SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 1999
or
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from ___________ to ___________
000-26801
(Commission File No.)
MEGAMEDIA NETWORKS, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 87-0633630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
57 WEST PINE STREET, ORLANDO, FLORIDA 32801
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, including area code: (407) 245-3636
Securities registered under Section 12(b) of the Securities
Exchange Act of 1934:
NONE
Securities registered under Section 12(g) of the Securities
Exchange Act of 1934:
COMMON STOCK, $.01 PAR VALUE
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $0.
As of March 31, 2000, the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was
recently sold was $25,660,032.
As of March 31, 2000, there were 14,052,355 shares of issuer's common stock
outstanding.
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TABLE OF CONTENTS
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PART I
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ITEM 1. Description of Business ............................................................................1
ITEM 2. Description of Property.............................................................................7
ITEM 3. Legal Proceedings...................................................................................7
ITEM 4. Submission of Matters to a Vote of Security Holders.................................................7
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters............................................8
ITEM 6. Management's Discussion of Plan of Operations.......................................................9
ITEM 7. Financial Statements...............................................................................11
ITEM 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..........................................................................11
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons of the Registrant;
Compliance with Section 16(a) of the Exchange Act.............................................11
ITEM 10. Executive Compensation.............................................................................13
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.....................................16
ITEM 12. Certain Relationships and Related Transactions.....................................................17
PART IV
ITEM 13. Exhibits and Reports on Form 8-K...................................................................17
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FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, this Annual
Report may contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Investors are cautioned that forward-looking statements are inherently
uncertain. Actual performance and results of operations may differ materially
from those projected or suggested in the forward-looking statements due to
certain risks and uncertainties, including, without limitation, the ability of
the Company to obtain adequate financing to continue its current operations; the
ability of the Company to successfully enter into strategic relationships and
agreements with additional suppliers; the ability of the Company to increase its
staff; risks associated with the ability to produce revenues through the sales
of advertising, pay-per-view, and subscriptions; the Company's history of
operating losses; dependence on senior management; risks inherent in the
internet industry and the Company's ability to manage growth. The
forward-looking statements contained herein represent the Company's judgment as
of the date of filing this Annual Report hereof, and the Company cautions
readers not to place undue reliance on such statements.
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ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
MegaMedia Networks, Inc. (the "Company" or "MegaMedia") is a global
Internet broadcast company specializing in "on-demand" delivery of entertainment
content through its portal site at www.megachannels.com ("MegaChannels").
MegaChannels product offerings include: movies, television programming, live
events, sports programming, animation, and "made for the internet" interactive
content. Entertainment products are offered to consumers in subscription,
pay-per-view and advertising-driven, free formats. MegaChannels began offering
content and associated merchandising to consumers in March 2000.
The founding principals of MegaMedia entered into an exclusive
arrangement with Nexttraffic, Inc. ("Nexttraffic"), an aggregator of Internet
traffic. Nexttraffic visitors are adults over 18, possessing a credit card, with
a history of using their credit cards for electronic transaction processing on
the Internet. Nexttraffic acts as a "collection conduit" of traffic from high
profile Internet websites from around the globe. Pursuant to this agreement,
MegaMedia expects that Nexttraffic will deliver over 2 million unique, qualified
visitors (over 18 years of age with an online credit card history) per day to
the Company's portal, making it one of the largest and busiest Internet sites of
the Web.
The Company has entered into strategic alliances with AT&T and Digex,
Incorporated to provide global bandwidth and hosting services. It also has
service agreements with TimeWarner, Incorporated; Sprint Group, plc; Qwest
Communications International Incorporated, UUNET/MCI and other
telecommunications service providers (the "Service Providers") to deliver its
signal to Internet users. The Service Providers collectively have the largest
bandwidth capacities in the United States. MegaMedia will depend upon the high
level of technical services of these Service Providers. If the Company were to
lose those services, its business would be severely affected and the Company
would be required to find alternative bandwidth. The Company believes that
adequate alternative sources of suitable replacement services would be available
if these contracts were terminated or impaired.
CORPORATE HISTORY
The Company was organized under the laws of the State of Utah on March
26, 1985 under the name Ace Investments, Inc. ("ACE") to create a small,
publicly-held corporation to seek out and acquire suitable acquisitions and
mergers. ACE's initial securities offering was deemed to be a "blind-pool" or
"blank check" offering.
On August 28, 1986, the Company's Articles of Incorporation were
amended to reflect a name change from "ACE Investments" to "Matlock
Communications, Inc." and to change the authorized capital to 100,000,000 shares
of $.001 par value common stock.
On May 16, 1989, the Articles of Incorporation were further amended to
reflect a name change from "Matlock Communications, Inc." to "Persimmon
Corporation" and to change the authorized capital to 110,000,000 shares of stock
comprised of; 10,000,000 shares of $.001 par value preferred stock and
100,000,000 shares of $.015 par value common stock. The Company also reverse
split its issued and outstanding common stock on a basis of one for fifteen.
On December 20, 1991, Amalgamated Entertainment, Inc. was incorporated
in the State of Delaware for the sole purpose of changing the Company's domicile
to the State of Delaware.
On January 28, 1992, Persimmon Corporation merged into Amalgamated
Entertainment, Inc., the Delaware corporation, with Amalgamated Entertainment,
Inc. the surviving corporation.
On April 6, 1999, the Company effected a thirty-to-one reverse split of
its outstanding common stock.
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On October 6, 1999, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with MegaMedia Networks, Inc., a
Nevada corporation ("MegaMedia-Nevada"), and all of MegaMedia-Nevada's
stockholders, pursuant to which the Company acquired 100% of the outstanding
securities of MegaMedia-Nevada in exchange for 10,461,367 shares of common stock
of the Company.
On September 13, 1999, the Company effected a 2.5-for-one forward stock
split.
On November 29, 1999, the Company's Certificate of Incorporation was
amended to reflect a name change from "Amalgamated Entertainment, Inc.," a
Delaware corporation, to "MegaMedia Networks, Inc.," a Delaware corporation, and
to increase the authorized common stock of the Company to 50,000,000 shares of
common stock, $.01 par value per share. Unless otherwise indicated, all future
references to "the Company" shall refer to MegaMedia Networks, Inc., a Delaware
corporation.
All share information provided with this Annual Report gives effect to
the stock splits effected in April 1999 and September 1999, discussed above.
INDUSTRY BACKGROUND/MARKET OVERVIEW
The Internet has grown rapidly in recent years, spurred by developments
such as easy-to-use Web browsers, the availability of inexpensive multimedia PCs
and Internet access, the adoption of more robust network architectures, and the
emergence of compelling Web-based content and commerce applications. The broad
acceptance of the Internet Protocol ("IP") standard has also led to the
emergence of intranets and the development of a wide range of non-PC devices
that enable users to access the Internet and intranets.
Much of the Internet's rapid evolution towards becoming a mass medium
can be attributed to the accelerated pace of technological innovation, which has
expanded the Web's capabilities and improved users' experiences. Most notably,
the Internet has evolved from a mass of static, text-oriented Web pages and
email services to a much richer environment, capable of delivering graphical,
interactive and multimedia content. Prior to the development of streaming media
technologies, users could not play back audio and video clips until the content
was downloaded in its entirety. As a result, live Internet broadcasts were not
possible and archived clips cumbersome to download and use. The development of
streaming media products by companies such as Microsoft and RealNetworks enables
the simultaneous transmission and playback (i.e., the Internet broadcast) of
continuous "streams" of audio and video content over the Internet and intranets.
These technologies have evolved to deliver audio and video over widely used 28.8
kilobits per second ("kbps") narrow bandwidth modems, yet can scale in quality
to take advantage of higher speed access that is expected to be provided by
xDSL, cable modems and other emerging broadband technologies.
Broadcasting audio and video content over the Internet offers certain
opportunities that are not generally available from traditional media. Currently
available analog technology and government regulations limit the ability of
radio and television stations to broadcast beyond certain geographic areas.
Radios and televisions are not widely used in office buildings and other
workplaces, where Internet access has become commonplace. Traditional business
communication tools such as audio conferencing and videoconferencing can be
costly, non-targeted and inconvenient. In addition, traditional broadcasters are
limited in their ability to measure or identify in real time the listeners or
viewers of a program. By using the Internet, streaming media content can be
targeted to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs. Internet users can interact
with the broadcast content by responding to online surveys, voting in polls and
obtaining additional information. In addition, Internet broadcasters can provide
highly specific information about a program's audience to content providers,
advertisers and users of Internet business services. The convergence of the
Internet's capabilities and attributes has accelerated its acceptance as a
business tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings.
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The Company believes that several challenges must be overcome to
realize cost-effective Internet broadcasting: aggregating diverse and compelling
content, scaling Internet broadcasts from small to large audiences, deploying
new transmission and streaming technologies in a timely manner and providing
multimedia advertisements and services. In order to aggregate content, Internet
broadcasters must rapidly identify and secure licensing opportunities by
demonstrating to content providers broad based distribution and the ability to
deliver associated traffic. Successful Internet broadcasters serving a large
number of simultaneous users around the clock also need to design, develop and
integrate complex network elements, including scalable bandwidth, streaming
licenses, equipment and technical expertise. The rapid evolution of streaming
media requires Internet broadcasters to support multiple vendors, an investment
few companies have made. The Company believes, therefore, that a successful
Internet broadcaster must develop a well-branded, highly-trafficked Web portal
and destination which offers compelling content, a network capable of streaming
audio and video programming to large audiences 24 hours a day-seven days a week
and an organization that can deliver quality broadcasting services to
advertisers, businesses and content providers.
THE MEGAMEDIA SOLUTION
MegaMedia believes it has established a significant brand for its
broadcasts and services on the Internet due to its breadth of content, network
infrastructure, audience size and distribution capabilities. In addition, the
Company's websites provide an attractive platform for advertisers seeking to
target specific users with rich, compelling advertising solutions.
PRODUCTS AND SERVICES
MegaChannels delivers entertainment on many levels to suit many
consumers:
FEATURE FILMS are available in both pay-per-view and subscription
plans, but at all times are available on-demand. The spectrum of movies
available will range from major studio blockbusters to independent low-budget
"B" movies. Currently the Company has available various feature films and
intends to expand its film selection. The Company is negotiating strategic
arrangements with several major studios to deliver a strong line-up of movies
that consumers recognize and desire. Contracts being developed with independent
producers and wholesalers will deliver second and third-tier movies on a
revenue-sharing basis. Standard movie presentation is augmented by wrap-around
features, context-specific merchandising, chat, additional information and
targeted advertising.
TELEVISION content currently features a sampling of well-known classic
series and sitcoms. The Company intends to expand that repertoire, and in
addition, add made for TV movies, game shows, and soap operas as well as current
hit shows. MegaChannels on-demand format enables consumers to spontaneously
select their viewing without being tied to a schedule, or having to plan ahead
to record their choices. Featured either through subscription service, or
on-demand, the television properties are secured on a revenue sharing and
modified television syndication basis.
LIVE EVENTS currently include some sports events. In addition to
expanding coverage of sports and concert events, the Company plans to add
awards, Vegas shows, Broadway performances, conferences and other perishable
content. All live events will be archived for future on-demand access.
MADE FOR THE NET content is also available at MegaChannels such as
animation, cartoons and Flash. In addition, the Company intends to include
shorts and interactive games. All of these products are designed to add
unprecedented levels of user interaction.
FREE CONTENT is listed in directory form to provide users with the most
compelling selection of entertainment offerings possible. These selections
create a link to the content provider site within a MegaChannels formatted page.
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RETAIL
As part of its online entertainment services, MEGACHANNELS will provide
its visitors, subscribers, and members with various product and merchandising
offerings. By establishing strategic alliances with online retailers
MEGACHANNELS will participate in revenues generated from consumer purchasing
without the associated expenses of establishing inventory, customer service
center, and distribution systems.
Standard industry alliances are currently in place, and continue to be
developed. These industry alliances include agreements with Internet aggregator
companies, such as WWW.WHN.COM, WWW.TRAVELOCITY.COM and WWW.MONEYNET.NET that
assure shared revenue programs (if a purchase is made through their websites, a
portion of the sale's proceeds will be paid to MegaChannels.com and vice-versa
- -- under a negotiated finders fee structure).
What's Hot Now (WHN.com), a leader in Internet merchandising and
fulfillment, has been selected as MegaChannels merchandising strategic partner.
WHN.com has a full-line of entertainment targeted merchandise including
movie-specific lines, Hollywood memorabilia, television-specific lines, music,
video and DVD products, general merchandise, publications and proprietary
products. MegaChannels receives a commission on each sale generated through
referral or on-site merchandising.
WHN.com will handle MegaChannels fulfillment needs for event-oriented
merchandise and private label (logo) lines as they are required.
MARKETING AND SALES
Marketing to consumers is accomplished through use of traditional
advertising, publicity and promotional activities as well as through a unique
strategic arrangement with NextTraffic, Inc. NextTraffic, Inc. has entered into
a three-year agreement with the Company to deliver to the MegaChannels.com
website 2 million potential consumers per day.
ADVERTISING
Advertising strategies are focused primarily on industry teaser and
informational campaigns aimed at creating awareness within the entertainment
community. Trade outlets and entertainment oriented print publications are the
primary vehicle to carry MegaChannel's message. Message points include an
explanation of Company capabilities in marketing and distribution of content.
Online efforts include banner ads through purchase and exchange targeting
creation of consumer awareness and affinity. The company has a three year
contract with NextTraffic, Inc. to provide traffic through prominent placement
of advertising in key sites yielding superior demographic consumer profiles for
online purchases.
PROMOTIONS AND PUBLICITY
MegaChannels strategy is to create noteworthy promotional events and
activities that can be widely publicized. Such activities include movie
premieres, sweepstakes, contests, live events, celebrity-focused events and
other promotions. These events target specific audiences and are crafted to
increase awareness of the company or to drive trial of the site. Internal
promotions are utilized once the customer has arrived on-site to generate repeat
visitation.
CUSTOMERS
MegaChannels welcomes internet users from across the globe. The site
serves as an entertainment portal providing one-stop access to entertainment
from all corners of the world. The Company's guests are technographically
attractive, having both the technological capacity to consume entertainment over
the internet and
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demographic and psychographic traits making them attractive to advertisers.
MegaChannels' primary audience is predominantly male, aged 18-39, with a history
of online credit card purchases.
PRODUCT DEVELOPMENT
Product development is a constant, on-going process for the Company, as
it is in the industry generally. Development of next-generation use interfaces,
site navigation, transaction processing and video delivery techniques are
currently in process. Current site performance is continually evaluated by the
Company for future development activities. Product development is conducted both
through the Company's in-house resources and by third party contractors.
COMPETITION
The market for Internet broadcasting and services is highly competitive
and the Company expects that competition will continue to intensify. The Company
competes with (i) other websites, Internet portals and Internet broadcasters to
acquire and provide content to attract users, (ii) online services, other
website operators and advertising networks, as well as traditional media such as
television, radio and print, for a share of advertisers' total advertising
budgets and (iii) local radio and television stations and national radio and
television networks for sales of advertising spots. There can be no assurance
that the Company will be able to compete successfully or that the competitive
pressures faced by the Company, including those described below, will not
adversely affect the Company's business.
MEGACHANNELS may be closely compared to the physical structure of one
of its competitors, Broadcast.com, which was recently acquired by Yahoo.com.
That acquisition combines the current leading aggregator and broadcaster of
"software necessary" streaming audio and video programming (Broadcast.com) with
one of the world's leading Web networks serving about 70 million unique visitors
per month (Yahoo.com). The acquisition expands Yahoo.com's rich multimedia
content offerings for its users making it the industry leader at this time.
Broadcast.com offers streaming media content such as live continuous
broadcasts of over 400 radio stations and networks, broadcasts of over 60 TV
stations and cable networks, as well as game broadcasts and other programming of
over 475 college and professional sports teams. The site also offers live
concerts, on-demand music, special-interest shows and Internet-only "Webcasts",
along with over 1,600 full-length audiobooks. Broadcast.com also delivers
turnkey broadcasting solutions and differentiated, interactive multimedia
advertising.
Other large Web portals that would directly compete with MegaChannels
in one form or another include the following:
ChannelSEEK -- ChannelSEEK offers webcasters and viewers an
open, non-player/content specific, streaming media site. As a result,
the company offers the broadcast spectrum of streaming media content on
the Web. ChannelSEEK's webcasting partners include ForeignTV.com, The
Auto Channel, CNN, the House of Blues, Pseudo and the Rolling Stone
Network. ChannelSEEK also offers a reminder service to simplify the
viewer's experience.
TV onthe WEB -- TV onthe WEB offers applications in on-demand
archiving and live webcasting. The TV onthe Web Network specializes in
narrowcasting to specific business-to-business and special interest
groups through revenue-generating TV channels underwritten by
organizations well known in niche communities. This business model has
created revenue streams from live events, advertising, e-commerce,
pay-per-view, and subscription sources.
Excite.com -- Excite.com is a leading Web portal that offers
free, personalized information and services including 18 content
channels, state-of-the-art search technology, Web-based email, PAL
instant messaging, chat and on-line shopping.
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Lycos.com -- The Lycos Network is estimated to be one of the
most visited hubs on the Internet purportedly reaching one out of every
two Web users. Its network sites includes Lycos.com, Tripods,
Angelfire, WhoWhere, MailCity, HotBot, HotWired, Wired News, Webmonkey,
Suck.com and MyTime.com. The Lycos Network provides search and
navigation, communications and personalization tools, homepage building
and Web community services and a shopping center as well.
MSN -- The Microsoft Network is the third-largest on-line
service in the world offering valuable services, communications and
communities, as well as compelling entertainment on the Internet. MSN
also provides hundreds of special-interest forums and bulletin boards,
along with Web shows such as: the Microsoft Encarta multimedia
encyclopedia; the Expedia travel service; Star Trek; Continuum;
Disney's Daily Blast and Disney's Family.com; the Slate online
magazine; the CarPoint on-line automotive service; the Microsoft
Investor on-line investing service; and up-to-date news and information
from MSNBC News.
Snap.com -- Snap is the Internet portal service company from
NBC and CNET. Its Internet portal services feature content from over
100 leading Web publishers. Snap.com's Internet portal services are
distributed by more than 70 leading Internet Service Providers,
telephone and communications companies, PC manufacturers and
third-party marketers. At the heart of Snap.com's Internet portal
services is a directory of websites and over 500 resource centers.
GO Network -- Go Network is a fairly new brand to the Internet
and is part of the Infoseek Corporation. The GO Network family sites
includes: espn.com, disney.com, family.com, ABCnews.com, ABC.com,
Mr.ShowBiz and Wall of Sound.
GOVERNMENTAL REGULATION
Although there are currently few laws and regulations directly
applicable to the Internet, it is likely that new laws and regulations will be
adopted in the United States and elsewhere covering issues such as privacy,
pricing, sales taxes and characteristics and quality of Internet services. It is
possible that governments will enact legislation that may be applicable to the
Company in areas such as content, network security, encryption and the use of
key escrow data and privacy protection, electronic authentication or "digital"
signatures, illegal and harmful content, access charges and retransmission
activities. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, content, taxation, defamation and
personal privacy is uncertain. The majority of such laws were adopted before the
widespread use and commercialization of the Internet and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies. Any such export or import restrictions, new legislation or
regulation or governmental enforcement of existing regulations may limit the
growth of the Internet, increase the Company's cost of doing business or
increase the Company's legal exposure, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
On October 28, 1998, the "Digital Millennium Copyright Act" ("DMCA")
affecting the performance of sound recordings by certain subscription and
nonsubscription transmission services was enacted. The DMCA permits statutory
licenses for the performance of sound recordings and for the making of ephemeral
recordings to facilitate transmissions. Under these statutory licenses, the
Company will be required to pay licensing fees for the performance of sound
recordings by the Company in original and archived programming and through
retransmissions of radio broadcasts. The DMCA does not specify the rate and
terms of the statutory licenses, which will be determined either through
voluntary inter-industry negotiations or arbitration. By distributing content
over the Internet, the Company also faces potential liability for claims based
on the nature and content of the materials that it distributes, including claims
for defamation, negligence or copyright, patent or trademark infringement, which
claims have been brought, and sometimes successfully litigated, against Internet
companies. While the current law generally states that entities like the
Company, which provide interactive computer services, shall not be treated as
the publisher or speaker with respect to third party content they distribute,
the scope of the law's definition and limitations on liability have not been
widely tested in court. Accordingly, the Company may be
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subject to such claims. To protect itself from such claims, the Company
maintains media liability insurance as well as general liability insurance.
Additionally, in the company's agreements with content providers, such content
providers generally represent that they have the rights to distribute and
transmit their programming on the Internet and, in most cases, indemnify the
Company for liability based on a breach of such representations and warranties.
The indemnification arrangements and the Company's media and general liability
insurance may not cover all potential claims of this type or may not be adequate
to indemnify the company for any liability that may be imposed. Any liability
not covered by indemnification or insurance or in excess of indemnification or
insurance coverage could adversely affect the Company's business.
INTELLECTUAL PROPERTY
The Company regards its copyrights, trademarks, trade secrets and
similar intellectual property as important to its success, and the Company
relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements and contractual
provisions with its employees and with third parties to establish and protect
its proprietary rights. There can be no assurance that these steps will be
adequate, that the Company will be able to secure trademark registrations for
all of its marks in the United States or other countries or that third parties
will not infringe upon or misappropriate the Company's copyrights, trademarks,
service marks and similar proprietary rights. In addition, effective copyright
and trademark protection may be unenforceable or limited in certain countries,
and the global nature of the Internet makes it impossible to control the
ultimate destination of the Company's broadcasts. In the future, litigation may
be necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
EMPLOYEES
As of March 31, 2000, the Company had 37 employees. Of these, 14 are in
development, 11 are in operations, 7 are in sales and marketing and 5 are in
administration. None of the Company's employees is represented by a labor union
and the Company believes its relations with its employees are good.
ITEM 2. DESCRIPTION OF PROPERTY
Currently, all of the Company's operations are housed in approximately
10,000 square feet of office space in Orlando, Florida, pursuant to a lease
expiring May, 2002 in for approximately $11,808.00 per month. The Company's
obligation under such office lease are personally guaranteed by William A.
Mobley, Jr. the Company's Chairman of the Board.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted on by stockholders during the last
quarter of the fiscal year ended December 31, 1999.
By written consent dated November 26, 1999, holders of 11,960,000
shares of the Company's then issued and outstanding common stock, representing
92% of then issued and outstanding shares, approved an amendment to the
Company's Certificate of Incorporation to (i) change the Company's name from
"Amalgamated Entertainment, Inc." to "MegaMedia Networks, Inc.," and (ii) to
increase the Company's authorized capital stock from 25,000,000 shares, par
value $.01 per share, to 50,000,000 shares, par value $.01 per share.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
No active trading market exists for the Company's common stock.
Although the Company enrolled with the National Quotation Bureau for "Pink
Sheet" reporting, no bid, asked or sales information for the Company has been
reported on the Pink Sheets as of April 7, 2000.
HOLDERS
As of April 7, 2000, there were 313 holders of record of the Company's
common stock. The Company believes that there are approximately 348 beneficial
owners of the Company's common stock.
DIVIDENDS
To date, the Company has not declared or paid any dividends on its
common stock. The payment of dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Board does
not intend to declare any dividends in the foreseeable future, but instead
intends to retain future earnings for use in the Company's business operations.
RECENT SALES OF UNREGISTERED SECURITIES
On January 9, 1999, the Company issued 250,000 shares of common stock
to an accredited investor, Jenson Services, Inc. ("Jenson"), in exchange for
Jenson's payment of $3,000 in expenses incurred and owed by the Company. The
shares were issued in reliance upon Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"). The investor was provided information about
the Company or had access to such information, and the investor was provided
opportunities to ask questions of management concerning the information provided
or made available. The investor confirmed in writing its investment intent, and
the certificates for the securities bear a legend accordingly.
On April 6, 1999, the Company issued 2,000,000 shares of its common
stock to accredited investors and a limited number of otherwise qualified
investors. The shares were issued pursuant to a private offering made in
reliance upon an exemption from registration pursuant to Rule 504 of Regulation
D of the Securities Act. All 800,000 shares were sold at a per share price of
$0.03, for aggregate gross proceeds of $24,000. The offers and sales were made
by officers and directors of the Company without compensation for same.
On October 6, 1999, pursuant to the Reorganization Agreement, the
Company issued 10,461,367 shares of its common stock to the stockholders of
MegaMedia-Nevada in exchange for 100% of the outstanding securities of
MegaMedia-Nevada. The shares were issued in reliance upon Section 4(2) of the
Securities Act. The investors were provided information about the Company or had
access to such information, and the investors were provided opportunities to ask
questions of management concerning the information provided or made available.
The investors confirmed in writing their investment intent, and the certificates
for the securities bear a legend accordingly.
On October 14, 1999, the Company commenced a private offering of common
stock, and thereafter issued 1,140,000 shares of its common stock to accredited
investors. All 1,140,000 shares were sold at a per share price of $2.00, which
included conversion of an outstanding debt of $720,000 into 360,000 shares, for
aggregate gross
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proceeds (including cancellation of the debt) of $2,280,000. The shares were
issued in reliance upon an exemption from registration pursuant to Rule 506 of
Regulation D of the Securities Act. The investors confirmed in writing their
investment intent, and the certificates for the securities bear a legend
accordingly. The offers and sales were made by officers and directors of the
Company without compensation for same.
On December 15, 1999, the Company commenced a private offering of
common stock. In respect of that private placement, the Company has issued or is
committed to issue 1,052,345 shares of its common stock to accredited investors.
All 1,052,345 shares were sold at a per share price of $3.00, for aggregate
proceeds of $3,157,035. The shares were/will be issued in reliance upon an
exemption from registration pursuant to Section 4(2) and/or Rule 506 of
Regulation D of the Securities Act. The investors confirmed in writing their
investment intent, and the certificates for the securities bear/will bear a
legend accordingly. The offers and sales were made by officers and directors of
the Company without compensation for same.
ITEM 6. MANAGEMENT'S DISCUSSION OF PLAN OF OPERATIONS
THE FOLLOWING DISCUSSION OF PLAN OF OPERATIONS SHOULD BE READ IN CONJUNCTION
WITH OUT FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE
IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE BUT ARE NOT LIMITED TO THOSE DISCUSSED BELOW AND
IN OTHER SECTIONS OF THIS REPORT.
OVERVIEW
MegaMedia Networks, Inc. is a global Internet broadcast company
specializing in on-demand delivery of high-quality movie, television, music and
sports entertainment programming to consumers via our website at
WWW.MEGACHANNELS.COM. The Company launched its site in late March 2000.
Additional upgraded releases of the site will follow in 2000.
Through various strategic marketing alliances, the Company expects that
its MegaChannels website will welcome up to two million unique, demographically
attractive customers to its "front door" daily, immediately making it one of the
most visited sites on the Internet.
Due to the fact that the Company is still a "development" stage company
and the rapidly evolving nature of the Internet industry, the Company believes
that financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance. To date, we have incurred
substantial costs to develop our technology. We will continue to incur costs to
develop our website, acquire content, build brand recognition and grow our
business. We may also incur significant additional costs with the possible
acquisitions of other businesses and technologies relevant to our growth
strategy. These costs may not correspond with a meaningful increase in revenues
in the short term.
Over the next 12 months, the Company is focused on finalizing strategic
relationships for additional content, improving website appeal and utility,
increasing advertising CPM rates, developing strategic alliance partners and
extending network infrastructure to key foreign territories. Management is
currently building staff to accommodate the anticipated growth. Content
acquisition will be pursued through acquisitions, partnerships,
marketing/distribution agreements and license agreements with studios and
independent owners. Site development is an ongoing activity that incorporates
consumer feedback, site performance and technical development to refine and
improve the consumer experience. Improved sales tools, customer data history and
an expanded sales force are the focus of efforts to drive higher advertising
rates. Strategic partnerships with key suppliers, consumer marketers and others
will be developed to lower costs, increase revenue and bolster brand stature.
Development of cost-effective network capacity will continue to ensure quality
delivery of content to the consumer.
9
<PAGE>
During the next 12 months, the Company plans to expend approximately
$500,000 in product development devoted to enhancements of its website.
Since October 6, 1999, the date of the Company's reorganization, the
Company hired 38 employees and expects to hire approximately 74 additional
employees during the next 12 months. The Company has retained a professional
employment organization which co-employs with the Company the Company's
employees and is responsible for providing employee benefits, payroll and
employment tax services.
The ability of the Company to realize its plans over the next 12 months
involves numerous risks and uncertainties, some of which are the Company's
ability to obtain additional financing; the ability of the Company to attract
and retain technical, marketing and other personnel; the Company's ability to
manage growth effectively; the Company's ability to effectively compete against
competitors who have more resources; and the Company's ability to successfully
enter into strategic relationships with additional suppliers (including studios
and independent film companies).
RESULTS OF OPERATIONS
REVENUES. Prior to the year ending December 31, 1999, the Company had
no revenues. We are in the "development" stage and as of December 31, 1999 had
not launched our web-site. Therefore, we had no revenues for the year ended
December 31, 1999.
OPERATING EXPENSES. Operating expenses, which consists primarily of
salaries and related personnel expenses, rent, travel, and general operating
expenses, were $857,249 for the year ended December 31, 1999. However, as we
expand operations, which we believe is essential to achieving and maintaining
market leadership, we anticipate that operating expenses will increase. In order
to meet our cash requirements, we raised an aggregate of $2,800,000 in private
placements during fiscal 1999.
OTHER INCOME. Other income for the year ended December 31, 1999 was
$8,012, representing interest income earned on overnight deposits.
INCOME TAXES. As of December 31, 1999, we had federal net operating
loss carryforwards of approximately $857,249. This net operating loss can be
carried forward for twenty years to offset future taxable income. Due to the
net loss of $857,249 for the year ended December 31, 1999 there has been no
provision made for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had cash and cash equivalents of
$1,007,211. On March 31, 2000, we had cash and cash equivalents of approximately
$2,500,000. This increase from December to March is the result of additional
funds raised in two private placement offerings.
Our capital requirements have been, and will continue to be,
significant. Since our inception, we have financed our development and
operations through the sales of stock in the form of private placements. Through
December 31, 1999, we had raised a total of approximately $2,800,000. As of
March 21, 2000, we had raised a total of approximately $5,375,000 in the form of
two private placement offerings. At March 31, 2000 our principal source of
liquidity is approximately $2,500,000 in the form of cash and cash equivalents.
We intend to use our existing cash and cash equivalents to fund our working
capital and capital expenditures for the next six months. However, we may need
additional capital to fund our operations during such six-month period and we
will need to raise additional cash through equity or debt financings to fund
operations for the next 12 months. There can be no assurance that we will be
able to obtain additional funding through the issuance of additional securities
through
10
<PAGE>
private placement offerings or through other means. If additional funding cannot
be secured, we will be required to significantly scale back operations, which
would most likely have an adverse effect on our performance.
YEAR 2000
As of March 31, 2000, we had not experienced any immediate adverse
impact on our operations from the transition to the Year 2000. We cannot grant
any assurances, however, that our operations have not been affected in a manner
that is not yet apparent or in a manner that will arise in the future. In
addition, certain computer programs that were date sensitive to the Year 2000
may not have been programmed to process the Year 2000 as a leap year, and
negative effects from this remain unknown. As a result, we will continue to
monitor our Year 2000 compliance and the Year 2000 compliance of our suppliers
and customers. However, we do not anticipate any Year 2000 problems that are
reasonably likely to have a material adverse effect on our operations.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements of the Company are filed as part of
this Report:
Page
----
Independent Auditors' Report F-2
Balance Sheet for the Year Ended December 31, 1999 F-3
Statements of Operations for the Period of May 27, 1999
(date of inception) through December 31, 1999 F-4
Statement of Stockholders' Equity for the Period of May 27,
1999 (date of inception) through December 31, 1999 F-5
Statement of Cash Flows for the Period of May 27, 1999
(date of inception) through December 31, 1999 F-6
Notes to Financial Statements F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
11
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- ---- ------------------------------------
<S> <C> <C>
William A. Mobley, Jr................. 37 Director (and Chairman of the Board)
Hon. Myron E. Tillman................. 67 Director
David A. Gust......................... 39 Chief Executive Officer
Paul J. Turcotte...................... 40 President
Stephen H. Noble, III................. 38 Chief Financial Officer
John P. Chambers, Jr.................. 40 Chief Technology Officer
Mark R. Dolan......................... 48 General Counsel, Secretary
</TABLE>
All directors serve until the next annual meeting of stockholders and
until their successors are duly elected and qualified. The Company's officers
serve at the pleasure of the Board of Directors. Directors receive $1,000 for
each meeting attended. In addition, each director is granted options for 2,500
shares of stock for each year or part-year that they serve. At December 31,
1999, no remuneration had been paid to any director, nor had any options been
granted.
BUSINESS EXPERIENCE
The following is a brief account of the business experience during the
past five years of each director and executive officer of the Company, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.
WILLIAM A. MOBLEY, Jr. has served as the Company's Chairman of the
Board since June 1999. Prior to his employment with the Company, Mr. Mobley was
the founder of World Commerce Online, Inc., a publicly, traded company that
develops global commercial networks and e-commerce solutions, and served as its
President and Chief Executive Officer from November 1993 to April 1999.
HON. MYRON E. TILLMAN has served as a Director of the Company since
April 2000. Mr. Tillman also serves as corporate counsel to Noble House of
Boston, a public relations firm, a position which he has held since January
2000. He also is corporate counsel to and a director of Chaos Holdings, Inc., a
publicly traded fashion accessory firm and has served in such capacity since
January 2000. From January 1985 to January 1995, Mr. Tillman was a New York
Supreme Court Justice. From January 1973 to January 1981, he served as a
Surrogate and Circuit Court Judge in New York State. Mr. Tillman is an attorney
who was in private practice with Tillman, Roberts & Purphe from 1962 to 1973 in
Corning, New York and Tillman & Roby from January 1995 to January 1999 in
Rochester, New York. From January l 1996 to December 31, 1999, he was also
President and Chief Executive Officer of IGG Holdings, Inc., Tampa, Florida, a
company involved in the golf industry.
DAVID A. GUST has served as the Company's Chief Executive Officer since
January 2000. Prior to joining the Company, from July 1996 to December 1999, he
served as Vice President of Marketing and New Ventures for Hard Rock Cafe
International, Inc., a restaurant, entertainment and leisure company ("Hard
Rock"). Prior to his tenure at Hard Rock, Mr. Gust served in various executive
capacities for the Walt Disney Company for thirteen years.
PAUL J. TURCOTTE has served as the Company's President since March,
2000. Prior to joining the Company from September 1996 to February 2000, Mr.
Turcotte was the Vice President of Publishing at Ziff-Davis, Inc.,
12
<PAGE>
where he also served as President of Yahoo! Internet Life Magazine. From
February 1996 through July 1996, Mr. Turcotte was an Associate Publisher for
Conde Nast, a private company. Prior to that, from January 1995 to January 1996,
Mr. Turcotte served as Associate Publisher of Times Mirror, a public company.
STEPHEN H. NOBLE, III has served as the Company's Chief Financial
Officer since February 2000. From June 1999 to February 2000, he served as an
independent consultant to Lasergate Systems, Inc., where he directed the merger
of that company into Tickets.com, Inc., a publicly traded Internet-based event
and venue ticketing services company. From January, 1995 to April, 1999, Mr.
Noble was employed by A.L. Williams, Jr., where he served in various roles
including Chief Financial Officer of the Tampa Bay Lightning of The National
Hockey League and The Ice Palace Arena in Tampa, Florida. He also served as
Senior Vice President and Controller for a local franchise of The Canadian
Football League. Prior to 1995, Mr. Noble was a principal of Noble & Associates,
CPA's, P.C., a full service accounting and management consulting practice
serving primarily large, privately-held companies.
JOHN P. CHAMBERS, JR. has served as the Company's Chief Technology
Officer since June 1999. Prior to joining the Company, Mr. Chambers was the
Director of Internet Services for American Floral Services, a private company
from April 1998 to June 1999. From September 1997 to April 1998, as a Microsoft
Certified Technical Instructor, he contracted with certified technical education
centers throughout the country delivering Microsoft technical course material.
Mr. Chambers provided business consulting services, and served as the Senior
Manager of Education Services for Precision Computer Services, Inc., a private
company, from June 1993 to August 1997.
MARK R. DOLAN has served as the Company's General Counsel and Secretary
since July 1999. Prior to joining the Company, Mr. Dolan was a sole legal
practitioner from January 1998 to July 1999. Prior to that, from January 1995 to
January 1998, he was a Partner in the law firm of LIROT - DOLAN, P.A. Mr. Dolan
also serves as a Director and/or Secretary of several privately-held
corporations, such as Ybor Land, Inc., Benore Ventures, Inc., Xcite, Inc.,
Telegraph, Inc., Toledo Holdings, Inc., Nextelligence, Inc., M-Jade, Inc.,
Midnight Rodeo, Inc., and J. B. Monroe, Inc.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Company's
outstanding common stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
common stock. Such persons are required by SEC regulation to furnish the Company
with copies of all such reports they file. William A. Mobley, Jr., Chairman,
filed late with the SEC an initial report of ownership in connection with stock
he received in respect of the reorganization consummated in October 1999. Mark
R. Dolan, General Counsel and Secretary, John P. Chambers, Chief Technology
Officer, and John A. Hughes, Vice President - Content Acquisition, filed late
with the SEC initial reports of ownership in connection with their becoming
officers of the Company. NextTraffic, Inc., owning over 10% of the Company's
outstanding common stock, filed late with the SEC an initial report of
ownership in connection with its becoming a more than 10% owner.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
the compensation paid for each of the Company's last three fiscal years to the
Company's Chief Executive Officer and each of its other executive officers that
received compensation in excess of $100,000 during such periods (collectively,
the "Named Executive Officer"). No other executive officers of the Company
earned compensation in excess of $100,000 during such periods.
13
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
--------------------------- ---- ------ ----- -------
<S> <C> <C> <C> <C> <C>
William A. Mobley, Jr. 1999 $ 80,769 (1) $ 0 0
Former Chief Executive Officer 1998 N/A N/A N/A
and President (Currently, Chairman 1997 N/A N/A N/A
of the Board)
- ------------------------------------------
1999 $51,280 (2) $0 100,000(3)
John P. Chambers, 1998 N/A N/A N/A
Chief Technology Officer 1997 N/A N/A N/A
</TABLE>
- -----------
(1) Includes $8,653.86 received by Mr. Mobley for consulting services rendered
to the Company.
(2) Mr. Chambers executed an Employment Agreement with the Company on June
24, 1999 that provides for an annual
base salary of $105,000, $51,280 of which was paid in fiscal 1999.
(3) Options to purchase 100,000 shares of common stock were granted to Mr.
Chambers on June 24, 1999 pursuant to the terms of a Stock Option Agreement
between the Company and Mr. Chambers, dated June 24, 1999. Pursuant to the
Stock Option Agreement, all 100,000 options are exercisable at $2.00 per
share on the earlier of (i) June 23, 2001, if Mr. Chambers is employed by
the Company, (ii) termination by the Company of Mr. Chambers' employment
without cause before June 23, 2001, (iii) voluntary termination by Mr.
Chambers of his employment with the Company for "constructive discharge"
(as defined in his Employment Agreement) before June 23, 2001, or (iv) upon
a "change in control" of the Company (as defined in the Stock Option
Agreement) before June 23, 2001. Such options expire June 23, 2011.
EMPLOYMENT AND CONSULTING AGREEMENTS
Effective June 24, 1999, the Company entered into an employment
agreement with John P. Chambers, Jr., under which Mr. Chambers serves as the
Company's Chief Technology Officer for a period of two years. The agreement
provides for an annual base salary of $105,000 and contains customary
confidentiality provisions. It also prohibits Mr. Chambers from competing with
the Company during the term of the agreement and for a period of two years
thereafter. In addition, pursuant to the agreement, Mr. Chambers was granted
options to purchase 100,000 shares of the Company's common stock at $2.00 per
share, which options shall vest upon the earlier of (i) June 23, 2001, if Mr.
Chambers is employed by the Company, (ii) termination by the Company of Mr.
Chambers' employment without cause before June 23, 2001, (iii) voluntary
termination by Mr. Chambers of his employment with the Company for "constructive
discharge" (as defined in his Employment Agreement) before June 23, 2001, or
(iv) upon a "change in control" of the Company (as defined in the Stock Option
Agreement) before June 23, 2001. Such options expire June 23, 2011. Also
pursuant to the agreement, 100,000 shares of the Company's common stock have
been placed in escrow, which shares Mr. Chambers may purchase on June 23, 2000
for $.01 per share. However, if prior to June 23, 2000 Mr. Chambers dies,
becomes permanently disabled, is terminated without cause or there is a change
in control in the Company, he may then purchase the 100,000 escrowed shares for
$.01 per share at such time.
In January, 2000, the Company entered into a consulting agreement
with William A. Mobley, Jr., the Company's Chairman of the Board, pursuant to
which the Company agreed to pay Mr. Mobley $200,000 per annum, payable bi-weekly
in arrears. The agreement has a six-month term and automatic six-month renewals
unless cancelled by either party upon 30 days' written notice before the end of
a particular term. Under the agreement, Mr. Mobley provides specialized interim
management services related to (a) Web solutions in connection with continued
product development, advanced technologies, e-commerce systems and consumer
generation tools; (b) mergers and acquisitions; and (c) communication and
investor relations.
14
<PAGE>
STOCK OPTIONS
The following table sets forth information with respect to stock
options granted in fiscal 1999 to the officers listed in the Summary
Compensation Table.
<TABLE>
<CAPTION>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
INDIVIDUAL GRANTS
------------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (1)
OPTIONS IN FISCAL PRICE EXPIRATION __________________
NAME GRANTED YEAR PER SHARE DATE 5% 10%
---------------- ----------- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William A. Mobley, Jr. 177,841(2) 64% $2.00 01/05/09 $293,437 $723,813
John P. Chambers, Jr. 100,000(3) 36% $2.00 06/24/09 $165,000 $407,000
</TABLE>
- -------------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date based on the initial public offering price. These
assumptions are not intended to forecast future appreciation of our stock
price. The potential realizable value computation does not take into
account federal or state income tax consequences of option exercises or
sales of appreciate stock.
(2) Represents an option to purchase 177,841 shares of common stock granted in
December 1999 pursuant to the terms of a stock option agreement between the
Company and Mr. Mobley dated January 5, 2000. All 177,841 options are
exercisable at $2.00 per share commencing January 5, 2000. In the event of
the death of the optionee, any unexercised portion of the options shall be
exercisable by his estate until the expiration of the option.
(3) Represents an option to purchase 100,000 shares of common stock granted to
Mr. Chambers in June 1999 pursuant to the terms of a stock option agreement
between the Company and Mr. Chambers, dated June 24, 1999. All 100,000
options are exercisable at $2.00 per share on the earlier of (i) June 23,
2001, if Mr. Chambers is employed by the Company, (ii) termination by the
Company of Mr. Chambers' employment without cause before June 23, 2001,
(iii) voluntary termination by Mr. Chambers of his employment with the
Company for "constructive discharge" (as defined in his employment
agreement) before June 23, 2001, or (iv) upon a "change in control" of the
Company (as defined in his stock option agreement) before June 23, 2001.
15
<PAGE>
STOCK OPTION PLAN
The Company does not currently have in place a formalized stock option
plan for key employees, directors or consultants, but intends to implement such
a plan during fiscal 2000. All stock options to date have been granted exclusive
of a stock option plan. During fiscal 1999, the Company granted to employees
options to purchase an aggregate of 277,841 shares of common stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, the number of
shares of Common Stock that were owned beneficially by (i) each person who is
known by the Company to beneficially own more than 5% of the common stock, (ii)
each director, (iii) the Named Executive Officers (as defined in "Executive
Compensation") and (iv) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF
SHARES BENEFICIALLY ACQUIRABLE TOTAL NUMBER OF SHARES
OWNED WITHIN 60 DAYS BENEFICIAL OWNER PERCENTAGE
NAME (1)(2) (A) (3) (COLUMNS (A)+(B)) OF OWNERSHIP
----------- -------------------- -------------- ---------------------- ------------
<S> <C> <C> <C> <C>
NextTraffic, Inc. (4) 3,250,000 3,250,000 23%
100 S. Orange Avenue, Suite 1000
Orlando, Florida 32801
William A. Mobley, Jr. 5,236,511(5) 177,841(6) 5,414,352 38%
John P. Chambers, Jr. 100,000 -0- 100,000 *
David A. Gust -0- 0 -0- -0-
Paul J. Turcotte -0- -0- -0- -0-
Hon. Myron E. Tillman -0- -0- -0- -0-
Officers & Directors as a group
(7 persons) 2,249,011(7) 189,697 2,438,708 17%
</TABLE>
- -------------------------
* Less than one percent.
(1) Except as otherwise noted, and subject to community property laws where
applicable, each person named in the table has sole voting and investment
power with respect to all securities owned by such person.
(2) Unless otherwise noted, the address of each person or entity listed is
MegaMedia Networks, Inc., 57 West Pine Street, Orlando, Florida 32801.
(3) Reflects the number of shares that could be purchased by the holder by
exercise of options granted pursuant to stock option agreements dated
January 5, 2000.
(4) William A. Mobley, Jr. is a principal stockholder, officer and director of
NextTraffic, Inc.
(5) Includes (i) 500,000 shares of common stock owned by Mobley Investments
Ltd., a limited partnership in which Mr. Mobley serves as Managing Member
of the General Partner of the limited partnership, (ii) 1,000,000 shares of
common stock owned by Mobley Family Ltd., a limited partnership in which
Mr. Mobley serves as President of the General Partner of the limited
partnership, (iii) 486,511 shares of common stock which Mr. Mobley owns
jointly with his spouse, Michelle M. Mobley; and (iv) the 3,250,000 shares
owned by NextTraffic, Inc. of which Mr. Mobley is a 25% owner and that
company's sole director.
(6) Represents shares of common stock deposited into an escrow account
established by the Company and certain of its stockholders under which the
stockholders who deposited the shares into escrow may reacquire the shares
pursuant to options with an exercise price of $2.00 per share. The options
expire on January 5, 2009 and are exercisable in full commencing on January
5, 2000.
(7) Excludes the 3,250,000 shares owned by NextTraffic, Inc. of which Mr.
Mobley is a 25% stockholder and sole director.
16
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Mobley, the Company's Chairman of the Board, has personally
guaranteed the Company's obligations under its office lease. See Item 2.
"Description of Property."
On January 17, 2000, the Company entered into an Internet Traffic
Agreement with NextTraffic, Inc., which is owned by William Mobley, Chairman of
the Board and a principal stockholder of the Company. Under the terms of the
agreement, NextTraffic has agreed to supply the Company's website with up to two
million visitors a day for which the Company has agreed to pay NextTraffic
monthly fees equal to 25% of all purchases of the Company's services made by
visitors to the Company's site supplied by NextTraffic.
Harry Timmons, a former member of the Board of Directors of the
Company, is the President of NextTraffic.
In January 2000, the Company entered into a consulting agreement with
William A. Mobley, Jr., the Company's Chairman of the Board, pursuant to which
the Company agreed to pay Mr. Mobley $200,000 per annum, payable bi-weekly in
arrears. The agreement has a six-month term and automatic six-month renewals
unless cancelled by either party upon 30 days' written notice before the end of
a particular term. For further discussion of the agreement, see "Executive
Compensation -- Employment and Consulting Agreements."
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Reorganization, dated October 6, 1999, among the
Company, MegaMedia-Nevada and MegaMedia-Nevada stockholders. (1)
3.1 Articles of Incorporation of ACE Investments, Inc., a Utah corporation,
filed March 26, 1985. (2)
3.2 By-Laws of the Company. (2)
3.3 Articles of Amendment to the Articles of Incorporation changing the
Company's name to "Matlock Communications, Inc.," filed August 28,
1986. (2)
3.4 Articles of Amendment to the Articles of Incorporation changing the
Company's name to "Persimmon Corporation," filed June 28, 1989. (2)
3.5 Certificate of Incorporation of Amalgamated Entertainment, Inc., a
Delaware corporation, filed December 20, 1991. (2)
3.6 Articles of Merger of Persimmon Corporation into Amalgamated
Entertainment, Inc., filed January 29, 1992. (2)
3.7 Certificate of Amendment to the Company's Certificate of Incorporation
with respect to a 30-1 reverse stock split, filed April 6, 1999. (2)
3.8 Certificate of Amendment to the Company's Certificate of Incorporation
with respect to a 2.5-1 stock split, filed September 13, 1999. (3)
17
<PAGE>
3.9 Certificate of Amendment to the Company's Certificate of Incorporation
to change the Company's name to "MegaMedia Networks, Inc. filed
November 29, 1999.*
4.1 Stock Option Agreement, dated June 24, 1999, between the Company and
John P. Chambers.*
4.2 Stock Option Agreement, dated July 5, 1999, between the Company and
Mark R. Dolan.*
4.3 Stock Option Agreement, dated January 5, 2000, between the Company and
William A. Mobley, Jr.*
4.4 Stock Option Agreement, dated January 5, 2000, between the Company and
Mark R. Dolan.*
10.1 Lease Agreement, dated June 14, 1999, between Kyung Park and Bang Park,
landlords, and the Company.*
10.1.1 Addendum to Lease Agreement, dated October 6, 1999.*
10.2 Product Development Agreement, dated January 7, 2000, between the
Company and Nextelligent, Inc.*
10.3 Internet Traffic Agreement dated January 7, 2000 between the Company
and NextTraffic, Inc.*
10.4 Consulting Agreement, dated January 7, 2000, between the Company and
William A. Mobley, Jr.*
10.5 Employment Agreement, dated June 24, 1999, between the Company and John
P. Chambers, Jr.*
10.6 Escrow Agreement, dated as of December 29, 1999, among the Company,
certain stockholders of the Company and Christopher P. Flannery, as
escrow agent ("Flannery").*
21.1 List of Subsidiaries.*
27.1 Financial Data Schedule.*
- -------------------------
(1) Incorporated by reference and filed as an exhibit to the Company's
Current Report on Form 8-K, filed with the Securities and Exchange
Commission on October 26, 1999.
(2) Incorporated by reference and filed as an exhibit to the Company's
Registration Statement on Form 10SB, filed with the Securities and
Exchange Commission on July 22, 1999.
(3) Incorporated by reference and filed as an exhibit to the Company's
Quarterly Report on Form 10QSB, filed with the Securities and Exchange
Commission on October 12, 1999.
* Filed herewith.
(B) REPORTS ON FORM 8-K:
(i) The Company filed a Current Report on Form 8-K on October
26, 1999 in connection with the Reorganization Agreement.
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MEGAMEDIA NETWORKS, INC.
Date: April 12, 2000 BY: /s/ DAVID A. GUST
--------------------------------------
David A. Gust, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: April 12, 2000 BY: /s/ WILLIAM A. MOBLEY
----------------------
William A. Mobley, Jr. Chairman of
the Board
Date: April 12, 2000 BY: /s/ STEPHEN H. NOBLE, III
--------------------------
Stephen H. Noble, III,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: April 12, 2000 BY: /s/ MYRON E. TILLMAN
---------------------
Hon. Myron E. Tillman, Director
19
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGES
Independent Auditors' Report.......................................... F-2
Financial Statements:
Balance Sheet................................................ F-3
Statements of Operations..................................... F-4
Statements of Stockholders' Equity........................... F-5
Statement of Cash Flows...................................... F-6
Notes to Financial Statements................................ F-7
F-1
<PAGE>
The Board of Directors
MegaMedia Networks, Inc.
Orlando, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of
MegaMedia Networks, Inc. (a development stage company) as of December 31, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period of May 27, 1999 (date of inception) through December
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MegaMedia
Networks, Inc. as of December 31, 1999, and the results of its operations and
its cash flows for the period of May 27, 1999 (date of inception) through
December 31, 1999, in conformity with generally accepted accounting principles.
/S/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
March 20, 2000
Maitland, Florida
F-2
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash $ 1,007,211
Other receivables 10,000
-----------
Total current assets 1,017,211
PROPERTY AND EQUIPMENT, net of accumulated depreciation 519,929
DEPOSITS 21,012
-------
Total assets $ 1,558,152
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 100,587
-----------
Total current liabilities 100,587
-----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000 shares authorized,
13,000,010 shares issued and outstanding 130,000
Paid-in capital 2,184,814
Deficit accumulated during the development stage (857,249)
-----------
Total stockholders' equity 1,457,565
-----------
Total liabilities and stockholders' equity $ 1,558,152
===========
</TABLE>
The Accompanying Notes Are An Integral Part
Of These Consolidated Financial Statements
F-3
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
REVENUES $ --
-----------
EXPENSES:
Advertising 6,525
Automobile 4,584
Contributions 750
Depreciation 11,242
Dues and subscriptions 1,861
Employee leasing 398,499
Equipment rentals 13,416
Insurance 15,454
Licenses and permits 4,438
Marketing 31,259
Miscellaneous 5,752
Office 19,299
Parking and tolls 7,576
Postage 2,273
Printing and reproduction 14,188
Professional development 16,154
Professional fees 61,809
Rent 41,450
Repairs and maintenance 13,087
Supplies 30,617
Taxes-other 5,585
Telephone 29,222
Travel 126,479
Utilities 3,742
-----------
Total expenses 865,261
-----------
OTHER INCOME:
Interest income 8,012
-----------
LOSS BEFORE INCOME TAXES (857,249)
INCOME TAXES --
----------
NET LOSS $ (857,249)
===========
BASIC EARNINGS (LOSS) PER COMMON SHARE $ (.07)
===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 4,877,401
===========
The Accompanying Notes Are An Integral Part
Of These Consolidated Financial Statements
F-4
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
--------------------------- During the Total
Number of Par Paid-in Development Stockholders'
Shares Value Capital Stage Equity
--------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Common stock issued to
founding directors in
exchange for services 2,500 $ 25 $ 24,975 $ -- $ 25,000
Common stock issued in
exchange for services 5,000 50 49,950 -- 50,000
Recapitalization, including
effect of reverse
acquisition 11,852,510 118,525 (118,525) -- --
Stock issuance costs -- -- (40,186) -- (40,186)
Common stock issued
for cash 780,000 7,800 1,552,200 -- 1,560,000
Common stock issued in
exchange for conversion
of notes payable 360,000 3,600 716,400 -- 720,000
Net loss -- -- -- (857,249) (857,249)
----------- --------- ----------- ---------- -----------
BALANCE -
December 31, 1999 13,000,010 $ 130,000 $ 2,184,814 $ (857,249) $ 1,457,565
============ ========= =========== ========== ===========
</TABLE>
The Accompanying Notes Are An Integral Part
Of These Consolidated Financial Statements
F-5
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash paid to suppliers $ (720,606)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (531,171)
Payments of security deposits (21,012)
-----------
Net cash flows from investing activities (552,183)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,560,000
Proceeds from notes payable 720,000
-----------
Net cash flows from financing activities 2,280,000
-----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,007,211
CASH AND CASH EQUIVALENTS - Beginning of year --
-----------
CASH AND CASH EQUIVALENTS - End of year $ 1,007,211
===========
RECONCILIATION OF NET LOSS TO NET CASH FLOWS
FROM OPERATING ACTIVITIES:
Net loss $ (857,249)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation 11,242
Noncash professional fees 75,000
Noncash stock issuance costs (40,186)
Change in other receivables (10,000)
Change in accounts payable 100,587
-----------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (720,606)
===========
</TABLE>
- --------------------------------------------------------------------------------
NONCASH FINANCING ACTIVITIES:
During the period of May 27, 1999 (date of inception) through December 31,
1999, the Company issued 7,500 shares of common stock, in exchange for
professional services received valued at $75,000.
During the period of May 27, 1999 (date of inception) through December 31,
1999, the Company converted notes payable in the amount of $720,000 into
360,000 shares of common stock.
The Accompanying Notes Are An Integral Part
Of These Consolidated Financial Statements
F-6
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
NOTE A - NATURE OF OPERATIONS
MegaMedia Networks, Inc. (a Nevada corporation and a development stage
company) ("Company") was incorporated on May 27, 1999 and is headquartered
in Orlando, Florida. The Company provides users of the internet with an
online environment for purchasing specialized on-demand or live
pay-per-view events, music, videos, concerts and services.
On October 6, 1999, MegaMedia Networks, Inc. agreed to exchange shares with
Amalgamated Entertainment, Inc., a Delaware public company. Accordingly,
MegaMedia Networks, Inc. exchanged all outstanding shares of the Company's
common stock for 10,461,367 shares of Amalgamated Entertainment, Inc. stock
in a business combination accounted for as a reverse acquisition. During
the period Amalgamated Entertainment, Inc. was in existence, prior to the
reverse acquisition, its only activity was to raise equity capital. For
accounting purposes, the reverse acquisition is reflected as if MegaMedia
Networks, Inc. issued its stock for the net assets of Amalgamated
Entertainment, Inc. The net assets of Amalgamated Entertainment, Inc. were
not adjusted in connection with the reverse acquisition since they were
monetary in nature. Coincident with the reverse acquisition, Amalgamated
Entertainment, Inc. changed its name to MegaMedia Networks, Inc.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Parent and its wholly- owned Subsidiary. All material
intercompany transactions have been eliminated.
DEVELOPMENT STAGE OPERATIONS: The Company was incorporated May 27, 1999.
Operations to date have been devoted primarily to raising capital,
obtaining financing, establishing supplier affiliations and strategic
alliance arrangements, establishing the corporate headquarters, and
administrative functions.
CASH AND CASH EQUIVALENTS: For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
DEFERRED INCOME TAXES: Deferred income taxes result from the tax effects of
net operating loss carryforwards and temporary differences between the
basis of items for income tax purposes and the carrying amounts of such
items for financial reporting purposes. The primary temporary difference
which gives rise to the Company's deferred income tax balance relates to
the use of accelerated depreciation methods for tax purposes. A valuation
allowance has been provided for the deferred tax asset balance based on the
Company's assessment of the likelihood of realization.
STOCK-BASED COMPENSATION: In October 1995, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123) which sets forth
accounting and disclosure requirements for stock-based compensation
arrangements. The new statement encourages but does not require, companies
to measure stock-based compensation using a fair value method, rather than
the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25 (APB no. 25.) The Company has adopted disclosure
requirements of SFAS 123 and has elected to continue to record stock-based
compensation expense using the intrinsic value approach prescribed by APB
No. 25. Accordingly, the Company computes compensation cost for each
employee stock option granted as the amount by which the quoted market
price of the Company's common stock on the date of grant exceeds the amount
the employee must pay to acquire the stock. The amount of compensation
cost, if any, will be charged to operations over the vesting period.
F-7
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES: Management uses estimates and assumptions in preparing
consolidated financial statements. Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and reported revenues and expenses.
Significant estimates used in preparing these consolidated financial
statements include those assumed in determining the estimated useful lives
of property and equipment. It is at least reasonably possible that the
significant estimates used will change within the next year.
ADVERTISING COSTS: Advertising costs are expensed as incurred.
NOTE C - CONCENTRATION OF CREDIT RISK
The Company maintains its cash in a bank account which, at times, may
exceed federally insured limits. The Company has not experienced any losses
in this account and believes it is not exposed to any significant credit
risk related to cash and cash equivalents.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Estimated
Category Cost Lives
----------------------------------- --------- --------
Leasehold improvements $ 50,531 39 years
Office furniture and equipment 19,309 7 years
Computer equipment 313,050 3-7 years
Software development in process 148,281 3 years
---------
Total property and equipment 531,171
Less: Accumulated depreciation (11,242)
---------
Net property and equipment $ 519,929
=========
NOTE E - COMMITMENTS AND CONTINGENCIES
LEASES: The Company is the lessee under operating lease agreements for its
office facility and for certain furniture and equipment. Total lease
expense under these leases amounted to approximately $43,000 for the year
ended December 31, 1999. Future minimum lease payments under these
operating leases as of December 31, 1999, are approximately as follows:
YEAR ENDING
DECEMBER 31,
------------
2000 $ 268,300
2001 $ 224,600
2002 $ 69,000
In addition, the Company is obligated under a 3-year agreement with an
internet traffic consolidator ("NextTraffic"), a corporation owned by the
President of the Company, who will provide pre-qualified internet traffic
to the Company's Website. Under the terms of this agreement. NextTraffic
will provide up to 2 million visitors per day to the website at a cost of
$0.03 per visitor or up to $60,000 per day.
F-8
<PAGE>
MEGAMEDIA NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For The Period of May 27, 1999 (date of inception) Through December 31, 1999
NOTE E - COMMITMENTS AND CONTINGENCIES (Continued)
EMPLOYMENT AGREEMENTS: The Company has entered into employment agreements
with certain key employees with terms ranging from one to three years.
Future obligations under these agreements as of December 31, 1999 are as
follows:
Year Ending
December 31,
------------
2000 $ 750,000
2001 $ 537,500
2002 $ 420,000
2003 $ 70,000
NOTE F - STOCK OPTIONS
During the year ended December 31, 1999, the Company offered stock options
to certain employees whereby the employees may purchase a certain number of
shares of common stock at specified amounts. Under the terms of the option
agreements, the options are only exercisable upon being fully vested which
does not occur until the year 2001. Therefore, no compensation expense
related to these options has been recorded in the accompanying consolidated
financial statements.
In addition, the Company has offered stock options to certain additional
employees subsequent to the balance sheet date. Under the terms of the
option agreements, employees are granted a certain number of options to
purchase the Company's common stock at specified amounts.
The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25 under which no compensation cost for stock options is recognized for
stock option awards granted at or above fair market value.
Had compensation expense been determined based upon fair values at the
grant date for the award of options as described herein in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
loss and basic earnings (loss) per common share would not be materially
changed from the amounts as reported in the accompanying consolidated
financial statements.
Accordingly, management has not presented the pro forma effects of the
application of SFAS No. 123 herein with respect to net loss and basic
earnings (loss) per common share for the period of May 27, 1999 (date of
inception) through December 31, 1999.
NOTE G - SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the Company offered two confidential
private offering memorandums. The first offering, which was dated December
15, 1999, produced $3,181,032 of additional equity by issuing 1,060,344
shares of restricted common stock for $3.00 per share. This offering
expired January 14, 2000. The second offering, which is dated March 8,
2000, expects to produce $5,000,000 of additional equity by offering
1,000,000 shares of restricted common stock for $5.00 per share. This
offering expires April 30, 2000.
F-9
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Reorganization, dated October 6, 1999, among the
Company, MegaMedia-Nevada and MegaMedia-Nevada stockholders. (1)
3.1 Articles of Incorporation of ACE Investments, Inc., a Utah corporation,
filed March 26, 1985. (2)
3.2 By-Laws of the Company. (2)
3.3 Articles of Amendment to the Articles of Incorporation changing the
Company's name to "Matlock Communications, Inc.," filed August 28,
1986. (2)
3.4 Articles of Amendment to the Articles of Incorporation changing the
Company's name to "Persimmon Corporation," filed June 28, 1989. (2)
3.5 Certificate of Incorporation of Amalgamated Entertainment, Inc., a
Delaware corporation, filed December 20, 1991. (2)
3.6 Articles of Merger of Persimmon Corporation into Amalgamated
Entertainment, Inc., filed January 29, 1992. (2)
3.7 Certificate of Amendment to the Company's Certificate of Incorporation
with respect to a 30-1 reverse stock split, filed April 6, 1999. (2)
3.8 Certificate of Amendment to the Company's Certificate of Incorporation
with respect to a 2.5-1 stock split, filed September 13, 1999. (3)
3.9 Certificate of Amendment to the Company's Certificate of Incorporation
to change the Company's name to "MegaMedia Networks, Inc. filed
November 29, 1999.*
4.1 Stock Option Agreement, dated June 24, 1999, between the Company and
John P. Chambers.*
4.2 Stock Option Agreement, dated July 5, 1999, between the Company and
Mark R. Dolan.*
4.3 Stock Option Agreement, dated January 5, 2000, between the Company and
William A. Mobley, Jr.*
4.4 Stock Option Agreement, dated January 5, 2000, between the Company and
Mark R. Dolan.*
10.1 Lease Agreement, dated June 14, 1999, between Kyung Park and Bang Park,
landlords, and the Company.*
10.1.1 Addendum to Lease Agreement, dated October 6, 1999.*
10.2 Product Development Agreement, dated January 7, 2000, between the
Company and Nextelligent, Inc.*
10.3 Internet Traffic Agreement dated January 7, 2000 between the Company
and NextTraffic, Inc.*
<PAGE>
10.4 Consulting Agreement, dated January 7, 2000, between the Company and
William A. Mobley, Jr.*
10.5 Employment Agreement, dated June 24, 1999, between the Company and John
P. Chambers, Jr.*
10.6 Escrow Agreement, dated as of December 29, 1999, among the Company,
certain stockholders of the Company and Christopher P. Flannery, as
escrow agent ("Flannery").*
21.1 List of Subsidiaries.*
27.1 Financial Data Schedule.*
- -------------------------
(1) Incorporated by reference and filed as an exhibit to the Company's
Current Report on Form 8-K, filed with the Securities and Exchange
Commission on October 26, 1999.
(2) Incorporated by reference and filed as an exhibit to the Company's
Registration Statement on Form 10SB, filed with the Securities and
Exchange Commission on July 22, 1999.
(3) Incorporated by reference and filed as an exhibit to the Company's
Quarterly Report on Form 10QSB, filed with the Securities and Exchange
Commission on October 12, 1999.
* Filed herewith.
EXHIBIT 3.9
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMALGAMATED ENTERTAINMENT, INC.
Amalgamated Entertainment Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is Amalgamated Entertainment, Inc.
SECOND: The following amendments were adopted by the Board of
Directors and persons owning in excess of 92% of the outstanding voting
securities of the Corporation, in the manner prescribed by Sections 141.228 and
242 of the General Corporation Law of the State of Delaware and pursuant to an
Information Statement mailed to all stockholders of record on November 4, 1999:
1. Name The name of this corporation is MegaMedia Networks, Inc.
4. Number of Shares. The number of common shares this
Corporation shall be authorized to issue is 50,000,000 shares
of $0.01 par value common stock. The remaining provisions of
this paragraph shall remain the same.
Such amendments shall take effect on the date of filing of this Certificate of
Amendment with the Secretary of State of the State of Delaware.
THIRD: This amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
FOURTH: This amendment does effect a change in the stated capital of
the Corporation from $250,000 to $500,000.
IN WITNESS WHEREOF, Amalgamated Entertainment, Inc. has caused this
Certificate to be signed by William A. Mobley, Jr., its sole director, President
and Secretary, this 26th day of November, 1999.
AMALGAMATED ENTERTAINMENT, INC.
By:/s/ William A. Mobley, Jr.
--------------------------------
William A. Mobley, Jr.
Sole Director, President and Secretary
EXHIBIT 4.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT as of June 24, 1999, by and between MegaMedia
Networks, Inc., and John P. Chambers. (the "Optionee").
------------------------------
In consideration for the Optionee signing an Employment Agreement (the
"Employment Agreement") with MegaMedia Networks, Inc. (the "Company") and for
other good and valuable consideration, receipt of which is hereby acknowledged,
MegaMedia Networks hereby grants the Optionee the option to acquire shares of
the common stock of the Company upon the following terms and conditions:
1. Grant of Option
---------------
A. The Company hereby grants to the Optionee the right and option (the
"Option") to purchase up to 100,000 fully paid and non-assessable shares of
Common Stock par value $.01 per share of the Company (the "Shares"), subject to
the vesting provisions described below.
B. This Option shall vest in Executive on the earliest to occur of the
following:
(i) On June 24, 2001, provided that Executive remains employed by
Company, a parent or subsidiary corporation of Company; or,
(ii) Upon termination of Executive's employment by Company without
"Cause" as defined in paragraph 9D of Executive's Employment Agreement of even
date herewith prior to June 24, 2001; or,
(iii) Upon Executive's voluntary termination of his employment for
"Constructive Discharge" as defined paragraph 9C of Executive's Employment
Agreement of even date herewith prior to June 24, 2001; or,
(iv) Upon a "change in control" of the Company, which shall be
defined as (i) a sale, merger or other business combination which results in
transfer to a third party of an ownership interest of greater than 50% of the
Company or any successor entity to the Company, (ii) a sale of all or
substantially all of the Company's assets, or (iii) election by the shareholders
of the Company of persons to serve as directors of the Company, comprising more
than one-half (1/2) the total number of directors, persons who were not
nominated or recommended to the shareholders for election as directors by the
Board's nominating committee, prior to June 24, 2001.
C. The Option once vested, may be exercised during the period ("Option
Period") commencing on June 24, 2001 and expiring at 5:00 p.m. Eastern Standard
Time on June 24, 2011 at which time the Optionee shall have no further right to
purchase any Shares not then purchased. MegaMedia Networks shall at all times
during the term of this Agreement have available such number of Shares of Common
Stock as will be sufficient to satisfy the Option.
Initials___________/____________
<PAGE>
D. It is not intended that these Options qualify as Incentive Stock
Options within the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Exercise Price
---------------
The exercise price of the Option (the "Exercise Price") shall be Two
Dollars $2.00 per Share, and shall be payable by certified or bank check payable
to the order of MegaMedia Networks in full at the time of the exercise. As an
alternative, Optionee may present Shares already owned by the Optionee with a
market value at least equal to the aggregate Exercise Price of the Options which
Optionee seeks to exercise.
3. Exercise of Option
------------------
The Optionee may exercise this Option in whole or in part, by providing
notice to MegaMedia Networks, in the form attached as Exhibit A, by registered
or certified mail, return receipt requested, addressed to his principal office,
signed by Optionee, indicating the number of Options which he desires to
exercise. The notice shall be accompanied by payment of the Option Price as
specified in Paragraph 2 above. As soon as practicable after the receipt of such
notice of exercise, MegaMedia Networks shall cause the Company's transfer agent
to issue to the Optionee certificates issued in the Optionee's name evidencing
the Shares purchased by the Optionee.
4. Death of Optionee
------------------
In the event of the death of the Optionee, any unexercised portion of
his Option shall be exercisable (to the extent that such Option was exercisable
at the time of his death) for sixty (60) days after the Optionee's death only by
his personal representative or such persons to whom such deceased Optionee's
rights shall pass under such Optionee's will or by the laws of descent and
distribution.
5. Non-Transferability of Option
-----------------------------
The Optionee may not give, grant, sell, exchange, transfer legal title,
pledge, assign or otherwise encumber or dispose of the Option or any interest
therein, otherwise than by will or the laws of descent and distribution and,
except as provided in this paragraph and paragraph 4, the Option shall be
exercisable only by the Optionee. Upon any attempt to so transfer the Option, or
upon the levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
6. Restriction on Issuance of Shares - Investment Representation. By
accepting the Option, the Optionee agrees for himself, his heirs and legatees
that any and all Shares purchased upon the exercise of the Option shall be
acquired for investment and not for distribution. Upon the issuance of any or
all of the Shares subject to the Option, the Company, in its discretion, may
require the Optionee, or his heirs or legatees receiving such Shares to deliver
to the Company a representation in writing, in a form satisfactory to the Board
of Directors, that such Shares are being acquired in good faith for investment
and not for distribution. The Company may place a "stop transfer" order with
respect to such Shares with its transfer agent and may place an appropriate
restrictive legend on the certificate(s) evidencing such Shares. Any stock
certificates issued upon the exercise of the Option may bear an appropriate
restrictive legend, if deemed necessary by the Company. The Company agrees to
register the Shares as part of any Form S-8 registration by the Company for so
long as any Shares subject to Options remain outstanding.
Initials____________/_______________
2
<PAGE>
7. Adjustments Upon Changes in Capitalization
------------------------------------------
A. In the event of changes in the outstanding shares of the Company by
reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations or liquidations, the number and class of shares or the amount of
cash or other assets or securities available upon the exercise of the Option and
the Exercise Price shall be correspondingly adjusted.
B. Any adjustment in the number of Shares shall apply proportionately
to only the then unexercised portion of the Option. If fractional Shares would
result from any such adjustment, the adjustment shall be revised to the next
higher whole number.
8. No Rights as Stockholder
------------------------
The Optionee shall have no rights as a stockholder in Shares as to
which the Option has not been exercised.
9. Taxes
-----
The Company may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with the
Options granted hereby. The Company may further require notification from the
Optionee upon any disposition of Shares acquired pursuant to the exercise of
Options granted hereunder.
10. Binding Effect
--------------
Except as herein otherwise expressly provided, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their legal
representatives and assigns.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida applicable to agreements made
and to be performed wholly within the State of Florida
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
- -------------------------------------
Witness: MegaMedia Networks, Inc.
---------------------------- By /s/ William A. Mobley, Jr.
----------------------------------
William A. Mobley, Jr., President
- -------------------------------------
Witness: Optionee: /s/ John P. Chambers
---------------------------- ----------------------------
John P. Chambers
Initials__________/___________
3
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be Executed If Optionee Desires to Exercise the Options)
TO: MegaMedia Networks, Inc.
The undersigned, being the Optionee of certain options ("Options") to
purchase shares of common stock of MegaMedia Networks, Inc. (the "Company" and
the "Shares"), under the conditions thereof, hereby exercises Options to
purchase __________________ Shares evidenced by the within Option Agreement, and
herewith makes payment of the exercise price in full in cash or immediately
available funds. Kindly issue all Shares to the undersigned and deliver them to
the undersigned at the address stated below. If such number of Shares shall not
be all of the Shares purchasable under the within Option Agreement, please issue
a new Option Agreement of like tenor for the balance of the remaining Shares
purchasable hereunder to be delivered to the undersigned at the address stated
below.
By signing below, the Undersigned acknowledges that he has received
such financial and other information to his satisfaction regarding the Company
as he requires to make an informed investment decision. The Undersigned has had
the opportunity to ask questions and receive answers from the Company regarding
the Shares and the Company. The Undersigned further acknowledges that he is
aware that the Shares issued pursuant to this exercise are restricted from
transfer.
Name ____________________________________
(Please Print)
Address __________________________________
Signature _________________________________
Dated _____________________
Initials_________/____________
EXHIBIT 4.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of July 5, 1999, by and between
MegaMedia Networks, Inc.(the "Company"), and Mark R. Dolan, (the "Optionee").
------------------------------
In consideration for the Optionee signing an Employment Agreement of
even date herewith (the "Employment Agreement") with the Company and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
Company hereby grants the Optionee the option to acquire shares of the common
stock of the Company upon the following terms and conditions:
1. Grant of Option
A. The Company hereby grants to the Optionee the right and option (the
"Option") to purchase up to 100,000 fully paid and non-assessable shares of
Common Stock par value $.01 per share of the Company (the "Shares"), subject to
the vesting provisions described below.
B. This Option shall vest in Executive on the earliest to occur of the
following:
(i) On July 4, 2001, provided that Executive remains employed by
Company, a parent or subsidiary corporation of Company; or
(ii) Upon termination of Executive's employment by Company without
"Cause" (as defined in paragraph 8D of the Employment Agreement) prior to July
4, 2001; or
(iii) Upon Executive's termination of his employment for
"Constructive Discharge" (as defined paragraph 8C of the Employment Agreement)
prior to July 4, 2001; or
(iv) A "change in control" of the Company, prior to July 4, 2001.
A "change in control" of the Company shall be defined as (i) a sale, purchase,
merger or other business combination which results in transfer to a third party
of an ownership interest of greater than 50% of the Company or any successor
entity to the Company, (ii) a sale or other disposition of all or substantially
all of the Company's assets, or (iii) election by the shareholders of the
Company of persons to serve as directors of the Company, comprising more than
one-half (1/2) the total number of directors, persons who were not nominated or
recommended to the shareholders for election as directors by the Board's
nominating committee.
C. The date on which the Option vests under this paragraph shall be
known as the "Vesting Date".
D. The Option once vested, may be exercised during the period ("Option
Period") commencing on the Vesting Date and expiring at 5:00 p.m. Eastern
Standard Time on the date that is exactly ten (10) years after the Vesting Date.
For example, if the Vesting Date is July 4, 2001, the Option Period shall expire
at 5:00 PM on July 4, 2011. Upon expiration of the Option Period the
Initials___________/___________
<PAGE>
Optionee shall have no further right to purchase any Shares not then purchased.
The Company shall at all times during the Option Period have available such
number of Shares as will be sufficient to satisfy the Option.
E. It is not intended that these Options qualify as Incentive Stock
Options within the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Exercise Price
--------------
The exercise price of the Option (the "Exercise Price") shall be Three
Dollars ($3.00) per Share, and shall be payable by certified or bank check
payable to the order of the Company at the time of the exercise. As an
alternative, Optionee may present Shares already owned by the Optionee with a
market value at least equal to the aggregate Exercise Price of the Options which
Optionee seeks to exercise.
3. Exercise of Option
------------------
The Optionee may exercise this Option in whole or in part, by providing
notice to the Company, in the form attached as Exhibit A, by registered or
certified mail, return receipt requested, or by overnight mail or personal
delivery, addressed to its principal office, signed by Optionee, indicating the
number of Options which he desires to exercise. The notice shall be accompanied
by payment of the Exercise Price as specified in Paragraph 2 above. As soon as
practicable after the receipt of such notice of exercise, the Company shall
cause the Company's transfer agent to issue to the Optionee certificates issued
in the Optionee's name evidencing the Shares purchased by the Optionee.
4. Death of Optionee
-----------------
In the event of the death of the Optionee, any unexercised portion of
his Option shall be exercisable (to the extent that such Option was exercisable
at the time of his death) for one hundred and twenty (120) days after the
Optionee's death only by his personal representative or such persons to whom the
deceased Optionee's rights shall pass under the Optionee's will or by the laws
of descent and distribution.
5. Non-Transferability of Option
-----------------------------
The Optionee may not give, grant, sell, exchange, transfer legal title,
pledge, assign or otherwise encumber or dispose of the Option or any interest
therein, otherwise than by will or the laws of descent and distribution and,
except as provided in this paragraph and paragraph 4, the Option shall be
exercisable only by the Optionee. Upon any attempt to so transfer the Option, or
upon the levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
6. Restriction on Issuance of Shares - Investment Representation. By
accepting the Option, the Optionee agrees for himself, his heirs and legatees
that any and all Shares purchased upon the exercise of the Option shall be
acquired for investment and not for distribution. All shares acquired by
Executive under these provisions will be subject to statutory restrictions,
registration and to such lockup agreements as Company may reasonably require of
its executives. Upon the issuance of any or all of the Shares subject to the
Option, the Company, in its discretion, may require the Optionee, or his heirs
or legatees receiving such Shares to deliver to the Company a representation in
writing, in a form satisfactory to the Board of Directors, that such Shares are
being acquired in good faith for investment and not for distribution. The
Company may place a "stop transfer" order with respect to such Shares with its
transfer
Initials_______________/____________
2
<PAGE>
agent and will place an appropriate restrictive legend on the certificate(s)
evidencing such Shares. The Company agrees to register the Shares as part of any
Form S-8 registration by the Company for so long as any Shares subject to
Options remain outstanding.
7. Adjustments Upon Changes in Capitalization
------------------------------------------
A. The Stock Option referenced herein shall not be subject to any
dilution as to percentage of ownership, that differs from any dilution of
percentage of ownership that may be from time to time be appropriately approved
and undertaken by the Company and that is applicable to all issued and
outstanding stock of the Company. In the event that the outstanding shares are
changed into or exchanged for a different number or kind of shares or securities
of the Company, or of any other corporation, by reason of reorganization,
merger, or other subdivision, consolidation. Recapitalization, reclassification,
stock split, stock divided or combination of shares or similar event, the
Company shall make an appropriate and equitable adjustment to the Stock Option
or to the Purchase Price so that Executive's proportionate interest shall be
maintained as before the occurrence of such event to the maximum extent
possible.
B. Any adjustment in the number of Shares shall apply proportionately
to only the then unexercised portion of the Option. If fractional Shares would
result from any such adjustment, the adjustment shall be revised to the next
higher whole number.
8. No Rights as Stockholder
------------------------
The Optionee shall have no rights as a stockholder in Shares as to
which the Option has not been exercised.
9. Taxes
-----
The Company may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with the
exercise of the Option granted hereby. The Company may further require
notification from the Optionee upon any disposition of Shares acquired pursuant
to the exercise of the Options granted hereunder.
10. Binding Effect
--------------
Except as herein otherwise expressly provided, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their legal
representatives and assigns.
11. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida applicable to agreements made and to be
performed wholly within the State of Florida
Initials__________/______________
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
- -------------------------------
Witness: MegaMedia Networks, Inc.
---------------------- By: /s/ William A. Mobley, Jr.
---------------------------
William A. Mobley, Jr., President
- -------------------------------
Witness: Optionee: /s/ Mark R. Dolan
---------------------- -------------------------
Mark R. Dolan
Initials________/__________
4
<PAGE>
EXERCISE FORM
(To be Executed If Optionee Desires to Exercise the Options)
TO: MegaMedia Networks, Inc.
The undersigned, being the Optionee of certain options ("Options") to
purchase shares of common stock of MegaMedia Networks, Inc. (the "Company" and
the "Shares"), under the conditions thereof, hereby exercises Options to
purchase __________________ Shares evidenced by the within Option Agreement, and
herewith makes payment of the exercise price in full in cash or immediately
available funds or by presenting shares already owned by the Optionee with a
market value at least equal to the aggregate exercise price due.. Kindly issue
all Shares to the undersigned and deliver them to the undersigned at the address
stated below. If such number of Shares shall not be all of the Shares
purchasable under the within Option Agreement, please issue a new Option
Agreement of like tenor for the balance of the remaining Shares purchasable
hereunder to be delivered to the undersigned at the address stated below.
By signing below, the Undersigned acknowledges that he has received
such financial and other information to his satisfaction regarding the Company
as he requires to make an informed investment decision. The Undersigned has had
the opportunity to ask questions and receive answers from the Company regarding
the Shares and the Company. The Undersigned further acknowledges that he is
aware that the Shares issued pursuant to this exercise may be restricted from
transfer.
Name ____________________________________
(Please Print)
Address _________________________________
___________________________ Signature _______________________________
Dated _____________________
Initials__________/_________
EXHIBIT 4.3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT as of January 5, 2000, by and between MegaMedia
Networks, Inc., a Delaware corporation with its principal office located at 57
West Pine Street, Orlando, Florida 32801 (the "Company") and William A. Mobley,
Jr. (the "Optionee").
------------------------------
In recognition of Optionee's assistance to the Company in its
formation, organization and executive recruiting, the Company hereby grants the
Optionee an option (the "Option") to purchase 177,841 shares of the Company's
Common Stock (the "Shares"). The Company's Board of Directors has adopted this
Agreement between the Optionee and the Company.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Company
hereby grants the Optionee the Option upon the following terms and conditions:
1. Grant of Option
(a) The Company hereby grants to the Optionee the Option to
purchase up to 177,841 fully paid and non-assessable Shares, to be issued upon
the exercise of the Option as described below. The Option is fully vested on the
date of this Agreement.
(b) The Option may be exercised during the period ("Option
Period") commencing on the date of this Agreement and expiring at 5:00 p.m.
Eastern Standard Time on January 5, 2009 at which time the Optionee shall have
no further right to purchase any Shares not then purchased. The Company shall at
all times during the term of this Agreement reserve and keep available such
number of Shares as is sufficient to satisfy the requirements of this Agreement.
(c) It is not intended that these Options qualify as Incentive
Stock Options within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price
--------------
The exercise price of the Option (the "Exercise Price") shall be
$2.00 per Share, and shall be payable by certified or bank check payable to the
order of the Company in full at the time of the exercise. As an alternative,
Optionee may present Shares already owned by the Optionee with a market value at
least equal to the aggregate Exercise Price of the Options that Optionee seeks
to exercise.
<PAGE>
3. Exercise of Option
------------------
The Optionee may exercise options to purchase Shares by providing
notice to the Company in the form attached as Exhibit A, by registered or
certified mail, return receipt requested, addressed to its principal office,
signed by Optionee, indicating the number of Options which he desires to
exercise. The notice shall be accompanied by payment of the Exercise Price as
specified in Paragraph 2 above. As soon as practicable after the receipt of such
notice of exercise, the Company shall issue or shall cause its transfer agent to
issue, to the Optionee certificates issued in the Optionee's name evidencing the
Shares purchased by the Optionee hereunder.
4. Death of Optionee
-----------------
In the event of the death of the Optionee, any unexercised
portion of his Option shall be exercisable (to the extent that such Option was
exercisable at the time of his death) until the expiration of the Option and
shall be exercisable only by his personal representative or such persons to whom
such deceased Optionee's rights shall pass under such Optionee's will or by the
laws of descent and distribution.
5. Non-Transferability of Option
-----------------------------
The Optionee may not give, grant, sell, exchange, transfer legal
title, pledge, assign or otherwise encumber or dispose of the Option herein
granted or any interest therein, otherwise than by will or the laws of descent
and distribution and, except as provided in paragraph 4 herein, the Option shall
be exercisable only by the Optionee. Upon any attempt to so transfer the Option,
or upon the levy or attachment or similar process of the Option, the Option
shall automatically become null and void.
6. Restriction on Issuance of Shares - Investment Representation
-------------------------------------------------------------
By accepting the Option, the Optionee agrees for himself, his
heirs and legatees that any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion, may require the Optionee, or his heirs or legatees receiving such
Shares to deliver to the Company a representation in writing, in a form
satisfactory to the Board of Directors, that such Shares are being acquired in
good faith for investment and not for distribution. The Company may place a
"stop transfer" order with respect to such Shares with its transfer agent and
may place an appropriate restrictive legend on the certificate(s) evidencing
such Shares. Any stock certificates issued upon the exercise of the Option may
bear an appropriate restrictive legend, if deemed necessary by the Company. The
Company agrees to register the Shares as part of any Form S-8 registration by
the Company so long as any Shares subject to Options remain outstanding.
2
<PAGE>
7. Adjustments Upon Changes in Capitalization
------------------------------------------
(a) In the event of changes in the outstanding shares of the
Corporation by reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations or liquidations, the number and class of shares or the amount of
cash or other assets or securities available upon the exercise of the Option and
the Exercise Price shall be correspondingly adjusted.
(b) Any adjustment in the number of Shares shall apply
proportionately to only the then unexercised portion of the Option. If
fractional Shares would result from any such adjustment, the adjustment shall be
revised to the next higher whole number.
8. No Rights as Stockholder
------------------------
The Optionee shall have no rights as a stockholder in respect of
the Shares as to which the Option has not been exercised and payment made.
9. Taxes
-----
The Company may make such provisions as it may deem appropriate
for the withholding of any taxes which it determines is required in connection
with the Options granted hereby. The Company may further require notification
from the Optionee upon any disposition of Shares acquired pursuant to the
exercise of Options granted hereunder.
10. Binding Effect
--------------
Except as herein otherwise expressly provided, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto,
their legal representatives and assigns.
11. Governing Law
--------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida applicable to agreements made and to be
performed wholly within the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
MegaMedia Networks, Inc.
By: /s/ Mark R. Dolan
----------------------------
Mark R. Dolan
/s/ William A. Mobley, Jr.
-----------------------------
William A. Mobley, Jr.
3
<PAGE>
EXHIBIT "A"
EXERCISE FORM
(To be Executed If Optionee Desires to Exercise the Options)
TO: MegaMedia Networks, Inc.
The undersigned, being the Optionee of certain options ("Options") to purchase
shares of common stock of MegaMedia Networks, Inc. (the "Company" and the
"Shares"), under the conditions thereof, hereby exercises Options to purchase
___________________ Shares evidenced by the within Option Agreement, and
herewith makes payment of the exercise price in full in cash or immediately
available funds. Kindly issue all Shares to the undersigned and deliver them to
the undersigned at the address stated below. If such number of Shares shall not
be all of the Shares purchasable under the within Option Agreement, please issue
a new Option Agreement of like tenor for the balance of the remaining Shares
purchasable hereunder to be delivered to the undersigned at the address stated
below.
By signing below, the Undersigned acknowledges that he has received such
financial and other information to his satisfaction regarding the Company as he
requires to make an informed investment decision. The Undersigned has had the
opportunity to ask questions and receive answers from the Company regarding the
Shares and the Company. The Undersigned further acknowledges that he is aware
that the Shares issued pursuant to this exercise are restricted from transfer.
Name:_______________________________
(Please Print)
Address:____________________________
Signature:__________________________
Dated:___________________________
4
EXHIBIT 4.4
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT as of January 5, 2000, by and between MegaMedia
Networks, Inc., a Delaware corporation with its principal office located at 57
West Pine Street, Orlando, Florida 32801 (the "Company") and Mark R. Dolan (the
"Optionee").
------------------------------
In recognition of Optionee's assistance to the Company in its
formation, organization and executive recruiting, the Company hereby grants the
Optionee an option (the "Option") to purchase 11,856 shares of the Company's
Common Stock (the "Shares"). The Company's Board of Directors has adopted this
Agreement between the Optionee and the Company.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Company
hereby grants the Optionee the Option upon the following terms and conditions:
1. Grant of Option
---------------
(a) The Company hereby grants to the Optionee the Option to
purchase up to 11,856 fully paid and non-assessable Shares, to be issued upon
the exercise of the Option as described below. The Option is fully vested on the
date of this Agreement.
(b) The Option may be exercised during the period ("Option
Period") commencing on the date of this Agreement and expiring at 5:00 p.m.
Eastern Standard Time on January 5, 2005 at which time the Optionee shall have
no further right to purchase any Shares not then purchased. The Company shall at
all times during the term of this Agreement reserve and keep available such
number of Shares as is sufficient to satisfy the requirements of this Agreement.
(c) It is not intended that these Options qualify as Incentive
Stock Options within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price
--------------
The exercise price of the Option (the "Exercise Price") shall be
$2.00 per Share, and shall be payable by certified or bank check payable to the
order of the Company in full at the time of the exercise. As an alternative,
Optionee may present Shares already owned by the Optionee with a market value at
least equal to the aggregate Exercise Price of the Options that Optionee seeks
to exercise.
<PAGE>
3. Exercise-of-Option
-------------------
The Optionee may exercise options to purchase Shares by providing
notice to the Company in the form attached as Exhibit A, by registered or
certified mail, return receipt requested, addressed to its principal office,
signed by Optionee, indicating the number of Options which he desires to
exercise. The notice shall be accompanied by payment of the Exercise Price as
specified in Paragraph 2 above. As soon as practicable after the receipt of such
notice of exercise, the Company shall issue or shall cause its transfer agent to
issue, to the Optionee certificates issued in the Optionee's name evidencing the
Shares purchased by the Optionee hereunder.
4. Death of Optionee
-----------------
In the event of the death of the Optionee, any unexercised
portion of his Option shall be exercisable (to the extent that such Option was
exercisable at the time of his death) until the expiration of the Option and
shall be exercisable only by his personal representative or such persons to whom
such deceased Optionee's rights shall pass under such Optionee's will or by the
laws of descent and distribution.
5. Non-Transferability of Option
-----------------------------
The Optionee may not give, grant, sell, exchange, transfer legal
title, pledge, assign or otherwise encumber or dispose of the Option herein
granted or any interest therein, otherwise than by will or the laws of descent
and distribution and, except as provided in paragraph 4 herein, the Option shall
be exercisable only by the Optionee. Upon any attempt to so transfer the Option,
or upon the levy or attachment or similar process of the Option, the Option
shall automatically become null and void.
6. Restriction on Issuance of Shares - Investment Representation
-------------------------------------------------------------
By accepting the Option, the Optionee agrees for himself, his
heirs and legatees that any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion, may require the Optionee, or his heirs or legatees receiving such
Shares to deliver to the Company a representation in writing, in a form
satisfactory to the Board of Directors, that such Shares are being acquired in
good faith for investment and not for distribution. The Company may place a
"stop transfer" order with respect to such Shares with its transfer agent and
may place an appropriate restrictive legend on the certificate(s) evidencing
such Shares. Any stock certificates issued upon the exercise of the Option may
bear an appropriate restrictive legend, if deemed necessary by the Company. The
Company agrees to register the Shares as part of any Form S-8 registration by
the Company so long as any Shares subject to Options remain outstanding.
2
<PAGE>
7. Adjustments Upon Changes in Capitalization
------------------------------------------
(a) In the event of changes in the outstanding shares of the
Corporation by reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations or liquidations, the number and class of shares or the amount of
cash or other assets or securities available upon the exercise of the Option and
the Exercise Price shall be correspondingly adjusted.
(b) Any adjustment in the number of Shares shall apply
proportionately to only the then unexercised portion of the Option. If
fractional Shares would result from any such adjustment, the adjustment shall be
revised to the next higher whole number.
8. No Rights as Stockholder
------------------------
The Optionee shall have no rights as a stockholder in respect of
the Shares as to which the Option has not been exercised and payment made.
9. Taxes
-----
The Company may make such provisions as it may deem appropriate
for the withholding of any taxes which it determines is required in connection
with the Options granted hereby. The Company may further require notification
from the Optionee upon any disposition of Shares acquired pursuant to the
exercise of Options granted hereunder.
10. Binding Effect
--------------
Except as herein otherwise expressly provided, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto,
their legal representatives and assigns.
11. Governing Law
--------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida applicable to agreements made and to be
performed wholly within the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
MegaMedia Networks, Inc.
By: /s/ William A. Mobley, Jr.
------------------------------
William A. Mobley, Jr.
/s/ Mark R. Dolan
------------------------------
Mark R. Dolan
3
<PAGE>
EXHIBIT "A"
EXERCISE FORM
(To be Executed If Optionee Desires to Exercise the Options)
TO: MegaMedia Networks, Inc.
The undersigned, being the Optionee of certain options ("Options") to purchase
shares of common stock of MegaMedia Networks, Inc. (the "Company" and the
"Shares"), under the conditions thereof, hereby exercises Options to purchase
Shares evidenced by the within Option Agreement, and herewith makes payment of
the exercise price in full in cash or immediately available funds. Kindly issue
all Shares to the undersigned and deliver them to the undersigned at the address
stated below. If such number of Shares shall not be all of the Shares
purchasable under the within Option Agreement, please issue a new Option
Agreement of like tenor for the balance of the remaining Shares purchasable
hereunder to be delivered to the undersigned at the address stated below.
By signing below, the Undersigned acknowledges that he has received such
financial and other information to his satisfaction regarding the Company as he
requires to make an informed investment decision. The Undersigned has had the
opportunity to ask questions and receive answers from the Company regarding the
Shares and the Company. The Undersigned further acknowledges that he is aware
that the Shares issued pursuant to this exercise are restricted from transfer.
Name:______________________________
(Please Print)
Address:___________________________
Signature:_________________________
Dated:________________________
4
Exhibit 10.1
--------------------------
LEASE AGREEMENT
--------------------------
LANDLORD
KYUNG PARK AND BANG PARK
AND
TENANT
MEGAMEDIA NETWORKS, INC.
- Third Floor -
<PAGE>
LEASE AGREEMENT
THIS LEASE was entered into effective the ___ day of June, 1999, by and
between KYUNG PARK and BANG PARK, his wife ("Landlord") and MEGAMEDIA NETWORKS,
INC., a Florida Corporation ("Tenant"). In consideration of the obligation of
Tenant to pay rent as herein provided and in consideration of the terms,
covenants, and conditions of this agreement, Landlord leases to Tenant, and
Tenant takes from Landlord the Premises for the Term as provided below.
ARTICLE I
---------
DEFINITIONS AND ENUMERATION OF EXHIBITS
1.1 DEFINITIONS. In addition to other terms which are defined in this
lease, the following terms shall have the meanings and only such meanings,
unless such meanings are expressly limited or expanded elsewhere in this
agreement:
(a) BUILDING. (i) The real estate depicted or described on Exhibit "A",
(ii) such contiguous real estate as Landlord may from time to time designate in
writing as being included in Building, (iii) the buildings and improvements
constructed on such real estate together with all alterations and additions, and
(iv) such improvements as may be constructed on such real estate after the
Rental Commencement Date.
(b) THE PREMISES. That portion of Building which is outlined on the
floor plan or plans, marked Exhibit "B". The Premises are deemed to contain
approximately 3663 square feet of Gross Rentable Area being the Third floor of
the existing building, but reserving and excepting to Landlord the use of the
roof and exterior walls and the right to install, maintain, use, repair and
replace pipes, ducts, conduits, wires and appurtenant fixtures, leading through
the Premises in locations which will not materially interfere with Tenant's use
thereof. The parties accept the above computation as the actual size of the
premises and waive any right to seek adjustments if it is subsequently
determined to be incorrect.
Tenant has an option to add the second floor of the building to the
Premises. This option shall expire on August 10, 1999. Tenant may exercise the
option by notifying Landlord in writing prior to the expiration date and
tendering therewith the security deposit of $3,000.00 and the first months rent
together with prorated rent for any partial month.
(c) READY FOR OCCUPANCY. The Premises are accepted "as is" and are
therefore ready for occupancy by Tenant, subject to completion of any
improvements by Tenant for its benefit. Tenant may take occupancy upon execution
of this lease and payment of the required deposit.
(d) RENTAL COMMENCEMENT DATE. The rental commencement date shall be
June 14, 1999.
<PAGE>
(e) LEASE TERM. June 4, 1999 until May 30, 2002, unless extended
pursuant to the option to extend for the term of two (2) years as provided
below.
(f) MINIMUM GUARANTEE RENTAL. The Base Rent provided herein.
(g) ADVANCED DEPOSIT. One month's rent of $4,273.50 plus $256.41 sales
tax paid with execution of the Lease (to be applied to the first obligations
that accrue hereunder).
(h) SECURITY DEPOSIT. $5,000.00. Additional $3,000.00 if option to add
second floor is exercised.
(i) TENANT'S WORK. Not Applicable.
(j) LANDLORD'S WORK. None.
(k) LANDLORD'S MAILING ADDRESS:
KYUNG and BANG PARK
21 South Orange Avenue
Orlando, Florida 32801
Or such other address as Landlord designates to Tenant in writing.
(l) TENANT'S MAILING ADDRESS:
MEGAMEDIA NETWORK, INC.
ATTN: WILLIAM MOBLEY
829 Hickory Hill Court
Orlando, Fl 32828
Or such other address as Tenant designates in writing to Landlord.
(m) USE OF PREMISES. The Premises may be used only for a business
office.
(n) LANDLORD'S CONTRIBUTION TO TENANT'S WORK. None.
(o) COMMON AREAS. Those areas of the Building which are from time to
time for joint use by the tenants of Building or by the public including,
without limiting the generality of the elevator, fire escapes, delivery
passages, walkways, backyard and landscaped areas which are not leased to or
reserved for individual tenants.
(p) GROSS RENTABLE AREA. Floor area designed for tenant occupancy and
exclusive use which is the third floor of the Building and will include the
second floor if the Tenant exercises the option to include it in the Premises.
(q) ASSESSMENT PERCENTAGE. 36%. This percentage is intended to
represent Tenant's Premises proportionate size of the Gross Rental Area of the
Building. The parties agree to use
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this percentage even if there are minor variations from the actual number. If
the Tenant exercises the option to include the second floor in the Premises the
total Assessment Percentage shall increase by 28% and total 64%.
(r) LEASE YEAR. The Term "Lease Year" shall mean, in the case of the
first Lease Year, that period from the Rental Commencement Date to the first
succeeding December 31; thereafter, "Lease Year" shall mean each successive
twelve (12) calendar month period following the expiration of the first Lease
Year, in each case commencing on January 1 and ending the next succeeding
December 31, except that in the event of the termination of this lease on any
day other than December 31, then the last Lease Year shall be the period from
the end of the preceding Lease Year to such date of termination.
(s) LIABILITY INSURANCE LIMITS. $1,000,000 with respect to injuries to
or death of any one person and $1,000,000.00 with respect to any one occurrence
and $500,000.00 with respect to property damage or a combined single limit of
$2,000,000.00. Limits are subject to adjustment as provided in this Lease.
1.2 EXHIBITS. The exhibits enumerated in this section (if used) and
attached to this lease are incorporated in this lease by this reference and are
to be construed as a part of this lease.
(a) EXHIBIT "A". Building.
(b) EXHIBIT "B". General Floor area plan of Premises and building
containing Premises.
(c) EXHIBIT "C". (DELETED)
(d) EXHIBIT "D". Rules and Regulations. (None at this time).
(e) EXHIBIT "E". Guarantee.
(f) EXHIBIT "F". (NONE)
ARTICLE II
----------
CONSTRUCTION, ACCEPTANCE AND FINANCING OF PREMISES
2.1 LANDLORD'S CONSTRUCTION. The Landlord's work has been completed and
the Premises are accepted by the Tenant "as is".
2.2 TENANT'S PLANS. Tenant agrees to submit to Landlord the date of
this Lease, plans and specifications in such detail as Landlord may reasonably
for work which Tenant proposes to do on the Premises. Such plans and
specifications shall comply with all requirements as set forth herein. Tenant
shall not commence work on the Premises until Landlord has approved such plans
and specifications in writing, which approval shall not be unreasonably withheld
or delayed.
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2.3 TENANT'S WORK. Tenant agrees to proceed with due diligence to
perform the work described in such plans and specifications which have been
approved by Landlord, and to install its fixtures, furniture and equipment on
the Premises. By occupying the Premises, Tenant shall be deemed to have
acknowledged that the Landlord has complied with all of its covenants and
obligations with respect to the construction of the Premises, except for defects
in Landlord's work which are latent at the time the Premises are occupied. In
the event of any dispute concerning work performed or required to be performed
in the Premises by Landlord or Tenant, the matter in dispute shall be submitted
to Landlord's architect for determination and his certificate with respect
thereto shall be binding on Landlord and Tenant. Tenant will pay all impact
fees, permitting costs and other charges associated with the construction and
opening of the Premises for business.
2.4 OCCUPANCY. (Deleted)
2.5 LEASE MODIFICATION. (Deleted)
2.6 SITE MODIFICATIONS. Landlord may do any one or more of the
following with respect to the Building and the Common Areas provided that
reasonable access to the Premises shall not be materially impaired: (i)
construct alterations and signs; (ii) construct additions thereto; (iii) connect
to then-existing buildings.
ARTICLE III
-----------
TERM AND OPTION TO EXTEND
3.1 INITIAL TERM. The Initial Term shall run from the Rental
Commencement Date until May 30, 2002.
3.2 OPTION TO EXTEND. Tenant shall have the option to extend the Term
for two (2) years, upon the same terms and conditions as in effect immediately
prior to each extension except that the monthly Base Rent shall be the amount
established below. The option to renew shall be deemed waived unless Tenant
notifies Landlord in writing at least one hundred and twenty (120) days before
the expiration of the existing Term.
Conditions to the valid exercise of the renewal term are: Tenant shall
not be in default hereunder beyond any applicable period to cure (a) at the time
of exercise of the option through commencement of the renewal term, or (b) more
than once during any twelve (12) month period prior to the exercise date.
3.3 HOLDING OVER. If Tenant continues in possession of the Premises
after expiration of the Term without the written consent of Landlord, Tenant
shall be deemed a tenant at sufferance. Landlord's acceptance of payments from
Tenant during any such holdover shall not convert Tenant's occupancy to anything
other that a tenancy at sufferance, nor shall it be deemed to renew the term of
this Lease. During any such tenancy at sufferance, Tenant shall pay during each
month of the period of Tenant's holdover double the Monthly Base Rental charged
Tenant during the month immediately preceding the expiration or termination of
this Lease.
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Alternatively, at the election of Landlord expressed in written notice to
Tenant, and not otherwise, Tenant's retention of possession after the
termination hereof shall constitute a renewal of this Lease for one year at the
annual Base Rental that would have been in effect for and additional year; but
acceptance by Landlord of rent after termination shall not of itself constitute
a renewal. If Tenant continues in possession of the Premises after the
expiration of the term of this Lease with the prior written consent of Landlord
Tenant shall become a tenant at will of the Premises. In that event, either
party may terminate such tenancy by giving thirty (30) days prior written notice
to the other party of such termination. All terms of this Lease, so far as
applicable shall govern Tenant's occupancy as a Tenant at will, except that the
Base Monthly Rental for such tenancy shall be at a rate equal to 200% of the
Base Monthly Rental paid by Tenant at the time of the expiration hereof. This
provision shall not be construed to confer any rights whatsoever on Tenant to
hold over without written consent of Landlord.
ARTICLE IV
----------
RENT
4.1 BASE RENT. Tenant shall pay to the Landlord the rent in equal
monthly installments in advance on the first day of each month. The Base Rent
for the Term is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(a) June 1, 1999 through and including May 30, 2000 $4,273.50 per month
(b) June 1, 2000 through and including May 30, 2001 $4,578.75 per month
(c) June 1, 2001 through and including May 30, 2002 $4,884.00 per month
If the Tenant exercises the option to acquire the second floor then the
following additional rent shall be due:
<CAPTION>
<S> <C> <C>
(a) Date option is exercised through and including May 30, 2000 $2,367.50 per month
(b) June 1, 2000 through and including May 30, 2001 $2,604.25 per month
(c) June 1, 2001 through and including May 30, 2002 $2,841 .00 per month
</TABLE>
If the Tenant exercises the option to extend the Term, for Lease Years
commencing with 2002, the Base Rent shall be adjusted in, and effective for,
January of each Lease Year by increasing, never decreasing, the previous Lease
Year's monthly rent by the percentage increase in the "Consumer Price Index" as
published by the Bureau of Labor Statistics of the United States Department of
Labor with adjustments being determined by using as a basis the index number for
the then last preceding October, compared to the same index for the month
preceding the Rental Commencement Date of this Lease. For example, Base Rent for
2002 shall be computed by comparing the index for December, 2001 with the index
for December, 1999.
NOTE: Notwithstanding the foregoing, this adjustment shall not affect
the rent for June 1, 2001 through May 30, 2002.
5
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Should such index number become unavailable, or if there is a
substantial change in the method of computing the index, the index to be used
will be the "Index Number of Wholesale Prices of All Commodities Revised"
published by the United States Department of Labor; if the aforementioned index
also become unavailable or its method of computation is substantially changed,
the index to be used is the "Index of the General Price Level" issued by the
Federal Reserve Bank of New York. In the event that the parties are unable to
agree with regard to the amount of such increase, either party may at any time
submit the controversy to arbitration in Orange County, Florida, according to
the rules of the American Arbitration Association. The cost incurred by such
determination shall be shared equally by the parties and the award therefrom may
be enforced in any court of competent jurisdiction. The Tenant shall not
withhold rent if there is a misunderstanding or problem determining the
adjustment.
RENTAL ADJUSTMENT. Notwithstanding the foregoing, If the option to
extend the Term is exercised, the Base Rent for the shall be adjusted and
changed by increasing the Base Rent by whichever of the following procedures
results in the largest Base Rent:
(a) The first 12 months Base Rent shall be 3% larger than the rate for
the prior 12 months; the second 12 month period shall have a Base
Rent 3% higher than the prior 12 months Base Rent.
(b) The CPI adjustment provided for above.
4.2 ADDITIONAL. (deleted)
4.3 NO SETOFF. It is the purpose and intent of the parties that the
rent is absolutely net and shall be paid without offset, counterclaim, abatement
or defense, and this Lease shall not be subject to termination by Tenant for any
cause unless expressly provided herein.
4.4 LATE FEE. All rent and charges hereunder are to be delivered or
mailed to Landlord on or before the eighth (8th) business day of each month.
Tenant shall pay a late fee of $200 for each payment that is late, the parties
agreeing that this represents an agreed estimation of the liquidated damages and
is not to be considered interest, forfeiture or penalty. Landlord shall notify
Tenant of the late receipt and the late fee shall be due with the next rent
obligation. This provision is not intended to waive any other remedy Landlord
may have.
4.5 SALES TAX. Tenant shall also pay all sales and other taxes now or
hereafter imposed on Tenant in connection with this agreement which shall be
paid to Landlord when Landlord is required by law to collect the tax.
4.6 RENT ABATEMENT AND RENT INSURANCE. (deleted)
4.7 LIEN. Landlord shall have a lien on all property of the Tenant on
the Premises or in the Shopping Center as security for the payment of all sums
due under this lease and Landlord shall have, in addition to any other rights
allowed by law, all of the rights of a secured party under the Uniform
Commercial Code as adopted by Florida, including a right to possession of
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the property upon a default by Tenant. The lien of the Landlord shall be
subordinate to any prior liens encumbering said property at the time it is
brought upon the Premises.
ARTICLE V
---------
COMMON AREAS
5.1 USE OF COMMON AREAS. Tenant, and its licensees, invitees, employees
and clients shall have the non-exclusive right to use the Common Areas, subject
to such reasonable rules and regulations as Landlord may from time to time
prescribe. Tenant shall not solicit business, distribute handbills or display
merchandise or signs within the Common Area.
The entryway depicted on Exhibit "B" attached hereto shall be for the
exclusive use of the Tenants of the third floor and second floor. Tenant may
install an access control device on the gate if the second floor is included in
the Premises. Tenant shall maintain the entryway at its expense, including the
landscaping within the entryway, however, Tenant may, by written notice to
Landlord, require Landlord to assume responsibility for same as provided for
below.
The grounds at the rear of the Building and the landscaping in the
front shall be for the exclusive use of the tenant of the first floor and
expenses of maintaining same shall be paid solely by the Landlord or the tenant
of the first floor
5.2 MAINTENANCE. Except as provided herein, Landlord shall maintain the
Common Areas in good order, condition, and repair. Tenant agrees to pay to
Landlord, as additional rent, its share of any and all expenses incurred by
Landlord with respect to the operation, maintenance and repair, of the Common
Areas, including, without limiting the generality of the foregoing, the
following: landscaping, utilities, fire protection, security services, all
insurance coverages (including rent coverage) carried by Landlord for the
Building, and overhead costs equal to fifteen percent (15%) of all such costs.
Notwithstanding the foregoing to the contrary, Landlord may cause all or any
portion of the foregoing services to be provided by independent contractors.
Common area maintenance shall be deemed to include the normal maintenance
expenses incurred in the maintenance of the exterior walls and roof of the
building.
Tenant shall be responsible for the day to day maintenance of the air
conditioning (including regular replacement of the filters) system servicing the
third floor (and the second floor if Tenant includes it in the Premises) and the
elevator which Landlord represents are in good order and repair. If the Tenant
does not include the elevator in the Premises the Landlord shall require any
Tenant who subsequently leases the second floor to contribute 1/3 of the
maintenance cost of the elevator which Landlord shall be responsible for
collecting and timely remitting to Tenant. The Landlord shall be responsible for
any major repairs or replacements of the air conditioning or elevator system
reasonably deemed other than normal maintenance items.
5.3 ASSESSMENTS. The share to be paid by Tenant shall be that
percentage of such costs which the Gross Rentable Area of the Premises bears to
the total Gross Rentable Area of the Building which is set forth in Article I
subject to the adjustments in Paragraph 5.2 above regarding the elevator.
Landlord may, at its option, make monthly or other periodic charges
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<PAGE>
based upon the estimated annual cost of operation and maintenance of the Common
Areas, payable in advance but subject to adjustment after the end of each
calendar year on the basis of the actual costs for such year. Within ninety (90)
days after the close of calendar year, upon written request from Tenant,
Landlord will furnish to Tenant a detailed statement of the expenses relating to
the Common Areas for such year, such statement to include Tenant's proportionate
share of the expenses relating to the Common Areas computed as herein provided.
ARTICLE VI
----------
USE AND CARE OF PREMISES
6.1 BUSINESS OPERATION. The Premises shall not be used for any other
purpose than that provided in Section 1.1. Tenant shall occupy the Leased
Premises, conduct its business and control its agents, employees, invitees and
visitors in such a manner as is lawful, reputable and will not create a nuisance
to other tenants in the Property. Tenants shall not permit any operation which
emits any odor or matter which intrudes into other portions of the Property, use
any apparatus or machine which makes undue noise or caused vibration in any
portion of the Property or otherwise interfere with, annoy or disturb any other
tenant in its normal business operations or Landlord in its management of the
Property. Tenant shall neither permit any waste on the Leased Premises nor allow
the Leased Premises to be used in any way which would, in the opinion of
Landlord, be extra hazardous on account of fire or which would in any way
increase or render void the fire insurance on the Property.
6.2 LAWFUL COMPLIANCE. In the use and occupancy of the Premises, the
Tenant shall comply with all laws and ordinances and all valid rules and
regulations of any governmental authority having jurisdiction over the Premises
and all requirements of any public or private agency having authority over the
Premises.
6.3 HAZARDOUS SUBSTANCES. Tenant represents and warrants to Landlord
that the activities Tenant will conduct on the Premises pose no hazard to human
health or the environment nor do they violate any applicable federal, state or
local laws, ordinances, rules or regulations pertaining to Hazardous Materials
(to be hereinafter defined) or industrial hygiene or environmental conditions
("Environmental Laws"). Tenant shall not cause or permit the Premises to be used
for the generation handling, storage, transportation, disposal, or release of
any Hazardous Materials except as exempted or permitted under applicable
Environmental Laws and Tenant shall not cause or permit the Premises or any
activities conducted thereunto be in violation of any applicable Environmental
Laws. Tenant shall acquire and maintain all permits, approvals, licenses and the
like required by Environmental Laws for Tenant's activities on the Premises and
Tenant shall keep those permits approvals, licenses, and the like current, and
shall comply with all regulations, rules and restrictions thereto. Tenant agrees
to indemnify Landlord and hold Landlord harmless from all claims, losses,
damages (including all foreseeable and unforeseeable consequential damages)
liabilities, fines, penalties, and charges, and all costs and expenses incurred
in connection therewith (including without limitation attorney's fees and
expenses) directly or indirectly resulting in whole or in part from Tenant's
violation of any Environmental Laws applicable to the Premises or to any
activity conducted thereon, or from any
8
<PAGE>
use, generation, handling, storage, transportation, disposal or release of
Hazardous Materials at or in connection with the Premises, or any cleanup or
other remedial measures required with respect to the Premises under any
Environmental Laws. Tenant shall reimburse Landlord immediately upon demand for
all sums paid and costs incurred by Landlord with respect to the foregoing
matters. This indemnity shall survive the full performance and expiration of
this Lease and shall inure to the benefit of any transferee of title to the
Premises. For purposes of this Lease, the term "Hazardous Materials" shall
include any substances defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "toxic substances",
"contaminants", "regulated substances", or other pollution under any applicable
federal, state or local law ordinances, rules or regulations now or hereafter in
effect.
ARTICLE VII
-----------
TENANT'S COVENANTS
7.1 GENERAL. Tenant shall not, nor shall Tenant at any time permit any
occupant of the Premises to: (i) use or permit to be used any portion of the
Premises for any unlawful purpose or use or permit the use of any portion of the
Premises as regular living quarters, sleeping apartments or lodging rooms or for
the conduct of any manufacturing business, (ii) use the Premises for or conduct
therein activities, the purpose for which is excluded from or inconsistent with
or not including within the purpose for which the Premises may be used according
to Section 1. I of this lease, or (iii) use, operate or maintain the Premises in
such manner that any of the rates for any insurance carried by Landlord, or the
occupant of any premises within the Building, shall thereby be increased, unless
Tenant shall pay to Landlord or such occupant within the Building, as the case
may be, an amount equal to any such increase in rates, such payment to be made
promptly on demand as each premium which shall include such increase shall
become due and payable.
7.2 GLASS AND REFUSE. Tenant (i) will maintain the Premises in a clean,
orderly and sanitary condition and free of insects, rodents, vermin, and other
pests; and (ii) will not permit undue accumulation of garbage, trash, rubbish or
other refuse in the Premises and Landlord shall provide a suitable location for
Tenant's outside trash receptacle which Tenant shall use and not allow refuse to
be left outside of the receptacle.
7.3 RULES AND REGULATIONS. The rules and regulations as shown on
Exhibit "D" are hereby made a part of this Lease and Tenant agrees to comply
with them. Tenant's failure to observe the rules and regulations shall
constitute a breach of this Lease. Landlord reserves the right to amend or
supplement the rules and regulations. Notice of such additional rules and
regulations, if any, shall be given to Tenant and Tenant agrees to comply with
the rules and regulations, and amendments thereto, provided the same shall apply
uniformly to all tenants of the Building.
9
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ARTICLE VIII
------------
MAINTENANCE AND REPAIR OF PREMISES,
ALTERATIONS AND LANDLORD'S RIGHT OF ACCESS
8.1 MAINTENANCE FOR TENANT. Landlord shall keep, at the Landlord's
expense, the foundation, the roof and the exterior and interior load bearing
walls and supports of the Premises (except plate glass doors, door closures,
door frames, store fronts, windows and window frames located in exterior
building walls) in good repair. In the event that the Premises should become in
need of repairs required to be made by Landlord hereunder, Tenant shall give
immediate written notice thereof to Landlord, and Landlord shall not be
responsible in any way for failure to make any such repairs until a reasonable
time shall have elapsed after the giving of such written notice.
8.2 MAINTENANCE BY TENANT. Tenant shall, at its sole expense, keep the
Premises in a safe, sightly, and serviceable condition and free from any
infestation by insects, rodents, or other pests, and except as specifically
otherwise provided, make all needed maintenance including maintaining standard
service contracts for (i) the heating, ventilating and air conditioning systems
serving the Premises: (ii) the exterior and interior portion of all doors,
windows, window frames, plate glass, door closures and door frames; (iii) all
plumbing and sewage facilities within the Premises, including free flow up to
the connection to the main sewer line; (iv) all sprinkler systems serving the
Premises; (vii) all interior walls, floors, and ceilings; (viii) any of Tenant's
Work and repairs related to Tenants alterations; and (x) all necessary repairs
and replacements of Tenant's trade fixtures required for the proper conduct and
operation of Tenant's business. If at any time and from time to time during the
Term, and any extensions and renewals thereof, Tenant shall fail to make any
maintenance, repairs, or replacements in and to the Premises as required in this
lease, Landlord shall have the right, but not the obligation, to enter the
Premises and to make such maintenance, repairs and replacements for and on
behalf of Tenant and all sums expended by Landlord for such maintenance,
repairs, and replacements shall be deemed to be additional rent hereunder and
shall be payable to Landlord upon demand. At the termination of this lease,
Tenant shall surrender the Premises in good condition, reasonable wear and tear
and loss by fire or other casualty alone excepted.
8.3 NO ALTERATIONS. Tenant shall not make any alterations, additions,
or replacements to the Premises without prior written consent of Landlord,
except for Tenant's Work and the installation of unattached moveable fixtures
which may be installed without drilling, cutting, or otherwise defacing the
Premises. All alterations, additions, and improvements made in and to the
Premises and all floor covering that is cemented or adhesively fixed to the
floor and all fixtures (other than trade fixtures) which are installed in the
Premises shall remain in and be surrendered with the Premises and shall become
the property of Landlord at the expiration of this lease. So long as Tenant is
not in default hereunder, Tenant shall have the right to remove its trade
fixtures from the Premises, provided that Tenant shall repair and restore any
damage to the Premises, caused or occasioned by such removal.
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8.4 WORKMANLIKE WORK. All Tenant's Work and all repairs, alterations,
additions and improvements done by Tenant within the Premises shall be performed
in a good and workmanlike manner, in compliance with all governmental
requirements, and at such times and in the such manner as will cause a minimum
of interference with other construction in progress and with the transaction of
business in the Building. Whenever Tenant proposes to do any construction work
within the Premises, Tenant shall first furnish to Landlord plans and
specifications covering such work in such detail as Landlord may reasonably
request. Such plans and specifications shall comply with such requirements as
Landlord may from time to time prescribe for construction within the Building.
In no event shall any construction work be commenced within the Premises without
Landlord's written approval of such plans and specifications.
8.5 RIGHT OF ENTRY. Landlord shall have the right, but not the duty, to
enter upon the Premises, at any time for emergencies and otherwise with at least
one business day advance notice for the purpose of inspecting the same, or of
making repairs to the Premises, or of making repairs, alterations, or additions
to adjacent property, or of showing the Premises to lenders or to prospective
purchasers or tenants.
8.6 NO LIENS. Tenant shall not suffer or permit any materialmen's,
mechanics', artisans' or other liens to be filed or placed or exist against the
land or building of which the Premises are a part, or Tenant's interest in
Premises by reason of work, services, or materials supplied or claimed to have
been supplied to Tenant or anyone holding the Premises or any part thereof
through or under the Tenant, and nothing contained in this lease shall be deemed
or construed in any way as constituting the consent or request of Landlord,
expressed or implied, to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials for any
improvements, alterations or repairs of or to the Premises or any part thereof,
nor as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of a materialmen's mechanics' or other lien against the
Premises. If any such lien should, at any time, be filed, Tenant shall cause the
same to be discharged of record within fifteen (15) days after the date of
filing the same. If Tenant shall fall to discharge such lien within such period,
then, in addition to any other right or remedy of Landlord, Landlord may, but
shall not be obligated to discharge the same either by paying the amount claimed
to be due or by procuring the discharge of such lien by a deposit in court or by
posting a bond. Any amount paid by Landlord for any of the aforesaid purposes or
for the satisfaction of any other lien not caused by Landlord, and all
reasonable expenses of Landlord in defending any such action or in procuring the
discharge of such lien, shall be deemed additional rent hereunder and shall be
repaid by Tenant to Landlord on demand.
This Lease shall serve as notice to all potential construction lienors
that neither Landlord nor the Premises shall be liable or subject to liens for
any work performed or materials supplied at Tenant's request or at the request
of anyone claiming interest through Tenant. Landlord reserves the right to
record a copy of this Lease or a memorandum hereof in the public records of the
County where the Premises are located, or to post a notice on the Premises
containing this provision, for the purpose of alerting potential claimants of
construction liens that neither
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Landlord nor the Premises are obligated for such liens, and Tenant shall execute
any document requested by Landlord in order to make record of such.
8.7 INTERRUPTION OF BUSINESS. Landlord shall not be liable to Tenant
for any interruption of Tenant's business or inconvenience caused Tenant or
Tenant's assigns, sublessees, clients, invitees, employees or licensees in the
Premises on account of Landlord's performance of any repair, maintenance or
replacement in the Premises or any other work therein pursuant to Landlord's
rights or obligations under this lease so long as such work is being conducted
by Landlord in accordance with the term of this lease and without gross
negligence or gross disregard for Tenant's business operations.
ARTICLE IX
----------
SIGNS, DISPLAYS, DIRECTORY
9.1 SIGNS/DISPLAYS. Tenant shall not, without the prior written consent
of Landlord, (i) paint, decorate or make any changes to the front of the
Premises; (ii) install any exterior lighting, awning or protrusions, or any
exterior signs, advertising matter, decoration or painting; (iii) affix any
window or door lettering, sign decoration or advertising matter to any window or
door glass; or (iv) erect or install any signs, window or door lettering,
placards, decorations or advertising media of any type which can be viewed from
the exterior of the Premises, excepting only dignified displays of customary
type in store windows. Use of the roof of the Premises is reserved to Landlord,
and Landlord may install upon the roof equipment, signs, antenna, displays, and
other objects and may construct additional stories above the Premises, provided
any such use does not unreasonably interfere with Tenant's occupancy of the
Premises.
9.2 SIGN/DIRECTORY. Tenant shall have the use of 1/3 of any approved
signage. The Landlord may impose reasonable rules for the use of the signage.
ARTICLE X
---------
UTILITIES
10.1 SUPPLY. Landlord agrees to cause to be provided such mains,
conduits and other facilities necessary to supply electricity, water, sewer and
telephone to the Premises, in accordance with and subject to any special
provisions contained in Exhibit "C" and shall provide Tenant with separate
meters for utilities serving the Premises.
10.2 CHARGES. Tenant shall promptly pay all charges for electricity,
water, sewer and telephone (where applicable) furnished to the Premises, and
Landlord may, if it so elects, furnish one or more of such services to Tenant,
and, in such event, Tenant shall purchase such services as are tendered by
Landlord and shall pay for such services at the rates established therefore by
Landlord, provided that such rates shall not exceed the rates which would be
charged for the same service if furnished directly by the applicable public
utility then furnishing such service. In the event that at any time during the
Term, or any extensions and renewals thereof, Tenant shall fail to promptly pay
any of the foregoing charges, Landlord shall have the right, but not the
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obligation, to pay such charge or charges for and on behalf of Tenant and such
amounts so paid shall be deemed to be additional rent hereunder and shall be
payable by Tenant to Landlord upon demand.
10.3 INTERRUPTION. Landlord shall not be liable in the event of any
interruption in the supply of any utilities including, without limitation, any
heating and air-conditioning (if provided). Tenant agrees that it will not
install any equipment which will exceed or overload the capacity of any utility
facilities serving the Premises and that if any equipment installed by Tenant
shall require additional utility facilities, the same shall be installed at
Tenant's expense in accordance with plans and specifications to be approved in
writing by Landlord.
ARTICLE XI
----------
INDEMNITY AND NON-LIABILITY
11.1 INDEMNIFICATION. Tenant does hereby agree to indemnify and save
Landlord harmless from and against any and all liability for any injury to or
death of any person or persons or any damage to property in any way arising out
of or connected with the condition other than latent defects, use or occupancy
of the Premises, or in any way arising out of the activities in the Premises,
Common Areas or other portions of the Building, of the Tenant, its assigns or
sublessees or of the respective agents, employees, licensees or invitees of
Tenant, its assigns, or sublessees and from all costs expenses and liabilities,
including, but not limited to, court costs and reasonable attorneys' fees,
incurred by Landlord in connection therewith, excepting however, liability
caused by Landlord's gross negligence.
11.2 NON-LIABILITY. Tenant covenants and agrees that Landlord shall not
be liable to Tenant for any injury to or death of any person or persons or for
damage to any property of Tenant, or any person claiming through Tenant, arising
out of any accident or occurrence on the Premises or any other portion of the
Building, including, without limiting the generality of the foregoing, injury,
death or damage caused by the Premises or other portions of the Building
becoming out of repair or caused by any defect in or failure of equipment,
pipes, or wiring, or caused by broken glass, or caused by the backing up of
drains, or caused by gas, water, steam, electricity, or oil leaking, escaping or
flowing into the Premises, or caused by fire or smoke, or caused by the acts or
omissions of other tenants of the Building.
11.3 DISCLAIMER. Except for the gross negligence of the Landlord,
Landlord shall not be responsible or liable at any time for any loss or damage
to Tenant's merchandise, equipment, fixtures or other personal property or to
Tenant's business; and Landlord shall not be responsible or liable for any
defect, latent or otherwise, in the Building or any of the equipment, machinery,
utilities, appliances or apparatus therein.
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ARTICLE XII
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INSURANCE
12.1 PUBLIC LIABILITY INSURANCE. Tenant shall, at its sole cost and
expense, procure and maintain throughout The Term of this lease a policy or
policies of insurance, insuring Tenant, Landlord and any other persons
designated by Landlord against any and all liability for injury to or death of a
person or persons and for damage to property occasioned by or arising out of the
condition of the Premises, the use or occupancy of the Premises or any
construction work being done on the Premises by Tenant, or if applicable, boiler
explosion. The limits of such policy shall be in an amount not less than the
Liability Insurance Limits as specified in 1.1 and shall be written by an
insurance company or companies reasonably satisfactory to Landlord. Such
policies shall be non-cancelable except after ten (10) days written notice to
Landlord and designees of Landlord. Such policies or duly executed certificates
of insurance with respect thereto shall be delivered to Landlord prior to the
Rental Commencement Date and renewals thereof as required shall be delivered to
Landlord at least thirty (30) days prior to the expiration of the respective
policy terms. The policy limits may be adjusted from time to time by Landlord if
reasonable men would agree that the limits are too low for good business
judgment.
ARTICLE XIII
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DAMAGE BY CASUALTY
13.1 DAMAGE. Tenant shall give immediate written notice to Landlord of
any damage to the Premises caused by fire or other casualty, and if Landlord
does not elect to terminate this lease as hereinafter provided, Landlord shall
proceed with reasonable diligence and at its sole expense to rebuild and repair
the Premises. Notwithstanding the foregoing, in the event that (i) the insurance
proceeds payable in connection with such damage and destruction shall be
insufficient to make such restoration, (ii) the Building in which the Premises
are located shall be destroyed or substantially damaged by casualty not covered
by standard fire or extended coverage insurance, (iii) said building shall be
destroyed or rendered unrentable by any casualty to the extent of at least fifty
percent (50%) of the Gross Rentable Area of said building, (iv) Landlord shall
not have actual and unconditional receipt of the insurance proceeds payable in
connection with such damage and destruction, (v) the holder of any mortgage,
which encumbers Landlord's interest hereunder or in the Premises shall
unrentable by any casualty to the extent of at least fifty percent (50%) of the
Gross Rentable Area of said building, (iv) Landlord shall not have actual and
unconditional receipt of the insurance proceeds payable in connection with such
damage and destruction, (v) the holder of any mortgage, which encumbers
Landlord's interest hereunder or in the Premises shall require that such
proceeds shall be applied against any indebtedness owed to such holder, or (vi)
there shall be less than two (2) years remaining in the Term, or any extension
or renewal thereof, then, in any of such events, Landlord may elect either to
terminate this lease or to proceed to rebuild and repair the Premises. Landlord
shall give written notice to Tenant of such election within ninety (90) days
after the occurrence of such casualty.
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13.2 RESTORATION. Landlord's obligation to rebuild and repair the
Premises under this Article XIII shall in any event be limited to restoring
Landlord's Work to substantially the condition in which the same existed prior
to the casualty, and Tenant agrees that promptly after the completion of such
work by Landlord, Tenant will proceed with reasonable diligence and at its sole
cost and expense to restore Tenant's Work to substantially the condition in
which the same existed prior to the casualty.
13.3 RENT. Tenant agrees that during any period of reconstruction or
repair of the Premises, it will continue the operation of its business within
the Premises to the extent practicable. Tenant shall maintain a "business
interruption" insurance policy, naming Landlord as an additional insured to
assure continuation of the payment of the Minimum Guaranteed Rental. A copy of
the policy shall be provided to Landlord.
13.4 POLICIES. Tenant agrees at all times at its expense to keep its
equipment, fixtures, Tenant's Work (excluding any portion of said work deemed a
fixture properly covered by the building hazard policy) and its other property
situated within the Premises insured against fire, with extended coverage, to
the extent of at least eighty (80%) percent of the full insurable value thereof
Such insurance shall be carried with companies reasonably satisfactory to
Landlord. Such insurance shall be non-cancelable except for ten (10) days
written notice to Landlord. Such policies or duly executed certificates of
insurance with respect thereto shall be delivered to Landlord prior to the
Rental Commencement Date and renewals thereof as required shall be delivered to
Landlord at least thirty (30) days prior to the expiration of the respective
policy terms. The proceeds of such insurance shall be for use by Tenant, except
with the consent of Landlord, for the repair or replacement of merchandise,
fixtures, Tenant's Work, or other property which was situated within the
Premises.
13.5 WAIVER OF SUBROGATION. All fire and extended coverage insurance
carried by Landlord or Tenant covering losses arising out of destruction of or
damage to the Premises or its contents shall, to the extent reasonably
obtainable, provide for waiver of subrogation against Landlord, Tenant and other
tenants in the Building, on the part of the insurance carrier. Evidence of the
existence of such waiver will be furnished by either party to the other party on
request.
13.6 RIGHT TO TERMINATE. In the event that Fifty (50%) percent or more
of the Gross Rentable Area of the Building shall be destroyed or substantially
damaged by any casualty, notwithstanding that the Premises may be unaffected by
such casualty, either Landlord or Tenant may terminate this lease by giving
thirty (30) days prior written notice of election to do so, which notice shall
be given, if at all, within ninety (90) days following the date of said
occurrence. Rent shall be adjusted as of the date of such termination.
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ARTICLE XIV
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EMINENT DOMAIN
14.1 RIGHT TO CANCEL. If more than ten (10%) percent of the Gross
Rentable Area of the Premises is taken for any public or quasi-public use under
any governmental law, ordinance, or regulation, or by right of eminent domain,
or by private purchase under threat thereof, this lease shall terminate upon the
election of either party effective on the date possession of a portion of the
Premises is taken by the condemning authority.
14.2 RENT ADJUSTMENT. If less than ten percent (10%) of the Gross
Rentable Area of the Premises is taken for any public or quasi-public use under
any governmental law, ordinance or regulation, or by right of eminent domain, or
by private purchase under threat thereof, this lease shall not terminate, or if
more than ten percent (10%) of the Gross Rentable Area of the Premises is so
taken and this lease is not terminated in accordance with Section 14.1, then in
either of such events the Minimum Guaranteed Rental (but not percentage rental)
payable hereunder during the unexpired portion of the Term shall be reduced by
the percentage which the area taken bears to the area of the Premises prior to
the date possession of such portion of the Premises is taken by the condemning
authority.
14.3 NOTICE. Any election to terminate this lease following
condemnation shall be evidenced by written notice of termination delivered to
the other party within thirty (30) days after the date by which both Landlord
and Tenant are notified of such taking or such sale, and, in the event that
neither Landlord nor Tenant shall so exercise such election to terminate this
lease, then this lease shall continue in full force and effect.
14.4 RESTORATION. If this lease is not terminated following any
condemnation, Landlord shall make all necessary repairs or alterations within
the scope of Landlord's Work necessary to make the Premises an architectural
whole, and Tenant agrees that promptly after completion of such work by
Landlord, Tenant will proceed with reasonable diligence and at its sole cost and
expense to make all necessary repairs or alterations within the scope of
Tenant's Work necessary to make the Premises an architectural whole.
14.5 COMPENSATION. All compensation awarded for any taking (or the
proceeds of private sale under threat thereof), whether for the whole or a part
of the Premises, shall be the property of Landlord, whether such award is
compensation for damages to Landlord's or Tenant's interest in the Premises, and
Tenant hereby assigns all of its interest in any such award to Landlord;
provided, however, Landlord shall have no interest in any award made to Tenant
for loss of business or for the taking of Tenant's fixtures personal property
within the Premises if a separate award for such items if made to Tenant.
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ARTICLE XV
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ASSIGNMENT AND SUBLETTING
15.1 ASSIGNMENT. This lease (and all options) may be assigned, sublet
or transferred by Tenant, provided (a) Landlord prior to any assignments
consents thereto in writing which consent may not be unreasonably withheld, (b)
Tenant is not in default of any term of this Lease (c) the sublessee or assignee
provides Landlord with such financial information as Landlord reasonably
requires and agrees in writing to be bound by the terms of this Lease, and (d)
the Base Rent is increased, not decreased, to an amount equal to the then
current market rental rate (as determined by and MAI appraisal prepared by an
appraiser selected by a mutually agreeable third party).
15.2 LANDLORD'S TRANSFER. The term "Landlord" as used in this lease
means only the owner or entity from time to time owning the building containing
the Premises, so that in the event of any sale or sales thereof, the Landlord
who is a grantor in any such sale shall be and hereby is, without further
agreement, entirely freed and relieved of all the obligations of Landlord
hereunder. Any such sale or sales of the Premises, unless pursuant to a
foreclosure sale or deed in lieu of such foreclosure, shall be subject to this
lease and it shall be deemed and construed without further agreement that the
purchaser at any such sale has assumed and agreed to carry out any and all
obligations of Landlord under this lease so long as such purchaser shall be the
owner of the building containing the Premises.
15.3 NO ENCUMBRANCE. Tenant shall not pledge or otherwise encumber its
interest under this lease. Tenant has only a usufruct, not subject to levy, sale
or other transfer, whether voluntary or by operation of law, except in
accordance with this Article XIV.
ARTICLE XVI
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TAXES
16.1 GENERAL. Tenant shall be liable for and shall pay all taxes levied
against personal property, fixtures, and Tenant's Work in the Premises; if such
taxes for which Tenant is liable are levied against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value of
Landlord's property is increased by inclusion of any such items and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes for which tenant is liable hereunder.
16.2 REAL ESTATE TAXES. Tenant agrees to pay as additional rent, its
share of the general real estate taxes, assessments, and governmental charges
levied against the Building for each calendar year beginning with the Rental
Commencement Date and during the Lease Term and any renewals or extensions
thereof Said taxes, assessments, and governmental charges shall be appropriately
prorated during the first and last years of the lease term if such years are
less than full calendar years. The proportionate share to be paid by Tenant
shall be the same percentage used to determine Tenant's share of the maintenance
expenses provided for in paragraph 1.1(q). Landlord may at its option make
monthly or other periodic charges based upon
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the estimated annual taxes, payable in advance but subject to adjustment after
receipt of the tax statement Landlord; adjustments shall be paid within fifteen
(15) days of presentation of the tax statement.
16.3 RENT TAX. Tenant agrees to pay as additional rent any rent or use
tax imposed on rent payments or imposed upon Landlord based upon rent payments
by Tenant, however, Tenant shall not be required to pay any income tax of
Landlord.
ARTICLE XVII
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DEFAULTS AND REMEDIES
17.1 DEFAULT BY LANDLORD. If Landlord defaults in the performance of
any term, covenant or condition required to be performed by Landlord under this
Lease, Landlord shall have thirty (30) day period, Landlord shall have all
reasonable and necessary time to complete such cure, as long as Landlord is upon
the occurrence of nay default set forth in this Lease and subsequent failure by
Landlord to cure or commence actions to cure as provided above. Tenant shall, as
Tenant's sole remedy, have the right to maintain an action against Landlord for
specific performance or injunctive relief.
17.2 INJUNCTION. If Tenant fails to keep or perform or violates any
covenant or provision of this lease (except payment of any installment of rent
or other charge or money obligation herein required to be paid by Tenant)
Landlord may without notice and in addition to any other remedy enjoin Tenant
from any such failure or violation hereunder.
17.3 DEFAULT BY TENANT. If, except as otherwise provided in Sections
9.2, 9.6 and 11.2 hereof, Tenant fails to perform or violates any covenant or
provision of this Lease (except the payment of any installment of rent or other
charge or money obligation herein required to be paid by Tenant) and such
failure or violation continues for a period of ten (10) days after written
notice by Landlord, or in case of a failure or violation which cannot with due
diligence be cured within a period of ten (10) days, if Tenant fails to cure
such failure or violation promptly after the service of such notice and with all
due diligence, then Landlord may in addition to any other remedies cure or
prosecute the curing of such failure or violation at reasonable expense, which
expense shall be deemed to be additional rental and shall be paid to Landlord by
Tenant on demand. Tenant agrees that neither Landlord nor any person acting on
Landlord's behalf shall be liable for any loss or damage suffered by Tenant
resulting from the exercise of the rights granted under this section.
17.4 INTEREST. Any installment of rent or any other charge or money
obligation herein required to be paid by Tenant which is not paid within ten
(10) days of when due shall bear interest at the maximum rate allowed by law,
from the due date until paid and the Landlord may treat any such charge or money
obligation as additional rent hereunder.
17.5 ACTS OF DEFAULT. The happening of any one or more of the following
shall be deemed to be events of default under this lease:
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(a) The making by Tenant of an assignment for the benefit
of its creditors.
(b) The levying of a writ of execution or attachment on
or against the property of Tenant within the Premises
or against Tenant's leasehold interest and the same
not being released or discharged within thirty (30)
days thereafter;
(c) The institution of proceedings in a court of
competent jurisdiction for the reorganization,
liquidation, or voluntary or involuntary dissolution
of Tenant, or for its adjudication as a bankrupt or
insolvent, or for the appointment of a receiver of
the property of Tenant, and/or for the appointment of
a receiver of the property of Tenant, and said
proceedings not being dismissed, and any receiver,
trustee or liquidator appointed therein not being
discharged within thirty (30) days after the
institution of such proceedings.
(d) The doing or permitting of any act by Tenant which
creates a lien or claim therefore against the land or
building of which the Premises are a part and the
same not being released or otherwise provided for by
indemnification satisfactory to Landlord within
thirty (30) days thereafter.
(e) Failure of Tenant to pay any installment of rent or
other charge or money obligation herein required to
be paid by Tenant as and when such payment is due and
payable; notwithstanding the foregoing, Landlord
agrees to allow Tenant ten (10) days from the date of
receipt of written notice of any failure to pay
before the Landlord will assert a default to
accommodate justified oversights of the Tenant, but
the Landlord reserves the right, and shall be
entitled to find the Tenant in default if the Tenant
has unreasonably and habitually compels the Landlord
to enforce timely payment of the rent by giving a
written notice.
(f) Failure of Tenant to comply with any covenant or
provision of this lease (except payment of any
installment of rent or other charge or money
obligation herein required to be paid by Tenant)
within fifteen (15) days after written notice of such
failure to comply is given by Landlord, or if it is
not feasible to cure such failure within such period,
to begin performance of such covenant within such
period and to diligently pursue performance to
completion in a reasonable time thereafter.
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17.6 LANDLORD'S REMEDIES. Upon the occurrence of any of such events of
default, Landlord shall have the option to pursue any one or more of the
following remedies without any notice or demand whatsoever;
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord. Landlord may, without
prejudice to any other remedy which it may have, enter upon
and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying the Premises or any
part thereof, by force, if necessary, without being liable for
prosecution or any claim of damages therefore.
(b) Not terminate this lease but rather enter upon and take
possession of the Premises and, if Landlord so elects, make
such alterations and repairs as may be necessary to relet the
Premises, and relet the Premises or any part thereof, as the
agent of Tenant, at such rent and for such term and subject to
such terms and conditions as Landlord may deem advisable and
receive the rent therefore. Upon each such reletting all
rentals received by the Landlord from such relenting shall be
applied, first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the
payment of any loss and expenses of such relenting, including
brokerage fees and attorneys' fees and costs of such
alterations and repairs; third, to the payment of rent due and
unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rent as the same may
become due and payable hereunder, and Tenant agrees to pay to
Landlord on demand any deficiency that may arise by reason of
such relenting. Notwithstanding any such relenting without
termination, Landlord may at any time thereafter elect to
terminate this lease for such previous breach.
(c) Should Landlord at any time terminate this lease for any
breach, in addition to any other remedies it may have, it may
recover from Tenant all damages it may incur by reason of such
breach, including the cost of recovering the Premises
reasonable attorneys' fees, and the worth at the time of such
termination of the excess, if any, of the amount of rent and
charges equivalent to rent, reserved in this lease for the
remainder of the Term over the then reasonable rental value of
the Premises for the remaining portion of the Term, all of
which amounts shall be immediately due and payable from Tenant
to Landlord. In determining the rent which would be payable by
Tenant hereunder, subsequent to default, the annual rent for
each year of the unexpired term shall be equal to the average
Minimum Guaranteed Rental and percentage rent paid by Tenant
from the Rental Commencement Date to the time of default or
during the preceding two (2) calendar years, whichever period
is shorter.
(d) Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any
other remedies provided by law, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing
to Landlord by reason of
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the violation of any of the covenants and provisions herein
contained. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon an event of default shall
not be deemed or construe to constitute a waiver of such
default.
17.7 LEGAL FEES. If, because of any breach or default hereunder, it
shall become necessary for the Landlord to employ an attorney to enforce or
defend any of the rights remedies hereunder, the Tenant agrees to pay any such
fees or costs incurred by the Landlord.
17.8 DEPOSITS. Landlord hereby acknowledges receipt from tenant of an
Advance Deposit, which shall be applied to rent due for April and May, 1997.
Landlord further acknowledges receipt from Tenant of the Security Deposit, which
shall be held by Landlord without interest as security for this lease, it being
expressly understood that such deposit is not an advance payment of rent or a
measure of Landlord's damages in case of default by Tenant. Upon the occurrence
of any event of default by Tenant, Landlord may, from time to time, without
prejudice to any other remedy provided herein, or provided by law, use the
Security deposit to the extent necessary to make good any arrears of rent and
any other damage, injury, expense or liability caused to Landlord by such event
of default. Following any such application of the Security Deposit, Tenant shall
pay to Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount. If Tenant is not then in default hereunder, any
remaining balance of the Security Deposit shall be returned by Landlord to
Tenant upon termination of this lease.
ARTICLE XVIII
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SUBORDINATION
18.1 SUBORDINATION. This lease and all rights of Tenant hereunder are
and shall be subject and subordinate to the lien of any mortgage now or
hereafter encumbering the Premises or Landlord's interest. In confirmation of
such subordination, Tenant shall, upon demand at any time or times, execute,
seal and deliver to Landlord, without expense to Landlord, all instruments in
recordable form that may be requested to evidence this subordination to the lien
of any such mortgage and each renewal, modification, consolidation, replacement,
and extension thereof. All said instruments shall be drafted and prepared by the
Landlord and delivered to the Tenant at Landlord's expense. If Tenant shall fail
to execute, seal and deliver any such instrument, Landlord in addition to any
other remedies available to it in consequence thereof may execute, seal and
deliver the same as the attorney in fact of Tenant and in Tenant's name, place
and stead, and Tenant hereby irrevocably makes, constitutes, and appoints
Landlord, its successors and assigns, as such attorney in fact for that purpose.
18.2 ATTORNMENT. If the holder of any mortgage, shall hereafter succeed
to the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease, then, at the option of such
holder, Tenant shall attorn to and recognize such successor as Tenant's landlord
under this lease and shah promptly execute and deliver any instrument that may
be necessary to evidence such attornment.
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18.3 NONDISTURBANCE. Upon attornment this lease shall continue in full
force and effect as a direct lease between such successor landlord and Tenant,
subject to all the terms, covenants, and conditions of this lease.
ARTICLE XIX
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MISCELLANEOUS
19.1 NOTICES. Whenever any notice is required or permitted, such notice
shall be in writing, deposited in the United States Mail, postage prepaid,
certified mail, return receipt requested, addressed to the address specified in
Section 1.1.
19.2 NOTICES TO LENDER. Tenant agrees that upon the request of either
Landlord or the holder of any mortgage, encumbering Landlord's interest
hereunder or in the Premises, Tenant shall send to such holder copies of all
notices sent to Landlord; Tenant agrees that it may not exercise any of its
remedies on account of a default by Landlord under this lease until such holder
shall have received written notice from Tenant and a period of thirty (30) days
after receipt of such notice for curing such default shall thereafter have
elapsed.
19.3 CAPTIONS. The captions and the contents used in this lease are for
convenience only and do not in any way limit or amplify the terms and provisions
hereof Whenever the singular number is used the same shall include the plural,
and words of any gender shall include each other gender.
19.4 WAIVER. Failure of Landlord to declare an event of default
immediately upon its occurrence, or delay in taking any action in connection
with an event of default, shall not constitute a waiver of the default, but
Landlord shall have the right to declare the default at any time and take such
action as is lawful or authorized under this Lease. Pursuit of any on e or more
of the remedies set forth in Article II above shall not preclude pursuit of any
one or more of the any remedy hereunder or at law constitute forfeiture or
waiver of any rent or damages accruing to Landlord by reason of the violation of
any of the terms, provisions or covenants of this Lease. Failure by Landlord to
enforce one or more of the remedies provided hereunder or at law upon any event
of default shall not be deemed or construed to constitute a waiver of the
default or of any other violation or breach or any of the terms, provisions and
covenants contained in this Lease. Landlord may collect and receive rent due
from tenant without waiving or affecting any rights or remedies that Landlord
may have at law or in equity or by virtue of this Lease at the time of such
payment. Institution of nay action to reenter the Leased Premises shall not be
construed to be an election by Landlord to terminate this Lease.
19.5 ACT OF GOD OR FORCE MAJEURE. An "Act of God" or "Force Majeure" is
defined for purposes of this Lease as strikes, lockouts, sitdowns, material or
labor restrictions by any governmental authority, unusual transportation delays,
riots, floods, washouts, explosions, earthquakes, fire storms, weather
(including wet grounds or inclement weather which prevents constructions), acts
of the public enemy, wars, insurrections, and/or any other cause not reasonable
within the control of Landlord or which by the exercise of due diligence
Landlord is unable wholly or in part, to prevent or overcome. Landlord shall not
be required to perform any
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covenant or obligation in this Lease, or be liable in damages to Tenant, so long
as the performance or nonperformance of the covenant or obligation is delayed or
prevented by an "Act of God", "Force Majeure" or by Tenant.
19.6 ENTIRE AGREEMENT. This lease contains the entire agreement between
the parties and no agreement, representation or inducement shall be effective to
change, modify or terminate this lease in whole or in part unless in writing and
signed by the parties.
19.7 JURY TRIAL. The parties waive the right to a trial by jury in any
legal proceeding.
19.8 ESTOPPEL INFORMATION. Tenant, after reasonable notice, shall
execute, acknowledge and deliver to Landlord a certificate evidencing whether or
not:
(a) This lease is in full force and effect;
(b) This lease has been amended in any way;
(c) There are any existing defaults hereunder to the knowledge of
Tenant and specifying the nature of such default, if any; and
(d) The date to which rent, including percentage rental, if any, has
been paid. Each certificate delivered pursuant to this Section may
be relied on by an prospective purchaser or transferee of the
Building or of Landlord's interest hereunder or by any mortgagee of
the Building or of Landlord's interest hereunder or by any assignee
of any such mortgagee.
19.9 SUCCESSORS BOUND. The terms, provisions and covenants contained in
this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and their respective heirs, assigns, successors in interest and
legal representatives except as otherwise provided; however, all claims,
demands, or causes of action which Tenant may have against Landlord shall be
enforceable solely against Landlord's right, title and interest in Building and
no other property of Landlord shall be subject to any such claim, demand or
cause of action.
19.10 TIME OF ESSENCE. Time is of the essence in this agreement.
19.11 LAW. The laws of the State of Florida shall govern the
interpretation, of this lease. If any provision of this lease shall be held to
be invalid or unenforceable, the validity and enforce-ability of the remaining
provisions of this lease shall not be affected.
19.12 SURRENDER PREMISES. Tenant shall, on or before the last day of
the Term hereof, or when sooner terminated, peaceably and quietly surrender the
Premises to Landlord with all alterations, additions, improvements, fixtures and
equipment, including air conditioning equipment (excluding trade fixtures and
other personal property of Tenant), be in good order and repair, ordinary wear
and tear excepted. All such property not removed shall be deemed abandoned by
Tenant and conveyed to Landlord unless Landlord shall give notice to Tenant to
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remove all or any part hereof, in which event Tenant shall promptly at its
expense remove same, or Landlord may do so at Tenant's expense.
19.13 VENUE. Venue for any litigation regarding this agreement shall
lie in Orange County, Florida.
19.14 NO PARTNERSHIP. Deleted.
19.15 LANDLORD'S LIABILITY. (Deleted)
19.16 MULTIPLE TENANTS. If this Lease is executed by more than one
person or entity as "Tenant", each such person or entity shall be jointly and
severally liable hereunder. It is expressly understood that any one of the named
Tenants shall be empowered to execute any modification, amendment, exhibit,
floor plan, or other documents herein referred to and bind all of the named
Tenants thereto; and Landlord shall be entitled to rely on same to the extent as
if all of the named Tenants had executed same.
19.17 LIMITATION OF WARRANTIES. Landlord and Tenant expressly agree
that there are and shall be no implied Warranties of merchantability,
habitability, suitability, fitness for a particular purpose of or of any other
kind arising out of this Lease, and there are no warranties which extend beyond
those expressly set forth in this Lease. Without limiting the generality of the
foregoing, Tenant expressly acknowledges that Landlord has made no warranties or
representations concerning any hazardous substances or other environmental
matters affecting any part of the Property, and Landlord hereby expressly
disclaims and Tenant waives any express or implied warranties with respect to
any such matters.
19.18 SPECIAL STIPULATIONS CONTROL. To the extent that the Special
Stipulations set forth in Exhibit "F" conflict with any of the printed
provisions of this lease, such Special Stipulations shall control.
19.19 RADON GAS. Notice to Prospective Purchaser/Tenant: Radon is a
naturally occurring gas that, when it has accumulated in a building in
sufficient quantities, may present health risks to persons who are exposed to it
over time. Levels of radon that exceed Federal and State guidelines have been
found in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit. (pursuant to
Section 404.056(8), Florida Statutes.)
19.20 SHORT FORM OF LEASE. Simultaneously with the execution and
delivery hereof the parties have executed a Memorandum if Lease Agreement and
the LESSOR or the LESSEE may record such Memorandum of Lease Agreement in lieu
of recording this lease.
19.21 BROKER. The parties represent to each other that no brokers are
affiliated with this transaction.
19.22 CONDITION PRECEDENT. This lease shall not be binding unless it is
executed and delivered by and to both parties on or before
24
<PAGE>
19.23 ACCEPTANCE BY FACSIMILE. Either party may demonstrate its
acceptance or execution of this Lease by facsimile transmitted by facsimile
showing the transmitting parties' signature thereon. Such a facsimile, once
received by the other party, shall bind the transmitting party to the same
extent as would delivery of this Lease (or a counterpart) containing the parties
actual signature.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
by their duly authorized officers the day and year first above written.
AS TO LANDLORD:
/s/ A. J. Stanton, Jr. /s/ Kyung Park
Print Name: A. J. Stanton, Jr. KYUNG PARK
/s/ Amanda R. Moody
Print Name: Amanda R. Moody
/s/ Bank Park
/s/ A. J. Stanton, Jr. BANG PARK
Print Name: A. J. Stanton, Jr.
/s/ Amanda R. Moody
Print Name: Amanda R. Moody
AS TO TENANT:
MEGAMEDIA NETWORKS, INC.
/s/ A. J. Stanton, Jr.
Print Name: A. J. Stanton, Jr. By: /s/ William Mobley, President
/a/ Amanda R. Moody
Print Name: Amanda R. Moody
25
<PAGE>
EXHIBIT A
---------
[Space Plan]
------------
A-1
<PAGE>
EXHIBIT B
---------
[FLOOR PLAN]
B-1
<PAGE>
EXHIBIT E
GUARANTEE AGREEMENT
THIS AGREEMENT was entered into on 14th day of June, 1999, between
Kyung Park and Bang Park, individually and as Landlord ("Landlord") and the
individuals signing hereto ("Guarantors") and secure performance of the lease
between Landlord and MEGAMEDIA NETWORKS, INC.("Lease").
RECITALS
a. Guarantors desire to induce the Landlord to enter into the
Lease between the Landlord and the Tenant.
b. The Landlord is unwilling to enter into the Lease without the
assurances afforded by the Guarantors set forth below.
NOW, THEREFORE, in consideration of the Lease being entered into
between the Landlord and Tenant, which benefits the Guarantors herein, and in
further consideration of the sum of One Dollar ($1.00), receipt of which is
acknowledged by the Guarantors, the Guarantors covenant and agree as follows:
1. The Guarantors hereby absolutely and unconditionally guarantee to
the Landlord the prompt, punctual payment and performance, when due, of all of
the Tenant's obligations to the Landlord under the terms and conditions of the
Lease between the Landlord and Tenant. The Guarantors agree that all payments
and other obligations under this Guarantee will be made promptly on demand.
2. The obligations hereunder are joint and several, and independent of
the obligations of the Tenant, and a separate action or actions may be brought
or prosecuted against one or more of the Guarantors whether action is brought
against the Tenant or whether the Tenant be joined in any such action or
actions- and Guarantors waive the benefit of any statute of limitations
affecting their liability hereunder or the enforcement thereof.
3. The Guarantors authorize the Landlord without notice, consent or
demand, at any time, and from time to time, either before or after the maturity
thereof, to extend the time for payment of any obligation of the Tenant; to
amend in any respect whatsoever, any provision of the Lease without notice or
assent from the Guarantors.
4. No delay on the part of the Landlord in exercising any right shall
operate as a waiver.
5. In the event that the Tenant is now or is hereafter indebted to any
of the Guarantors, the Guarantors agree that said indebtedness held by them is
hereby subordinated to the indebtedness of the Tenant to the landlord as long as
this Guarantee is in full force and effect.
E-1
<PAGE>
6. Guarantors waive any right to require Landlord to (a) proceed
against the Tenant, (b) proceed against or exhaust any security held or to which
Landlord is entitled, or (c) pursue any other remedy in Landlord's power
whatsoever. Guarantors waive any defense arising by reason of any disability,
lack of corporate authority or power, or other defense of the Tenant or any
other Guarantor, and shall remain liable regardless of whether Tenant or any
other Guarantor is found not liable for any reason. Until all the obligations
have been paid or complied with in U], Guarantors shall not have right of
subordination, and each waives any right to enforce any remedy which Landlord
now has or may hereafter hold or to which the Landlord is entitled.
7. This Guarantee Agreement she remain in full force and effect until
all of the terms and conditions of the Lease have been complied with and shall
be binding upon Guarantors, and the respective heirs, legal representatives,
successors and assigns of Guarantors and, along with all rights, title, benefits
and securities existing and to exist hereunder, shall inure to the benefit of
and be available to Landlord, his successors and assigns.
IN WITNESS WHEREOF, the undersigned Guarantors have set their hands and
seals.
/s/ William A. Mobley
WILLIAM A. MOBLEY
E-2
EXHIBIT 10.1.1
FIRST ADDENDUM TO LEASE AGREEMENT
---------------------------------
This First Addendum was entered into on the dates indicated below and
is effective October 6, 1999. This first addendum modifies the Lease Agreement
between Kyung Park and Bang Park ("Landlord") and MegaMedia Networks, Inc.
("Tenant") dated June 14, 1999 ("Lease").
In consideration of the mutual covenants contained herein and other
valuable consideration, the parties agree to amend the Lease as provided herein.
The following numbered paragraphs refer to the same numbered paragraphs in the
Lease and said paragraphs remain in effect except to the extent specifically
modified.
1. (b) THE PREMISES. Tenant desires to lease the second and first
floors of the Building. Therefore, the Premises shall now
include the entire Building and grounds generally known as 57
West Pine Street, Orlando, Florida.
(c) READY FOR OCCUPANCY. The Premises are accepted by the
Tenant in "as is" condition without any obligation or
expectation of the Landlord.
(h) SECURITY DEPOSIT. The Security Deposit has been increased
from $5,000.00 to $12,000.00 with execution of this Addendum.
(m) USE OF PREMISES. The Premises may be used for any purpose
authorized under the existing zoning ordinances, subject to
the other provisions of the Lease.
(s) LIABILITY INSURANCE LIMITS. The amount of liability
insurance maintained by the Tenant shall be adjusted as
necessary based upon the use of the Premises from time to
time.
4.1 BASE RENT. The Base Rent shall now be as provided below. No Base
Rent shall accrue or be charged for the first floor and second floor until
January 1, 2000. Base Rent shall continue on the third floor as provided in the
Lease until December 31, 1999. Thereafter the Base Rent for the Premises shall
be as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(a) January 1, 2000 through and including May 30, 2000 $11,140.00 per month
(b) June 1, 2000 through and including May 30, 2001 $11,685.00 per month
(c) June 1, 2001 through and including May 30, 2002 $12,230.00 per month
</TABLE>
5.1 COMMON AREAS. Tenant shall have the exclusive use of the Common
Areas.
5.2 MAINTENANCE: Tenant shall be responsible for all maintenance
expenses of the Building and Premises. As to the elevator and air conditioners,
the Landlord shall remain liable for major repairs or replacement of the air
conditioning or elevator system reasonably deemed other than normal maintenance
items. Notwithstanding the foregoing, the Tenant accepts the air conditioning
systems in "as is" condition and all additions or replacements shall become the
property of the Landlord. The Tenant shall maintain the maintenance contract for
the elevator.
<PAGE>
5.3 ASSESSMENTS. There are no other pending expenses to be assessed to
the Tenant except as follows:
Tenant's portion of the elevator maintenance contract, air conditioning
for the lobby and the Building hazard insurance premium, all are prorated as of
October 6, 1999. The parties have agreed that the amount due for these items is
$_______ which has been paid with execution of this agreement.
7.3 RULES AND REGULATIONS. This paragraph is now not applicable and is
deleted.
9.2 SIGN/DIRECTORY. Tenant shall have exclusive use of any directory
and is entitled to all signage rights and benefits subject to the provisions in
the Lease not in conflict with this exclusivity right.
12.2 ARTICLES 12 AND 13. The public liability policy maintained by
Tenant shall be amended to note the additional space. Tenant agrees at all times
at it's expense to maintain in the name of the Landlord and any other parties
designated by Landlord, a hazard insurance policy with extended coverage, to the
extent of at least ninety (90%) percent of the full insurable value of the
Building. Such insurance shall be carried with companies reasonably satisfactory
to Landlord. Such insurance shall be non-cancelable except with thirty (30) days
prior written notice. The proceeds of such insurance shall be for use by
Landlord as provided in the Lease.
16.2 REAL ESTATE TAXES. The parties agree that Tenant's proportionate
share of the real estate taxes for the third floor for 1999 shall be 36% of the
total bill for the Premises prorated for six months (i.e., 18%) and 64% of the
total bill for the Premises for 1999 for the first and second floors prorated
for three months (i.e., 16%) for a total liability of 34% of the entire tax
bill.
MISCELLANEOUS. Tenant shall provide Landlord with copies of all blue
prints, plumbing plans and wiring schematics for the Premises as same are used
from time to time for the Premises.
RATIFICATION. Except as specifically provided herein all provision of
the Lease Agreement between the parties not inconsistent herewith are ratified
and reaffirmed.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
by their duly authorized officers the day and year first above written.
AS TO LANDLORD:
/s/ Dwayne E. Smith /s/ Kyung Park
Print Name: Dwayne E. Smith KYUNG PARK
/s/ A. J. Stanton, Jr. /s/ Bank Park
Print Name: A. J. Stanton, Jr. BANG PARK
AS TO TENANT: MEGAMEDIA NETWORK, INC.
/s/ Mark A. Dolan /s/ William A. Mobley
Print Name: Mark A. Dolan WILLIAM A. MOBLEY
<PAGE>
/s/ A. J. Stanton, Jr. (For the Corporation and Individually)
Print Name: A. J. Stanton, Jr.
EXHIBIT 10.2
PRODUCT DEVELOPMENT AGREEMENT
THIS PRODUCT DEVELOPMENT AGREEMENT ("Agreement") dated this 7th day of
January, 2000, is entered into between MEGAMEDIA NETWORKS, INC., ("MegaMedia")
whose address is 57 West Pine Street, Orlando, Florida 32801, and NEXTELLIGENT,
INC. ("Nextelligent") whose address is 57 West Pine Street, Orlando, Florida
32801, provides as follows:
WHEREAS, MegaMedia is involved in providing on-line broadcasts to its
customers; and
WHEREAS, Nextelligent is engaged in portal and software platform
development ("Services"); and
WHEREAS, MegaMedia wishes to receive services from Nextelligent and
Nextelligent is willing to provide such services to MegaMedia in accordance with
the terms and conditions contained herein.
NOW, THEREFORE, in return for valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. UTILIZATION OF SERVICES. During the term of this Agreement,
MegaMedia will utilize Nextelligent as its exclusive provider for the Services
provided the pricing and time frame specifications for the Services are mutually
agreeable to the parties. For each project in which MegaMedia has need for the
Services it will contact Nextelligent, provide the goals and specifications for
the project and negotiate in good faith the pricing and time frame requirements
for the project. If the parties are unable to reach agreement then MegaMedia may
engage another vendor to provide the required Services provided, however, the
pricing, time frame requirements and other terms and conditions for the Services
to be provided by the other vendor cannot in the aggregate be more favorable
than those which were offered to Nextelligent.
2. TERM. The term of this agreement shall be for five (5) years.
3. GOVERNING LAW/VENUE. This Agreement shall be construed and enforced
in accordance with the laws of the State of Florida. Venue of any action brought
hereunder shall lie in Orange County, Florida.
4. ENTIRE AGREEMENT. This Agreement constitutes and embodies the entire
understanding and agreement of the parties and supersedes and replaces all prior
understandings, agreements and negotiations between the parties related to the
subject matter herein.
<PAGE>
5. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, all of
which shall remain enforceable in accordance with their terms.
6. NOTICES. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail to the principal office of each party.
7. ATTORNEY'S FEES. The prevailing party in any action to enforce any
provision of this Agreement shall be entitled to recover from the other party
all of its reasonable costs and expenses, including reasonable attorney's fees
incurred in such litigation, at all trial and appellate levels.
MEGAMEDIA NETWORKS, INC.
By: /s/ Mark R. Dolan
----------------------------------
Printed Name: Mark R. Dolan
------------------------
Its: Secretary
---------------------------------
NEXTELLIGENT, INC.
By: /s/ William A. Mobley, Jr.
----------------------------------
Printed Name: William A. Mobley, Jr.
------------------------
Its: Proprietor
---------------------------------
2
EXHIBIT 10.3
INTERNET TRAFFIC AGREEMENT
THIS AGREEMENT, is made and entered into this 7th day of January, 2000,
by and between MegaMedia Networks, Inc., a Delaware corporation, its affiliates,
successors and assigns, hereinafter referred to as "MegaMedia" and NextTraffic,
Inc., a Delaware corporation, its affiliates, successors and assigns,
hereinafter referred to as "NextTraffic."
WHEREAS MegaMedia is a media company providing its customers with
entertainment, news, marketing, and advertising services via the internet; and,
WHEREAS, NextTraffic is an internet traffic consolidator who provides
its clients with internet traffic; and,
WHEREAS, MegaMedia desires and intends to acquire internet traffic from
NextTraffic as hereinafter provided;
NOW THEREFORE, in consideration of the foregoing, NextTraffic and
MegaMedia agree as follows:
1. RECITATIONS. The foregoing recitations are true and correct.
2. CERTAIN DEFINITIONS. The following terms used in this Agreement, with
their initial letters capitalized, unless the context requires
otherwise or unless otherwise expressly provided in this Agreement,
have the meanings specified in this Section 2. The singular includes
the plural and vice versa, as the context requires. When used in this
Agreement, the following terms have the meanings set forth below:
A. "Agreement" means this written agreement between MegaMedia and
NextTraffic.
B. "Day" means a 24 hour period spanning from midnight of one day
to midnight of the following day.
C. "Host" means an entity that stores third-party Web Sites on
its Internet server computers, receives or stores commands or
data transmitted by Internet users, transmits Web Page data to
users' Internet addresses, and performs related maintenance.
D. "Internet" means the global computer network comprising
interconnected networks using standard protocols as it exists
contemporaneously with the execution of this Agreement,
including but not limited to the world wide web, as well as
any functionally equivalent medium, or medium competitive to
the Internet that may now or hereafter exist.
E. "Portal Page" means the first page viewed by a visitor or
customer accessing the MegaMedia Web Site also known as the
First Page.
F. "Protocols" means a set of rules that regulate the way data is
transmitted between computers.
G. " Visitor" and "Traffic" mean a person who accesses the Portal
Page of the MegaMedia Web Site via tracked database referral
from NextTraffic.
H. "Web Master Program" means an incentive based traffic or
customer referral program.
I. "Web Page" means each individual screen display contained in
MegaMedia's Web Site.
J. "Web Site" means all Web Pages and Domain Names associated
with MegaMedia and its products or services, and which are
stored on MegaMedia's Internet Server computer.
K. "World Wide Web" or "WWW" is a subset of the Internet, and is
a common system for browsing Internet Web Sites.
3. TERM. The term of this Agreement is that period of time beginning on
the effective date of this Agreement and ending three calendar years
thereafter.
4. OBLIGATIONS OF NEXTTRAFFIC. NextTraffic covenants and agrees with
MegaMedia that it shall during the terms of this Agreement:
Page 1 of 5
<PAGE>
A. Supply two million (2,000,000) Visitors per day to the
MegaMedia Web Site Portal Page in an Even Flow. NextTraffic
shall be compensated for the Visitors it supplies as provided
in Paragraph 6 below. MegaMedia, in its sole and unfettered
discretion, shall without liability to NextTraffic, have the
unrestricted right to lessen, diminish or terminate the
purchase of Visitors from NextTraffic at any time and for any
reason upon the giving of thirty (30) days written notice of
same to NextTraffic.
B. Upon request, NextTraffic will provide MegaMedia with all
documentary support evidencing NextTraffic's ability to
perform the above services.
5. TRAFFIC VERIFICATION. Visitors provided by NextTraffic to MegaMedia
shall be verified through independent Nielson I/PRO AUDIT reporting.
A. Monthly Reports. MegaMedia shall issue a monthly report to
NextTraffic indicating the total number of Visitors that have
been provided by NextTraffic to the MegaMedia Portal Page per
Day.
B. Server Logs. NextTraffic shall also have the right to review
the raw data contained in MegaMedia's server logs for an
immediately preceding three (3) month period.
6. CONSIDERATION TO NextTraffic. In consideration for the above referenced
services to be rendered and provided by NextTraffic to MegaMedia,
MegaMedia agrees to:
A. Pay as a Fee for the Traffic supplied by NextTraffic pursuant
to this Agreement, and subject to adjustment for sales that
are subsequently not paid to MegaMedia for any reason, on a
monthly basis, a sum equal to twenty five percent (25%) of all
purchases of MegaMedia services made by Visitors that are
supplied to MegaMedia by NextTraffic. MegaMedia shall pay the
above Traffic Fee to NextTraffic on Recurring Revenue
(recurring charges billed on a monthly basis) received by
MegaMedia arising out of purchases of MegaMedia services made
by Visitors that were supplied to MegaMedia by NextTraffic.
MegaMedia's obligation to pay the above Traffic Fee to
NextTraffic for each month for which Recurring Revenue payment
is received, shall be limited to a maximum of two (2)
additional months after the original sale; or $0.05 per
Visitor, whichever is greater.
7. REPRESENTATIONS AND WARRANTIES OF NEXTTRAFFIC. NextTraffic warrants and
represents to MegaMedia that:
A. NextTraffic acknowledges that it has been advised to consult
with legal counsel of its choosing and acknowledges that
MegaMedia is represented by legal counsel and that this
Agreement and all other documents related to MegaMedia that
have been presented to it have been prepared solely for the
benefit of MegaMedia by its counsel, who does not and cannot
represent NextTraffic or its interests in this transaction.
B. No third party has or will have any claim, right, title, lien,
security interest or other interest in or to any of the Goods
or Services to be provided by NextTraffic to MegaMedia
pursuant to this Agreement.
C. NextTraffic has all necessary legal capacity, right, power and
authority to enter into, execute, deliver, perform and be
bound by this Agreement, free of any liens, security
interests, encumbrances, claims or interests of any third
party, and to perform all NextTraffic's obligations under this
Agreement.
D. NextTraffic's execution and delivery of this Agreement and the
performance by NextTraffic of NextTraffic's obligations under
this Agreement do not breach, and will not result in a breach
or violation of, any agreement, lien, security interest or
other understanding or obligation to which NextTraffic is a
party or by which NextTraffic is bound.
E. There is no demand, claim, suit, action, arbitration or other
proceeding pending or threatened (or for which any basis
exists) that in any way questions or jeopardizes (or could
question or jeopardize) the ability of NextTraffic to enter
into this Agreement or to perform any of NextTraffic's
obligations hereunder.
8. REPRESENTATIONS AND WARRANTIES OF MEGAMEDIA. MegaMedia represents,
warrants, and agrees as follows:
A. No third party has or will have any claim, right, title, lien,
security interest or other interest in or to any of the shares
of common stock to be provided by MegaMedia to NextTraffic
pursuant to this Agreement.
Page 2 of 5
<PAGE>
B. MegaMedia has all necessary legal capacity, right, power and
authority to enter into, execute, deliver, perform and be
bound by this Agreement, free of any liens, security
interests, encumbrances, claims or interests of any third
party, and to perform all MegaMedia's obligations under this
Agreement.
C. MegaMedia's execution and delivery of this Agreement and the
performance by MegaMedia of MegaMedia's obligations under this
Agreement do not breach, and will not result in a breach or
violation of, any agreement, lien, security interest or other
understanding or obligation to which MegaMedia is a party or
by which MegaMedia is bound.
D. There is no demand, claim, suit, action, arbitration or other
proceeding pending or threatened (or for which any basis
exists) that in any way questions or jeopardizes (or could
question or jeopardize) the ability of MegaMedia to enter into
this Agreement or to perform any of MegaMedia's obligations
hereunder.
9. INDEMNITY.
A. NextTraffic shall indemnify, defend and hold harmless
MegaMedia and its officers, directors, employees and agents
(separately and collectively provided to as the
"Indemnitees"), against and in respect of:
i. All liabilities and other obligations of NextTraffic
of any nature, whether accrued, absolute, contingent,
or otherwise, arising out of acts or omissions of
NextTraffic or its agents, employees, directors,
officers, representatives, shareholders, members or
contractors, in its performance of this Agreement.
ii. Any and all liabilities, whether under the Securities
Act of 1933, as amended, the securities act of any
state, or any other statute or common law or
otherwise, arising out of the sale or disposition by
NextTraffic of any of such securities in a manner
contrary to the representations set forth herein.
iii. Any claim, suit, obligation, liability, loss, damage,
injury or expense, arising out of, connected with,
related to, or resulting from any breach of any
covenant, representation, warranty or agreement made
by NextTraffic in this Agreement.
iv. All actions, suits, proceedings, demands,
assessments, judgment, costs and expenses incident to
any of the foregoing to include, without limitation,
attorney's fees and costs for all proceedings, trials
and appeals, whether incurred before, during or after
trial or appeal.
v. NextTraffic shall reimburse MegaMedia on demand for
any payment made by it at any time in respect of any
liability, obligation or claim to which the foregoing
indemnity relates. Should any claim covered by the
foregoing indemnity be asserted against MegaMedia,
MegaMedia shall notify NextTraffic promptly and give
it an opportunity to defend the same, and MegaMedia
shall extend reasonable cooperation to NextTraffic in
connection with such defense. In the event that
NextTraffic fails to defend the same within a
reasonable time, MegaMedia shall be entitled to
assume the defense thereof, and NextTraffic shall be
liable to repay MegaMedia for all its expenses
reasonably incurred in connection with the defense
(including reasonable attorneys' fees and settlement
payments).
vi. In the event NextTraffic does not reimburse MegaMedia
as set forth above, then MegaMedia shall have a right
to set off the amount of such liability, obligation
or claim, including MegaMedia's other expenses as set
forth above, against monies or MegaMedia shares due
NextTraffic by virtue of this or any other Agreement
between MegaMedia and NextTraffic, such amounts being
applied first to the next payment due and to each
payment due thereafter until such amount is repaid to
MegaMedia in full.
B. MegaMedia shall indemnify, defend and hold harmless
NextTraffic and its officers, directors, employees and agents
(separately and collectively provided to as the
"Indemnitees"), against and in respect of:
i. All liabilities and other obligations of MegaMedia of
any nature, whether accrued, absolute, contingent, or
otherwise, arising out of acts or omissions of
MegaMedia or its agents, employees, directors,
officers, representatives, shareholders, members or
contractors, in its performance of this Agreement.
ii. Any and all liabilities, whether under the Securities
Act of 1933, as amended, the securities act of any
state, or any other statute or common law or
otherwise, arising out of the sale to NextTraffic by
MegaMedia of any of such securities in a manner
contrary to the representations set forth herein.
Page 3 of 5
<PAGE>
iii. Any claim, suit, obligation, liability, loss, damage,
injury or expense, arising out of, connected with,
related to, or resulting from any breach of any
covenant, representation, warranty or agreement made
by MegaMedia in this Agreement.
iv. All actions, suits, proceedings, demands,
assessments, judgment, costs and expenses incident to
any of the foregoing to include, without limitation,
attorney's fees and costs for all proceedings, trials
and appeals, whether incurred before, during or after
trial or appeal.
v. MegaMedia shall reimburse NextTraffic on demand for
any payment made by it at any time in respect of any
liability, obligation or claim to which the foregoing
indemnity relates. Should any claim covered by the
foregoing indemnity be asserted against NextTraffic,
NextTraffic shall notify MegaMedia promptly and give
it an opportunity to defend the same, and NextTraffic
shall extend reasonable cooperation to MegaMedia in
connection with such defense. In the event that
MegaMedia fails to defend the same within a
reasonable time, NextTraffic shall be entitled to
assume the defense thereof, and MegaMedia shall be
liable to repay NextTraffic for all its expenses
reasonably incurred in connection with the defense
(including reasonable attorneys' fees and settlement
payments).
vi. In the event MegaMedia does not reimburse NextTraffic
as set forth above, then NextTraffic shall have a
right to set off the amount of such liability,
obligation or claim, including NextTraffic's other
expenses as set forth above, against monies due
MegaMedia by virtue of this or any other Agreement
between NextTraffic and MegaMedia, such amounts being
applied first to the next payment due and to each
payment due thereafter until such amount is repaid to
NextTraffic in full.
10. MISCELLANEOUS.
A. Complete Agreement. These Agreement constitutes the complete
and exclusive statement of agreement among the parties with
respect to the subject matter described. This Agreement
replaces and supersedes all prior agreements, as to the
subject matter of this Agreement, by and among the parties or
any of them and no representation, statement, or condition or
warranty not contained in this Agreement is binding on any
party hereto or has any force or effect whatsoever.
B. Venue and Governing Law. This Agreement and the rights of the
parties hereunder are governed by, interpreted, and enforced
in accordance with the laws of the State of Florida and the
parties agree that venue for any action arising out of this
agreement or the subject matter of this agreement, is
restricted to Orange County Circuit, Florida, or the U.S.
District Court for the Middle District of Florida, Orlando
Division.
C. Terms. Common nouns and pronouns refer to the singular and
plural, identity of the person or persons, firm or corporation
as the context requires. Any reference to the Code,
Regulations or other statutes or laws will include all
amendments, modifications, or replacements of the specific
sections and provisions concerned.
D. Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered
in the construction or interpretation of any provision of this
Agreement.
E. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under the present or future
laws effective during the term of this Agreement, such
provision is fully severable; this Agreement is to be
construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by
the illegal, invalid, or unenforceable provision; there will
be added automatically as a part of this Agreement a provision
as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and
enforceable.
F. Multiple Counterparts. This Agreement may be executed in
several counterparts, each of which is deemed an original but
all of which constitute one and the same instrument. However,
in making proof only one copy signed by the party to be
charged is required.
G. Additional Documents and Acts. Each party agrees to execute
and deliver additional documents and instruments and to
perform all additional acts necessary or appropriate to
effectuate, carry out and perform all of the terms,
provisions, and conditions of this Agreement and the
transactions contemplated hereby.
H. No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto,
and their respective successors and assigns subject to the
express provisions hereof
Page 4 of 5
<PAGE>
relating to successors and assigns, and no other person has or
will have any rights, interest, or claims hereunder or be
entitled to any benefits under or on account of this Agreement
as a third party beneficiary or otherwise.
I. Amendments. All amendments to this Agreement must be in
writing and signed by all the parties.
J. Notices. Any notice to be given or to be served on any party
hereto in connection with this Agreement must be in writing
and is deemed to have been given and received when deposited
in the U.S. mail, addressed specified by the party to receive
the notice.
As to MegaMedia: 57 West Pine Street, 3rd Floor
Orlando, Florida 32081
Attention: Legal Department
As to NextTraffic:
Any party may at any time, designate any other address in
substitution of the foregoing address to which such notice
will be given by giving written notice to the other party at
least (15) days prior to the date of delivery of the notice.
K. Reliance on Authority of Person Signing Regulations. In the
event that a party is not a natural person, no other party
will (a) be required to determine the authority of the
individual signing this Agreement to make any commitment or
undertaking on behalf of such Entity or to determine any fact
or circumstance bearing on the existence of the authority of
such individual or (b) be required to see to the application
or distribution of proceeds paid or credited to individuals
signing this Agreement on behalf of such Entity.
L. Attorney's Fees. In the event it shall be necessary for any
party to seek court intervention in order to enforce or defend
its rights hereunder, the prevailing party in any such action
shall recover from the non-prevailing, party or parties, all
reasonable attorneys' fees, costs and expenses incurred
therein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement, to be
effective as of the date last signed by all parties hereto.
/s/ William A. Mobley, Jr. 1/7/2000
- ------------------------------------ --------
MegaMedia Networks, Inc. Date
By William A. Mobley, Jr., President
/s/ Harry Timmons 1/7/2000
- ------------------------------------ --------
NextTraffic, Inc. Date
By Harry Timmons, President
Page 5 of 5
EXHIBIT 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this
7th day of January, 2000, by and between WILLIAM A. MOBLEY, JR., ("Consultant"),
whose address is 829 Hickory Hill Court, Orlando, Florida 32828, and MEGAMEDIA
NETWORKS, INC., a Florida corporation ("Company"), whose address is 57 West Pine
Street, Orlando, Florida 32801.
WHEREAS, Company desires to hire Consultant as an employee of the
Company; and
WHEREAS, Consultant possesses expertise in planning, consulting and
management involving Company business; and
WHEREAS, Company desires to employ Consultant during the term of this
Agreement to assist the Company in planning, organization and management of
Company's business and special projects in which the Company may become involved
in the future.
NOW, THEREFORE, in return for valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employees Employee as a consultant to
perform such duties as may be assigned to him from time to time by the Board of
Directors of Company. The Company and Consultant agree that Consultant will
devote such time and effort as may be reasonably required to perform such
duties. Consultant may on his own behalf render services to other entities,
including but not limited to Nextelligence, Inc. and other entities as
Consultant may from time to time elect provided, however, such additional
services and activities do not adversely affect Company or prevent Consultant
from performing his duties for Company.
2. TERM. The term of this Agreement shall commence effective January
15, 2000, and will terminate six (6) months after the effective date on July 15,
2000. This Agreement shall be automatically renewed and extended for continuing
six (6) month periods unless terminated by either of the parties hereto.
Termination can be effected by either Consultant or Company by giving thirty
(30) days' written notice to other party prior to the end of the then existing
term of this Agreement.
3. COMPENSATION. Company shall pay to Consultant Two Hundred Thousand
Dollars ($200,000.00) per year, such compensation to be paid on a bi-weekly
basis. Company reserves the right to pay a discretionary bonus to Consultant at
any time and in such amounts as are deemed appropriate by Company.
4. BENEFITS. Consultant shall be entitled to all such benefits no less
favorable than those provided to full-time executive officers of the Company,
including but not limited to medical insurance for Consultant and his
dependants, vacations, sick leave, car allowance, communication tools, stock
options and other benefit programs.
<PAGE>
Company shall reimburse Consultant such authorized business
expenses incurred by Consultant as are reasonably connected to the performance
of his duties upon presentation of receipts or other appropriate documentation.
Reimbursement shall be in accordance with Company's normal policies regarding
reimbursement.
5. CHOICE OF LAW. This Agreement and the duties and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Florida. The parties agree that venue for all legal actions instituted
to enforce any rights or obligations contained herein shall be in Orange County,
Florida. To the extent local, state or federal law or regulation renders any
provision of this Agreement invalid or unenforceable, that portion of the
Agreement shall be stricken. The rest and remainder of this Agreement shall
remain in full force and effect.
6. ATTORNEYS' FEES. The prevailing party in any action to enforce any
provision of this Agreement shall be entitled to recover from the other party
all of its reasonable costs and expenses, including reasonable attorney's fees
incurred in such litigation, at all trial and appellate levels.
7. NOTICES. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail to the principal address of each party.
8. CONFIDENTIALITY. The Consultant acknowledges that the information,
observations and data obtained by him while employed by Company and which relate
to the business of the Company are the property of the Company. Therefore,
Consultant agrees that he shall not disclose to any unauthorized person or use
for his own account any confidential information without the prior written
consent of the Board of Directors, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of Consultant's acts or omissions to act.
Consultant shall deliver to the Company at the termination of Consultant's
employment, or at any other time the Company may request, all memoranda, notes,
plans, records reports, computer tapes and software and other documents and data
(and copies thereof) relating to the confidential information, work product or
the business of the Company which he may then possess or have under his control.
9. OTHER PROVISIONS. Consultant is presently also serving as a director
of the Company. Nothing contained herein obligates Consultant to serve as a
director or officer of the Company but in the event requested to do so by
Company and agreed to by Consultant, Consultant may continue to serve as a
director of the Company and receive such additional benefits as are provided by
Company to directors in return for services rendered as a director.
10. COMPLETE AGREEMENT. Except as expressly identified herein, this
Agreement contains the sole agreement between the parties regarding the
employment relationship and supersedes any and all other employment agreements.
The parties acknowledge and agree that neither of them has made any
representation with respect to Consultant's employment except as are
specifically set forth herein, and Consultant acknowledges that he has relied on
his own judgment or counsel in entering into this Agreement. Consultant
acknowledges that Company
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<PAGE>
has written workplace policies, procedures and guidelines which are not
contracts of employment.
MEGAMEDIA NETWORKS, INC.
a Florida corporation
/s/ William Barber By: /s/ Mark R. Dolan
- ------------------------------ -----------------------------------
Printed Name: Mark R. Dolan
------------------------
/s/ Its Secretary
- ------------------------------ ----------------------------------
COMPANY
/s/ /s/ William A. Mobley, Jr.
- ------------------------------ --------------------------
William A. Mobley, Jr.
/s/ William Barber CONSULTANT
- ------------------------------
3
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), commencing as of the 24th
day of June, 1999, is entered into between MegaMedia Networks, Inc., a Delaware
Corporation (the "Company"), and John P. Chambers, Jr., (the "Employee").
RECITAL
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company upon the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the Recital and of the mutual
promises set forth in this Agreement, the Company and the Employee agree as
follows:
AGREEMENT
1. EMPLOYMENT. The Company employs the Employee as the Chief Technology Officer
and he shall coordinate all of Employer's technical operations, new product
development and implementation of Internet related software and hardware,
management of third party vendor support, relations and alliances, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. TERM. The term of this Agreement shall be two (2) years, commencing on June
24, 1999, and ending on June 23, 2001, subject to earlier termination pursuant
to the provisions of Section 9.
3. DUTIES. During the term of this Agreement, subject to the direction of the
Board of Directors of the Company, the Employee shall serve in the capacities
set forth in Section 1 hereof. The Employee shall devote his full business time
and energies to the business and affairs of the Company and shall use his best
efforts, skills and abilities to promote the interests of the Company and to
diligently and competently perform his duties.
4. COMPENSATION, STOCK OPTIONS AND BENEFITS:
A. Executive Compensation. Simultaneous with the execution of this
Agreement, Employee shall receive an annual salary of $105,000 (one hundred five
thousand dollars).
B. Upon execution of this Agreement, the Company shall place into
escrow 100,000 shares of fully paid, non-assessable, common stock of the Company
at a cost of $.01 par value per share for the benefit of Executive. Said shares
shall be held in escrow with Christopher Flannery, Esq., a duly licensed
attorney who practices law in the Commonwealth of Pennsylvania. An Escrow
Agreement, establishing the terms and conditions of escrow and confirming the
receipt of the 100,000 shares in escrow shall be provided to Executive herewith
as Exhibit A. Provided that Executive has not voluntarily terminated his
employment (other than for "constructive discharge" as defined in paragraph 9C
and provided that Executive's employment has not been terminated "for cause" as
defined in paragraph 9D, prior to June 23, 2000, title to the 100,000 shares
shall vest in Executive on the earliest to occur of the following:
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<PAGE>
i. June 23, 2000;
ii. Executive's death;
iii. Executive's permanent disability;
iv. Termination of the Executive by the Company without cause;
v. A "change in control" of the Company, which shall be
defined as (i) a sale, merger or other business combination which results in
transfer to a third party of an ownership interest of greater than 50% of the
Company or any successor entity to the Company prior to June 23, 2000., (ii) a
sale of all or substantially all of the Company's assets, prior to June 23,
2000.
Upon vesting and upon payment to the escrow agent of the stated
par value for the 100,000 shares, a Certificate or Certificates evidencing same
shall be promptly delivered to Executive.
C. Upon execution of this Agreement, the Company shall issue to
Executive one Stock Option Agreement as set forth in Exhibit B, attached here to
and incorporated herein by reference, providing Executive conditional rights to
purchase up to 100,000 shares of fully paid, non-assessable common stock of the
Company.
D. Promptly upon Executive's vesting of stock option rights as provided
in the Stock Option Agreements, the Company shall provide Executive with a
Notice of Vesting confirming such vesting of option rights. The Notice of
Vesting shall set forth the date of vesting, the number, exercise price and term
of the option rights that have vested in Executive. The stock that is subject to
the purchase rights and options referenced herein shall not be subject to any
dilution as to percentage of ownership, that differs from any dilution of
percentage of ownership that may be from time to time be appropriately approved
and undertaken by the Company and that is applicable to all issued and
outstanding stock of the Company. Executive shall also be entitled to
participate in the Employer's standard stock option and benefit programs as may
be generally available to Executives, including 401-K programs. All shares
acquired by Executive under these provisions will be subject to statutory
restrictions, registration and lockup agreements as Employer may reasonably
require of its Executives.
E. Benefits. During the term of this Agreement, the Employee shall be
entitled to participate in or benefit from, in accordance with the eligibility
and other provisions thereof such medical, insurance, pension, retirement, life
insurance, profit sharing and other fringe benefit plans or policies as the
Company may make available to, or have in effect for, its other senior Employee
employees generally from time to time. The Company retains the right to
terminate or alter any such plans or policies from time to time. Participation
of Employee's family in medical insurance plans may be elected at Employee's
expense.
F. Reimbursement of Business Expenses. During the term of this
Agreement, upon submission of appropriate supporting documentation, the Employee
shall be reimbursed by the Company for all reasonable business expenses actually
and necessarily incurred by the Employee on behalf of the Company in connection
with the performance of services under this Agreement.
G. Reimbursement of Other Expenses. During the term of this Agreement,
the Employee shall receive a monthly auto allowance of $400.00 per month and
shall participate in any other reimbursements (ie. cellular phone, pager, etc.)
offered to other senior Employees.
H. Vacation. During the term of this Agreement Employee shall be
eligible for fifteen (15) days paid vacation per year. No vacation days will be
cumulative and they will not carry over from year to year.
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<PAGE>
I. Sick Leave. Employee will be eligible for 5 paid sick days per year.
Paid sick days can be used for any purpose during the Employee year. No sick
days will be cumulative and they will not carry over from year to year.
5. REPRESENTATION OF EMPLOYEE: The Employee represents and warrants that he is
not a party to, or bound by, any agreement or commitment, or subject to any
restriction, including but not limited to agreements related to previous
employment containing confidentiality or noncompete covenants, which in the
future may have a possibility of adversely affecting or interfering with the
business of the Company, the full performance by the Employee of his duties
under this Agreement or the exercise of his best efforts hereunder.
6. CONFIDENTIALITY:
A. Confidential Information. The Employee acknowledges that as a result
of his employment and engagement with the Company, the Employee will have
knowledge of and access to, all proprietary and confidential information of the
Company, including, without limitation, all "Confidential Information" (as
defined herein), and that such information, even though it may be contributed,
developed or acquired by the Employee, and whether or not the foregoing
information is actually novel or unique or is actually known by other,
constitutes valuable assets of the Company developed at great expense which are
the exclusive property of the Company or its affiliates. Accordingly, the
Employee shall not, at any time, either during or subsequent to the term of this
Agreement, use, reveal, report, publish, transfer or otherwise disclose to any
person, corporation or other entity (a "person"), any of the Confidential
Information without the prior written consent of the Company's Board of
Directors, except to responsible officers and employees of the Company and other
responsible persons who are in contractual or fiduciary relationship with the
Company and who have a need for such information for purposes in the best
interests of the Company, and except for such information which is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by the Employee. The Employee acknowledges that the Company would not
enter into this Agreement without the covenants set forth in Sections 6, 7 and 8
of this Agreement and that such covenants are given as an integral part of and
incident to this Agreement. As used in this Agreement, "Confidential
Information" shall mean any and all studies, plans, reports, surveys, analysis,
sketches, drawings, specifications, notes, records, memoranda,
computer-generated data, computer programs, algorithms, or documents, and all
other nonpublic information relating to the business activities of the Company,
including, without limitation, all methods, processes, techniques, equipment,
research data, experiments, marketing and sales information, personnel data,
customer lists, pricing data, employee lists, supplier lists, merchandising
systems, financial data, trade secrets, and the like which presently or, in the
future, are in the possession of the Company. Said Confidential Information may
be in either human or computer readable form, including, but not limited to,
software, source code, hex code, or any other form.
B. Return of Confidential Information. Upon the termination of the
Employee's employment and engagement with the Company, the Employee shall
promptly deliver to the Company all manuals, letters, notes, notebooks, reports
and copies thereof and all other materials relating to the Company's business,
including without limitation any materials incorporating Confidential
Information, which are in the Employee's possession or control.
7. NONCOMPETITION: The Employee acknowledges that his services to be rendered
hereunder are of a special and unusual character and have a unique value to the
Company, the loss of which cannot be adequately compensated by damages in any
court of law. In view of the unique value to the Company of
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<PAGE>
the services of the Employee, the Employee hereby covenants and agrees that so
long as he remains employed or engaged by the Company (whether under this
Agreement or any other written or oral agreement or arrangement) and for a
period of two (2) years after the termination or expiration of any such
employment or engagement for any reason whatsoever other than that set forth in
Sections 9(b) or 9(d) hereof, the Employee shall not directly or indirectly
engage in or have an active interest in, anywhere in the world, alone or in
association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company, the Employee hereby acknowledging that the company conducts business
and distributes its products, or contemplates conducting business and
distributing its product, on a worldwide basis; provided, however, that his
Section 9 shall not prevent the Employee from acquiring, solely as an investment
and through market purchases, up to ten percent (10%) of the securities of any
issuer that are registered under Section 12 (b) or 12 (g) of the Securities
Exchange Act of 1934, as amended, and that are listed or admitted for trading on
any United States national securities exchange or that are quoted on the
National Association of Securities Dealers Automated Quotations System. During
the same period, the Employee shall not, and shall not permit, cause or
authorize any of his employees, agents or others under his control to, directly
or indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of; or otherwise engaged by, the
Company or any successor to the business of the Company or any affiliate of the
Company to terminate his or her employment or other relationship with the
Company or such successor or affiliate during the preceding two (2) years. The
Employee shall not at any time, directly or indirectly, use or purport to
authorize any Person to use any name, mark, logo, trade dress or other
identifying words or images which are the same as or similar to those used at
any time by the Company or any affiliate in connection with any product or
service, whether or not such use would be in a business competitive with that of
the Company. This Restrictive Covenant on the part of the Employee is given and
made by the Employee to induce MegaMedia to employ the Employee and to enter
into this Employment Agreement with the Employee, and the Employee hereby
acknowledges the sufficiency of the consideration for this Restrictive Covenant.
This Restrictive Covenant shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the Employee against MegaMedia, whether predicated
upon this Agreement or otherwise, shall not constitute a defense to the
enforcement by MegaMedia of this Restrictive Covenant. MegaMedia has fully
performed all obligations entitling it to this Restrictive Covenant, and this
Restrictive Covenant therefore is not executory or otherwise subject to
rejection under the Bankruptcy Code. This Restrictive Covenant is a reasonable
and necessary restraint of trade and does not violate the Sherman Antitrust Act,
the Florida Antitrust Act, or the common law; it is supported by valid business
interests, including the protection of MegaMedia trade secrets and confidential
business information and the protection of MegaMedia's relationships with its
customers and prospective customers, and the two (2) ear restriction is
essential to the full protection of those valid business interests. If any
portion of this Restrictive Covenant is held by a court of competent
jurisdiction to be unreasonable, arbitrary, or against public policy for any
reason, this Restrictive Covenant shall be considered divisible as to line of
business, time, and geographic area; if a court of competent jurisdiction should
determine the specified lines of business, the specified period, or the
specified geographic area to be unreasonable, arbitrary, or against public
policy for any reason, a narrower line of business, a lesser period, or a
smaller geographic area that is determined to be reasonable, non-arbitrary, and
not against public policy for any reason, may be enforced by MegaMedia against
the Employee.
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<PAGE>
8. REMEDIES: MegaMedia and the Employee agree that, in the event of a breach by
the Employee of the Restrictive Covenants set forth in Paragraphs 6 and 7,
above, such a breach would irreparably injure MegaMedia and would leave
MegaMedia with no adequate remedy at law, and MegaMedia and the Employee further
agree that, if legal proceedings (including arbitration proceedings) should have
to be brought by MegaMedia against the Employee to enforce the Restrictive
Covenant, MegaMedia shall be entitled to all available civil remedies, including
without limitation:
A. Preliminary and permanent injunctive relief restraining the Employee
from violating, directly or indirectly, either as an individual on his or her
own account or as a partner, joint venturer, Employee, agent, salesman,
contractor, officer, director, or stockholder or otherwise, the restrictions of
Paragraph 6 and 7, above;
B. Attorneys' fees in the trial and appellate courts and in all
arbitration proceedings; and
C. Costs and expenses of investigation, litigation, and arbitration,
including expert witness fees, deposition costs (appearance fees and transcript
charges) , injunction bond premiums, travel and lodging expenses, arbitration
fees and charges, and all other reasonable costs and expenses.
Nothing in this Employment Agreement shall be construed as prohibiting
MegaMedia from pursuing any other legal or equitable remedies available to it
for breach or threatened breach of the Restrictive Covenants.
If the Employee violates the Restrictive Covenants, directly or
indirectly, either as an individual on his or her own account or as a partner,
joint venturer, Employee, agent, salesman, contractor, officer, director, or
stockholder or otherwise, any and all sales of services by the Employee (or the
partnership, joint venture, corporation, or other entity with which he or she is
associated) in competition with the services of MegaMedia shall be conclusively
presumed to have been made by MegaMedia but for the violation of the Restrictive
Covenant.
Should legal proceedings (including arbitration proceedings) have to be
brought by MegaMedia against the Employee to enforce the Restrictive Covenants,
the period of restriction shall be deemed to begin running on the date of entry
of an order granting MegaMedia preliminary injunctive relief and shall continue
uninterrupted for the next succeeding two (2) years; the Employee acknowledges
that such purposes and effect would be frustrated by measuring the period of
restriction from the date of termination of employment where the Employee failed
to honor the Restrictive Covenant until directed to do so by court order.
MegaMedia and the Employee agree that, if MegaMedia is granted preliminary
injunctive relief under this Agreement, an injunction bond of no more than
$5,000 shall be sufficient to indemnify the Employee for any costs or damages
that he or she might incur if the Court ultimately determines that the Employee
was wrongfully enjoined. If the Employee breaches any of the provisions of
Sections 6 or 7, in addition to its other rights and remedies, the Company shall
have the right to require the Employee to account for any pay over to the
Company all compensation, profits, money, accruals and other benefits derived or
received, directly or indirectly, by the Employee from the action constituting
such breach.
9. TERMINATION: This Agreement may be terminated prior to the expiration of the
term set forth in Section 2 upon the occurrence of any of the events set forth
in, and subject to the terms of; this Section 9.
A. Death. This Agreement will terminate immediately and automatically
upon the death of the Employee.
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<PAGE>
B. Disability. This Agreement may be terminated at the Company's
option, immediately upon written notice to the Employee, if the Employee shall
suffer a permanent disability. For the purposes of this Agreement, the term
"permanent disability" shall mean the Employee's inability to perform his duties
under this Agreement for a period of 120 consecutive days or for an aggregate of
180 days, whether or not consecutive, in any twelve (12) month period, due to
illness, accident or any other physical or mental condition, as determined by
the Board of Directors of the Company.
C. Cause. This Agreement may be terminated at the Company's option,
immediately upon notice to the Employee, upon: (i) gross negligence or willful
misconduct of the Employee in connection with the performance of his duties
under this Agreement of Employee's willful refusal to perform any of his duties
or responsibilities required pursuant to this Agreement; or (ii) fraud, criminal
conduct (as evidenced by the conviction of the Employee for any criminal action)
or embezzlement by the Employee.
D. Without Cause. This Agreement may be terminated at the Company's
option without cause immediately upon notice to the Employee. In the event the
Company elects to terminate this Agreement without cause pursuant to this
subsection, the Company shall pay to Employee as wages in lieu of notice
$52,500.00 payable $1,050,00 per week over a period of 50 weeks commencing seven
(7) days after notice of termination. Simultaneous with the receipt of the first
installment of the wages in lieu of notice and as a condition to the receipt
thereof, the Employee shall deliver to the Company a general release in form
acceptable to the Company releasing the Company from any and all rights, claims,
demands, judgments, obligations, liabilities and damages, whether accrued or
unaccrued, asserted or unasserted, and whether known or unknown, relating to the
Company which ever existed, then existed, or may thereafter exist, by reason of
the termination of this Agreement without cause, except payment of the
$52,500.00 wages in lieu of notice.
E. Effect of Termination. In the event of any termination under this
Section 9, the Company shall have no further obligation under this Agreement to
make any payment to, or bestow any benefits on, the Employee from and after the
date of the termination other than payments or benefits accrued and due and
payable to him prior to the date of the termination and the stock purchase
rights due if any, and any vested stock option rights.
10. INVENTIONS, IDEAS, PROCESSES, AND DESIGNS: All inventions, ideas, processes
programs, software, and designs (including all improvements) (i) conceived
(whether or not actually conceived during regular business hours) or made by the
Employee during the course of his or her employment with MegaMedia and for a
period of six (6) months subsequent to the termination of such employment with
MegaMedia, and (ii) related to the business of MegaMedia, shall be disclosed in
writing promptly to MegaMedia and shall be the sole and exclusive property of
MegaMedia. The Employee shall cooperate with MegaMedia and its attorneys in the
preparation of patent and copyright applications for such developments and shall
promptly assign all such inventions, ideas, processes, and designs to MegaMedia.
The decision to file for patent or copyright protection or to maintain such
development as a trade secret shall be in the sole discretion of MegaMedia, and
the Employee shall be bound by such decision. The Employee shall provide, on the
back of this Employment Agreement, a complete list of all inventions, ideas,
processes, and designs, if any, patented or unpatented, copyrighted or
uncopyrighted, including a brief description, which he or she made or conceived
prior to his or her employment with MegaMedia and which therefore are excluded
from the scope of this Agreement.
11. CONSIDERATION. The Employee expressly acknowledges and agrees that the
execution by MegaMedia of this Employment Agreement constitutes full, adequate,
and sufficient consideration to the
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Employee from MegaMedia for the duties, obligations, and covenants of the
Employee under this Agreement, including, by way of illustration and not by way
of limitation, the agreements, covenants, and obligations of the Employee under
Paragraphs 6 and 7 of this Agreement. MegaMedia expressly acknowledges and
agrees similarly with respect to the consideration received by it from the
Employee under this Agreement.
12. INDEBTEDNESS. If, during the course of the Employee's employment under this
Employment Agreement, the Employee becomes indebted to MegaMedia for any reason,
MegaMedia may, if it so elects, set off any sum due to MegaMedia from the
Employee and collect from the Employee any remaining balance.
13. TRAINING EXPENSES. MegaMedia shall pay for all reasonable training expenses
incurred by the Employee while he or she is employed under this Employment
Agreement.
14. CONSENT TO PERSONAL JURISDICTION AND VENUE; WAIVER OF JURY TRIAL. The
Employee hereby consents to personal jurisdiction and venue, for any action
brought by MegaMedia arising out of a breach or threatened breach of this
Employment Agreement, exclusively in the United States District Court for the
Middle District of Florida, Orlando Division, or in the circuit court in and for
Orange County, Florida; the Employee hereby agrees that any action brought by
him or her, alone or in combination with others, against MegaMedia, whether
arising out of this Agreement or otherwise, shall be brought exclusively in the
United States District Court for the Middle District of Florida, Orlando
Division, or in the Circuit Court in and for Hillsborough County, Florida. The
Employee hereby agrees that any controversy which may arise under this Agreement
would involve complicated and difficult factual and legal issues. Therefore, if
a court of law determines for any reason that the arbitration clause of
Paragraph 15 of this Agreement is unenforceable, then any action brought by
MegaMedia against the Employee or brought by the Employee, alone or in
combination with others, against MegaMedia, whether arising out of this
Agreement or otherwise, shall be determined by a Judge sitting without a jury.
15. ARBITRATION. All controversies, claims, disputes, and matters in question
arising out of, or related to, this Employment Agreement or the breach of this
Agreement, or the relations between the signatories to this Agreement, shall be
decided by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The signatories agree that the arbitration
shall take place exclusively in Orlando, Florida, and shall be governed by the
substantive law of the state of Florida. Any award rendered by the arbitrator
shall be final, and final judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof, including a federal
district court, pursuant to the Federal Arbitration Act. The arbitrator may
grant MegaMedia injunctive relief, including mandatory injunctive relief, to
protect the rights of MegaMedia, but the arbitrator shall not be limited to such
relief. This arbitration provision shall not preclude MegaMedia from seeking
temporary or preliminary injunctive relief in a court of law to protect its
rights, nor shall the filing of such an action constitute any waiver by
MegaMedia of its right to arbitrate. In connection with the arbitration of any
dispute between the signatories to this Agreement, each signatory may utilize
all methods of discovery authorized by the Federal and Florida Rules of Civil
Procedure.
16. SERVICE OF PROCESS-MEGAMEDIA. If the Employee institutes legal proceedings
(including arbitration proceedings) against MegaMedia, the signatories to this
Employment Agreement agree that service of process by registered and certified
U.S. mail of the complaint and summons to the national headquarters of
MegaMedia, currently located at 57 West Pine Street, Orlando, Florida 32801, is
reasonably calculated to apprise MegaMedia of any legal proceedings (including
arbitration proceedings) instituted against it by the Employee. The
above-described method for service of process shall not
7
<PAGE>
constitute the consent by MegaMedia to the exercise of personal jurisdiction by
any court except the United States District Court for the Middle District of
Florida, Orlando Division or the Circuit Court for Hillsborough County, Florida,
in connection with any controversy or dispute between the signatories to this
Agreement.
17. SERVICE OF PROCESS-EMPLOYEE. If MegaMedia institutes legal proceedings
(including arbitration proceedings) against the Employee, the parties agree
that, except as provided below, MegaMedia shall serve process by process server
upon the Employee at his or her last known residence address located in the
United States. The Employee shall notify MegaMedia in writing of any change in
his or her residence address within ten (10) calendar days of the change. If the
Employee changes his or her U.S. residence address and fails to notify MegaMedia
in writing within ten (10) calendar days of the change, the signatories agree
that the following specified method of service of process is reasonably
calculated to reach the Employee and to apprise the Employee of the legal
proceedings instituted by MegaMedia:
MegaMedia shall (i) serve copies of the summons and complaint by
certified and registered U.S. Mail to the Employee's last known residence
located in the United States and (ii) place a public notice in a newspaper of
general circulation in the geographic area of the Employee's last known
residence address for a period of two consecutive weeks following commencement
(i.e., filing) of the proceedings. The Employee expressly acknowledges that the
above-described method for service of process is (i) reasonably calculated to
apprise him or her of any legal proceedings (including arbitration proceedings)
instituted against him by MegaMedia and (ii) sufficient for the court issuing
the summons or the American Arbitration Association to exercise personal
jurisdiction over him or her.
18. ACKNOWLEDGMENTS. The Employee hereby acknowledges that he or she has been
provided with a copy of this Employment Agreement for review prior to signing
it, that he or she has been given the opportunity to have this Agreement
reviewed by his or her own attorney prior to signing it, that he or she
understands the purposes and effects of this Agreement, and that he or she has
been given a signed copy of this Agreement for his or her own records. The
parties hereto acknowledge that this Agreement and all matters contemplated
herein, have been negotiated between both of the parties hereto and their
respective legal counsel and that both parties have participated in the drafting
and preparation of this Agreement from the commencement of negotiations at all
times through the execution hereof.
19. WAIVER. The waiver by MegaMedia of a breach or threatened breach of this
Employment Agreement by the Employee shall not be construed as a waiver of any
subsequent breach by the Employee. The refusal or failure of MegaMedia to
enforce the Restrictive Covenant of Paragraph 7 or the prohibitions of Paragraph
6 of this Agreement (or any similar agreement) against any other Employee,
agent, or independent contractor, for any reason, shall not constitute a defense
to the enforcement by MegaMedia of the Restrictive Covenant of Paragraph 7 or
the prohibitions of Paragraph 6, nor shall it give rise to any claim or cause of
action by such Employee, agent, or independent contractor or consultant against
MegaMedia.
20. INDEMNIFICATION. The Company shall indemnify Executive to the fullest extent
permitted by applicable law against damages and expenses (including fees and
disbursements of counsel) in connection with his status or arising out of the
ordinary and proper conduct of his duties as an employee or officer of the
Company.
8
<PAGE>
21. MISCELLANEOUS.
A. Entire Agreement. This Employment Agreement, together with Exhibits
A and B specifically supersedes and replaces all prior Employment Agreements
between the parties and constitutes the entire agreement between its signatories
pertaining to the subject matters of the Agreement, and it supersedes all
negotiations, preliminary agreements, and all prior and contemporaneous
discussions and understandings of the signatories in connection with the subject
matters of the Agreement. Except as otherwise herein provided, no covenant,
representation, or condition not expressed in this Agreement, or in an amendment
made and executed in accordance with the provisions of the subparagraph (b) of
this paragraph, shall be binding upon the signatories or shall affect or be
effective to interpret, change, or restrict the provisions of this Agreement.
B. Amendments. No change, modification, or termination of any of the
terms, provisions, or conditions of this Employment Agreement shall be effective
unless made in writing and signed or initialed by all signatories to this
Agreement.
C. Governing Law. This Employment Agreement shall be governed and
construed in accordance with the statutory and decisional law of the State of
Florida governing contracts to be performed in their entirety in Florida.
D. Separability. If any paragraph, subparagraph, or provision of this
Employment Agreement, or the application of such paragraph, subparagraph, or
provision, is held invalid by a court of competent jurisdiction, the remainder
of the Agreement, and the application of such paragraph, subparagraph, or
provision to persons or circumstances other than those with respect to which it
is held invalid, shall not be affected.
E. Headings and Captions. The titles and captions of paragraphs and
subparagraphs contained in this Employment Agreement are provided for
convenience of reference only, and they shall not be considered a part of this
Agreement for purposes of interpreting or applying this Agreement; such titles
or captions are not intended to define, limit, extend, explain, or describe the
scope or extent of this Agreement or any of its terms, provisions,
representations, warranties, or conditions in any manner or way whatsoever.
F. Continuance of Agreement. The rights, responsibilities, and duties
of the signatories to this Employment Agreement, and the covenants and
agreements contained in this Agreement, shall continue to bind the signatories,
shall continue in full force and effect until each and every obligation of the
signatories pursuant to this Agreement (and any document or agreement
incorporated hereby by reference) shall have been fully Performed, and shall be
binding upon the successors and assigns of the signatories.
G. Successors and Assigns. Neither party shall have the right to assign
this personal Agreement, or assign any rights or delegate any obligations
hereunder, without the consent of the other party; provided, however, that upon
the sale of all or substantially all of the assets, business and goodwill of the
Company to another company, this Agreement shall inure to the benefit of; and be
binding upon, both Employee and the company purchasing such assets, business and
goodwill, or surviving such merger or consolidation, as the case may be, in the
same manner and to the same extent as though such other company were the
Company. Subject to the foregoing, this Agreement shall inure to the benefit of;
and be binding upon, the parties hereto and their legal representatives, heirs,
successors and assigns.
9
<PAGE>
H. Additional Acts. The Employee and the Company each agrees to
execute, acknowledge and deliver and file, or cause to be executed, acknowledged
and delivered and filed, any and all further instruments, agreements or
documents as may be necessary or expedient in order to consummate the
transactions provided for in this Agreement and do any and all further acts and
things as may be necessary or expedient in order to carry out the purposes and
intent of this Agreement.
I. Notices. Any notice or other communication under this Agreement,
other than as provided above, shall be in writing and shall be delivered
personally or sent by certified mail, return receipt requested, postage prepaid,
or sent by facsimile or prepaid overnight courier to the parties at the
addresses set for the below (or at such other addresses as shall be specified by
the parties by like notice). Such notices, demands, claims and other
communications shall be deemed given when actually received or (a) in the case
of delivery by overnight service with guaranteed next day delivery, the next day
or the day designated for delivery, (b) in the case of facsimile, the date upon
which the transmitting party received confirmation of receipt by facsimile,
telephone or otherwise.
To the Company: MegaMedia Networks, Inc.
57 West Pine Street
Orlando, Florida 32801
Attn: Law Department
To the Employee:
J. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, together, will constitute
one and the same agreement. Any facsimile version of a manually executed
signature page delivered by one party to the other shall be deemed manually
executed and delivered original.
/s/ /s/ William A. Mobley, Jr.
- ------------------------------ ----------------------------------------
Witness MegaMedia Networks, Inc. Date
By William A. Mobley, Jr., President
/s/ /s/ John P. Chambers, Jr.
- ------------------------------ ----------------------------------------
Witness Employee - John P. Chambers, Jr. Date
10
EXHIBIT 10.6
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is dated as of December
29, 1999, by and among certain stockholders of MegaMedia Networks, Inc. (the
"Company"), listed on Exhibit A (the "Stockholders") and Christopher P.
Flannery, an attorney who practices law in the Commonwealth of Pennsylvania, as
Escrow Agent (the "Escrow Agent").
WHEREAS, the Stockholders wish to assist the Company in securing a top
management team; and
WHEREAS, the Stockholders have agreed to transfer certain shares of
common stock of the Company (the "Shares") to the Escrow Agent to facilitate
this matter utilizing an escrow arrangement as described in this Escrow
Agreement; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth below, and intending to be legally bound, the parties
hereto hereby agree as follows:
1. ESCROW ACCOUNT.
1.1 Deposit. On or about December 30, 1999 or as soon thereafter as
practicable, the Stockholders will deliver the Shares to the Escrow Agent along
with blank stock powers with Medallion guaranteed signatures (the "Escrow") to
be held by the Escrow Agent in a separate account (the "Escrow Account") subject
to the terms and provisions of this Escrow Agreement. Once the Shares are
deposited in the Escrow Account, they are commingled and no longer the property
of the Stockholders.
2. DISBURSEMENT OF ESCROW.
2.1 Disbursement. The Stockholders agree that all of the Shares in
the Escrow Account will be used to support options or stock grants for employees
of the Company (the "Eligible Employees"). Exhibit B lists the names of Eligible
Employees, the terms of the options, vesting schedules and the exercise prices.
The Escrow Agent will write and deliver option agreements (the "Option
Agreements") to the Eligible Employees at the time they become employees of the
Company, with copies to the Stockholders. The Eligible Employees shall pay an
option purchase price of $0.01 per Share at the issuance of the Option
Agreement, with the exercise price and vesting schedule as described in Exhibit
B.
<PAGE>
2.2 Option Exercise. An Eligible Employee may exercise the Option
Agreement in accordance with the terms of the Option Agreement vesting schedule
and other exercise terms. An Eligible Employee.
2.3 Delivery of Shares. Once an Eligible Employee properly
exercises an Option Agreement and pays the exercise price, the Escrow Agent will
take the steps necessary to transfer the Shares subject to the exercise to the
Eligible Employee. All certificates for Shares will bear a restrictive legend
and Eligible Employees may be subject to additional restrictions on transfer.
2.4 Controversies. If any controversy arises between two or more of
the parties, or between any of the parties and any person not a party, as to
whether or not or to whom the Escrow Agent shall deliver the Escrow or any
portion thereof or as to any other matter arising out of or relating to this
Escrow Agreement, the Escrow Agent shall not be required to determine the same
and need not make any delivery of the Escrow concerned or any portion thereof
but may retain the same until the rights of the parties to the dispute shall
have been finally determined by agreement or by final judgment of a court of
competent jurisdiction after all appeals have been finally determined (or the
time for further appeals has expired without an appeal having been made). The
Escrow Agent shall deliver that portion of the Escrow concerned covered by such
agreement or final order within five (5) days after the Escrow Agent receives a
copy thereof. The Escrow Agent shall assume that no such controversy has arisen
unless and until it receives written notice from the Stockholders or the Company
that such controversy has arisen, which refers specifically to this Agreement
and identifies the adverse claimants to the controversy.
2.5 No Other Disbursements. No portion of the Escrow shall be
disbursed or otherwise transferred except in accordance with this Escrow
Agreement.
3. ESCROW AGENT. The acceptance by the Escrow Agent of his duties
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any
manner whatever for the sufficiency, correctness, genuineness or validity of any
property deposited with or held by him.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
him to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its willful misconduct or bad faith.
2
<PAGE>
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any document or to determine whether
or not the signatures contained in said documents are genuine or to require
documentation or evidence substantiating any such document or signature.
3.5 The Escrow Agent shall have no duties as Escrow Agent except
those which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto. The
Escrow Agent shall not be prohibited from owning an equity interest in the
Company or any third party that is in any way affiliated with or conducts
business with the Company.
3.6 The Company and the Stockholders acknowledge that the Escrow
Agent is a practicing attorney, and may have worked with the Company, the
Stockholders, or affiliates of them on other unrelated transactions, and that
they and each of them has specifically requested that the Escrow Agent draft the
documents for this transaction and act as Escrow Agent. Each party represents
that it has retained legal and other counsel of its choosing with respect to the
transactions contemplated herein and is satisfied in its sole discretion with
the form and content of the documentation drafted by the Escrow Agent. The
parties hereby waive any objection to the Escrow Agent so acting based upon
conflict of interest or lack of impartiality. The Escrow Agent agrees to act
impartially and in accordance with the terms of this Agreement and with the
parties' respective instructions, so long as they are not in conflict with the
terms of this Escrow Agreement.
4. TERMINATION. This Agreement shall terminate on the earlier of
(a) the date on which the Escrow Account shall have been fully disbursed in
accordance with the terms and conditions of this Escrow Agreement, or (b) the
next business day after the expiration of the last of the Option Agreements. Any
Shares remaining in the Escrow Account after termination of the Escrow will be
returned to the Company's Transfer Agent and cancelled as of record and become
authorized but unissued Shares.
5. MISCELLANEOUS.
5.1 Indemnification of Escrow Agent.
(a) The Company and the Stockholders each agree, jointly and
severally, to indemnify the Escrow Agent for, and to hold him harmless against,
any loss incurred without willful misconduct or bad faith on the Escrow Agent's
part, arising out of or in connection with the administration of this Agreement,
including the costs and expenses of defending himself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall not apply to a party with respect
to a direct claim against the Escrow Agent by such party alleging in good faith
a breach of this Escrow Agreement by the Escrow Agent, which claim results in a
final non-appealable judgment against the Escrow Agent with respect to such
claim.
3
<PAGE>
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyer, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction
sitting in Philadelphia, Pennsylvania or in any appropriate federal court, in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Amendments. This Escrow Agreement may be modified or amended
only by a written instrument executed by each of the parties hereto.
5.3 Notices. All communications required to be given under this
Agreement to any party shall be sent by first class mail or facsimile to such
party at the address listed below.
5.4 Successors and Assigns. This Escrow Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Escrow Agent shall not assign its duties
under this Escrow Agreement.
5.5 Governing Law. This Escrow Agreement shall be governed by and
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
5.6 This Escrow Agreement may be executed in two or more
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same,. agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
Internet Online Services
By: /s/ William Barber /s/ Mark R. Dolan
------------------------------ -----------------------------
Its: President
Capital Access Management Group
By: /s/ Harry Timmons /s/ David Marshlack
------------------------------- -----------------------------
Its: President
/s/ William A. Mobley, Jr.
-----------------------------
ESCROW AGENT:
/s/Christopher P. Flannery, Esq.
- ---------------------------------
Christopher P. Flannery, Esq.
4
<PAGE>
EXHIBIT A
List of Stockholders
Internet Online Services
Capital Access Management Group
William A. Mobley, Jr.
Mark R. Dolan
David Marshlack
5
SUBDIDIARIES OF MEGAMEDIA NETWORKS, INC.
1. MegaChannels.com, Inc., a Delaware corporation
2. MegaMedia Networks, Inc., a Nevada corporation
3. Titan Hosting, Inc., a Delaware corporation
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
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<CURRENT-ASSETS> 1,017,211
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<DEPRECIATION> 11,242
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<COMMON> 130,000
<OTHER-SE> 1,327,565
<TOTAL-LIABILITY-AND-EQUITY> 1,558,152
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<TOTAL-COSTS> 856,261
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