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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SKYLYNX COMMUNICATIONS, INC.
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(Exact Name of Small Business Issuer in its Charter)
Colorado 84-1360029
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
103 Sarasota Quay, Sarasota, Florida 34236
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(Address of Principal Offices (Zip Code)
Registrant's telephone number, including area code: (941) 366-4747
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Registration Statement are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are thus prospective. Such statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. Such risks and uncertainties include, but are not
limited to, competitive pressures, changing economic conditions and other
factors, some of which will be outside of the control of the Company.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
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SkyLynx Communications, Inc. (the "Company" or "SkyLynx") is a
corporation formed in 1996 under the laws of the State of Colorado. The
objective of SkyLynx is to globally install and operate its high speed
Internet service and its two-way Community Area Networking ("CAN") systems to
interconnect and transport computer data and information within a given city;
connecting Local Area Networks ("LANs") together, between cities; and
connecting each city to other cities by using Wide Area Networks ("WANs").
The SkyLynx Network Programming Service ("City Network") is designed to be a
cost-effective computer communications solution available for businesses
worldwide.
The features of the SkyLynx system include asymmetrical data
transmission with simultaneous downstream speeds of up to 10 Megabits per
second (Mbps) and upstream speeds of 2.0 Mbps, competitive costs to competing
systems, total security of user data and information, the ability to utilize
existing microwave infrastructure and technologies for system access and data
transfer and on demand computer-to-computer video conferencing. Deployment of
the system can be undertaken through the formation of joint ventures, leases
and/or purchases of microwave facilities or channels and can take advantage of
local sales affiliates already present in targeted markets.
Management projects that each licensed microwave communication
facility can support a minimum of 2,100 router locations on a full-time basis.
Each router location supports up to 20 workstations. Moreover, technology is
readily accessible which will increase the number of routers served to a level
of 3,500-4,000 routers and the number of network connections by 10,000 to
15,000 per microwave facility.
The Company is currently developing the first two City Networks: a
symmetric system in the Tampa, Florida market using ISM band and an asymmetric
system in the Fresno, California market using a licensed microwave
communications facility. Each of those networks is expected to be deployed in
July 1998.
HISTORY AND BACKGROUND
- ----------------------
The Company was formed and organized under the laws of the State of
Colorado in September 1996 under the name "Allied Wireless, Inc." In 1997 the
Company consummated the acquisition of SkyLynx Express Holdings, Inc.
("SkyLynx Express"), which was then merged with and into the Company.
Subsequently in 1998, the Company changed its name to "SkyLynx Communications,
Inc." SkyLynx Express had been formed and organized by Network System
Technologies, Inc., a California corporation, ("NST") to become a wireless
data network services provider through the use of a proprietary high speed 2-
way wireless router product line. Prior to and subsequent to the acquisition
of SkyLynx Express, the Company has been actively involved in acquiring rights
to utilize FCC licensed spectrum in several metropolitan areas to support the
development and deployment of wireless network systems. Financing for these
activities has been provided through private offerings of the Company's
securities undertaken in reliance upon exemptions from the registration
requirements of the Securities Act of 1933, as amended, (the "Securities
Act"), contained in Regulation D thereunder. The Company is voluntarily
filing this Registration Statement in order to become a reporting company
under Section 13 of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") with the expectation that such status will enhance the
Company's opportunities to expand the deployment of networks into new markets
through the formation of license, partnership, joint venture and other
arrangements with third parties which control spectrum and potential
transmitter locations in those markets. To date, there exists no public
trading market for the Company's securities.
BUSINESS
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The Company is engaged in providing high-speed Internet access to
businesses through the use of wireless frequencies. Through a non-exclusive
license from Network System Technologies, Inc. ("NST"), the Company has
obtained the use of a unique high-speed 2-way wireless router product line
that has been developed by NST. The Company intends to form strategic
relationships with wireless operators to market its "SkyLynx Network"
initially to non-residential customers in the United States and
internationally.
INDUSTRY OVERVIEW
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Growth Of Internet Usage And Content
------------------------------------
The Internet, a network of hundreds of interconnected, separately-
administered public and commercial networks, has emerged as a
global communications medium enabling millions of people to share information
and conduct business electronically. During the past few years, the number
of Internet users, advertisers and content developers and businesses online
has grown dramatically. With readily-available, low-cost Internet
access, consumers and businesses are making increased use of Web browsers,
electronic mail, corporate intranets, telecommuting, online advertising and
electronic commerce. According to Jupiter Communications, the number of
Internet households worldwide will grow from an estimated 23.4 million in 1996
to 66.6 million by 2000. The Company believes that this growth in the number
of users will drive more substantial increases in Internet commerce,
which International Data Corporation ("IDC") estimates will grow from $318
million in 1995 to $95 billion in 2000. Increased Internet usage and the
availability of powerful new tools for the development and distribution of
Internet content have led to a proliferation of Internet-based services, such
as advertising, online magazines, specialized news feeds, interactive games
and educational and entertainment applications, that are increasingly
incorporating multimedia information such as video and near-CD- quality audio
clips. The Internet has the potential to become a platform through which
consumers and businesses easily access rich multimedia information and
entertainment, creating new sources of revenue for advertisers, content
providers and businesses. The growth of Internet advertising and commerce
depends, in part, on the ability of advertisers and online merchants to
deliver a compelling multimedia message to attract viewers and potential
customers. However, multimedia content and other data-intensive applications
require wide bandwidth.
The potential of the Internet as a medium for communication,
education, entertainment and commerce remains unfulfilled due to problems with
its performance and reliability. The Internet's performance limitations stem
from its basic architecture, which is not optimized for distribution of data-
intensive multimedia content. A limitation associated with any element in
the system, whether it is the "last-mile" connection to the user (the
"local loop"), the infrastructure of the Internet Service Provider ("ISP") or
the Online Service Provider ("OSP"), the Internet backbone or the content
provider's Web server, can result in performance bottlenecks that slow data
transmission speed to that of the weakest link. For example, dial-up users
frequently encounter busy signals upon attempting to connect to their ISP/OSPs
and are unable to access quality multimedia content readily due to the slow
speed of their analog modems. Performance limitations of the Internet
frustrate and discourage users from fully utilizing it as a convenient and
effective information tool, a compelling educational and entertainment
resource, or a way to purchase goods and services.
Several new technologies attempt to address the performance
problems of the Internet which increase the transmission speed of data across
the local loop.
- Improved Modem Offerings. In early 1997, dial-up modems offering
a peak data transmission speed of 56 kilobytes per second
("Kbps") were introduced for use with ISP/OSPs over existing
telephone lines, although many ISP/OSPs do not yet support
this transmission speed. The lack of a universal standard has
slowed the rate of adoption of faster modems.
- Telecommunications-Based Offerings. Integrated Services Digital
Network ("ISDN") technology enables a peak data transmission
speed of 128 Kbps between the user and the ISP/OSP over specially
conditioned telephone lines. Although ISDN technology has been
available for several years, it has not been widely deployed due
primarily to its high costs.
- Asymmetric Digital Subscriber Line ("ADSL") is currently the most
prominent implementation of Digital Subscriber Line ("xDSL")
technology, an emerging telecommunications protocol
originally developed to deliver video on demand. ADSL enables
peak data transmission speeds of 8.4 megabytes per second
("Mbps") downstream from the ISP/OSP to the user and 640
Kbps upstream from the user to the ISP/OSP; however, typical
implementations realize substantially lower data transmission
speeds. ADSL access is priced significantly above other access
services and is not expected to be widely available in the near
term.
- Satellite Offerings. Satellite-delivered approaches such as
direct broadcast satellite ("DBS") currently provide a peak data
transmission speed of approximately 400 Kbps downstream and rely
on dial-up modems and the telephony network for upstream
transmission ("telephone return"). These approaches have scaling
limitations due to the necessity of dividing a finite amount
of satellite bandwidth among subscribers in a broad geographic
area.
- Cable Offerings. Transmission of two-way signals over cable is
dependent on the availability of high-speed two-way hybrid fiber
coaxial ("HFC") cable. Although large cable system operators
have begun upgrading to HFC cable infrastructure, only a small
portion of existing cable plants in the United States have been
upgraded, and the Company believes that even less are capable of
high-speed two-way transmission. Peak data transmission speeds
across HFC cable approach 27 Mbps downstream and 10 Mbps
upstream.
The Wireless Industry
---------------------
The wireless industry has many facets to it and it has traditionally
been a very segmented industry with many niches such as cellular, paging,
data, private radio and subscription television, just to name a few. In
addition, the wireless industry can be segmented into two very distinct
groups, the mobile wireless industry and the fixed wireless industry. In
turn, the fixed wireless industry is mostly famous for backbone "trunk" links
for telephone networks and for the television networks. The subscription
television industry was begun in the late 1940s to serve the needs of
residents of predominantly rural areas having limited access to local off-air
VHF/UHF channels. The industry subsequently expanded to metropolitan areas
because, among other reasons, its systems were able to offer better reception
and more programming than local off-air VHF/UHF channels. Currently,
subscription television systems typically offer a variety of services
including basic service, enhanced basic service, premium service and, in some
instances, pay-per-view service. Typically, subscription television providers
charge customers an installation fee plus a fixed monthly fee for basic
service. Monthly fees constitute the major source of revenue for subscription
television providers.
Most subscription television systems are hard-wire cable systems
which currently use coaxial cable to transmit television signals, although
many have upgraded or are considering upgrading to fiber optic cable which
provides greater channel capacity than coaxial cable. Traditional hard-wire
systems have headends which receive signals for programming services, which
signals have been transmitted to the headend by local broadcast or satellite
transmissions. A headend consists of signal reception, decryption,
retransmission, encoding and related equipment. The operator then delivers
the signal from the headend to customers via an extensive network of coaxial
or fiber optic cable, amplifiers and related equipment. The use of a network
of coaxial cable inherently results in signal degradation and increases the
possibility of outages. Although fiber optic networks will substantially
reduce the transmission problems of coaxial cable systems and will expand
channel capacity, the installation of such networks will require a substantial
investment by hard-wire cable operators.
Like a traditional hard-wire cable system, a wireless system
receives programming at a headend. Unlike traditional hard-wire cable
systems, however, programming is then retransmitted by microwave transmitters
located on a tower or building to a small receiving antenna located at each
subscriber's premises. At the subscriber's location, the signals are
descrambled, converted to frequencies that can be viewed on a television set
and relayed to a subscriber's television set by coaxial cable. Because the
microwave frequencies used will not pass through trees, hills, buildings or
other obstructions, wireless systems require a clear line of sight ("LOS")
from the headend to a subscriber's receiving antenna. Many LOS obstructions
can be overcome with the use of signal repeaters which retransmit an otherwise
blocked signal over a limited area. Because wireless systems do not require
an extensive network of coaxial cable and amplifiers, wireless operators can
provide subscribers with a reliable signal having few transmission
disruptions, resulting in a television signal of a quality comparable or
superior to traditional hard-wire cable systems, and at a significantly lower
system capital cost per installed subscriber.
Wireless Data
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Wireless data is the most recent segment of the wireless industry.
There are many existing wireless data networks that cater to mobile data
users, but there aren't yet many wireless data networks that cater to fixed
site "broadband" data users. Only recently with the advent of the Internet
has there been strong demand for broadband networks. Now, fixed site,
wireless data networks are a viable alternative to high speed telephone lines,
cable TV or fiber optics. The reason "broadband" wireless data networks have
been slow to appear in the marketplace is that most corporate network business
users have relied primarily on high speed telephone lines to build their
networks. This is because, in the past, broadband wireless data links did not
have the availability, reliability and network management sophistication that
is needed to run corporate Intranet data networks.
THE COMPANY'S TECHNOLOGY
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The Company has a non-exclusive sub-license from NST to utilize a
proprietary high-speed 2-way wireless router product line that has been
developed by NST using technology that is acquiring the license from Hybrid
Networks, Inc. This 2-way wireless router operates with licensed frequencies
in the downstream direction and unlicensed, point-to-point, spread spectrum
wireless links in the upstream direction. For phase one of this 2-way
wireless product, NST is working with a third party to manufacture hardware
for immediate availability. The Company believes that the second phase of
this product line will be manufactured by Hybrid Networks, among others. NST
is doing most of the non-recurring engineering work for the product line.
This 2-way wireless router offers advantages over wireless system
operators that do not offer 2-way wireless configurations. The wireless
router provides a shared 10Mbps service in the downstream direction with
shared and/or dedicated 2.0 Mbps wireless links in the upstream direction.
This means that a subscriber to the Company's system, which the Company calls
the "SkyLynx Network," will enjoy high-speed connectivity for many
applications. The high speed downstream channel is ideal for high speed
Internet access and also for high speed access to digital content on
centralized servers, host computers and/or databases. The upstream wireless
channels are fast enough to support the uploading of digital information and
for full-duplex video conferencing applications.
In the future, the Company will look for other manufacturers and
technologies to augment these 2-way wireless products to offer more choices to
its subscribers and to help scale the networks. Additionally, the Company is
reviewing plans to market a point-to-point microwave wireless link that would
be used to interconnect larger information/content providers and larger
corporate office networks to the Company's distribution centers and Internet
points-of-presence ("PoPs"). This product would also be used in the backbone
side of a broadband wireless network to interconnect various cell-sites to the
PoPs. The Company is also reviewing a plan to add certain local multipoint
distribution service ("LMDS") products to some of its high density cells in
regions in which it can gain access to such frequencies. But, in regions
where the Company cannot get access to licensed frequencies (LMDS or other
licensed frequencies), the Company is also considering other higher frequency
symmetric wireless routers that operate only on unlicensed frequencies (e.g. 5
Ghz). Finally, the Company will develop products that will help it deploy
these broadband wireless data networks in apartments, hotels, condominiums
and other residential or commercial buildings that have large concentrations
of professional workers.
The Company anticipates that it will receive some revenue from
selling the wireless router products to subscribers. However, the Company
believes it will generate most of its revenue from service fees collected for
connection to the SkyLynx Network. Network fees will depend on the end-user
services being contracted for. These fees will be shared with the Company's
strategic partners on a case-by-case basis as those relationships are formed
in various geographical markets.
PLAN OF OPERATION
- -----------------
The Company will offer secure and reliable Internet and Intranet
access through wireless frequencies, using its wireless router, directly to
end-users, as well as through connections to corporate local area networks,
which will provide companies the ability to create virtual private networks.
The Company expects that many of its services will be highly transferable to
international markets, recognizing that some degree of localization of content
will be essential to achieving success. The SkyLynx Network will be scalable,
enabling it to provide sustainable high performance as usage increases. In
order to shorten time to market for wireless operators and other frequency
holder RBU partners, the Company provides a turnkey solution, which includes
or will include not only a technology platform, but also a national
brand, marketing, customer service and billing. This solution will enable
wireless operators and RBU partners to leverage their infrastructures to
deliver high-bandwidth, interactive data services that represent significant
new revenue opportunities.
The Company plans to form strategic relationships with wireless
operators, broadcasters, and wireless frequency holders. As relationships are
developed with these persons, the Company will seek to establish Regional
Business Units ("RBU"s) that will market and sell the SkyLynx wireless data
network "brand name" in their respective territories. Those RBUs, with the
assistance of NST, will be able to deploy turn-key systems to customers
quickly, efficiently, and relatively inexpensively.
The Company will own a significant percentage of the recurring
revenues of each system, depending on who pays for equipment and its initial
installation, local sales, and who owns the spectrum, among other things.
RBUs will be staffed with individuals organized into specialized
teams consisting of an experienced account lead, who will manage varied
customers within the RBU service area and who will be the individual most
accountable to the RBU management for revenue growth and profitability. Each
account lead will be supported by network services specialists, customer
premises management specialists, and content/application specialists,
depending on the size of the service area and the resources available to the
RBU management. The account lead, network services and content/application
tooling specialists will normally be employed by the RBU; whereas the customer
premises management specialist will normally employed by an affiliate
organization.
Infrastructure of RBU's
-----------------------
NST will provide system integration services to fully deploy turn
key asymmetric networks, quickly, efficiently, and cost-effectively. It will
provide system design and installation, network deployment and testing, and
initial end user beta site installations. Once the system has been fully
deployed, NST will provide support on adds, moves and changes to the
subscriber database. The installed systems will be monitored from NST's
Network Operations Center ("NOC"). The NOC is a network management center
that will primarily be used to monitor, control and troubleshoot the wireless
networks from a centralized location. The NOC will also maintain the
integrity of databases of various network elements (e.g., routers and
servers). The NOC is located in San Jose, CA. Subject to a critical mass of
use being achieved, NST will staff the NOC 7 days a week and 24 hours per day
in order to provide full-time network support services to wireless operators
and other regional support centers.
Vertical Markets
----------------
In addition to the forming of strategic partnerships and RBUs, the
Company will target certain vertical markets at the RBU level to which it
plans to sell its network services and to offer information products which
will be developed by the Company to meet the needs of those markets. The
Company believes that the following types of customers would be able to
utilize a network that the Company could provide. Accordingly, the Company
initially plans to focus its marketing efforts on the following groups of
customers:
- telecommuters - individuals that usually work in an office
environment for a business or an institution and either extend
their working day by continuing to work at home with personal
computers, or completely substitute working at home for going to
the office; e.g. persons employed by high technology firms that
wish to provide their employees with remote computing
capabilities similar to those available to them in their primary
workspaces;
- medium size and small businesses - small branch or field offices
of a business or institution which is most productive when the
staff has full access to the computer networks of the
headquarters office; e.g. insurance adjusters wishing to search
their company's claims databases from their sales offices, or a
bank researching a credit history, or an institutional buyer
tying in to large product databases;
- businesses that require frequent and timely updates of large
software modules; e.g., sales offices and major customers of
software companies, where the ability to quickly distribute
updates and to de-bug software has become increasingly important
as businesses become more and more dependent on software supplied
and supported by outside vendors;
- businesses that need to access large amounts of data, quickly and
efficiently, from locations remote to the source; e.g.,
hospitals, healthcare providers and managers, universities and
other educational and training facilities, and government
agencies.
The Company foresees the demand for better networking of
professional users to increase steadily over the next decade. The growing
need for such "Information Superhighways" is demonstrated by the current US
Administration's National Information Infrastructure (NII) initiatives.
Indeed, many large cities are considering legislation that would force
companies to provide alternatives to the traditional one-car-one-person
commuting. Networks and services that give these companies alternatives to
the traditional commute, while satisfying legislative mandates, are extremely
valuable.
NETWORKS UNDER DEVELOPMENT
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Tampa Network
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The Company has entered into an agreement with an affiliate of a
national broadcast network facilities operator covering the greater Tampa Bay
metropolitan area. Under the terms of the agreement, the Company has leased
all excess capacity and agreed to develop a network system linking all
American Red Cross offices located in the Tampa, Florida metropolitan area
using the shared community broadband network. The initial network linkage to
the American Red Cross will also permit the network to service the
requirements of at least seven major medical facilities in the greater Tampa
Bay area or 500 to 900 business users.
Under the terms of the agreement, the Company will provide all
funds, equipment, engineering, sales, marketing, legal and related expenses to
engineer, install, deploy and operate the network system. The geographical
area which will be covered by the network extends from Brooksville, Florida in
the north to Naples, Florida in the south. This area has a general population
of approximately 3,000,000 persons with 50,000 or more potential business
users. Under the terms of the excess capacity lease, the Company has agreed
to pay the facilities operator a royalty equal to 20% of all network revenues.
To date, the Company has completed the engineering for the Tampa
network which will initially consist of three cell sites being constructed
near the American Red Cross facilities in the Tampa metropolitan area. The
network is expected to be completed and deployed in July 1998. As currently
configured, the Tampa network will be initially an intranet 2-way wireless
symmetric system with two megabyte capability in both the upstream and
downstream modes. This system will operate on unlicensed frequencies
initially.
Fresno Network
--------------
The Company has acquired a 96% net revenue lease covering two MDS
channels in the Fresno, California market. The leases cover two FCC licenses
for microwave spectrum in these markets which the Company acquired in
consideration of the issuance of 50,000 shares of common stock and the
agreement to issue in the future an additional 25,000 shares of common stock,
subject to the Fresno network achieving annual net income for a full fiscal
year of at least $835,000. The lease requires payment of approximately
$47,000 per year to maintain in full force and effect.
Utilizing the FCC licenses held under the foregoing lease
assignment, the Company has completed engineering and has begun construction
of the Fresno network, which is also expected to become completed and deployed
in July 1998. As originally configured, the Fresno network will consist of a
2-way asymmetric wireless system utilizing both licensed and unlicensed
frequencies. With the unlicensed frequencies, the Company's system will offer
two megabyte capability in both the upstream and downstream modes; while
utilizing the licensed frequency of the Company will be able to upgrade the
downstream capability to 30 megabytes per second per channel. The Company
currently has arrangements with approximately 30 beta site users for the
Fresno network.
THE MICROWAVE COMMUNICATIONS INDUSTRY
- -------------------------------------
The microwave communications infrastructure, as it is still utilized
today to provide private backbone services for only a small number of major
customers in our cities, is poised for rapid growth as new technologies from
SkyLynx and others are making the sharing of these very dynamic facilities by
large groups of customers affordable. For example, until the early 1980's,
the U.S. long distance network was carried exclusively over private microwave
facilities. SkyLynx permits the conversion of these facilities to digital
transmission formats that include shared computing network architectures.
In the 50 largest markets of the U.S., 33 shareable analog channels,
among others, are authorized for conversion by the Federal Communications
Commission. In the smaller markets, 32 are available. Each of these channels
is 6 Megahertz ("MHZ") in bandwidth. Persons and entities that control this
spectrum in the larger and medium sized markets do not often have sufficient
resources to operate as a full service provider.
In addition to microwave spectrum lease agreements with existing
facility operators, SkyLynx will also implement two additional strategies that
will allow the Company to achieve rapid deployment of its high-speed data
access services. The first strategy involves the use of both the Industrial,
Scientific and Medical (ISM) bandwidth and the National Information
Infrastructure (NII) bands. The second strategy involves the creation of
other strategic experimental bands, by working with the FCC to expand the
allocation of certain spectrum for high-speed (broadband) Internet access
services.
There are several bands of spectrum that have been allocated by the
FCC to be used for unencumbered data transmission. The most popular of those
bands are in the 900 MHZ, 2.4 GHz and 5 GHz bands. Specifically, at 2.4 GHz,
the FCC allocated 83 MHZ of bandwidth for ISM operation. The modulation
schemes approved for these ISM bands are known as "spread spectrum" modulation
techniques and they include both frequency hopping and direct sequence spread
spectrum techniques.
Given these circumstances, SkyLynx has identified many opportunities
for joint ventures with existing operators to build and operate two-way high-
speed asymmetric data networks using these facilities.
There are many existing low speed data networks that cater to mobile
data users, but few microwave data networks that cater to fixed site
"broadband" computing network users. Only recently with the advent of the
Internet has there been strong demand locally for broadband computing
networks. Now, fixed site, microwave data networks are a viable alternative
to high-speed telephone, CATV cable or fiber optic facilities. The primary
reason broadband wireless data networks have been slow to appear in the
marketplace is that most corporate network business users have so far relied
on high speed telephone lines to build their wide area computing networks.
This is due to the fact that broadband microwave data links did not have the
availability, reliability and network management sophistication that is needed
to run most corporate Intranet data networks.
Direct Microwave Facilities Purchases and Leases
------------------------------------------------
The owners of microwave facilities who decide to rely exclusively on
SkyLynx 's expertise to operate the resulting asymmetric data network, are the
most likely candidates to be strategic business partners of SkyLynx. These
microwave operators become joint owners of the RBUs that are formed to offer
our network services in the various cities. Candidates include existing
owners of commercial MDS, MMDS, ITFS, VHF, UHF or LPTV microwave facilities,
who want to get into the data networking business with SkyLynx. SkyLynx is
currently negotiating with many of these individuals and organizations that
want to participate in building City Networks by SkyLynx.
Competition
-----------
As the Company has only a non-exclusive license to use the NST 2-way
asymmetric wireless technology and no agreement or commitment from NST to
limit or restrict the grant to third parties of the same or similar license
rights, the Company must compete not only with NST and other potential NST
licensees, but also with other entities using competitive technologies and
telecommunication media. As a result, the Company must rely upon a "first to
the market" approach to competing successfully, of which there can be no
assurance.
The markets for consumer and business Internet services and on-line
content are extremely competitive, and the Company expects that competition
will intensify in the future. The principal competitive factors in this
market include product performance and features (including speed of
transmission and upstream transmission capabilities), reliability, price, size
and stability of operations, breadth of product and service lines, technical
support and service, strategic relationships and standards compliance and
general industry and economic conditions. Certain of these factors are
outside of the Company's control. The existing conditions in the high speed
network connectivity market could change rapidly and significantly as a result
of technological changes and the development and market acceptance of
alternative technologies could decrease the demand for the Company's networks
or render them obsolete. Similarly, the continued emergence or evolution of
industry standards or specifications may put the Company at a disadvantage in
relation to its competitors.
The Company's most direct competitors are Internet service providers
("ISPs"), national long distance carriers and local exchange carriers
("TelCos"), other wireless service providers, on-line service providers
("OSPs") and operators in the cable-based services market. Many of these
competitors are offering (or may soon offer) technologies that will attempt to
compete with some or all of the Company's high speed data service offerings.
Such technologies include Integrated Services Digital Network ("ISDN") and
Digital Subscriber Line ("xDSL"). The factors affecting competition in these
markets include transmission speed, reliability of service, ease of access,
price/performance, ease of use, content quality, quality of presentation,
timeliness of content, customer support, brand recognition, operating
experience and revenue sharing.
ISPs provide basic Internet access to residential consumers and
businesses, generally using existing telephone network infrastructures. This
method is widely available and inexpensive. Barriers to entry are low,
resulting in a highly competitive and fragmented market.
Long distance inter-exchange carriers have deployed large-scale
Internet access networks and sell connectivity to business and residential
customers. The regional Bell operating companies ("RBOCs") and other local
exchange carriers have also entered this field and are providing price
competitive services. Many of such carriers are offering diversified packages
of telecommunications services, including Internet access service, to
residential customers and could bundle such services together, which could
place the Company at a competitive disadvantage.
Other wireless service providers, including AT&T and Hughes Network
Systems, are developing wireless Internet connectivity, such as multi-channel,
multi-point distribution service, local multi-point distribution service and
digital broadcast satellite.
OSPs that provide, over the Internet and on proprietary online
services, content and applications ranging from news and sports to consumer
video conferencing. These services are designed for broad consumer access
over telecommunications-based transmission media, which enables the provision
of data services to the large group of consumers who have personal computers
with modems.
The Company's competitors in the cable-based services market are
those cable companies that have developed their own cable-based services and
market those services to unaffiliated cable system operators that are planning
to deploy data services. Several cable system operators, including
Telecommunications, Inc. ("TCI"), Time Warner, Inc. ("Time Warner") and the
Continental Cablevision subsidiary of US West, Inc. ("US West") have deployed
high speed Internet access services over their existing local HFC cable
networks.
Many of the Company's competitors and potential competitors have
substantially greater financial, technical and marketing resources, larger
subscriber bases, longer operating histories, greater name recognition and
more established relationships with advertisers and content and application
providers than the Company. Such competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and
devote substantially more resources to developing Internet services than the
Company. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competitive
pressures faced by the Company will not materially adverse effect the
Company's business, operating results or financial condition. In particular,
it is possible that the perceived high speed access advantage provided by
cable may be undermined by the need to share bandwidth, which results in the
reduction in individual throughput speeds. In addition, the emergence or
evolution of industry standards, through either adoption by official standards
committees or widespread use by cable system operators, other broadband
wireless system operators or TelCos, could require the Company to redesign its
products, resulting in delays in the introduction of products and services.
Product Development and Engineering
-----------------------------------
The Company's product development and engineering efforts focus on
the design and development of new technologies and products to increase the
speed and efficiency of the network and to facilitate the development and
distribution of broadband communications. The principal areas of current
product development and engineering include:
- enhancing techniques to improve network performance and
efficiency;
- advancing multi-casting technologies to provide efficient
transport of "one-to-many" content;
- developing advertisement targeting and content personalization
systems to fit desired subscriber profiles;
- developing virtual private network technology solutions to enable
secure and scalable end-to-end telecommuting and commercial
services over the network;
- enhancing the Company's advanced network management capabilities
to identify and address network performance issues before they
affect user experience.
Under the Company's General Operating Agreements with NST, the
Company plans to be the beneficiary of much of the product development and
enhancement undertaken by NST to improve performance. The Company also plans
to retain engineers and other computer experts to further enhance and develop
its technologies internally, although to date the Company has engaged in no
internal product development.
Intellectual Property
---------------------
The Company regards its licensed technology, while non-exclusive, as
proprietary and attempts to protect it with copyrights, trademarks, trade
secret laws, restrictions on disclosure and other methods. The Company also
generally enters into confidentiality or license agreements with its employees
and consultants, and generally controls access to and distribution of its
documentation and other proprietary information. Despite these precautions,
as the Company has only a non-exclusive right to use the NST technology and no
commitment or agreement from NST to limit or restrict the grant of similar
rights to third parties, it is probable that the Company will be forced to
compete directly with other potential NST licensees as well as those offering
competitive technologies. In addition, effective copyright, trademark and
trade secret protection may be unavailable or limited in certain foreign
countries, and the global nature of the Internet makes it virtually impossible
to control the ultimate destination of the Company's content offerings.
Policing unauthorized use of the Company's content offerings is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its technology. In addition, litigation
may be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity
and scope of the proprietary rights of others. Such litigation could result
in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company may receive in the future, notice of claims of
infringement of other parties' proprietary rights, including claims for
infringement resulting from the downloading of materials by the online or
Internet services operated or facilitated by the Company. There can be no
assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any assertions or prosecutions will not
materially adversely affect the Company's business, operating results and
financial condition. Irrespective of the validity or the successful assertion
of such claims, the Company would incur significant costs and diversion of
resources with respect to the defense thereof, which could have a material
adverse effect on the Company's business, operating results and financial
condition. If any claims or actions are asserted against the Company, the
Company may seek to obtain a license under a third party's intellectual
property rights. There can be no assurance, however, that under such
circumstances a license would be available on commercially reasonable terms,
or at all.
Employees
---------
As of May 31, 1998, the Company had eight employees, consisting of
its President, Executive Vice President, Executive Vice President of Sales and
Marketing, General Counsel, three employees involved in developing the Fresno
network, and one administrative assistant. The Company considers its
relations with its employees to be good. The Company's ability to achieve its
financial and operational objectives depends in large part upon the continued
service of its senior management and key technical personnel and its
continuing ability to attract and retain highly qualified technical and
managerial personnel. Competition for such qualified personnel in the
Company's industry is intense.
Facilities
----------
The Company is headquartered in facilities consisting of
approximately 1,250 square feet in Sarasota, Florida, which the Company
occupies under a five year lease. The Company also maintains a satellite
office in San Jose, California consisting of 500 square feet which it occupies
under a one year lease. The San Jose office is the headquarters for the
Company's West Coast operations. The Company anticipates that its existing
facilities are adequate for the foreseeable future. The Tampa facility has a
multi-year lease and occupies 3,000+ square feet of office space.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in this
report.
REVERSE SPLIT
- -------------
Unless otherwise stated, all share and per share information
contained in this Registration Statement gives retroactive effect to a 1-for-
13 reverse split of all outstanding shares of common stock which was effected
on January 23, 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Since its inception, the Company has relied principally upon the
proceeds of private equity financings to provide working capital. The Company
has not generated any revenues from operations to date. During the year ended
December 31, 1997, the Company sold an aggregate of 781,805 shares of its
Common Stock in private offerings realizing proceeds, net of offering
expenses, of $963,227. The Company is currently undertaking a private
offering of units ("Units"), each Unit consisting of one share of the
Company's Series A Convertible Preferred Stock and two Common Stock Purchase
Warrants (the "1998 Private Offering"). The Company has received and accepted
subscriptions to purchase an aggregate of 279,600 Units representing gross
subscription proceeds of $1,118,400. The Company intends to continue the 1998
Private Offering up to a maximum of 3,750,000 Units or maximum gross proceeds
of $15,000,000. However, there can be no assurance that the Company will be
successful in its efforts to sell additional Units in the 1998 Private
Offering.
At March 31, 1998, the Company had total assets of $907,408. The
assets consisted of cash of $250,807 and communications and related equipment
of $554,414, net of depreciation.
Total liabilities at March 31, 1998 were $503,884, consisting of
accounts payable in the aggregate amount of $388,882, or 79.2%, and a note
payable to a third party in the amount of $100,000.
Stockholders' equity at March 31, 1998 was $403,524. The Company
will require working capital for the acquisition of licensed or leased
wireless spectrum as well as the deployment of one or more wireless data
networks. The precise timing of the Company's future capital requirements
cannot accurately be predicted. The Company will require additional financing
including, but not limited to, the sale of equity or debt securities in the
future. The Company has no commitments for any additional financing in the
1998 Private Offering or otherwise and there can be no assurance that such
commitments can be obtained. Any additional equity financing may be dilutive
to the Company's existing stockholders and debt financing, if available, may
involve pledging some or all of the Company's assets and may contain
restrictive covenants with respect to raising future capital and other
financial and operational matters. If the Company is unable to obtain
additional financing as needed, the Company may be required to reduce the
scope of its operations, which would have a material adverse effect upon the
Company's business, financial condition and results of operation.
RESULTS OF OPERATIONS
- ---------------------
The Company has realized no revenues from continuing operations.
For the period ending March 31, 1998, the Company's activities were
limited to completing the acquisition of SkyLynx Express and efforts to
purchase or otherwise acquire wireless frequencies for use in connection with
the development and deployment of 2-way wireless data networks, and
preliminary development of the Tampa and Fresno networks. These activities
resulted in a net loss for the period of $269,816 for the consolidated
entities.
Subject to the Company being successful in its efforts to raise
additional working capital of which there can be no assurance, future revenues
will depend upon its ability to acquire wireless frequencies and construct and
deploy high-speed two-way wireless networks in one or more markets. There can
be no assurance that these efforts will be successful.
NET OPERATING LOSS CARRYFORWARDS
- --------------------------------
At December 31, 1997, the Company had a net operating loss
carryforward for income tax purposes of approximately $2,200, which expires
beginning in 2012. Under the Tax Reform Act of 1986, the amounts of and the
benefits from net operating loss carryforwards are subject to certain
limitations in the amount of net operating losses that the Company may utilize
to offset future taxable income.
EARNINGS PER SHARE
- ------------------
In February 1997, the Financial Accounting Standards Board issued
SFAS 128, "Earnings Per Share." SFAS 128 establishes new standards for
computing and presenting earnings per share ("EPS"). Specifically, SFAS 128
replaces the currently required presentation of primary EPS with a
presentation of basic EPS, requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures, and requires a reconciliation of the numerator and denominator of
the basic and diluted EPS computations to the financial statements issued for
periods ending after December 15, 1997, and early application is not
permitted. Upon adoption, SFAS 128 requires restatement of prior period EPS
presented to conform to the requirements of SFAS 128. Management believes the
adoption of SFAS 128 will not have a material effect on the Company's
previously-issued financial statements.
COMPREHENSIVE INCOME
- --------------------
In June 1997, the Financial Accounting Standards Board issued SFAS
130, "Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expense, gains, and losses) in a full set of general purpose financial
statements. Specifically, SFAS 130 requires that all items that meet the
definition of components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. However, SFAS 130 does not specify when to recognize or how to
measure the items that make up comprehensive income. SFAS 130 is effective for
fiscal years beginning after December 15, 1997, and early application is
permitted. SFAS 130 requires reclassification of financial statements for all
periods presented for comparative purposes. Management believes the adoption
of SFAS 130 will not have a material effect on the Company's future financial
statements.
REPORTING FOR SEGMENTS
- ----------------------
In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Financial Reporting for Segments of a Business Enterprise." SFAS 131
supersedes the "industry segment" concept of SFAS 14 with a "management
approach" concept as the basis for identifying reportable segments. SFAS 131
is effective for fiscal years beginning after December 15, 1997, and early
application is permitted. Management believes the adoption of SFAS 131 will
not have a material effect on the Company's future financial statements.
THE YEAR 2000 ISSUE
- -------------------
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. Based upon a
recent assessment, the Company has made a preliminary determination that it
may be required to upgrade or replace certain portions of its software so that
its computer systems will properly utilize dates beyond December 31, 1999.
The Company presently believes that with upgrades of existing software and
conversions to new software, the Year 2000 Issue can be mitigated. However,
if such upgrades and conversions are not made, or are not completed or
available timely, the Year 2000 Issue could have a material impact on the
operations of the Company. Furthermore, the Company has yet to initiate
formal communications with its significant suppliers and large customers to
determine the extent to which the Company is vulnerable to those third
parties' failure to remediate their own Year 2000 Issue. As a result, there
can be no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company. In view of
the foregoing, there can be no assurance that the Year 2000 Issue will not
have a material adverse effect upon the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The Company has no ownership interest in any real or personal
property. The Company currently maintains its corporate offices at 103
Sarasota Quay, Sarasota, Florida 34236. This facility consists of
approximately 1,250 square feet and is occupied under a five year lease,
subject to the Company's right to enter into a five year lease convering the
same premises. The Company also maintains a satellite office in San Jose,
California consisting of 500 square feet which it occupies under a one year
lease. The Company anticipates that its existing facilities are adequate for
the foreseeable future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this Registration
Statement, the number of shares of the Company's Common Stock owned by (i)
each person who owned of record, or was known to own beneficially, more than
five percent (5%) of the Company's outstanding shares of Common Stock,
(ii) each of the Company's current directors and executive officers and (iii)
all of the Company's current directors and executive officers as a group:
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Name & Address of Owner(4)(5) Owned Ownership(1)(2)
- ----------------------------- ------------ --------------
<S> <C> <C>
Gary L. Brown 2,594,231 28.8%
Joseph F. Morgan 1,009,615 11.2%
Eduardo J. Moura(3) 1,923,077 21.3%
William J. Chastain 480,769 5.3%
Frank P. Ragano 60,128 0.7%
Kenneth L. Marshall 230,769 2.6%
Network System Technologies, Inc.(3) 1,923,077 21.3%
55 South Market Street
San Jose, California 96112
All Directors and Officers as a
Group (6 Persons) 6,298,589 71.8%
</TABLE>
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them within sixty (60) days of the date of
this Registration Statement are treated as outstanding when determining
the percent of the class owned by such individual and when determining
the percent owned by the group.
(2) Assumes the conversion of all Preferred Stock sold in the 1998 Private
Offering into an equal number of shares of Common Stock.
(3) Network System Technologies, Inc. ("NST"), a California corporation, is
the record owner of the subject shares. Voting and investment power with
respect to such shares is exercised by the NST Board of Directors which
is comprised solely of Eduardo J. Moura, Tony Colheo and J.R. Gallucci.
Mr. Moura disclaims beneficial ownership of such shares for purposes of
Section 16 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(4) Unless otherwise noted, each person's address is c/o SkyLynx
Communications, Inc., 103 Sarasota Quay, Sarasota, Florida 34236.
(5) Each shareholder exercises the sole investment and voting power with
respect to their shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
The name, position with the Company, age of each Director and
executive officer of the Company is as follows:
<TABLE>
<CAPTION>
Name Age Position (1)
- ---- ---- ------------
<S> <C> <C>
Gary L. Brown 50 President and Director
Joseph F. Morgan 51 Executive Vice President and Director
Eduardo J. Moura 39 Director
William J. Chastain 36 Executive Vice President of Sales and
Marketing and Director
Frank P. Ragano 69 Director
Kenneth L. Marshall 58 Secretary and General Counsel
</TABLE>
- -----------------------
(1) There exists no family relationship between any officer or director.
Gary L. Brown is President and Chairman of the Board and original
founder of Allied Wireless, Inc. Mr. Brown has been in the securities
industry since 1973 as a registered securities principal. Mr. Brown attended
Central Missouri State University from 1967 to 1972 and currently resides in
Sarasota, Florida.
Joseph F. Morgan is Executive Vice President, Director and serves as
Chief Financial Officer. Mr. Morgan received his B.S. degree in Accounting
from Kings' College in 1968 and an M.B.A. degree in Finance from Temple
University in 1976. Mr. Morgan started his business career in 1968 with the
international public accounting firm of Arthur Andersen & Company and
subsequently served as a senior level financial officer for several publicly
listed companies. Mr. Morgan has been a CPA since 1972 and for ten years
served as an Associate Professor of Finance and Management at Temple
University, Monmouth University and several other northeastern universities.
For the past twelve years, Mr. Morgan has managed his own CPA firm and has
specialized in assisting development stage companies become operational.
William J. Chastain is Director and Executive Vice President of
Sales and Marketing of SkyLynx. He was formerly an affiliate of Network
System Technology, Inc. ("NST"). He heads up the West Coast Headquarters of
SkyLynx, located in San Jose, CA. He has over 17 years of experience in the
computer communications and data networking industry. He holds a degree in
Electrical Engineering from the University of Florida and also holds numerous
high achievement awards from the companies to whom he has provided his
professional services during his career. Prior to his work with NST, Mr.
Chastain was employed with Tektronix, Inc., NCR Corporation and IKOS Systems,
Inc. He is a member of the World Forum of Silicon Valley and the Institute of
Electrical and Electronics Engineers.
Eduardo J. Moura, Director, is the founder of Network System
Technologies, Inc. and a founder of Hybrid Networks, Inc. He began his career
in communications networking at Racal Vadic as well as at BNR. While employed
with Sytek Corporation, he was a leader in the evolution of digital
transmission over cable TV networks. While employed at Excelan Corporation,
he led many projects in local area networking which were directly related to
the evolution of TCP/IP and the Internet into the commercial sector.
Following his employment with Excelan and prior to founding Hybrid Networks,
Inc., Mr. Moura was a principal and founder of Halley Systems and Network
Application Technologies, two start-up Silicon Valley companies. During this
period of time his primary focus was in the internet working field. As
founder of Hybrid Networks, Inc. and NST, Mr. Moura has been involved in the
technological formation of the new Metropolitan Area Networking industry. He
holds a patent for the "asymmetric networking-remote link adapters" as well as
a patent on the "Hybrid Access System." He has published numerous articles in
networking industry magazines. Mr. Moura is a graduate of Santa Clara
University with a BSEE-CS degree, which he received in 1980.
Frank P. Ragano, Director; Major General, U. S. Army (Ret.); Mr.
Ragano is President and CEO of CMS, Inc., a wholly owned subsidiary of
Daimler-Benz GmbH. He graduated with a B. S. degree from Duquense University
in 1950 and later graduated with a Master of Business Administration (MBA),
Syracuse University, New York. After his well-decorated career in the
military, Mr. Ragano retired from active Army service and became Vice
President of the American Defense Preparedness Association; Chairman and CEO
of BEI Defense Systems Company.
Kenneth L. Marshall is Secretary and General Counsel; member of the
Florida Bar, he has practiced law in Sarasota, FL since April, 1972. Mr.
Marshall was the President and Director of a microwave communications company
for the last four and one-half years.
Each director is elected to serve for a term of one year until a
successor is duly elected and qualified.
The executive officers of the Company are elected annually at the
first meeting of the Company's Board of Directors held after each annual
meeting of stockholders. Each executive officer will hold office until his
successor is duly elected and qualified, until his resignation or until he
shall be removed in the manner provided by the Company's By-Laws.
During the fiscal year ended December 31, 1997, the Company had no
standing Audit Committee. The Company plans to form an Audit Committee during
the current fiscal year. No member of the Audit Committee receives any
additional compensation for his service as a member of that Committee. The
Audit Committee is responsible for providing assurance that financial
disclosures made by management reasonably portray the Company's financial
condition, results of operations, plan and long-term commitments. To
accomplish this, the Audit Committee oversees the external audit coverage,
including the annual nomination of the independent public accountants, reviews
accounting policies and policy decisions, reviews the financial statements,
including interim financial statements and annual financial statements,
together with auditor's opinions, inquires about the existence and substance
of any significant accounting accruals, reserves or estimates made by
management, reviews with management the Management's Discussion and Analysis
section of the Annual Report, reviews the letter of management Representations
given to the independent public accountants, meets privately with the
independent public accountants to discuss all pertinent matters, and reports
regularly to the Board of Directors regarding its activities.
The Company plans to form a Compensation Committee during fiscal
1998. No member of the Compensation Committee will receive any additional
compensation for his service as a member of that Committee. The Compensation
Committee will be responsible for reviewing pertinent data and making
recommendations with respect to compensation standards for the executive
officers, including the President and Chief Executive Officer, establishing
guidelines and making recommendations for the implementation of management
incentive compensation plans, reviewing the performance of the President and
CEO, establishing guidelines and standards for the grant of incentive Stock
options to key employees under the Company's Stock Incentive Plan, and
reporting regularly to the Board of Directors with respect to its
recommendations.
There are no family relationships among Directors or persons
nominated or chosen by the Company to become a Director, nor any arrangements
or understandings between any Director and any other person pursuant to which
any Director was elected as such. The present term of office of each Director
will expire at the next annual meeting of stockholders.
During the fiscal year ended December 31, 1997, outside Directors
received no cash compensation or other remuneration for their services as
such, however they were reimbursed their expenses associated with attendance
at meetings or otherwise incurred in connection with the discharge of their
duties as Directors of the Company.
Directors who are also executive officers of the Company receive no
additional compensation for their services as Directors.
There are no material proceedings to which any director, officer or
affiliate of the Company, or any owner of record or beneficiary of more than
five percent (5%) of any class of voting securities of the Company, or any
associate of any such director, officer, affiliate of the Company, or
securityholder is a party adverse to the Company or any of its subsidiaries or
has a material interest adverse to the Company or any of its subsidiaries.
During the past five years, no director or officer of the Company
has:
(1) Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver, fiscal agent
or similar officer been appointed by a, court for the business or property of
such person, or any partnership in which he was a general partner, or any
corporation or business association of which he was an Executive Officer at or
within two years before such filings;
(2) Been convicted in a criminal proceeding or is a named subject
of a pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from, or
otherwise limiting his involvement in any type of business, securities or
banking activities.
(4) Been found by a court of competent jurisdiction in a civil
action, the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated any federal or state securities or
commodities law, which judgment has not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
The following table and discussion set forth information with
respect to all compensation earned by or paid to the Company's Chief Executive
Officer ("CEO"), and its most highly compensated executive officers other than
the CEO, for all services rendered in all capacities to the Company and its
subsidiaries for each of the Company's last three fiscal years; provided,
however, that no disclosure has been made for any executive officer, other
than the CEO, whose total annual salary and bonus does not exceed $100,000.
<PAGE>
<PAGE>
TABLE 1
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------
Annual Compensation Awards Payouts
------------------------------------ ------ -------
Other Re- All
Annual stricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($) ($) ($) ($) SARs ($) ($)
- --------- ---- ------ ----- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary Brown,
President and
CEO 1997 $47,346 -0- -0- -0- -0- -0- -0-
</TABLE>
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENTS
- ---------------------
The Company has undertaken and agreed to enter into, although to
date has no, written employment agreements for a term of one year expiring
December 31, 1998 with each of its executive officers. Gary Brown, as
President and CEO of the Company, will receive a base salary of $96,000 for
the year; Mr. Joseph Morgan, as Executive Vice President, will receive a base
salary of $60,000 for the year; Mr. William Chastain, as Executive Vice
President for Sales and Marketing will receive a base salary of $65,000 for
the year, and Kenneth Marshall, as General Counsel, will receive a base salary
of $52,000 for the year. Each employee will also be eligible to participate
in the Company's Stock Incentive Plan which the Board of Directors and
shareholders have adopted.
The Company has also entered into one year employment agreements
with three individuals who were affiliates of the entity from which the
Company acquired the lease covering the MDS channels for the Fresno,
California market. Under the terms of these agreements which expire in April
1999, Til Fritzsching, Daniel Marshall and Michael Corcoran are responsible
for the development, deployment and operation of the Fresno network which is
currently under construction.
STOCK INCENTIVE PLAN
- --------------------
The Company's Board of Directors and Shareholders have adopted and
approved the Company's 1998 Stock Incentive Plan (the "Plan"). Pursuant to
the Plan, Stock options granted to eligible participants may take the form of
Incentive Stock Options ("ISO's") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or options which do not qualify as ISO's
(Non-Qualified Stock Options or "NQSO's"). As required by Section 422 of the
Code, the aggregate fair market value of the Company's Common Stock with
respect to its ISO's granted to an employee exercisable for the first time in
any calendar year may not exceed $100,000. The foregoing limitation does not
apply to NQSO's. The exercise price of an ISO may not be less than 100% of
the fair market value of the shares of the Company's Common Stock on the date
of grant. The exercise price of an NQSO may be set by the administrator. An
option is not transferable, except by will or the laws of descent and
distribution. If the employment of an optionee terminates for any reason
(other than for cause, or by reason of death, disability, or retirement), the
optionee may exercise his options within a ninety day period following such
termination to the extent he was entitled to exercise such options at the date
of termination. Either the Board of Directors (provided that a majority of
directors are "disinterested") can administer the Plan, or the Board of
Directors may designate a committee comprised of directors meeting certain
requirements to administer the Plan. The Administrator will decide when and
to whom to make grants, the number of shares to be covered by the grants, the
vesting schedule, the type of award and the terms and provisions relating to
the exercise of the awards. An aggregate of 1,750,000 shares of the Company's
Common Stock is reserved for issuance under the Plan.
At May 31, 1998, the Company had granted no stock options under the
Plan.
The following tables set forth certain information concerning the
granting and exercise of incentive Stock options during the last completed
fiscal year by each of the named executive officers and the fiscal year-end
value of unexercised options on an aggregated basis:
TABLE 2
Option/SAR Grants for Last
Fiscal Year - Individual Grants
-------------------------------
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name Granted (#) Fiscal Year Price ($/sh) Date
- ----- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Gary Brown -0- 0% -0-
</TABLE>
TABLE 3
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
---------------------------------------------------
<TABLE>
<CAPTION> Value of
Number of Unexercisable
Unexercised in-the-Money
Shares Value Options/SARs Options/SARs
Acquired on Realized (1) at FY-End (#) at FY-End ($)(2)
Name Exercise (#) ($) Exercisable Exercisable
- ---- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Gary Brown -0- -0- -0- -0-
</TABLE>
(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market
value of the Common Stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal year end and the exercise price of the options. The
fair market value of the securities underlying the options, based on the
closing bid price of the Company's Common Stock at December 31, 1997.
INDEMNIFICATION AND LIMITATION ON LIABILITY OF DIRECTORS
- --------------------------------------------------------
The Company's Articles of Incorporation provide that the Company
shall indemnify, to the fullest extent permitted by Colorado law, any
director, officer, employee or agent of the corporation made or threatened to
be made a party to a proceeding, by reason of the former or present official
of the person, against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceeding if certain
standards are met. At present, there is no pending litigation or proceeding
involving any director, officer, employee or agent of the Company where
indemnification will be required or permitted. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
The Company's Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Colorado Business Corporation
Act. Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for (i) any
breach of the duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or that involved intentional misconduct or a
knowing violation of law, (iii) dividends or other distributions of corporate
assets that are in contravention of certain statutory or contractual
restrictions, (iv) violations of certain laws, or (v) any transaction from
which the director derives an improper personal benefit. Liability under
federal securities law is not limited by the Articles. There are no written
employment agreements between the Company and any of its officers or
Directors. The officers of the Company will dedicate sufficient time to
fulfill their fiduciary obligations to the Company's affairs. The Company has
no retirement, pension, profit sharing or insurance or medical reimbursement
plans, or stock incentive or other option plans for its officers and
Directors, and does not contemplate implementing any such plans at this time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
FOUNDERS' STOCK
- ---------------
Upon formation of the Company in September 1996, the Board of
Directors of the Company authorized the issuance of a total of 8,500,000
shares of Common Stock to the Company's initial officers and directors, for
services provided the Company by such persons. The services were valued at
$0.001 per share, and the shares were issued for that consideration.
CONSULTANTS' SHARES
- -------------------
In 1997 the Company issued an aggregate of 492,307 shares of Common
Stock to six consultants in consideration of services. Among such
consultants, Joseph F. Morgan, the Company's Executive Vice President and
Director, received 192,308 shares and Kenneth Marshall, the Company's General
Counsel, received 230,769 shares.
ACQUISITION OF SKYLYNX EXPRESS HOLDINGS, INC.
- ---------------------------------------------
In 1997 the Company consummated the acquisition of 100% of the
outstanding Common Stock of SkyLynx Express Holdings, Inc. (the "SkyLynx
Express"). In the transaction, the Company issued to the shareholders of
SkyLynx Express, pro rata, an aggregate of 6,875,000 shares of the Company's
Common Stock. Those shareholders of SkyLynx Express, and the number of shares
received by each, is set forth below:
<TABLE>
<CAPTION>
SkyLynx Express Shareholder # of Shares
--------------------------- -----------
<S> <C>
Network System Technologies, Inc. 1,923,077
Gary Brown 2,163,462
William Chastain 480,769
Rovel Finance, Ltd. 673,077
Joseph F. Morgan 817,308
A.V.G. Enterprises, Inc. 817,308
</TABLE>
SkyLynx Express had been formed and organized by NST networking the
purpose of developing and serving markets utilizing NST's asymmetric wireless
technology. As part of the acquisition, the Company obtained from NST a
nonexclusive, worldwide, royalty-free sublicensable right to utilize or
otherwise commercially exploit the NST technology, including its two-way
wireless asymmetric digital high speed data technology. In addition, NST
committed to become engaged by the Company under general operating agreements
("GOAs") to deploy and operate the Company's wireless networks utilizing NST
technology.
As further consideration of the foregoing, and in addition to the
issuance of the 6,875,000 shares of the Company's Common Stock, the Company
(i) purchased a dishonored check issued by Paradise Cable Corporation to NST
in the amount of $71,570.91, (ii) paid NST fees and expenses in the amount of
$37,500, (iii) assumed NST's obligations under a $100,000 promissory note and
(iv) assumed and agreed to pay an NST account payable to Hybrid Network, Inc.
in the approximate amount of $480,000.
ITEM 8. LEGAL PROCEEDINGS.
Neither the Company nor any of its management in their capacities as
such is the subject of any pending material legal proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
MARKET PRICE
- ------------
To date, there has existed no public trading market for the
Company's securities. In the future, it is likely that the Company will
attempt to develop a public trading market for its common stock; although
there can be no assurance that any broker/dealer will agree to act as a market
maker for the Company's securities in the future.
THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990
- -------------------------------------------------------------
The Securities Enforcement and Penny Stock Reform Act of 1990
requires additional disclosure, relating to the market for penny stocks, in
connection with trades in any stock defined as a penny stock. The Commission
recently adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject
to certain exceptions. Such exceptions include any equity security listed on
NASDAQ and any equity security issued by an issuer that has (I) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years, or
(iii) average annual revenue of at least $6,000,000, if such issuer has been
in continuous operation for less than three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
If a public trading market for the Company's securities develops in
the future, of which there can be no assurance, the securities of the Company
will likely be subject to rules adopted by the Commission regulating broker-
dealer practices in connection with transactions in "penny stocks." Those
disclosure rules applicable to penny stocks require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to deliver
a standardized list disclosure document prepared by the Commission. That
disclosure document advises an investor that investments in penny stocks can
be very risky and that the investor's salesperson or broker is not an
impartial advisor but rather paid to sell the shares. It contains an
explanation and disclosure of the bid and offer prices of the security, any
retail charges added by the dealer to those prices ("markup" or "markdown"),
and the amount of compensation or profit to be paid to or received by the
salesperson in connection with the transaction. The disclosure contains
further admonitions for the investor to exercise caution in connection with an
investment in penny stocks, to independently investigate the security as well
as the salesperson with whom the investor is working, and to understand the
risky nature of an investment in the security. Further, the disclosure
includes information regarding the market for penny stocks, explanations
regarding the influence that market makers may have upon the market for penny
stocks and the risk that one or two dealers may exercise domination over the
market for such security and therefore control and set prices for the security
not based upon competitive forces. The broker-dealer must also provide the
customer with certain other information and must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Further,
the rules require that following the proposed transaction the broker provide
the customer with monthly account statements containing market information
about the prices of the securities. These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules. If the Common
Stock became subject to the penny stock rules, many brokers may be unwilling
to engage in transactions in the Common Stock because of the added disclosure
requirements, thereby making it more difficult for security holders to dispose
of their securities.
DIVIDENDS
- ---------
Since inception, the Company has not paid or declared any cash
dividends on its securities. The Company's Board of Directors does not
currently intend to pay any such cash dividends in the future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
1. In 1996, the Company issued an aggregate of 8,500,000 shares of
common stock valued at $.001 per share to the Company's initial officers and
directors for services provided the Company by such persons. The securities
which were taken for investment and were subject to appropriate transfer
restrictions were issued without registration under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act.
2. In 1997, the Company issued an aggregate of 492,307 shares of
common stock to six consultants in consideration of services. The shares were
valued at $.013 per share. The securities, which were taken for investment
and were subject to appropriate transfer restrictions, were issued without
registration under the Securities Act in reliance upon the exemption provided
in Section 4(2) of the Securities Act.
3. In 1997, the Company sold an aggregate of 781,805 shares of
common stock for gross proceeds of $999,501. The shares were issued without
registration under the Securities Act in reliance upon the exemption provided
in Rule 504 of Regulation D under the Securities Act.
4. In 1997, the Company issued an aggregate of 6,875,000 shares of
common stock in exchange for 100% of the issued and outstanding shares of
common stock of SkyLynx Express Holdings, Inc. The securities, which were
taken for investment and were subject to appropriate transfer restrictions,
were issued without registration under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act.
5. In 1998, the Company issued 50,000 shares of common stock in
consideration of the assignment of a 96% net revenue lease covering two MDS
channels in the Fresno, California market. The securities, which were subject
to transfer restrictions, were issued without registration under the
Securities Act in reliance upon Section 4(2) of the Securities Act.
6. In 1998, the Company has sold an aggregate of 646,100 Units,
each Unit consisting of one share of Series A Convertible Preferred Stock and
two Common Stock Purchase Warrants for a total consideration of $2,584,400, or
$4.00 per unit. The securities, which were acquired for investment purposes
and subject to appropriate transfer restrictions, were issued without
registration under the Securities Act in reliance upon Section 4(2) thereof
and Rule 506 of Regulation D thereunder.
ITEM 11. DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 150,000,000 shares of $.001
par value Common Stock and 50,000,000 shares of $.01 par value Preferred
Stock. As of June 1, 1998, 8,822,189 shares of Common Stock and 279,600
shares of Preferred Stock were issued and outstanding.
COMMON STOCK
- ------------
Each holder of Common Stock of the Company is entitled to one (1)
vote for each share held of record. There is no right to cumulative voting of
shares for the election of directors. The shares of Common Stock are not
entitled to pre-emptive rights and are not subject to redemption or
assessment. Each share of Common Stock is entitled to share ratably in
distributions to shareholders and to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
Upon liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive, pro-rata, the assets of the Company
which are legally available for distribution to shareholders. The issued and
outstanding shares of Common Stock are validly issued, fully paid and non-
assessable.
PREFERRED STOCK
- ---------------
The Company is authorized to issue up to 50,000,000 shares of $.01
par value Preferred Stock, of which 5,000,000 shares have been designated
Series A Convertible Preferred Stock. The preferred Stock of the corporation
can be issued in one or more series as may be determined from time-to-time by
the Board of Directors. In establishing a series the Board of Directors shall
give to it a distinctive designation so as to distinguish it from the shares
of all other series and classes, shall fix the number of shares in such
series, and the preferences, rights and restrictions thereof. All shares of
any one series shall be alike in every particular. All series shall be alike
except that there may be variation as to the following: (1) the rate of
distribution, (2) the price at and the terms and conditions on which shares
shall be redeemed, (3) the amount payable upon shares for distributions of any
kind, (4) sinking fund provisions for the redemption of shares, and (5) the
terms and conditions on which shares may be converted if the shares of any
series are issued with the privilege of conversion, and (6) voting rights
except as limited by law.
Although the Company currently does not have any plans to designate
any additional series of Preferred Stock, there can be no assurance that the
Company will not do so in the future. As a result, the Company could
authorize the issuance of a series of Preferred Stock which would grant to
holders preferred rights to the assets of the Company upon liquidation, the
right to receive dividend coupons before dividends would be declared to common
stockholders, and the right to the redemption of such shares, together with a
premium, prior to the redemption to Common Stock. The common stockholders of
the Company have no redemption rights. In addition, the Board could issue
large blocks of voting Stock to fend off unwanted tender offers or hostile
takeovers without further shareholder approval.
SERIES A CONVERTIBLE PREFERRED STOCK
- ------------------------------------
The Company has authorized the issuance of up to 5,000,000 shares of
Series A Convertible Preferred Stock (the "Preferred Stock"), of which
3,750,000 shares of Preferred Stock are included in the Units being offered in
the 1998 Private Offering. The relative rights and preferences of holders of
shares of Preferred Stock are controlled by a Certificate of Designation of
Rights and Preferences of Series A Convertible Preferred Stock (the
"Certificate"), a copy of which is attached as Appendix E to this Memorandum
and incorporated herein by reference. The following is a brief summary of the
provisions of the Certificate, does not purport to be a complete statement of
all of the relative rights and preferences of holders of Preferred Stock and
is qualified in its entirety by reference to the Certificate.
Holders of Preferred Stock shall hold and exercise the right to one
(1) vote for every share of Preferred Stock owned at any meeting of the
shareholders of the Company. Holders of Preferred Stock are entitled to
receive payment of dividends on the Preferred Stock at the annual rate of 10%
per share of Preferred Stock, accruing in arrears from the date of first
issuance, payable quarterly in arrears when, as and if declared by the
Company's Board of Directors. The Company anticipates that dividends will be
paid quarterly as accrued, although no assurance can be given that dividends
will always be declared. Cumulative dividends which are not paid shall be
carried forward as an accrued obligation without interest. Holders of
Preferred Stock are not entitled to receive payment of any additional
dividends on the Preferred Stock, but rather are entitled to participate pro
rata in dividends paid on outstanding shares of Common Stock when and if
declared and paid by the Company.
The Preferred Stock is not redeemable by the Company and holders of
Preferred Stock have no right to compel the redemption by the Company of any
shares of the Preferred Stock.
Holders of outstanding shares of convertible Stock have an option to
convert each share of Preferred Stock into one (1) share of the Company's
Common Stock (the "Conversion Stock"). The conversion value is subject to
certain anti-dilution adjustments, including adjustments in the event of stock
splits, dividends, reclassifications and the like. Such optional conversion
may be exercised at any time commencing the earlier of (i) one year from the
date of issue or (ii) the effective date of a registration statement
(the"Registration Statement"), registering for sale under the Securities Act
the issuance of the Conversion Stock. In addition, each share of Preferred
Stock will convert, automatically, into one share of Common Stock upon the
earlier of (i) the third anniversary of the date of issue or (ii) in the event
(a) there has developed a public trading market for the Company's Common
Stock, (b) the Registration Statement registering for sale the Conversion
Stock has been filed and declared effective by the Commission and (iii) the
closing bid price of the Company's Common Stock has been at least $6.00 per
share (150% of the then effective conversion value) for at least ten (10)
consecutive trading days.
Upon liquidation, dissolution or winding up of the Company, holders
of Preferred Stock shall be entitled to receive, pro rata, cash or assets of
the Company which are legally available for distribution to shareholders equal
to $4.00 per share of Preferred Stock prior to any distributions to the common
stockholders. The issued and outstanding shares of Preferred Stock shall be,
when subscribed and paid for as provided for herein, validly issued, fully
paid and non-assessable.
CLASS A AND CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
- -------------------------------------------------------------
The Company has issued as part of the Units sold in the 1998 Private
Offering Class A and Class B Warrants exercisable to purchase shares of Common
Stock for the period commencing the earlier of (i) the effective date of the
Registration Statement or (ii) one year from the date of issue, and expiring
on the third anniversary of the date of issue (the "Exercise Period").
During the Exercise Period, each Class A Warrant is exercisable to
purchase one share of the Company's Common Stock at an exercise price of $7.50
per share; and each Class B Warrant is exercisable to purchase one share of
the Company's Common Stock at an exercise price of $10.00 per share. The
Company has authorized and reserved for issuance the Common Stock issuable
upon exercise of the A and B Warrants offered hereby.
The Company has the right to extend the Expiration Date of the
Warrants by resolution of the Board of Directors. There currently exists no
plan or intention to extend the expiration date of the Warrants.
The Warrants are redeemable by the Company at any time after
issuance at a price of $0.01 per Warrant (the "Redemption Price") upon thirty
(30) days' written notice in the event (i) the Registration Statement has been
filed and has been declared effective by the Commission covering the issuance
of shares of Common Stock upon exercise of the Warrants, (ii) there has been
developed and exists a public trading market for the Company's Common Stock,
and (iii) the public trading price of the Company's Common Stock has equaled
or exceeded one hundred fifty percent (150%) of the then current respective
exercise prices of the A and/or B Warrant ($11.25 per share for the A Warrant
and $15.00 per share for the B Warrant) for ten (10) or more consecutive
trading days. The holders of Warrants called for redemption have exercise
rights until the close of business on the date next preceding the date fixed
for redemption.
The Company has agreed to register for sale under the Securities Act
in the Registration Statement (i) the Warrant Stock and (ii) Conversion Stock.
However, the Warrant Stock and Conversion Stock will be subject to a six (6)
month lockup following the effective date of the Registration Statement
pursuant to which those shares may not be sold during the six (6) month lockup
period without the consent of the Company.
The Company has not agreed and is under no obligation to register
for resale under the Securities Act the Warrants. As a result, the Warrants
may not be resold except pursuant to an exemption from the registration
requirements of the Securities Act. Further, it is unlikely that a public
trading market for the Warrants will develop or exist at any time during their
respective exercise periods. In the event the outstanding Warrants are not
exercised on or before the Expiration Date, all unexercised Warrants will,
thereafter, become void and be of no further force and effect.
The Warrants do not contain anti-dilution provisions that prevent
dilution of the equity interest represented by the underlying Common Stock
upon the occurrence of certain events such as share dividends. Moreover, no
anti-dilution provisions will apply in the event a merger or acquisition is
undertaken by the Company. In the event that the Company adopts a resolution
to merge, consolidate or sell percentages in all of its assets, prior to the
expiration of the Common Stock Purchase Warrants, each Warrantholder upon the
exercise of his/her Warrants would be entitled to receive the same treatment
as a holder of any share of Common Stock. In the event the Company adopts the
resolution for the liquidation, dissolution or winding up of the Company's
business, the Company will give written notice of the adoption of such
resolution to the registered holders of the Common Stock Purchase Warrants.
Thereupon, all liquidation and dissolution rights under the Common Stock
Purchase Warrants will terminate at the end of thirty (30) days from the date
of the notice to the extent not exercised within those thirty (30) days.
Holders of the Warrants will have no voting, preemptive, liquidation or other
rights of a shareholder, and no dividends will be declared on the Warrants.
WARRANT SOLICITATION FEES
- -------------------------
The Company has no agreement nor any arrangement whereby any fees or
other compensation will be paid to any person or entity upon exercise of any
or all of the Warrants.
TRANSFER AGENT AND REGISTRAR
- ----------------------------
The transfer agent for the Company's common stock is Corporate Stock
Transfer, Inc., 370 17th Street, Suite 2350, Denver, Colorado 80202.
REPORTS TO STOCKHOLDERS
- -----------------------
The Company intends to furnish annual reports to shareholders which
will include certified financial statements reported on by its certified
public accountants. In addition, the Company may issue unaudited quarterly or
other interim reports to shareholders as it deems appropriate.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, is as follows:
Article IX of the Company's Articles of Incorporation provides as follows:
The Corporation may and shall indemnify each director,
officer and any employee or agent of the Corporation, his
heirs, executors and administrators, against any and all
expenses or liability reasonably incurred by him in
connection with any action, suit or proceeding to which he
may be a party by reason of his being or having been a
director, officer, employee or agent of the Corporation to
the full extent required or permitted by the Colorado
Business Code.
Article XII of the Company's Articles of Incorporation provides as follows:
DIRECTORS' LIABILITY
a. A director of this corporation shall not be liable to
the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except to the
extent that such exemption from liability or limitation
thereof is not permitted under the General Corporation Law
of the State of Colorado as the same exists or may
hereafter be amended.
b. Any repeal or modification of the foregoing paragraph
A by the stockholders of the corporation shall not
adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or
modification.
The By-Laws of the Company, as amended, provide for the
indemnification of officers and Directors to the maximum extent allowable
under Colorado law. Insofar as the indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be permitted to Directors,
officers or persons controlling the Company pursuant to such provisions, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS
- --------------------
See Indices to Financial Statements following the list of exhibits.
<PAGE>
<PAGE>
EXHIBITS
- --------
Exhibit No. Title
- ----------- -----
2.1 Agreement and Plan of Reorganization dated August 5, 1997
2.2 Amendment No. 1 to Agreement and Plan of Reorganization dated
December 16, 1997
3.1 Articles of Incorporation
3.2 Articles of Amendment to Articles of Incorporation dated August 1997
3.3 Articles of Amendment to Articles of Incorporation dated February
1998
3.4 Articles of Amendment to Articles of Incorporation dated March 1998
3.5 Bylaws
4.1 Certificate of Designations of Rights and Preferences of Series A
Convertible Preferred Stock
4.2 Specimen Common Stock Certificate
4.3 Specimen Preferred Stock Certificate
4.4 Specimen Class A Warrant Certificate
4.5 Specimen Class B Warrant Certificate
10.1 1998 Stock Incentive Plan
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SKYLYNX COMMUNICATION, INC.
(formerly Allied Wireless, Inc.)
1. Independent Auditors' Report
2. Balance Sheets, December 31, 1997 and December 31, 1996
3. Statements of Operation from January 1 through December 30, 1997, from
September 23, 1996 (inception) through December 30, 1996, and from
September 23, 1996 (inception) through December 30, 1997
4. Statements of Shareholders' Equity from September 23, 1996 (inception)
through December 30, 1997
5. Statements of Cash Flows from January 1 through December 30, 1997, from
September 23, 1996 (inception) through December 31, 1996, and from
September 23, 1996 (inception) through December 30, 1997
6. Notes to Financial Statements
<PAGE>
<PAGE>
March 4, 1998
To the Board of Directors and Shareholders
SkyLynx Communications, Inc.
Independent Auditors' Report
We have audited the balance sheet of SkyLynx Communications, Inc. (formerly
Allied Wireless, Inc.) as of December 30, 1997 and December 31, 1996, and the
related statements of operations and cash flows for the period from January 1
through December 30, 1997, September 23, 1996 (inception) through December 31,
1996, and for the period from September 23, 1996 (inception) through December
30, 1997, and the statement of shareholders' equity (deficit) for the period
from September 23, 1996 (inception) through December 30, 1997. 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 audit.
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 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 in the first paragraph
present fairly, in all material respects, the financial position of SkyLynx
Communications, Inc. as of December 30,1997 and December 31, 1996, and the
related statements of operations and cash flows for the period from January 1,
through December 30, 1997, September 23, 1996 (inception) through December 31,
1996, and for the period from September 23, 1996 (inception) through December
30, 1997, and the statement of shareholders' equity (deficit) for the period
from September 23, 1996 (inception) through December 30, 1997, in conformity
with generally accepted accounting principles.
As discussed in Note F to the financial statements, certain license rights
acquired from an affiliate have been valued by management at fair value. We
have reviewed the procedures applied by management in valuing such license
rights and have inspected underlying documentation, and in the circumstances,
we believe the procedures applied are reasonable and the documentation
appropriate. However, because of inherent uncertainty of valuation,
management's estimate of fair value may differ significantly from the value
that would have been used if the rights had been acquired from an unrelated
third party or if a ready market existed for such rights, and the difference
could be material.
Cordovano and Harvey, P.C.
Denver, Colorado
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly Allied Wireless, Inc.)
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
December 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 628,110 $ -0-
License rights (Note F) 100,000 -0-
Deposit 91,000 -0-
Intangible assets, less accumulated
amortization of $250 and $0 2,250 500
----------- -----------
$ 821,360 $ 500
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 4,923 $ 500
Note payable (Note C) 100,000 -0-
Accrued interest payable 3,126 -0-
Other current liabilities 1,375 -0-
----------- -----------
TOTAL LIABILITIES 109,424 500
----------- -----------
SHAREHOLDERS' EQUITY (Note D)
Preferred stock, $.01 par value; 50,000,000
shares authorized, -0- issued and
outstanding -0- -0-
Common stock, $.001 par value; 150,000,000
shares authorized, 1,897,189 and -0-
shares issued and outstanding 1,897 -0-
Additional paid-in capital 979,855 -0-
Deficit accumulated during development stage (269,816) -0-
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 711,936 -0-
----------- -----------
$ 821,360 $ 500
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly Allied Wireless, Inc.)
(A Development Stage Company)
Statements of Operation
<TABLE>
<CAPTION>
September 23, September 23,
January 1, 1996 1996
1997 (inception) (inception)
through through through
December 30, December 31, December 30,
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
COSTS AND EXPENSES
Consulting, related parties
(Note B) $ 73,261 $ -0- $ 73,261
Compensation 16,330 -0- 16,330
Professional fees 50,894 -0- 50,894
Write-off of advances in
connection with merger
(Note G) 95,263 -0- 95,263
Amortization 250 -0- 250
Other 34,386 -0- 34,386
------------ ------------ ------------
(270,384) -0- (270,384)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 4,278 -0- 4,278
Interest expense (3,710) -0- (3,710)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES (269,816) -0- (269,816)
INCOME TAX BENEFIT (EXPENSE)
(NOTE E)
Current 71,652 -0- 71,652
Deferred (71,652) -0- (71,652)
------------ ------------ ------------
NET LOSS $ (269,816) $ -0- $ (269,816)
============= ============ ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly Allied Wireless, Inc.)
(A Development Stage Company)
Statement of Shareholder's Equity
September 23, 1996 (Inception) through December 30, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Share-
------------------- ------------------ Paid-in Development holders'
Shares Amount Shares Amount Capital Stage Deficit
------- ---------- -------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance September 23,
1996 (Inception) -0- $ -0- -0- $ -0- $ -0- $ -0- $ -0-
------- --------- -------- -------- --------- --------- ------------
Balance December 31,
1996 -0- -0- -0- -0- -0- -0- -0-
Issuance of common stock
for services, valued
at cost (Note B) -0- -0- 7,250,000 7,250 5,000 -0- 12,250
Sale of common stock to
founders -0- -0- 1,250,000 1,250 -0- -0- 1,250
Sale of common stock,
pursuant to a private
placement memorandum,
net of offering costs
of $3,650 (Note D) -0- -0- 4,000,000 4,000 67,351 -0- 71,351
Sale of common stock,
pursuant to a private
placement memorandum, net
of offering costs of
$34,000 (Note D) -0- -0- 6,163,342 6,163 884,338 -0- 890,501
Issuance of common stock
for services, valued at
cost as determined by
management (Note B) -0- -0- 6,400,000 6,400 -0- -0- 6,400
One for 13 reverse stock
split (Note D) -0- -0-(23,166,153) (23,166) 23,166 -0- -0-
Net loss for the period
from January 1 through
December 30, 1997 -0- -0- -0- -0- -0- (269,816) (269,816)
-------- --------- ---------- --------- ------------------------------
Balance December 30,
1997 -0- $ -0- 1,897,189 $ 1,897 $979,855 $(269,816)$ 711,936
======== ========= ========== ========= ========= ========= ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly Allied Wireless, Inc.)
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
September 23,September 23,
January 1, 1996 1996
1997 (inception) (inception)
through through through
December 30, December 31, December 30,
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (269,816) $ -0- $ (269,816)
Transactions not requiring cash:
Common stock issued in exchange
for consulting services provided
by shareholders (Note B) 16,150 -0- 16,150
Write-off of cash advances in
connection with merger (Note G) 23,500 -0- 23,500
Amortization 250 -0- 250
------------ ------------ ------------
(229,916) -0- (229,916)
Changes in current liabilities:
Increase in accounts payable 4,923 500 5,423
Increase in accrued interest
payable 3,126 -0- 3,126
------------ ------------ ------------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES (221,867) 500 (221,367)
INVESTING ACTIVITIES
Deposit on equipment paid to
related party (Note B) (91,000) -0- (91,000)
Organization costs incurred -0- (500) (500)
Cash advanced to merger candidate
(Note G) (23,500) -0- (23,500)
------------ ------------ ------------
NET CASH (USED IN) INVESTING
ACTIVITIES (114,500) (500) (115,000)
FINANCING ACTIVITIES
Proceeds from the issuance of
common stock 1,002,127 -0- 1,002,127
Offering costs incurred (37,650) -0- (37,650)
------------ ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 964,477 -0- 964,477
NET INCREASE IN CASH AND CASH
EQUIVALENTS 628,110 -0- 628,110
Cash and cash equivalents,
beginning of period -0- -0- -0-
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 628,110 $ -0- $ 628,110
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 583 $ -0- $ 583
============ ============ ============
Cash paid for income taxes $ -0- $ -0- $ -0-
============ ============ ============
Noncash investing and
financing activities:
Common stock issued for
consulting services capi-
talized as organization
costs (Note B) $ 2,500 $ -0- $ 2,500
============ ============ ============
Debt assumed in exchange for
license rights (Note C) $ 100,000 $ -0- $ 100,000
============ ============ ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly Allied Wireless, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 30, 1997
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
SkyLynx Communications, Inc. (the "Company") is a development stage company in
accordance with Statements of Financial Accounting Standard No. 7.
Organization
- ------------
The Company was incorporated under the laws of Colorado on September 23, 1996
as Allied Wireless, Inc. (AWI). The Company changed its name on February 12,
1998. The Company intends to become involved in the wireless communications
industry through the purchase of one or more licenses or franchises or through
the acquisition of entities that are in control of such licenses or
franchises.
The principal activities since inception have been organizational matters, the
sale and issuance of shares of its $.001 par value common stock, and the
acquisition of certain technology. The Company has adopted a calendar year
end.
Cash Equivalents
- ----------------
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Intangible Assets and Amortization
- ----------------------------------
Organization costs are recorded at cost. Amortization is calculated by the
straight-line method over a period of sixty months, once operations commence.
Income Taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset future
taxable income and tax credits that are available to offset future federal
income taxes.
Shares Issued for Noncash Consideration
- ---------------------------------------
Common stock issued for services is valued at the regular billing rates
charged for that service.
Offering Costs
- --------------
In connection with a private offering of its common shares, the Company
incurred certain offering costs consisting of legal and accounting fees. These
costs are deducted from the offering proceeds upon completion of the offering,
and reflected in the accompanying financial statements as a reduction of
additional-paid-in capital.
Use of Estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
NOTE B: RELATED PARTY TRANSACTIONS
During the period ended December 30, 1997, the Company issued approximately
7,250,000 shares of its common stock to shareholders in lieu of cash payment
for services provided by the Company. The services were valued at their cost
of $12,250, as determined by management. $2,500 of the services were
capitalized as organization costs and $9,750 were charged as consulting costs
in the accompanying financial statements.
Effective December 16, 1997, the Company issued 6,400,000 (pre-split) shares
of common stock to affiliates in exchange for services. The services were
valued by management at $6,400, or $.013 per share.
During the period ended December 30, 1997, the Company paid a shareholder
$20,000 for consulting fees, an affiliate $27,346 for consulting fees, office
expenses, travel reimbursements, and another affiliate $9,765 for consulting
fees.
NOTE C: NOTE PAYABLE
On December 16, 1997, the Company assumed an affiliate's promissory note
payable in the amount of $100,000, plus accrued interest, to an individual.
The note is unsecured and is convertible into 33,333 (pre-split) shares of the
SkyLynx Express Holdings, Inc. $.0001 par value common stock, at the option of
the holder. The note matures on July 31, 1998 and the principal plus any
unpaid interest is due at that time. Accrued interest as of December 30, 1997
was $3,126.
NOTE D: SHAREHOLDERS' EQUITY
Common Stock Offering
- ---------------------
During the period ended December 30, 1997, the Company sold at $.01875 per
share, an aggregate of 4,000,000 shares of its $.001 par value per share
common stock and received $71,351, after related costs. In addition, the
Company sold, at $.15 per share, an aggregate of 6,163,342 shares of its $.001
par value per share common stock and received $890,501, after related costs.
The shares were offered and sold without registration under the federal
securities laws in reliance upon an exemption from registration requirements
contained in Rule 504 of Regulation D of the Securities Act of 1933, as
amended.
Preferred Stock
- ---------------
The Company's preferred stock, authorized 50,000,000 shares, has a par value
of $.01 per share. The preferred stock is issuable in series by the Board of
Directors who establish the terms and preferences in the series.
Reverse Stock Split
- -------------------
On January 23, 1998, the shareholders of the Company approved a 1 for 13
reverse stock split. The accompanying financial statements, however give
effect to this reverse stock split as if it had occurred as of December 30,
1997.
NOTE E: INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate follows for the
period from January 1, through December 30, 1997 and for the period from
September 23, 1996 through December 31,1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
U.S. statutory federal rate on amounts less
than $50,000 15% 15%
State income tax rate 5% 5%
---- ----
20% 20%
NOL for which no tax benefit is currently
available -20% -20%
---- ----
0% 0%
==== ====
</TABLE>
The benefit for income taxes from operations consisted of the following
components: current tax benefit of $71,652 resulting from a net loss before
income taxes, and deferred tax expense of $71,652 resulting from the valuation
allowance recorded against the deferred tax asset resulting from net operating
losses. The change in the valuation allowance from January 1 through December
30, 1997 and from September 23, 1996 (inception) through December 31,1996 was
$7,652 and $-0-, respectively. Net operating loss carry forwards for 1997
will expire in 2012. The valuation allowance will be evaluated at the end of
each year, considering positive and negative evidence about whether the asset
will be realized. At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the allowance
if positive evidence indicates that the value of the deferred tax asset is no
longer impaired and the allowance is no longer required.
NOTE F: AGREEMENT AND PLAN OF REORGANIZATION
Effective December 16, 1997, AWI entered into an Agreement and plan of
Reorganization (the "Agreement") with SkyLynx Express Holdings, Inc. (SEHI)
and Network System Technologies, Inc. (NST). Under the Agreement, AWI was
acquired, in a reverse acquisition by SEHI. In addition, AWI acquired certain
license rights, and made an earnest money deposit on equipment to be acquired
from NST by SEHI. The Agreement was ratified by the Company's shareholders on
January 23, 1998.
Reverse Acquisition
- -------------------
Effective December 16, 1997, SEHI exchanged 100 percent of its outstanding
shares of common stock for 6,875,000 (post-split) shares of the Company's
common stock. This transaction has been treated as a reverse acquisition
whereby SEHI is considered the surviving entity. Costs of the transaction
have been charged to the period. The reverse acquisition took place on
December 16, 1997; however, the accompanying financial statements have been
prepared as if the acquisition took place on December 31, 1997.
Acquisition of License Rights
- -----------------------------
In addition to the above capitalization, the Company acquired certain license
rights from NST covering technology (consisting of computer software, know-
how, trade secrets, and licensed patent rights) used to deploy a wireless data
network.
Deposit on Equipment
- --------------------
In addition, the Company made an earnest money deposit on special
communications equipment, valued at $482,299, to be acquired from NST.
NOTE G: MERGER NEGOTIATIONS
On December 17, 1997 and again on December 31, 1997, the Company executed a
letter of intent to purchase certain assets of Cable Corporation of America,
Inc. (CCA). Pursuant to the letters of intent, the Company paid payroll and
certain operating expenses on behalf of CCA totaling $23,500 through December
30, 1997.
During 1998, acquisition negotiations between the two companies broke off.
Accordingly, the advances totaling $23,500, as of December 30, 1997, have been
written off in the accompanying financial statements.
Additional advances in 1998, prior to negotiation termination, totaling
$36,000 have also been written off.
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SKYLYNX COMMUNICATION, INC.
(formerly SkyLynx Express Holdings, Inc.)
1. Independent Auditors' Report
2. Consolidated Balance Sheets, December 30, 1997 and March 31, 1998
(unaudited)
3. Consolidated Statements of Operation from July 29, 1997 (inception) through
December 31, 1997, for the three months ended March 31, 1998 (unaudited),
and from July 29, 1997 (inception) through March 31, 1998 (unaudited)
4. Statement of Shareholders' Equity, July 29, 1997 (inception) through March
31, 1998 (unaudited)
5. Statements of Cash Flows from July 29, 1997 (inception) through December
31, 1997, for the three months ended March 31, 1998 (unaudited), and from
July 29, 1997 (inception) through March 31, 1998 (unaudited)
6. Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
March 4, 1998
To the Board of Directors and Shareholders
SkyLynx Communications, Inc. and Subsidiary
Independent Auditors' Report
We have audited the balance sheet of SkyLynx Communications, Inc. (formerly
SkyLynx Express Holdings, Inc.) and subsidiaries as of December 31, 1997 and
the related consolidated statements of operations, shareholders' equity and
cash flows for the period from July 29, 1997 (inception) through December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 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 in the first paragraph
present fairly, in all material respects, the financial position of SkyLynx
Communications, Inc. as of December 31,1997 and the results of its operations
and its cash flows for the period from July 29, 1997 (inception) through
December 31, 1997 in conformity with generally accepted accounting principles.
As discussed in Note G to the financial statements, certain license rights
acquired from an affiliate have been valued by management at fair value. We
have reviewed the procedures applied by management in valuing such license
rights and have inspected underlying documentation, and in the circumstances,
we believe the procedures applied are reasonable and the documentation
appropriate. However, because of inherent uncertainty of valuation,
management's estimate of fair value may differ significantly from the value
that would have been used if the rights had been acquired from an unrelated
third party or if a ready market existed for such rights, and the difference
could be material.
The information for the three months ended March 31, 1998 and from July 29,
1997 (inception) through March 31, 1998 has been included on an unaudited
basis. Accordingly, we do not express an opinion or any other form of
assurance on it.
Cordovano and Harvey, P.C.
Denver, Colorado
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly SkyLynx Express Holdings, Inc.)
(A Development Stage Company)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 628,110 $ 250,807
Due from employees (Note B) -0- 18,492
Equipment, less accumulated depreciation of
$0 and $12,490, respectively (Note C) 482,299 554,414
License rights, less accumulated amortization of
$0 and $8,333, respectively (Note G) 100,000 91,667
Organizational costs, less accumulated
amortization of $250 and $375, respectively 2,250 2,125
----------- -----------
$1,212,659 $ 917,505
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES (Notes B and D)
Accounts and notes payable
Accounts payable 4,923 7,583
Accounts payable, related party (Note G) 391,299 391,299
Note payable 100,000 100,000
Accrued interest payable 3,126 5,002
Accrued payroll taxes payable -0- 24,718
Other current liabilities 1,375 -0-
----------- -----------
TOTAL LIABILITIES 500,723 528,602
----------- -----------
SHAREHOLDERS' EQUITY (Note E)
Preferred stock, $.01 par value; 50,000,000
shares authorized, -0- and -0- shares
issued and outstanding, respectively -0- -0-
Common stock, $.001 par value; 150,000,000
shares authorized, 8,772,189 and 8,772,189
shares issued and outstanding, respectively 8,772 8,772
Additional paid-in capital 981,918 981,918
Deficit accumulated during development stage (278,754) (601,787)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 711,936 388,903
----------- -----------
$ 1,212,659 $ 917,505
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly SkyLynx Express Holdings, Inc.)
(A Development Stage Company)
Consolidated Statements of Operation
<TABLE>
<CAPTION>
July 29, 1997 For the July 29, 1997
(inception)Three Months (inception)
through Ended through
December 31 March 31, March 31,
1997 1998 1998
----------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
COSTS AND EXPENSES
Consulting, related parties
(Note B) $ 8,938 $ 16,399 $ 25,337
Consulting, other -0- 5,390 5,390
Salaries and payroll taxes -0- 105,790 105,790
Travel -0- 60,738 60,738
Legal and accounting -0- 44,263 44,263
Rent and utilities -0- 15,939 15,939
Depreciation -0- 12,490 12,490
Amortization -0- 8,458 8,458
Insurance -0- 10,104 10,104
Printing -0- 7,328 7,328
Write-off of advances in connection
with merger (Note G) -0- 36,500 36,500
Other -0- 2,066 2,066
----------- ------------ ------------
OPERATING LOSS (8,938) (325,465) (334,403)
----------- ------------ ------------
OTHER INCOME (EXPENSE)
Interest income -0- 4,308 4,308
Interest expense -0- (1,876) (1,876)
----------- ------------ ------------
LOSS BEFORE INCOME TAXES (8,938) (323,033) (331,971)
INCOME TAX BENEFIT (EXPENSE) (NOTE E)
Current 71,652 102,934 174,586
Deferred (71,652) (102,934) (174,586)
----------- ------------ ------------
NET LOSS $ (8,938) $ (323,033) $ (331,971)
=========== ============ ============
Basic loss per common share $ * $ (0.04) $ (0.05)
=========== ============ ============
Basic weighted average common shares
outstanding 6,187,500 8,772,189 7,156,758
=========== ============ ============
* less than $.01 per share
</TABLE>
See accompanying notes to financial statements<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly SkyLynx Express Holdings, Inc.)
(A Development Stage Company)
Consolidated Statement of Shareholders' Equity
July 29, 1997 (inception) through March 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional During the
------------------ ------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
------- ------- -------- ---------- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 29, 1997
(inception) -0- $ -0- -0- $ -0- $ -0- $ -0- $ -0-
Common stock issued
for intellectual
property at estimated
fair value (Note B) -0- -0- 6,875,000 6,875 2,063 -0- 8,938
Recapitalization (Note F) -0- -0- 1,897,189 1,897 979,855 (269,816) 711,936
Net loss for the period
ended December 31, 1997 -0- -0- -0- -0- -0- (8,938) (8,938)
------ ------- -------- --------- --------- --------- ------------
BALANCE DECEMBER 31, 1997 -0- $ -0- 8,772,189 $ 8,772 $981,918 $ (278,754) $ 711,936
Net loss for the months
ended March 31, 1998
(unaudited) -0- -0- -0- -0- -0- (323,033) (323,033)
------ ------- -------- --------- --------- --------- ------------
BALANCE MARCH 31, 1998
(UNAUDITED) -0- $ -0- 8,772,189 $ 8,772 $981,918 $ (601,787) $ 388,903
====== ======= ========== ========= ========= ========= ============
</TABLE>
See accompanying notes to financial statements<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly SkyLynx Express Holdings, Inc.)
(A Development Stage Company)
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
July 29, 1997 For the July 29, 1997
(inception) Three Months (inception)
through Ended through
December 31, March 31, March 31,
1997 1998 1998
------------ ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (8,938) $ (323,033) $ (331,971)
Transactions not requiring cash:
Common stock issued for
intellectual property
contributed by shareholders
(Note B) 8,938 -0- 8,938
Depreciation and amortization -0- 20,948 20,948
------------ ----------- ------------
-0- (302,085) (302,085)
Changes in operating assets and
liabilities:
Due from employees -0- (18,492) (18,492)
Accounts payable and other
current liabilities 8,049 27,879 35,928
------------ ----------- ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (8,049) (292,698) (284,649)
INVESTING ACTIVITIES
Payments for transmitter equipment -0- (67,293) (67,293)
Purchases of office equipment -0- (17,312) (17,312)
------------ ----------- ------------
NET CASH (USED IN) INVESTING
ACTIVITIES -0- (84,605) (84,605)
FINANCING ACTIVITIES
Recapitalization (Note F) 620,061 -0- 620,061
------------ ----------- ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 620,061 -0- 620,061
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 628,110 (377,303) 250,807
Cash at beginning of period -0- 628,110 -0-
------------ ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 628,110 $ 250,807 $ 250,807
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 583 $ -0- $ 583
=========== =========== ============
Cash paid for income taxes $ -0- $ -0- $ -0-
=========== =========== ============
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Debt assumed in exchange for
license rights $ 100,000 $ -0- $ 100,000
=========== =========== ============
Debt assumed in acquiring
equipment $ 482,299 $ -0- $ 482,299
=========== =========== ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(formerly SkyLynx Express Holdings, Inc.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 1998
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
- --------------------------------------
Effective December 31, 1997, SkyLynx Express Holdings, Inc. (SEHI) merged with
Allied Wireless, Inc. (AWI). Subsequent to the merger, AWI changed its name
to SkyLynx Communications, Inc. (the "Company") (see Note F).
AWI was incorporated under the laws of Colorado on September 23, 1996 and was
formed for the purpose of engaging in the wireless communication industry. In
1997, AWI sold 6,163,342 shares of its common stock at a price of $.15 per
share and 4,000,000 at $.01875 per share. AWI closed the offering on December
15, 1997 and realized approximately $961,852 from the offerings, after related
expenses (see Note E).
SEHI was initially capitalized with certain intellectual property useful in
the wireless industry. It was incorporated under the laws of Delaware on July
29, 1997.
The Company is a development stage company and its consolidated financial
statements are prepared in accordance with Statement of Financial Accounting
Standards (SFAS) No. 7. Its consolidated financial statements include the
accounts of the SkyLynx Communications, Inc. and its wholly owned subsidiary,
SEHI. All material intercompany accounts and transactions have been
eliminated in consolidation.
Cash Equivalents
- ----------------
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments with original
maturities of three months or less.
Use of Estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those
estimates.
Equipment and Depreciation
- --------------------------
Equipment is stated at cost. Expenditures for maintenance and repairs are
charged to expense as incurred. Additions and improvements are capitalized.
The cost and related accumulated depreciation of equipment sold or otherwise
disposed of are removed from the accounts and any gain or loss is reported in
the year's revenue or expense. Depreciation expense is calculated based on
the straight-line method over the estimated useful lives of the assets.
Transmitter Equipment
- ---------------------
Transmitter equipment is stated at cost. Since the property has not yet been
placed in service, no depreciation expense has been recorded.
Intangible Assets and Amortization
- ----------------------------------
Intangible assets, consisting of organization costs, are stated at cost and
amortized over five years.
License Rights
- --------------
The Company acquired license rights in connection with its business
combination on December 16, 1997. These rights have been capitalized and are
amortized over three years using the straight-line method commencing January
1, 1998. Amortization expense for the period ended December 31, 1997 and the
three months ended March 31, 1988 totaled $0 and $8,333, respectively.
Income Taxes
- ------------
The Company reports income taxes in accordance with SFAS No. 109 "Accounting
for Income Taxes" which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between
the tax basis of an asset or liability and its reported amount on the
financial statements.
Deferred tax amounts are determined by using the tax rates expected to be in
effect when the taxes will be actually paid or refunds received, as provided
under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized.
Income tax expense or benefit is the tax payable or refundable, respectively,
for the period plus or minus the change during the period in the deferred tax
assets and liabilities.
Loss Per Common Share
- ---------------------
The Company reports loss per share using a dual presentation of basic and
diluted loss per share. Basic loss per share excludes the impact of common
stock equivalents. Diluted loss per share utilizes the average market price
per share when applying the treasury stock method in determining common stock
equivalents. However, the Company has a simple capital structure for the
periods presented and, therefore, there is no variance between the basic and
diluted loss per share.
NOTE B: RELATED PARTY TRANSACTIONS
As of March 31, 1998, employees owed the Company $18,492 (unaudited) for
payroll taxes not withheld. The $18,492 is included in the accompanying
financial statements as due from employees.
On August 10, 1997, the Company entered into the following transactions:
1. Issued 2,307,692 shares of common stock to affiliates in exchange for
intellectual property. The property was valued by management at $3,438
or ($.0013 per share);
2. Issued 2,644,230 shares of common stock to officers and directors in
exchange for intellectual property. The property was valued by
management at $3,438 (or $.0013 per share); and
3. Issued 1,923,078 shares of common stock to an affiliate in exchange for
technology. The technology was valued by management at $2,500 (or $.0013
per share).
NOTE C: EQUIPMENT
Equipment consisted of the following as of December 31, 1997 and March 31,
1998:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
(unaudited)
<S> <C> <C>
Communications equipment (Note G) $ -0- $ 482,299
Office equipment -0- 17,312
----------- -----------
-0- 499,611
Less accumulated depreciation -0- (12,490)
----------- -----------
-0- 487,121
Transmitter equipment -0- 67,293
----------- -----------
$ -0- $ 554,414
=========== ===========
</TABLE>
Depreciation expense for the period ended December 31, 1997 and the three
months ended March 31, 1998, totaled $0 and $12,490 (unaudited), respectively.
NOTE D: NOTE PAYABLE
On December 16, 1997, the Company assumed an affiliate's promissory note
payable in the amount of $100,000 plus accrued interest of $3,126 to an
individual. The note bears interest at 7.5%, is unsecured and is convertible
into 2,564 shares of the Company's $.001 par value common stock, at the option
of the holder. The note and related accrued interest was paid in full on June
30, 1998.
NOTE E: SHAREHOLDERS' EQUITY
Common Stock Issuance
- ---------------------
On August 10, 1997, the Board of Directors approved the issuance of 6,875,000
shares of the common stock, after giving effect to the reverse split of 1 for
13 shares, in exchange for intellectual property consisting of expertise and
trade secrets. The shares were issued without registration under the federal
securities laws in reliance upon an exemption from registration requirements
contained in the Securities Act of 1933, as amended. Management expensed the
intellectual property in the period ended December 31, 1997.
Preferred Stock
- ---------------
The Company's preferred stock, authorized 50,000,000 shares, has a par value
of $.01 per share. The preferred stock may be issued in series by the Board
of Directors who establish the terms and preferences in the series.
1 for 13 Reverse Stock Split
- ----------------------------
On January 23, 1998, the shareholders of the Company approved a 1 for 13
reverse stock split. The accompanying financial statements have been
retroactively restated to give effect to the reverse stock split.
All common shares reflected in the consolidated financial statements have been
restated based upon the exchange rates of common stock issued in connection
with the merger with AWI.
NOTE F: INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate follows for the
period from July 29, 1997 (inception) through December 31,1997, the three
months ended March 31, 1998, and the period from July 29, 1997 (inception)
through March 31, 1998:
<TABLE>
<CAPTION>
July 29, 1997 For theJuly 29, 1997
(inception) Three Months (inception)
through Ended through
December 31, March 31, March 31,
1997 1998 1998
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
U.S. statutory federal rate 34.0% 34.0% 34.0%
State income tax rate 5.0% 5.0% 5.0%
Net operating loss for which no
tax benefit is currently
available (39.0)% (39.0)% (39.0)%
------- ------- -------
0% 0% 0%
======= ======= =======
</TABLE>
The benefit for income taxes from operations consisted of the following
components at December 31, 1997: current tax benefit of $73,905 resulting from
a net loss before income taxes, and deferred tax expense of $73,905 resulting
from the valuation allowance recorded against the deferred tax asset resulting
from net operating losses. The change in the valuation allowance from July
29, 1997 (inception) through December 31, 1997, and from December 31, 1997 to
March 31, 1998 was $73,905 and $102,934 (unaudited), respectively. Net
operating loss carryforwards at December 31, 1997 will expire in 2012. The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At
that time, the allowance will either be increased or reduced; reduction could
result in the complete elimination of the allowance if positive evidence
indicates that the value of the deferred tax asset is no longer impaired and
the allowance is no longer required.
NOTE G: AGREEMENT AND PLAN OF REORGANIZATION
Effective December 15, 1997, AWI entered into an Agreement and Plan of
Reorganization (the "Agreement") with SEHI and Network System Technologies,
Inc. (NST) in order to acquire certain equipment and rights to the technology
necessary to use such equipment. The Company acquired the equipment and
rights to support the development and implementation of wireless networks,
which became the business of the Company as a result of the transaction.
Under the Agreement, SEHI became a subsidiary of the Company through a reverse
acquisition and NST became an affiliate by virtue of the issuance of common
shares to the developer of the technology. Specifically, the Agreement called
for:
1. The issuance of 6,875,000 (post-split) shares of common stock
representing approximately 78% of the then total issued and outstanding
shares. Management assigned a value of $0.0013 per share to the shares
issued and expensed this cost in the accompanying financial statements;
2. The payment of $71,571 to NST as part of the assumption by the Company of
NST's activities to deploy a system in the Sarasota area. This amount
was expensed in the accompanying financial statements;
3. The Company to assume NST's obligations under a $100,000 promissory note.
This amount was assigned to the License Rights and capitalized in the
accompanying financial statements;
4. The Company to pay NST's transaction fees and expenses in the amount of
$37,500 which were expenses in the accompanying financial statements; and
5. The Company to pay NST $482,299 for the equipment purchased in the
transaction.
Nature of the License Rights
- ----------------------------
The license gives the Company the non-exclusive rights to use the equipment
acquired from NST as well as to develop and implement wireless networks using
the technology underlying the rights as well as future upgrades to the
technology. It also gives the Company the exclusive rights to the technology,
provided the Company is first to deploy them in a basic trading area. The
rights are amortized over their estimated useful life of three years as
determined by management beginning January 1, 1998.
Deposit on Equipment
- --------------------
In addition, the Company made an earnest money deposit of $91,000 on special
communications equipment, valued at $482,299, to be acquired from NST. As of
March 31, 1998, $391,299 was owed to NST and is included in the accompanying
financial statements as accounts payable, related party.
NOTE H: MERGER ATTEMPT
On December 17, 1997 and again on December 31, 1997, the Company executed a
letter of intent to purchase certain assets of Cable Corporation of America,
Inc. (CCA). Pursuant to the letters of intent, the Company paid certain
operating expenses on behalf of CCA totaling $23,500 through December 30,
1997. In addition, the Company paid an obligation on behalf of CCA to NST
totaling $71,763.
During 1998, acquisition negotiations between the two companies broke off.
Accordingly, the advances totaling $95,263, as of December 30, 1997, have been
written off in the accompanying financial statements.
Additional advances paid during the three months ended March 31, 1998, prior
to negotiation termination, totaling $36,500 have also been written off.
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
SKYLYNX COMMUNICATIONS, INC.
Date: July 22, 1998 By: /s/ Gary L. Brown
--------------------------------------
Gary L. Brown, President
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of
August 5, 1997
between
SkyLynx Express Holdings, Inc.
NETWORK SYSTEM TECHNOLOGIES, INC.
and
ALLIED WIRELESS, INC.
<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION 1: GENERAL DEFINITIONS -1-
1.1 Best Knowledge -1-
1.2 Business Day -2-
1.3 Code -2-
1.4 Erisa -2-
1.5 Exchange Act -2-
1.6 Fiscal Year -2-
1.7 Governmental Authority -2-
1.8 Governmental Requirement -2-
1.9 IRS -2-
1.10 Legal Requirements -2-
1.11 Ownership Interest -2-
1.12 Person -3-
1.13 Section -3-
1.14 Securities Act -3-
1.15 Taxes -3-
SECTION 2: EXCHANGE OF SECURITIES -3-
2.1 Exchange of Common Stock -3-
2.2 NST/SkyLynx Reorganization -3-
2.3 Allied Recapitalization -3-
2.4 Consultation Fees and Agreements -4-
2.5 Private Financing -4-
2.6 Determination of Issuable Allied Shares -4-
2.7 Income Tax Considerations -5-
2.8 Compliance with Securities Laws -5-
SECTION 3: CLOSING -5-
3.1 General Procedure -5-
3.2 Time and Place -5-
3.3 Covenants Regarding Closing -5-
3.4 Conditions to Obligation of Allied -6-
3.5 Conditions to Obligation of SkyLynx -9-
3.6 Specific Items to be Delivered at the Closing -12-
3.7 Election of Directors and Executive Officers of Allied -13-
3.8 Post Closing Matters -14-
SECTION 4: REPRESENTATIONS AND WARRANTIES BY SKYLYNX -14-
4.1 Organization and Standing -15-
4.2 Subsidiaries, etc -15-
4.3 Qualification -15-
4.4 Corporate Authority -15-
4.5 Financial Statements -15-
4.6 Capitalization of the Corporation -16-
4.7 Taxes -16-
4.8 No Actions, Proceedings, etc -16-
4.9 Post Balance Sheet Changes -16-
4.10 No Breaches -17-
4.11 Condition of the Corporation's Assets -17-
4.12 Inventory -17-
4.13 Accounts Receivable -17-
4.14 Corporate Acts and Proceedings -17-
4.15 Registered Rights and Proprietary Information -18-
4.16 Changes in Suppliers and Customers -19-
4.17 No Liens or Encumbrances -19-
4.18 Employee Matters -19-
4.19 Legal Proceedings and Compliance with Law -20-
4.20 Contract Schedules -20-
4.21 Labor Matters -21-
4.22 Insurance -21-
4.23 Environmental -21-
4.24 Disclosure of Information -22-
SECTION 5: COVENANTS OF SKYLYNX -23-
5.1 Preservation of Business -23-
5.2 Ordinary Course -23-
5.3 Negative Covenants -23-
5.4 Access to Books and Records, Premises, etc -24-
5.5 Compensation -24-
5.6 No Solicitation -24-
SECTION 6: REPRESENTATIONS AND WARRANTIES OF ALLIED -25-
6.1 Organization and Standing -25-
6.2 Subsidiaries, etc -25-
6.3 Qualification -25-
6.4 Corporate Authority -25-
6.5 Financial Statements -26-
6.6 Capitalization of the Corporation -26-
6.7 Taxes -27-
6.8 No Actions, Proceedings, etc -27-
6.9 Post Balance Sheet Changes -27-
6.10 No Breaches -28-
6.11 Condition of the Corporation's Assets -28-
6.12 Inventory -28-
6.13 Accounts Receivable -28-
6.14 Corporate Acts and Proceedings -28-
6.15 Registered Rights and Proprietary Information -29-
6.16 Changes in Suppliers and Customers -30-
6.17 No Liens or Encumbrances -30-
6.18 Employee Matters -30-
6.19 Legal Proceedings and Compliance with Law -30-
6.20 Contracts -31-
6.21 Labor Matters -32-
6.22 Insurance -32-
6.23 Environmental -32-
6.24 Disclosure of Information -33-
SECTION 7: COVENANTS OF ALLIED -33-
7.1 Preservation of Business -33-
7.2 Ordinary Course -34-
7.3 Negative Covenants -34-
7.4 Access to Books and Records, Premises, etc -34-
7.5 Compensation -35-
7.6 Post-Closing Financing -35-
7.7 No Solicitation -35-
7.8 Audited Financial Statements and Bring-Downs -36-
7.9 Delivery of Additional Filings -36-
SECTION 8: TERMINATION -37-
8.1 Termination -37-
8.2 Effect of Termination -37-
SECTION 9: REMEDIES FOR BREACH -37-
9.1 Remedies for Breach -37-
SECTION 10: NONDISCLOSURE OF CONFIDENTIAL INFORMATION -37-
10.1 Nondisclosure of Confidential Information -37-
10.2 No Publicity -38-
SECTION 11: EXPENSES -39-
SECTION 12: MISCELLANEOUS -39-
12.1 Attorney's Fees -39-
12.2 No Brokers -39-
12.3 Survival and Incorporation of Representations -39-
12.4 Incorporation by Reference -39-
12.5 Parties in Interest -40-
12.6 Amendments and Waivers -40-
12.7 Waiver -40-
12.8 Governing Law - Construction -40-
12.9 Limitation of Actions -40-
12.10 Representations and Warranties -40-
12.11 Notices -40-
12.12 Fax/Counterparts -42-
12.13 Captions -42-
12.14 Severability -42-
12.15 Good Faith Cooperation and Additional Documents -42-
12.16 Specific Performance -42-
12.17 Assignment -42-
12.18 Time -43-
<PAGE>
<PAGE>
EXHIBITS
Exhibit 2.1 SkyLynx Express Holdings, Inc. List of Holders of SkyLynx
Common Stock
Exhibit 2.2 SkyLynx Express Holdings, Inc. contract rights, licenses,
intellectual property rights, technology and other tangible
and intangible assets
Exhibit 3.4(o) SkyLynx Form of Shareholder Assignment
Exhibit 3.4(u) Opinion of Robert Gallucci, J.R. Gallucci, Inc., counsel for
SkyLynx, dated as of the Closing Date
Exhibit 3.5(w) Opinion of Neuman & Drennen, llc, counsel for Allied, dated
as of the Closing Date
Exhibit 3.7(a) Reconstituted Board of Directors of Allied Wireless, Inc.
Exhibit 4.7 SkyLynx Express Holdings, Inc. Exceptions to Timely Filing
of Taxes; Tax Related Disputes
Exhibit 4.8 SkyLynx Express Holdings, Inc. Pending or Threatened
Actions or Proceedings
Exhibit 4.9 SkyLynx Express Holdings, Inc. Post Balance Sheet
Changes
Exhibit 4.11 SkyLynx Express Holdings, Inc. Third Party Proprietary
Interest in Intangible Assets
Exhibit 4.12 SkyLynx Express Holdings, Inc. Exceptions to Inventory
Valuation, Condition and Marketability
Exhibit 4.13 SkyLynx Express Holdings, Inc. Exceptions to Collectability
of Accounts Receivable (Material Counterclaims or Set-Offs)
Exhibit 4.15 SkyLynx Express Holdings, Inc. Patents, Other Registered
Rights and Proprietary Information
Exhibit 4.16 SkyLynx Express Holdings, Inc. Changes in Suppliers and
Customers
Exhibit 4.17 SkyLynx Express Holdings, Inc. Liens or Encumbrances
Exhibit 4.18 SkyLynx Express Holdings, Inc. Current Employees
Exhibit 4.19 SkyLynx Express Holdings, Inc. Pending or Threatened Legal,
Administrative, or Other Proceedings or Governmental
Investigation, Exceptions to Compliance with Laws,
Ordinances, Requirements, Regulations, or Orders
Exhibit 4.20(a) SkyLynx Express Holdings, Inc. Material Contract Agreements
Exhibit 4.20(b) SkyLynx Express Holdings, Inc. Labor Contracts, Employment
Agreements and Collective Bargaining Agreements
Exhibit 4.20(c) SkyLynx Express Holdings, Inc. Liens or Security Interest
Securing Indebtedness
Exhibit 4.20(d) SkyLynx Express Holdings, Inc. Profit Sharing, Pension,
Stock Option, Severance pay, Retirement, Bonus, Deferred
Compensation, Group Life and Health Insurance or other
Employee Benefit Plans, Agreements, Arrangements or
Commitments
Exhibit 4.20(e) SkyLynx Express Holdings, Inc. Other Material Documents or
Instruments
Exhibit 4.21(f) SkyLynx Express Holdings, Inc. Defaults or Breaches of
Existing Contracts, Agreements, Leases, Licenses, Plans,
Arrangements and Commitments
Exhibit 4.22 SkyLynx Express Holdings, Inc. Insurance Coverage
Exhibit 4.23 SkyLynx Express Holdings, Inc. Environmental Concerns:
Hazardous Waste Production, Storage, etc.
Exhibit 6.4 Allied Wireless, Inc. Corporate Authority
Exhibit 6.5 Allied Wireless, Inc. Financial Statements
Exhibit 6.7 Allied Wireless, Inc. Exceptions to Timely Filing of Taxes;
Tax Related Disputes
Exhibit 6.8 Allied Wireless, Inc. Actions, Proceedings, Orders, Writs,
Injunctions, Decrees, Liability for Damages
Exhibit 6.18 Allied Wireless, Inc. Benefit Plans, Arrangements or
Understandings
Exhibit 6.19 Allied Wireless, Inc. Pending or Threatened Legal,
Administrative, or Other Proceedings or Governmental
Investigation, Exceptions to Compliance with Laws,
Ordinances, Requirements, Regulations, or Orders
Exhibit 6.23 Allied Wireless, Inc. Environmental Concerns: Hazardous
Waste Production, Storage, etc.
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT ("Agreement") is made and entered into effective this 5th
day of August, 1997, by and between ALLIED WIRELESS, INC., a Colorado
corporation having its principal place of business at 333 North 30th Street,
Boulder, Colorado 80301 ("Allied"), and SkyLynx Express Holdings, Inc., a
Delaware corporation having its principal place of business at 55 South Market
Street, Suite 240, San Jose, California 95113 ("SkyLynx") (hereafter Allied
and SkyLynx may collectively be referred to as the "Companies"); and NETWORK
SYSTEM TECHNOLOGIES, INC., a California corporation, having its principal
place of business at 55 South Market Street, Suite 240, San Jose, California
95113 ("NST").
WITNESSETH
WHEREAS, NST is the owner of certain assets including, inter alia, rights
to use existing products and rights to certain technology and products, as
well as future products and rights which may be required by NST through other
relationships (the "Assets"); and
WHEREAS, NST has agreed to form and organize SkyLynx as a wholly-owned
subsidiary and to undertake a tax-free reorganization, pursuant to which NST
will transfer and assign to SkyLynx the Assets solely in exchange for shares
of common stock of SkyLynx; and
WHEREAS, Allied desires to acquire all but in no event less than 80% of
the issued and outstanding shares of common stock of SkyLynx owned by its
shareholder ("Shareholder") which shall consist exclusively of NST, subject to
the terms and conditions set forth in this Agreement; and
WHEREAS, Allied has agreed to undertake a private offering of shares of
its common stock pursuant to Rule 504 of Regulation D under the Securities Act
(the "Private Offering") in which it will raise a minimum of $750,000 and a
maximum of $1,000,000 prior to and as a condition to the Closing herein; and
WHEREAS, certain affiliates of Allied have agreed to remain engaged
following the Closing in the process of raising an additional $9,000,000
pursuant to the business plan of SkyLynx;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and adequacy whereof is hereby
acknowledged, the parties agree as follows:
SECTION 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 Best Knowledge. "Best Knowledge" shall mean both what a Person knew
as well as what the Person should have known had the Person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known or
should have known as the result of the exercise of reasonable diligence to the
current directors and executive officers of the Person.
1.2 Business Day. "Business Day" means any day which is not a Saturday,
Sunday or a permitted or required bank holiday in San Francisco, California.
1.3 Code. "Code" means the Internal Revenue Code of 1986, as amended.
1.4 Erisa. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.5 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.6 Fiscal Year. "Fiscal Year" shall mean a twelve-month period
beginning January 1.
1.7 Governmental Authority. "Governmental Authority" shall mean any and
all foreign, federal, state or local governments, governmental institutions,
public authorities and governmental entities of any nature whatsoever, and any
subdivisions or instrumentalities thereof, including, but not limited to,
departments, boards, bureaus, commissions, agencies, courts, administrations
and panels, and any division or instrumentalities thereof, whether permanent
or ad hoc and whether now or hereafter constituted or existing.
1.8 Governmental Requirement. "Governmental Requirement" shall mean any
and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules regulations, interpretations,
guidelines, directions, orders, judgments, writs, injunctions, decrees,
decisions or similar items or pronouncements, promulgated, issued, passed or
set forth by any Governmental Authority.
1.9 IRS. "IRS" means the Internal Revenue Service.
1.10 Legal Requirements. "Legal Requirements" means applicable common
law and any statute, ordinance, code or other laws, rule, regulation, order,
technical or other standard, requirement, judgment, or procedure enacted,
adopted, promulgated, applied or followed by any governmental authority,
including, without limitation, any order, decree, award, verdict, findings of
fact, conclusions of law, decision or judgment, whether or not final or
appealable, of any court, arbitrator, arbitration board or administrative
agency.
1.11 Ownership Interest. "Ownership Interest" shall mean any form of
direct or indirect interest in the ownership, equity or profits of SkyLynx or
Allied, whether certificated or non-certificated, issued or unissued,
contingent or otherwise, including, without limitation, the following:
shares, or the right thereto, executory rights to receive shares, options,
warrants, instruments or obligations convertible into shares or profit
interests.
1.12 Person. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or
otherwise.
1.13 Section. Unless otherwise stated herein, the term "Section" when
used in this Agreement shall refer to the Sections of this Agreement.
1.14 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.15 Taxes. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
SECTION 2: EXCHANGE OF SECURITIES
2.1 Exchange of Common Stock. Subject to the terms and conditions
hereinafter set forth, on the Closing Date, NST as the sole Shareholder of
SkyLnyx shall deliver to Allied, and Allied shall accept from each such
holder, an aggregate of up to 100% of the issued and outstanding shares of
Common Stock, _______ par value, of SkyLynx (the "SkyLynx Common Stock") in
exchange for an aggregate of up to a number of shares of Allied Common Stock,
$.001 par value (the "Common Exchange Shares"), determined in accordance with
Section 2.6 below. Hereafter the Common Exchange Shares shall be referred to
as the "Exchange Shares."
2.2 NST/SkyLynx Reorganization. Prior to the Closing Date, NST shall
undertake a reorganization pursuant to which NST shall form and organize
SkyLynx as a wholly-owned subsidiary and transfer to SkyLynx certain rights
and properties of NST in exchange for SkyLynx shares of Common Stock (the
"Reorganization"). The Reorganization shall be undertaken in such a manner as
to qualify for a tax-free reorganization under Section 351 of the Code, and
the parties hereby agree to undertake all reasonable actions necessary both
before and after the consummation of the Reorganization to effect such
treatment. In connection with the Reorganization, NST shall transfer to
SkyLynx solely in exchange for shares of SkyLynx common stock certain contract
rights, licenses, technology and other tangible and intangible assets (the
"Assets") more fully described on Exhibit 2.2 hereof. Immediately following
the Reorganization, SkyLynx shall have outstanding shares of Common Stock
issued to NST in connection with the Reorganization and no other shares of
common stock, preferred stock, equity securities, options, warrants,
convertible debentures or other securities exercisable to purchase or
convertible into shares of SkyLynx equity securities. Further, immediately
following the Reorganization, SkyLynx shall have only those debts, liabilities
or obligations as Allied may agree.
2.3 Allied Recapitalization. Prior to the Closing of the Exchange,
Allied shall eliminate, either through the payment, forgiveness or conversion
into equity or some other means satisfactory to SkyLynx, all debt of Allied.
To the extent that Allied eliminates debt by conversion of debt to equity, the
securities issued in connection with such conversion (the "Conversion Shares")
shall be included in the shares of Allied Common Stock outstanding prior to
the Exchange for purposes of Section 2.7 below.
2.4 Consultation Fees and Agreements. The parties acknowledge that in
connection with the negotiation, preparation, execution and consummation of
the Exchange, the parties hereto have engaged the services of one or more
consultants. The parties agree that in consideration of their services,
Allied shall be authorized to issue to such consultants, in the aggregate,
shares of common stock of Allied (the "Consultant Shares") which will
represent, immediately following the Exchange, up to 4.7% of the total issued
and outstanding shares of Allied Common Stock. Such shares shall be issued by
Allied without registration under the Securities Act in reliance upon an
exemption from the registration requirements thereof contained in Section 4(2)
thereof. Such shares shall be "restricted securities" under the Securities
Act and shall have customary piggyback registration rights. The Consultant
Shares shall be included in the shares deemed to be outstanding prior to the
Exchange for the purposes of determining the number of shares issuable in the
Exchange pursuant to 2.7 hereof.
2.5 Private Financing. Immediately following the execution of this
Agreement, and prior to the Effective Date of the Exchange, Allied agrees to
undertake a private offering of shares of its common stock exclusively to
persons who qualify as "accredited investors" within the meaning of
Rule 501(a) of Regulation D of the Securities Act (the "Private Offering").
The Private Offering shall be undertaken and structured in a manner to raise
gross proceeds of a minimum of $750,000, all-or-none ("Minimum Offering") and
a maximum of $1,000,000, best efforts ("Maximum Offering") before deduction of
offering expenses not to exceed $25,000. The Private Offering shall be
undertaken without registration under the Securities Act in reliance upon an
exemption from such registration requirements contained in Rule 504,
Regulation D thereunder. Allied agrees to undertake the Private Offering in
conformity with all applicable Legal Requirements including, without
limitation, applicable federal and state securities laws. The net proceeds of
the Private Offering shall be utilized after the Effective Date for the
completion of various high-speed modem access contracts and expenditures
reasonably related thereto. All shares of equity securities of Allied sold in
the Private Offering ("Private Offering Shares") shall be added to the Allied
Shares deemed outstanding on the Effective Date for purposes of determining
the number of Exchange Shares issuable to the Shareholders on the Effective
Date of the Exchange pursuant to Section 2.6 hereof. The completion by Allied
of the Private Offering shall be a condition precedent to the Closing of the
Exchange by SkyLynx.
2.6 Determination of Issuable Allied Shares. The number of Exchange
Shares issuable to the Shareholder on the Closing Date pursuant to Section 2.1
shall be a number such that if 100% of the issued and outstanding shares of
SkyLynx Common Stock are tendered for exchange for Exchange Shares, the
aggregate number of shares of Allied Common Stock issuable in the Exchange to
the Shareholder shall represent, in the aggregate, after giving effect to the
issuance, if any, of the Conversion Shares, Consultant Shares and Private
Offering Shares, 80% of the total issued and outstanding shares of Allied
Common Stock on a fully diluted basis immediately following consummation of
the Exchange. By way of example, the following table illustrates the relative
equity positions of the following parties immediately following the Exchange,
assuming a total of 125,000,000 shares of Allied Common Stock will be issued
and outstanding immediately following the Exchange:
<TABLE>
<CAPTION>
<S> <C> <C>
Allied Wireless Stockholders 12,500,000 (10%)
Consultants 5,833,333 (4.7%)
Private Offering Shares and Conversion Shares 6,666,667 (5.3%)
SkyLynx Shareholder (NST) 100,000,000 (80%)
Total Outstanding 125,000,000 (100%)
</TABLE>
2.7 Income Tax Considerations. It is the intention of the parties
hereto that the exchange of stock contemplated by this Agreement will qualify
for treatment as a tax-free reorganization under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended, and the parties hereby agree to
undertake all reasonable actions necessary both before and after the
consummation of the Exchange to effect such treatment.
2.8 Compliance with Securities Laws. The Exchange provided for in
Sections 2.1 above shall be undertaken in reliance upon an exemption from the
registration requirements contained in Section 5 of the Securities Act
contained in Section 4(2). Allied shall take such actions as may be necessary
or advisable in order consummate the Exchange in conformity with applicable
laws including, without limitation, federal and state securities laws; and
SkyLynx, together with its directors and officers, agrees to take such actions
as may be necessary or advisable upon the reasonable request of Allied to
consummate the Exchange in conformity with such Legal Requirements.
SECTION 3: CLOSING
3.1 General Procedure. Subject to the terms and conditions hereinafter
set forth, at the Closing each party shall deliver such documents, instruments
and materials as may be reasonably required in order to effectuate the intent
and provisions of this Agreement, and all such documents, instruments and
materials shall be satisfactory in form and substance to counsel for each
party.
3.2 Time and Place. Upon the terms and subject to the conditions set
forth in this Agreement, the Exchange transactions contemplated by Section 2.1
shall be consummated and closed (the "Closing") at 10:00 a.m. at the offices
of _______________________________ on the earlier of (i) sixty (60) days
following the date of this Agreement, and (ii) five Business Days after the
date on which the conditions set forth in Sections 3.4 and 3.5 shall have been
satisfied or waived or such other time, date and place as the parties shall
agree upon (the date of the Closing being herein referred to as the "Closing
Date").
3.3 Covenants Regarding Closing. SkyLynx and Allied each hereby
covenant and agree that they shall (i) use reasonable efforts to cause each of
their respective Exhibits to be prepared and exchanged with the other party,
and its legal counsel, within ten (10) business days following the execution
of this Agreement, except to the extent the express terms of this Agreement
provide for a different time period for such delivery to be accomplished,
(ii) use reasonable efforts to cause all of their respective representations
and warranties set forth in this Agreement, and Exhibits hereto, to be true on
and as of the Closing Date, (iii) use reasonable efforts to cause all of their
respective obligations that are to be fulfilled on or prior to the Closing
Date to be so fulfilled, (iv) use reasonable efforts to cause all conditions
to the Closing set forth in this Agreement to be satisfied on or prior to the
Closing Date, and (v) use reasonable efforts to deliver to each other at the
Closing the certificates, updated lists, notices, consents, authorizations,
approvals, agreements, transfer documents, receipts and amendments required
hereby (with such additions or exceptions to such items as are necessary to
make the statements set forth in such items true and correct, provided that if
any such additions or exceptions cause any of the conditions to its respective
obligations hereunder as set forth herein below not to be performed, satisfied
or fulfilled, such additions and exceptions shall in no way limit the rights
of the parties hereto to terminate this Agreement or refuse to consummate the
transactions contemplated hereby).
3.4 Conditions to Obligation of Allied. The obligation of Allied to
complete the Exchange on the Closing Date on the terms set forth in this
Agreement is, at the option of Allied, subject to the satisfaction or written
waiver by Allied of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by SkyLynx in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date, except to the extent that such representations and
warranties expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) Compliance with Covenants. All covenants which SkyLynx is
required to perform, satisfy or comply with on or before the Closing Date
shall have been fully complied with or performed in all material respects.
(c) Corporate Approvals. Any action required to be taken by the
Board of Directors of SkyLynx or its Shareholders to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken.
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which SkyLynx is a party
shall require the consent of any person to the Exchange or any other
transaction provided for herein, such consent shall have been obtained and
Allied shall have received reasonably satisfactory evidence thereof; provided,
however, that SkyLynx shall not make, as a condition for the obtaining of any
such consent, any agreements or undertakings not approved in writing by Allied
to the extent that such condition otherwise has an effect on Allied. Allied
shall have been furnished with evidence satisfactory to it of the timely
consent or approval of, filing with or notice to, each Governmental Authority
or Person which in the good faith judgment of Allied is necessary or required
with respect to the execution and delivery by SkyLynx and the consummation by
SkyLynx of the transactions contemplated hereby.
(e) Review and Due Diligence. Allied, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete, and
shall have completed, a satisfactory due diligence investigation of SkyLynx,
together with a satisfactory review of SkyLynx's corporate status and
SkyLynx's property, all of which shall be satisfactory in form and substance
to Allied in its sole discretion.
(f) No Litigation, Etc. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental Authority, or before
any arbitral, mediation panel or tribunal of any kind shall have been
instituted or threatened (i) to restrain or prohibit the transactions
contemplated by this Agreement, or (ii) to claim that the consummation of any
such transaction is illegal or (iii) which, if determined adversely, would
effect adversely Allied or SkyLynx following consummation of the transactions
contemplated hereby and SkyLynx shall have delivered to Allied a certificate
dated as of the Closing Date and executed by SkyLynx, stating that to its Best
Knowledge, no such items exist. No governmental authority or arbitral,
mediation panel or tribunal of any kind shall have taken any other action as a
result of which the management of Allied, in its sole discretion, reasonably
deems it inadvisable to proceed with the transactions contemplated by this
Agreement.
(g) No Material Adverse Change. No material adverse change in the
business, property or assets of SkyLynx shall have occurred, and no loss or
damage to any of the assets, whether or not covered by insurance, with respect
to SkyLynx hereto has occurred, and SkyLynx shall have delivered to Allied a
certificate dated as of the Closing Date to such effect.
(h) Update of Contracts. SkyLynx shall have delivered to Allied an
accurate list, as of the Closing Date, showing (i) all agreements, contracts
and commitments of the type listed on Exhibit 4.20 entered into since the date
of this Agreement; and (ii) all other agreements, contracts and commitments
related to the businesses or the assets of SkyLynx entered into since the date
of this Agreement, together with true, complete and accurate copies of all
such documents (the "SkyLynx New Contracts"). Allied shall have had the
opportunity to review and approve the SkyLynx New Contracts of the other, and
any of the Companies shall have the right to delay the Closing for up to ten
(10) days if it in its sole discretion deems such delay necessary to enable it
to adequately review the SkyLynx New Contracts.
(i) No Adverse Information. The investigations with respect to
SkyLynx, the assets and the respective businesses performed by Allied's
respective professional advisors and other representatives shall not have
revealed any information concerning SkyLynx, its assets, liabilities or its
business that has not been made known to Allied, in writing prior to the date
of this Agreement and that, in the opinion of such party and its advisors,
materially and adversely affects the business or assets of the other party or
the viability of the transaction contemplated by this Agreement.
(j) Ordinary Course of Business. During the period from the date
of this Agreement until the Closing Date, SkyLynx shall have carried on its
business in the ordinary and usual course, and shall have delivered to Allied
a certificate to that effect.
(k) Liens. SkyLynx shall have delivered to Allied a reasonably
current lien and judgment search (both state and county levels in each
jurisdiction where the party is qualified to or is doing business or owns
material assets) confirming the absence of any judicial liens, security
interests, tax liens and similar such liens affecting any of its business or
assets.
(l) Approval of Counsel. All actions, proceedings, instruments and
documents required or incidental to carry out this Agreement, including all
schedules and exhibits thereto, and all other related legal matters shall have
been approved by Neuman & Drennen, llc, counsel to Allied.
(m) Other Documents. SkyLynx shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as Allied or its attorneys may have reasonably requested.
(n) Compliance with Securities Laws. Allied shall have undertaken
all actions necessary or advisable to consummate the Private Offering and
Exchange in conformity with all Governmental Requirements including, without
limitation, applicable federal and state securities laws.
(o) Shareholder Assignments. At Closing, not less than eighty
percent (80%) of the combined voting power of the issued and outstanding
shares of SkyLynx Common Stock shall have been delivered for exchange pursuant
to Section 2 of this Agreement. Surrendering SkyLynx Shareholders shall have
executed and delivered to Allied Assignments substantially in the form of
Exhibit 3.4(o) hereto assigning to Allied their SkyLynx Common Stock.
(p) Appraisal Rights and/or Dissenters' Rights. At or prior to
Closing, no beneficial or record owner of any outstanding shares of SkyLynx
Common Stock shall have exercised or shall have given notice to Allied or
SkyLynx of their intent to exercise any rights under applicable state law, if
any, to dissent from the Exchange or obtain the payment of the fair market
value of such shares of SkyLynx Common Stock in lieu of participating in the
Exchange in accordance with the terms and subject to the conditions set forth
herein.
(q) Reorganization. Prior to Closing, NST shall have completed the
Reorganization by forming, organizing and transferring the Assets to SkyLynx
upon terms and subject to the conditions of this Agreement.
(r) Non-Disclosure. On or prior to Closing, all current directors,
officers and other personnel of Allied and all agents, advisors and
consultants to Allied with access to the Allied Registered Rights and the
Allied Proprietary Information and/or the SkyLynx Registered Rights and the
SkyLynx Proprietary Information, shall have executed and delivered to Allied a
confidential information agreement restricting such person's right to disclose
any confidential or proprietary information of Allied or of SkyLynx.
(s) Private Offering. Allied shall have successfully completed and
closed upon the Minimum Offering in the Private Offering.
(t) Financial Advisory Fees. At or prior to Closing, all
obligations or commitments of Allied and SkyLynx to their respective financial
advisors and investment bankers shall have been paid or otherwise satisfied
through the issuance of the Consultant Shares, and Allied and SkyLynx shall
each have been delivered and received such written consents, approvals,
estoppel certificates or other instruments or undertakings from its advisors
or other third parties as each may deem reasonable, necessary or advisable.
(u) Opinion of Counsel. Allied shall have received an opinion of
Robert Gallucci, J.R. Gallucci, Inc., counsel for SkyLynx, dated as of the
Closing Date substantially in the form of Exhibit 3.4(u) hereto.
3.5 Conditions to Obligation of SkyLynx. The obligations of SkyLynx on
the Closing Date under the terms set forth in this Agreement are, at the
option of SkyLynx, subject to the satisfaction or written waiver by SkyLynx of
each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Allied in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date, except to the extent that such representations and
warranties expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) Compliance with Covenants. All covenants which Allied are
required to perform, satisfy or comply with on or before the Closing Date
shall have been fully complied with or performed in all material respects.
(c) Corporate Approvals. Any action required to be taken by the
Board of Directors of Allied and shareholders to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken.
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which Allied is a party
shall require the consent of any person to the exchange of Allied's shares of
Common Stock or any other transaction provided for herein, such consent shall
have been obtained and SkyLynx shall have received reasonably satisfactory
evidence thereof; provided, however, that Allied shall not make, as a
condition for the obtaining of any such consent, any agreements or
undertakings not approved in writing by SkyLynx to the extent that such
condition otherwise has an effect on SkyLynx or Allied. SkyLynx shall have
been furnished with evidence satisfactory to it of the timely consent or
approval of, filing with or notice to, each Governmental Authority or Person
which in the good faith judgment of SkyLynx is necessary or required with
respect to the execution and delivery by Allied and the consummation by Allied
of the transactions contemplated hereby.
(e) Review and Due Diligence. SkyLynx, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete, and
shall have completed, a satisfactory due diligence investigation of Allied,
its assets and liabilities, together with a satisfactory review of Allied's
corporate status and the marketability of title to Allied's property, all of
which shall be satisfactory in form and substance to SkyLynx in its sole
discretion.
(f) No Litigation, Etc. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental Authority, or before
any arbitral, mediation panel or tribunal of any kind shall have been
instituted or threatened (i) to restrain or prohibit the transactions
contemplated by this Agreement or (ii) to claim that the consummation of any
such transaction is illegal or (iii) which, if determined adversely, would
effect adversely Allied or SkyLynx following consummation of the transactions
contemplated hereby and the Companies shall have delivered to each other
certificates dated as of the Closing Date and executed by such parties,
stating that to their Best Knowledge, no such items exist. No Governmental
Authority or arbitral or mediation panel or tribunal of any kind shall have
taken any other action as a result of which the management of SkyLynx, in its
sole discretion, reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
(g) No Material Adverse Change. No material adverse change in the
business, property, assets or liabilities of any Company shall have occurred,
and no loss or damage to any of the assets, whether or not covered by
insurance, with respect to Allied hereto has occurred, and Allied shall have
delivered to SkyLynx a certificate dated as of the Closing Date to such
effect.
(h) Update of Contracts. Allied shall have delivered to SkyLynx an
accurate list, as of the Closing Date, showing (i) all agreements, contracts
and commitments of the type listed on Exhibit 6.20 entered into since the date
of this Agreement; and (ii) all other agreements, contracts and commitments
related to the businesses or the assets of Allied entered into since the date
of this Agreement, together with true, complete and accurate copies of all
such documents (the "Allied New Contracts"). SkyLynx shall have had the
opportunity to review and approve the Allied New Contracts, and SkyLynx shall
have the right to delay the Closing for up to ten (10) days if it in its sole
discretion deems such delay necessary to enable it to adequately review the
Allied New Contracts.
(i) No Adverse Information. The investigations with respect to
Allied, the assets, liabilities and their respective businesses performed by
SkyLynx's respective professional advisors and other representatives shall not
have revealed any information concerning Allied, its assets, liabilities or
business that has not been made known to SkyLynx, in writing prior to the date
of this Agreement and that, in the opinion of SkyLynx and its advisors,
materially and adversely affects the business, liabilities or assets of Allied
or the viability of the transactions contemplated by this Agreement.
(j) Ordinary Course of Business. During the period from the date
of this Agreement until the Closing Date, Allied shall have undertaken no
material business operations and shall have delivered to SkyLynx a certificate
to that effect.
(k) Liens. Allied shall have delivered to SkyLynx a reasonably
current lien and judgment search (both state and county levels in each
jurisdiction where the party is qualified to or is doing business or owns
material assets) confirming the absence of any judicial liens, security
interests, tax liens and similar such liens affecting the business or assets
of Allied or any subsidiary, except for Permitted Liens identified in Section
6.17.
(l) Approval of Counsel. All actions, proceedings, instruments and
documents required or incidental to carry out this Agreement, including all
schedules and exhibits thereto, and all other related legal matters shall have
been approved as to substance and form by J.R. Gallucci, Inc, counsel to
SkyLynx.
(m) Other Documents. Allied shall have delivered or caused to be
delivered all other documents, agreements, resolutions, certificates or
declarations as SkyLynx or its attorneys may have reasonably requested.
(n) Compliance with Securities Laws. Allied shall otherwise have
undertaken all actions necessary or advisable to consummate the Private
Offering and Exchange in conformity with all Governmental Requirements,
including, without limitation, applicable federal and state securities laws.
(o) Appraisal Rights and/or Dissenters' Rights. At or prior to
Closing, no beneficial or record owner of any outstanding shares of SkyLynx
Common Stock shall have exercised or shall have given notice to Allied or
SkyLynx of their intent to exercise any rights under applicable state law, if
any, to dissent from the Exchange or obtain the payment of the fair market
value of such shares of SkyLynx Common Stock in lieu of participating in the
Exchange in accordance with the terms and subject to the conditions set forth
herein.
(p) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Exchange shall be in effect.
(q) Non-Disclosure. On or prior to Closing, all current directors,
officers and other personnel of SkyLynx and all agents, advisors and
consultants to SkyLynx with access to the SkyLynx Registered Rights and the
SkyLynx Proprietary Information and/or the Allied Registered Rights and the
Allied Registered Rights, shall have executed and delivered to SkyLynx a
confidential information agreement restricting such person's right to disclose
any confidential or proprietary information of Allied or of SkyLynx.
(r) Private Offering. Allied shall have successfully completed and
closed upon the Minimum Offering in the Private Offering.
(s) Financial Advisory Fees. At or prior to Closing, all
obligations or commitments of Allied and SkyLynx to their respective financial
advisors and investment bankers shall have been paid or otherwise satisfied
through the issuances of the Consultant Shares, and Allied and SkyLynx shall
each have been delivered and received such written consents, approvals,
estoppel certificates or other instruments or undertakings from its advisors
or other third parties as each may deem reasonable, necessary or advisable.
(t) Reorganization. Prior to Closing, NST shall have completed the
Reorganization by forming, organizing and transferring the Assets to SkyLynx
upon terms and subject to the conditions of this Agreement.
(u) Shareholder Assignments. At Closing, not less than eighty
percent (80%) of the combined voting power of the issued and outstanding
shares of SkyLynx Common Stock shall have been delivered for exchange pursuant
to Section 2 of this Agreement. Surrendering SkyLynx Shareholders shall have
executed and delivered to Allied Assignments substantially in the form of
Exhibit 3.4(o) hereto assigning to Allied their SkyLynx Common Stock.
(v) Elimination of Outstanding Debts. At or prior to Closing,
Allied shall have effected the elimination of all outstanding debts and
obligations pursuant to the provisions of Section 2.3 above.
(w) Opinion of Counsel. SkyLynx will have received an opinion of
Neuman & Drennen, llc, counsel for Allied, dated as of the Closing Date,
substantially in the form of Exhibit 3.5(w) hereto.
3.6 Specific Items to be Delivered at the Closing. The parties shall
deliver the following items to the appropriate party at the Closing of the
transactions contemplated by this Agreement.
(a) To be delivered by SkyLynx:
(i) A certificate dated the Closing Date of SkyLynx, signed by
the President of SkyLynx stating that the representations
and warranties of SkyLynx set forth in this Agreement are
true and correct in all material respects. Said
certificate shall further verify and affirm that all
consents or waivers, if any, which may be necessary to
execute and deliver this Agreement have been obtained and
are in full force and effect.
(ii) A certificate dated the Closing Date of SkyLynx, signed by
the President and the Chief Financial Officer of SkyLynx,
in form and substance satisfactory to Allied and its legal
counsel, certifying that all conditions precedent set
forth in this Agreement to the obligations of SkyLynx to
close, have been fulfilled or waived in writing, and that
no event of default hereunder and no event which, with the
giving of notice or passage of time, or both, would be an
event of default, has occurred as of such date.
(iii) Certificates dated the Closing Date of SkyLynx, signed by
the Secretary of SkyLynx, (I) certifying attached copies
of resolutions duly adopted by the Board of Directors of
SkyLynx, authorizing the execution of this Agreement and
the other transactions to be consummated pursuant thereto;
(ii) certifying the names and incumbency of the officers
of SkyLynx who executed the Agreement and any certificates
delivered pursuant to this Section 3.6(a) for and on
behalf of SkyLynx; (iii) certifying the authenticity of
copies of the Articles of Incorporation and Bylaws of
SkyLynx; and (iv) certifying the authenticity of a
reasonably current Certificate of Good Standing, from all
jurisdictions in which the company is qualified to conduct
business.
(iv) Opinion of Robert Gallucci, J.R. Gallucci, Inc., counsel
to SkyLynx, substantially in the form of Exhibit 3.4(u).
(b) To be delivered by Allied:
(i) Certificate or certificates representing the number of
shares of Allied Common Stock determined in accordance
with Section 2.6 to be deposited with the Exchange Agent
for the benefit of the holders of shares of SkyLynx Common
Stock for exchange in accordance with the provisions of
Section 2 of this Agreement; and
(ii) A certificate dated the Closing Date of Allied, signed by
the President of Allied stating that the representations
and warranties of Allied set forth in this Agreement are
true and correct in all material respects. Said
certificate shall further verify and affirm that all
consents or waivers, if any, which may be necessary to
execute and deliver this Agreement have been obtained and
are in full force and effect.
(iii) A certificate dated the Closing Date of Allied, signed by
the Chief Executive Officer and the Chief Financial
Officer of Allied, in form and substance satisfactory to
SkyLynx and its legal counsel, certifying that all
conditions precedent set forth in this Agreement to the
obligations of Allied to close, have been fulfilled or
waived in writing, and that no event of default hereunder
and no event which, with the giving of notice or passage
of time, or both, would be an event of default, has
occurred as of such date.
(iv) Certificates dated the Closing Date of Allied, signed by
the Secretary of Allied, (i) certifying attached copies of
resolutions duly adopted by the Board of Directors of
Allied, authorizing the execution of this Agreement and
the other transactions to be consummated pursuant thereto;
(ii) certifying the names and incumbency of the officers
of Allied who executed the Agreement and any certificates
delivered pursuant to this Section 3.6(b) for and on
behalf of Allied; (iii) certifying the authenticity of
copies of the Articles of Incorporation and Bylaws of
Allied and its Subsidiaries; and (iv) certifying the
authenticity of a reasonably current Certificate of Good
Standing, from all jurisdictions in which Allied and its
Subsidiaries are qualified to conduct business.
(v) Opinion of Neuman & Drennen, llc, counsel to Allied,
substantially in the form of Exhibit 3.5(w).
3.7 Election of Directors and Executive Officers of Allied.
(a) At Closing, the following actions shall be taken to
reconstitute the Board of Directors of Allied such that it is comprised of
only the persons set forth on Exhibit 3.7(a)
(b) At Closing, all executive officers of Allied shall tender their
resignations, and the newly constituted Board of Directors shall nominate and
elect in their sole discretion persons to serve as executive officers of
Allied until the next regular annual meeting of the Company's Board of
Directors.
(c) At Closing, the following employees of SkyLynx may execute and
enter into written employment agreements with SkyLynx pursuant to which they
will provide services upon such terms as the newly-constituted Board of
Directors and such persons shall mutually agree:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Ed Moura President
William Chastian Vice President
Kenneth L. Marshall Vice President and
Co-General Counsel
</TABLE>
Base salary and incentive compensation shall be reviewed annually and
subject to increase upon agreement of SkyLynx and the employee. To the extent
they satisfy the eligibility requirements, the foregoing employees shall be
eligible to participate in the SkyLynx Stock Incentive Plan and other employee
benefit programs maintained or developed by SkyLynx during the term of
employment. Such participant shall be equivalent to the extent of the
participation in benefit programs offered to other employees of SkyLynx or
their subsidiaries of comparable rank and responsibility. The employment
agreements shall also contain customary provisions respecting non-competition,
confidentiality and noninterference.
3.8 Post Closing Matters.
(a) As soon as practicable following the Effective Date of the
Exchange, Allied shall schedule and conduct a special meeting of its
shareholders at which the shareholders of Allied shall be requested to ratify
and approve (i) a change in Allied's name to "SkyLynx Express Holdings, Inc.,"
(ii) a reverse stock split of the outstanding securities by a factor to be
mutually agreed upon by the parties, and a concomitant increase in the stated
par value of Allied's common stock, (iii) the adoption of a Stock Incentive
Plan pursuant to which Allied shall be authorized to grant incentive stock
options, non-qualified stock options and other rights to acquire securities of
Allied to officers, directors, key employees and consultants, and (iv) such
other matters as the Board of Directors may determine. All of the foregoing
is subject to ratification or nullification by the Board of Directors selected
by the Shareholders after the Exchange is consummated.
SECTION 4: REPRESENTATIONS AND WARRANTIES BY SKYLYNX
As a material inducement to Allied to enter into this Agreement and with
the understanding and expectations that Allied will be relying thereon in
consummating the Exchange contemplated hereunder, SkyLynx (hereinafter
referred to as the "Corporation" or "SkyLynx " for the purposes of this
Section 4 only) represents and warrants as follows:
4.1 Organization and Standing. SkyLynx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own its assets and
properties and to carry on its business as it is now being conducted.
4.2 Subsidiaries, etc. Except as set forth on Exhibit 4.2, the
Corporation does not have any direct or indirect Ownership Interest in any
corporation, partnership, joint venture, association or other business
enterprise.
4.3 Qualification. Except as set forth on Exhibit 4.3 and for any
jurisdiction where the failure to be qualified to engage in business as a
foreign corporation would not have a material adverse affect on the
Corporation, the Corporation is not qualified to engage in business as a
foreign corporation in any state other than Delaware and there is no other
jurisdiction wherein the character of the properties presently owned by the
Corporation or the nature of the activities presently conducted by the
Corporation makes necessary the qualification, licensing or domestication of
the Corporation as a foreign corporation.
4.4 Corporate Authority. Except as set forth on Exhibit 4.4 hereto,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby nor compliance by the Corporation with
any on the provisions hereof will
(a) conflict with or result in a breach of any provision of its
Articles of Incorporation or By-Laws;
(b) result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Corporation is a party, or by which any
of its properties or assets may be bound except for such default (or right of
termination, cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by the Corporation prior to the
Closing Date or the obtaining of which shall have been waived by Allied; or
(c) violate any order, writ, injunction, decree or, to the
Corporation's Best Knowledge, any statute, rule or regulation applicable to
the Corporation or any of its properties or assets. No consent or approval by
any Governmental Authority is required in connection with the execution and
delivery by the Corporation of this Agreement or the consummation by the
Corporation of the transactions contemplated hereby.
4.5 Financial Statements. The Corporation represents and warrants to
Allied that it was formed and organized on July _______, 1997 and that except
for consummating the Reorganization described in Section 2.2 above has
conducted no operations. As of the date of this Agreement and as of the
Closing Date, the Corporation does not have any liabilities or payables,
absolute or contingent, known or unknown, except for liabilities or payables
set forth on Exhibit 4.5 hereto.
4.6 Capitalization of the Corporation. The authorized capital stock of
SkyLynx consists of: (i) ___________ shares of Preferred Stock, $_____ par
value, of which no shares are issued and outstanding, and (ii) ___________
shares of Common Stock, $_____ par value, of which ___________ shares are
issued and outstanding. The names of the record owners of the issued and
outstanding Common Stock are set forth on Exhibit 2.1 hereto. All issued and
outstanding shares of SkyLynx Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. There are no other
outstanding rights, options, warrants, subscriptions, calls, convertible
securities or agreement of any character or nature under which the Company is
or may become obligated to issue any shares of its capital stock of any kind,
other than those shares indicated in this Section as presently outstanding and
shares issuable in accordance with the terms of this Agreement.
4.7 Taxes. Except as set forth in Exhibit 4.7, the Corporation has
filed (or has obtained extensions for filing) all income, excise, sales,
corporate franchise, property, payroll and other tax returns or reports
required to be filed by it, as of the date hereof by the United States of
America, any state or other political subdivision thereof or any foreign
country and has paid all Taxes or assessments shown to be due on such returns
or reports. To the Best Knowledge of the Corporation, except as set forth in
Exhibit 4.7, the amounts set up as provisions for Taxes in the Latest
Financial Statements are sufficient for the payment of all unpaid federal,
foreign, state or local Taxes of the Corporation accrued for or applicable to
all periods ended on or prior to the date of this Agreement, or which may
subsequently be determined to be owing by the Corporation with respect to all
periods ending on or prior to the Closing Date, subject to normal year-end
adjustments, which will not be material. There are no present disputes as to
Taxes of any nature payable by the Corporation.
4.8 No Actions, Proceedings, etc. Except as listed on the attached
Exhibit 4.8, there is no action or proceeding (whether or not purportedly on
behalf of the Corporation) pending or to its knowledge threatened by or
against the Corporation which might result in any material adverse change in
the condition, financial or otherwise, of the Corporation's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency which does nor may result in any
material adverse change in the Corporation's assets or properties or in the
financial condition or the business of the Corporation. Except for
liabilities referred to in attached Exhibit 4.8, the Corporation is not liable
for damages to any employee or former employee as a result of any violation of
any state, federal or foreign laws directly or indirectly relating to such
employee or former employee.
4.9 Post Balance Sheet Changes. Except as set forth on the attached
Exhibit 4.9 and as contemplated by this Agreement, since _________________,
the Corporation has not (a) issued, bought, redeemed or entered into any
agreements, commitments or obligations to sell, buy or redeem any shares of
its capital stock; (b) incurred any obligation or liability (absolute or
contingent), other than current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business; (c) discharged or
satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities incurred in the
ordinary course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien of
current or real property taxes not yet due and payable; (e) waived any rights
of substantial value, whether or not in the ordinary course of business; (f)
suffered any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting its assets or its business; (g) made or
suffered any amendment or termination of any material contract or any
agreement which adversely affects its business; (h) received notice or had
knowledge of any labor trouble other than routine grievance matters, none of
which is material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other benefits to
which employees may be entitled, other than employee salary increases made in
the ordinary course of business and reflected on an Exhibit hereto; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
4.10 No Breaches. The Corporation is not in violation of, and the
consummation of the transactions contemplated hereby do not and will not
result in any material breach of, any of the terms or conditions of any
mortgage, bond, indenture, agreement, contract, license or other instrument or
obligation to which the Corporation is a party or by which its assets are
bound; nor will the consummation of the transactions contemplated hereby cause
SkyLynx to violate any statute, regulation, judgment, writ, injunction or
decree of any court, threatened or entered in a proceeding or action in which
the Corporation is, was or may be bound or to which any of the Corporation's
assets are subject.
Exhibit 4.11, SkyLynx's assets are currently in good and usable condition
and there are no defects or other conditions which, in the aggregate, materially
and adversely affect the operation or values of such assets taken as a whole.
Except as disclosed on Exhibit 4.11, no person other than SkyLynx (including
any officer or employee of the Corporation) has any proprietary interest in
any know-how or other intangible assets used by the Corporation in the conduct
of its business. The Company does not currently market any products for sale.
4.12 Inventory. As of the date of this Agreement and as of the Closing
Date, the Corporation will have no inventory held for resale in the ordinary
course of business.
4.13 Accounts Receivable. As of the date of this Agreement and as of the
Closing Date, the Corporation will have no accounts receivable generated from
the sale of goods or services in the ordinary course of business.
4.14 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of SkyLynx, has been
duly executed and delivered by an authorized officer of SkyLynx, and is a
valid and binding Agreement on the part of SkyLynx that is enforceable against
SkyLynx in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, fraudulent transfers,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and to judicial limitations on the enforcement of the remedy
of specific performance and other equitable remedies.
(a) Exhibit 4.15 hereto contains a true and complete list of all
patents, letters patent and patent applications, service marks, trademark and
service mark registrations and applications, copyright, copyright
registrations and applications, grants of licenses and rights to the
Corporation with respect to the foregoing, both domestic and foreign, claimed
by the Corporation or used or proposed to be used by the Corporation in the
conduct of its business (collectively herein, "SkyLynx Registered Rights").
Exhibit 4.15 hereto also contains a true and complete list of all and every
trade secret, know-how, process, formula, discovery, development, research,
design, technique, customer and supplier list, contracts, product development
plans, product development concepts, author contracts, marketing and
purchasing strategy, invention, and any other matter required for, incident
to, or related to the conduct of its business (hereafter collectively the
"SkyLynx Proprietary Information"). Except as described in Exhibit 4.15
hereto, the Corporation is not obligated or under any liability whatever to
make any payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any SkyLynx Registered Right or SkyLynx
Proprietary Information with respect to the use thereof in the conduct of its
business or otherwise.
(b) Except as described in Exhibit 4.15 hereto, to the
Corporation's Best Knowledge, the Corporation owns and has the unrestricted
right to use the SkyLynx Registered Rights and SkyLynx Proprietary Information
required for or incident to the design, development, manufacture, operation,
sale and use of all products and services sold or rendered or proposed to be
sold or rendered by the Corporation or relating to the conduct or proposed
conduct of its business free and clear of any right, title, interest, equity
or claim of others. As soon as practicable following the execution of this
Agreement, and except as described in Exhibit 4.15 hereto, the Corporation
agrees to take all necessary steps (including without limitation entering into
appropriate confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and consultants of the
Corporation and others with access to or knowledge of the SkyLynx Proprietary
Information) to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, the SkyLynx Proprietary Information and all related
documentation and intellectual property rights therein necessary for the
conduct or proposed conduct of its business.
(c) Except as described in Exhibit 4.15 hereto, the Corporation has
not sold, transferred, assigned, licensed or subjected to any right, lien,
encumbrance or claim of others, any SkyLynx Proprietary Information, including
without limitation any SkyLynx Registered Right, or any interest therein,
related to or required for the design, development, manufacture, operation,
sale or use of any product or service currently under development or
manufactured, or proposed to be developed, sold or manufactured, by it.
Exhibit 4.15 contains a true and complete list and description of all licenses
of SkyLynx Proprietary Information granted to the Corporation by others or to
others by the Corporation. Except as described in Exhibit 4.15 hereto, there
are no claims or demands of any person pertaining to, or any proceedings that
are pending or threatened, which challenge the rights of the Corporation in
respect of any SkyLynx Proprietary Information used in the conduct of its
business.
(d) Except as described in Exhibit 4.15 hereto, the Corporation
owns and on the Closing Date shall own, has and shall have, holds and shall
hold, exclusively all right, title and interest in the SkyLynx Registered
Rights, free and clear of all liens, encumbrances, restrictions, claims and
equities of any kind whatsoever, has and shall have the exclusive right to
use, sell, license or dispose of, and has and shall have the exclusive right
to bring action for the infringement of the SkyLynx Registered Rights and the
SkyLynx Proprietary Information. To the Best Knowledge of Corporation, the
marketing, promotion, distribution or sale by the Corporation of any products
or interests subject to the SkyLynx Registered Rights or making use of SkyLynx
Proprietary Information shall not constitute an infringement of any patent,
copyright, trademark, service mark or misappropriation or violation of any
other party's proprietary rights or a violation of any license or agreement by
the Corporation. Except as described in Exhibit 4.15 hereto, to the knowledge
of the Corporation after due inquiry no facts or circumstances exist that
could result in the invalidation of any of the SkyLynx Registered Rights.
4.16 Changes in Suppliers and Customers. Except as disclosed on Exhibit
4.16, the Corporation is not aware of any fact which indicates that any of the
suppliers supplying products, components or materials to the Corporation
intends to cease selling such products to the Corporation nor is the
Corporation aware of any fact which indicates that any major customer of the
Corporation intends to terminate its business relations with the Corporation.
4.17 No Liens or Encumbrances. The Corporation has good and marketable
title to all of the property and assets, tangible and intangible, employed in
the operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever except as
set forth on the attached Exhibit 4.17 and except for such property and assets
as may be leased by SkyLynx, and except for any property which is the subject
of Sections 4.12, 4.13 or 4.15.
4.18 Employee Matters. Exhibit 4.18 attached hereto contains a true,
complete and accurate list of all employees of the Corporation and the
remuneration of each (including wages, salaries and fringe benefits). The
Corporation has no information or facts indicating that any employee listed on
Exhibit 4.18 intends to terminate his/her employment relationship with the
Corporation prior or subsequent to the Closing Date, except as may be required
by this Agreement. Except as specifically described on Exhibit 4.18, the
Corporation has no employee benefit plans (including, but not limited to,
pension plans and health or welfare plans), arrangements or understandings,
whether formal or informal. The Corporation does not now and has never
contributed to a "multi-employer plan" as defined in Section 400(a)(3) of the
ERISA. The Corporation has complied with all applicable provisions of ERISA
and all rules and regulations promulgated thereunder, and neither the
Corporation nor any trustee, administrator, fiduciary, agent or employee
thereof has at any time been involved in a transaction that would constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA as to any
covered plan of the Corporation. The Corporation is not a party to any
collective bargaining or other union agreement. The Corporation has not,
within the past five (5) years had, or been threatened with, any union
activities, work stoppages or other labor trouble with respect to its
employees which had a material adverse effect on the Corporation, its business
or assets. Except as set forth in Exhibit 4.9, the Corporation has not made
any commitment or agreements to increase the wages or modify the conditions or
terms of employment of any of the employees of the Corporation used in
connection with its business, and between the date of this Agreement and the
Closing Date, the Corporation will not make any agreement to increase the
wages or modify the conditions or terms of employment of any of the employees
of the Corporation used in the conduct of its business, without the prior
written consent of all parties hereto.
4.19 Legal Proceedings and Compliance with Law. Except as set forth in
Exhibit 4.19, SkyLynx has not received notice of any legal, administrative,
arbitration or other proceeding or governmental investigation pending or
threatened (including those relating to the health, safety, employment of
labor, or protection of the environment) pertaining to SkyLynx which might
result in the aggregate in money damages payable by SkyLynx in excess of
insurance coverage or which might result in a permanent injunction against
SkyLynx. Except as set forth in such Exhibit, SkyLynx has substantially
complied with, and is not in default in any respect under any laws,
ordinances, requirements, regulations, or orders applicable to the business of
SkyLynx, the violation of which might materially and adversely affect it.
Except as set forth in such Exhibit, SkyLynx is not a party to any agreement
or instrument, nor is it subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule, regulation, code or
ordinance which materially and adversely affects, or might reasonably be
expected materially and adversely to affect the business, operations,
prospects, property, assets or condition, financial or otherwise, of SkyLynx.
4.20 Contract Schedules. Attached as Exhibits 4.20(a) to 4.20(e) hereto
are an accurate list of the following:
(a) All contracts, leases, agreements, covenants, licenses,
instruments or commitments of SkyLynx pertaining to the business of SkyLynx
calling for the payment of $5,000 or more or which is otherwise material to
the business of SkyLynx, including, without limitation, the following:
(i) Licenses and contracts held in the ordinary course of
business;
(ii) Executory contracts for the purchase, sale or lease of any
assets;
(iii) Management or consulting contracts;
(iv) Patent, trademark and copyright applications,
registrations or licenses, and know-how, intellectual
property and trade secret agreements or other licenses;
(v) Note agreements, loan agreements, indentures and the like,
other than those entered into and executed in the ordinary
course of business;
(vi) All sales, agency, distributorship or franchise
agreements; and
(vii) Any other contracts not in the ordinary course of
business.
(b) All labor contracts, employment agreements and collective
bargaining agreements to which SkyLynx is a party.
(c) All instruments evidencing any liens or security interest
securing any indebtedness of SkyLynx covering any asset of SkyLynx.
(d) All profit sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans, agreements, arrangements or commitments of any
nature whatsoever, whether or not legally binding, and all agreements with any
present or former officer, director or shareholder of the Corporation.
(e) Any and all documents, instruments and other writings not
listed in any other schedule hereto which are material to the business
operations of SkyLynx.
Except as set forth in Exhibit 4.20(f), all of such contracts,
agreements, leases, licenses, plans, arrangements and commitments and all
other such items set forth above are valid, binding and in full force and
effect in accordance with their terms and conditions, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
fraudulent transfer, reorganization or other similar laws affecting the
enforcement of contracts generally, and there is no existing material default
thereunder or breach thereof by the Corporation, or to SkyLynx's knowledge by
any party to such contracts, or any conditions which, with the passage of time
or the giving of notice or both, might constitute such a default by the
Corporation or by any other party to the contracts.
4.21 Labor Matters. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of SkyLynx or any of its agent or employees, threatened
against SkyLynx.
4.22 Insurance. SkyLynx maintains in full force and effect insurance
coverage on its assets and business in such amounts and against such risks and
losses as set forth in Exhibit 4.22.
4.23 Environmental. Except as disclosed on Exhibit 4.23, SkyLynx has
never owned or operated any real property except for leased office space:
(a) to the Best Knowledge of SkyLynx, no real property (or the
subsurface soil and the ground water thereunder) now or previously leased by
SkyLynx (the "Leased Premises") either contains any Hazardous Substance (as
hereinafter defined) or has underneath it any underground fuel or liquid
storage tanks;
(b) to the Best Knowledge of SkyLynx, there has been no generation,
transportation, storage, treatment or disposal of any Hazardous Substance on
or beneath the Leased Premises, now or in the past;
(c) SkyLynx is not aware of any pending or threatened litigation or
proceedings before any court or administrative agency in which any person
alleges, or threatens to allege, the presence, release, threat of release,
placement on or in the Leased Premises, or the generation, transportation,
storage, treatment or disposal at the Leased Premises, of any Hazardous
Substance;
(d) SkyLynx has not received any notice and has no knowledge that
any Governmental Authority or any employee or agent thereof has determined or
alleged, or is investigating the possibility, that there is or has been any
presence, release, threat of release, placement on or in the Leased Premises,
or any generation, transportation, storage, treatment or disposal at the
Leased Premises, of any Hazardous Substance;
(e) To SkyLynx's Best Knowledge, there have been no communications
or agreements with any Governmental Authority or agency (federal, state, or
local) or any private person or entity (including, without limitation, any
prior owner of the Leased Premises and any present or former occupant or
tenant of the Leased Premises) relating in any way to the presence, release,
threat of release, placement on or in the Leased Premises, or any generation,
transportation, storage, treatment or disposal at the Leased Premises, of any
Hazardous Substance. SkyLynx further agrees and covenants that SkyLynx will
not store or deposit on, otherwise release or bring onto or beneath, the
Leased Premises any Hazardous Substance prior to the Closing Date; and
(f) there is no litigation, proceeding, citizen's suit or
governmental or other investigation pending, or, to SkyLynx's Best Knowledge,
threatened, against SkyLynx, and SkyLynx knows of no facts or circumstances
which might give rise to any future litigation, proceeding, citizen's suit or
governmental or other investigation, which relate to SkyLynx's compliance with
environmental laws, regulations, rules, guidelines and ordinances.
For purposes of this Section 4.23, "Hazardous Substance" shall mean and
include (1) a hazardous substance as defined in 42 U.S.C. Section 9601(14),
the Regulations at 40 C.F.R. Part 302, (2) any substance regulated under the
Emergency Planning and Community Right to Know Act (including without
limitation any extremely hazardous substances listed at 40 C.F.R. Part 355 and
any toxic chemical listed at 40 C.F.R. Part 372), (3) hazardous wastes and
hazardous substances as specified under any California state or local
Governmental Requirement governing water pollution, groundwater protection,
air pollution, solid wastes, hazardous wastes, spills and other releases of
toxic or hazardous substances, transportation of hazardous substances,
materials and wastes and occupational or employee health and safety, and (4)
any other material, gas or substance known or suspected to be toxic or
hazardous (including, without limitation, any radioactive substance, methane
gas, volatile hydrocarbon, industrial solvent, and asbestos) or which could
cause a material detriment to, or materially impair the beneficial use of, the
Leased Premises, or constitute a material health, safety or environmental risk
to any person exposed thereto or in contact therewith. For purposes of this
Section 4.23, "Hazardous Substance" shall not mean and shall not include the
following, to the extent used normally and required for everyday uses or
normal housekeeping or maintenance: (A) fuel oil and natural gas for heating,
(B) lubricating, cleaning, coolant and other compounds customarily used in
building maintenance, (C) materials routinely used in the day-to-day
operations of an office, such as copier toner, (D) consumer products, (E)
material reasonably necessary and customarily used in construction and repair
of an office project, and (F) fertilizers, pesticides and herbicides commonly
used for routine office landscaping.
4.24 Disclosure of Information. The Corporation represents and warrants
that all statements, data and other written information provided by it to any
party hereto as well as their respective consultants and representatives have
been accurate copies or true originals. The Corporation represents and
warrants that, to its Best Knowledge, (i) there exists no material information
concerning the Corporation which has been requested but not been disclosed to
or made available to the other parties and their representatives or
consultants and which would be material to a decision to consummate the
transactions provided for in this Agreement and (ii) in the aggregate, such
information does not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made in
them, in light of the circumstances under which they are made, not misleading.
SECTION 5: COVENANTS OF SKYLYNX
5.1 Preservation of Business. Until Closing, SkyLynx shall use its best
efforts to :
(a) preserve intact the present business organization of SkyLynx;
(b) maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) preserve and protect the goodwill and advantageous
relationships of SkyLynx with its customers and all other persons having
business dealings with SkyLynx;
(d) preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade
secrets, service marks, copyrights, bonds and other similar rights of
SkyLynx; and
(e) comply with all laws applicable to the conduct of its business
5.2 Ordinary Course. Until Closing, SkyLynx shall conduct its business
only in the usual, regular and ordinary course, in substantially the same
manner as previously, and shall not make any substantial change to its methods
of management or operation in respect of such business or property. Without
limiting the foregoing, SkyLynx shall not, with respect to SkyLynx:
(a) sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of its property or assets, other than in the ordinary
course of business;
(b) incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or enter into
any contract or commitment, except in the ordinary course of business.
5.3 Negative Covenants. Until Closing, except as contemplated by this
Agreement or disclosed in Exhibits to this Agreement, from the date hereof
until the Closing Date, unless and until Allied otherwise consents in writing,
SkyLynx will not (a) change or alter the physical contents or character of the
tangible and intangible assets so as to materially affect the nature of
SkyLynx's business; (b) incur any obligations or liabilities (absolute or
contingent) other than current liabilities incurred and obligations under
contracts entered into in the ordinary course of business; (c) mortgage,
pledge or voluntarily subject to lien, charge or other encumbrance any assets,
tangible or intangible, other than the lien of current property taxes not due
and payable; (d) sell, assign or transfer any of its assets or cancel any
debts or claims, other than in the ordinary course of business; (e) waive any
right of any substantial value; (f) declare or make any payment or
distribution to Shareholders or issue, purchase or redeem any shares of its
capital stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other compensation
of any of its directors, officers, or employees or make any increase in any
benefits to which such employees might be entitled; (h) institute any bonus,
benefit, profit sharing, stock option, pension, retirement plan or similar
arrangement, or make any changes in any such plans or arrangements presently
existing; or (i) enter into any material transactions or series of
transactions other than in the ordinary course of business.
5.4 Access to Books and Records, Premises, etc. From the date of this
Agreement through the Closing Date, SkyLynx will grant Allied and its
authorized representatives reasonable access to its books and records,
premises, products, employees and customers and other parties with whom it has
contractual relations during reasonable business hours and in a manner not to
disrupt or interfere with SkyLynx's business relationships for purposes of
enabling Allied to fully investigate the business of SkyLynx. SkyLynx will
also deliver copies of its monthly statements of operations and financial
condition for the period subsequent to its financial statements referred to in
Section 4.5 to Allied within a reasonable time of such statements becoming
available.
5.5 Compensation. SkyLynx shall not enter into or agree to enter into
any employment contract or agreement for consulting, professional, or other
services which will adversely and materially affect the operation of SkyLynx
prior to the Closing Date, except for any extensions of said contracts or
agreements on substantially the same terms and conditions as were previously
in effect.
5.6 No Solicitation.
(a) Except in connection with the transactions contemplated by this
Agreement, SkyLynx shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative of, SkyLynx or
any of its subsidiaries to, (i) solicit, initiate or encourage the submission
of, any takeover proposal, (ii) enter into any agreement with respect to any
takeover proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by any executive
officer of SkyLynx or any of its subsidiaries or any investment banker,
attorney or other advisor or representatives of SkyLynx or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this Section by
SkyLynx. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger, consolidation or reorganization or other business
combination involving SkyLynx or any of its subsidiaries or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in,
any voting securities of, or options, rights, warrants or other interests
convertible or exercisable for or into such voting securities, or a
substantial or material portion of the assets or business of SkyLynx or any of
its subsidiaries, other than the transactions contemplated by this Agreement.
(b) Except upon a material breach of this Agreement by Allied or
following termination hereof, except for action permitted or contemplated by
this Agreement, including a party's right to terminate this Agreement under
certain circumstances, neither the Board of Directors of SkyLynx nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Allied, the approval or recommendation by such
Board of Directors of any such committee of this Agreement or the Exchange or
(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal.
(c) SkyLynx promptly shall advise Allied orally and in writing of
any takeover proposal or any inquiry with respect to or which could lead to
any takeover proposal and the identity of the person making any such takeover
proposal or inquiry. SkyLynx will keep Allied fully informed of the status
and details of any such takeover proposal or inquiry.
(d) The provisions of this Section 5.6 shall not be construed to
prevent any investment banker, attorney or other advisor or representative of
SkyLynx to engage in discussions with third parties in the ordinary course of
business with respect to transactions not involving the parties to this
Agreement.
SECTION 6: REPRESENTATIONS AND WARRANTIES OF ALLIED
As a material inducement to SkyLynx to enter into this Agreement and with
the understanding and expectations that SkyLynx will be relying thereon in
consummating the Exchange contemplated hereunder, Allied (hereinafter Allied
shall be referred to as the "Corporation" unless the context otherwise
requires for the purposes of this Section 6 only) hereby represents and
warrants as follows:
6.1 Organization and Standing. Allied is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
and has all requisite corporate power and authority to own its assets and
properties and to carry on its business as it is now being conducted.
6.2 Subsidiaries, etc. Except as set forth on Exhibit 6.2 hereto, the
Corporation does not have any direct or indirect Ownership Interest in any
corporation, partnership, joint venture, association or other business
enterprise.
6.3 Qualification. Except as set forth on Exhibit 6.3 and for any
jurisdiction where the failure to be qualified to engage in business as a
foreign corporation would not have a material adverse effect on the
corporation, the Corporation is not qualified to engage in business as a
foreign corporation in any state other than Colorado, and there is no other
jurisdiction wherein the character of the properties presently owned by the
Corporation or the nature of the activities presently conducted by the
Corporation makes necessary the qualification, licensing or domestication of
the Corporation as a foreign corporation.
6.4 Corporate Authority. Except as set forth on Exhibit 6.4 hereto,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby nor compliance by Allied with any on the
provisions hereof will
(a) conflict with or result in a breach of any provision of its
Articles of Incorporation or By-Laws or similar documents of any Subsidiary;
(b) result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Corporation is a party, or by which any
of its properties or assets may be bound except for such default (or right of
termination, cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by the Corporation prior to the
Closing Date or the obtaining of which shall have been waived by SkyLynx; or
(c) violate any order, writ, injunction, decree or, to the
Corporation's Best Knowledge, any statute, rule or regulation applicable to
the Corporation or any of its properties or assets. No consent or approval by
any Governmental Authority is required in connection with the execution and
delivery by the Corporation of this Agreement or the consummation by the
Corporation of the transactions contemplated hereby, except for possible
notice under plant closing laws.
6.5 Financial Statements. The following statements are attached to this
Agreement as Exhibit 6.5:
(a) Audited financial statements of the Corporation accompanied by
a report of its independent certified public accountants containing audited
balance sheets of Allied for the period beginning at inception and ending
December 31, 1996, together with statements of operations for the Corporation
from inception to and including December 31, 1996;
(b) Unaudited financial statements of the corporation containing
balance sheets and statements of operations for the Corporation covering the
period from the end of the period covered by the most recent audited financial
statements of the corporation through June 30, 1997.
To the Best Knowledge of the Corporation, such financial statements,
together with and subject to the disclosures and notes thereto, (i) are in
accordance with the books and records of the Corporation; (ii) present fairly
the financial condition of the Corporation; as of the dates of the balance
sheets; (iii) present fairly the results of operations for the periods covered
by such statements; (iv) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis; (v) include all
adjustments (consisting of only normal recurring accruals) which are necessary
for a fair presentation of the financial condition of the Corporation, and of
the results of operations of the Corporation for the periods covered by such
statements; and (vi) fully comply with all requirements of Regulation SB and
all applicable securities laws.
As of Closing, except as set forth in Exhibit 6.5(b) hereto, the
Corporation will not have any liabilities or payables (absolute or contingent,
known or unknown), except as reflected in the financial statements, or
described in its reports filed under Section 13(a) of the Exchange Act (copies
of which shall have been provided to SkyLynx and its counsel) or set forth in
Exhibits to this Agreement, except as disclosed to SkyLynx prior to the
Closing Date.
6.6 Capitalization of the Corporation.
(a) The authorized capital stock of Allied consists entirely of
150,000,000 shares of Common Stock having a par value of $.001 per share, and
50,000,000 shares of Preferred Stock having a par value of $.01 per share. As
of the date of this Agreement, 12,500,000 shares of Common Stock are issued
and outstanding. As of the Closing Date, giving effect to the issuance of the
Conversion Shares, Consultation Shares and Private Offering Shares, no more
than 25,000,000 shares of Common Stock and no shares of Preferred Stock will
be issued and outstanding. All outstanding shares of Allied's capital stock
have been validly issued, are fully paid and non-assessable, and are not
subject to pre-emptive rights. The shares of Common Stock to be issued to the
Shareholders on the Closing Date in accordance with Sections 2.1 hereof have
been duly approved by the Directors of Allied and will, upon their issuance,
have been validly issued and will be fully paid and non-assessable. As of the
Closing Date, there will be no other equity securities of Allied authorized,
issued or outstanding, and there are no authorized, issued or outstanding
subscriptions, options, warrants, contracts, calls, commitments or other
purchase rights of any nature or character relating to any of Allied's capital
stock, equity securities, debt or other securities convertible into stock or
equity securities of Allied. As of the date of this Agreement, there are no
outstanding contractual obligations of Allied to repurchase, redeem or
otherwise acquire any shares of capital stock of Allied.
6.7 Taxes. Except as set forth in Exhibit 6.7, the Corporation has
filed (or has obtained extensions for filing) all income, excise, sales,
corporate franchise, property, payroll and other tax returns or reports
required to be filed by it, as of the date hereof by the United States of
America, any state or other political subdivision thereof or any foreign
country and has paid all Taxes or assessments shown to be due on such returns
or reports. The amounts set up as provisions for Taxes in the Latest
Financial Statements are sufficient for the payment of all unpaid federal,
foreign, state or local Taxes of the Corporation accrued for or applicable to
all periods ended on or prior to the date of this Agreement, or which may
subsequently be determined to be owing by the Corporation with respect to all
periods ending on or prior to the Closing Date, subject to normal year-end
adjustments, which will not be material. There are no present disputes as to
Taxes of any nature payable by the Corporation. There will be no Taxes which
will be owing by Allied or any Subsidiary with respect to periods ending on or
prior to the Closing Date, except for Taxes for which Allied has made
sufficient reserves of cash or cash equivalents to pay such Taxes.
6.8 No Actions, Proceedings, etc. Except as listed on the attached
Exhibit 6.8, there is no action or proceeding (whether or not purportedly on
behalf of the Corporation) pending or to its knowledge threatened by or
against the Corporation, which might result in any material adverse change in
the condition, financial or otherwise, of the Corporation's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency which does nor may result in any
material adverse change in the Corporation's assets or properties or in the
financial condition or the business of the Corporation. The Corporation is not
liable for damages to any employee or former employee as a result of any
violation of any state, federal or foreign laws directly or indirectly
relating to such employee or former employee.
6.9 Post Balance Sheet Changes. Except as set forth on Exhibit 6.9 and
as contemplated by this Agreement, since the date of the latest financial
statements, the Corporation has not (a) issued, bought, redeemed or entered
into any agreements, commitments or obligations to sell, buy or redeem any
shares of its capital stock; (b) incurred any obligation or liability
(absolute or contingent), other than current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities incurred in
the ordinary course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien of
current or real property taxes not yet due and payable; (e) waived any rights
of substantial value, whether or not in the ordinary course of business; (f)
suffered any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting its assets or its business; (g) made or
suffered any amendment or termination of any material contract or any
agreement which adversely affects its business; (h) received notice or had
knowledge of any labor trouble other than routine grievance matters, none of
which is material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other benefits to
which employees may be entitled, other than employee salary increases made in
the ordinary course of business and reflected on an Exhibit hereto; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
6.10 No Breaches. Except as set forth on Exhibit 6.10, the Corporation
is not in violation of, and the consummation of the transactions contemplated
hereby do not and will not result in any material breach of, any of the terms
or conditions of any mortgage, bond, indenture, agreement, contract, license
or other instrument or obligation to which the Corporation is a party or by
which its assets are bound; nor will the consummation of the transactions
contemplated hereby cause Allied or any Subsidiary to violate any statute,
regulation, judgment, writ, injunction or decree of any court, threatened or
entered in a proceeding or action in which the Corporation is, was or may be
bound or to which any of the Corporation's assets are subject.
6.11 Condition of the Corporation's Assets. Except as set forth on
Exhibit 6.11, the Corporation's assets are currently in good and usable
condition and there are no defects or other conditions which, in the
aggregate, materially and adversely affect the operation or values of such
assets. Except as disclosed on Exhibit 6.11, no person other than the
Corporation (including any officer or employee of the Corporation) has any
proprietary interest in any know-how or other intangible assets used by the
Corporation in the conduct of its business. All product which is currently
being marketed by the Corporation is operable for its intended purposes in
accordance with its written specifications and trade representations.
6.12 Inventory. As of the date of this Agreement and as of the Closing
Date, the Corporation will have no inventory held for resale in the ordinary
course of business.
6.13 Accounts Receivable. As of the date of this Agreement and as of the
Closing Date, the Corporation will have no accounts receivable generated from
the sale of goods or services in the ordinary course of business.
6.14 Corporate Acts and Proceedings. This Agreement has been duly
authorized by all necessary corporate action on behalf of Allied, has been
duly executed and delivered by authorized officers of Allied, and is a valid
and binding Agreement on the part of Allied that is enforceable against Allied
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, fraudulent transfers,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and to judicial limitations on the enforcement of the remedy
of specific performance and other equitable remedies. All corporate action
necessary to issue and deliver to the SkyLynx Shareholders the Exchange Shares
and Exchange Rights (each as described in Sections 2.1, 2.1 and 2.3) has been
taken by Allied.
6.15 Registered Rights and Proprietary Information.
(a) Exhibit 6.15 hereto contains a true and complete list of all
patents, letters patent and patent applications, service marks, trademark and
service mark registrations and applications, copyright, copyright
registrations and applications, grants of licenses and rights to the
Corporation with respect to the foregoing, both domestic and foreign, claimed
by the Corporation or used or proposed to be used by the Corporation in the
conduct of its business (collectively herein, "Allied Registered Rights").
Exhibit 6.15 hereto also contains a true and complete list of all and every
trade secret, know-how, process, formula, discovery, development, research,
design, technique, customer and supplier list, contracts, product development
plans, product development concepts, author contracts, marketing and
purchasing strategy, invention, and any other matter required for, incident
to, or related to the conduct of its business (hereafter collectively the
"Allied Proprietary Information"). Except as described in Exhibit 6.15
hereto, the Corporation is not obligated or under any liability whatever to
make any payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any Allied Registered Right or Allied
Proprietary Information with respect to the use thereof in the conduct of its
business or otherwise.
(b) Except as described in Exhibit 6.15 hereto, to the
Corporation's Best Knowledge, the Corporation owns and has the unrestricted
right to use the Allied Registered Rights and Allied Proprietary Information
required for or incident to the design, development, manufacture, operation,
sale and use of all products and services sold or rendered or proposed to be
sold or rendered by the Corporation or relating to the conduct or proposed
conduct of its business free and clear of any right, title, interest, equity
or claim of others. As soon as practicable following the execution of this
Agreement and except as described in Exhibit 6.15 hereto, the Corporation
agrees to take all necessary steps (including without limitation entering into
appropriate confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and consultants of the
Corporation and others with access to or knowledge of the Allied Proprietary
Information) to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, the Allied Proprietary Information and all related
documentation and intellectual property rights therein necessary for the
conduct or proposed conduct of its business.
(c) Except as described in Exhibit 6.15 hereto, the Corporation has
not sold, transferred, assigned, licensed or subjected to any right, lien,
encumbrance or claim of others, any Allied Proprietary Information, including
without limitation any Allied Registered Right, or any interest therein,
related to or required for the design, development, manufacture, operation,
sale or use of any product or service currently under development or
manufactured, or proposed to be developed, sold or manufactured, by it.
Exhibit 6.15 contains a true and complete list and description of all licenses
of Allied Proprietary Information granted to the Corporation by others or to
others by the Corporation. Except as described in Exhibit 6.15 hereto, there
are no claims or demands of any person pertaining to, or any proceedings that
are pending or threatened, which challenge the rights of the Corporation in
respect of any Allied Proprietary Information used in the conduct of its
business.
(d) Except as described in Exhibit 6.15 hereto, the Corporation
owns and on the Closing Date shall own, has and shall have, holds and shall
hold, exclusively all right, title and interest in the Allied Registered
Rights, free and clear of all liens, encumbrances, restrictions, claims and
equities of any kind whatsoever, has and shall have the exclusive right to
use, sell, license or dispose of, and has and shall have the exclusive right
to bring action for the infringement of the Allied Registered Rights and the
Allied Proprietary Information. To the Best Knowledge of Corporation, the
marketing, promotion, distribution or sale by the Corporation of any products
or interests subject to the Allied Registered Rights or making use of Allied
Proprietary Information shall not constitute an infringement of any patent,
copyright, trademark, service mark or misappropriation or violation of any
other party's proprietary rights or a violation of any license or agreement by
the Corporation. Except as described in Exhibit 6.15 hereto, to the knowledge
of the Corporation after due inquiry no facts or circumstances exist that
could result in the invalidation of any of the Allied Registered Rights.
6.16 Changes in Suppliers and Customers. Except as disclosed on Exhibit
6.16, the Corporation is not aware of any fact which indicates that any of the
suppliers supplying products, components or materials to the Corporation
intends to cease selling such products to the Corporation nor is the
Corporation aware of any fact which indicates that any major customer of the
Corporation intends to terminate its business relations with the Corporation.
6.17 No Liens or Encumbrances. The Corporation has good and marketable
title to all of the property and assets, tangible and intangible, employed in
the operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever except as
set forth on the attached Exhibit 6.17 and except for such property and assets
as may be leased by the Corporation, and except for any property which is the
subject of Sections 6.12, 6.13 or 6.15.
6.18 Employee Matters. As of the Closing Date, the Corporation shall
have no employees and shall not be a party to or bound by any employment
agreements or commitments. Except as specifically described on Exhibit 6.18,
the Corporation has no employee benefit plans (including, but not limited to,
pension plans and health or welfare plans), arrangements or understandings,
whether formal or informal. The Corporation does not now and has never
contributed to a "multi-employer plan" as defined in Section 400(a)(3) of the
ERISA. The Corporation has complied with all applicable provisions of ERISA
and all rules and regulations promulgated thereunder, and neither the
Corporation nor any trustee, administrator, fiduciary, agent or employee
thereof has at any time been involved in a transaction that would constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA as to any
covered plan of the Corporation. The Corporation is not a party to any
collective bargaining or other union agreement. The Corporation has not,
within the past five (5) years had, or been threatened with, any union
activities, work stoppages or other labor trouble with respect to its
employees which has a material adverse effect on the Corporation, its business
or assets.
6.19 Legal Proceedings and Compliance with Law. Except as set forth in
Exhibit 6.19, the Corporation has not received notice of any legal,
administrative, arbitration or other proceeding or governmental investigation
pending or threatened (including those relating to the health, safety,
employment of labor, or protection of the environment) pertaining to the
Corporation which might result in the aggregate in money damages payable by
the Corporation in excess of insurance coverage or which might result in a
permanent injunction against the Corporation. Except as set forth in such
Exhibit, the Corporation has substantially complied with, and is not in
default in any respect under any laws, ordinances, requirements, regulations,
or orders applicable to the business of the Corporation, the violation of
which might materially and adversely affect it. Except as set forth in such
Exhibit, the Corporation is not a party to any agreement or instrument, nor is
it subject to any charter or other corporate restriction or any judgment,
order, writ, injunction, decree, rule, regulation, code or ordinance which
materially and adversely affects, or might reasonably be expected materially
and adversely to affect the businesses, operations, prospects, property,
assets or condition, financial or otherwise, of the Corporation.
6.20 Contracts. Attached as Exhibits 6.20(a) to 6.20(e) hereto are an
accurate list and summary description of the following:
(a) All contracts, leases, agreements, covenants, licenses,
instruments or commitments of the Corporation pertaining to the business of
the Corporation calling for the payment of $5,000 or more or which is
otherwise material to the business of the Corporation, including, without
limitation, the following:
(i) Executory contracts for the sale of products and services;
(ii) Executory contracts for the purchase, sale or lease of any
assets;
(iii) Management or consulting contracts;
(iv) Patent, trademark and copyright applications,
registrations or licenses, and know-how, intellectual
property and trade secret agreements or other licenses;
(v) Note agreements, loan agreements, indentures and the like,
other than those entered into and executed in the ordinary
course of business;
(vi) All sales, agency, distributorship or franchise
agreements; and
(vii) Any other contracts not in the ordinary course of
business.
(b) All labor contracts, employment agreements and collective
bargaining agreements to which Allied or any Subsidiary is a party.
(c) All instruments evidencing any liens or security interest
securing any indebtedness of Allied or any Subsidiary covering any asset of
Allied or any Subsidiary.
(d) All profit sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans, agreements, arrangements or commitments of any
nature whatsoever, whether or not legally binding, and all agreements with any
present or former officer, director or shareholder of the Corporation.
(e) Any and all documents, instruments and other writings not
listed in any other schedule hereto which are material to the business
operations of Allied or any Subsidiary.
Except as set forth in Exhibit 6.20(f), all of such contracts,
agreements, leases, licenses, plans, arrangements and commitments and all
other such items set forth above are valid, binding and in full force and
effect in accordance with their terms and conditions, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
fraudulent transfer, reorganization or other similar laws affecting the
enforcement of contracts generally, and there is no existing material default
thereunder or breach thereof by the Corporation, or to the Corporation's
knowledge by any party to such contracts, or any conditions which, with the
passage of time or the giving of notice or both, might constitute such a
default by the Corporation or by any other party to the contracts.
6.21 Labor Matters. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of the Corporation or any of its agent or employees,
threatened against the Corporation.
6.22 Insurance. Allied maintains in full force and effect insurance
coverage on the assets and business of the Corporation in such amounts and
against such risks and losses as set forth in Exhibit 6.22.
6.23 Environmental. Except as disclosed on Exhibit 6.23:
(a) to the Best Knowledge of the Corporation, no real property (or
the subsurface soil and the ground water thereunder) now or previously owned
by the Corporation (the "Real Property") either contains any Hazardous
Substance (as hereinafter defined) or has underneath it any underground fuel
or liquid storage tanks;
(b) to the Best Knowledge of the Corporation, there has been no
generation, transportation, storage, treatment or disposal of any Hazardous
Substance on or beneath the Real Property, now or in the past;
(c) the Corporation is not aware of any pending or threatened
litigation or proceedings before any court or administrative agency in which
any person alleges, or threatens to allege, the presence, release, threat of
release, placement on or in the Real Property, or the generation,
transportation, storage, treatment or disposal at the Real Property, of any
Hazardous Substance;
(d) the Corporation has not received any notice and has no
knowledge that any Governmental Authority or any employee or agent thereof has
determined or alleged, or is investigating the possibility, that there is or
has been any presence, release, threat of release, placement on or in the Real
Property, or any generation, transportation, storage, treatment or disposal at
the Real Property, of any Hazardous Substance;
(e) to the Corporation's Best Knowledge, there have been no
communications or agreements with any Governmental Authority or agency
(federal, state, or local) or any private person or entity (including, without
limitation, any prior owner of the Real Property and any present or former
occupant or tenant of the Real Property) relating in any way to the presence,
release, threat of release, placement on or in the Real Property, or any
generation, transportation, storage, treatment or disposal at the Real
Property, of any Hazardous Substance. The Corporation further agrees and
covenants that the Corporation will not store or deposit on, otherwise release
or bring onto or beneath, the Real Property any Hazardous Substance prior to
the Closing Date; and
(f) there is no litigation, proceeding, citizen's suit or
governmental or other investigation pending, or, to the Corporation's Best
Knowledge, threatened, against the Corporation, and the Corporation knows of
no facts or circumstances which might give rise to any future litigation,
proceeding, citizen's suit or governmental or other investigation, which
relate to the Corporation's compliance with environmental laws, regulations,
rules, guidelines and ordinances.
For purposes of this Section 6.23, "Hazardous Substance" shall mean and
include (1) a hazardous substance as defined in 42 U.S.C. Section 9601(14),
the Regulations at 40 C.F.R. Part 302, (2) any substance regulated under the
Emergency Planning and Community Right to Know Act (including without
limitation any extremely hazardous substances listed at 40 C.F.R. Part 355 and
any toxic chemical listed at 40 C.F.R. Part 372), (3) hazardous wastes and
hazardous substances as specified under any Colorado state or local
Governmental Requirement governing water pollution, groundwater protection,
air pollution, solid wastes, hazardous wastes, spills and other releases of
toxic or hazardous substances, transportation of hazardous substances,
materials and wastes and occupational or employee health and safety, and (4)
any other material, gas or substance known or suspected to be toxic or
hazardous (including, without limitation, any radioactive substance, methane
gas, volatile hydrocarbon, industrial solvent, and asbestos) or which could
cause a material detriment to, or materially impair the beneficial use of, the
Real Property, or constitute a material health, safety or environmental risk
to any person exposed thereto or in contact therewith. For purposes of this
Section 6.23, "Hazardous Substance" shall not mean and shall not include the
following, to the extent used normally and required for everyday uses or
normal housekeeping or maintenance: (A) fuel oil and natural gas for heating,
(B) lubricating, cleaning, coolant and other compounds customarily used in
building maintenance, (C) materials routinely used in the day-to-day
operations of an office, such as copier toner, (D) consumer products, (E)
material reasonably necessary and customarily used in construction and repair
of an office project, and (F) fertilizers, pesticides and herbicides commonly
used for routine office landscaping.
6.24 Disclosure of Information. The Corporation represents and warrants
that all statements, data and other written information provided by it to any
party hereto as well as their respective consultants and representatives have
been accurate copies or true originals and have been provided with the
knowledge of the Corporation that the receiving party will rely upon same in
connection with that parties' decision to consummate the transactions provided
for in this Agreement. The Corporation represents and warrants that, to its
Best Knowledge, (i) there exists no material information concerning the
Corporation which has been requested but not been disclosed to or made
available to the other parties and their representatives or consultants and
which would be material to a decision to consummate the transactions provided
for in this Agreement and (ii) in the aggregate, such information does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made in them, in light of the
circumstances under which they are made, not misleading.
SECTION 7: COVENANTS OF ALLIED
7.1 Preservation of Business. Until Closing, Allied shall use its best
efforts to:
(a) preserve intact the present business organization of the
Corporation;
(b) maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) preserve and protect the goodwill and advantageous
relationships of the Corporation with its customers and all other persons
having business dealings with the Corporation;
(d) preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade secrets,
service marks, copyrights, bonds and other similar rights of the Corporation;
and
(e) comply with all laws applicable to the conduct of its business.
7.2 Ordinary Course. Until Closing, Allied shall not, without the prior
written consent of SkyLynx:
(a) sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of the property or assets of Allied or the
Subsidiaries;
(b) incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or enter into
any contract or commitment;
7.3 Negative Covenants. Until Closing, except as contemplated by this
Agreement or as disclosed in Exhibits to this Agreement, from the date hereof
until the Closing Date, unless and until SkyLynx otherwise consents in
writing, Allied and the Subsidiaries will not (a) change or alter the physical
contents or character of the inventories of its business, so as to materially
affect the nature of the Corporation's business or materially and adversely
change the total dollar valuation of such inventories from that reflected on
the financial statements referred to in Section 4.5 other than in the ordinary
course of business; (b) incur any obligations or liabilities (absolute or
contingent) other than current liabilities incurred and obligations under
contracts entered into in the ordinary course of business; (c) mortgage,
pledge or voluntarily subject to lien, charge or other encumbrance any assets,
tangible or intangible, other than the lien of current property taxes not due
and payable; (d) sell, assign or transfer any of its assets or cancel any
debts or claims, other than in the ordinary course of business; (e) waive any
right of any substantial value; (f) declare or make any payment or
distribution to Shareholders or issue, purchase or redeem any shares of its
capital stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other compensation
of any of its directors, officers, or employees or make any increase in any
benefits to which such employees might be entitled; (h) institute any bonus,
benefit, profit sharing, stock option, pension, retirement plan or similar
arrangement, or make any changes in any such plans or arrangements presently
existing; or (i) enter into any transactions or series of transactions other
than in the ordinary course of business.
7.4 Access to Books and Records, Premises, etc. From the date of this
Agreement through the Closing Date, Allied will grant SkyLynx and its
authorized representatives reasonable access to its and the Subsidiaries'
books and records, premises, products, employees and customers and other
parties with whom it has contractual relations during reasonable business
hours for purposes of enabling SkyLynx to fully investigate the business of
Allied and the Subsidiaries. Allied will also deliver copies of the monthly
statements of operations and financial condition for the period subsequent to
the latest financial statements to SkyLynx within a reasonable time of such
statements becoming available.
7.5 Compensation. Until Closing, Allied and the Subsidiaries shall not
enter into or agree to enter into any employment contract or agreement for
consulting, professional, or other services which will adversely and
materially affect the operation of Allied or the Subsidiaries prior to the
Closing Date, except for any extensions of said contracts or agreements on
substantially the same terms and conditions as were previously in effect.
7.6 Post-Closing Financing. A material inducement for NST and SkyLynx
to enter into this Agreement, and a condition to the Closing, is the
representation and undertaking of Allied that it will raise in the Private
Offering a minimum of $750,000 and a maximum of $1,000,000. A further
material inducement for NST and SkyLynx to enter into this Agreement has been
the undertaking by certain affiliates and principals of Allied to assist
Allied following the Closing in its efforts to raise at least an additional
$9,000,000. As the consummation of the transactions provided for and
contemplated by this Agreement will result in those affiliates of Allied
resigning as officers and directors of Allied on the Closing Date and Allied
succeeding to all the rights, privileges, properties, assets and franchises of
SkyLynx (including changing its name to SkyLynx), such affiliates and
principals of Allied agree that following the Closing they shall use their
best efforts to assist Allied (SkyLynx) in its efforts to obtain after the
Closing the financing described herein.
7.7 No Solicitation.
(a) Except in connection with the transactions contemplated by this
Agreement, Allied shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative of, Allied or
any of its Subsidiaries to, (i) solicit, initiate or encourage the submission
of, any takeover proposal, (ii) enter into any agreement with respect to any
takeover proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the proceeding sentence by any executive
officer of Allied or any of its Subsidiaries or any investment banker,
attorney or other advisor or representatives of Allied or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section by
Allied. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger, consolidation or reorganization or other business
combination involving Allied or any of its Subsidiaries or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in,
any voting securities of, or options, rights, warrants or other interests
convertible or exercisable for or into such voting securities, or a
substantial or material portion of the assets or any business of Allied or any
of its Subsidiaries, other than the transactions contemplated by this
Agreement.
(b) Except upon material breach of this Agreement by SkyLynx or
following termination hereof, except for action permitted or contemplated by
this Agreement, including a party's right to terminate this Agreement under
certain circumstances, neither the Board of Directors of Allied nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to SkyLynx, the approval or recommendation by such
Board of Directors of any such committee of this Agreement or the Exchange or
(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal.
(c) Allied promptly shall advise SkyLynx orally and in writing of
any takeover proposal or any inquiry with respect to or which could lead to
any takeover proposal and the identity of the person making any such takeover
proposal or inquiry. Allied will keep SkyLynx fully informed of the status
and details of any such takeover proposal or inquiry.
(d) The provisions of this Section 7.7 shall not be construed to
prevent any investment banker, attorney or other advisor or representative of
Allied or any Subsidiary to engage in discussions with third parties in the
ordinary course of business with respect to transactions not involving the
parties to this Agreement.
7.8 Audited Financial Statements and Bring-Downs.
(a) Allied shall deliver as promptly as possible after the date
hereof but in no event later than prior to the Closing Date (i) the audited
consolidated balance sheet of Allied as of June 30, 1997, and the related
audited consolidated statements of income, stockholders' equity and cash flows
for the fiscal year ended June 30, 1997, accompanied by the unqualified report
of its independent financial accountant, in form and substance satisfactory to
SkyLynx, its counsel and auditor.
(b) Allied shall deliver as promptly as possible (i) the unaudited
consolidated balance sheet of Allied as of the last day of each month after
the date hereof and through the Closing Date, and the related unaudited
consolidated statements of income, stockholders' equity and cash flows for the
period from July 1, 1997 through the date of such financial statements, in
each case, accompanied by the unqualified bring-down certification of the
Chief Executive Officer and Chief Financial Officer of Allied with respect to
the financial position of Allied as of such date and as to results for the
period from July 1, 1997 to such date, in form and substance satisfactory to
SkyLynx, its counsel and auditors.
(c) The foregoing financial statements shall be subject to the
representations and warranties contained in Section 6.5 hereof to the same
extent as if such financial statements were expressly referred to therein.
7.9 Delivery of Additional Filings. Following the execution of this
Agreement and until the Closing Date, Allied shall provide SkyLynx with copies
of any and all reports, filings, notices or other information which Allied may
prepare and file with or receive from the Commission, NASDAQ or any other
regulatory authority, (and shall give SkyLynx an opportunity to review and
comment on any such filings) as well as copies of any pleadings, notices or
other filings made in connection with any pending litigation, arbitration,
investigation or proceeding in which Allied or any Subsidiary is party or
otherwise involved.
SECTION 8: TERMINATION
8.1 Termination. This Agreement may be terminated and abandoned solely
as follows:
(a) At any time until the Closing Date by the mutual agreement of
Allied and SkyLynx.
(b) By any party hereto, if for any reason the parties have failed
to close this Agreement on or before ninety (90) days from the date of this
Agreement, provided that the party requesting termination is not then in
default thereunder.
(c) By any party hereof, if the other party shall have breached any
representation, warranty or covenant contained in this Agreement and shall
have failed to cure such breach within ten (10) days following written notice
thereof by the party seeking termination.
(d) By any party hereof prior to August 31, 1997 if the results of
the due diligence investigation of the other shall not be satisfactory to such
party in its sole discretion.
In the event of any termination pursuant to this Section 8.1(b) or
(c), written notice setting forth the reasons therefor shall forthwith be
given by the terminating party to all of the other parties hereto.
8.2 Effect of Termination. If the Exchange is terminated and abandoned
as provided for in this Section 8, this Agreement shall forthwith become
wholly void and of no effect without liability to any party to this Agreement;
provided, however, that no such termination shall terminate or limit the
rights of any such terminating party to enforce any remedy otherwise available
for any breach hereof.
SECTION 9: REMEDIES FOR BREACH
9.1 Remedies for Breach. In the event of any breach of any of the
provisions of this Agreement, including but not limited to any breach of any
covenant, warranty or representation made by any party hereto, the breaching
or defaulting party shall be liable to the other for any damages proximately
resulting therefrom. In the event of any material breach by any party of any
provision under this Agreement, either party may file suit. Nothing contained
in this Agreement shall be deemed to preclude a party to sue for or seek
specific performance of the provisions of this Agreement in the appropriate
circumstance. The provisions of this Section 9 shall survive any termination
hereof.
SECTION 10: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 Nondisclosure of Confidential Information. Each of the parties
hereto recognizes and acknowledges that it has and will have access to certain
nonpublic information of the others which shall be deemed the confidential
information of the other Companies (including, but not limited to, business
plans, costs, trade secrets, licenses, research projects, profits, markets,
sales, customer lists, strategies, plans for future development, financial
information and any other information of a similar nature) that after the
consummation of the transactions contemplated hereby will be valuable, special
and unique property of the Companies. Information received by the other party
or its representatives shall not be deemed Confidential Information and
afforded the protections of this Section 10 if, on the Closing Date, such
information has been (i) developed by the receiving party independently of the
disclosing party, (ii) rightfully obtained without restriction by the
receiving party from a third party, provided that the third party had full
legal authority to possess and disclose such information, (iii) publicly
available other than through the fault or negligence of the receiving party,
(iv) released without restriction by the disclosing party to anyone, including
the United States government, or (v) properly and lawfully known to the
receiving party at the time of its disclosure, as evidenced by written
documentation conclusively established to have been in the possession of the
receiving party on the date of such disclosure. Each of the parties hereto
agrees that it shall not disclose, and that it shall use its best efforts to
prevent disclosure by any other Person of, any such confidential information
to any Person for any purpose or reason whatsoever, except to authorized
representatives of the Companies who agree to be bound by this confidentiality
agreement. Notwithstanding, a party may use and disclose any such
confidential information to the extent that a party may become compelled by
Legal Requirements to disclose any such information; provided, however, that
such party shall use all reasonable efforts and shall have afforded the other
Companies the opportunity to obtain an appropriate protective order or other
satisfactory assurance of confidential treatment for any such information
compelled to be disclosed. In the event of termination of this Agreement,
each party shall use all reasonable efforts to cause to be delivered to the
other parties, and to retain no copies of, any documents, work papers and
other materials obtained by such party or on such party's behalf during the
conduct of the matters provided for in this Agreement, whether so obtained
before or after the execution hereof. Each of the Companies recognizes and
agrees that violation of any of the agreements contained in this Section 10
will cause irreparable damage or injury to the Companies, the exact amount of
which may be impossible to ascertain, and that, for such reason, among others,
the Companies shall be entitled to an injunction, without the necessity of
posting bond therefor, restraining any further violation of such agreements.
Such rights to any injunction shall be in addition to, and not in limitation
of, any other rights and remedies the Companies may have against each other.
The provisions of this Section 10.1 shall survive any termination of this
Agreement.
10.2 No Publicity. Until the Closing or the termination of this
Agreement in accordance with its terms, neither Allied nor SkyLynx shall,
directly or indirectly, issue any press release, or make any public statement,
concerning the transactions contemplated by this Agreement without the prior
written consent of Allied (in the case of such a release or statement by
SkyLynx) or of SkyLynx (in the case of such a release or statement by Allied).
This Section 10.2 shall not, however, preclude any party from making any
disclosure required by applicable law, and in the event any party, or any
officer, director, employee, agent or representative of a party, believes that
any press release, public statement or other disclosure is so required, such
party will notify and consult with the other parties with respect thereto as
promptly as is practicable under the circumstances.
SECTION 11: EXPENSES
Each of the parties will pay all costs and expenses of its performance
and compliance with this Agreement. Notwithstanding the foregoing, if the
Agreement is not consummated by reason of a default of one of the Companies
provided for in Section 8.1(c), then the expenses of each of the Companies in
connection with the transaction contemplated herein shall be paid by such
defaulting Company. In no event will any party to this Agreement be liable to
any other party for incidental damages, lost profits, income tax consequences,
lost savings or any other consequential damages, even if such party has been
advised of the possibility of such damages, or for punitive damages, resulting
from the breach of any obligation under this Agreement. The provisions of
this Section 11 shall survive any termination hereof.
SECTION 12: MISCELLANEOUS
12.1 Attorney's Fees. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful
party to such proceeding, shall pay the successful party or parties all
statutorily recoverable costs, expenses and reasonable attorneys' fees
incurred by the successful party or parties including without limitation
costs, expenses, and fees on any appeals and the enforcement of any award,
judgment or settlement obtained, such costs, expenses and attorneys' fees
shall be included as part of the judgment. The successful party shall be that
party who obtained substantially the relief or remedy sought, whether by
judgment, compromise, settlement or otherwise.
12.2 No Brokers. Allied represents and warrants to SkyLynx and SkyLynx
represents and warrants to Allied, that except as disclosed on Exhibit 12.2,
neither it nor any party acting on its behalf has incurred any liability,
either express or implied, to any "broker," "finder," financial advisor,
employee or similar person in respect of any of the transactions contemplated
hereby. Allied agrees to indemnify SkyLynx against, and hold it harmless
from, and SkyLynx agrees to indemnify Allied against, and hold it harmless
from, any liability, cost or expense (including, but not limited to, fees and
disbursements of counsel) resulting from any agreement, arrangement or
understanding made by such party with any third party, including employees of
SkyLynx, for brokerage, finders' or financial advisory fees or other
commissions in connection with this Agreement or the transactions contemplated
hereby. The provisions of this Section shall survive any termination of this
Agreement.
12.3 Survival and Incorporation of Representations. The representations,
warranties, covenants and agreements made herein or in any certificates or
documents executed in connection herewith shall survive the execution and
delivery thereof, and all statements contained in any certificate or other
document delivered by any party hereunder or in connection herewith shall be
deemed to constitute representations and warranties made by that party to this
Agreement.
12.4 Incorporation by Reference. All Exhibits to this Agreement and all
documents delivered pursuant to or referred to in this Agreement are herein
incorporated by reference and made a part hereof.
12.5 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to, or shall, confer any rights or remedies under, or by
reason of, this Agreement, on any person other than the parties hereto and
their respective and proper successors and assigns and indemnitees pursuant to
Section 9. Nothing in this Agreement shall act to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement.
12.6 Amendments and Waivers. This Agreement may not be amended, nor may
compliance with any term, covenant, agreement, condition or provision set
forth herein be waived (either generally or in a particular instance and
either retroactively or prospectively) unless such amendment or waiver is
agreed to in writing by all parties hereto.
12.7 Waiver. No waiver of any breach of any one of the agreements,
terms, conditions, or covenants of this Agreement by the parties shall be
deemed to imply or constitute a waiver of any other agreement, term,
condition, or covenant of this Agreement. The failure of any party to insist
on strict performance of any agreement, term, condition, or covenant, herein
set forth, shall not constitute or be construed as a waiver of the rights of
either or the other thereafter to enforce any other default of such agreement,
term, condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term, condition,
or covenants of this Agreement.
12.8 Governing Law - Construction. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and construed in
accordance with the laws of the State of California except to the extent the
corporate law of the State of Colorado is applicable, excluding conflict of
law provisions which would act to apply the laws of another state.
Notwithstanding the preceding sentence, it is acknowledged that each party
hereto is being represented by, or has waived the right to be represented by,
independent counsel. Accordingly, the parties expressly agree that no
provision of this Agreement shall be construed against any party on the ground
that the party or its counsel drafted the provision. Nor may any provision of
this Agreement be construed against any party on the grounds that party caused
the provision to be present.
12.9 Limitation of Actions. No action may be brought by any party to
this Agreement to enforce any covenant made by any party hereto or to seek
damages or equitable relief arising from any claimed breach or nonperformance
of a covenant, representation, warranty or other performance provided for
herein unless such action is commenced within eighteen (18) months of the date
of Closing. The parties hereto agree to be bound by the aforesaid limitation
of actions notwithstanding the provisions of any applicable statutory
limitation of actions to the contrary.
12.10 Representations and Warranties. The representations and
warranties contained in Sections 4 and 6 of this Agreement shall survive the
Closing Date and shall remain operative in full force and effect for the
period of time set forth in Section 12.9 above regardless of any investigation
at any time made by or on behalf of either Allied or SkyLynx and shall not be
deemed merged in any document or instrument so executed or delivered by either
Allied or SkyLynx.
12.11 Notices. Any notice, communication, offer, acceptance,
request, consent, reply, or advice (herein severally and collectively, for
convenience, called "Notice"), in this Agreement provided or permitted to be
given, served, made, or accepted by any party or person to any other party or
parties, person or persons, hereunder must be in writing, addressed to the
party to be notified at the address set forth below, or such other address as
to which one party notifies the other in writing pursuant to the terms of this
Section, and must be served by (1) telefax or other similar electronic method,
or (2) depositing the same in the United States mail, certified, return
receipt requested and postage paid to the party or parties, person or persons
to be notified or entitled to receive same, or (3) delivering the same in
person to such party.
Notice shall be deemed to have been given immediately when sent by
telefax and confirmed received or other electronic method and seventy-two
hours after being deposited in the United States mail, or when personally
delivered in the manner herein above described. Notice provided in any manner
not specified above shall be effective only if and when received by the party
or parties, person or persons to be, or provided to be notified.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be addressed as set forth below:
If Allied, to: Allied Wireless, Inc.
4333 North 30th Street
Boulder, Colorado 80301
Attention: Neil Cox, President
Fax: (303)
With copy to: Clifford L. Neuman, Esq.
Neuman & Drennen, llc
1507 Pine Street
Boulder, Colorado 80302
Fax: (303) 449-1045
If NST/SkyLynx, to: SkyLynx Express Holdings, Inc./
Network Systems Technologies, Inc.
55 Market Street
San Jose, California 96112
Fax: (408) 298-7388
With copy to: Robert Gallucci, Esq.
J.R. Gallucci, Inc.
96 North Third Street, Suite 600
San Jose, California 96112-5519
Fax: (408) 298-1867
Any party receiving a facsimile transmission shall be entitled to rely upon a
facsimile transmission to the same extent as if it were an original. Any
party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions
of this Section for the giving of notice.
12.12 Fax/Counterparts. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and such facsimile transmission
shall be valid and binding to the same extent as if it were an original.
Further, this Agreement may be signed in one or more counterparts, all of
which when taken together shall constitute the same documents. For all
evidentiary purposes, any one complete counter set of this Agreement shall be
considered an original.
12.13 Captions. The caption and heading of various sections and
paragraphs of this Agreement are for convenience only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
12.14 Severability. Wherever there is any conflict between any
provision of this Agreement and any Governmental Requirement or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring it within the requirement of the law. In the event that
any part, section, paragraph or clause of this Agreement shall be held by a
court of proper jurisdiction to be invalid or unenforceable, the entire
Agreement shall not fail on account thereof, but the balance of the Agreement
shall continue in full force and effect unless such construction would clearly
be contrary to the intention of the parties or would result in unconscionable
injustice.
12.15 Good Faith Cooperation and Additional Documents. The parties
shall use their best good faith efforts to fulfill all of the conditions set
forth in this Agreement over which it has control or influence. Each party
covenants and agrees to cooperate in good faith and to enter into and deliver
such other documents and papers as the other party reasonably shall require in
order to consummate the transactions contemplated hereby, provided in each
instance, any such document is in form and substance approved by the parties
and their respective legal counsel.
12.16 Specific Performance. The obligations of the parties under
Section 10 are unique. If either party should default in its obligations
under said Section, the parties each acknowledge that it would be extremely
difficult and impracticable to measure the resulting damages; accordingly, the
non-defaulting party, in addition to any other available rights and remedies,
may sue in equity for injunction (mandatory or prohibitive) or specific
performance (all without the need to post a bond or undertaking of any
nature), and the parties each expressly waive the defense that a remedy at law
in damages is adequate.
12.17 Assignment. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of
its/their/his rights, obligations or liabilities under this Agreement without
the prior written consent of all other parties, which consent may be withheld
in their respective sole and absolute discretion. Any purported assignment or
delegation without such consent shall be null and void.
For purposes of this Section, the term "Agreement" shall include this
Agreement and the Exhibits and other documents attached hereto or described in
this Section 12. This Agreement, and other documents delivered pursuant to
this Agreement, contain all of the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersede all
prior and contemporaneous agreements, letters of intent, representations,
warranties, disclosures, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting that subject
matter, including, without limitation, the letter dated July 14, 1997, between
Allied and SkyLynx, as amended prior to the date hereof.
12.18 Time. Time is of the essence of this Agreement and each of its
provisions.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
ALLIED WIRELESS, INC.,
a Colorado corporation
By: /s/ Neil A. Cox
---------------------------------------
Neil A. Cox, President
SKYLYNX EXPRESS HOLDINGS, INC.,
a Delaware corporation
By: /s/ Eduardo J. Moura
---------------------------------------
Eduardo J. Moura
NETWORK SYSTEM TECHNOLOGIES, INC.,
a California corporation
By: /s/: Eduardo J. Moura
----------------------------------------
Eduardo J. Moura
<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT is made effective and entered into effective this 16th day
of December 1997, between and among ALLIED WIRELESS, INC. ("Allied"), SKYLYNX
EXPRESS HOLDINGS, INC. ("SkyLynx") and NETWORK SYSTEM TECHNOLOGIES, INC.
("NST");
WITNESSETH:
WHEREAS, Allied, SkyLynx and NST have entered into a certain Agreement
and Plan of Reorganization dated as of August 5, 1997 (the "Agreement");
WHEREAS, the parties desire to modify the Agreement in the particulars
hereinbelow set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained the parties covenant and agree as follows:
1. Prior to the Closing, SkyLynx shall be initially capitalized so as
to issue founders' stock to the following shareholders in the following
proportions:
<TABLE>
<CAPTION> Percent
Shareholder of Shares
----------- -----------
<S> <C>
NST 25.000%
Gary Brown 28.125%
Technology Research Bank 12.500%
William Chastain 6.250%
Rovel Finance, Ltd. 8.750%
Dostil Securities, Ltd. 10.625%
A.V.G. Enterprises, Inc. 10.625%
-----------
Total 100.000%
</TABLE>
At the Closing, the foregoing shall constitute the sole shareholders of
SkyLynx entitled to receive Exchange Shares of Allied in the reorganization in
accordance with the terms and conditions of the Agreement.
2. Concurrently with the Closing, the Board of Directors of SkyLynx
shall be reconstituted to consist of the following persons:
Gary Brown Chairman
Eduardo Moura
General Francis Ragano
William Chastain
3. Concurrently with the Closing, the following persons shall be
elected to serve as executive officers of SkyLynx until the next regular
annual meeting of the Company's Board of Directors or until their successors
have been duly elected and qualified:
Gary Brown President
William Chastain Vice President of Marketing and Sales
4. At the Closing, Allied shall purchase from NST a dishonored bank
draft issued by Paradise Cable Corporation ("Paradise") in the amount of
$71,570.91 (the "Paradise Check"). NST will assign to Allied all of NST's
right, title and interest in and to the Paradise Check in consideration for
payment to NST in the amount of $71,570.91.
5. At the Closing, Allied shall acquire from NST that certain
Promissory Note issued by NST in favor of Man Shek Lee dated July 21, 1997 in
the principal amount of $100,000 (the "Man Shek Lee Note"). Allied shall
agree to assume the Man Shek Lee Note in accordance with its terms.
6. At the Closing, Allied shall reimburse NST for all legal expenses
and costs incurred in connection with consummating the Agreement in the amount
of $37,500. NST shall indemnify, defend and hold harmless Allied and SkyLynx
from any further obligation or liability for legal fees or other expenses
incurred by NST or SkyLynx in connection with consummating the Agreement.
7. As soon as practicable following the Closing, NST and SkyLynx shall
enter into a formal Project Agreement and General Operating Agreement for the
installation of a SkyLynx express wireless communication network in the Los
Angeles metropolitan area (the "Los Angeles Project"). The terms of the
General Operating Agreement for the Los Angeles Project shall be those
customarily contained in NST's project operating agreements and shall be
negotiated by the parties in good faith. At the Closing, Allied shall pay to
NST a $91,000 earnest money deposit under the contemplated Los Angeles Project
Agreement. If the parties fail to execute and deliver a definitive General
Operating Agreement for the Los Angeles Project within thirty (30) days
following the Closing, then NST shall pay the full $91,000 deposit to Hybrid
Networks to reduce the outstanding NST liability to Hybrid that Allied will
assume pursuant to paragraph 8 below.
8. At or prior to the Closing, NST shall assign to SkyLynx all of NST's
right, title and interest in and to its existing contracts and agreements with
Digital Broadcast Corporation ("DBC") and Paradise Cable Corporation
("Paradise"), together with all inventory currently held by NST under the DBC
agreements. In consideration of those assignments, Allied shall assume and
agree to pay the existing liability of NST to Hybrid Networks ("Hybrid")
incurred in connection with NST's performance under the DBC contracts;
provided, however, that Allied will not be deemed to have assumed $91,000 of
such liability and NST will indemnify and hold harmless Allied to the extent
of such $91,000, if NST is required to pay same to Hybrid pursuant to
paragraph 7 above. Subject to executing and delivering all documents of
conveyance, assignment and assumption necessary to consummate the foregoing,
Allied agrees to pay to Hybrid at Closing the sum of $150,000 to reduce the
outstanding Hybrid liability by that amount.
9. For so long as NST is the record and beneficial owner of 10% of the
issued and outstanding shares of Allied Common Stock, NST shall have the pre-
emptive right, subject to any uniform conditions prescribed by the Allied
Board of Directors to provide a fair and reasonable opportunity to exercise
the right, to acquire proportional amounts of the unissued shares of Allied
common Stock upon the decision of the Board of Directors to issue them;
provided, however, that there shall be no pre-emptive right with respect to:
(i) Shares issued as compensation to directors, officers, agents or
employees of the corporation or its subsidiaries or affiliates;
(ii) Shares issued to satisfy conversion or option rights created to
provide compensation to directors, officers, agents or employees of the
corporation or its subsidiaries or affiliates;
(iii) Shares issued upon exercise of options or warrants or upon
conversion of convertible securities issued pursuant to due authorization of
the corporation's Board of Directors; or
(iv) Shares sold otherwise than for cash.
10. At or prior to the Closing, NST shall execute and deliver to SkyLynx
a non-exclusive license (the "License") granting to SkyLynx the non-exclusive,
worldwide, royalty-free, perpetual right and license to use and otherwise
commercially exploit any or all of NST's present products, services and other
intellectual property and technology, including any and all future
improvements thereof. Without in any way limiting the generality of the
foregoing, the License shall include, without limitation, the right to utilize
and commercially exploit the technology more fully described on Exhibit A
hereto. Such License shall be in lieu of the technology assignment provided
for in the Agreement.
11. Following the Closing, NST shall make available to SkyLynx all
products, services and technology developed by NST or offered by NST on terms
no less favorable than terms offered by NST to its preferred customers and
clients. Subject to such "favored nations" status, NST shall offer SkyLynx
System Integration and Network Operations Agreements pursuant to which NST
shall cooperate and assist SkyLynx in all reasonable respects in the efforts
of SkyLynx to originate, maintain and support network service areas and
affiliates. Subject to such "favored nations" status, NST shall provide such
origination, maintenance and support through NST's network operation center in
consideration for payment equal to 9% of network subscriber revenues generated
by SkyLynx utilizing such NST services. Notwithstanding the foregoing, in the
event SkyLynx in unable to renegotiate the terms of the DBC and Paradise
contracts, NST agrees that its fee for such services under the DBC and
Paradise Contracts shall be reduced to 4.5% of net subscriber revenues for
those networks.
12. NST agrees to make available to SkyLynx Remote Link Adapters at
volume discount prices to the prevailing list price, subject to SkyLynx
providing NST with a mutually-agreeable forecast covering a period of not less
than six months to which forecast SkyLynx is willing to commit.
13. The parties stipulate and agree that all conditions precedent to
Closing have as of this date either been satisfied or are herewith waived by
the parties. Each party unconditionally agrees to close the transactions
provided for or contemplated by the Agreement as expeditiously as possible.
14. Notwithstanding any provision of the Agreement to the contrary, the
Agreement shall remain and continue in full force and effect until the first
to occur of the Closing Date or December 31 1997, if the parties fail to close
by that date. The parties agree to exercise best efforts to complete the
preparation and delivery of all documents necessary to be delivered at the
Closing. Upon Closing, each party shall be deemed to have released the other
from any claims under the Agreement arising prior to the Closing.
15. Unless the context otherwise requires, all capitalized terms used
herein shall have the meanings set forth in the Agreement.
16. Except as expressly modified by the provisions hereof, all other
terms and conditions of the Agreement shall remain in full force and effect.
In the event that any conflict or inconsistency between any provision of this
Amendment and any provision of the Agreement, the provisions of this Amendment
shall control.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
ALLIED WIRELESS, INC., a Colorado corporation
By: /s/ Neil A. Cox
----------------------------------------
Neil A. Cox, President
SKYLYNX EXPRESS HOLDINGS, INC., a Delaware
corporation
By: /s/ Eduardo J. Moura
----------------------------------------
Eduardo J. Moura
NETWORK SYSTEM TECHNOLOGIES, INC., a
California corporation
By: /s/ Eduardo J. Moura
----------------------------------------
Eduardo J. Moura
APPROVED AND ACCEPTED
/s/ Eduardo J. Moura
- ------------------------------
Eduardo J. Moura
/s/ Gary L. Brown
- ------------------------------
Gary L. Brown
/s/ William Chastain
- ------------------------------
William Chastain
<PAGE>
ARTICLES OF INCORPORATION
Filed with Secretary
OF of State on 09-23-
96
ALLIED WIRELESS, INC.
The undersigned natural person of the age of eighteen years or more,
acting as incorporator of a corporation under the Colorado Business
Corporation Act, adopts the following Articles of Incorporation for such
corporation:
ARTICLE I
NAME
The name of the Corporation is to be ALLIED WIRELESS, INC.
ARTICLE II
TERMS OF EXISTENCE
The Corporation shall exist in perpetuity, from and after the date of
filing this Certificate of Incorporation with the Secretary of State of the
State of Colorado, unless sooner dissolved or disincorporated according to
law.
ARTICLE III
OBJECT, PURPOSES AND POWERS
Section 1. General Objects and Purposes. To engage in any lawful
activity as may from time to time be authorized by the Corporation's Board of
Directors, which is not prohibited by law or by these Articles of
Incorporation. To undertake such other activities as the Board of Directors
may deem reasonable or necessary in the furtherance of the general or specific
purposes and powers of the Corporation.
Section 2. General Powers. Further, the Corporation shall have and may
exercise all the rights, powers and privileges now or hereafter conferred upon
corporations organized under the laws of the State of Colorado and in addition
may do everything necessary, suitable, proper for, or incident to, the
accomplishment of any of these corporate purposes.
Section 3. Specific Purposes and Powers. Subject to any specific
written limitations or restrictions imposed by the Colorado Business
Corporation Act or by other law, or by these Articles of Incorporation, and
not in limitation of any of the statutory powers herein granted, the
Corporation shall have the following purposes and exercise the following
specific powers:
a. To Deal in Real Property. To acquire, hold, own, improve, manage,
operate, let as lessor, sell, convey or mortgage, or otherwise deal with,
either alone or in conjunction with others, real estate of every right, title
or interest, character and description whatsoever and wheresoever situated.
b. To Deal in Personal Property, Generally. To acquire, hold, own,
manage, operate, mortgage, pledge, hypothecate, exchange, sell, deal in and
dispose of, either alone or in conjunction with others, personal property and
commodities of every right, title or interest, character and description
whatsoever and wheresoever situated.
c. To Enter into Profit Sharing Arrangements and Partnerships. To
enter into any lawful arrangement for sharing profits, union of interest,
reciprocal association, or cooperative association with any corporation,
association, partnership, individual, or other legal entity for the carrying
on of any business, the purpose of which is similar to the Purposes set forth
in Section 1 of this Article, and to enter into any general or limited
partnership, the purpose of which is similar to such Purposes.
d. To Execute Guarantees. To make any guaranty respecting stocks,
dividends, securities, indebtedness, interest, contracts or other obligations
created by any individual, partnership, association, corporation, or other
entity, to the extent that such guaranty is made in pursuance to the Purposes
set forth in Section 1 of this Article.
e. To Borrow Funds. To borrow or raise monies for any of the Purposes
of the Corporation set forth in Section 1 of this Article, and, from time to
time, without limit as to amount, to execute, accept, endorse, and deliver as
evidence of such borrowing, all kinds of securities, including, but without
limiting the generality thereof, promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness; and to secure the payment and full performance
of such securities by mortgage on, or pledge, conveyance or assignment in
trust of, the whole, or any part of the assets of the Corporation.
f. To Lend Funds. To lend money to individuals or other business
entities and to charge interest for the same and to engage in the business,
buying, loaning money upon, selling, transferring, assigning, discounting,
borrowing money upon and pledging as collateral, and otherwise dealing as
principal agent or broker in bills of lading, warehouse receipts, evidence of
deposit and storage of personal property, bonds, stocks, promissory notes,
commercial paper account, invoices, choses in action, interest in estates,
contracts, mortgages on real or personal property, pledges of personal
property and other evidence of indebtedness of persons, firms or corporations,
and owning, holding or conveying such real estate as may be necessary in the
operating of its business, and purchasing, acquiring and holding shares of
stock in other corporations, domestic and foreign, and doing all things
incidental thereto; to do a general brokerage business, to buy, sell and deal
in all kinds of listed and unlisted stocks and bonds on commission; not for
the purpose of carrying on the business of banking, insurance or the operation
of railroads or the discounting of bills and notes, or the buying and selling
of bills of exchange.
Section 4. All the foregoing listed powers and/or purposes of the
Corporation are both purposes and powers of the Corporation and shall be
construed as such.
ARTICLE IV
CAPITAL STOCK
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is one hundred and fifty million
(150,000,000) shares of which one million (1,000,000) shares shall be
designated common stock, having a par value of one tenth of one percent
($.001) each, and of which fifty million (50,000,000) shares shall be
designated preferred stock of the Corporation, having a par value of one cent
($.01) each. All or any part of the common stock may be issued by the
Corporation from time to time and for such consideration and on such terms as
may be determined and fixed by the Board of Directors, without action of the
stockholders, as provided by law, unless the Board of Directors deems it
advisable to obtain the advice of the stockholders. Said stock may be issued
for money, property, services or other things of value, and when issued shall
be issued as fully paid and non-assessable. The private property of stock
holders shall not be liable for Corporation debts. Subject to the
preferences, rights and restrictions which may be ascribed to the preferred
stock of the Corporation by the Board of Directors, the preferences and
relative participating optional or other special rights and qualifications,
limitations or restrictions thereof of the common stock of the Corporation are
as follows:
a. Dividends. Dividends may be paid upon the common stock, as and when
declared by the Board of Directors, out of funds of the Corporation legally
available therefor.
b. Payment on Liquidation. Upon any liquidation, dissolution and
termination of the Corporation, and after payment or setting aside of any
amount sufficient to provide for payment in full of all debts and liabilities
of, and other claims against the Corporation, the assets shall be distributed
pro rata to the holders of the common stock.
c. Voting Rights. At any meeting of the stockholders of the
Corporation each holder of Common Stock shall be entitled to one vote for each
share outstanding in the name of such holder on the books of the Corporation
on the date fixed for determination of voting rights.
The stockholders, by vote or concurrence of a majority of the
outstanding shares of the Corporation entitled to vote on the subject matter,
may take any action which would otherwise require a two-thirds (2/3) vote
under the Colorado Business Corporation Act.
d. Cumulative Voting. Cumulative voting shall not be allowed in the
election of directors or for any other purpose.
e. Pre-Emptive Rights. Unless otherwise determined by the Board of
Directors, no stockholder of the Corporation shall have pre-emptive rights to
subscribe for any additional shares of stock, or for other securities of any
class, or for rights, warrants or options to purchase stock for the scrip, or
for securities of any kind convertible into stock or carrying stock purchase
warrants or privileges.
f. Restrictions on Sale or Disposition. All lawful restrictions on the
sale or other disposition of shares may be placed upon all or a portion or
portions of the certificates evidencing the Corporation's shares.
Section 2. The preferred stock of the Corporation shall be issued in
one or more series as may be determined from time to time by the Board of
Directors. In establishing a series the Board of Directors shall give to it a
distinctive designation so as to distinguish it from the shares of all other
series and classes, shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares of any one series
shall be alike in every particular. All series shall be alike except that
there may be variation as to the following: (1) the rate of distribution, (2)
the price at and the terms and conditions on which shares shall be redeemed,
(3) the amount payable upon shares for distributions of any kind, (4) sinking
fund provisions for the redemption of shares, and (5) the terms and conditions
on which shares may be converted if the shares of any series are issued with
the privilege of conversion, and (6) voting rights except as limited by law.
ARTICLE V
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the Corporation will be
at 4333 No. 30th Street, Boulder, Colorado 80301. The name of the initial
registered agent at such address is Neil A. Cox. The principal office of this
Corporation and its principal place of business is the same address as that of
the initial registered office. The Corporation may conduct part or all of its
business in the County of Boulder, or the State of Colorado, or the United
States, or of the world, and it may hold, purchase, mortgage, lease and convey
real and personal property in any of such places.
ARTICLE VI
DIRECTORS
The business and affairs of this Corporation and the management thereof
shall be vested in a Board of Directors consisting of not less than one (1)
nor more than ten (10) members. Directors need not be stockholders of the
Corporation. The persons, together with their addresses, who shall act as such
directors for the first year of existence of this Corporation and until their
successors shall be duly elected and qualified will be:
Neil A. Cox
4333 No. 30th Street
Boulder, Colorado 80301
The number of directors may be increased from time to time, within the
limits stated above, by action of the majority of the whole Board of Directors
but the number of Directors may thereafter be decreased only by the
stockholders of the Corporation at an annual or special meeting thereof.
ARTICLE VII
RIGHTS OF DIRECTORS, OFFICERS AND MANAGEMENT
TO CONTRACT WITH CORPORATION
No contract or other transaction between the Corporation and any other
corporation whether or not a majority of the shares of capital stock of such
other corporation is owned by this Corporation, and no act of this Corporation
shall be in any way affected or invalidated by the fact that any of the
directors, officers or other members of the management of this Corporation are
pecuniarily or otherwise interested in or are directors, officers or members
of management of such other corporation. Any director, officer or other
member of management of this Corporation individually, or any firm of which
such director, officer or member of management may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contract or
transaction of this Corporation, provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this Corporation or a majority thereof. Any director of
this Corporation who is also a director, officer or member of management of
such other corporation, or who is so interested, may be counted in determining
the existence of a quorum at any meeting of the Board of Directors of this
Corporation that shall authorize such contract or transaction, and may vote at
any such meeting to authorize such contract or transaction, with like force
and effect as if he were not such director, officer or member of management of
such other corporation or not so interested.
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
Clifford L. Neuman
Neuman & Cobb
Temple-Bowron House
1507 Pine Street
Boulder, Colorado 80302
ARTICLE IX
INDEMNIFICATION
The Corporation may and shall indemnify each director, officer and any
employee or agent of the Corporation, his heirs, executors and administrators,
against any and all expenses or liability reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a party by
reason of his being or having been a director, officer, employee or agent of
the Corporation to the full extent required or permitted by the Colorado
Business Corporation Act.
ARTICLE X
CORPORATE OPPORTUNITIES
The officers, directors and other members of management of this
Corporation shall be subject to the Doctrine of Corporate Opportunities only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by the Corporation's
Board of Directors as evidenced by resolutions appearing in the Corporation's
Minutes. When such areas of interest are delineated, all such business
opportunities within such areas or interests which come to the attention of
the officers, directors and other members of management of this Corporation
shall be disclosed promptly to this Corporation and made available to it. The
Board of Directors may reject any business opportunity presented to it and
therefore any officer, director or other member of management may avail
himself of such opportunity. Until such time as this Corporation, through its
Board of Directors, has designated an area of interest, the officers,
directors and other members of management of this Corporation shall be free to
engage in such areas of interest on their own and this Doctrine shall not
limit the rights of any officer, director or other member of this Corporation
to continue a business existing prior to the time that such area of interest
is designated by this Corporation, other than an officer, director or member
of management, from any duty which he may have to the Corporation.
ARTICLE XI
PARTIAL LIQUIDATION
The Board of Directors may, from time to time, distribute to the
Corporation's shareholders, in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets, in cash or
properties if (a) at the time the Corporation is solvent; (b) such
distribution would not render the Corporation insolvent; (c) all cumulative
dividends on all preferred or special classes of shares entitled to
preferential dividends shall have been paid fully; (d) the distribution would
not reduce the remaining net assets of the Corporation below the aggregate
preferential amount payable in the amount of voluntary liquidation to the
holders of shares having preferential rights to the assets of the Corporation
in the event of liquidation; (e) the distribution is not made out of capital
surplus arising from unrealized depreciation of assets of re-evaluation of
surplus; (f) the distribution is identified as a distribution in partial
liquidation and the amount per share is disclosed to the shareholders
receiving the same concurrently with the distribution thereof.
ARTICLE XII
DIRECTORS' LIABILITY
a. A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Colorado as the same exists or may hereafter be amended.
b. Any repeal or modification of the foregoing paragraph A by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
IN WITNESS WHEREOF, the above-named incorporator has hereunto set his
hand and seal this 20th day of September, 1996.
/s/ Neil A. Cox /s/ Clifford L. Neuman
- ---------------------------------- --------------------------------
Neil A. Cox, Registered Agent Clifford L. Neuman, Incorporator
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
I, Maureen Schreiber, a Notary Public, hereby certify that on the 20th
day of September, 1996, personally appeared before me Clifford L. Neuman, who,
being by me first duly sworn, declared that he was the person who signed the
foregoing document as the incorporator and that the statements therein
contained are true.
My commission expires: April 2, 1998
[seal]
/s/ Maureen Schreiber
-------------------------------------
Notary Public
<PAGE>
Mail to: Secretary of State Filed with
Corporations Section Secretary of
1560 Broadway, Suite 200 State on
Denver, CO 80202 08-07-97
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00 Please include a typed
MUST SUBMIT TWO COPIES self-addressed envelope
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Allied Wireless, Inc.
SECOND: The following amendment to the Articles of Incorporation was adopted
on August 5, 1997, as prescribed by the Colorado Business Corporation Act, in
the manner marked with an X below:
- ----- No shares have been issued or Directors Elected - Action by
Incorporators
- ----- No shares have been issued but Directors Elected - Action by
Directors
x Such amendment was adopted by the board of directors where shares
- ----- have been issued and shareholder action was not required.
x Such amendment was adopted by a vote of the shareholders. The
- ----- number of shares voted for the amendment was sufficient for
approval.
THIRD: If changing corporate name, the new name of the corporation is:
---------------------------------------------------------------
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
The first sentence of Section 1 of ARTICLE IV, CAPITAL STOCK of the
Company's Articles of Incorporation is hereby amended to read as follows:
The total number of shares of capital stock which the Corporation
shall have authority to issue is two hundred million (200,000,000)
shares of which one hundred fifty million (150,000,000) shares shall
be designated common stock, having a par value of one tenth of one
percent ($.001) each, and of which fifty million (50,000,000) shares
shall be designated preferred stock of the Corporation, having a par
value of one cent ($.01) each.
If these amendments are to have a delayed effective date, please list that
date:
--------------------------------------------------------
(Not to exceed ninety (90) days from the date of filing)
ALLIED WIRELESS, INC.
By: /s/ Neil A. Cox
-----------------------------------
Neil A. Cox, President
Mail to: Secretary of State
Corporations Section Filed with the
1560 Broadway, Suite 200 Secretary of
Denver, CO 80202 State on 02-12-98
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00 Please include a typed
MUST SUBMIT TWO COPIES self-addressed envelope
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Allied Wireless, Inc.
SECOND: The following amendment to the Articles of Incorporation was adopted
on January 23, 1998, as prescribed by the Colorado Business Corporation Act,
in the manner marked with an X below:
- ----- No shares have been issued or Directors Elected - Action by
Incorporators
- ----- No shares have been issued but Directors Elected - Action by
Directors
- ----- Such amendment was adopted by the board of directors where shares
have been issued and shareholder action was not required.
X Such amendment was adopted by a vote of the shareholders. The
- ----- number of shares voted for the amendment was sufficient for
approval.
THIRD: If changing corporate name, the new name of the corporation is SkyLynx
Communications, Inc.
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
If these amendments are to have a delayed effective date, please list that
date:
------------------------------------------------------
(Not to exceed ninety (90) days from the date of filing)
ALLIED WIRELESS, INC.
By:/s/ Gary Brown
--------------------------------
Gary Brown, President
<PAGE>
Mail to: Secretary of State
Corporations Section
1560 Broadway, Suite 200 Filed with the
Denver, CO 80202 Secretary of
(303) 894-2251 State on 03-25-98
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00 Please include a typed
MUST SUBMIT TWO COPIES self-addressed envelope
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is SkyLynx Communications, Inc.
SECOND: The following amendment to the Articles of Incorporation was adopted
on January 23, 1998, as prescribed by the Colorado Business Corporation Act,
in the manner marked with an X below:
- ----- No shares have been issued or Directors Elected - Action by
Incorporators
- ----- No shares have been issued but Directors Elected - Action by
Directors
- ----- Such amendment was adopted by the board of directors where shares
have been issued and shareholder action was not required.
X Such amendment was adopted by a vote of the shareholders. The
- ----- number of shares voted for the amendment was sufficient for
approval.
THIRD: If changing corporate name, the new name of the corporation is:
----------------------------------------
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
See Exhibit A attached hereto and incorporated herein by reference
If these amendments are to have a delayed effective date, please list that
date:
-----------------------------------------
(Not to exceed ninety (90) days from the date of filing)
SKYLYNX COMMUNICATIONS, INC.
By: /s/ Gary Brown
--------------------------------
Gary Brown, President
<PAGE>
<PAGE>
EXHIBIT "A"
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF SKYLYNX COMMUNICATIONS, INC.
---------------------------------------------------------------------------
Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act
---------------------------------------------------------------------------
SKYLYNX COMMUNICATIONS, INC., a corporation organized and existing under
the laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that
pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the provisions of the Colorado Business
Corporation Act, the Company's Board of Directors has duly adopted the
following resolution creating a series of the class of its authorized
Preferred Stock, designated as Series A Convertible Preferred Stock:
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Company has the authority to issue Fifty
Million (50,000,000) shares of $.01 par value Preferred Stock, the designation
and amount thereof and series, together with the powers, preferences, rights,
qualifications, limitations or restrictions thereof, to be determined by the
Board of Directors pursuant to the applicable law of the State of Colorado;
Now therefore, the Company's Board of Directors hereby establishes a
series of the class of Preferred Stock authorized to be issued by the Company
as above stated, with the designations and amounts thereof, together with the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, to be as follows:
1. Designations and Amounts.
Five Million (5,000,000) shares of the Company's authorized Preferred
Stock are designated as Series A Convertible Preferred Stock.
2. Definitions.
For the purposes of this Resolution the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean SkyLynx Communications, Inc., a Colorado
corporation.
(c) "Original Issue Date" for a series of Preferred Stock shall mean
the date on which the first share of such series of Preferred
Stock was originally issued.
(d) "Preferred Stock" shall refer to Series A Convertible Preferred
Stock.
(e) "Common Stock" shall refer to the Company's $.001 par value common
stock.
(f) "Unit" shall refer to units consisting of one share of Preferred
Stock, one Class A Warrant and one Class B Warrant sold by the
Company in a private offering in 1998.
(g) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting stock shall at the time be owned directly or
indirectly by the Company or by one or more Subsidiaries.
3. Dividends.
(a) The holders of outstanding Preferred Stock shall be entitled to
receive dividends at the annual rate of 10% based on the stated
value per share computed on the basis of a 360-day year and 12 30-
day months. Dividends shall be calculated from the date of issue
and payable, in each case quarterly on the fifteenth day of April,
July, October and January of each year (the "Dividend Payment
Date"). Dividends shall be paid to recordholders of shares of
Preferred Stock as of the date one business day prior to the
Dividend Payment Date (the "Dividend Record Date"). The right of
the holder of shares of Preferred Stock as of the Dividend Record
Date to the relevant dividend shall not be affected by the
subsequent transfer or cancellation of such shares; such dividend
being payable to the holder as of the Dividend Record Date
notwithstanding such transfer or cancellation.
(b) Dividends on the shares of Preferred Stock shall be cumulative;
therefore, if a full or partial dividend on the shares of this
series with respect to any dividend period is not declared by the
Board of Directors of the Company, the Company shall be obligated
to pay full dividend on the shares of this series with respect to
such dividend period. Dividends shall accrue but not compound on
a daily basis if full dividends on all outstanding shares of
Preferred Stock of this series at the rate set forth in Section
3(a) above shall not have been declared and paid for the
immediately preceding dividend period or for any prior dividend
period, such outstanding cumulative dividends shall not bear
interest.
(c) In addition to the Common Stock dividend, the holders of
outstanding Preferred Stock shall be entitled to participate, pro
rata, in dividends paid on outstanding shares of Common Stock, if,
when and as the Board of Directors shall in their sole discretion
deem advisable, and only from the net profits or surplus of the
Company as such shall be fixed and determined by the Board of
Directors. The determination of the Board of Directors at any
time of the amount of net profits or surplus available for
dividend shall be binding and conclusive on the holders of all the
stock of the Company at the time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the holders of each
share of Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution
to its shareholders, before any payment or declaration and setting
apart for payment of any amount shall be made in respect to any
outstanding preferred stock ranking junior to the Preferred Stock
or the Common Stock, an amount equal to Four Dollars ($4.00) per
share. If upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the assets to be
distributed to the holders of the Preferred Stock shall be
insufficient to permit the payment to such shareholders of the
full preferential amount aforesaid, then all of the assets of the
Company available to be distributed shall be distributed ratably
to the holders of the Preferred Stock.
(b) After the payment or distribution to the holders of the Preferred
Stock of the full preferential amounts aforesaid, the holders of
any preferred stock rank junior to the Preferred Stock and the
Common Stock then outstanding shall be entitled to receive all of
the remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of the Company,
a sale or other transfer of all or substantially all of its
assets, nor a sale of fifty percent (50%) or more of the Company's
capital stock then issued and outstanding nor the purchase or
redemption by the Company of stock of any class, nor the payment
of a dividend or distribution from net profits or surplus of the
Company shall be treated as or deemed to be a liquidation
hereunder.
5. Redemption.
The Company shall have neither the right nor the obligation to redeem any
of the outstanding Preferred Stock, and holders of the Preferred Stock shall
not have the right to demand the redemption of any of the outstanding
Preferred Stock.
6. Voting Rights.
Upon issuance, and subject to increase and additional rights as provided
below, holders of shares of this series of Preferred Stock shall be entitled
to vote with the holders of shares of Common Stock as a single class on all
matters presented for a vote to the shareholders of the Company. The number
of votes per share of this series of Preferred Stock which can be cast shall
be adjusted at such time or times as the conversion price is adjusted so that
the number of votes per share of this series of Preferred Stock which may be
cast shall always be equal to the full number of shares of Common Stock into
which each share of this series of Preferred Stock may be converted when
voting with the holders of Common Stock as a single class.
7. Conversion.
The Preferred Stock shall have the following conversion rights (the
"Conversion Rights"):
(a) OPTIONAL CONVERSION. Holders of outstanding shares of Preferred
Stock shall have an option to convert each share of Preferred
Stock into one share of the Company's Common Stock (the "Initial
Conversion Value"). At any time commencing the earlier of (i) one
year from the date of issue or (ii) upon the effective date of a
Registration Statement registering for sale under the Securities
Act of 1933, as amended "the Securities Act"), the shares of the
Company's Common Stock issuable upon such conversion ("Conversion
Stock").
(b) AUTOMATIC CONVERSION. The foregoing notwithstanding, each
outstanding share of Preferred Stock shall be automatically
converted into one share of Common Stock upon the earlier of (i)
the third anniversary of the date of issue or (ii) in the event
(a) a Registration Statement has been filed with the Securities
and Exchange Commission and declared effective registering for
sale under the Securities Act the Conversion Stock, (b) there has
been developed and exists a public trading market for the
Company's Common Stock on the over-the-counter market and (c) the
public trading price of the Company's Common Stock has equaled or
exceeded $6.00 per share (150% of the conversion value) for at
least ten consecutive trading days.
(c) MECHANICS OF CONVERSION. The conversion of all outstanding shares
of Preferred Stock to Common Stock shall occur automatically as
provided in Paragraph 7(b) above ("Triggering Events"). The
Company shall, within ten (10) days of either Triggering Event,
provide written notice, first class postage pre-paid, to each
holder of record of the Preferred Stock to be converted, at his
post office address last shown on the records of the Company, of
the conversion (the "Conversion Notice"). The Conversion Notice
shall state:
(i) That all of the holder's outstanding shares of Preferred
Stock were converted;
(ii) The number of shares of Preferred Stock held by the holder
that were converted;
(iii) The effective date of the Conversion (the "Conversion Date")
and the number of shares of Common Stock which the holder
will receive; and
(iv) That the holder is to surrender to the Company, in the
manner and at the place designated, his certificate or
certificates representing the shares of Preferred Stock
converted.
Thereafter, each holder of Preferred Stock to be converted shall
surrender the certificate or certificates representing such shares
to the Company, in the manner and at the place designated in the
Conversion Notice, and thereupon the requisite number of shares of
Common Stock shall be issued in the name of the person whose name
appears on the surrendered certificate or certificates as the
owner thereof, and each surrendered certificate shall be canceled
and retired. Notwithstanding that the certificates evidencing any
of the shares of Preferred Stock shall not have been surrendered,
all rights with respect to such shares shall forthwith after the
Conversion Date, terminate, except only the right of the holders
to receive the appropriate number of shares of Common Stock upon
surrender of their certificate or certificates therefor.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the Original Issue
Date for a series of the Preferred Stock effect a subdivision of
the outstanding Common Stock, the Conversion Value then in effect
immediately before that subdivision shall be proportionately
decreased, and conversely, if the Company shall at any time or
from time to time after the Original Issue Date for a series of
the Preferred Stock combine the outstanding shares of Common
Stock, the Conversion Value then in effect immediately before the
combination shall be proportionately increased. Any adjustment
under this Paragraph 7(d) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
(e) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR SUBSTITUTION. If
the Common Stock issuable upon the conversion of the Preferred
Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation, or sale of
assets provided for elsewhere in this Paragraph 7), then and in
each such event the holder of each share of Preferred Stock shall
have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into
which such shares of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or
change, all subject to further adjustments as provided herein.
(f) REORGANIZATION, MERGERS, CONSOLIDATIONS, OR SALES OF ASSETS. If
at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for
elsewhere in this Paragraph 7) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all of the company's assets to any other person,
then, as a part of such reorganization, merger, consolidation, or
sale, provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of
the Preferred Stock, the number of shares of stock or other
securities or property of the Company, or of the successor
corporation resulting form such merger or consolidation or sale,
to which a holder of Common Stock deliverable upon conversion
would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this
Paragraph 7 with respect to the rights of the holders of the
Preferred Stock after the reorganization, merger, consolidation,
or sale to the end that the provisions of this Paragraph 7
(including adjustment of the Conversion Value then in effect and
the number of shares purchasable upon conversion of the Preferred
Stock) shall be applicable after that event as nearly equivalent
as may be practicable.
(g) DEFINITION. The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed
issued (including a right or option to purchase Common Stock, or
shares of stock or an obligation convertible into Common Stock) by
the Company after the Original Issue Date for a series of
Preferred Stock, whether or not subsequently reacquired or retired
by the Company, other than (1) shares of Common Stock, and (2)
shares or other securities issued to employees, officers,
directors, consultants or other persons performing services for
the Company pursuant to any stock offering, option, plan, or
arrangement approved by the Board of Directors of the Company.
(h) NOTICES OF RECORD DATE. In the event of (i) any taking by the
Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution or (ii)
any reclassification or recapitalization of the capital stock of
the Company, any merger or consolidation of the Company, or any
transfer of all or substantially all of the assets of the Company
to any other corporation, entity, or person, or any voluntary or
involuntary dissolution, liquidation, or winding up of the
Company, the Company shall mail to each holder of Preferred Stock
at least 30 days prior to the record date specified therein, a
notice specifying (A) the date on which any such record is to be
taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding up is
expected to become effective, and (C) the time, if any is to be
fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or winding up.
(i) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to the product of such fraction
multiplied by the fair market value of one share of the Company's
Common Stock on the date of conversion, as determined in good
faith by the Board.
(j) NOTICES. Any notice required by the provisions of this Paragraph
7 to be given to the holder of shares of the Preferred Stock shall
be deemed given when personally delivered to such holder or five
(5) business days after the same has been deposited in the United
States mail, certified or registered mail, return receipt
requested, postage prepaid, and addressed to each holder of record
at his address appearing on the books of the Company.
(k) PAYMENT OF TAXES. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of
Preferred Stock.
(l) NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or
sale of securities or any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying
out all such action as may be reasonably necessary or appropriate
in order to protect the conversion rights of the holders of the
Preferred Stock against dilution or other impairment.
8. No Preemptive Rights.
No holder of the Series A Preferred Stock of the Corporation shall be
entitled, as of right, to purchase or subscribe for any part of the unissued
stock of the Corporation or of any stock of the Corporation to be issued by
reason of any increase of the authorized capital stock of the Corporation, or
to purchase or subscribe for any bonds, certificates of indebtedness,
debentures or other securities convertible into or carrying options or
warrants to purchase stock or other securities of the Corporation or to
purchase or subscribe for any stock of the Corporation purchased by the
Corporation or by its nominee or nominees, or to have any other preemptive
rights now or hereafter defined by the laws of the State of Colorado.
9. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the Company by reason
of purchase, conversion, or otherwise shall be reissued, and all such shares
shall be canceled, retired, and eliminated from the shares which the Company
shall be authorized to issue.
IN WITNESS WHEREOF, said SKYLYNX COMMUNICATIONS, INC, has caused this
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock to be duly executed by its President and attested by its
Secretary and has caused its corporate seal to be affixed hereto, this 6th day
of March. 1998.
SKYLYNX COMMUNICATIONS, INC.
Attest:
/s/ Kenneth Marshall By: /s/ Gary L. Brown
- ----------------------------- ---------------------------------
Kenneth Marshall, Secretary Gary L. Brown, President
[Corporate Seal]
<PAGE>
BY-LAWS OF
ALLIED WIRELESS, INC.
ARTICLE I
Section 1. The following paragraphs contain provisions for the
regulation and management of ALLIED WIRELESS, INC., a Colorado corporation.
Section 2. In the event that there is a conflict between a provision of
these By-Laws and a mandatory provision of the Articles of Incorporation of
this corporation, then said mandatory provision of the Articles of
Incorporation of this corporation shall control.
ARTICLE II
Place of Business
Section 1. The registered office of the corporation, which shall also be
the principal office of said corporation, shall be 4333 No. 30th Street,
Boulder, Colorado 80301. This designation shall be without prejudice to the
power and right of the corporation to conduct and transact any of its affairs
or business in other cities, states, territories, countries, or places.
Section 2. The registered agent of the corporation in the State of
Colorado shall be Neil A. Cox.
Section 3. The registered office and registered agent of the corporation
may be changed from time to time in the manner prescribed by law without
amending these By-Laws.
ARTICLE III
Officers
Section 1. Number. The officers of this corporation shall consist of a
President, a Secretary, a Treasurer, and such other officers, including one or
more Vice Presidents, and, if desired, a Chief Executive Officer, as may be
appointed in accordance with the provisions of Section 3 of this Article. One
person may hold any two of said offices, but no such officer shall execute,
acknowledge, or verify any instrument in more than one capacity if such
instrument is required by law or by these By-Laws or by a resolution of the
Board of Directors to be executed, acknowledged or verified by any two or more
officers.
Section 2. Election, Term of Office and Qualifications. The officers of
this corporation shall be chosen annually by the Board of Directors. Each
officer, except such officer as may be appointed in accordance with the
provisions of Section 3 of this Article, shall hold his office until his
successors shall have been removed in the manner hereinafter provided.
Section 3. Subordinate Officers. The Board of Directors may appoint
such other officers to hold office for such period, have such authority and
perform such duties as the Board of Directors may from time to time determine.
The Board of Directors may delegate to any officer the power to appoint any
such subordinate officers.
Section 4. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Such removal shall be by vote of a majority of the whole
Board of Directors at a regular meeting or a special meeting of the Board of
Directors called for this purpose.
Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or Secretary of
the corporation. Any such resignation shall take effect at the time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Chief Executive Officer. The Chief Executive Officer shall
be the principal executive officer of the corporation and, subject to the
control of the Board of Directors, shall in general supervise and control all
of the business and affairs of the corporation. He shall preside at all
meetings of the shareholders and all meetings of the Board of Directors; and
shall have general supervision over the affairs of the corporation and over
the other officers.
Section 7. President. The President shall be the chief operating
officer of the corporation. The President shall perform all duties incident
to the office of the President; shall sign all stock certificates and written
contracts of the corporation; and shall perform all such other duties as are
assigned to him from time to time by resolution of the Board of Directors or
the Chief Executive Officer.
Section 8. Vice President. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President shall
perform the duties of the President, and when so acting, shall have all the
powers of, and be subject to, all of the restrictions upon the President. The
Vice President shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 9. Secretary. The secretary shall be sworn to the faithful
discharge of his duty. He shall:
a. Keep the minutes of the meetings of the shareholders and of the
Board of Directors in books provided for that purpose;
b. See that all notices are duly given in accordance with the
provisions of these By-Laws or as required by law;
c. Be custodian of the records and of the seal of the corporation and
see that such seal is affixed to all stock certificates prior to
their issue and to all documents, the execution of which on behalf
of the corporation under its seal is duly authorized in accordance
with the provisions of these By-Laws.
d. Have charge of the stock books of the corporation and keep or cause
to be kept the stock and transfer books in such manner as to show at
any time the amount of the stock of the corporation issued and
outstanding, the manner in which and the time when such stock was
paid for, the names, alphabetically arranged, and the addresses of
the holders of record; and exhibit during the usual business hours
of the corporation to any director, upon application, the original
or duplicate stock ledger;
e. Sign with the President, or a Vice President, certificates of stock
of the corporation;
f. See that the books, reports, statements, certificates, and all other
documents and records of the corporation required by law are
properly kept and filed;
g. In general, perform all duties incident to the office of Secretary
and such other duties as, from time to time, may be assigned to him
by the Board of Directors or by the President.
Section 10. Treasurer. The Treasurer shall:
a. Have charge and custody of, and be responsible for, all funds and
securities of the corporation;
b. From time to time render a statement of the condition of the
finances of the corporation at the request of the Board of
Directors;
c. Receive and give receipt for monies due and payable to the
corporation from any source whatsoever;
d. In general, perform all duties incident to the office of Treasurer,
and such other duties as from time to time may be assigned to him by
the Board of Directors or by the President.
Section 11. Salaries. Salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
corporation.
ARTICLE IV
Directors
Section 1. General Powers. The business and affairs of this corporation
and the management thereof shall be vested in a Board of Directors consisting
of not less than one (1) nor more than ten (10) members.
Section 2. Number and qualification. The number of directors of this
corporation shall be not less than one (1) and not more than ten (10). The
number of directors may be increased from time to time within the limits
stated above by the action of the majority or the whole Board of Directors but
the number of directors may thereafter be decreased only by the stockholders
of the corporation at an annual or special meeting thereof. Otherwise, the
number of directors may be increased or decreased by amendment of these By-
Laws. The number of Directors shall always be an odd number. Directors shall
be elected for a term of one (1) year and shall serve until the election and
qualification of their successors, unless they sooner resign. At the first
annual meeting of the stockholders and at each annual meeting thereafter, the
stockholders shall so elect directors to hold office until the next succeeding
annual meeting. The directors need not be residents of the State of Colorado
or stockholders of the corporation.
Section 3. Executive Committee. The Board of Directors by resolution
passed by a majority of the whole Board may designate two or more of their
number to constitute an executive committee, which shall have and exercise,
subject to limitations, if any, as may be prescribed herein or by resolution
of the Board of Directors, the powers of the Board of Directors and the
management of the business and affairs of the corporation; provided such
executive committee shall act only at such times as the Board of Directors is
not in session and in no event to the exclusion of the Board of Directors at
any time to act as a Board upon any business of the corporation.
Section 4. Vacancy. Any director may resign at any time by giving
written notice to the President or to the Secretary of the corporation. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Any vacancy occurring in the Board of
Directors maybe filled by the affirmative majority vote of the whole Board of
Directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. A director chosen to fill a
position resulting from a vacancy or an increase in the number of directors
shall hold office until the next annual meeting of stockholders.
Section 5. Removal. Any director may be removed from office, either
with or without cause, at any time, and another person may be elected to his
place, to serve for the remainder of his term, at any special meeting of
shareholders called for that purpose, by a majority of all of the shares of
stock outstanding and entitled to vote. In case any vacancy so created shall
not be filled by the shareholders at such meeting, such vacancy may be filled
by the affirmative vote of a majority of the remaining directors though less
than a quorum.
Section 6. Meetings. The regular meeting of the Board of Directors
shall be held immediately following the annual shareholder's meeting. The
Board of Directors shall meet at such other time or times as they may from
time to time determine.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of
Directors may fix the place for holding any special meeting of the Board of
Directors called by them.
Section 8. Place of Meetings. The Board of Directors may hold its
meetings at such place or places within or without the State of Colorado as
the Board may from time to time determine, or, with respect to its meetings,
as shall be specified or fixed in respective notices or waivers of notice of
such meetings.
Section 9. Special Meetings: Notice. Special meetings of the Board of
Directors shall be held whenever called by the President or by two of the
directors. Notice of the time and place of holding said special meeting of
the Board of Directors shall be given to each director by either
(i) registered mail, return receipt requested, deposited in the mail at least
ten (10) days prior to the date of said special meeting, or (ii) guaranteed
overnight delivery by a nationally-used courier service at least three (3)
days prior to the date of said special meeting, or (iii) by telex or facsimile
copy sent at least forty-eight (48) hours prior to the time and date of such
special meeting. Attendance of a director at such special meeting shall
constitute a waiver of notice of such special meeting, except where a director
attends the meeting for the express purpose of objecting to the transacting of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular meeting or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
Section 10. Presence of Meetings. Members of the Board, or of any
committee thereof, may participate in a meeting of the Board or such committee
by means of conference telephone or similar communications equipment, by means
of which all persons participating in the meeting can hear one another.
Participation in a meeting pursuant to this Section 10 shall constitute
presence in person at such meeting.
Section 11. Quorum and Manner of Acting. A majority of the members of
the Board of Directors shall form a quorum for the transaction of business at
any regular or special meeting of the Board of Directors. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If the vote of a lesser number is
required for a specific act by the Articles of Incorporation, or by another
provision of these By-Laws, then that lesser number shall govern. In the
absence of a quorum, a majority of the directors present may adjourn the
meeting from time to time until a quorum be had.
Section 12. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, for attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 13. Election of Officers. At the first meeting of the Board of
Directors after the annual election, the President, Vice President, and
Secretary and Treasurer shall be elected to serve for the ensuing year and
until the election of their respective successors, and an executive committee
may be elected. Election shall be by ballot, and the majority of the votes
cast shall be necessary to elect. Any vacancies that occur may be filled by
the Board of Directors for the unexpired term. An officer may be removed at
any time by the majority vote of the directors present at any regular or
special meeting of said Board of Directors at which a quorum is present. The
Board of Directors shall have the power to fill officer vacancies, create new
officer positions, and adjust salaries of officers as said Board from time to
time shall deem necessary, all in accordance with the Articles of
Incorporation.
Section 14. Reporting. At each annual stockholder's meeting, the
directors shall submit a statement of business done during the preceding year,
together with a report of the general financial condition of the corporation,
and of the condition of its tangible property.
ARTICLE V
Books and Records
Section 1. The corporation shall keep either within or without the State
of Colorado, complete books and records of account and shall keep minutes of
the proceedings of its stock holders and the Board of Directors.
Section 2. The corporation shall keep at its registered office or
principal place of business, a record of its stock holders, giving the names
and addresses of all of the stock holders and the number and class of the
shares held by each.
Section 3. The books, records of account, financial statements and other
documents of the corporation shall be available to such persons who have been
designated by law as having a right thereto, and said books, records of
account, financial statements and documents shall be made available to such
persons in the manner and in accordance with the procedures established by
law.
ARTICLE VI
Stock
Section 1. Authorization. The authorized shares of stock of the
corporation shall be as provided by the Articles of Incorporation. Each share
shall have $.001 par value.
Section 2. Certificate of Shares. The shares of stock of the
corporation shall be represented by certificates signed by the Chief Executive
Officer, President or the Vice President and the Secretary or an assistant
Secretary of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof. The signatures of the President or Vice
President and the Secretary or Assistant Secretary upon a certificate may be
facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of its issue.
Section 3. Issuance of Certificates. Each certificate representing
shares shall state upon the face of same that the corporation is organized
under the laws of the State of Colorado, the name of the person to whom the
certificate is issued, the number and class of shares, and the designation of
the series, if any, which such certificate represents. No certificate shall
be issued for any shares until such shares are fully paid and when issued
shall bear the notation that the certificate is issued as a fully paid and
non-assessable certificate of stock.
Section 4. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the secretary of
the corporation, and on surrender for cancellation of the certificate for such
shares. Upon surrender to the corporation or to a transfer agent of the
corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of shares shall
be entered on the stock book of the corporation which shall be kept at its
principal office, or by its registrar duly appointed.
Section 5. Transfer Agent. The secretary of the corporation shall act
as transfer agent of the certificates representing the shares of the
corporation. The Secretary shall maintain a stock transfer book, the stubs in
which shall set forth, among other things, the names and addresses of the
holders of all issued shares of the corporation, the number of shares held by
each, the certificate numbers representing such shares, the date of issue of
the certificates representing such shares, and whether or not such shares
originate from original issue or from transfer. The names and addresses of
the shareholders as they appear on the stubs of the stock transfer book shall
be conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meetings of shareholders; to vote at such
meetings; to examine the list of the shareholders entitled to vote at
meetings; to receive dividends; and to own, enjoy and exercise any other
property rights deriving from such shares against the corporation. Each
shareholder shall be responsible for notifying the secretary in writing of any
change in his name or address and failure so to do will relieve the
corporation, its directors, officers and agents, from liability for failure to
direct notices or other documents, or to pay over or transfer dividends or
other property or rights, to a name and address other than the name and
address appearing on the stub of the stock transfer book.
The Board of Directors may at its discretion, appoint instead of the
secretary of the corporation, one or more transfer agents, registrars and
agents outside the corporation for making payment upon any class of stock,
bond, debenture, or other security of the corporation. Such agents and
registrars may be located either within or outside the State of Colorado.
They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
Section 6. Fractional Shares. The corporation may, but shall not be
obliged to, issue a certificate for a fractional share, and by action by its
Board of Directors, may issue in lieu thereof scrip in register or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip aggregated to a full share. The rights and
obligations of persons holding said fractional shares or scrip shall be as are
contained in any applicable provision of these By-Laws, Articles of
Incorporation, or laws of the State of Colorado.
Section 7. Treasury Shares. Treasury shares of stock shall be held by
the corporation subject to the disposal of the Board of Directors and shall
neither vote nor participate in dividends.
Section 8. Lien. The corporation shall have a first lien on all shares
of its stock and upon all dividends declared upon same for any indebtedness of
the respective holders thereof of the corporation.
Section 9. Lost Certificates. In cases of loss or destruction of a
certificate of stock, no new certificates shall be issued in lieu thereof
except upon satisfactory proof to the Board of Directors of such loss or
destruction, and, at the election of a majority of the Board of Directors,
upon giving satisfactory security by bond or otherwise, against loss to the
corporation. Any such new certificate shall be plainly marked "Duplicate" on
its face.
Section 10. Consideration and Payment for Shares. Shares having a par
value shall be issued for such consideration, expressed in dollars but not
less than the par value thereof, as shall be fixed from time to time by the
Board of Directors. Shares without par value shall be issued for such
consideration expressed in dollars as shall be fixed from time to time by the
Board of Directors. Treasury shares shall be disposed of for such
consideration expressed in dollars as may be fixed from time to time by the
Board of Directors. Such consideration may consist, in whole or in part, of
money, other property, tangible or intangible, or labor or services actually
performed for the corporation, but neither promissory notes nor future
services shall constitute payment or part payment for shares.
ARTICLE VII
Shareholders
Section 1. Annual Meeting. The regular meeting of the shareholders of
the corporation shall be held at a time and place to be designated by the
President, Vice President, or the Board of Directors, provided, however, that
whenever such day shall fall upon a Sunday or a legal holiday, the meeting
shall be held on the next succeeding business day. At the regular annual
meeting of the shareholders, the directors for the ensuing year shall be
elected. The officers of the corporation shall present their annual reports
and the Secretary shall have on file for inspection and reference, an
authentic list of the stockholders, giving the amount of stock held by each as
shown by the stock books of the corporation ten (10) days before the annual
meeting.
Section 2. Special Meeting. Special meetings of the shareholders may be
called at any time by the President, any member of the Board of Directors, or
by the holders of not less than ten (10%) percent of all of the shares
entitled to vote at said special meeting. The Board of Directors may
designate any place as the place for any annual meeting or for any special
meeting called by the Board of Directors. If a special meeting shall be
called otherwise than by the Board of Directors, the place of meeting shall be
the principal office of the corporation.
Section 3. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting, and in case of special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than fifty (50) days before the date of the
meeting, either personally, or by mail, by or at the discretion of the
President, the Secretary, or the director or the person calling the meeting,
to each stockholder of record entitled to vote at such meeting, except that if
the authorized capital stock is to be increased, at least thirty (30) days
notice shall be given. If mailed, such notice shall be deemed to be delivered
when deposited in the U.S. Mails and addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
Section 4. Closing Transfer Books. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shares for any other purpose,
the Board of Directors may provide that the stock transfer books shall be
closed for any stated period not exceeding fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of such shareholders, such
date in any case to be not more than fifty (50) days and in the case of a
meeting of shareholders, not less than ten (10) days prior to the date on
which the particular action, requiring such determination of shareholders, or
shareholders entitled to receive payment of a dividend, the day on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such a determination shall apply to
any adjournment thereof. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of shareholders
entitled to vote at any such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list for a period of ten (10) days prior to such meeting, shall be kept
on file at the principal office of the corporation. The original stock
transfer books shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
Section 5. Election of Directors. At each annual meeting of the
shareholders of the corporation, the directors shall be elected who shall
serve until their successors are duly elected and qualified, unless they
sooner resign. Election of directors shall be by such of the shareholders as
attend the annual meeting, either in person or by proxy, provided that if the
majority of stock is not represented, said meeting may be adjourned by the
shareholders present for a period not exceeding sixty (60) days at any one
adjournment. At each election of directors, cumulative voting shall not be
allowed.
Section 6. Quorum. A majority of the outstanding stock exclusive of
treasury stock, shall be necessary to constitute a quorum at meetings of the
shareholders. If a quorum is present at any meeting, a majority of the stock
represented there shall decide any question which is brought before such
meeting, except in those cases where it is otherwise provided by law. In the
absence of a quorum, those present may adjourn the meeting from day to day but
not exceeding sixty (60) days.
Section 7. Proxies. Any shareholder entitled to vote may be represented
at any regular or special meeting of the shareholders by a duly executed
proxy.
ARTICLE VIII
Waiver of Notice
Section 1. Directors and Officers. Unless otherwise provided by law,
whenever any notice is required to be given to any director or officer of the
corporation under the provisions of these By-Laws or under the provisions of
the Articles of Incorporation, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Section 2. Shareholders. No notice of the time, place or purpose of any
annual, regular, or special meeting of the shareholders need be given if all
shareholders of record on the date said meeting is held waive such notice in
writing either before or after the regular, or special meeting of the
shareholders, such meeting shall be deemed to have been legally and duly
called, noticed, held, and conducted.
ARTICLE IX
Action Without a Meeting
Section 1. Any action required by the laws of the State of Colorado, the
Articles of Incorporation, or by these By-Laws, to be taken at a meeting of
the directors or stockholders of this corporation, or any action which may be
taken at a meeting of the directors or stockholders, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all the directors or stockholders entitled to vote with respect to
the subject matter thereof. Such consent shall have the same force and effect
as a unanimous vote of the directors or stockholders, and may be stated as
such in any Articles or documents filed with the Secretary of State under the
law of the State of Colorado.
ARTICLE X
Contract, Loans, Checks and Deposits
Section 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 instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
Section 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 a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness 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 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE XI
Execution of Instruments
Section 1. Execution of Instruments. The President shall have power to
execute on behalf and in the name of the corporation any deed, contract, bond,
debenture, note or other obligations or evidences or indebtedness, or proxy,
or other instrument requiring the signature of an officer of the corporation,
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the corporation.
Unless so authorized, no officer, agent or employee shall have any power or
authority to bind the corporation in any way, to pledge its credit or to
render it liable pecuniarily for any purpose or in any amount.
Section 2. Checks and Endorsements. All checks and drafts upon the
funds to the credit of the corporation in any of its depositories shall be
signed by such of its officers or agents as shall from time to time be
determined by resolution of the Board of Directors which may provide for the
use of facsimile signatures under specified conditions, and all notes, bills
receivable, trade acceptances, drafts, and other evidences of indebtedness
payable to the corporation shall, for the purposes of deposit, discount or
collection, be endorsed by such officers or agents of the corporation or in
such manner as shall from time to time be determined by resolution of the
Board of Directors.
ARTICLE XII
Loans to Directors and Officers
Loans to employees or officers of the corporation, guarantees of their
obligations or other similar assistance to these employees or officers (except
those employees or officers who are directors of the corporation), shall be
contracted on behalf of the corporation only upon the specific authorization
of the Board of Directors of the corporation. Unless otherwise provided in
the Articles of Incorporation, loans to directors, guarantees of their
obligations, or other similar assistance to the directors shall be contracted
on behalf of the corporation only upon the specific authorization of the Board
of Directors and the affirmative vote of the holders of two-thirds (2/3) of
the outstanding shares of the corporation which are entitled to vote for
directors. No such loans or guarantees shall be secured by the shares of this
corporation.
ARTICLE XIII
Miscellaneous
Section 1. Corporate Seal. The Board of Directors shall provide a
corporate seal which shall be circular in form and shall have inscribed
thereon the name of the corporation, the state of incorporation, and the words
"Corporate Seal".
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the Board of Directors.
Section 3. Amendments. Subject to repeal or change by action of the
shareholders, the Board of Directors shall have the power to alter, amend, or
repeal the by-laws of the corporation and to make and adopt new by-laws at any
regular meeting of the Board or at any special meeting called for that
purpose.
Section 4. 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 its Articles
of Incorporation.
ADOPTED BY THE BOARD OF DIRECTORS this 30th day of September, 1996.
/s/ Neil A. Cox
-----------------------------------
Neil A. Cox
/s/ Gary Brown
-----------------------------------
Gary Brown
/s/ Andrei A. Leonov
-----------------------------------
Andrei A. Leonov
<PAGE>
CERTIFICATE OF DESIGNATION OF
RIGHTS AND PREFERENCES OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF SKYLYNX COMMUNICATIONS, INC.
-----------------------------------------------------------------
Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act
-----------------------------------------------------------------
SKYLYNX COMMUNICATIONS, INC., a corporation organized and existing under
the laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that
pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the provisions of the Colorado Business
Corporation Act, the Company's Board of Directors has duly adopted the
following resolution creating a series of the class of its authorized
Preferred Stock, designated as Series A Convertible Preferred Stock:
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Company has the authority to issue Fifty
Million (50,000,000) shares of $.01 par value Preferred Stock, the designation
and amount thereof and series, together with the powers, preferences, rights,
qualifications, limitations or restrictions thereof, to be determined by the
Board of Directors pursuant to the applicable law of the State of Colorado;
Now therefore, the Company's Board of Directors hereby establishes a
series of the class of Preferred Stock authorized to be issued by the Company
as above stated, with the designations and amounts thereof, together with the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, to be as follows:
1. Designations and Amounts. Five Million (5,000,000) shares of the
Company's authorized Preferred Stock are designated as Series A Convertible
Preferred Stock.
2. Definitions.
For the purposes of this Resolution the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean SkyLynx Communications, Inc., a Colorado
corporation.
(c) "Original Issue Date" for a series of Preferred Stock shall mean the
date on which the first share of such series of Preferred Stock was
originally issued.
(d) "Preferred Stock" shall refer to Series A Convertible Preferred
Stock.
(e) "Common Stock" shall refer to the Company's $.001 par value common
stock.
(f) "Unit" shall refer to units consisting of one share of Preferred
Stock, one Class A Warrant and one Class B Warrant sold by the
Company in a private offering in 1998.
(g) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting stock shall at the time be owned directly or
indirectly by the Company or by one or more Subsidiaries.
3. Dividends.
(a) The holders of outstanding Preferred Stock shall be entitled to
receive dividends at the annual rate of 10% based on the stated
value per share computed on the basis of a 360-day year and 12 30-
day months. Dividends shall be calculated from the date of issue
and payable, in each case quarterly on the fifteenth day of April,
July, October and January of each year (the "Dividend Payment
Date"). Dividends shall be paid to recordholders of shares of
Preferred Stock as of the date one business day prior to the
Dividend Payment Date (the "Dividend Record Date"). The right of
the holder of shares of Preferred Stock as of the Dividend Record
Date to the relevant dividend shall not be affected by the
subsequent transfer or cancellation of such shares; such dividend
being payable to the holder as of the Dividend Record Date
notwithstanding such transfer or cancellation.
(b) Dividends on the shares of Preferred Stock shall be cumulative;
therefore, if a full or partial dividend on the shares of this
series with respect to any dividend period is not declared by the
Board of Directors of the Company, the Company shall be obligated to
pay full dividend on the shares of this series with respect to such
dividend period. Dividends shall accrue but not compound on a daily
basis if full dividends on all outstanding shares of Preferred Stock
of this series at the rate set forth in Section 3(a) above shall not
have been declared and paid for the immediately preceding dividend
period or for any prior dividend period, such outstanding cumulative
dividends shall not bear interest.
(c) In addition to the Common Stock dividend, the holders of outstanding
Preferred Stock shall be entitled to participate, pro rata, in
dividends paid on outstanding shares of Common Stock, if, when and
as the Board of Directors shall in their sole discretion deem
advisable, and only from the net profits or surplus of the Company
as such shall be fixed and determined by the Board of Directors.
The determination of the Board of Directors at any time of the
amount of net profits or surplus available for dividend shall be
binding and conclusive on the holders of all the stock of the
Company at the time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the holders of each share
of Preferred Stock then outstanding shall be entitled to be paid out
of the assets of the Company available for distribution to its
shareholders, before any payment or declaration and setting apart
for payment of any amount shall be made in respect to any
outstanding preferred stock ranking junior to the Preferred Stock or
the Common Stock, an amount equal to Four Dollars ($4.00) per share.
If upon any liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed to
the holders of the Preferred Stock shall be insufficient to permit
the payment to such shareholders of the full preferential amount
aforesaid, then all of the assets of the Company available to be
distributed shall be distributed ratably to the holders of the
Preferred Stock.
(b) After the payment or distribution to the holders of the Preferred
Stock of the full preferential amounts aforesaid, the holders of any
preferred stock rank junior to the Preferred Stock and the Common
Stock then outstanding shall be entitled to receive all of the
remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization of the Company, a
sale or other transfer of all or substantially all of its assets,
nor a sale of fifty percent (50%) or more of the Company's capital
stock then issued and outstanding nor the purchase or redemption by
the Company of stock of any class, nor the payment of a dividend or
distribution from net profits or surplus of the Company shall be
treated as or deemed to be a liquidation hereunder.
5. Redemption.
The Company shall have neither the right nor the obligation to redeem any
of the outstanding Preferred Stock, and holders of the Preferred Stock shall
not have the right to demand the redemption of any of the outstanding
Preferred Stock.
6. Voting Rights.
Upon issuance, and subject to increase and additional rights as provided
below, holders of shares of this series of Preferred Stock shall be entitled
to vote with the holders of shares of Common Stock as a single class on all
matters presented for a vote to the shareholders of the Company. The number
of votes per share of this series of Preferred Stock which can be cast shall
be adjusted at such time or times as the conversion price is adjusted so that
the number of votes per share of this series of Preferred Stock which may be
cast shall always be equal to the full number of shares of Common Stock into
which each share of this series of Preferred Stock may be converted when
voting with the holders of Common Stock as a single class.
7. Conversion.
The Preferred Stock shall have the following conversion rights (the
"Conversion Rights"):
(a) Optional Conversion. Holders of outstanding shares of Preferred
Stock shall have an option to convert each share of Preferred Stock
into one share of the Company's Common Stock (the "Initial
Conversion Value"). At any time commencing the earlier of (i) one
year from the date of issue or (ii) upon the effective date of a
Registration Statement registering for sale under the Securities Act
of 1933, as amended "the Securities Act"), the shares of the
Company's Common Stock issuable upon such conversion ("Conversion
Stock").
(b) Automatic Conversion. The foregoing notwithstanding, each
outstanding share of Preferred Stock shall be automatically
converted into one share of Common Stock upon the earlier of (i) the
third anniversary of the date of issue or (ii) in the event (a) a
Registration Statement has been filed with the Securities and
Exchange Commission and declared effective registering for sale
under the Securities Act the Conversion Stock, (b) there has been
developed and exists a public trading market for the Company's
Common Stock on the over-the-counter market and (c) the public
trading price of the Company's Common Stock has equaled or exceeded
$6.00 per share (150% of the conversion value) for at least ten
consecutive trading days.
(c) Mechanics of Conversion. The conversion of all outstanding shares
of Preferred Stock to Common Stock shall occur automatically as
provided in Paragraph 7(b) above ("Triggering Events"). The Company
shall, within ten (10) days of either Triggering Event, provide
written notice, first class postage pre-paid, to each holder of
record of the Preferred Stock to be converted, at his post office
address last shown on the records of the Company, of the conversion
(the "Conversion Notice"). The Conversion Notice shall state:
(i) That all of the holder's outstanding shares of Preferred Stock
were converted;
(ii) The number of shares of Preferred Stock held by the holder that
were converted;
(iii) The effective date of the Conversion (the "Conversion Date")
and the number of shares of Common Stock which the holder will
receive; and
(iv) That the holder is to surrender to the Company, in the manner
and at the place designated, his certificate or certificates
representing the shares of Preferred Stock converted.
Thereafter, each holder of Preferred Stock to be converted shall
surrender the certificate or certificates representing such shares
to the Company, in the manner and at the place designated in the
Conversion Notice, and thereupon the requisite number of shares of
Common Stock shall be issued in the name of the person whose name
appears on the surrendered certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and
retired. Notwithstanding that the certificates evidencing any of
the shares of Preferred Stock shall not have been surrendered, all
rights with respect to such shares shall forthwith after the
Conversion Date, terminate, except only the right of the holders to
receive the appropriate number of shares of Common Stock upon
surrender of their certificate or certificates therefor.
(d) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Original Issue Date for a
series of the Preferred Stock effect a subdivision of the
outstanding Common Stock, the Conversion Value then in effect
immediately before that subdivision shall be proportionately
decreased, and conversely, if the Company shall at any time or from
time to time after the Original Issue Date for a series of the
Preferred Stock combine the outstanding shares of Common Stock, the
Conversion Value then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this
Paragraph 7(d) shall become effective at the close of business on
the date the subdivision or combination becomes effective.
(e) Adjustment for Reclassification, Exchange, or Substitution. If the
Common Stock issuable upon the conversion of the Preferred Stock
shall be changed into the same or a different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided
for elsewhere in this Paragraph 7), then and in each such event the
holder of each share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares
of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Preferred
Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further
adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of Assets. If at
any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for
elsewhere in this Paragraph 7) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all of the company's assets to any other person, then,
as a part of such reorganization, merger, consolidation, or sale,
provision shall be made so that the holders of the Preferred Stock
shall thereafter be entitled to receive upon conversion of the
Preferred Stock, the number of shares of stock or other securities
or property of the Company, or of the successor corporation
resulting form such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, merger, consolidation, or
sale. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph 7 with respect to
the rights of the holders of the Preferred Stock after the
reorganization, merger, consolidation, or sale to the end that the
provisions of this Paragraph 7 (including adjustment of the
Conversion Value then in effect and the number of shares purchasable
upon conversion of the Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(g) Definition. The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued
(including a right or option to purchase Common Stock, or shares of
stock or an obligation convertible into Common Stock) by the Company
after the Original Issue Date for a series of Preferred Stock,
whether or not subsequently reacquired or retired by the Company,
other than (1) shares of Common Stock, and (2) shares or other
securities issued to employees, officers, directors, consultants or
other persons performing services for the Company pursuant to any
stock offering, option, plan, or arrangement approved by the Board
of Directors of the Company.
(h) Notices of Record Date. In the event of (i) any taking by the
Company of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution or (ii)
any reclassification or recapitalization of the capital stock of the
Company, any merger or consolidation of the Company, or any transfer
of all or substantially all of the assets of the Company to any
other corporation, entity, or person, or any voluntary or
involuntary dissolution, liquidation, or winding up of the Company,
the Company shall mail to each holder of Preferred Stock at least 30
days prior to the record date specified therein, a notice specifying
(A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up is expected to become effective, and (C)
the time, if any is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up.
(i) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to the product of such fraction
multiplied by the fair market value of one share of the Company's
Common Stock on the date of conversion, as determined in good faith
by the Board.
(j) Notices. Any notice required by the provisions of this Paragraph 7
to be given to the holder of shares of the Preferred Stock shall be
deemed given when personally delivered to such holder or five (5)
business days after the same has been deposited in the United States
mail, certified or registered mail, return receipt requested,
postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Company.
(k) Payment of Taxes. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery of shares of Common Stock upon conversion of shares of
Preferred Stock.
(l) No Dilution or Impairment. The Company shall not amend its Articles
of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue, or sale of
securities or any other voluntary action, for the purpose of
avoiding or seeking to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all such
action as may be reasonably necessary or appropriate in order to
protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
8. No Preemptive Rights.
No holder of the Series A Preferred Stock of the Corporation shall be
entitled, as of right, to purchase or subscribe for any part of the unissued
stock of the Corporation or of any stock of the Corporation to be issued by
reason of any increase of the authorized capital stock of the Corporation, or
to purchase or subscribe for any bonds, certificates of indebtedness,
debentures or other securities convertible into or carrying options or
warrants to purchase stock or other securities of the Corporation or to
purchase or subscribe for any stock of the Corporation purchased by the
Corporation or by its nominee or nominees, or to have any other preemptive
rights now or hereafter defined by the laws of the State of Colorado.
9. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the Company by reason
of purchase, conversion, or otherwise shall be reissued, and all such shares
shall be canceled, retired, and eliminated from the shares which the Company
shall be authorized to issue.
IN WITNESS WHEREOF, said SKYLYNX COMMUNICATIONS, INC, has caused this
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock to be duly executed by its President and attested by its
Secretary and has caused its corporate seal to be affixed hereto, this 6th day
of March, 1998.
SKYLYNX COMMUNICATIONS, INC.
Attest:
/s/ Kenneth Marshall By: /s/ Gary L. Brown
- ------------------------------ -------------------------------
Kenneth Marshall, Secretary Gary L. Brown, President
[Corporate Seal]
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(a Colorado corporation)
COMMON STOCK CERTIFICATE
$.001 par value
Certificate No. No. of Shares
- --------------- -------------
THIS COMMON STOCK CERTIFICATE CERTIFIES THAT, for value received,
, or registered assigns
("Holder") is the registered holder of the above indicated number of Common
Stock, $.001 par value (the "Common Stock"), of SkyLynx Communications, Inc.,
a Colorado corporation (the "Company"), transferable only on the books of the
Company by the Holder hereof in person or by duly authorized attorney upon
surrender of this Certificate property endorsed.
IN WITNESS WHEREOF, SKYLYNX COMMUNICATIONS, INC. has caused this Common
Stock Certificate to be signed by its President and by its Secretary.
Dated:
-------------------
Attest:
By: By:
---------------------------- ------------------------------
Kenneth Marshall, Secretary Gary Brown, President
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
ASSIGNMENT
(Form of Assignment to be Executed if the Shareholder
Desires to Transfer Shares Evidenced Hereby)
Transfer Fee: $15.00 per certificate issued.
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER For value received
--------------------
hereby sell, assign, and transfer unto
-----------------------------------
Shares represented by this Series A Preferred Share Certificate, together with
all right, title, and interest therein, and do hereby irrevocably constitute
and appoint
--------------------------------------------------
attorney, to transfer this Series A Preferred Share Certificate on the books
of the Company, with full power of substitution.
Dated: X
--------------- --------------------------------
X
--------------------------------
SIGNATURE GUARANTEED: 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.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK
EXCHANGE.
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
(a Colorado corporation)
SERIES A CONVERTIBLE PREFERRED STOCK CERTIFICATE
$.01 par value
Certificate No. P-A No. of Shares
- ------------------- -------------
THIS SERIES A CONVERTIBLE PREFERRED STOCK CERTIFICATE CERTIFIES THAT, for
value received, , or registered assigns
("Holder") is the registered holder of the above indicated number of Series A
Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), of
SkyLynx Communications, Inc., a Colorado corporation (the "Company"),
transferable only on the books of the Company by the Holder hereof in person
or by duly authorized attorney upon surrender of this Certificate property
endorsed.
Each share of Preferred Stock is convertible into one share of the
Company's common stock, $.001 par value (the "Common Stock"), subject to
adjustment under certain circumstances ("the Conversion Ratio") at the option
of the Holder thereof at any time commencing the earlier of (i) one year from
the date of issuance or (ii) the effective date of the registration statement
registering for sale under the Securities Act of 1933, as amended, (the
"Securities Act") the shares of Common Stock issuable upon such conversion.
Each share of Preferred Stock shall automatically convert into four shares of
Common Stock upon the earlier of (a) the third anniversary of the date of the
issuance or (b) the closing bid price of the Company's Common Stock has been
at least $6.00 per share for at least ten consecutive trading days, provided
there is a registration statement in effect registering for sale under the
Securities Act the shares of the Company's Common Stock issuable upon such
conversion.
Dividends in the form of shares of the Company's Common Stock will accrue
on all outstanding shares of Preferred Stock at the rate of ten percent (10%)
per share per annum, payable quarterly in arrears commencing the date of
issuance.
The Company is authorized to issue shares of more than one class of
capital stock, namely 150,000,000 Common Shares and 50,000,000 Preferred
Shares. Pursuant to Section 7-106-206 of the Colorado Corporation Code, the
Company will furnish to any shareholder upon request (addressed to the
attention of the Secretary of the Company) and without charge a full statement
of the designations, preferences, limitations and relative rights of the
shares of each class authorized to be issued by the Company and of variations
in the relative rights and preferences between the shares of each series of
the Preferred Shares of the Company insofar as any such series has been fixed
and determined, and a statement of the authority of the Board of Directors of
the Company to fix and determine the relative rights and preferences of
subsequent series of the Preferred Shares.
This Series A Preferred Stock Certificate shall not be valid unless
countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, SKYLYNX COMMUNICATIONS, INC. has caused this Series A
Preferred Stock Certificate to be signed by its President and by its
Secretary, each by a facsimile of such person's signature.
Dated:
-------------------
Attest:
By: By:
------------------------------ -----------------------------
Kenneth Marshall, Secretary Gary Brown, President
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
370 - 17th Street, Suite 2350
Denver, Colorado 80202
By:
-----------------------------------
Transfer Agent and Registrar
Authorized Officer<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
ASSIGNMENT
(Form of Assignment to be Executed if the Shareholder
Desires to Transfer Shares Evidenced Hereby)
Transfer Fee: $15.00 per certificate issued.
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER For value received
--------------------
hereby sell, assign, and transfer unto
-----------------------------------
Shares represented by this Series A Preferred Share Certificate, together with
all right, title, and interest therein, and do hereby irrevocably constitute
and appoint
--------------------------------------------------
attorney, to transfer this Series A Preferred Share Certificate on the books
of the Company, with full power of substitution.
Dated: X
--------------- --------------------------------
X
--------------------------------
SIGNATURE GUARANTEED: 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.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK
EXCHANGE.
<PAGE>
The Securities represented by this instrument have not been registered under
the Securities Act of 1933 (the "Securities Act") or qualified under the
securities laws of any state, in reliance upon exemptions from such
registration and qualification requirements.
CLASS A REDEEMABLE
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$.001 Par Value per Share
of
SKYLYNX COMMUNICATIONS, INC.
(a Colorado corporation)
Warrant No. WA - Warrants
---------- -----------
THIS WARRANT CERTIFIES THAT, for value received,
or registered assigns
("Warrantholder") is the registered owner of the above indicated number of
Warrants entitling the Warrantholder, commencing upon the Exercise Date, as
defined in paragraph 1 of this Certificate, but before 5:00 o'clock p.m.,
Eastern Standard Time, on the day of ("Expiration
Date") but not thereafter, to subscribe for, purchase and receive one (1)
fully paid and non-assessable share of Common Stock, $.001 par value (the
"Common Stock") of SkyLynx Communications, Inc., a Colorado corporation (the
"Company"), at a purchase price of $7.50 per share of Common Stock ("Exercise
Price") upon presentation and surrender of this Warrant and upon payment of
the Exercise Price for such of the shares of Common Stock of the Company, at
any time after the Exercise Date, but only subject to the conditions set forth
herein. The Exercise Price, the number of shares purchasable upon exercise of
each Warrant, and the Expiration Date are subject to adjustments described
herein. The Warrantholders may exercise all or any number of the Warrants
represented hereby. Upon exercise of this Warrant, the form of election
hereinafter provided for must be duly executed and the instructions for
registration of the Common Stock acquired by such exercise must be completed.
If the rights represented hereby shall not be exercised at or before the
Expiration Date, this Warrant shall become and be void without further force
or effect, and all rights represented hereby shall cease and expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate
may be exercised in whole or in part at any time commencing the earlier of (i)
one year from the date of issue or (ii) the effective date of a Registration
Statement registering for sale under the Securities Act of 1933, as amended
("Securities Act") the shares of Common Stock issuable upon such exercise, and
ending at 5:00 p.m. Eastern Time, on the day of
("Expiration Date"); provided, however, that the Company may extend the
Exercise Period of this Warrant by giving notice of such extension.
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving thirty
(30) days' written notice thereof to the Warrantholder. If this Warrant is
not exercised on or before the extended Expiration Date, it shall become
wholly void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or
different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, or in the event the
Company shall at any time issue Common Stock by way of dividend or other
distribution on any stock of the Company, or subdivide or combine the
outstanding shares of Common Stock, then in each such event the Holder of this
Warrant shall have the right thereafter to exercise such Warrant and receive
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by
holders of the number of shares of Common Stock into which such Warrant might
have been exercised immediately prior to such reorganization, reclassification
or change. In the case of any such reorganization, reclassification or
change, the Exercise Price shall also be appropriately adjusted so as to
maintain the aggregate Exercise Price. Further, in case of any consolidation
or merger of the Company with or into another corporation in which
consolidation or merger the Company is not the continuing corporation, or in
case of any sale or conveyance to another corporation of the property of the
Company as an entirety, or substantially as an entirety, the Company shall
cause effective provision to be made so that the Warrantholder shall have the
right thereafter, by exercising this Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale or conveyance by holders of the number of shares
of Common Stock into which such Warrant might have been exercised immediately
prior to such consolidation, merger, sale or conveyance, which provision shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. Notwithstanding the foregoing,
no adjustment of the Exercise Price shall be made as a result of or in
connection with (1) the issuance of Common Stock of the Company pursuant to
options, warrants and share purchase agreements now in effect or hereafter
outstanding or created, (2) the establishment of option plans of the Company,
the modification, renewal or extension of any plan now in effect or hereafter
created, or the issuance of Common Stock upon exercise of any options pursuant
to such plans, (3) the issuance of Common Stock in connection with an
acquisition, consolidation or merger of any type in which the Company is the
continuing corporation, or (4) the issuance of Common Stock in consideration
of such cash, property or service as may be approved by the Board of Directors
of the Company and permitted by applicable law.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole
discretion, lower the purchase price at any time, or from time-to-time. When
any adjustment is made in the purchase price, the Company shall cause a copy
of such statement to be mailed to the Warrantholder, as of a date within ten
(10) days after the date when the purchase price has been adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced by
this Warrant Certificate may exercise all or any whole number of such Warrants
during the Exercise Period in the manner stated herein. This Warrant
Certificate, together with the purchase form provided herein duly executed by
the Warrantholder or by the Warrantholder's duly authorized attorney, plus
payment of the exercise price in the manner set forth in paragraph 6 below,
shall be surrendered to the Company. If upon exercise of any Warrants
evidenced by this Warrant Certificate the number of Warrants exercised shall
be less than the total number of Warrants so evidenced, there shall be issued
to the Warrantholder a new Warrant Certificate evidencing the number of
Warrants not so exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be paid,
to the extent permitted by applicable statutes and regulations, either (I) in
cash at the time the Warrant is exercised, (ii) by delivery to the Company of
other Common Stock of the Company valued at its then established fair market
value, (iii) by delivery to the Company of either options or warrants of the
Company, including, without limitation, this Warrant, valued at the difference
between their exercise price and the then established fair market value of the
Company's Common Stock, (iv) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock of the Company) with the holder
hereof, or (v) any other form of legal consideration that may be acceptable to
the Board of Directors, in their discretion. For the purposes of this
paragraph 6, the fair market value of the Company's Common Stock shall be (I)
the closing sale price for the Common Stock on the primary exchange upon which
the shares are listed and traded on the date the Warrant is exercised, or (ii)
if the shares are not traded on any national exchange, the closing sale price
for the Common Stock on the NASDAQ National Market on the date the Warrant is
exercised, or (iii) if the shares or neither traded on a national exchange nor
listed on the NASDAQ National Market, then the average of the bid and ask
prices for the Common Stock in the Over-The-Counter Market as quoted on the
NASDAQ Small-Cap Market or (iv) if the shares of Common Stock are neither
traded on a national exchange or the NASDAQ National Market nor quoted on the
NASDAQ Small-Cap Market, the average of the bid and ask prices for the Common
Stock as quoted by any recognized securities quotation service such as the
National Quotation Bureau, Inc. or the OTC Electronic Bulletin Board on the
date the Warrant is exercised. In the case of any deferred payment
arrangement, any interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Internal Revenue Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
7. REDEMPTION. The Company shall have the right to redeem any or all
outstanding and unexercised Warrants evidenced by this Certificate at a
redemption price of $0.01 per Warrant upon thirty (30) days' written notice in
the event (I) a Registration Statement registering for sale under the
Securities Act of 1933, as amended (the "Act"), the shares of the Company's
Common Stock issuable upon exercise of the Warrant, has been filed with the
Securities and Exchange Commission and is in effect on the date of written
notice and the redemption date contained therein, (ii) there has been
developed and exists on the date of written notice a public trading market for
the Company's Common Stock and such shares are listed for quotation on the
NASDAQ Stock Market or OTC Electronic Bulletin Board, and (iii) the public
trading price of the Company's Common Stock has equaled or exceeded $11.25 per
share for ten (10) or more consecutive trading days. On each occasion that
the Company elects to exercise its rights of redemption, the Company must mail
such written notice within ten (10) days following the satisfaction of all of
the foregoing conditions. The holders of the Warrants called for redemption
shall have the right to exercise the Warrants evidenced hereby until the close
of business on the date next preceding the date fixed for redemption. On or
after the date fixed for redemption, the holder hereof shall have no rights
with respect to this Warrant except the right to receive $0.01 per Warrant
upon surrender of this Certificate.
8. RESERVATION OF COMMON STOCK. The Company agrees that the number of
shares of Common Stock sufficient to provide for the exercise of the Warrant
upon the basis herein set forth will at all times during the term of this
Warrant be reserved for the exercise thereof.
9. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its expense,
shall cause to be issued, within ten (10) days after exercise of this Warrant,
a certificate or certificates in the name requested by the Warrantholder of
the number of shares of Common Stock to which the Warrantholder is entitled
upon such exercise. All shares of Common Stock or other securities delivered
upon the exercise of the Warrants shall be validly issued, fully paid and non-
assessable.
10. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a stockholder
of the Company.
11. NO ASSIGNMENT. This Warrant may not be assigned without the written
consent of the Company.
Dated: SKYLYNX COMMUNICATIONS, INC.
----------------
By:
-------------------------------
Gary Brown, President
By:
-------------------------------
Kenneth Marshall, Secretary
Countersigned
CORPORATE STOCK TRANSFER, INC.
By:
-------------------------------
Transfer Agent and Registrar
Authorized Officer <PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
ELECTION OF PURCHASE
Transfer Fee: $15.00 per certificate issued.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate, and to purchase the common shares
issuable upon the exercise of such Warrants, and requests that the
certificates for such shares shall be issued in the name of:
-----------------------------------
Name
---------------------------------------------------------------
Address
--------------------------------
Social Security or other identifying number
and be delivered to
-----------------------------------------------------
Name
at
---------------------------------------------------------------------
Address
and, if said number of Warrants shall not be all the Warrants evidenced by
this Warrant certificate, that a new Warrant certificate for the balance of
such Warrants be registered in the name of, AND delivered to, the undersigned
at the address stated below.
Dated:
----------------------
Name of Warrantholder:
-----------------------------------------------------
Address:
--------------------------------------------------------------------
Signature:
----------------------------------------
<PAGE>
<PAGE>
ASSIGNMENT
For value received
-----------------------------------------------------
hereby sell, assign, and transfer unto
--------------------------------------
Warrants represented by this Warrant certificate, together with all right,
title, and interest therein, and do hereby irrevocably constitute and appoint
---------------------------------------------------------------
attorney, to transfer this Warrant certificate on the books of the Company,
with full power of substitution.
Dated: X
----------------- ------------------------------------
X
------------------------------------
SIGNATURE GUARANTEED: 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.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK
EXCHANGE.
<PAGE>
The Securities represented by this instrument have not been registered under
the Securities Act of 1933 (the "Securities Act") or qualified under the
securities laws of any state, in reliance upon exemptions from such
registration and qualification requirements.
CLASS B REDEEMABLE
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$.001 Par Value per Share
of
SKYLYNX COMMUNICATIONS, INC.
(a Colorado corporation)
Warrant No. WB - Warrants
- ---------------- --------------
THIS WARRANT CERTIFIES THAT, for value received,
, or registered assigns ("Warrantholder") is the registered
owner of the above indicated number of Warrants entitling the Warrantholder,
commencing upon the Exercise Date, as defined in paragraph 1 of this
Certificate, but before 5:00 o'clock p.m., Eastern Standard Time, on the
day of ("Expiration Date") but not thereafter, to
subscribe for, purchase and receive one (1) fully paid and non-assessable
share of Common Stock, $.001 par value (the "Common Stock") of SkyLynx
Communications, Inc., a Colorado corporation (the "Company"), at a purchase
price of $10.00 per share of Common Stock ("Exercise Price") upon presentation
and surrender of this Warrant and upon payment of the Exercise Price for such
of the shares of Common Stock of the Company, at any time after the Exercise
Date, but only subject to the conditions set forth herein. The Exercise
Price, the number of shares purchasable upon exercise of each Warrant, and the
Expiration Date are subject to adjustments described herein. The
Warrantholders may exercise all or any number of the Warrants represented
hereby. Upon exercise of this Warrant, the form of election hereinafter
provided for must be duly executed and the instructions for registration of
the Common Stock acquired by such exercise must be completed. If the rights
represented hereby shall not be exercised at or before the Expiration Date,
this Warrant shall become and be void without further force or effect, and all
rights represented hereby shall cease and expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate
may be exercised in whole or in part at any time commencing the earlier of (i)
one year from the date of issue or (ii) the effective date of a Registration
Statement registering for sale under the Securities Act of 1933, as amended
("Securities Act") the shares of Common Stock issuable upon such exercise, and
ending at 5:00 p.m. Eastern Time, on the day of
("Expiration Date"); provided, however, that the Company may extend the
Exercise Period of this Warrant by giving notice of such extension.
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving thirty
(30) days' written notice thereof to the Warrantholder. If this Warrant is
not exercised on or before the extended Expiration Date, it shall become
wholly void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or
different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, or in the event the
Company shall at any time issue Common Stock by way of dividend or other
distribution on any stock of the Company, or subdivide or combine the
outstanding shares of Common Stock, then in each such event the Holder of this
Warrant shall have the right thereafter to exercise such Warrant and receive
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by
holders of the number of shares of Common Stock into which such Warrant might
have been exercised immediately prior to such reorganization, reclassification
or change. In the case of any such reorganization, reclassification or
change, the Exercise Price shall also be appropriately adjusted so as to
maintain the aggregate Exercise Price. Further, in case of any consolidation
or merger of the Company with or into another corporation in which
consolidation or merger the Company is not the continuing corporation, or in
case of any sale or conveyance to another corporation of the property of the
Company as an entirety, or substantially as an entirety, the Company shall
cause effective provision to be made so that the Warrantholder shall have the
right thereafter, by exercising this Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale or conveyance by holders of the number of shares
of Common Stock into which such Warrant might have been exercised immediately
prior to such consolidation, merger, sale or conveyance, which provision shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. Notwithstanding the foregoing,
no adjustment of the Exercise Price shall be made as a result of or in
connection with (1) the issuance of Common Stock of the Company pursuant to
options, warrants and share purchase agreements now in effect or hereafter
outstanding or created, (2) the establishment of option plans of the Company,
the modification, renewal or extension of any plan now in effect or hereafter
created, or the issuance of Common Stock upon exercise of any options pursuant
to such plans, (3) the issuance of Common Stock in connection with an
acquisition, consolidation or merger of any type in which the Company is the
continuing corporation, or (4) the issuance of Common Stock in consideration
of such cash, property or service as may be approved by the Board of Directors
of the Company and permitted by applicable law.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole
discretion, lower the purchase price at any time, or from time-to-time. When
any adjustment is made in the purchase price, the Company shall cause a copy
of such statement to be mailed to the Warrantholder, as of a date within ten
(10) days after the date when the purchase price has been adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced by
this Warrant Certificate may exercise all or any whole number of such Warrants
during the Exercise Period in the manner stated herein. This Warrant
Certificate, together with the purchase form provided herein duly executed by
the Warrantholder or by the Warrantholder's duly authorized attorney, plus
payment of the exercise price in the manner set forth in paragraph 6 below,
shall be surrendered to the Company. If upon exercise of any Warrants
evidenced by this Warrant Certificate the number of Warrants exercised shall
be less than the total number of Warrants so evidenced, there shall be issued
to the Warrantholder a new Warrant Certificate evidencing the number of
Warrants not so exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be paid,
to the extent permitted by applicable statutes and regulations, either (I) in
cash at the time the Warrant is exercised, (ii) by delivery to the Company of
other Common Stock of the Company valued at its then established fair market
value, (iii) by delivery to the Company of either options or warrants of the
Company, including, without limitation, this Warrant, valued at the difference
between their exercise price and the then established fair market value of the
Company's Common Stock, (iv) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock of the Company) with the holder
hereof, or (v) any other form of legal consideration that may be acceptable to
the Board of Directors, in their discretion. For the purposes of this
paragraph 6, the fair market value of the Company's Common Stock shall be (I)
the closing sale price for the Common Stock on the primary exchange upon which
the shares are listed and traded on the date the Warrant is exercised, or (ii)
if the shares are not traded on any national exchange, the closing sale price
for the Common Stock on the NASDAQ National Market on the date the Warrant is
exercised, or (iii) if the shares or neither traded on a national exchange nor
listed on the NASDAQ National Market, then the average of the bid and ask
prices for the Common Stock in the Over-The-Counter Market as quoted on the
NASDAQ Small-Cap Market or (iv) if the shares of Common Stock are neither
traded on a national exchange or the NASDAQ National Market nor quoted on the
NASDAQ Small-Cap Market, the average of the bid and ask prices for the Common
Stock as quoted by any recognized securities quotation service such as the
National Quotation Bureau, Inc. or the OTC Electronic Bulletin Board on the
date the Warrant is exercised. In the case of any deferred payment
arrangement, any interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Internal Revenue Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
7. REDEMPTION. The Company shall have the right to redeem any or all
outstanding and unexercised Warrants evidenced by this Certificate at a
redemption price of $0.01 per Warrant upon thirty (30) days' written notice in
the event (I) a Registration Statement registering for sale under the
Securities Act of 1933, as amended (the "Act"), the shares of the Company's
Common Stock issuable upon exercise of the Warrant, has been filed with the
Securities and Exchange Commission and is in effect on the date of written
notice and the redemption date contained therein, (ii) there has been
developed and exists on the date of written notice a public trading market for
the Company's Common Stock and such shares are listed for quotation on the
NASDAQ Stock Market or OTC Electronic Bulletin Board, and (iii) the public
trading price of the Company's Common Stock has equaled or exceeded $15.00 per
share for ten (10) or more consecutive trading days. On each occasion that
the Company elects to exercise its rights of redemption, the Company must mail
such written notice within ten (10) days following the satisfaction of all of
the foregoing conditions. The holders of the Warrants called for redemption
shall have the right to exercise the Warrants evidenced hereby until the close
of business on the date next preceding the date fixed for redemption. On or
after the date fixed for redemption, the holder hereof shall have no rights
with respect to this Warrant except the right to receive $0.01 per Warrant
upon surrender of this Certificate.
8. RESERVATION OF COMMON STOCK. The Company agrees that the number of
shares of Common Stock sufficient to provide for the exercise of the Warrant
upon the basis herein set forth will at all times during the term of this
Warrant be reserved for the exercise thereof.
9. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its expense,
shall cause to be issued, within ten (10) days after exercise of this Warrant,
a certificate or certificates in the name requested by the Warrantholder of
the number of shares of Common Stock to which the Warrantholder is entitled
upon such exercise. All shares of Common Stock or other securities delivered
upon the exercise of the Warrants shall be validly issued, fully paid and non-
assessable.
10. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a stockholder
of the Company.
11. NO ASSIGNMENT. This Warrant may not be assigned without the written
consent of the Company.
Dated: SKYLYNX COMMUNICATIONS, INC.
-----------------
By:
----------------------------
Gary Brown, President
By:
----------------------------
Kenneth Marshall, Secretary
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
By:
------------------------------
Transfer Agent and Registrar
Authorized Officer <PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
ELECTION OF PURCHASE
Transfer Fee: $15.00 per certificate issued.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate, and to purchase the common shares
issuable upon the exercise of such Warrants, and requests that the
certificates for such shares shall be issued in the name of:
-----------------------------------
Name
---------------------------------------------------------------
Address
--------------------------------
Social Security or other identifying number
and be delivered to
-----------------------------------------------------
Name
at
---------------------------------------------------------------------
Address
and, if said number of Warrants shall not be all the Warrants evidenced by
this Warrant certificate, that a new Warrant certificate for the balance of
such Warrants be registered in the name of, AND delivered to, the undersigned
at the address stated below.
Dated:
----------------------
Name of Warrantholder:
-----------------------------------------------------
Address:
--------------------------------------------------------------------
Signature:
----------------------------------------
<PAGE>
<PAGE>
ASSIGNMENT
For value received
-----------------------------------------------------
hereby sell, assign, and transfer unto
--------------------------------------
Warrants represented by this Warrant certificate, together with all right,
title, and interest therein, and do hereby irrevocably constitute and appoint
---------------------------------------------------------------
attorney, to transfer this Warrant certificate on the books of the Company,
with full power of substitution.
Dated: X
----------------- ------------------------------------
X
------------------------------------
SIGNATURE GUARANTEED: 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.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE,
PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK
EXCHANGE.
<PAGE>
SKYLYNX COMMUNICATIONS, INC.
1998 EQUITY INCENTIVE PLAN
INTRODUCTION
On January 10, 1998, the Board of Directors adopted this 1998 Equity
Incentive Plan (the "Plan") which Plan was approved by the Stockholders on
January 23, 1998.
1. PURPOSES
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its
Affiliates may be given an opportunity to benefit from increases in
value of the common stock of the Company ("Common Stock") through
the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to purchase restricted
stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure
and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated
pursuant to subsection 3(c), be either (i) Options granted pursuant
to Section 6 or 7 hereof, including Incentive Stock Options and
Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 8 hereof, or
(iii) stock appreciation rights granted pursuant to Section 9
hereof. All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and a
separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means SKYLYNX COMMUNICATIONS, INC.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" OR "CONCURRENT RIGHT" means a
right granted pursuant to subsection 9(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant"
shall not include Directors who are paid only a director's fee by
the Company or who are not compensated by the Company for their
services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may
determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave,
military leave, or any other personal leave; or (ii) transfers
between locations of the Company or between the Company, Affiliates
or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither
service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest
volume of trading in Common Stock) on the last market trading
day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems
reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(n) "INDEPENDENT STOCK APPRECIATION RIGHT" means a right granted
pursuant to subsection 9(b)(3) of the Plan.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or
subsidiary, does not receive compensation (directly or indirectly)
from the Company or its parent or subsidiary for services rendered
as a consultant or in any capacity other than as a Director (except
for an amount as to which disclosure would not be required under
Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act of 1933 ("Regulation S-K"), does not possess an interest in any
other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms
and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time, and is not
currently receiving direct or indirect remuneration from the Company
or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(v) "PLAN" means this SKYLYNX COMMUNICATIONS, INC. 1998 Equity Incentive
Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(x) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 9 of the Plan.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and
conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
(aa) "TANDEM STOCK APPRECIATION RIGHT" OR "TANDEM RIGHT" means a right
granted pursuant to subsection 9(b)(1) of the Plan.
3. ADMINISTRATION
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; whether a Stock Award will be an
Incentive Stock Option, a Nonstatutory Stock Option, a stock
bonus, a right to purchase restricted stock, a Stock
Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; whether a
person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each
such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 15.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the
provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one or more members of the Board. In
the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Code Section 162(m),
or solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board (and references
in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock
Awards shall not exceed in the aggregate one million seven hundred
fifty thousand (1,750,000) shares of Common Stock (determined
without giving effect to any stock split that may be made in
anticipation of the Company's initial public offering of the Common
Stock). If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in
full (or vested in the case of Restricted Stock), the stock not
acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to Stock
Appreciation Rights exercised in accordance with Section 9 of the
Plan shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
6. OPTION PROVISIONS
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted,
and the exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is
exercised, or (ii) at the discretion of the Board or the Committee,
at the time of the grant of the Option, (A) by delivery to the
Company of other Common Stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common
Stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d), or
(C) in any other form of legal consideration that may be acceptable
to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the
person to whom the Incentive Stock Option is granted only by such
person. A Nonstatutory Stock Option may be transferred to the
extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be
transferable except by will, by the laws of descent and distribution
or pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from
time to time during each of such installment periods, the Option may
become exercisable ("vest") with respect to some or all of the
shares allotted to that period, and may be exercised with respect to
some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to
any Option provisions governing the minimum number of shares as to
which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to exercise
it at the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result
of the Optionee's disability, the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it
at the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following
such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of
the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a three-month period (or 12 month period in the case of
totally disabled Optionees) after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option
shall be fully vested and may be exercised by the Optionee's estate,
by a person who acquired the right to exercise the Option by bequest
or inheritance or by a person designated to exercise the option upon
the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, at
the time of death, the Optionee was not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion
of the Option shall revert to and again become available for
issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Any unvested shares so purchased may be subject to a
repurchase right in favor of the Company or to any other restriction
the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options
hereunder, the Board or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a
provision entitling the Optionee to a further Option (a "Re-Load
Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms
and conditions of the Option Agreement. Any such Re-Load Option (i)
shall be for a number of shares equal to the number of shares
surrendered as part or all of the exercise price of such Option;
(ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to
such Re-Load Option; and (iii) shall have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Re- Load Option on the date of exercise
of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is an Incentive Stock Option and which is granted to a
10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of
the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term
which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate
at the time of the grant of the original Option; PROVIDED, HOWEVER,
that the designation of any Re-Load Option as an Incentive Stock
Option shall be subject to the one hundred thousand dollars
($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 13(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and shall be
subject to such other terms and conditions as the Board or Committee
may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS
Unless otherwise explicitly provided by the Board, Non-Employee Directors
shall not be eligible for any Stock Awards under the Plan other than the
nonstatutory stock options provided under this Section 7 on the following
terms and conditions:
(a) INITIAL GRANT FOR NON-EMPLOYEE DIRECTORS. Each person who is a Non-
Employee Director at the date the Company's initial public offering
of shares of common stock is effective or who becomes a Non-Employee
Director as of any date thereafter shall, upon such date, be granted
an option to purchase a number of shares of Common Stock determined
by a majority of non-participating Directors on the terms and
conditions set forth herein.
(b) ANNUAL GRANT. Following each annual meeting of the Company's
stockholders occuring after the effectiveness of the initial public
offering of the Common Stock, (i) each person who continuously has
been a Non-Employee Director for a full year since the last annual
meeting of the Company's stockholders automatically shall be granted
an option to purchase a number of shares of Common Stock determined
by a majority of non-participating Directors (determined without
giving effect to any stock split that may be made in anticipation
of the Company's initial public offering of the Common Stock) on
the terms and conditions set forth herein, and (ii) each other
person who is then a Non-Employee Director automatically shall be
granted an option to purchase, on the terms and conditions set
forth herein, the number of shares of common stock of the Company
(rounded up to the nearest whole share) determined by multiplying
the number of shares determined by the Board (determined without
giving effect to any stock split that may be made in anticipation
of the Company's initial public offering of the Common Stock) by a
fraction, the numerator of which is the number of days the person
continuously has been a Non-Employee Director as of the date of
such grant and the denominator of which is 365.
(c) TERM. The term of each Non-Employee Director's option commences on
the date it is granted and, unless sooner terminated as set forth
herein, expires on the date ("Expiration Date") ten (10) years from
the date of grant. If the Non-Employee Director's Continuous Status
as an Employee, Director or Consultant terminates, the option shall
terminate on the earlier of the Expiration Date or the date three
(3) months following the date of termination of such Continuous
Status (twelve (12) months if such termination is due to death or
disability). In any and all circumstances, a Non-Employee
Director's option may be exercised following termination of his or
her Continuous Status as an Employee, Director or Consultant only as
to that number of shares as to which it was exercisable on the date
of termination of such status under the provisions of subsection
7(g).
(d) PRICE. The exercise price of each Non-Employee Director's option
shall be one hundred percent (100%) of the fair market value of the
stock subject to such option on the date such option is granted.
(e) CONSIDERATION. Payment of the exercise price of each option is due
in full in cash upon any exercise when the number of shares being
purchased upon such exercise is less than 1,000 shares. However,
when the number of shares being purchased upon an exercise is 1,000
or more shares, the Non-Employee Director may elect to make payment
of the exercise price under one of the following alternatives:
(1) Payment of the exercise price per share in cash or by check at
the time of exercise; or
(2) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of shares of common stock
of the Company already owned by the optionee, held for the
period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which common stock shall be
valued at its fair market value on the date preceding the date
of exercise; or
(3) Payment by a combination of the methods of payment specified in
Paragraphs (1) and (2) above.
Notwithstanding the foregoing, a Non-Employee Director's option
may be exercised pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which
results in the receipt of cash (or check) by the Company prior
to the issuance of shares of the Company's common stock.
(f) TRANSFERABILITY. A Non-Employee Director's option shall not be
transferable except by will or by the laws of descent and
distribution, or pursuant to a domestic relations order satisfying
the requirements of Rule 16b-3 and shall be exercisable during the
lifetime of the Non-Employee Director only by such person (or by his
guardian or legal representative) or transferee pursuant to such an
order. Notwithstanding the foregoing, a Non-Employee Director may,
by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the
death of the Non-Employee Director, shall thereafter be entitled to
exercise the option.
(g) VESTING. A Non-Employee Director's initial grant under Section 7(a)
may, but need not become exercisable in installments over a period
of years at a rate determined by the Board; provided that the
optionee has, during the entire period prior to such vesting date,
continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate, whereupon such option
shall become fully exercisable in accordance with its terms with
respect to that portion of the shares represented by that
installment. A Non-Employee Director's annual grant under Section
7(b) shall be fully vested at all times.
8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus
or restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee
shall determine and designate in such agreement but in no event
shall the purchase price be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made.
Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws
of descent and distribution or, if the agreement so provides,
pursuant to a domestic relations order satisfying the requirements
of Rule 16b-3, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board or the
Committee, according to a deferred payment or other arrangement with
the person to whom the stock is sold; or (iii) in any other form of
legal consideration that may be acceptable to the Board or the
Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or
for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board
or the Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an
Employee, Director or Consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock
held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
9. STOCK APPRECIATION RIGHTS
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees, Directors and Consultants. To
exercise any outstanding Stock Appreciation Right, the holder must
provide written notice of exercise to the Company in compliance with
the provisions of the Stock Award Agreement evidencing such right.
Except as provided in subsection 5(c), no limitation shall exist on
the aggregate amount of cash payments the Company may make under the
Plan in connection with the exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall,
except as specifically set forth in this Section 9, be subject
to the same terms and conditions applicable to the particular
Option grant to which it pertains. Tandem Stock Appreciation
Rights will require the holder to elect between the exercise of
the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in
an equivalent number of shares of stock based on Fair Market
Value on the date of the Option surrender) in an amount up to
the excess of (A) the Fair Market Value (on the date of the
Option surrender) of the number of shares of stock covered by
that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any
portion of the shares of stock subject to the underlying Option
and shall, except as specifically set forth in this Section 9,
be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. A Concurrent
Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains. The
appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent
number of shares of stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount
equal to such portion as shall be determined by the Board or
the Committee at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the
Concurrent Right) of the vested shares of stock purchased under
the underlying Option which have Concurrent Rights appurtenant
to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as
specifically set forth in this Section 9, be subject to the
same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on
the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Independent Right) of
a number of shares of Company stock equal to the number of
share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the
aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock.
The appreciation distribution payable on the exercised
Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value
on the date of the exercise of the Independent Right.
10. CANCELLATION AND RE-GRANT OF OPTIONS
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding
Options and/or any Stock Appreciation Rights under the Plan and/or
(ii) with the consent of any adversely affected holders of Options
and/or Stock Appreciation Rights, the cancellation of any
outstanding Options and/or any Stock Appreciation Rights under the
Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or
different numbers of shares of stock, but having an exercise price
per share not less than: eighty-five percent (85%) of the Fair
Market Value for a Nonstatutory Stock Option, one hundred percent
(100%) of the Fair Market Value in the case of an Incentive Stock
Option or, in the case of an Incentive Stock Option held by a 10%
stockholder (as described in subsection 5(b)), not less than one
hundred ten percent (110%) of the Fair Market Value per share of
stock on the new grant date. Notwithstanding the foregoing, the
Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth
above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 10 shall continue to be counted against the
maximum award of Options and Stock Appreciation Rights permitted to
be granted pursuant to the Plan. The repricing of an Option and/or
Stock Appreciation Right hereunder resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original
Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such
repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of
Options and Stock Appreciation Rights permitted to be granted
pursuant to the Plan, to the extent required by Section 162(m) of
the Code.
11. COVENANTS OF THE COMPANY
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to
satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares under Stock Awards; provided,
however, that this undertaking shall not require the Company to
register under the Securities Act of 1933, as amended (the
"Securities Act") either the Plan, any Stock Award or any stock
issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock
under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
12. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
13. MISCELLANEOUS
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions
in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to
whom a Stock Award is transferred in accordance with the Plan shall
be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such Stock Award
unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant
or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate, or to continue serving as a
Consultant and Director, or shall affect the right of the Company or
any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate
the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a
Director pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during
any calendar year under all plans of the Company and its Affiliates
exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance
with the Plan, as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial
and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is
capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the Stock
Award for such person's own account and not with any present
intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise or acquisition of stock under the Stock Award has
been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel
to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited
to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise
or acquisition of stock under a Stock Award by any of the following
means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the participant as
a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
14. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to
the Plan and the maximum number of shares subject to award to any
person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares
and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the
receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation;
or (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash
or otherwise, then to the extent permitted by applicable law: (i)
any surviving corporation or an Affiliate of such surviving
corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under
the Plan, or (ii) such Stock Awards shall continue in full force and
effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute
similar options for those outstanding under the Plan, then, with
respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such
Stock Awards may be exercised shall be accelerated and the Stock
Awards terminated if not exercised prior to such event.
15. AMENDMENT OF THE PLAN AND STOCK AWARDS
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments
upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent
stockholder is necessary for the Plan to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding
the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive
officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide
eligible Employees, Directors or Consultants with the maximum
benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive
Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to
whom the Stock Award was granted and (ii) such person consents in
writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person
to whom the Stock Award was granted and (ii) such person consents in
writing.
16. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards
may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Stock
Award was granted.
17. EFFECTIVE DATE OF PLAN
This amendment and restatement of the Plan shall become effective on the
date of closing of the initial public offering pursuant to an effective
registration statement covering the offer and sale of Common Stock to the
public, but no Stock Awards granted under the Plan shall be exercised unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.
IN WITNESS WHEREOF, the Company has executed this Plan as of the 23rd day
of January, 1998.
SKYLYNX COMMUNICATIONS, INC.
By: /s/ Gary Brown
---------------------------------
Gary Brown, President
By: /s/ Kenneth Marshall
---------------------------------
Kenneth Marshall, Secretary
