizes the issue of some or all of the shares of any or all classes or
series without certificates, certificates representing shares of the
Corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him. These
certificates shall be signed by the Chief Executive Officer, the Chief
Operating Officer, the Chairman of the Board, the Assistant Secretary, the
Treasurer or an Assistant Treasurer, either manually or in facsimile (provided
that certificates bearing facsimile signatures of both officers shall be
manually countersigned by a registrar, transfer agent or other authenticating
agent). They shall be consecutively numbered or otherwise identified; and the
name and address of the persons to whom they are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation.
Section 7.2 TRANSFER OF SHARES. Transfer of shares represented by
certificates shall be made on the stock transfer books of the Corporation only
upon the surrender of the certificates for the shares sought to be transferred
by the record holder thereof or by his duly authorized agent, transferee or
legal representative, or as otherwise provided by applicable law. All
certificates surrendered for transfer shall be canceled before new certificates
for the transferred shares shall be issued.
Section 7.3 LOST CERTIFICATES. The Board of Directors may authorize the
issuance of a new share certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken, upon receipt of an affidavit of such
fact from the person claiming the loss or destruction. When authorizing such
issuance of a new certificate, the Board may require the claimant to give the
Corporation a bond in such sum and with such sureties as it may direct to
indemnify the Corporation against loss from any claim with respect to the
certificate claimed to have been lost, destroyed or wrongfully taken; or the
Board may, by resolution reciting that the circumstances justify such action,
authorize the issuance of the new certificate without requiring such a bond
with respect to a certificate claimed to have been lost or destroyed. Any such
authorization by the Board of Directors may be general or confined to specific
instances. Nothing herein shall require the Board of Directors to authorize the
issuance of any such replacement certificate under any circumstances in which
the Corporation is not required to issue such certificate, this provision being
permissible and not mandatory.
-13-
<PAGE> 14
ARTICLE VIII
RECORDS AND REPORTS
Section 8.1 GENERAL. The Corporation shall keep all records and submit and
file all reports and filings as are required by applicable law. Unless the
Board of Directors otherwise directs, the Treasurer shall be responsible for
keeping, or causing to be kept, all financial and accounting records of the
Corporation and for submitting or filing, or causing to be submitted or filed,
all reports and filings of a financial or accounting nature, and the Secretary
shall be responsible for keeping, or causing to be submitted or filed, all
other reports and filings.
The Corporation shall keep as permanent records minutes of all meetings of
its incorporators, shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by Committees of the Board of Directors. The Corporation
shall maintain appropriate accounting records. The Corporation or its agent
shall maintain a record of its shareholders, in a form that permits preparation
of a list of the names and addresses of all shareholders, in alphabetical order
by class of shares showing the number and class of shares held by each. The
Corporation shall maintain its records in written form or in another form
capable of conversion into written form within a reasonable time.
Section 8.2 RECORDS AT PRINCIPAL OFFICE. The Corporation shall keep a copy
of the following records at the Corporation's principal office:
(a) Its Articles or restated Articles of Incorporation and all amendments
to them currently in effect;
(b) Its Bylaws or restated Bylaws and all amendments to them currently
in effect;
(c) Resolutions adopted by the Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences, and
limitations, if shares issued pursuant to those resolutions are outstanding;
(d) The minutes of all shareholders' meetings, and records of all action
taken by shareholders without a meeting, for the past three years;
(e) All written communications to shareholders generally within the past
three years and the financial statements required by law to be made available
to the shareholders for the past three years;
(f) A list of the names and business addresses of its current
-14-
<PAGE> 15
directors and officers; and
(g) Its most recent annual report delivered to the North Carolina
Secretary of State pursuant to the North Carolina Business Corporation Act.
Section 8.3 FINANCIAL STATEMENTS. The Corporation shall make available to
its shareholders annual financial statements, which may be consolidated or
combined statements of the Corporation and one or more of its subsidiaries, as
appropriate, that include a balance sheet as of the end of the fiscal year, an
income statement for that year, and a statement of cash flows for the year
unless that information appears elsewhere in the financial statements. If
financial statements are prepared for the Corporation on the basis of generally
accepted accounting principles, the annual financial statements shall also be
prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, such accountant's report shall accompany them. If not, the
statements shall be accompanied by a statement of the President or the
Treasurer or other person responsible for the Corporation's accounting records:
(a) Stating his or her reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not prepared on
a basis of accounting consistent with the statements prepared for the preceding
year.
The Corporation shall mail the annual financial statements, or a written
notice of their availability, to each shareholder within 120 days after the
close of each fiscal year; provided that the failure of the Corporation to
comply with this requirement shall not constitute the basis for any claim of
damages by any shareholder unless such failure was in bad faith. Thereafter, on
written request from a shareholder who was not mailed the statements, the
Corporation shall mail such shareholder the latest financial statements.
Section 8.4 OTHER REPORTS TO SHAREHOLDERS. If the Corporation is not a
public corporation and it indemnifies or advances expenses to a director in
connection with a proceeding by or in the right of the Corporation, the
Corporation shall report the indemnification or advance in writing to the
shareholders with or before notice of the next shareholders' meeting.
If the Corporation is not a public corporation and it issues or authorizes
the issuance of shares for promissory notes or for promises to render services
in the future, other than in a
-15-
<PAGE> 16
transaction or pursuant to a plan previously approved by a majority of the
shares entitled to vote thereon, the Corporation shall report in writing to the
shareholders the number of shares authorized or issued, and the consideration
received by the Corporation, with or before the notice of the next
shareholders' meeting.
Section 8.5 ANNUAL REPORT. The Corporation shall prepare and deliver to
the North Carolina Secretary of State for filing each year the annual report
required by the North Carolina Business Corporation Act. Such annual report
shall be filed each year within 60 days after the end of the month of _________
(month in which Corporation was incorporated), or at such other time as is then
required by applicable law. The Corporation may, and when required by law
shall, file all necessary or appropriate corrections and amendments to such
annual report, and shall promptly file an amendment to its annual report to
reflect any change in the location of the principal office of the Corporation.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and the Articles
of Incorporation of the Corporation. The Board of Directors may fix in advance
a dividend. If such record date is not fixed by the Board of Directors, the
date the Board of Directors authorizes such dividend shall be the record date.
Section 9.2 SEAL. The corporate seal of the Corporation shall consist of
two concentric circles between or within which are name of the Corporation, the
state of incorporation, the year of incorporation and the word "SEAL." The seal
may be used by causing it or a facsimile thereof to be impressed, affixed,
stamped or reproduced by any means. Any officer of the Corporation authorized
to execute or attest a document on behalf of the Corporation may affix or
reproduce on such document, as and for the corporate seal of the Corporation, a
seal in any other form sufficient to evidence that it is intended by such
officer to represent the corporate seal of the Corporation, in which case such
seal shall be as effective as the corporate seal in the form herein prescribed.
Section 9.3 NOTICE AND WAIVER OF NOTICE. Except as otherwise provided in
the Articles of Incorporation or these Bylaws, any notice permitted or required
to be given pursuant to these Bylaws may be given in any manner permitted by
applicable law and with the effect therein provided. Without limiting the
generality of the foregoing, written notice by the Corporation to a shareholder
is effective when deposited in the United States mail with postage
-16-
<PAGE> 17
thereon prepaid and correctly addressed to the shareholder's address shown in
the Corporation's current record of shareholders.
Whenever any notice is required to be given to any shareholder or director
under the provisions of the North Carolina Business Corporation Act under the
provisions of the Articles of Incorporation or Bylaws of the corporation, a
waiver thereof in writing signed by the person or persons entitled to such
notice and included in the minutes or filed with the corporate records, whether
done before or after the time stated in the notice, shall be equivalent to the
giving of such notice.
Section 9.4 FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 9.5 INDEMNIFICATION. Any person who at any time serves or has
served as a director of the Corporation shall have a right to be indemnified by
the Corporation to the fullest extent permitted by law against (a) expenses,
including reasonable attorneys' fees, actually and necessarily incurred by him
or her in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, whether
formal or informal, and whether or not brought by or on behalf of the
Corporation, arising out of his or her status as such director, or his or her
status as an officer, employee or agent of the Corporation, or his or her
service, at the request of the Corporation, as a director, officer, partner,
trustee, employee or agent of any other corporation, partnership, joint
venture, trust or other enterprise or as a trustee or administrator under an
employee benefit plan, or his or her activities in any of the foregoing
capacities, and (b) any liability incurred by him, including without
limitation, satisfaction of any judgment, money decree, fine (including any
excise tax assessed with respect to an employee benefit plan), penalty or
settlement, for which he or she may have become liable in connection with any
such action, suit or proceeding.
The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this Bylaw, including without limitation, to the
extent necessary, (a) making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due him
or her and (b) giving notice to and obtaining approval by the shareholders of
the Corporation.
Expenses incurred by a director in defending an action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director to pay such amount unless it shall ultimately be determined that
he or she is entitled to be indemnified by the Corporation against such
-17-
<PAGE> 18
expenses.
Any person who at any time after the adoption of this Bylaw serves or has
served as a director of the Corporation shall be deemed to be doing or to have
done so in reliance upon, and as consideration for, the right of indemnification
provided herein, and any modification or repeal of these provisions for
indemnification shall be prospective only and shall not affect any rights or
obligations existing at the time of such modification or repeal. Such right
shall inure to the benefit of the legal representatives of any such person,
shall not be exclusive of any other rights to which such person may be entitled
apart from the provisions of this Bylaw, and shall not be limited by the
provisions for indemnification in Section 55-8-51 through 55-8-56 or the North
Carolina Business Corporation Act or any successor statutory provisions. Any
person who is entitled to indemnification by the Corporation hereunder shall
also be entitled to reimbursement of reasonable costs, expenses and attorneys'
fees incurred in obtaining such indemnification.
Section 9.6 CONSTRUCTION. All references in these Bylaws to "shareholder"
or "shareholders" refer to the person or persons in whose names shares are
registered in the records of the Corporation, except to the extent that a
beneficial owner of shares that are registered in the name of a nominee is
recognized by the Corporation as a "shareholder" in accordance with a procedure
therefor that the Corporation may, but need not, establish pursuant to
applicable law. All personal pronouns used in these Bylaws shall include
persons of any gender. All terms used herein and not specifically defined
herein but defined in the North Carolina Business Corporation Act shall have
the same meanings herein as given under the North Carolina Business act, unless
the context otherwise requires.
Section 9.7 AMENDMENTS. Except as otherwise provided herein or in the
Articles of Incorporation or by applicable law, these Bylaws may be amended or
repealed and new bylaws may be adopted by action of the Board of Directors or
the shareholders.
Adopted at Organization
Meeting of Directors
Held January 7, 1997.
----------------------------------------
Secretary
-18-
<PAGE> 1
Exhibit 4.1
NO PAR VALUE
NUMBER SHARES
1984
AMERICAN MULTIPLEXER CORP.
COMMON STOCK
INCORPORATED UNDER THE LAWS
OF THE STATE OF NORTH CAROLINA
THIS CERTIFIES THAT CUSIP 027648 10 4
SEE REVERSE FOR CERTAIN DEFINITIONS
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
AMERICAN MULTIPLEXER CORP., U.S.A. (hereinafter called the "Corporation"),
transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate and the shares represented hereby are
issued and shall be held subject to all of the provisions of the Certificate of
Incorporation of the Corporation to all of which the holder by acceptance
hereof assents.
This Certificate is not valid unless countersigned and
registered by the Transfer Agent.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Date
[Signature Illegible] /s/ DENNIS E.BURT
President -------------------------
Secretary
AMERICAN MULTIPLEXER CORP.
CORPORATE SEAL
Countersigned: [Signature Illegible]
Florida Atlantic Stock Transfer, Inc.
5701 North Pine Island Road,
Tamakac, Florida 33321 Transfer agent
<PAGE> 2
The following abbreviation, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________Custodian__________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviation may also be used though not in above list.
For value received, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Shares of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, ________________________
________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
The shares represented by this certificate have not been registered under the
Securities Act of 1933 and are "restricted securities" as that term is defined
in Rule 144 under the Act. The shares may not be sold or offered for sale
except pursuant to an effective registration statement under the Securities Act
of 1933 or an opinion of counsel for the corporation that registration is not
required under such Act.
<PAGE> 1
EXHIBIT 10.1
575 N. Pastoria Ave., Sunnyvale
Maude 2
LEASE AGREEMENT
---------------
THIS LEASE, made this 2nd day of NOVEMBER, 1998, between SCP-I, A
CALIFORNIA GENERAL PARTNERSHIP, hereinafter called LANDLORD, and AMERICAN
MULTIPLEXER CORPORATION, A NORTH CAROLINA CORPORATION, hereinafter called
TENANT.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit
"A", attached hereto and incorporated herein by this reference thereto more
particularly described as follows:
ALL OF THAT CERTAIN 12,354+/- SQUARE FOOT BUILDING LOCATED AT 575
NORTH PASTORIA AVENUE, SUNNYVALE, CALIFORNIA, LEASED ON AN "AS-IS" BASIS.
SAID PREMISES LEASED HEREUNDER INCLUDE THE EXTERIOR AND THOSE PARKING
SPACES OUTLINED IN RED ON EXHIBIT "A" AND THE INTERIOR IMPROVEMENTS AS PER
EXHIBIT "B" ATTACHED HERETO AND BY REFERENCE MADE A PART HEREOF.
The word "Premises" as used throughout this Lease is hereby defined to
include the nonexclusive use of sidewalks and driveways. The leased area of the
Premises shall be measured from outside of exterior walls to outside of
exterior walls, and shall include any atriums, covered entrances or egresses
and covered loading areas. Said letting and hiring is upon and subject to the
terms, covenants and conditions and restrictions hereinafter set forth and
Tenant covenants as a material part of the consideration for this Lease to
perform and observe each and all of said terms, covenants and conditions. This
Lease is made upon the conditions of such performance or observance.
1. USE: Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances and only for the purpose
of: SOFTWARE DEVELOPMENT, OPERATING ADMINISTRATIVE OFFICES, MARKETING, RESEARCH
AND DEVELOPMENT, SALES AND MANUFACTURING AND FOR THE DIRECTLY RELATED LEGAL
USES THEREOF AND FOR NO OTHER PURPOSE. Tenant shall not do or permit to be done
in or about the Premises nor bring or keep or permit to be brought or kept in or
about the Premises anything which is prohibited by or will in any way increase
the existing rate of (or otherwise affect) fire or any insurance covering the
Premises or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
walls, or ceiling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers
placed inside exterior enclosures designated by Landlord for that purpose or
inside of the building proper where designated by Landlord. No materials,
supplies, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door partition or wall that may appear unsightly from
outside the Premises. No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability arising out of failure to comply with any applicable law.
Tenant shall comply with any term, covenant, condition, or restriction
("TCC&R's") affecting the Premises. The provisions of this paragraph are for
the benefit of Landlord only and shall not be construed to be for the benefit
of any tenant or occupant of the Premises.
2. TERM:
----
A. The term of this Lease shall be for a period of *SIXTY AND ONE-HALF
MONTHS (unless sooner terminated as hereinafter provided) and, subject to
Paragraphs 2B and 3, shall commence on the 1st day of NOVEMBER, 1998 and end on
the 30th day of NOVEMBER, 2003.
*PLEASE SEE PARAGRAPH 39 FOR OPTION TO EXTEND.
B. Possession of the Premises shall be deemed tendered and the term of
the Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed;
or,
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel.
3. POSSESSION: If Landlord, for any reason whatsoever, cannot deliver possession
of said Premises to Tenant at the commencement of said term, as herein
specified, the Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease, and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 2B, above. The above is, however, subject
to the provision that the period of delay and delivery of the Premises shall not
exceed THIRTY (30) DAYS from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond
-1-
<PAGE> 2
Landlord's control shall be excluded in calculating such period) in which
instance Tenant, at its option, may, by written notice to Landlord, terminate
this Lease.
4. RENT:
A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord
may designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of **ONE
MILLION SIX HUNDRED TWENTY-THREE THOUSAND SIX HUNDRED TWENTY-FIVE AND 03/100
DOLLARS ($1,623,625.03) in lawful money of the United States of America,
payable as follows:
UPON EXECUTION OF THIS LEASE AGREEMENT, ONE-HALF OF THE SECURITY DEPOSIT OR
AN AMOUNT EQUAL TO TWENTY-SIX THOUSAND FIVE HUNDRED AND 00/100 DOLLARS
($26,500.00) SHALL BE DUE IN ADDITION TO THE MONTHLY RENT FOR NOVEMBER,
1998, IN THE AMOUNT OF TWENTY-FOUR THOUSAND SEVEN HUNDRED EIGHT AND 00/100
DOLLARS ($24,708.00) FOR A TOTAL DUE OF FIFTY-ONE THOUSAND TWO HUNDRED
EIGHT AND 00/100 DOLLARS ($51,208.00). PLEASE SEE PARAGRAPH 4(F).
ON DECEMBER 1, 1998, THE SUM OF TWELVE THOUSAND THREE HUNDRED FIFTY-FOUR
AND 00/100 AND 00/100 DOLLARS ($12,354.00) SHALL BE DUE.
ON JANUARY 1, 1999, THE SUM OF TWENTY-FOUR THOUSAND SEVEN HUNDRED EIGHT AND
00/100 DOLLARS ($24,708.00) SHALL BE DUE.
ON FEBRUARY 1, 1999, THE SECOND HALF OF THE SECURITY DEPOSIT, OR TWENTY-SIX
THOUSAND FIVE HUNDRED AND 00.100 ($26,500.00) SHALL BE DUE IN ADDITION TO
THE MONTHLY RENT FOR FEBRUARY, 1999, IN THE AMOUNT OF TWENTY-FOUR THOUSAND
SEVEN HUNDRED EIGHT AND 001/00 DOLLARS ($24,708.00) FOR A TOTAL DUE OF
FIFTY-ONE THOUSAND TWO HUNDRED EIGHT AND 00/100 DOLLARS ($51,208.00).
ON MARCH 1, 1999, THE SUM OF TWENTY-FOUR THOUSAND SEVEN HUNDRED EIGHT AND
00/100 ($24,708.00) SHALL BE DUE AND A LIKE SUM DUE ON OR BEFORE THE FIRST
DAY OF EACH AND EVERY MONTH THEREAFTER THROUGH AND INCLUDING OCTOBER, 1999.
ON NOVEMBER 1, 1999, THE SUM OF TWENTY-FIVE THOUSAND SIX HUNDRED NINETY-SIX
AND 32/100 ($25,696.32) SHALL BE DUE AND A LIKE SUM DUE ON OR BEFORE THE
FIRST DAY OF EACH AND EVERY MONTH THEREAFTER THROUGH AND INCLUDING OCTOBER,
2000.
ON NOVEMBER 1, 2000, THE SUM OF TWENTY-SIX THOUSAND SEVEN HUNDRED
TWENTY-FOUR AND 17/100 DOLLARS ($26,724.17) SHALL BE DUE AND A LIKE SUM DUE
ON OR BEFORE THE FIRST DAY OF EACH AND EVERY MONTH THEREAFTER THROUGH AND
INCLUDING OCTOBER, 2001.
ON NOVEMBER 1, 2001, THE SUM OF TWENTY-SEVEN THOUSAND SEVEN HUNDRED
NINETY-THREE AND 14/100 DOLLARS ($27,793.14) SHALL BE DUE AND A LIKE SUM
DUE ON OR BEFORE THE FIRST DAY OF EACH AND EVERY MONTH THEREAFTER THROUGH
AND INCLUDING OCTOBER, 2002.
ON NOVEMBER 1, 2002, THE SUM OF TWENTY-EIGHT THOUSAND NINE HUNDRED FOUR AND
87/100 ($28,904.87) SHALL BE DUE AND A LIKE SUM DUE ON OR BEFORE THE FIRST
DAY OF EACH AND EVERY MONTH THEREAFTER THROUGH AND INCLUDING OCTOBER, 2003.
ON NOVEMBER 1, 2003, THE SUM OF THIRTY THOUSAND SIXTY-ONE AND 06/100
DOLLARS ($30,061.06) SHALL BE DUE.
**PLEASE SEE PARAGRAPH 39 FOR OPTION TO EXTEND.
B. Time for Payment. Full monthly rent is due in advance on the first day
of each calendar month. In the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from
such date of commencement to the first day of the next succeeding calendar
month that proportion of the monthly rent hereunder which the number of days
between such date of commencement and the first day of the next succeeding
calendar month bears to THIRTY (30). In the event that the term of this Lease
for any reason ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof Tenant shall pay
to Landlord as rent for the period from said first day of said last calendar
month to and including the last day of the term hereof that proportion of the
monthly rent hereunder which the number of days between said first day of said
last calendar month and the last day of the term hereof bears to THIRTY (30).
C. Late Charge. Notwithstanding any other provision of this Lease, if
Tenant is in default in the payment of rental as set forth in this Paragraph 4
when due, or any part thereof, Tenant agrees to pay Landlord, in addition to
the delinquent rental due, a late charge for each rental payment in default
TEN (10) DAYS. Said late charge shall equal TEN PERCENT (10%) of each rental
payment so in default.
D. Additional Rent: Beginning with the commencement date of the term of
this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:
a) All Taxes relating to the Premises as set forth in Paragraph 9, and
b) All insurance premiums relating to the Premises, as set forth in
Paragraph 12, and
c) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenant's failure to pay such amounts, and all damages,
reasonable costs and expenses which Landlord may incur by reason of default of
Tenant or failure on Tenant's part to comply with the terms of this Lease. In
the event of nonpayment by Tenant of Additional Rent, Landlord shall have all
the rights and remedies with respect thereto as Landlord has for nonpayment of
rent.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent (1) within FIVE (5) DAYS after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option of
Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorata
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items,
-2-
<PAGE> 3
which estimated amount shall be reconciled at the end of each calendar year as
compared to Landlord's actual expenditure for said Additional Rent Items, with
Tenant paying to Landlord, upon demand, any amount of actual expenses expended
by Landlord in excess of said estimate amount, or Landlord refunding to Tenant
(providing Tenant is not in default in the performance of any of the terms,
covenants and conditions of this Lease) any amount of estimated payments made
by Tenant in excess of Landlord's actual expenditures for said Additional Rent
Items.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this Lease,
and if the term hereof shall expire or shall otherwise terminate on a day other
than the last day of a calendar year, the actual Additional Rent incurred for
the calendar year in which the term hereof expires or otherwise terminates
shall be determined and settled on the basis of the statement of Additional
Rent for such calendar year and shall be prorated in the proportion which the
number of days in such calendar year preceding such expiration or termination
bears to 365.
E. PLACE OF PAYMENT OF RENT AND ADDITIONAL RENT. A Basic Rent hereunder
and all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at:
SCP-I, 2100 BRYANT STREET, PALO ALTO, CA 94301-3906
TELEPHONE: (650) 329-9182 FACSIMILE: (650) 329-8410
or such other person or to such other place as Landlord may from time to time
designate in writing.
F. SECURITY DEPOSIT. CONCURRENTLY WITH TENANT'S EXECUTION OF THIS LEASE,
TENANT SHALL DEPOSIT WITH LANDLORD THE SUM OF TWENTY-SIX THOUSAND FIVE HUNDRED
AND 00/100 DOLLARS ($26,500.00) IN ADDITION TO THE FIRST MONTH'S RENT AS STATED
IN PARAGRAPH 4(a), ABOVE. ON FEBRUARY 1, 1999, TENANT SHALL DEPOSIT
WITH LANDLORD THE SUM OF TWENTY-SIX THOUSAND FIVE HUNDRED AND 00/100 DOLLARS
($26,500.00) IN ADDITION TO THE FEBRUARY 1, 2000 RENT AS STATED IN PARAGRAPH
4(a), ABOVE FOR A TOTAL SECURITY DEPOSIT OF FIFTY-THREE THOUSAND AND 00/100
DOLLARS ($53,000.00). Said sum shall be held by Landlord as a Security Deposit
for the faithful performance by Tenant of all the terms, covenants and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, the provisions relating to the payment of rent
and any of the monetary sums due herewith, Landlord may (but shall not be
required to) use, apply or retain all or any part of this Security Deposit for
the payment of any other amount which Landlord may spend by reason of Tenant's
default or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of said Deposit is so
used or applied, Tenant shall, within TEN (10) DAYS after written demand
therefor, deposit cash with Landlord in the amount sufficient to restore the
Security Deposit to it's original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep this
Security Deposit from its general funds, and Tenant shall not be entitled to
interest on such Deposit. If Tenant fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of such Deposit or the accounting therefor.
5. ACCEPTANCE AND SURRENDER OF THE PREMISES: By entry hereunder, Tenant
accepts the Premises as being in good and sanitary order, condition and repair
and accepts the building and improvements included in the Premises in their
present condition and without representation or warranty by Landlord as to the
condition of such building or as to the use or occupancy which may be made
thereof. Any exceptions to the foregoing must be by written agreement executed
by Landlord and Tenant. Tenant agrees on the last day of the Lease term, or on
the sooner termination of this Lease, to surrender the Premises promptly and
peaceably to Landlord in good condition and repair (damage by Acts of God, fire,
normal wear and tear excepted), with all interior walls painted, or cleaned so
that they appear freshly painted, and repaired and replaced, if damaged; all
floors cleaned and waxed; all carpets cleaned and shampooed; all broken, marred
or nonconforming ceiling tiles replaced; all windows washed; the air
conditioning and heating systems serviced by a reputable and licensed service
firm and in good operating condition and repair; the plumbing and electrical
systems and lighting in good order and repair, including replacement of any
burned out or broken light bulbs or ballasts; the lawn and shrubs in good
condition including the replacement of any dead or damaged plantings; the
sidewalk, driveways and parking areas in good order, condition and repair;
together with all alterations, additions and improvements which may have been
made in, to or on the Premises (except moveable trade fixtures installed at the
expense of Tenant) except that Tenant shall ascertain from Landlord within
THIRTY (30) DAYS before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such part
or parts thereof before the end of this Lease at Tenant's sole cost and expense.
Tenant, on or before the end of the term or sooner termination of this Lease,
shall remove all of the Tenant's personal property and trade fixtures from the
Premises, and all property not so removed on or before the end of the term or
sooner termination of this Lease shall be deemed abandoned by Tenant and title
to same shall thereupon pass to Landlord without compensation to Tenant.
Landlord may, upon termination of this Lease, remove all moveable furniture and
equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage
caused by such removal at Tenant's sole cost. If the Premises are not
surrendered at the end of the term or sooner termination of this Lease, Tenant
shall indemnify Landlord against loss or liability resulting from the delay by
Tenant in so surrendering the Premises including, without limitation, any claims
made by any succeeding tenant founded, on such delay. Nothing contained herein
shall be construed as an extension of the term hereof or as a consent of
Landlord to any holding over by Tenant. The voluntary or other surrender of this
Lease or the Premises by Tenant or a mutual cancellation of this Lease shall not
work as a merger and, at the option of Landlord, shall either terminate all or
any existing subleases or subtenancies or operate as an assignment to Landlord
of all or any such subleases or subtenancies.
6. ALTERATIONS AND ADDITIONS: Tenant shall not make, or suffer to be made,
any alteration or addition to the Premises, or any part thereof, without the
written consent of Landlord first had and obtained by Tenant (such consent not
to be unreasonably withheld), but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixtures, shall
at once become a part of the Premises and belong to Landlord. Landlord reserves
the right to approve all contractors and mechanics proposed by Tenant to make
such alterations and additions. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All heating, lighting,
electrical, air conditioning, partitioning, drapery, carpeting, and floor
installations made by Tenant, together with all property that has become an
integral part of the Premises, shall not be deemed trade fixtures. Tenant agrees
that it will not proceed to make such alterations or additions, without having
-3-
<PAGE> 4
obtained consent from Landlord to do so, and until FIVE (5) DAYS from the
receipt of such consent, in order that Landlord may post appropriate notices to
avoid any liability to contractors or material suppliers for payment for
Tenant's Improvements. Tenant will at all times permit such notices to be posted
and to remain posted until the completion of work. Tenant shall, if required by
Landlord, secure at Tenant's own cost and expense, a completion and lien
indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to Tenant, will be discharged by Tenant, by bond or otherwise, within TEN (10)
DAYS after the filing thereof, at the cost and expense of Tenant. Any exceptions
to the foregoing must be made in writing and executed by both Landlord and
Tenant.
7. TENANT MAINTENANCE: Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, or replacement, and in good and sanitary
condition. Tenant's maintenance and repair responsibilities herein referred to
include, but are not limited to, janitorization, all windows (interior and
exterior), window frames, plate glass and glazing (destroyed by accident or act
of third parties), truck doors, plumbing systems (such as water and drain lines,
sinks, toilets, faucets, drains showers and water fountains), electrical systems
(such as panels, conduits, outlets, lighting fixtures, lamps, bulbs, tubes and
ballasts), heating and air conditioning systems (such as compressors, fans, air
handlers, ducts, mixing boxes, thermostats, time clocks, boilers, heaters,
supply and return grills), structural elements and exterior surfaces of the
building, store fronts, roofs, downspouts, all interior improvements within the
premises including but not limited to wall coverings, window coverings, carpet,
floor coverings, partitioning, ceilings, doors (both interior and exterior),
including closing mechanisms, latches, locks, skylights (if any), automatic fire
extinguishing systems, and elevators and all other interior improvements of any
nature whatsoever, and all exterior improvements including but not limited to
landscaping, sidewalks, driveways, parking lots including striping and sealing,
sprinkler systems, lighting, ponds, fountains, waterways, and drains. Tenant
agrees to provide carpet shields under all rolling chairs or to otherwise be
responsible for wear and tear of the carpet caused by such rolling chairs if
such wear and tear exceeds that caused by normal foot traffic in surrounding
areas. Areas of excessive wear and tear shall be replaced at Tenant's sole
expense upon Lease termination. Tenant hereby waives all rights under, and
benefits of, Subsection 1 of Section 1932 and Section 1941 and 1942 of the
California Civil Code and under any similar law, statute or ordinance now or
hereafter in effect. In the event any of the above maintenance responsibilities
apply to any other tenant(s) of Landlord where there is common usage with other
tenant(s), such maintenance responsibilities and charges shall be allocated to
the leased Premises by square footage or other equitable basis as calculated and
determined by Landlord.
8. UTILITIES: Tenant shall pay promptly, as the same become due, all charges for
water, gas, electricity, telephone, telex and other electronic communication
service, sewer service, waste pick-up and any other utilities, materials or
services furnished directly to or used by Tenant on or about the Premises during
the term of this Lease, including, without limitation, any temporary or
permanent utility surcharge or other exactions whether or not hereinafter
imposed. In the event the above charges may apply to any other tenant(s) of
Landlord where there is common usage with other tenant(s), such charges shall be
allocated to the leased Premises by square footage or other equitable basis as
calculated and determined by Landlord.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
Tenant shall indemnify Landlord for any payment for any utilities, which
Landlord pays on Tenant's behalf.
9. TAXES:
A. As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay to Landlord, or if Landlord so directs, directly to the Tax
Collector, all Real Property Taxes relating to the Premises. In the event the
Premises leased hereunder consist of only a portion of the entire tax parcel,
Tenant shall pay to Landlord Tenant's proportionate share of such real estate
taxes allocated to the leased Premises by square footage or other reasonable
basis as is calculated and determined by Landlord. If the tax billing pertains
100% to the leased Premises, and Landlord chooses to have Tenant pay said real
estate taxes directly to the Tax Collector, then in such event it shall be the
responsibility of Tenant to obtain the tax and assessment bills and pay, prior
to delinquency, the applicable real property taxes and assessments pertaining to
the leased Premises, and failure to receive a bill for taxes and/or assessments
shall not provide a basis for cancellation of or non-responsibility for payment
of penalties for nonpayment or late payment by Tenant. The term "Real Property
Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership of the Premises)
now or hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct or indirect power to tax or levy assessments,
which are levied against, or with respect to the value, occupancy or use of, all
or any portion of the Premises (as now constructed or as may at any time
hereafter be constructed, altered, or otherwise changed) or Landlord's interest
therein; any improvements located within the Premises (regardless of ownership);
the fixtures, equipment and other property of Landlord, real or personal, that
are an integral part of and located in the Premises; or parking areas, public
utilities, or energy within the Premises; (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Premises; and (iii) all costs and fees (including reasonable attorneys'
fees) incurred by Landlord in reasonably contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If at any time
during the term of this Lease the taxation or assessment of the Premises
prevailing as of the commencement date of this Lease shall be altered so that in
lieu of or in addition to any Real Property Tax described above there shall be
levied, assessed or imposed (whether by reason of a change in the method of
taxation or assessment, creation of a new tax or charge, or any other cause) an
alternate or additional tax or charge (i) on the value, use or occupancy of the
Premises or Landlord's interest therein or (ii) on or measured by the gross
receipts, income or rentals from the Premises, on Landlord's business of leasing
the Premises, or computed in any manner with respect to the operation of the
Premises, then any such tax or charge, however designated, shall be included
within the meaning of the term "Real Property Taxes" for purposes of this Lease.
If any Real Property Tax is based upon property or rents unrelated to the
Premises, then only that part of such Real Property tax that is fairly allocable
to the Premises shall be included within the meaning of the term "Real Property
Taxes". Notwithstanding the foregoing, the term "Real Property Taxes" shall not
include estate, inheritance, gift or franchise taxes of Landlord or the federal
or state net income tax imposed on Landlord's income from all sources.
-4-
<PAGE> 5
B. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for and shall pay
TEN (10) DAYS before delinquency, taxes levied against any personal property or
trade fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall upon demand, as the case may be, repay to
Landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with Landlord's full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of such taxes so paid under protest, and any amount so recovered shall
belong to Tenant.
10. LIABILITY INSURANCE: Tenant, at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of comprehensive general liability
insurance for bodily injury and property damage occurring in, or about the
Premises, including parking and landscaped areas, in the amount of TWO MILLION
DOLLARS ($2,000,000.00) combined single limit. Such insurance shall be primary
and noncontributory as respects any insurance carried by Landlord. The policy
or policies effecting such insurance shall name Landlord as additional
insureds, and shall insure any liability of Landlord, contingent or otherwise,
as respects acts or omissions of Tenant, its agents, employees or invitees or
otherwise by any conduct or transactions of any of said persons in or about or
concerning the Premises, including any failure of Tenant to observe or perform
any of its obligations hereunder; shall be issued by an insurance company
admitted to transact business in the State of California; and shall provide
that the insurance effected thereby shall not be canceled, except upon THIRTY
(30) DAYS' prior written notice to Landlord. A copy of said policy should be
delivered to Landlord. If, during the term of this Lease, in the considered
opinion of Landlord's Lender, insurance advisor, or counsel, the amount of
insurance described in this Paragraph 10 is not adequate, Tenant agrees to
increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.
11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKERS' COMPENSATION INSURANCE:
Tenant shall maintain a policy or policies of fire and property damage
insurance in "all risk" form with a sprinkler leakage endorsement insuring the
personal property, inventory, trade fixtures, and leasehold improvements within
the leased Premises for the full replacement value thereof. The proceeds from
any of such policies shall be used for the repair or replacement of such items
so insured.
Tenant shall also maintain a policy or policies of workers' compensation
insurance and any other employee benefit insurance sufficient to comply with
all laws.
12. PROPERTY INSURANCE: Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord Tenant's proportionate share (allocated to the leased Premises
by square footage or other equitable basis as calculated and determined by
Landlord) of the cost of, policy or policies of insurance covering loss or
damage to the Premises (excluding routine maintenance and repairs and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake insurance,
if available, plus a policy of rental income insurance in the amount of ONE
HUNDRED PERCENT (100%) PERCENT of TWELVE (12) MONTHS' Basic Rent, plus sums
paid as Additional Rent. If such insurance cost is increased due to Tenant's
use of the Premises, Tenant agrees to pay Landlord the full cost of such
increase. Tenant shall have no interest in nor any right to the proceeds of any
insurance procured by Landlord for the Premises.
Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing party, from any liability for
loss or damage caused by fire or any of the extended coverage casualties
included in the releasing party's insurance policies, irrespective of the cause
of such fire or casualty; provided, however, that if the insurance policy of
either releasing party prohibits such waiver, then this waiver shall not take
effect until consent to such waiver is obtained. If such waiver is so
prohibited, the insured party affected shall promptly notify the other party
thereof.
13. INDEMNIFICATION: Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however, the negligence of Landlord, its agents,
servants, employees, invitees, or contractors of which negligence Landlord has
knowledge and reasonable time to correct. Except as to injury to persons or
damage to property the principal cause of which is the negligence of Landlord,
Tenant shall hold Landlord harmless from and defend Landlord against any and
all expenses, including reasonable attorneys' fees, in connection therewith,
arising out of any injury to or death of any person or damage to or destruction
of property occurring in, on or about the Premises, or any part thereof, from
any cause whatsoever.
14. COMPLIANCE: Tenant at its sole cost and expense, shall promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
office; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action against Tenant, whether by Landlord be a
party thereto or not, that Tenant has violated any such law, statute, ordinance
or governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
own cost and expense, comply with any and all requirements pertaining to said
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance covering
requirements pertaining to said Premises, of any insurance organization or
company, necessary for the maintenance of reasonable fire and public liability
insurance covering the Premises.
15. LIENS: Tenant shall keep the Premises free from any liens arising out of
work performed, materials furnished or obligation incurred by Tenant. In the
event that Tenant shall not, within TEN (10) DAYS following the imposition of
such lien, cause the same to be released of record, Landlord shall have, in
addition to all other remedies
-5-
<PAGE> 6
provided herein and by law, the right, but no obligation, to cause the same to
be released by such means as it shall deem proper, including payment of the
claim giving rise to such lien. All sums paid by Landlord for such purpose, and
all expenses incurred by it in connection therewith, shall be payable to
Landlord by Tenant on demand with interest at the prime rate of interest as
quoted by the Bank of America.
16. ASSIGNMENT AND SUBLETTING: Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest therein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
granting this consent to any assignment, transfer, or subletting, Landlord may
require that Tenant agrees to pay Landlord, as additional rent, all rents or
additional consideration received by Tenant from its assignees, transferees, or
subtenants in excess of the rent payable by Tenant to Landlord hereunder. Tenant
shall, by NINETY (90) DAYS' written notice, advise Landlord of its intent to
assign or transfer Tenant's interest in the Lease or sublet the Premises or any
portion thereof for any part of the term hereof. Within THIRTY (30) DAYS after
receipt of said written notice, Landlord may, in its sole discretion, elect to
terminate this Lease as to the portion of the Premises described in Tenant's
notice on the date specified in Tenant's notice by giving written notice of such
election to terminate. If no such notice to terminate is given to Tenant within
said THIRTY (30) DAY period, Tenant may proceed to locate an acceptable
sublessee, assignee, or other transferee for presentment to Landlord for
Landlord's approval, all in accordance with the terms, covenants, and conditions
of this Paragraph 16. If Tenant intents to sublet the entire Premises and
Landlord elects to terminate this Lease, this Lease shall be terminated on the
date specified in Tenant's notice. If, however, this Lease shall terminate
pursuant to the foregoing with respect to less than all the Premises, the rent,
as defined and reserved hereinabove shall be adjusted on a pro rata basis to the
number of square feet retained by Tenant, and this Lease as so amended shall
continue in full force and effect. In the event Tenant is allowed to assign,
transfer or sublet the whole or any part of the Premises, with the prior written
consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premises, without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer, hypothecation,
subletting, occupation or use by any other person shall not release Tenant from
any of Tenant's obligations hereunder and be deemed to be a transfer,
hypothecation, subletting, occupation or use without such consent shall be void
and shall constitute a breach of this Lease by Tenant and shall, at the option
of Landlord exercised by written notice to Tenant, terminate this Lease. The
leasehold estate under this Lease shall not, or shall any interest therein, be
assignable for any purpose by operation of law without the written consent of
Landlord. As a condition to its consent, Landlord may require Tenant to pay all
expenses in connection with the assignment, and Landlord may require Tenant's
assignee or transferee (or other assignees or transferees) to assume in writing
all of the obligations under this Lease and for Tenant to remain liable to
Landlord under this Lease.
17. SUBORDINATION AND MORTGAGES: In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Tenant hereby irrevocably appoints Landlord the attorney in fact of
Tenant to execute, deliver and record any such instrument or instruments for and
in the name and on behalf of Tenant. Notwithstanding any such subordination,
Tenant's possession under this Lease shall not be disturbed if Tenant is not in
default and so long as Tenant shall pay all rent and observe and perform all of
the provisions set forth in this Lease.
18. ENTRY BY LANDLORD: Landlord reserves, and shall at all reasonable times
have, the right to enter the Premises to inspect them; to perform any services
to be provided by Landlord hereunder; to make repairs or provide any services to
a contiguous tenant(s); to submit the Premises to prospective purchasers,
mortgagors or tenants; to post notices of non-responsibility; and to alter,
improve or repair the Premises or other parts of the building, all without
abatement of rent, and may erect scaffolding and other necessary structures in
or through the Premises where reasonably required by the character of the work
to be performed; provided, however, that the business of Tenant shall be
interfered with to the least extent that is reasonably practical. Any entry to
the Premises by Landlord for the purposes provided for herein shall not be
construed or deeded to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive, of Tenant from the Premises or
any portion thereof.
19. BANKRUPTCY AND DEFAULT: The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within THIRTY (30)
DAYS after an order for relief in a liquidation action or within THIRTY (30)
DAYS after the commencement of any action.
Within thirty (30) DAYS after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained in this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a default hereunder by
Tenant upon expiration of the appropriate grace period hereinafter provided.
-6-
<PAGE> 7
Tenant shall have a period of FIVE (5) DAYS from the date of written notice from
Landlord within which to cure any default in the payment of rental or adjustment
thereto. Tenant shall have a period of TEN (10) DAYS from the date of written
notice from Landlord within which to cure any other default under this Lease.
Upon an uncured default of this Lease by Tenant, Landlord shall have the
following rights and remedies in addition to any other rights or remedies
available to Landlord at law or in equity:
(a) The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the net worth at the time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of rental loss for the same period that
Tenant proves could be reasonably avoided, as computed pursuant to subsection
(b) of said section 1951.2. Any proof by Tenant under subparagraphs (2) and (3)
of Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
(b) The rights and remedies provided by California Civil Code Section
1951.4 which allows Landlord to continue the Lease in effect and to enforce all
of its rights and remedies under this Lease, including the right to recover rent
as it becomes due, for so long as Landlord does not terminate Tenant's right to
possession. Acts of maintenance or preservation, efforts to re-let the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d) The right and power, as attorney-in-fact for Tenant, to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, as attorney-in-fact for Tenant, may from
time to time sublet the Premises or any part thereof for such term or terms
(which may extend beyond the term of this Lease) and at such rent and such other
terms as Landlord in its reasonable sole discretion may deem advisable, with the
right to make alterations and repairs to the Premises. Upon each subletting, (i)
Tenant shall be immediately liable to pay Landlord, in addition to indebtedness
other than the rent due hereunder, the reasonable cost of such subletting,
including, but not limited to, reasonable attorneys' fees, and any real estate
commissions actually paid, and the cost of such reasonable alterations and
repairs incurred by Landlord and the amount, if any, by which the rent hereunder
for the period of such subletting (to the extent such period does not exceed the
term hereof) exceeds the amount to be paid as rent for the Premises for such
period or (ii) at the option of Landlord, rents received from such subletting
shall be applied in payment of future rent as the same becomes due hereunder. If
Tenant has been credited with any rent to be received by such subletting under
option (i) and such rent shall not be promptly paid to Landlord by the
subtenant(s), or if such rentals received from such subletting under option (ii)
during any month be less that to be paid during that month by Tenant hereunder,
Tenant shall pay any such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. For all purposes set forth in this subparagraph
(d), Landlord is hereby irrevocably appointed attorney-in-fact for Tenant, with
power of substitution. No taking possession of the Premises by Landlord, as
attorney-in-fact for Tenant, shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such subletting without termination, Landlord may at
any time hereafter elect to terminate this Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted by
Landlord as attorney-in-fact for Tenant pursuant to subparagraph (d), above.
20. ABANDONMENT: Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or surrender
the Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord.
21. DESTRUCTION: In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental damage
and destruction caused from vandalism and accidents for which Tenant is
responsible under Paragraph 7, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the
damage or destruction, or
(b) Terminate this Lease.
If Landlord does not give Tenant notice in writing within THIRTY (30) DAYS
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in the proportion that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises. If
Landlord does not complete the rebuilding or restoration within ONE HUNDRED
EIGHTY (180) DAYS following the date of destruction (such period of time to be
extended for delays caused by the fault or neglect of Tenant or because of Acts
of God, acts of public agencies, labor disputes, strikes, fires, freight
embargoes, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
FIFTEEN (15) DAYS' prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixture, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33-1/3% of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not. In the event Tenant causes the destruction of the Premises,
Tenant shall pay the deductible portion of Landlord's insurance proceeds.
-7-
<PAGE> 8
575 N. Pastoria Ave., Sunnyvale
Maude 2
22. EMINENT DOMAIN: If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or
conveyance in lieu thereof, this Lease shall terminate as to any portion of the
Premises so taken or conveyed on the date when title vests in the condemnor,
and Landlord shall be entitled to any and all payment, income, rent, award, or
any interest therein whatsoever which may be paid or made in connection with
such taking or conveyance, and Tenant shall have no claim against Landlord or
otherwise for the value of any unexpired term of this Lease. Notwithstanding
the foregoing paragraph, any compensation specifically awarded Tenant for loss
of business, Tenant's personal property, moving cost or loss of goodwill, shall
be and remain the property of Tenant.
If any action or proceeding is commenced for such taking of the Premises
or any part thereof, then Landlord shall have the right to terminate this Lease
by giving Tenant written notice thereof within SIXTY (60) DAYS of the date or
receipt of said written advice, or commencement of said action or proceeding,
or taking conveyance, which termination shall take place as of the first to
occur of the last day of the calendar month next following the month in which
such notice is given or the date on which title to the Premises shall vest in
the condemnor.
In the event of such a partial taking or conveyance of the Premises, if
the portion of the Premises taken or conveyed is so substantial that the Tenant
can no longer reasonably conduct its business, Tenant shall have the privilege
of terminating this Lease within SIXTY (60) DAYS from the date of such taking
or conveyance, upon written notice to Landlord of its intention to do so, and
upon giving of such notice this Lease shall terminate on the last day of the
calendar month next following the month in which such notice is given, upon
payment by Tenant of the rent from the date of such taking or conveyance to the
date of termination.
If a portion of the Premises is taken by condemnation or conveyance in
lieu thereof and neither Landlord nor Tenant shall terminate this Lease as
provided herein, this Lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed, and the rent herein shall be
apportioned as of the date of such taking or conveyance so that thereafter the
rent to be paid by Tenant shall be in the ratio that the area of the portion of
the Premises not so taken or conveyed bears to the total area of the Premises
prior to such taking.
23. SALE OR CONVEYANCE BY LANDLORD: In the event of a sale or conveyance of the
Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any
further liability upon any of the terms, covenants or conditions (express or
implied) herein contained in favor of Tenant, and in such event, insofar as
such transfer is concerned, Tenant agrees to look solely to the responsibility
of the successor in interest of such transferor in and to the Premises and this
Lease. This Lease shall not be affected by any such sale or conveyance, and
Tenant agrees to attorn the successor in interest of such transferor.
24. ATTORNMENT TO LENDER OR THIRD PARTY: In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether
such interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental hereinreserved and upon all the
other terms, conditions and covenants herein contained.
25. HOLDING OVER: Any holding over by Tenant after expiration or other
termination of this Lease with the written consent of Landlord delivered to
Tenant shall not constitute a renewal or extension of the Lease or give Tenant
any rights in or to the leased premises except as expressly provided in this
Lease. Any holding over after the expiration or other termination of the term
of this Lease, with consent of Landlord, shall be construed to be a tenancy
from month-to-month, on the same terms and conditions herein specified insofar
as applicable except that the monthly rent shall be increased to an amount
equal to ONE HUNDRED FIFTY PERCENT (150%) of the monthly rent required during
the last month of the Lease term.
26. CERTIFICATE OF ESTOPPEL: Tenant shall at any time upon not less than TEN
(10) DAYS' prior written notice to Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults, if any, are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord, that there are no
uncured defaults in Landlord's performance, and that not more than one month's
rent has been paid in advance.
27. CONSTRUCTION CHANGES: It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord and Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.
28. RIGHT OF LANDLORD TO PERFORM: All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant and Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid
by it hereunder or shall fail to perform any other term or covenant hereunder
on its part to be performed, and such failure shall continue for FIVE (5) DAYS
after written notice thereof by Landlord, Landlord, without waiving or
releasing Tenant from any obligation of Tenant hereunder, may, but shall not be
obliged to, make any such payment or perform any such other term or covenant on
Tenant's part to be performed. All sums so paid by Landlord and all necessary
costs of such performance by Landlord together with interest thereon at the
rate of the prime rate of interest per annum as quoted by the Bank of America
from the date of such payment on performance by Landlord, shall be paid (and
Tenant covenants to make such payment) to Landlord on demand by Landlord, and
Landlord shall have
-8-
<PAGE> 9
575 N. Pastoria Ave., Sunnyvale
Maude 2
(in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of nonpayment by Tenant as in the case of failure by
Tenant in the payment of rent hereunder.
29. ATTORNEYS' FEES:
A. In the event that Landlord should bring suit for the possession of the
Premises, for the recovery of any sum due under this Lease, or because of the
breach of any provision of this Lease, or for any other relief against Tenant
hereunder, then all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party therein shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted to judgment.
B. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including reasonable attorneys' fees.
30. WAIVER: The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any
way affect, the right of either party to insist upon performance and observance
by the other party in strict accordance with the terms hereof.
31. NOTICES: All notices, demands, requests, advices or designations which may
be or are required to be given by either party to the other hereunder shall be
in writing. All notices, demands, requests, advices or designations by
Landlord to Tenant shall be sufficiently given, made or delivered if personally
served on Tenant by leaving the same at the Premises or if sent by United
States certified or registered mail, postage prepaid, addressed to Tenant at
the Premises. All notices, demands, requests, advices or designations by Tenant
to Landlord shall be sent by United States certified or registered mail,
postage prepaid, addressed to Landlord at its offices at:
SCP-I, 2100 BRYANT STREET, PALO ALTO, CA 94301-3906
TELEPHONE: (650) 329-9182 FACSIMILE: (650) 329-8410
Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed received on the date of the personal service or
mailing thereof in the manner herein provided, as the case may be.
32. EXAMINATION OF LEASE: Submission of the instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its
execution and delivery by both Landlord and Tenant.
33. DEFAULT BY LANDLORD: Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than THIRTY (30) DAYS after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than THIRTY (30) DAYS are required for performance, then Landlord shall
not be in default if Landlord commences performance within such THIRTY (30) DAY
period and thereafter diligently prosecutes the same to completion.
34. CORPORATE AUTHORITY: If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or
partnership) in accordance with its terms. If Tenant is a corporation, Tenant
shall, within THIRTY (30) DAYS after execution of this Lease, deliver to
Landlord a certified copy of the resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.
35. LIMITATION OF LIABILITY: In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in
the event of any actual or alleged failure, breach or default hereunder by
Landlord:
(a) the sole and exclusive remedy shall be against Landlord and
Landlord's assets;
(b) no partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(d) no partner of Landlord shall be required to answer or otherwise plead
to any service of process;
(e) no judgment will be taken against any partner of Landlord;
(f) any judgment taken against any partner of Landlord may be vacated and
set aside at any time without hearing;
(g) no writ of execution will ever be levied against the assets of any
partner of Landlord;
(h) these covenants and agreements are enforceable by both Landlord and
also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
36. SIGNS: No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written
consent of Landlord first had and obtained and Landlord shall have the right to
remove any such sign, placard, picture, advertisement, name or notice without
notice to and at the expense of Tenant. If Tenant is allowed to
-9-
<PAGE> 10
575 N. Pastoria Ave., Sunnyvale
Maude 2
print or affix or in any way place a sign in, on, or about the Premises, upon
expiration or sooner termination of this Lease, Tenant at Tenant's sole cost
and expense shall both remove such sign and repair all damage in such a manner
as to restore all aspects of the appearance of the Premises to the condition
prior to the placement of said sign.
All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall, which may appear unsightly from
outside the Premises.
37. HAZARDOUS MATERIALS/USE OF PREMISES:
A. As used herein, the term "Hazardous Material" shall mean any substance
or material which has been determined by any state, federal or local
governmental authority to be capable of posing a risk of injury to health,
safety or property, including all of those materials and substances designated
as hazardous or toxic by the city in which the Premises are located, the U.S.
Environmental Protection Agency, the Consumer Product Safety Commission, the
Food and Drug Administration, the California Water Resources Control Board, the
Regional Water Quality Control Board, San Francisco Bay Region, the California
Air Resources Board, CAL/OSHA Standards Board, California Department of Food and
Agriculture, the California Department of Health Services, and any federal
agencies that have overlapping jurisdiction with such California agencies, or
any other governmental agency now or hereafter authorized to regulate materials
and substances in the environment. Without limiting the generality of the
foregoing, the term "Hazardous Material" shall include all of those materials
and substances defined as "Toxic Materials" in Sections 66680 through 66685 of
Title 22 of the California Administrative Code, Division 4, Chapter 30, as the
same shall be amended from time to time, or any other materials requiring
remediation under federal, state or local statutes, ordinances, regulations or
policies.
B. Tenant agrees not to introduce any Hazardous Material in, on or
adjacent to the Premises without complying with all applicable federal, state
and local laws, rules, regulations, policies and authorities relating to the
storage, use or disposal, and cleanup of Hazardous Materials, including, but
not limited to, the obtaining of proper permits.
C. Tenant shall immediately notify Landlord of any inquiry, test,
investigation, or enforcement proceeding by or against Landlord or the Premises
concerning a Hazardous Material. Tenant acknowledges that Landlord, as the
owner of the Premises, shall have the right, at its election, in its own name
or as a Tenant's agent, to negotiate, defend, approve, and appeal, at Tenant's
expense, any action taken or order issued with regard to a Hazardous Material
by an applicable governmental authority.
D. If Tenant's storage, use or disposal of any Hazardous Material in, on
or adjacent to the Premises results in any contamination of the Premises, the
soil or surface or groundwater requiring remediation under federal, state or
local statutes, ordinances regulations or policies, Tenant agrees to cleanup
the contamination. Tenant further agrees to indemnify, defend and hold Landlord
harmless from and against any claims, suits, causes of action, costs, fees,
including attorneys' fees and costs, arising out of or in connection with any
cleanup work, inquiry or enforcement proceeding in connection therewith, and
any Hazardous Materials currently or hereafter used, stored or disposed of by
Tenant or its agents, employees, contractors or invitees on or about the
Premises.
E. Notwithstanding any other right or entry granted to Landlord under this
Lease, Landlord shall have the right to enter the Premises or to have
consultants enter the Premises throughout the term of this Lease for the
purpose of determining: (1) whether the Premises are in conformity with
federal, state and local statutes, regulations, ordinances and policies
including those pertaining to the environmental condition of the Premises, (2)
whether Tenant has complied with this Paragraph (37) and the Lease, and (3) the
corrective measures, if any, required of Tenant to ensure the safe use, storage
and disposal of Hazardous Materials, or to remove Hazardous Materials in
accordance with applicable laws. Tenant agrees to provide access and reasonable
assistance for such inspections. Such inspections may include, but are not
limited to, entering the Premises or adjacent property with drill rigs or other
machinery for the purpose of obtaining laboratory samples. Landlord shall not
be limited in the number of such inspections during the term of this Lease. If
such consultants determine that Tenant has contaminated the Premises with
Hazardous Materials used, stored or caused to be used or stored by Tenant,
Tenant shall reimburse Landlord for the cost of such inspections within TEN
(10) DAYS of receipt of a written statement thereof. Tenant shall, in a timely
manner, at its expense, remove such Hazardous Materials or otherwise comply
with the recommendations of such consultants to the reasonable satisfaction of
Landlord and any applicable governmental agencies. The right granted to
Landlord herein to inspect the Premises shall not create a duty on Landlord's
part to inspect the Premises, or liability of Landlord for Tenant's use,
storage or disposal of Hazardous Materials, it being understood that Tenant
shall be solely responsible for all liability in connection therewith.
F. Tenant shall surrender the Premises to Landlord upon the expiration or
earlier termination of this Lease free of Hazardous Materials used, stored or
caused to be used or stored by Tenant on the Premises, and in a condition which
complies with all governmental statutes, ordinances, regulations and policies,
recommendations of consultants hired by Landlord, and such other reasonable
requirements as may be imposed by Landlord with respect to those Hazardous
Materials used, stored or caused to be used or stored by Tenant.
G. Tenant's obligations herein shall survive termination of this Lease.
H. Tenant agrees to provide Landlord with a Hazardous Material audit or
list as to any Hazardous Materials Tenant used, stored, disposed of or caused
to be on the Premises during the term or earlier occupancy of this Lease,
within FIVE (5) DAYS of the written request by Landlord for said audit.
38. "ZERO-TOLERANCE" DRUG CLAUSE:
Tenant covenants and agrees, as an express condition of continued
occupancy of the demised Premises, not to cause, permit or allow the use of any
controlled or illegal substances on the Premises, including, without implied
limitation, those substances defined by virtue of Health & Safety Code of the
State of California Section 11007.
Tenant covenants and agrees that any such activity on more than one
occasion shall constitute a nuisance and Landlord will be entitled, but not
limited, to all remedies provided for under California Code of Civil Procedure,
Section 1164(4). Tenant acknowledges that such prohibited activity will, at the
sole discretion of Landlord, result in
-10-
<PAGE> 11
575 N. Pastoria Ave., Sunnyvale
Maude 2
termination of Tenant's lease and subject Tenant to eviction upon service of a
three (3) day notice to quit. Further Tenant agrees that breach of this covenant
may not be cured by subsequent acts of the Tenant.
Tenant agrees to defend, indemnify and hold Landlord harmless from and
against any and all acts, which Landlord may perform in, attempted or actual
enforcement of this provision or in any acts or omissions with respect to its
policy of keeping the Premises "drug free". Tenant hereby adopts a "drug free"
policy for the Premises, and covenants to advise law enforcement officers and
Landlord when there is any actual, possible or suspected use or sale of
controlled substances on or near the subject Premises and to take all reasonable
steps to abate the same. In so doing Tenant shall not place Tenant, nor any of
Tenant's employees, guests or agents in any risk of physical danger but shall
defer to law enforcement officers.
39. MISCELLANEOUS AND GENERAL PROVISIONS:
A. USE OF BUILDING NAME. Tenant shall not, without the written consent of
Landlord, use the name of the building for any purpose other than as the address
of the business conducted by Tenant in the Premises.
B. CHOICE OF LAW; SEVERABILITY. This Lease shall in all respects be
governed by and construed in accordance with the laws of the State of
California. If any provision of this Lease shall be invalid, unenforceable or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.
C. DEFINITION OF TERMS. "Premises" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The term
"Landlord" or any pronoun used in place thereof includes the plural as well as
the singular and the successors and assigns of Landlord. The term "Tenant" or
any pronoun used in place thereof includes the plural as well as the singular
and individuals, firms, associations, partnerships and corporations, and their
and each of their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations.
D. QUITCLAIM. At the expiration or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord, within TEN (10) DAYS
after written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in the
State of California, to remove the cloud or encumbrance created by this Lease
from the real property of which Tenant's Premises are a part.
E. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This instrument along
with any exhibits and attachments hereto constitutes the entire agreement
between Landlord and Tenant relative to the Premises and this Agreement and the
exhibits and attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant. Landlord and Tenant
agree hereby that all prior or contemporaneous oral agreements between and among
themselves and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this agreement.
F. RECORDING. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.
G. AMENDMENTS FOR FINANCING. Tenant further agrees to execute any
amendments required by a lender to enable Landlord to obtain financing, so long
as Tenant's rights hereunder are not substantially affected.
H. ADDITIONAL PARAGRAPH(S). Paragraph(s) 39 THROUGH 41 are added hereto and
are included as a part of this Lease.
I. CLAUSES, PLATS AND RIDERS. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.
J. DIMINUTION OF LIGHT, AIR OR VIEW. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect this
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.
K. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to
the benefit of the heirs executors, administrators, successors and assigns (as
permitted pursuant to the provisions of this Lease) of the parties hereto.
L. GENDER. All references to gender shall be deemed to include all others,
as the context may require.
M. HEADINGS. The captions contained herein are for convenience only and
shall be disregarded in the construction of this Lease.
N. TIME OF ESSENCE. Time is of the essence of this Lease and of each and
all of its provisions.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
LANDLORD: TENANT:
SCP-I, A CALIFORNIA GENERAL PARTNERSHIP AMERICAN MULTIPLEXER CORPORATION,
A NORTH CAROLINA CORPORATION
/s/ MICHAEL P. SIRI /s/ EDWARD TAN
- --------------------------------------- ---------------------------------
Michael P. Siri By: Edward Tan
Title: Managing Partner Title: President and CEO
-11-
<PAGE> 12
575 N. Pastoria Ave., Sunnyvale
Maude 2
ADDITIONAL PARAGRAPHS
39. OPTION TO EXTEND: If Tenant is not in default of any material provisions of
this Lease upon the expiration of its term, Tenant shall have the option to
extend the term for an additional period of FIVE (5) YEARS, NOVEMBER 1, 2003,
THROUGH NOVEMBER 30, 2008 (the "Option Period"). If Tenant intends to exercise
such option, Tenant shall furnish written notice of such intention to Landlord
at least NINETY (90) DAYS prior to the expiration of the Lease. All terms,
covenants, conditions and restrictions of this Lease shall apply during the
option period; however, in no case shall the rental rate be lower that the
rental for the last month of the last year of the Lease terms set herein.
40. HVAC/PLUMBING SYSTEMS: Landlord warranties that the HVAC and plumbing
system will be in good operating condition at the commencement of this Lease.
Landlord further warranties these building systems for a period of SIXTY (60)
DAYS from the date of occupancy.
41. LANDLORD CONCESSIONS: As a material provision of this Lease Agreement,
Landlord agrees to the following:
1) Landlord shall replace the two existing single-entry glass
front-entry doors to a new glass double-door entry system.
2) All carpets shall be shampooed.
3) All windows cleaned.
4) All tile (VCT) floors stripped and waxed.
5) Any and all damaged or stained ceiling tiles shall be replaced.
6) The roof screen at the front of the building shall be rebuilt or
upgraded.
7) The building exterior shall be pressure washed.
8) Landlord, subject to proper City approvals, shall allow Tenant to
install its antenna/dish (approximately 15'x 20') in the parking lot
area immediately adjacent to the southwest corner of the building.
Tenant shall be allowed to erect a fence around the antenna/dish as
required and trench required cabeling to the building providing; upon
termination of this Lease or any extending term option(s), Tenant
restores the Premises (See Paragraph 5, above) to the condition
originally leased to Tenant and more fully described in Exhibits "A"
and "B" attached hereto.
The remainder of this page has been left blank intentionally.)
-12-
<PAGE> 13
[FLOOR PLAN FOR 575 N. PASTORIA AVE.]
<PAGE> 1
EXHIBIT 10.2
6,000,000 SHARES
AMERICAN MULTIPLEXER CORPORATION
WARRANT TO PURCHASE COMMON SHARES
MAY 14th 1999
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
THIS IS TO CERTIFY THAT, for value received, Edward S C Tan, President
and CEO of American Multiplexer Corporation, ("the holder") is entitled to
purchase from American Multiplexer Corporation (the "Company"), a corporation
organized under the laws of North Carolina, at any time or from time to time
during the period (the "Exercise Period") commencing on the date hereof (the
"Commencement Date") until 5:00 p.m., California Time, on May 14th, 2004 (the
"Expiration Date"), up to 6,000,000 fully paid and non-assessable common shares,
no par value, of the Company (the "Common Shares"), as now constituted, all per
share in accordance with the terms and provisions hereof. The number of Common
Shares to be received upon the exercise of this Warrant and the price to be paid
for each Common Share shall be adjusted from time to time as hereinafter set
forth. The Common Shares or other securities or property deliverable upon such
exercise, as adjusted from time to time, are hereinafter sometimes referred to
as "Warrant Shares" and the exercise price of a Common Share in effect at any
time and as adjusted from time to time is hereinafter sometimes referred to as
the "Exercise Price". Unless the context otherwise requires, the term "Warrant"
or "Warrants" as used herein includes this Warrant and any other Warrant or
Warrants which may be issued pursuant to the provisions of this Warrant, whether
upon transfer, assignment, partial exercise, divisions, combinations, exchange,
or otherwise, and the term- "Holder" includes any transferee or transferees or
assignee or assignees of the Holder named above, all of whom shall be subject to
the provisions of the Warrant, and, when used with reference to Warrant Shares,
means the holder or holders of such Warrant Shares.
Subject to Paragraph 5 hereof, this Warrant is exercisable at a purchase
price of $1.00 per share (the "Exercise Price").
The Common Shares issuable upon exercise of this Warrant have not been
registered with the Securities and Exchange Commission. This Warrant was
originally issued pursuant to and in satisfaction of all the work put in by
Edward Tan including bringing in funds for the company.
1. EXERCISE OF WARRANTS
The purchase rights represented by this Warrant are exercisable from time
to time at the option of the Holder hereof; in whole or in part (but not as to
fractional Common Shares), during the Exercise Period until 5:00 p.m. California
time on the Expiration Date by presentation and surrender to Company at its
principal office, with the warrant exercise form attached hereto, duly executed
and
<PAGE> 2
accompanied by payment (either in cash or by certified or official bank check,
payable to the order of the Company) of the Exercise Price for the number of the
Warrant Shares specified in such form. In case of the purchase of fewer than all
of the Common Shares purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender thereof and shall execute and deliver a new
Warrant of like tenor, dated the date hereof; for the balance of the Common
Shares purchasable hereunder. Each person in whose name any certificate for
Common Shares is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the date of exercise of this Warrant,
irrespective of the date of delivery of such certificate, except that if the
stock transfer books of the Company are closed on such exercise date, such
person shall be deemed to have become the Holder of record of such shares at the
close of business on the next succeeding date on which the stock transfer books
are open. The Company shall take all actions necessary to ensure that all Common
Shares issued upon the exercise of this Warrant are, when they are issued as
provided herein, duly and validly authorized and issued, fully paid and
non-assessable.
2. ISSUANCE OF STOCK CERTIFICATES
The issuance of certificates for Common Shares upon the exercise of
this Warrant shall be made without charge to the Holder hereof and such
certificates shall be issued in the name of; or in such names as may be directed
by, the Holder hereof; provided, however, that the Company shall not be required
to pay any transfer tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or person requesting the issuance
thereof shall have paid to the Company the amount of such transfer tax or shall
have established to the satisfaction of the Company that such transfer tax has
been paid or that no such tax is due.
3. RIGHTS OF HOLDER
Nothing in this Warrant shall be construed as conferring upon the
Holder hereof any rights as shareholder of the Company. No provision of this
Warrant, in the absence of affirmative action by the Holder to purchase Common
Shares, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the holder for the Exercise Price or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors thereof.
<PAGE> 3
4. RESTRICTIONS ON TRANSFERABILITY: REDEMPTION
Any such assignment shall be effected by the Holder (i) executing the
form of assignment at the end hereof and (ii) surrendering this Warrant for
cancellation at the office or agency of the Company, accompanied by a
certificate (signed by the holder, or an officer of the Holder if the Holder is
a corporation), stating that each transferee is a permitted transferee under
this paragraph 4; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Warrant or Warrants of
like tenor and representing in the aggregate rights to purchase the same number
of Common Shares as are purchasable hereunder.
5. ADJUSTMENT OF EXERCISE PRICE AND WARRANT SHARES PURCHASABLE
(a) The Exercise Price at which Common Shares shall be purchasable,
as set forth in Section 1 hereof; shall be $1.00 per share, subject to
adjustment from time to time, if the Company shall declare a dividend payable
in Common Shares, subdivide or combine the outstanding Common Shares, the
Exercise Price shall be adjusted (to the nearest whole cent) to that price
determined by multiplying the Exercise Price in effect immediately prior to
such event by a fraction (i) the numerator of which shall be the number of
Common Shares outstanding immediately prior to such event and (ii) the
denominator of which shall be the number of Common Shares outstanding
immediately after such event. Appropriate readjustment of the Exercise Price
shall be made if any dividend referred to above shall be abandoned.
(b) In the event of an adjustment of the Exercise Price, the number
of Common Shares (or reclassified stock) issuable upon exercise of this Warrant
after such adjustment shall be equal to the number determined by dividing (i)
an amount equal to the product of (1) the number of Common Shares issuable upon
exercise of this Warrant immediately prior to such adjustment, and (2) the
Exercise Price immediately prior to such adjustment; by (ii) the Exercise Price
immediately after such adjustment.
(c) In the event of any reorganization or reclassification of the
outstanding Common Shares (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination) or in the event of any consolidation of the Company
with, or merger of the Company with, another entity after which no securities
of the Company will be publicly held, or in the event of any sale, lease or
conveyance of all, or substantially all, of the property, assets, business and
goodwill of the Company as an entity, the Holder of this Warrant shall
thereupon or thereafter, at any time after the Commencement Date and prior to
the Expiration Date, have the right, but not the obligation, to exercise this
Warrant. Upon such exercise, the Holder shall have the right to purchase and/or
receive the kind and amount of stock and other securities, cash or other
property receivable upon such reorganization, reclassification, consolidation,
merger or sale by a holder of the number of Common Shares which the Holder of
this Warrant would have received had he exercised this Warrant immediately
prior to such reorganization, reclassification, consolidation, merger or sale,
at a price equal to the aggregate Exercise Price then in effect pertaining
<PAGE> 4
to this Warrant (the kind, amount and price of such stock and other securities
to be subject to adjustment as herein provided). After any such reorganization,
reclassification, consolidation, merger or sale which shall result in any cash
distribution in excess of the Exercise Price provided for by this Warrant, the
Holder of this Warrant may at his option exercise the same without making
payment of the Exercise Price and in such case the Company shall upon the
distribution to said Holder, consider that said Exercise Price has been paid in
full to it and in making settlement to said Holder, shall deduct from the
amount payable to such Holder an amount equal to such Exercise Price.
(d) In the event the Company shall, at any time after the
Commencement Date and prior to the Expiration Date and prior to the exercise
thereof dissolve, liquidate or wind up its affairs, the Holder of this Warrant
shall thereupon or thereafter at any time be entitled, but not obligated, to
exercise this Warrant, and upon the exercise thereof; to receive, in lieu of
the Common Shares of the Company which he would have been entitled to receive,
the same kind and amount of assets as would have been issued, distributed or
paid to him upon any such dissolution, liquidation or winding up with respect
to such Common Shares of the Company, had he been the holder of record of such
Common Shares receivable upon the exercise of this Warrant on the record date
for the determination of those entitled to receive any such liquidating
distribution. After any such dissolution, liquidation or winding up which shall
result in any cash distribution in excess of the Exercise Price provided for by
this Warrant, the Holder of this Warrant may at his option exercise the same
without making payment of the Exercise Price, and in such case the Company
shall upon the distribution to said Holder consider that said Exercise Price
has been paid in full to it and in making settlement to said Holder shall
deduct from the amount payable to such Holder an amount equal to such Exercise
Price.
(e) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant, this
Warrant may continue to express the same price and number and kind of shares as
when originally issued.
(f) The Company may retain a firm of independent public accountants
of recognized standing (who may be any such firm regularly employed by the
Company) to make any computation required under this Section, and a Certificate
signed by such firm shall be conclusive evidence of the correctness of any
computation made under this Paragraph.
(g) Notwithstanding anything contained herein to the contrary, no
adjustment of the Exercise Price or the number of shares issuable upon exercise
of this Warrant shall be made for any action taken by the Company pursuant to
written agreements in existence on the original issue date of this Warrant.
6. OFFICER'S CERTIFICATE
Whenever the Exercise Price shall be adjusted as required by the
provisions of Paragraphs, the Company shall forthwith file in the custody of
its Secretary or an Assistant Secretary at its principal office and, in the
event it shall have informed the Holder that an agent has been designated as an
agent for the exercise or transfer of this Warrant, with such warrant transfer
agent, an
<PAGE> 5
officer's certificate showing the adjusted Exercise Price determined as therein
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional Common Shares, if
any, the consideration for such shares, determined as provided in Paragraph 5,
and such other facts as shall be necessary to show the officer's certificate
shall be made available at all reasonable times for inspection by the Holder of
this Warrant and the Company shall, forthwith after each such adjustment, mail
copy of such certificate to such Holder by certified mail, return receipt
requested.
7. NOTICES TO WARRANT HOLDER
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Shares
otherwise than in cash and out of earned surplus, or (ii) if the Company shall
offer to the holders of Common Shares for subscription or purchase by them any
shares of any class or any other rights, or (iii) if there shall be any
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of all
or substantially all of the property and assets of the Company, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such event, the Company shall cause to be mailed by
certified mail to the Holder, at least thirty days prior to the date specified
in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date or expected date on
which (x) a record is to be taken for the purpose of such dividend distribution
or rights, or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease or transfer, dissolution, liquidation or winding up is to
take place and the date, if any, is to be fixed, or expected date as of which
the holders of Common Shares of record shall be entitled to exchange their
Common Shares for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance, lease or
transfer, dissolution, liquidation or winding up.
8. REGISTRATION
8.1 Definitions. For purposes of this paragraph 8:
(a) The term "Act" means the Securities Act of 1933, as amended;
(b) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of
such registration statement;
(c) The term "Registrable Securities" means this Warrant, the Warrant
Shares and any capital stock of the Company issued as a dividend or other
distribution with respect to, or in exchange or in replacement of; this Warrant
and/or the Warrant Shares; and
(d) The term "Holder" means any holder of this Warrant and/or Warrant
Shares.
<PAGE> 6
(e) The term "Warrant" shall mean this Warrant with all other
purchase warrants of like tenor, (differing, however, as to date, identity of
holders and number of shares purchasable) originally issued simultaneously with
the original predecessor of this Warrant.
8.2 Piggy-back. During the three-year period commencing on the
Commencement Date of this Warrant and ending on the Expiration Date of this
Warrant, the Company shall advise each holder of Warrants or Warrant Shares, at
least thirty (30) days prior to any date on which the Company proposes to
register any of its equity securities under the Act on a registration form
usable for resales (other than on Form S-8 or other form similar thereto
relating to employee benefit plans or Form S-4 or similar forms used in
connection with business combinations). Upon the written request of any Holder
given within twenty (20) days after receipt of any such notice by the Company,
the Company shall use its best efforts to cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested be
registered.
Notwithstanding the foregoing, if the underwriter of such offering
determines that the total amount of securities which it and any other persons
or entities intend to include in such offering would adversely affect the
success of such offering, then the amount or kind of securities to be offered
by the holders of Warrant Shares and the holders of any other securities (the
"Other Securities") seeking to have such securities included in such
registration statement pursuant to the incidental registration rights of such
other holders shall be determined as follows: (i) there shall first be included
all Registrable Securities sought to be registered by holders thereof before
any Other Securities are included in such registration statement and there
shall then be included the Other Securities, and (ii) in the event that all
Registrable Securities cannot be so included, there shall be included
Registrable Securities pro rata to the extent necessary to reduce the total
amount recommended by such underwriters or excluded in their entirety, as the
case may be. In addition, if such registration statement relates to an
underwritten public offering and the number of shares to be offered is reduced
by the underwriter(s) subsequent to the initial filing thereof with the
Securities and Exchange Commission, the number of Registrable Securities to be
registered under such registration statement will be reduced pro rata.
Further, the Company shall have the right at any time it shall have
given written notice pursuant to this Paragraph 8.2 (irrespective of whether a
written request for inclusion of Registrable Securities shall have been made)
to elect not to file any such proposed registration statement, or to withdraw
the same after the filing thereof.
8.3 Covenants with Respect to Registration. In connection with any
registration under Paragraph 8.2, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to have any
registration statement declared effective remain effective for a period
adequate for all Holders to dispose of their Registrable Securities; provided,
however, that in connection with any proposed registration (i) intended to
permit an offering of any securities from time to time (i.e., a so-called
"shelf registration"), the Company shall in no event be obligated to cause any
such registration to remain effective for more
<PAGE> 7
than two hundred seventy (270) days, or (ii) covering the resales of the
Warrant Shares which are underwritten, the Company shall in no event be
obligated to cause any such registration to remain effective for longer than
the expiration of the distribution period of the Warrant Shares.
(b) The Company shall, to the extent provided for in this
agreement, prepare and file with the Securities and Exchange Commission ("SEC")
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) The Company shall furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) The Company shall use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the registration
statement, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions, and
further provided that (anything in this Agreement to the contrary
notwithstanding with respect to the bearing of expenses) if any jurisdiction
in which the securities shall be qualified shall required that expenses
incurred in connection with the qualification of the securities in that
jurisdiction be borne by selling shareholders, then such expenses shall be
payable by selling shareholders pro rata, to the extent required by such
jurisdiction.
8.4 Information Regarding Holder. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Paragraph
that the Holders shall furnish to the Company such information regarding them,
the Registrable Securities held by them, and the intended method of disposition
of such securities as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
8.5 Expenses. The Company shall pay all expenses incurred in connection
with a registration pursuant to the paragraph, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, except for (i) the fees and
disbursements of counsel for the Holders, if any (ii) state transfer taxes;
(iii) underwriting discounts and commissions and (iv) brokerage commissions.
9. COVENANTS OF THE COMPANY
The Company covenants and agrees that all Common Shares which may be
issued upon the exercise of this Warrant will, upon full payment therefor, be
duly authorized, validly issued, fully
<PAGE> 8
paid and non-assessable (free from all taxes, liens, and charges with respect to
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with each issue)). Without limiting the generality of the
foregoing, the Company will from time to time take all such action as may be
required to assure that the par value, if any, per share of the Common Shares is
at all times not in excess of the applicable Exercise Price. The Company further
covenants and agrees that during the period within which this Warrant may be
exercised, the Company will at all times reserve for issue and delivery upon
exercise of this Warrant such number of Common Shares as shall be required for
issue and delivery upon exercise in full of this Warrant.
10. EXCHANGE AND REPLACEMENT OF WARRANT
This Warrant is exchangeable without expense to Holder, upon the surrender
hereof by Holder at the principal executive office of the Company, for a new
Warrant or Warrants of like tenor and date representing in the aggregate the
right to purchase the same number of shares as are purchasable hereunder in such
denominations as shall be designated by the registered holder hereof at the time
of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the cases of
loss, theft or destruction) of reasonably satisfactory indemnity, or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expense incidental thereto, and upon surrender and cancellation of
this Warrant of like tenor and date, in lieu of this Warrant and any such lost,
stolen or destroyed Warrant shall thereupon become void.
11. NON ISSUANCE OF FRACTIONAL INTERESTS
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon exercise hereof; the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the current market value of
such fractional share, determined as follows:
(a) If the Warrant Shares are listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange, the
current value shall be the last reported sale price of the Warrant Shares on
such exchange on the last business day prior to the date of exercise of this
Warrant or if no such sale is made on such day, or the Warrant Shares are listed
on The Nasdaq National Market or Small Cap Market (collectively "NASDAQ"), the
average closing bid and asked prices of the Warrant Shares for such day on such
exchange or NASDAQ, as the case may be; or
(b) If the Common Shares are not so listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported
high bid and low asked prices of the Common Shares reported by the National
Quotation Bureau, Inc. or a comparable firm selected by the
<PAGE> 9
Board of Directors of the Company, on the last business day prior to the date of
the exercise of this Warrant; or
(c) If the Common Shares are not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
value shall be an amount, not less than book value per share of Common Shares,
determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company.
12. NOTICES
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered, or mailed
by registered or certified mail, return receipt requested:
(a) If to the Holder of this Warrant, at 124 Mountain Road, So. San
Francisco, CA 94080 or such other address of which the Company has received
written notice; or
(b) If to the Company, at 575 N Pastoria Avenue, Sunnyvale, CA 94086
or such other address of which the Company gives written notice to the
registered Holder of this Warrant.
13. SUCCESSORS
All the covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns, provided, however, that
except as otherwise provided herein this Warrant may not be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of without the prior
written consent of the Company.
14. HEADINGS
The Article and paragraph headings in this Warrant are inserted for purposes of
convenience only and have no substantive effect.
15. LAW GOVERNING
This Warrant shall be construed and enforced in accordance with, and governed
by, the laws of the State of California.
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers as of the day and year first above written.
AMERICAN MULTIPLEXER CORPORATION
By: /s/ EDWARD TAN
-----------------------------
Edward Tan, President
ATTEST:
- -----------------------------
[SEAL]
<PAGE> 1
EXHIBIT 10.3
AMERICAN MULTIPLEXER(TM) CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
American Multiplexer(TM) Corporation, a California corporation (the
"Company"), has granted to ________________________ (the "Optionee"), an option
(the "Option") to purchase a total of _________________________ (_____________)
shares of Common Stock (the "Shares") of the Company on the terms and
conditions set forth below.
1. Nature of the Option. This Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.
2. Exercise Price. The exercise price is __________________ for each share of
Common Stock, which price is not less than the fair market value per share
of the Common Stock on the date of grant.
3. Exercise of Option. This Option shall be exercisable during its term as
follows:
(i) Right to Exercise
(a) This Option shall be exercisable cumulatively, to the extent
of 25% on the one-year anniversary of the optionee's hire
date, and an additional 1/36 of the Shares on the last day
of each calendar month thereafter.
(b) Stock Acceleration
There is stock ownership acceleration for the completion of
agreed upon milestones in development, marketing, and sales. If
milestones per the business plan are met, the ISO stock ownership
will accelerate to vesting 50% of shares at completion of
SatExpress Beta Field trials and completion of the Digicop-2
development. The remaining 50% is proposed to accelerate with the
launch of the SatExpress and DSL products into the full market
place. The issued restricted stock warrants will accumulate at
30% at start of any SatExpress Equipment Sales and the remaining
20% at the completion of SatExpress Beta Field trials. An AMC
Warrant agreement will be defined in a separate agreement.
Otherwise, the ISO shares will vest normally at 25% per year as
per section 3 (I)(a).
(c) This Option may not be exercised for a fraction of a share.
(d) Rights of Survivorship
In the event of the optionee's death, disability or other
termination of employment, other than cause, the rights to
exercise the options will be transferable to the optionee's
beneficiary or other designatee defined by the optionee.
(ii) Merger, Consolidation or Sale of Assets. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Company shall provide
Optionee with written notice of such transaction not later
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Option Agreement
Page 1 of 4
<PAGE> 2
than thirty (30) days prior to the projected date of such transaction.
Notwithstanding the vesting provisions of Section 3(i)(a)(b) above, after
delivery of such notice Optionee may exercise this Option to the full extent.
After delivery of such notice, the optionee can, upon providing notice,
accelerate vesting at 100% on or prior to the date of such transaction and may
condition his exercise upon the occurrence of the transaction. Whether or not
so exercised, this Option agreement shall terminate immediately upon the
consummation of such proposed sale, merger or offering.
(iii) Method of Exercise of Options. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company or designee. The written notice shall be deemed to be exercised upon
receipt by the Company of such written notice accompanied by the exercise price
at the fair market value at the time of exercise. Exhibit A contains the form
that should be used.
No shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
4. Method of Payment. Payment of the exercise price shall be by cash, check,
or delivery of Common Stock of the Company that has been vested by the
Optionee. The value of such common stock shall have a fair market value
equal to the exercise price payable with respect to the exercise hereof or
any combination of such methods of payment.
5. Termination of Status as an Employee. In the event of termination of
Optionee's status as an employee, he may, but only within one
hundred-eighty (180) days after date of such termination, exercise this
option to the extent that he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise this
option at the date of such termination, or if he does not exercise this
Option within the time specified herein, the Option shall terminate.
6. Disability of Optionee. Notwithstanding the provisions of Section 5 above,
in the event of termination of Optionee's status as an employee as a result
of disability, he may, but only within six months from the date of
termination of employment, exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that
he was not entitled to exercise the Option at the date of termination, or
if he does not exercise such Option within the time specified herein, the
Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee, the Option may be
exercised, at any time within six months following the date of death, by
Optionee's estate, spouse or by a person who acquired the right to exercise
the Option by bequest or inheritance but only to the extent of the right to
exercise that has accrued at the date of death of the Optionee. To the
extent that an Optionee was not entitled to exercise the Option at the date
of his death, or if the Optionee's estate or legatee does not exercise the
Option within the time specified herein, the Option shall terminate.
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Option Agreement
Page 2 of 4
<PAGE> 3
8. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The
terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
9. Term of Option. This Option may not be exercised more than ten (10) years
from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
10. Early Disposition of Stock. Optionee understands that if he disposes of
any Shares received under this Option within two years after the date of
this Agreement or within one year after such Shares were transferred to
him, he will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount generally
measured by the difference between the price paid for the Shares and the
lower of the fair market value of the Shares at the date of the exercise
or the fair market value of the Shares at the date of the disposition.
Optionee understands that if he disposes of such Shares at any time after
the expiration of such two-year and one-year holding periods, any gain on
such sale will be taxed as long-term capital gain.
Date of grant:
AMERICAN MULTIPLEXER CORPORATION,
a California corporation
By:
--------------------------
Edward Tan, President/CEO
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Option Agreement
Page 3 of 4
<PAGE> 4
EXHIBIT A
NOTICE OF INTENT TO EXERCISE OF
INCENTIVE STOCK OPTION
AMERICAN MULTIPLEXER CORPORATION Date of Exercise:
Re: Incentive Stock Option Dated ______________________________
Gentlemen:
This constitutes notice under my Stock Option Agreement that I elect to purchase
the number of shares of Common Stock set forth below for the price set forth
below:
Stock option dated: ________________________
Number of shares as to which
option is exercised: ________________________
Total exercise price: ________________________
Cash payment delivered herewith: ________________________
Unless such documents are enclosed herewith, I hereby agree to execute such
additional documents evidencing such other representations and agreements as to
my investment intent with respect to these shares of Common Stock as may be
required by the Company pursuant to the provisions of the Stock Option
Agreement. Please advise what additional documents may be required.
Very truly yours,
__________________________
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Option Agreement
Page 4 of 4
<PAGE> 5
[AMERICAN MULTIPLEXER(TM) CORPORATION LETTERHEAD]
Name Date:
Address
City,State,Zip
Dear ____________
AMC is pleased to offer you the position of _________________ reporting to
_______________. Your initial, exempt pay rate will be $___________ per month,
annualized at $_______________. Thereafter, you will be on an annual review
cycle.
As an employee of AMC, you will be given the companies present benefit package
including medical, dental, and life insurance, which is available to you and
your dependents. This benefit package is effective your first day of employment.
In addition, subject to the approval of the board of directors, you will be
recommended for a stock option of _____________ shares of AMC common stock. The
terms and conditions for normal vesting and accelerated vesting are contained in
the "Employee Incentive Stock Option Agreement" dated 12/98.
It is understood that either AMC or you can rescind this contract by giving the
other a 30-day notice in writing. If the employee violates any of the rules
under our Human Resources Policy handbook or acts in any unprofessional manner,
he may be terminated with cause without notice.
_____________, we are looking forward to your joining AMC and believe your
personal qualifications and professional experience will be an asset to our
future business growth. This offer is in effect through ____________, 1998.
Please sign and return the enclosed copy of this letter indicating your start
date should you decide to accept the offer. Please feel free to give Ron
Everoski a call at 408-730-8200 x102, if you have any further questions.
Sincerely,
American Multiplexer(TM) Corporation
__________________________
Edward Tan-President & CEO
Ron Everoski
VP/CTO
____________________________________ __________________________
Offer Accepted Start Date
1998-99 American Multiplexer(TM) Corp. Company Confidential Page 1 of 1
<PAGE> 1
EXHIBIT 10.4
AMERICAN MULTIPLEXER(TM) CORPORATION,
RESTRICTED STOCK WARRANT AGREEMENT
American Multiplexer(TM) Corporation, a California corporation (the
"Company"), has granted to Douglas R. Hanson (the "Warrantee"), a warrant (the
"Warrant") to purchase a total of One Million (1,000,000) shares of Common
Stock (the "Shares") of the Company on the terms and conditions set forth below.
1. Nature of the Warrant: This Warrant is intended to qualify according to
SEC rules.
2. Exercise Price: The exercise price will be $1.00 per share.
3. Right to Exercise Warrant: The Warrant is granted by the Company based on
the intent of the Parties to the Warrant for the company to enter into a
new business and to accomplish certain goals and objectives some of which
are identified in the Descriptive Memorandum (c)1998. Warrantee shall
accumulate the right to exercise the shares of the Warrant based on a) the
Company's stock increasing in price over time, and/or b) the Company's
achievement of certain milestones as identified herein. Said rights may be
exercised independently based on the following set of conditions:
(a) Stock Price. The right to exercise up to 50% of the warrant
(500,000 shares) is based on the following stock price milestones (with a
base of 20 million shares in the company), whereby the stock maintains an
average price on the OTC BB or other market for a period of 30 days:
Stock Price @ $1.00 per share - 100,000 shares exercisable
Stock Price @ $3.00 per share - 100,000 shares exercisable
Stock Price @ $5.00 per share - 100,000 shares exercisable
Stock Price @ $10.00 per share - 100,000 shares exercisable
Stock Price @ $20.00 per share - 100,000 shares exercisable
The above stock prices will be adjusted downward proportionally if
the base of 20 million shares increases in the future.
(b) Marketing and Technical Milestones. The right to exercise up
to 50% of the warrant (500,000 shares) is based on the Company achieving
the following marketing, sales and engineering milestones. The achievement
of the milestones is subject to the availability of funding to support the
development and sales efforts as specified herein., and is based on time
following the expenditure of said funds. If the funding is delayed, the
technical or marketing milestone date is also delayed, but such change in
milestone date does not cancel or void the Warrant.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Milestone Months Cumulative Eng. Shares
From Funding Exercisable
Funding Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. DigiCop-1 Redesign $ 1,217,000 50,000
- ---------------------------------------------------------------------------------------------
2. DVB Compliant System Integration $ 2,051,540 50,000
- ---------------------------------------------------------------------------------------------
3. Ku Band Radio Production $ 3,279,653 75,000
- ---------------------------------------------------------------------------------------------
4. Availability of DVB Services $ 4,496,706 75,000
- ---------------------------------------------------------------------------------------------
6. Beta Test SatExpress $ 9,713,278 100,000
- ---------------------------------------------------------------------------------------------
7. Hub Production $11,267,098 75,000
- ---------------------------------------------------------------------------------------------
8. SatExpress Production $14,785,718 75,000
- ---------------------------------------------------------------------------------------------
</TABLE>
(c) This Warrant may not be exercised for a fraction of a share.
The right to exercise to purchase the individual share as described above
will expire 3 years after it becomes exercisable.
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Option Agreement
Page 1 of 4
<PAGE> 2
4. Rights of Survivorship. In the event of the warrantee's death, disability
or other termination of employment, other than cause, the rights to
exercise the warrants will be transferable to the warrantee's beneficiary
or other designatee defined by the warrantee.
5. Merger, Consolidation or Sale of Assets. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Company shall provide
Warrantee with written notice of such transaction not later than thirty
(30) days prior to the projected date of such transaction. Notwithstanding
the vesting provisions of Section 3(a)(b) above, after delivery of such
notice Warrantee may exercise this Warrant to the full extent. After
delivery of such notice, the warrantee can, upon providing notice,
accelerate vesting at 100% of the full value of the warrant on or prior to
the date of such transaction and may condition his exercise upon the
occurrence of the transaction. Whether or not so exercised, this Warrant
agreement shall terminate immediately upon the consummation of such
proposed sale, merger or offering.
6. Method of Exercise of Warrants. This Warrant shall be exercisable by
written notice which shall state the election to exercise the Warrant, the
number of Shares in respect of which the Warrant is being exercised, and
such other representations. Such written notice shall be signed by the
Warrantee and shall be delivered in person or by certified mail to the
Secretary of the Company or designee. The written notice shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied
by the exercise price at the fair market value at the time of exercise.
Exhibit A contains the form that should be used. No shares will be issued
pursuant to the exercise of an Warrant unless such issuance and such
exercise shall comply with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Warrantee on the date on which the Warrant
is exercised with respect to such Shares.
7. Method of Payment. Payment of the exercise price shall be by cash, check,
or delivery of Common Stock of the Company that has been vested by the
Warrantee. The value of such common stock shall have a fair market value at
least equal to the exercise price payable with respect to the exercise
hereof or any combination of such methods of payment.
8. Termination of Status as an Employee.
a) Termination without Cause: In the event of termination without
cause of the warrantee's status as an employee, the full value of this
warrant will be exercisable.
b) Termination with Cause. In the event of termination with cause of
Warrantee's status as an employee, he may, but only within one
hundred-eighty (180) days after date of such termination, exercise this
warrant to the extent that he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise this
warrant at the date of such termination, or if he does not exercise this
Warrant within the time specified herein, the Warrant shall terminate.
9. Disability of Warrantee. Notwithstanding the provisions of Section 8 above,
in the event of termination of Warrantee's status as an employee as a
result of disability, he may, but only within six months from the date of
termination of employment, exercise his Warrant to the extent he was
entitled to exercise it at the date of such termination. To the extent that
he was not entitled to exercise the Warrant at the date of termination, or
if he does not exercise such Warrant within the time specified herein, the
Warrant shall terminate.
10. Death of Warrantee. In the event of the death of Warrantee, the Warrant may
be exercised, at any time within six months following the date of death, by
Warrantee's estate, spouse or by a person who acquired the right to
exercise the Warrant by bequest or inheritance but only to the extent of
the right
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Warrant Agreement
Page 2 of 4
<PAGE> 3
to exercise that has accrued at the date of death of the Warrantee. To the
extent that Warrantee was not entitled to exercise the Warrant at the date
of his death, or if the Warrantee's estate or legatee does not exercise the
Warrant within the time specified herein, the Warrant shall terminate.
11. Transferability of Warrant. This Warrant may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Warrantee only by him. The terms of
this Warrant shall be binding upon the executors, administrators, heirs,
successors and assigns of the Warrantee.
12. Term of Warrant. This Warrant may not be exercised more than ten (10) years
from the date of grant of this Warrant, and may be exercised during such
term only in accordance with the Plan and the terms of this Warrant.
13. Early Disposition of Stock. Warrantee understands that if he disposes of
any Shares received under this Warrant within two years after the date of
this Agreement or within one year after such Shares were transferred to
him, he will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount generally
measured by the difference between the price paid for the Shares and the
lower of the fair market value of the Shares at the date of the exercise or
the fair market value of the Shares at the date of disposition. Warrantee
understands that if he disposes of such Shares at any time after the
expiration of such two-year and one-year holding periods, any gain on such
sale will be taxed as long-term capital gain.
Date of grant: November 1, 1998
AMERICAN MULTIPLEXER CORPORATION,
a California corporation
By: /s/ EDWARD TAN
----------------------------
Edward Tan, President/CEO
1998-99 American Multiplexer(TM) Corp. Confidential-Stock Warrant Agreement
Page 3 of 4
<PAGE> 1
[SATMEX LOGO] EXHIBIT 10.5
INTERIM AGREEMENT
The purpose of this Interim Agreement, dated September 1st, 1999, is to set the
terms and conditions of a temporary signal conduction via satellite service,
which shall enter into "Contract number 266-I for Rendering of the International
Service of Signal Conduction via Satellite through the Mexican Satellite System
("Sistema de Satelites Mexicanos"), entered into by and between American
Multiplexer ("AM") and Satelites Mexicanos S.A. de C.V. ("SATMEX").
"AMC" AND "SATMEX" hereby undertake to execute "Contract number 266-I for
Rendering of the International Service of Signal Conduction via Satellite
through the Mexican Satellite System ("Sistema de Satelites Mexicanos")
(hereinafter the "Contract"), for services beginning September 1st, 1999, within
thirty (30) days under the following conditions:
1. The parties agree to subscribe the Contract for 72 MHz capacity, on "Ku1"
band, on SATMEX 5 satellite, according to the schedule stipulated in point
3 below, with the understanding that the other technical, commercial and
legal specifications shall be stipulated in the Contract. Said Contract
will be signed no later than 30 calendar days from the date of signing of
this Interim Agreement, and will be based on mutually agreed terms and
conditions. If mutual agreement on the terms and conditions are not
reached within thirty days, contract will become null and void.
2. The term of the contract shall be five (5) years, counted from January
1st, 2000 (date on which the second transponder shall be taken).
3. "AMC" shall pay "SATMEX" for the service subject matter of the Contract,
the total amount of USD$19,059,600.00 (nineteen million fifty-nine
thousand six hundred 00/100 U.S. Dollars), according to the following
monthly payment schedule:
<TABLE>
<CAPTION>
===========================================================================================
BANDWIDTH (MHz) EIRP $US/MONTH $US/MHz
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From September 1st 1st transponder (36 MHz) Nominal $155,400.00 $4,316.66
1999, to December
31st, 1999
- -------------------------------------------------------------------------------------------
From January 1st, 1st and 2nd transponders Nominal $307,300.00 $4,268.05
2000, to December (72 MHz)
31st, 2005
===========================================================================================
</TABLE>
The above committed transponders will be reserved for "AMC" on the same
polarization.
During October and November, 1999, "AMC" will have one 24 MHz carrier in a
"Ku1" transponder and one 12 MHz carrier (Beta) in another "Ku1"
transponder. Both carriers must use their nominal EIRP.
4. "AMC" shall guarantee "SATMEX" fulfillment of its obligations for an
amount of USD$310,800.00, equivalent to two (2) monthly payments for the
first transponder.
This guarantee can be provided in the form of a cash deposit or
irrevocable standby Letter of Credit. In case of a standby Letter of
Credit, it must be issued by or confirmed by Citibank, New York.
--------------------
CLIENT'S INITIALS
--------------------
<PAGE> 2
[SATMEX LOGO]
The guarantee shall be due and payable to "SATMEX" upon the signing of the
formal Contract and valid through March 31st, 2005.
5. "AMC" must pay for service on or before the 15th day of each month for
which service is rendered, and by wire transfer to SATMEX bank account as
follows:
Beneficiary: Satelites Mexicanos, S.A. de C.V.
Citibank N.A., 111 Wall Street, 21st floor, 10043, New York
Account No.: 36184091
ABA No.: 021000089
6. "SATMEX" will extend validity of the proposal dated August 25th, 1999, for
a third, fourth and fifth additional transponder until November 15th,
1999. During this period, "SATMEX" will not reserve this capacity. The
capacity is subject to availability.
PROPOSAL: RAMP-UP SCHEDULE:
Transponder 3 Start 6/1/00: US$148,400
Transponder 4 Start 9/1/00: US$145,040
Transponder 5 Start 12/1/00: US$141,600
PROPOSAL GENERAL TERMS AND CONDITIONS:
A) It is required 60 days advance written notice confirming the start of
transponders 3, 4 and 5.
B) If transponders 3, 4 and 5 are not taken until such date, then a
penalty equal to five months per transponder will apply.
C) "AMC" must take all five transponders no longer than 12/31/00.
7. "AMC" will integrate space segment capacity into telecom solutions for
third parties within the international markets.
8. "AMC" may cancel the Contract or a part thereof, notifying this to
"SATMEX", in writing, at least thirty (30) working days in advance. In
such case, the cancellation or termination date shall be referred to a
calendar month (last day of the month).
In case it is "AMC" that cancels part of the capacity Contracted or
terminates this Interim Agreement before the end of the term in force
indicated in point 3 above, the latter shall pay to "SATMEX", in one single
payment and before the date notified by "AMC" has elapsed, the amount
resulting from the tariff corresponding on a monthly basis to Contracts at
one (1) year, for each month remaining to conclude the time period
originally agreed upon, not to exceed twelve (12) months.
In the assumption of partial cancellation, the aforementioned payment
shall be applied to the capacity affected.
<PAGE> 3
[LOGO OF SATMEX]
Advance cancellation or termination of a service does not release "AMC" from
previous indebtedness or moratory interest.
"SATMEX" reserves the right to assign the satellite capacity released due to
advance cancellation or termination to another interested party, as of the
day following the termination or cancellation date.
9. The legal documentation required for the signature of the Contact is as
follows:
- Article of Incorporation, duly notarized and with an Apostille seal.
- Power of attorney that stipulates the legal representative with powers
to sign the Contract, duly notarized and with an Apostille seal.
This Interim Agreement is signed in counterparts, each remaining in possession
of each party, in Mexico City, as of 9/1/99.
"SATMEX" "AMC"
/s/ Edward Tan
MR. JOSEPH DEL RIEGO Edward Tan
CHIEF OPERATING OFFICER CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR OTHER
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 DEC-31-1998
<CASH> 0 1,027 5,661 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 6,749 9,043 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 579,319 50,000 0
<CURRENT-ASSETS> 0 687,095 217,362 0
<PP&E> 0 63,369 504,384 0
<DEPRECIATION> 0 6,914 38,462 0
<TOTAL-ASSETS> 0 823,540 712,288 0
<CURRENT-LIABILITIES> 0 734,773 506,811 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 2,628,004 6,293,810 0
<OTHER-SE> 0 (2,539,237) (6,088,333) 0
<TOTAL-LIABILITY-AND-EQUITY> 0 823,540 712,288 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 0 0 0 0
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 412,914 2,542,437 3,664,657 6,107,094
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> (356,850) (2,539,237) (3,549,096) (6,088,333)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (356,850) (2,539,237) (3,549,096) (6,088,333)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (356,850) (2,539,237) (3,549,096) (6,088,333)
<EPS-BASIC> (0.02) (0.13) (0.16) (0.30)
<EPS-DILUTED> (0.02) (0.13) (0.16) (0.30)
</TABLE>
